Michigan
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6331
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27-1298795
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(State or other jurisdiction of
incorporation or organization)
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(Primary Standard Industrial
Classification Code Number)
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(I.R.S. Employer
Identification Number)
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Donald J. Kunz
Honigman LLP
2290 First National Building
660 Woodward Avenue
Detroit, Michigan 48226
(313) 465-7454
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Thomas L. Hanley
Stradley Ronon Stevens & Young, LLP
2005 Market Street, Suite 2600
Philadelphia, PA 19103-7018
(215) 564-8000
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☐ Large accelerated filer
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☐ Accelerated filer
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☒ Non-accelerated filer
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☒ Smaller reporting company
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☐ Emerging growth company
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Exchange Act Rule 13e-4(i) ☐
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Exchange Act Rule 14d-1(d) ☐
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(Cross-Border Issuer Tender Offer)
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(Cross-Border Third-Party Tender Offer)
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Per
Note
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Total
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Public Offering Price(1)
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%
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$
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Placement Agent’s Commissions(2)
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%
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$
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Proceeds to the Company(3)
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%
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$
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(1)
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Plus interest, if any, accrued from the date of issuance.
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(2)
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Assumes all of the New Notes offered in the New Offering are sold. See “Plan of Distribution.”
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(3)
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Before deducting offering expenses payable by us in connection with the Exchange Offer and New Offering and estimated to be $
million. We will not receive any proceeds from the Exchange Offer.
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the inherent uncertainty of estimating reserves and the possibility that incurred losses may be greater than our loss and
loss adjustment expense reserves;
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inaccurate estimates and judgments in our risk management may expose us to greater risks than intended;
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the interruption or system failure of our information technology and telecommunication systems
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the occurrence of severe weather conditions and other catastrophes;
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the cyclical nature of the insurance industry, resulting in periods during which we may experience excess underwriting
capacity and unfavorable premium rates;
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our ability to obtain reinsurance coverage at reasonable prices or on terms that adequately protect us;
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a decline in our financial strength rating resulting in a reduction of new or renewal business;
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our ability to manage our growth effectively;
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exposure to credit risk, interest rate risk and other market risk in our investment portfolio;
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competition within the property and casualty insurance industry;
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the potential loss of key members of our management team or key employees and our ability to attract and retain personnel;
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potential effects on our business of emerging claim and coverage issues;
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losses in our investment portfolio;
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additional government or market regulation;
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a forced sale of investments to meet our liquidity needs;
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our underwriters and other associates could take excessive risks;
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losses resulting from reinsurance counterparties failing to pay us on reinsurance claims;
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the potential impact of internal or external fraud, operational errors, systems malfunctions or cybersecurity incidents;
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an adverse outcome in a legal action that we are or may become subject to in the course of our insurance operations;
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failure to maintain effective internal controls in accordance with the Sarbanes-Oxley Act of 2002; and
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other factors that we discuss in the section titled “Risk Factors” in this Prospectus.
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Q:
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WHY IS THE COMPANY DOING THE EXCHANGE OFFER AND NEW OFFERING?
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A:
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We believe that the Exchange Offer and New Offering are important
components of our plan to re-calibrate our capital structure in order to better execute our business strategy. If all outstanding Existing Notes are validly tendered and accepted in the Exchange Offer, the Company does not intend to
issue all potential $25 million of New Notes in the New Offering, and may in its sole discretion issue a lower amount of New Notes even if indications of interest for all $25 million are received. However, to the extent that the
Exchange Offer is not fully subscribed, the Company intends to use any proceeds from the New Offering to redeem all or a portion of the Existing Notes, to pay other debt obligations, and for general corporate purposes. We have no
plans to materially increase our indebtedness as a result of these offerings.
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Q:
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IF I PARTICIPATE IN THE EXCHANGE OFFER, WHAT WILL I RECEIVE IN EXCHANGE FOR MY EXISTING NOTES?
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A:
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If you validly tender your Existing Notes in the Exchange Offer and we
accept your tender you will receive New Notes with the following characteristics:
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For each $25 in principal amount of your Existing Notes exchanged, you will receive $25 in principal amount of our New Notes;
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Interest will accrue on the new notes at a rate of 9.75% per year accruing from , 2023 (the “Settlement Date”);
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The New Notes will be general unsecured senior obligations of Conifer, and will mature on , 2028.
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Q:
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WHAT ARE THE IMPORTANT DIFFERENCES BETWEEN THE EXISTING NOTES AND THE NEW NOTES?
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A:
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The Existing Notes are unsecured debt obligations of ours that pay
interest at the rate of 6.75% per year and mature on September 30, 2023. The New Notes also are unsecured debt obligations of ours, but pay interest at the rate of 9.75% per year and mature on , 2028. Both the Existing Notes and the
New Notes pay interest quarterly in arrears. Beginning on , 2025 and prior to the maturity date, we may, at our option, redeem the New Notes in whole at any time or in part from time to time, on not less than 30 days and not more
than 60 days prior notice delivered to the holders of the New Notes. The New Notes will be redeemable at a redemption price equal to 100% of the principal amount of the New Notes to be redeemed plus accrued and unpaid interest to, but
not including, the date of redemption. Other than the differences in interest rate, date of optional redemption, and maturity date, the material terms of the Existing Notes and the New Notes, including Conifer’s obligations under the
indenture and indenture supplements governing the Existing Notes and New Notes and the rights of the holders of the Existing Notes and the New Notes, are substantially similar.
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Q:
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IF I DO NOT PARTICIPATE IN THE EXCHANGE OFFER BUT THE EXCHANGE OFFER IS COMPLETED, HOW WILL MY EXISTING NOTES
BE AFFECTED?
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A:
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If you do not participate in the Exchange Offer you will continue to
hold the Existing Notes with no changes to any of the terms of the Existing Notes, including the interest rate, interest payment dates, maturity date and other financial terms, covenants and conditions, and such Existing Notes will
continue to be governed by the indenture, the supplemental indenture and the amendment to the supplemental indenture relating to the Existing Notes (the “Existing Indenture”).
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Q:
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HOW DO I INDICATE MY INTEREST FOR NEW NOTES FOR CASH IN THE NEW OFFERING?
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A.
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If you are interested in purchasing New Notes for cash, please contact
Janney Montgomery Scott LLC at prospectus@janney.com. Allocations of New Notes in the New Offering will be made by the placement agent, after consultation with us. The closing of the New Offering is anticipated to occur on the same
day as the closing of the Exchange Offer.
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Q:
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WHAT RISKS SHOULD EXISTING NOTE HOLDERS CONSIDER IN DECIDING WHETHER OR NOT TO TENDER THEIR EXISTING NOTES IN
THE EXCHANGE OFFER?
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A:
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Holders of Existing Notes, in deciding whether to participate in the
Exchange Offer, should carefully consider the discussion of risks and uncertainties affecting our business and the New Notes that are described in “Risk Factors” in this Prospectus.
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Q:
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WHEN DOES THE EXCHANGE OFFER EXPIRE?
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A:
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The Exchange Offer will expire at the Expiration Date and Time, which
is 5:00 p.m., New York City time, on , 2023, unless extended or earlier terminated by us.
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Q:
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WILL THE NEW NOTES BE FREELY TRADABLE?
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A:
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Yes. However, the New Notes represent a new issuance of securities and
there is currently no public market for the New Notes, and we cannot provide any assurance that one will develop. We have applied to list the New Notes on the Nasdaq Global Market under the symbol “CNFRZ.” However, we cannot assure
you that the New Notes will be approved for listing or, if listed, that they will continue to be listed and we are not required to maintain a listing on the Nasdaq Global Market or any other exchange. Listing of the Notes does not
guarantee that a trading market will develop or be maintained.
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Q:
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WHO CAN I CONTACT WITH QUESTIONS ABOUT THE EXCHANGE OFFER OR TO REQUEST ANOTHER COPY OF THE PROSPECTUS?
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A:
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You can contact the following at:
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Hospitality, such as restaurants, bars and taverns (that require, among other lines, liquor liability insurance), as well
as small grocery and convenience stores;
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Artisan contractors, such as plumbers, painters, carpenters, electricians and other independent contractors; and
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Security service providers, such as companies that provide security guard services and private investigative services.
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Gross Written Premium by Segment
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2022
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%
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2021
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%
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2020
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%
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Commercial
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$116,868
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85%
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$117,075
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89%
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$102,763
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92%
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Personal
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21,151
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15%
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15,020
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11%
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8,572
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8%
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Total
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$138,019
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100%
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$132,095
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100%
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$111,335
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100%
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Gross Written Premiums by State
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2022
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%
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2021
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%
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2020
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%
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Michigan
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$33,739
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24.5%
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$29,314
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22.2%
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$23,304
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20.9%
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Texas
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14,236
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10.3%
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12,062
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9.1%
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10,243
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9.2%
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Florida
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13,705
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9.9%
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13,727
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10.4%
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13,573
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12.2%
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California
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12,967
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9.4%
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11,805
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8.9%
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8,140
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7.3%
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Oklahoma
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11,882
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8.6%
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7,695
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5.8%
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2,264
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2.2%
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New York
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10,622
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7.7%
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7,893
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6.0%
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6,386
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5.7%
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Pennsylvania
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4,499
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3.3%
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4,863
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3.7%
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4,846
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4.4%
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Ohio
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4,378
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3.2%
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4,123
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3.1%
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3,823
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3.4%
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Indiana
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3,232
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2.3%
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3,692
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2.8%
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3,559
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3.2%
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Colorado
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3,010
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2.2%
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2,917
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2.2%
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2,832
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2.5%
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Illinois
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2,644
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1.9%
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2,457
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1.9%
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1,818
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1.6%
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All Other States
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23,105
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16.7%
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31,547
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23.9%
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30,547
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27.4%
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Total
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$138,019
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100.0%
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$132,095
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100.0%
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$111,335
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100.0%
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•
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Focus on under-served markets. We focus on providing specialty insurance products
to targeted policyholders in under-served markets. We believe that most of our small business customers, many of which are owner-operated, value the efficiency of dealing with a single insurer for multiple products. By targeting
small- to medium-sized accounts, we add value to the business owner directly without competing solely on price.
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Strong relationships with our agents. We develop strong relationships with our
independent agents providing them with responsive service, attractive commissions and competitive products to offer policyholders. We believe our agents understand that we view them as key partners in risk selection that help us serve
our ultimate client - the insured.
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Deep understanding of the business and regulatory landscapes of our markets. The
competition for insurance business and the regulatory operating environment vary significantly from state to state. We focus on tailoring our business to concentrate on the geographic markets and regulatory environments with the
greatest opportunities for growth and profitability. Our business plan centers on identification of market opportunities in jurisdictions where our insurance products can profitably suit the needs of our potential customers.
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Emphasis on flexibility. We offer coverage to our insureds both on an E&S and
admitted basis. We believe this flexibility enables us to pivot effectively between E&S and admitted policies as customer needs and regulatory conditions dictate.
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Conservative risk management with an emphasis on lowering volatility. We focus on
the risk/reward of insurance underwriting, while maintaining a prudent investment policy. We employ conservative risk management practices and opportunistically purchase reinsurance to minimize our exposure to liability for individual
risks. In addition, we seek to maintain a diversified liquid investment portfolio to reduce overall balance sheet volatility. As of December 31, 2022, our investments primarily consisted of fixed income investments with an average
credit rating of “AA+” and an option adjusted duration of 3.5 years.
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Talented underwriters with broad expertise. Our underwriters have significant
experience managing account profitability across market cycles. With an average of over 28 years of experience, our senior underwriters possess the required expertise to respond appropriately to market forces.
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Controlled and disciplined underwriting. We underwrite substantially all policies
to our specific guidelines with our experienced, in-house underwriting team. We customize the coverages we offer, and continually monitor our markets and respond to changes in our markets by adjusting our pricing, product structures
and underwriting guidelines. By tailoring the terms and conditions of our policies, we align our actual underwriting risk with the profit of each insurance account that we write.
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Proactive claims handling. We employ a proactive claims handling philosophy that
utilizes an internal team of experienced in-house attorneys to manage and supervise our claims from inception until resolution. We pay what we owe, contest what we don't, and make sound judgment for those claims that fall in between.
Our proactive handling of claims reinforces our relationships with our customers and agents by demonstrating our willingness to defend our insureds aggressively and help them mitigate losses.
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Proven management team. Our senior management team has an average of over
26 years of experience in the insurance industry. Our senior management team has successfully created, managed and grown numerous insurance companies and books of business, and has longstanding relationships with many independent
agents and policyholders in our targeted markets.
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Ability to leverage technology to drive efficiency. We utilize a web-based
information technology system that creates greater organizational efficiency in our company. Leveraging the infrastructure of programmers and support staff of third-party vendors allows our in-house business analysts to focus on new
product development and roll-out. We believe this capability reduces our time to market for new products, enhances services for insureds, increases our ability to capture data, and reduces cost.
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Operational Risks
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Investment Risks
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Liquidity Risks
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Legal and Regulatory Risks
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Rating Agency Risks
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Exchange Offer and the New Offering Risks
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General Risk Factors
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For the majority of our policies, we are obligated to pay any covered loss that occurs while the policy is in force.
Accordingly, claims may be reported and develop many years after a policy has lapsed;
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Even when a claim is received, it may take considerable time to fully appreciate the extent of the covered loss suffered by
the insured and, consequently, estimates of loss associated with specific claims can increase over time;
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New theories of liability are enforced retroactively from time to time by courts;
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Volatility in the financial markets, economic events, weather events and other external factors may result in an increase in
the number of claims and the severity of the claims reported. In addition, elevated inflationary conditions would, among other things, drive loss costs to increase;
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When we enter new lines of business, or encounter new theories of claims liability, we may encounter an increase in claims
frequency and greater claims handling costs than we had anticipated; and
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Estimation of IBNR losses is a complex and inherently uncertain process which involves a considerable degree of judgment and
expertise, which adds to the overall difficulty of estimating loss reserves.
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Collect and properly analyze a substantial volume of data from our insureds;
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Develop, test and apply appropriate actuarial projections and rating formulas;
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Closely monitor and timely recognize changes in trends; and
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Project both frequency and severity of our insureds’ losses with reasonable accuracy.
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Insufficient or unreliable data;
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Incorrect or incomplete analysis of available data;
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Uncertainties generally inherent in estimates and assumptions;
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Our failure to implement appropriate actuarial projections and rating formulas or other pricing methodologies;
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Regulatory constraints on rate increases; and
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Our failure to accurately estimate investment yields and the duration of our liability for loss and loss adjustment expenses,
as well as unanticipated court decisions, legislation or regulatory action.
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An increase in capital-raising by companies in our lines of business, which could result in new entrants to our markets and
an excess of capital in the industry;
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The deregulation of commercial insurance lines in certain states and the possibility of federal regulatory reform of the
insurance industry, which could increase competition from standard carriers for our E&S lines of insurance business; and
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Changing practices caused by the Internet may lead to greater competition in the insurance business. Among the possible
changes are shifts in the way insurance is purchased. If our distribution model were to be significantly altered by changes in the way products are marketed, including, without limitation, through use of the Internet, it could have a
material adverse effect on our premiums, underwriting results and profits.
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An insurance holding company system’s ultimate controlling person submit an annual enterprise risk report to its domiciliary
state insurance regulator which identifies activities, circumstances or events involving one or more affiliates of an insurer that may have a material adverse effect upon the financial condition or liquidity of the insurer or its
insurance holding company system as a whole,
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A controlling person to submit prior notice to its domiciliary insurance regulator of a divestiture of control, and
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Insurers comply with certain minimum requirements for cost sharing and management agreements between the insurer and its
affiliates.
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If unfavorable financial, regulatory or market trends affect us, including excess market capacity;
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If we incur operating losses or significant investment portfolio losses;
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If we have unresolved issues with government regulators;
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If we are unable to retain our senior management or other key personnel;
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If A.M. Best or Kroll alters its capital adequacy assessment methodology in a manner that would adversely affect our rating.
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limiting our ability to satisfy our obligations with respect to the New Notes;
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increasing our vulnerability to general adverse economic and industry conditions;
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limiting our ability to obtain additional financing to fund future working capital, capital expenditures, and other general
corporate requirements;
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requiring a substantial portion of our cash flow from operations for the payment of principal of, and interest on, our
indebtedness and thereby reducing our ability to use our cash flow to fund working capital, capital expenditures and general corporate requirements; and
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limiting our flexibility in planning for, or reacting to, changes in our business and the industry; and putting us at a
disadvantage compared to competitors with less indebtedness.
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the number of holders of the New Notes;
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the interest of securities dealers in making a market for the New Notes;
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the overall market for debt securities;
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our financial performance and prospects; and
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the prospects for companies in our industry generally.
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United States interest rates. We expect that the market value of the New Notes will be affected by actual or anticipated
changes in interest rates in the United States. In general, if U.S. interest rates increase, the market value of the New Notes may decrease.
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Our credit ratings, financial condition and results. Actual or anticipated changes in our A.M. Best ratings, other credit
ratings, financial condition or results of operations may affect the market value of the New Notes.
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Our other existing and future liabilities. Existing and any future indebtedness and other obligations of our, or of our
subsidiaries, may affect the market value of the New Notes.
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General economic conditions. General economic conditions may affect the market value of the New Notes.
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Market for similar securities. The market for similar securities may affect the market value of the New Notes.
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Fund liquidity needs caused by underwriting or investment losses;
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Replace capital lost in the event of significant losses or adverse reserve development;
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•
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Satisfy letters of credit or guarantee bond requirements that may be imposed by our clients or by regulators;
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Meet rating agency or regulatory capital requirements; or
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Respond to competitive pressures.
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Permit the Board to issue up to 10 million shares of preferred stock, with any rights, preferences and privileges as they may
determine (including the right to approve an acquisition or other change in control);
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Provide that the authorized number of directors may be fixed only by the Board in accordance with our amended and restated
bylaws;
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Do not provide for cumulative voting rights (therefore allowing the holders of a majority of the shares entitled to vote in
any election of directors to elect all of the directors standing for election);
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Provide that all vacancies and newly created directorships may be filled by the affirmative vote of a majority of directors
then in office, even if less than a quorum;
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Prohibit removal of directors without cause;
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•
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Prohibit shareholders from calling special meetings of shareholders;
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Requires unanimous consent for shareholders to take action by written consent without approval of the action by our Board;
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•
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Provide that shareholders seeking to present proposals before a meeting of shareholders or to nominate candidates for
election as directors at a meeting of shareholders must provide advance notice in writing and also comply with specified requirements related to the form and content of a shareholder’s notice;
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•
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Require at least 80% supermajority shareholder approval to alter, amend or repeal certain provisions of our amended and
restated articles of incorporation; and
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Require at least 80% supermajority shareholder approval in order for shareholders to adopt, amend or repeal our amended and
restated bylaws.
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•
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on an actual basis; and
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•
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on an as adjusted basis to give effect to the issuance of New Notes in the Exchange Offer, assuming all of the outstanding
Existing Notes were validly tendered and accepted for exchange on March 31, 2023.
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March 31, 2023
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|||
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Actual
|
| |
As
Adjusted
|
|
| |
(dollars in thousands)
|
|||
Cash and cash equivalents
|
| |
$21,549
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| |
|
Debt
|
| |
|
| |
|
Senior Unsecured Notes*
|
| |
24,251
|
| |
|
Subordinated Notes*
|
| |
9,703
|
| |
|
Line of credit
|
| |
0
|
| |
|
Total liabilities
|
| |
270,879
|
| |
|
Shareholders' equity
|
| |
|
| |
|
Common stock
|
| |
97,968
|
| |
|
Accumulated deficit
|
| |
(59,759)
|
| |
|
Accumulated other comprehensive income (loss)
|
| |
(15,917)
|
| |
|
Total shareholders' equity
|
| |
22,292
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| |
|
Total capitalization
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$293,171
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| |
|
*
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Carried at face value of debt net of unamortized debt issuance costs on the consolidated balance sheets
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•
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delay the acceptance of Existing Notes tendered for exchange, for example, in order to allow for the rectification of any
irregularity or defect in the tender of Existing Notes, provided that, in any event we will promptly issue New Notes or return tendered Existing Notes after expiration or withdrawal of the Exchange Offer;
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•
|
extend the time period during which the Exchange Offer is open, by giving oral or written notice of an extension to the
holders of Existing Notes in the manner described below; during any extension, all Existing Notes previously tendered and not withdrawn will remain subject to the Exchange Offer;
|
•
|
waive any condition or amend any of the terms or conditions of the Exchange Offer, other than the condition that the
registration statement or, if applicable, a post-effective amendment, becomes effective under the Securities Act; and
|
•
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terminate the Exchange Offer, as described under “—Conditions for Completion of the
Exchange Offer” below.
|
•
|
a timely book-entry confirmation of your Existing Notes into the exchange agent’s account at the DTC book-entry transfer
facility;
|
•
|
an electronic confirmation of the submitting holder’s acceptance through DTC’s ATOP system; and
|
•
|
all other required documents, if any.
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•
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specify the name of the person who tendered the Existing Notes to be withdrawn;
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contain a statement that you are withdrawing your election to have your Existing Notes exchanged;
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be signed by the holder in the same manner as the by which the existing notes were tendered, including any required signature
guarantees; and
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if you delivered Existing Notes to the exchange agent, you must specify the name and number of the account at DTC to be
credited with the withdrawn existing notes and otherwise comply with the procedures of such facility.
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Neither the Exchange Offer nor the issuance of the New Notes in the Exchange Offer or the New Offering has been determined to
violate any applicable law or interpretation of the staff of the SEC, and no order, statute, rule, regulation, stay, decree, judgment or injunction shall have been proposed, enacted, entered, issued, promulgated, enforced or deemed
applicable by any court or governmental, regulatory or administrative agency or instrumentality that, in our sole judgment, either (a) would or might prohibit, prevent, restrict or delay consummation of the Exchange Offer or the New
Offering or (b) is, or is reasonably likely to be, materially adverse to Conifer’s business, operations, properties, condition (financial or otherwise), assets, liabilities or prospects;
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•
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Neither the trustee under the indenture governing the Existing Notes nor any holder of any Existing Notes nor any holder of
indebtedness of ours or any of our subsidiaries (or any agent or trustee therefor) shall have (a) asserted in any fashion that a default or event of default exists with respect to such Existing Notes or other indebtedness or would
result from the consummation of the Exchange Offer or (b) objected in any respect to, or taken action that could in our sole judgment adversely affect, the consummation of the Exchange Offer or shall have taken any action that
challenges the validity or effectiveness of the procedures used by us in the making of the Exchange Offer or the acceptance of some or all of the Existing Notes pursuant to the Exchange Offer;
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There does not exist, in our sole judgment, any actual or threatened legal impediment to the acceptance for exchange of, or
exchange of, the Existing Notes pursuant to the Exchange Offer, including the issuance of the New Notes;
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There has not occurred (a) any general suspension of, or limitation on prices for, trading in securities in the U.S. or other
major securities or financial markets, (b) a material impairment in the trading market for debt securities, (c) a declaration of a banking moratorium or any suspension of payments with respect to banks in the U.S. or other major
financial markets, (d) any limitation by any government or governmental, administrative or regulatory authority or agency, domestic or foreign, or other event that, in our sole judgment might affect the extension of credit by banks or
other lending institutions, (e) a commencement of a war, armed hostilities, terrorist acts or other national or international calamity directly or indirectly involving the U.S. or (f) in the case of any of the foregoing existing on the
date hereof, in our sole judgment, a material acceleration or worsening thereof; and
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There shall not have occurred or be likely to occur any event or condition affecting us or any of our subsidiaries
(including, without limitation, the consummation of the Exchange Offer) that, in our sole judgment (a) is, or could reasonably be expected to be, materially adverse to Conifer’s business, operations, properties, condition (financial or
otherwise), assets, liabilities, or prospects, taken as a whole, (b) would or might prohibit, prevent, restrict or delay consummation of the Exchange Offer, (c) would materially impair the contemplated benefits of the Exchange Offer or
(d) would result in a default or event of default under any indenture or agreement governing any other indebtedness of the Issuer or any of its subsidiaries or any other material agreement of ours or any of our subsidiaries; and
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default in the payment of any installment of interest on the New Notes as and when due and payable, and continuance of such
default for a period of 30 days;
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default in the payment of the principal on the New Notes as and when due and payable either at maturity, upon redemption, by
declaration of acceleration or otherwise;
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failure to duly observe or perform any of the covenants, warranties or agreements on the part of Conifer in respect of the
New Notes in the New Indenture (other than a covenant, warranty or agreement, a default in whose performance or whose breach is specifically dealt with in the section of the New Indenture governing events of default) and the continuance
of such default or breach for a period of 90 days after the date on which written notice of such failure, specifying such failure and requiring the same to be remedied, shall have been given to Conifer by the New Notes Trustee, by
registered mail, or to Conifer and the New Notes Trustee by the holders of at least 25% in aggregate principal amount of the New Notes;
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if any event of default as defined in any mortgage, indenture or instrument under which there may be issued, or by which
there may be secured or evidenced, any indebtedness of Conifer, whether such indebtedness now exists or is hereafter created or incurred, happens and consists of default in the payment of more than $15 million in principal amount of
such indebtedness at the maturity thereof, after giving effect to any applicable grace period, or results in such indebtedness in principal amount in excess of $15 million becoming or being declared due and payable prior to the date on
which it would otherwise become due and payable, and such default is not cured or such acceleration is not rescinded or annulled within a period of 30 days after the date on which written notice of such failure, specifying such failure
and requiring the same to be remedied, shall have been given to Conifer by the New Notes Trustee, by registered mail, or to Conifer and the New Notes Trustee by the holders of at least 25% in aggregate principal amount of the New Notes;
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the failure by Conifer within 60 days to pay, bond or otherwise discharge any uninsured judgment or court order for the
payment of money in excess of $15 million, which is not stayed on appeal or is not otherwise being appropriately contested in good faith;
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a decree or order by a court having jurisdiction in the premises shall have been entered adjudging Conifer bankrupt or
insolvent, or approving as properly filed a petition seeking reorganization of Conifer under the Federal bankruptcy laws or any other similar applicable Federal or state law, and such decree or order shall have continued undischarged
and unstayed for a period of 60 days; or a decree or order of a court having jurisdiction in the premises for the appointment of a receiver or liquidator or trustee or assignee or other similar official in bankruptcy or insolvency of
Conifer or of all or substantially all of its property, or for the winding up or liquidation of its affairs, shall have been entered, and such decree or order shall have continued undischarged and unstayed for a period of 60 days; or
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Conifer shall institute proceedings to be adjudicated voluntarily bankrupt, or shall consent to the filing of a bankruptcy
proceeding against it, or shall file a petition or answer or consent seeking an arrangement or a reorganization under the Federal bankruptcy laws or any other similar applicable Federal or state law, or shall consent to the filing of
any such petition, or shall consent to the appointment of a receiver or liquidator or trustee or assignee or other similar official in bankruptcy or insolvency of it or of all or substantially all of its property, or shall make an
assignment for the benefit of creditors, or shall admit in writing its inability to pay its debts generally as they become due.
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such holder has previously given the New Notes Trustee written notice of the occurrence of an event of default and the
continuance thereof;
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holders of not less than 25% in aggregate principal amount of the outstanding New Notes have made a written request to the
New Notes Trustee to pursue the remedy;
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such holders provide to the New Notes Trustee such indemnity as the New Notes Trustee may require against any loss, liability
or expense;
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the New Notes Trustee has not complied with such request within 60 days after receipt of the request and the provision of
security or indemnity reasonably acceptable to the New Notes Trustee; and
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the holders of a majority in aggregate principal amount of the outstanding New Notes do not give the New Notes Trustee a
direction inconsistent with the request within such 60-day period.
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rank senior in right of payment to any of Conifer existing and future indebtedness and other obligations that are, by their
terms, expressly subordinated or junior in right of payment to the New Notes;
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rank equally in right of payment to all of Conifer existing and future unsecured indebtedness and other obligations that are
not, by their terms, expressly subordinated or junior in right of payment to the New Notes;
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be effectively subordinated to all of Conifer existing and future secured indebtedness and other obligations to the extent of
the value of the collateral securing such secured indebtedness and other obligations; and
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be structurally subordinated to the indebtedness and other obligations of all of Conifer subsidiaries.
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immediately after such consolidation, merger, sale, conveyance or lease, the person formed by or surviving any such
consolidation or merger, or to which such sale, conveyance or lease is made, is not in default in the performance or observance of any of the terms, covenants and conditions of the New Indenture to be kept or performed by Conifer; and
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the due and punctual payment of the principal of and premium, if any, and interest on the New Notes, and the due and punctual
performance and observance of all of the covenants and conditions of the New Indenture to be performed or observed by Conifer, are expressly assumed by the person (if other than Conifer) formed by such consolidation, or into which
Conifer is merged, or by the person which shall have acquired or leased such property.
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prohibits Conifer from, directly or indirectly, selling, assigning, pledging, transferring or otherwise disposing, and
Conifer cannot permit any of its subsidiaries to, directly or indirectly, sell, pledge, assign, transfer or otherwise dispose of, shares of voting capital stock, or securities convertible into voting capital stock, or options, warrants
or rights to subscribe for or purchase capital stock of a Material Subsidiary (as defined below); and
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prohibits Conifer from permitting a Material Subsidiary to issue, sell or otherwise dispose of any shares of its voting
capital stock or securities convertible into its voting capital stock or options, warrants or rights to subscribe for or purchase its voting capital stock, unless Conifer will own, directly or indirectly, at least 90% of the issued and
outstanding voting stock of the Material Subsidiary after giving effect to that transaction. The covenant described in the preceding sentence does not apply to any transaction of the type described above under “— Merger, Consolidation,
Sale, Lease or Conveyance.”
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merge or consolidate with or into any corporation or other person, unless such Material Subsidiary is the surviving
corporation or person, or unless Conifer will own, directly or indirectly, at least 90% of the surviving corporation’s issued and outstanding voting stock;
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lease, sell, assign or transfer all or substantially all of its properties and assets to any corporation or other person
(other than us), unless Conifer will own, directly or indirectly, at least 90% of the issued and outstanding voting stock of that corporation or other person; or
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pay any dividend in a Material Subsidiary’s voting capital stock or make any other distribution in its voting capital stock,
other than to Conifer or its other subsidiaries, unless the Material Subsidiary to which the transaction relates, after obtaining any necessary regulatory approvals, unconditionally guarantees payment of the principal and any premium
and interest on the New Notes.
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pledge, encumbrance or lien to secure Conifer’s indebtedness or the indebtedness of a subsidiary as part of the purchase
price of such shares of voting stock, or incurred prior to, at the time of or within 120 days after acquisition thereof for the purpose of financing all or any part of the purchase price thereof;
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lien for taxes, assessments or other government charges or levies (i) which are not yet due or payable without penalty,
(ii) which Conifer is contesting in good faith by appropriate proceedings so long as Conifer has set aside on its books such reserves as shall be required in respect thereof in conformity with generally accepted accounting principles or
(iii) which secure obligations of less than $500,000 in amount; or
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lien of any judgment, if that judgment (i) is discharged, or stayed on appeal or otherwise, within 90 days, (ii) is currently
being contested in good faith by appropriate proceedings so long as Conifer has set aside on its books such reserves as shall be required in respect thereof in conformity with generally accepted accounting principles or (iii) involves
claims of less than $500,000.
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The holders of not less than a majority in aggregate principal amount of the New Notes may waive compliance in a particular
instance by Conifer with any provision of the New Indenture or the New Notes, including the foregoing covenants, except as otherwise stated below under “— Modification of the New Indenture.”
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(1)
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either: (a) all New Notes that have been authenticated and delivered, except lost, stolen or destroyed New Notes that have
been replaced or paid and New Notes for which payment has been deposited in trust or segregated and held in trust by Conifer and thereafter repaid to Conifer, have been delivered to the New Notes Trustee for cancellation; or (b) all
Notes that have not been delivered to the New Notes Trustee for cancellation (i) have become due and payable at their stated maturity, (ii) shall become due and payable within one year or (iii) if redeemable at Conifer’s option, are to
be called for redemption within one year under arrangements satisfactory to the New Notes Trustee for the giving of notice of redemption by the New Notes Trustee in the name, and at the expense, of Conifer and Conifer has irrevocably
deposited with the New Notes Trustee or the paying agent, in trust, for the benefit of the holders of the New Notes, cash in United States dollars and/or non-callable government securities in such amounts as will be sufficient, in the
opinion of a nationally recognized firm of independent public accountants, to pay and discharge the entire indebtedness on the New Notes not delivered to the New Notes Trustee for cancellation for principal, premium, if any, and accrued
but unpaid interest, to the date of maturity or redemption, as the case may be;
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(2)
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Conifer has paid all sums payable by it under the New Indenture with respect to the New Notes;
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(3)
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Conifer has delivered irrevocable instructions to the New Notes Trustee to apply the deposited money toward the payment of
the New Notes at maturity or on the redemption date, as the case may be; and
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(4)
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Conifer has delivered to the New Notes Trustee an officers’ certificate and an opinion of counsel stating that the conditions
precedent to the satisfaction and discharge of the New Notes have been satisfied.
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(1)
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Conifer has irrevocably deposited with the New Notes Trustee, in trust, cash in United States dollars and/or non-callable
government securities that will provide funds in amount sufficient, without reinvestment, in the opinion of a nationally recognized public accounting firm, to pay the principal of, premium, if any, and accrued interest on the New Notes
at the time such payments are due or on the applicable redemption date in accordance with the terms of the New Indenture;
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(2)
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Conifer has delivered to the New Notes Trustee: (i) an opinion of counsel to the effect that beneficial owners of the New
Notes will not recognize income, gain or loss for federal income tax purposes as a result of the defeasance and will be subject to federal income tax on the same amounts and in the same manner and at the same times as would have been
the case if such defeasance had not occurred, which opinion of counsel must be based upon a ruling of the Internal Revenue Service to the same effect or a change in applicable federal income tax law or related treasury regulations after
the date of the New Indenture; and (ii) an opinion of counsel to the effect that the defeasance trust does not constitute an “investment company” within the meaning of the Investment Company Act of 1940 and, after the passage of 91 days
following the deposit, the trust funds will not be subject to the effect of any applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors’ rights generally;
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(3)
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no default (as defined above) or event of default will have occurred and be continuing on the date of such deposit, or
insofar as events of default due to certain events of bankruptcy, insolvency or reorganization in respect of Conifer are concerned, during the period ending on the 91st day after the date of such deposit;
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(4)
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Conifer shall have delivered to the New Notes Trustee an officers’ certificate and an opinion of counsel, each stating that,
subject to certain assumptions and exclusions, all conditions precedent provided for or relating to the defeasance have been complied with; and
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(5)
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the New Notes Trustee shall have received such other documents, assurances and opinions of counsel as the New Notes Trustee
shall have reasonably required.
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change the stated maturity of the principal of, or any premium or any installment of interest on, the New Notes;
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reduce the principal amount of, or the rate, or modify the calculation of such rate, of interest on, or any premium payable
upon the redemption of, the New Notes;
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change the redemption provisions of the New Notes;
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change the place of payment or the coin or currency in which the principal of or any premium or interest on the New Notes is
payable;
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impair the right to institute suit for the enforcement of any payment on or after the stated maturity of the New Notes or, in
the case of redemption, on or after the redemption date;
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modify any of the provisions of the indenture relating to the offices for notices and payments, filling vacancies in the New
Notes Trustee’s office, and paying agent provisions in a manner adverse to holders of the debt securities; or
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reduce the percentage of New Notes, the holders of which are required to:
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consent to any supplemental indenture;
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rescind and annul a declaration that the New Notes are due and payable as a result of the occurrence of an event of default;
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waive any past event of default under the New Indenture and its consequences; and
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waive compliance with other specified provisions of the New Indenture.
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to evidence the succession of another corporation to Conifer under the New Indenture, or successive successions, and the
assumption by the successor corporation of our covenants, agreements and obligations pursuant to the New Indenture;
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to add to the covenants applicable to Conifer such further covenants, restrictions, conditions or provisions as our board of
directors and the New Notes Trustee shall consider to be for the protection of the holders of the New Notes, and to make the occurrence, or the occurrence and continuance, of a default in any of such additional covenants, restrictions,
conditions or provisions a default or event of default with respect to such series permitting the enforcement of all or any of the several remedies provided in the New Indenture; provided, however, that in respect of any such additional
covenant, restriction or condition, such supplemental New Indenture may provide for a particular period of grace after default (which period may be shorter or longer than that allowed in the case of other defaults) or may provide for an
immediate enforcement upon such default or may limit the remedies available to the New Notes Trustee upon such default;
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to cure any ambiguity or to correct or supplement any provision contained in the New Indenture or in any supplemental New
Indenture which may be defective or inconsistent with any other provision contained in the New Indenture or in any supplemental indenture or any description of such provision contained in this “Description
of the New Notes;”
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to convey, transfer, assign, mortgage or pledge any property to or with the New Notes Trustee;
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to make other provisions in regard to matters or questions arising under the New Indenture as shall not adversely affect the
interests of the holders and to make any change that would provide additional rights or benefits to the holders of the New Notes or that does not adversely affect the legal rights under the New Indenture of any such holder;
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to evidence and provide for the acceptance of appointment by another corporation as a successor trustee under the New
Indenture with respect to the New Notes and to add to or change any of the provisions of the New Indenture as shall be necessary to provide for or facilitate the administration of the trusts under the New Indenture by more than one
trustee;
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to modify, amend or supplement the New Indenture in such a manner as to permit the qualification of any supplemental
indenture under the TIA as then in effect, except that nothing contained in the New Indenture shall permit or authorize the inclusion in any supplemental indenture of the provisions referred to in Section 316(a)(2) of the TIA;
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to provide for the issuance under the New Indenture of debt securities in coupon form (including debt securities registrable
as to principal only) and to provide for exchangeability of such debt securities with debt securities of the same series issued hereunder in fully registered form and to make all appropriate changes for such purpose;
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to change or eliminate any of the provisions of the New Indenture; provided, however, that any such change or elimination
shall become effective only when there is no debt security outstanding of any series created prior to the execution of such supplemental indenture which is entitled to the benefit of such provision; and
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to establish any additional form of debt security and to provide for the issuance of any additional series of debt
securities.
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by notification in writing by the holders of a majority in aggregate principal amount of the outstanding New Notes; or
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by Conifer if the New Notes Trustee (i) fails to comply with the obligations imposed upon it under the TIA; (ii) is not
organized and doing business under the laws of the United States or any state thereof; (iii) becomes incapable of acting as Trustee; or (iv) a court takes certain actions with respect to such New Notes Trustee relating to bankruptcy or
insolvency.
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upon deposit of the global notes, DTC will credit the accounts of participants designated by the underwriters with portions
of the principal amount of the global notes; and
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ownership of interests in the global notes will be shown on, and the transfer of ownership of the global notes will be
effected only through, records maintained by DTC (with respect to participants) or by participants and indirect participants (with respect to other owners of beneficial interests in the global notes).
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any aspect of DTC’s records or any participant’s or indirect participant’s records relating to, or payments made on account
of, beneficial ownership interests in the global notes, or for maintaining, supervising or reviewing any of DTC’s records or any participant’s or indirect participant’s records relating to the beneficial ownership interests in the
global notes; or
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any other matter relating to the actions and practices of DTC or any of its participants or indirect participants.
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DTC notifies Conifer that it is unwilling or unable to continue as depositary for the global notes and Conifer fails to
appoint a successor depositary within 90 days of receipt of DTC’s notice, or DTC has ceased to be a clearing agency registered under the Exchange Act and Conifer fails to appoint a successor depositary within 90 days of becoming aware
of this condition;
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at Conifer’s request, DTC notifies holders of the New Notes that they may utilize DTC’s procedures to cause the New Notes to
be issued in certificated form, and such holders request such issuance; or
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an event of default, or any event which after notice or lapse of time or both would be an event of default, exists under the
New Indenture and a request is made by DTC or one of its participants.
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default in the payment of any installment of interest on the Existing Notes as and when due and payable, and continuance of
such default for a period of 30 days;
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default in the payment of the principal on the Existing Notes as and when due and payable either at maturity, upon
redemption, by declaration of acceleration or otherwise;
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failure to duly observe or perform any of the covenants, warranties or agreements on the part of Conifer in respect of the
Existing Notes in the Existing Indenture (other than a covenant, warranty or agreement, a default in whose performance or whose breach is specifically dealt with in the section of the Existing Indenture governing events of default) and
the continuance of such default or breach for a period of 90 days after the date on which written notice of such failure, specifying such failure and requiring the same to be remedied, shall have been given to Conifer by the Existing
Notes Trustee, by registered mail, or to Conifer and the Existing Notes Trustee by the holders of at least 25% in aggregate principal amount of the Existing Notes;
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•
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if any event of default as defined in any mortgage, indenture or instrument under which there may be issued, or by which
there may be secured or evidenced, any indebtedness of Conifer, whether such indebtedness now exists or is hereafter created or incurred, happens and consists of default in the payment of more than $15 million in principal amount of
such indebtedness at the maturity thereof, after giving effect to any applicable grace period, or results in such indebtedness in principal amount in excess of $15 million becoming or being declared due and payable prior to the date on
which it would otherwise become due and payable, and such default is not cured or such acceleration is not rescinded or annulled
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the failure by Conifer within 60 days to pay, bond or otherwise discharge any uninsured judgment or court order for the
payment of money in excess of $15 million, which is not stayed on appeal or is not otherwise being appropriately contested in good faith;
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a decree or order by a court having jurisdiction in the premises shall have been entered adjudging Conifer bankrupt or
insolvent, or approving as properly filed a petition seeking reorganization of Conifer under the Federal bankruptcy laws or any other similar applicable Federal or state law, and such decree or order shall have continued undischarged
and unstayed for a period of 60 days; or a decree or order of a court having jurisdiction in the premises for the appointment of a receiver or liquidator or trustee or assignee or other similar official in bankruptcy or insolvency of
Conifer or of all or substantially all of its property, or for the winding up or liquidation of its affairs, shall have been entered, and such decree or order shall have continued undischarged and unstayed for a period of 60 days; or
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•
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Conifer shall institute proceedings to be adjudicated voluntarily bankrupt, or shall consent to the filing of a bankruptcy
proceeding against it, or shall file a petition or answer or consent seeking an arrangement or a reorganization under the Federal bankruptcy laws or any other similar applicable Federal or state law, or shall consent to the filing of
any such petition, or shall consent to the appointment of a receiver or liquidator or trustee or assignee or other similar official in bankruptcy or insolvency of it or of all or substantially all of its property, or shall make an
assignment for the benefit of creditors, or shall admit in writing its inability to pay its debts generally as they become due.
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such holder has previously given the Existing Notes Trustee written notice of the occurrence of an event of default and the
continuance thereof;
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•
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holders of not less than 25% in aggregate principal amount of the outstanding Notes have made a written request to the
Existing Notes Trustee to pursue the remedy;
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•
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such holders provide to the Existing Notes Trustee such reasonable indemnity as the Existing Notes Trustee may require
against any loss, liability or expense;
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•
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the Existing Notes Trustee has not complied with such request within 60 days after receipt of the request and the provision
of security or indemnity reasonably acceptable to the Existing Notes Trustee; and
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the holders of a majority in aggregate principal amount of the outstanding Existing Notes do not give the Existing Notes
Trustee a direction inconsistent with the request within such 60-day period.
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rank senior in right of payment to any of Conifer existing and future indebtedness and other obligations that are, by their
terms, expressly subordinated or junior in right of payment to the Existing Notes;
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rank equally in right of payment to all of Conifer existing and future unsecured indebtedness and other obligations that are
not, by their terms, expressly subordinated or junior in right of payment to the Existing Notes;
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are effectively subordinated to all of Conifer existing and future secured indebtedness and other obligations to the extent
of the value of the collateral securing such secured indebtedness and other obligations; and
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are structurally subordinated to the indebtedness and other obligations of all of Conifer subsidiaries.
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immediately after such consolidation, merger, sale, conveyance or lease, the person formed by or surviving any such
consolidation or merger, or to which such sale, conveyance or lease is made, is not in default in the performance or observance of any of the terms, covenants and conditions of the Existing Indenture to be kept or performed by Conifer;
and
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•
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the due and punctual payment of the principal of and premium, if any, and interest on the Existing Notes, and the due and
punctual performance and observance of all of the covenants and conditions of the Existing Indenture to be performed or observed by Conifer, are expressly assumed by the person (if other than Conifer) formed by such consolidation, or
into which Conifer is merged, or by the person which shall have acquired or leased such property.
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prohibits Conifer from, directly or indirectly, selling, assigning, pledging, transferring or otherwise disposing, and
Conifer cannot permit any of its subsidiaries to, directly or indirectly, sell, pledge, assign, transfer or otherwise dispose of, shares of voting capital stock, or securities convertible into voting capital stock, or options, warrants
or rights to subscribe for or purchase capital stock of a Material Subsidiary (as defined below); and
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prohibits Conifer from permitting a Material Subsidiary to issue, sell or otherwise dispose of any shares of its voting
capital stock or securities convertible into its voting capital stock or options, warrants or rights to subscribe for or purchase its voting capital stock, unless Conifer will own, directly or indirectly, at least 90% of the issued and
outstanding voting stock of the Material Subsidiary after giving effect to that transaction. The covenant described in the preceding sentence does not apply to any transaction of the type described above under “— Merger, Consolidation,
Sale, Lease or Conveyance.”
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•
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merge or consolidate with or into any corporation or other person, unless such Material Subsidiary is the surviving
corporation or person, or unless Conifer will own, directly or indirectly, at least 90% of the surviving corporation’s issued and outstanding voting stock;
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•
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lease, sell, assign or transfer all or substantially all of its properties and assets to any corporation or other person
(other than us), unless Conifer will own, directly or indirectly, at least 90% of the issued and outstanding voting stock of that corporation or other person; or
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pay any dividend in a Material Subsidiary’s voting capital stock or make any other distribution in its voting capital stock,
other than to Conifer or its other subsidiaries, unless the Material Subsidiary to which the transaction relates, after obtaining any necessary regulatory approvals, unconditionally guarantees payment of the principal and any premium
and interest on the Existing Notes.
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•
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pledge, encumbrance or lien to secure Conifer’s indebtedness or the indebtedness of a subsidiary as part of the purchase
price of such shares of voting stock, or incurred prior to, at the time of or within 120 days after acquisition thereof for the purpose of financing all or any part of the purchase price thereof;
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lien for taxes, assessments or other government charges or levies (i) which are not yet due or payable without penalty,
(ii) which Conifer is contesting in good faith by appropriate proceedings so long as Conifer has set aside on its books such reserves as shall be required in respect thereof in conformity with generally accepted accounting principles or
(iii) which secure obligations of less than $500,000 in amount; or
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•
|
lien of any judgment, if that judgment (i) is discharged, or stayed on appeal or otherwise, within 90 days, (ii) is currently
being contested in good faith by appropriate proceedings so long as Conifer has set aside on its books such reserves as shall be required in respect thereof in conformity with generally accepted accounting principles or (iii) involves
claims of less than $500,000.
|
•
|
The holders of not less than a majority in aggregate principal amount of the Existing Notes may waive compliance in a
particular instance by Conifer with any provision of the Existing Indenture or the Existing Notes, including the foregoing covenants, except as otherwise stated below under “— Modification of the Existing Indenture.”
|
(1)
|
either: (a) all Existing Notes that have been authenticated and delivered, except lost, stolen or destroyed Existing Notes
that have been replaced or paid and Existing Notes for which payment has been deposited in trust or segregated and held in trust by Conifer and thereafter repaid to Conifer, have been delivered to the Existing Notes Trustee for
cancellation; or (b) all Existing Notes that have not been delivered to the Existing Notes Trustee for cancellation (i) have become due and payable at their stated maturity, (ii) shall become due and payable within one year or (iii) if
redeemable at Conifer’s option, are to be called for redemption within one year under arrangements satisfactory to the Existing Notes Trustee for the giving of notice of redemption by the Existing Notes Trustee in the name, and at the
expense, of Conifer and Conifer has irrevocably deposited with the Existing Notes Trustee or the paying agent, in trust, for the benefit of the holders of the Existing Notes, cash in United States dollars and/or non-callable government
securities in such amounts as will be sufficient, in the opinion of a nationally recognized firm of independent public accountants, to pay and discharge the entire indebtedness on the Existing Notes not delivered to the Existing Notes
Trustee for cancellation for principal, premium, if any, and accrued but unpaid interest, to the date of maturity or redemption, as the case may be;
|
(2)
|
Conifer has paid all sums payable by it under the Existing Indenture with respect to the Existing Notes;
|
(3)
|
Conifer has delivered irrevocable instructions to the Existing Notes Trustee to apply the deposited money toward the payment
of the Existing Notes at maturity or on the redemption date, as the case may be; and
|
(4)
|
Conifer has delivered to the Existing Notes Trustee an officers’ certificate and an opinion of counsel stating that the
conditions precedent to the satisfaction and discharge of the Existing Notes have been satisfied.
|
(1)
|
Conifer has irrevocably deposited with the Existing Notes Trustee, in trust, cash in United States dollars and/or
non-callable government securities that will provide funds in amount sufficient, without reinvestment, in the opinion of a nationally recognized public accounting firm, to pay the principal of, premium, if any, and accrued interest on
the Existing Notes at the time such payments are due or on the applicable redemption date in accordance with the terms of the Existing Indenture;
|
(2)
|
Conifer has delivered to the Existing Notes Trustee: (i) an opinion of counsel to the effect that beneficial owners of the
Existing Notes will not recognize income, gain or loss for federal income tax purposes as a result of the defeasance and will be subject to federal income tax on the same amounts and in the same manner and at the same times as would
have been the case if such defeasance had not occurred, which opinion of counsel must be based upon a ruling of the Internal Revenue Service to the same effect or a change in applicable federal income tax law or related treasury
regulations after the date of the Existing Indenture; and (ii) an opinion of counsel to the effect that the defeasance trust does not constitute an “investment company” within the meaning of the Investment Company Act of 1940 and, after
the passage of 91 days following the deposit, the trust funds will not be subject to the effect of any applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors’ rights generally;
|
(3)
|
no default (as defined above) or event of default will have occurred and be continuing on the date of such deposit, or
insofar as events of default due to certain events of bankruptcy, insolvency or reorganization in respect of Conifer are concerned, during the period ending on the 91st day after the date of such deposit;
|
(4)
|
Conifer shall have delivered to the Existing Notes Trustee an officers’ certificate and an opinion of counsel, each stating
that, subject to certain assumptions and exclusions, all conditions precedent provided for or relating to the defeasance have been complied with; and
|
(5)
|
the Existing Notes Trustee shall have received such other documents, assurances and opinions of counsel as the Existing Notes
Trustee shall have reasonably required.
|
•
|
change the stated maturity of the principal of, or any premium or any installment of interest on, the Existing Notes;
|
•
|
reduce the principal amount of, or the rate, or modify the calculation of such rate, of interest on, or any premium payable
upon the redemption of, the Existing Notes;
|
•
|
change the redemption provisions of the Existing Notes;
|
•
|
change the place of payment or the coin or currency in which the principal of or any premium or interest on the Existing
Notes is payable;
|
•
|
impair the right to institute suit for the enforcement of any payment on or after the stated maturity of the Existing Notes
or, in the case of redemption, on or after the redemption date;
|
•
|
modify any of the provisions of the Existing Indenture relating to the offices for notices and payments, filling vacancies in
the Existing Notes Trustee’s office, and paying agent provisions in a manner adverse to holders of the debt securities; or
|
•
|
reduce the percentage of Existing Notes, the holders of which are required to:
|
•
|
consent to any supplemental indenture;
|
•
|
rescind and annul a declaration that the Existing Notes are due and payable as a result of the occurrence of an event of
default;
|
•
|
waive any past event of default under the Existing Indenture and its consequences; and
|
•
|
waive compliance with other specified provisions of the Existing Indenture.
|
•
|
to evidence the succession of another corporation to Conifer under the Existing Indenture, or successive successions, and the
assumption by the successor corporation of our covenants, agreements and obligations pursuant to the Existing Indenture;
|
•
|
to add to the covenants applicable to Conifer such further covenants, restrictions, conditions or provisions as our board of
directors and the Existing Notes Trustee shall consider to be for the protection of the holders of the Existing Notes, and to make the occurrence, or the occurrence and continuance, of a default in any of such additional covenants,
restrictions, conditions or provisions a default or event of default with respect to such series permitting the enforcement of all or any of the several remedies provided in the Existing Indenture; provided, however, that in respect of
any such additional covenant, restriction or condition, such supplemental indenture may provide for a particular period of grace after default (which period may be shorter or longer than that allowed in the case of other defaults) or
may provide for an immediate enforcement upon such default or may limit the remedies available to the Existing Notes Trustee upon such default;
|
•
|
to cure any ambiguity or to correct or supplement any provision contained in the Existing Indenture or in any supplemental
indenture which may be defective or inconsistent with any other provision contained in the Existing Indenture or in any supplemental indenture or any description of such provision contained in this “Description of the Existing Notes;”
|
•
|
to convey, transfer, assign, mortgage or pledge any property to or with the Existing Notes Trustee;
|
•
|
to make other provisions in regard to matters or questions arising under the Existing Indenture as shall not adversely affect
the interests of the holders and to make any change that would provide additional rights or benefits to the holders of the Existing Notes or that does not adversely affect the legal rights under the Existing Indenture of any such
holder;
|
•
|
to evidence and provide for the acceptance of appointment by another corporation as a successor trustee under the Existing
Indenture with respect to the Existing Notes and to add to or change any of the provisions of the Existing Indenture as shall be necessary to provide for or facilitate the administration of the trusts under the indenture by more than
one trustee;
|
•
|
to modify, amend or supplement the Existing Indenture in such a manner as to permit the qualification of any supplemental
indenture under the TIA as then in effect, except that nothing contained in the Existing Indenture shall permit or authorize the inclusion in any supplemental indenture of the provisions referred to in Section 316(a)(2) of the TIA;
|
•
|
to provide for the issuance under the Existing Indenture of debt securities in coupon form (including debt securities
registrable as to principal only) and to provide for exchangeability of such debt securities with debt securities of the same series issued hereunder in fully registered form and to make all appropriate changes for such purpose;
|
•
|
to change or eliminate any of the provisions of the Existing Indenture; provided, however, that any such change or
elimination shall become effective only when there is no debt security outstanding of any series created prior to the execution of such supplemental indenture which is entitled to the benefit of such provision; and
|
•
|
to establish any additional form of debt security and to provide for the issuance of any additional series of debt
securities.
|
•
|
by notification in writing by the holders of a majority in aggregate principal amount of the outstanding Existing Notes; or
|
•
|
by Conifer if the Existing Notes Trustee (i) fails to comply with the obligations imposed upon it under the TIA; (ii) is not
organized and doing business under the laws of the United States or any state thereof; (iii) becomes incapable of acting as Existing Notes Trustee; or (iv) a court takes certain actions with respect to such Existing Notes Trustee
relating to bankruptcy or insolvency.
|
•
|
upon deposit of the global notes, DTC will credit the accounts of participants designated by the underwriters with portions
of the principal amount of the global notes; and
|
•
|
ownership of interests in the global notes will be shown on, and the transfer of ownership of the global notes will be
effected only through, records maintained by DTC (with respect to participants) or by participants and indirect participants (with respect to other owners of beneficial interests in the global notes).
|
•
|
any aspect of DTC’s records or any participant’s or indirect participant’s records relating to, or payments made on account
of, beneficial ownership interests in the global notes, or for maintaining, supervising or reviewing any of DTC’s records or any participant’s or indirect participant’s records relating to the beneficial ownership interests in the
global notes; or
|
•
|
any other matter relating to the actions and practices of DTC or any of its participants or indirect participants.
|
•
|
DTC notifies Conifer that it is unwilling or unable to continue as depositary for the global notes and Conifer fails to
appoint a successor depositary within 90 days of receipt of DTC’s notice, or DTC has ceased to be a clearing agency registered under the Exchange Act and Conifer fails to appoint a successor depositary within 90 days of becoming aware
of this condition;
|
•
|
at Conifer’s request, DTC notifies holders of the Existing Notes that they may utilize DTC’s procedures to cause the Existing
Notes to be issued in certificated form, and such holders request such issuance; or
|
•
|
an event of default, or any event which after notice or lapse of time or both would be an event of default, exists under the
Existing Indenture and a request is made by DTC or one of its participants.
|
•
|
An individual who is a citizen or resident of the United States;
|
•
|
a corporation (including an entity treated as a corporation for U.S. federal income tax purposes) created or organized in or
under the laws of the United States or of any state of the United States or the District of Columbia;
|
•
|
an estate, the income of which is subject to U.S. federal income taxation regardless of its source; or
|
•
|
a trust if (i) a court within the United States is able to exercise primary supervision over the administration of the trust
and one or more U.S. persons have the authority to control all substantial decisions of the trust or (ii) it has a valid election in effect under applicable U.S. Treasury regulations to be treated as a “United States person.”
|
•
|
a Non-U.S. Holder does not actually or constructively own 10% or more of our stock within the meaning of 871(h)(3) of the
Code;
|
•
|
a Non-U.S. Holder is not a “controlled foreign corporation” for U.S. federal income tax purposes that is related to us
(directly or indirectly) through ownership;
|
•
|
a Non-U.S. Holder is not a bank extending credit under a loan agreement in the ordinary course of its trade or business;
|
•
|
the Non-U.S. Holder satisfies the certification requirements described below; and
|
•
|
such interest is not effectively connected with the conduct of a trade or business in the United States by a Non-U.S. Holder.
|
|
| |
Years Ended December 31,
|
|||||||||
|
| |
2022
|
| |
2021
|
| |
$ Change
|
| |
% Change
|
Gross written premiums
|
| |
$138,019
|
| |
$132,095
|
| |
$5,924
|
| |
4.5%
|
|
| |
|
| |
|
| |
|
| |
|
Net written premiums
|
| |
$91,232
|
| |
$101,429
|
| |
$(10,197)
|
| |
(10.1%)
|
|
| |
|
| |
|
| |
|
| |
|
Net earned premiums
|
| |
$96,711
|
| |
$98,802
|
| |
$(2,091)
|
| |
(2.1%)
|
Other income
|
| |
2,768
|
| |
2,671
|
| |
97
|
| |
3.6%
|
Losses and loss adjustment expenses, net
|
| |
81,440
|
| |
69,861
|
| |
11,579
|
| |
16.6%
|
Policy acquisition costs
|
| |
22,179
|
| |
28,451
|
| |
(6,272)
|
| |
(22.0%)
|
Operating expenses
|
| |
18,789
|
| |
16,509
|
| |
2,280
|
| |
13.8%
|
Loss portfolio transfer risk fee
|
| |
5,400
|
| |
—
|
| |
5,400
|
| |
*
|
Underwriting gain (loss)
|
| |
(28,329)
|
| |
(13,348)
|
| |
(14,981)
|
| |
(112.2%)
|
Net investment income
|
| |
3,043
|
| |
1,968
|
| |
1,075
|
| |
54.6%
|
Net realized investment gains (losses)
|
| |
(1,505)
|
| |
2,878
|
| |
(4,383)
|
| |
*
|
Change in fair value of equity securities
|
| |
403
|
| |
(2,020)
|
| |
2,423
|
| |
*
|
Gain from VSRM Transaction
|
| |
8,810
|
| |
—
|
| |
8,810
|
| |
*
|
Other gains (losses)
|
| |
59
|
| |
11,664
|
| |
(11,605)
|
| |
*
|
Interest expense
|
| |
2,971
|
| |
2,852
|
| |
119
|
| |
4.2%
|
Income (loss) before income taxes
|
| |
(20,490)
|
| |
(1,710)
|
| |
(18,780)
|
| |
*
|
Equity earnings in Affiliate, net of tax
|
| |
368
|
| |
824
|
| |
(456)
|
| |
(55.3%)
|
Income tax expense
|
| |
(9,441)
|
| |
208
|
| |
(9,649)
|
| |
*
|
Net income (loss)
|
| |
$(10,681)
|
| |
$(1,094)
|
| |
$(9,587)
|
| |
*
|
Underwriting Ratios:
|
| |
|
| |
|
| |
|
| |
|
Loss ratio(1)
|
| |
83.9%
|
| |
70.5%
|
| |
|
| |
|
Expense ratio(2)
|
| |
38.4%
|
| |
42.4%
|
| |
|
| |
|
Combined ratio(3)
|
| |
122.3%
|
| |
112.9%
|
| |
|
| |
|
(1)
|
The loss ratio is the ratio, expressed as a percentage, of net losses and loss adjustment expenses to net earned premiums and
other income from underwriting operations.
|
(2)
|
The expense ratio is the ratio, expressed as a percentage, of policy acquisition costs and operating expenses to net earned
premiums and other income from underwriting operations.
|
(3)
|
The combined ratio is the sum of the loss ratio and the expense ratio. A combined ratio under 100% indicates an underwriting
profit. A combined ratio over 100% indicates an underwriting loss.
|
*
|
Percentage change is not meaningful
|
|
| |
Years Ended December 31,
|
|||||||||
|
| |
2022
|
| |
2021
|
| |
$ Change
|
| |
% Change
|
Gross written premiums
|
| |
|
| |
|
| |
|
| |
|
Commercial lines
|
| |
$116,868
|
| |
$117,075
|
| |
$(207)
|
| |
(0.2%)
|
Personal lines
|
| |
21,151
|
| |
15,020
|
| |
6,131
|
| |
40.8%
|
Total
|
| |
$138,019
|
| |
$132,095
|
| |
$5,924
|
| |
4.5%
|
|
| |
|
| |
|
| |
|
| |
|
Net written premiums
|
| |
|
| |
|
| |
|
| |
|
Commercial lines
|
| |
$72,318
|
| |
$87,307
|
| |
$(14,989)
|
| |
(17.2%)
|
Personal lines
|
| |
18,914
|
| |
14,122
|
| |
4,792
|
| |
33.9%
|
Total
|
| |
$91,232
|
| |
$101,429
|
| |
$(10,197)
|
| |
(10.1%)
|
|
| |
|
| |
|
| |
|
| |
|
Net Earned premiums
|
| |
|
| |
|
| |
|
| |
|
Commercial lines
|
| |
$80,823
|
| |
$87,759
|
| |
$(6,936)
|
| |
(7.9%)
|
Personal lines
|
| |
15,888
|
| |
11,043
|
| |
4,845
|
| |
43.9%
|
Total
|
| |
$96,711
|
| |
$98,802
|
| |
$(2,091)
|
| |
(2.1%)
|
Year Ended December 31, 2022
|
| |
Commercial
Lines
|
| |
Personal
Lines
|
| |
Total
|
Accident year net losses and LAE
|
| |
$46,884
|
| |
$10,272
|
| |
$57,156
|
Net (favorable) adverse development
|
| |
23,878
|
| |
406
|
| |
24,284
|
Calendar year net loss and LAE
|
| |
$70,762
|
| |
$10,678
|
| |
$81,440
|
|
| |
|
| |
|
| |
|
Accident year loss ratio
|
| |
57.9%
|
| |
64.3%
|
| |
58.9%
|
Net (favorable) adverse development
|
| |
29.4%
|
| |
2.6%
|
| |
25.0%
|
Calendar year loss ratio
|
| |
87.3%
|
| |
66.9%
|
| |
83.9%
|
Year Ended December 31, 2021
|
| |
Commercial
Lines
|
| |
Personal
Lines
|
| |
Total
|
Accident year net losses and LAE
|
| |
$45,393
|
| |
$5,036
|
| |
$50,429
|
Net (favorable) adverse development
|
| |
18,475
|
| |
957
|
| |
19,432
|
Calendar year net loss and LAE
|
| |
$63,868
|
| |
$5,993
|
| |
$69,861
|
|
| |
|
| |
|
| |
|
Accident year loss ratio
|
| |
51.6%
|
| |
45.0%
|
| |
50.9%
|
Net (favorable) adverse development
|
| |
21.0%
|
| |
8.6%
|
| |
19.6%
|
Calendar year loss ratio
|
| |
72.6%
|
| |
53.6%
|
| |
70.5%
|
|
| |
Years Ended December 31,
|
|||
|
| |
2022
|
| |
2021
|
Commercial Lines
|
| |
|
| |
|
Policy acquisition costs
|
| |
21.8%
|
| |
29.2%
|
Operating expenses
|
| |
16.1%
|
| |
13.2%
|
Total
|
| |
37.9%
|
| |
42.4%
|
|
| |
|
| |
|
Personal Lines
|
| |
|
| |
|
Policy acquisition costs
|
| |
28.8%
|
| |
29.6%
|
Operating expenses
|
| |
12.2%
|
| |
12.1%
|
Total
|
| |
41.0%
|
| |
41.7%
|
|
| |
|
| |
|
Total Underwriting
|
| |
|
| |
|
Policy acquisition costs
|
| |
23.0%
|
| |
29.3%
|
Operating expenses
|
| |
15.4%
|
| |
13.1%
|
Total
|
| |
38.4%
|
| |
42.4%
|
|
| |
Years Ended December 31,
|
||||||
|
| |
2022
|
| |
2021
|
| |
Change
|
Commercial Lines
|
| |
$(25,845)
|
| |
$(13,229)
|
| |
$(12,616)
|
Personal Lines
|
| |
(1,248)
|
| |
529
|
| |
(1,777)
|
Total Underwriting
|
| |
(27,093)
|
| |
(12,700)
|
| |
(14,393)
|
Wholesale Agency
|
| |
(554)
|
| |
(261)
|
| |
(293)
|
Corporate
|
| |
(921)
|
| |
(757)
|
| |
(164)
|
Eliminations
|
| |
239
|
| |
370
|
| |
(131)
|
Total underwriting income (loss)
|
| |
$(28,329)
|
| |
$(13,348)
|
| |
$(14,981)
|
|
| |
Three Months Ended
March 31,
|
| |
|
| |
|
|||
|
| |
2023
|
| |
2022
|
| |
$ Change
|
| |
%
Change
|
Gross written premiums
|
| |
$36,214
|
| |
$32,964
|
| |
$3,250
|
| |
9.9%
|
|
| |
|
| |
|
| |
|
| |
|
Net written premiums
|
| |
$18,342
|
| |
$18,021
|
| |
$321
|
| |
1.8%
|
|
| |
|
| |
|
| |
|
| |
|
Net earned premiums
|
| |
$21,952
|
| |
$23,955
|
| |
$(2,003)
|
| |
(8.4)%
|
Other income
|
| |
626
|
| |
698
|
| |
(72)
|
| |
(10.3%)
|
Losses and loss adjustment expenses, net
|
| |
13,713
|
| |
18,018
|
| |
(4,305)
|
| |
(23.9)%
|
Policy acquisition costs
|
| |
4,721
|
| |
5,464
|
| |
(743)
|
| |
(13.6)%
|
Operating expenses
|
| |
4,279
|
| |
4,160
|
| |
119
|
| |
2.9%
|
Underwriting gain (loss)
|
| |
(135)
|
| |
(2,989)
|
| |
2,854
|
| |
*
|
Net investment income
|
| |
1,307
|
| |
507
|
| |
800
|
| |
157.8%
|
Net realized investment gains (losses)
|
| |
—
|
| |
(69)
|
| |
69
|
| |
*
|
Change in fair value of equity securities
|
| |
694
|
| |
280
|
| |
414
|
| |
147.9%
|
Other gains (losses)
|
| |
—
|
| |
(5)
|
| |
5
|
| |
*
|
Interest expense
|
| |
686
|
| |
711
|
| |
(25)
|
| |
(3.5)%
|
Income (loss) before equity earnings in Affiliate, net of tax
|
| |
1,180
|
| |
(2,987)
|
| |
4,167
|
| |
*
|
Equity earnings (loss) in Affiliate, net of tax
|
| |
(179)
|
| |
76
|
| |
(255)
|
| |
*
|
Income tax expense
|
| |
—
|
| |
(41)
|
| |
41
|
| |
*
|
Net income (loss)
|
| |
$1,001
|
| |
$(2,870)
|
| |
$3,871
|
| |
*
|
|
| |
|
| |
|
| |
|
| |
|
Book value per common share outstanding
|
| |
$1.82
|
| |
$3.13
|
| |
|
| |
|
|
| |
|
| |
|
| |
|
| |
|
Underwriting Ratios:
|
| |
|
| |
|
| |
|
| |
|
Loss ratio(1)
|
| |
62.2%
|
| |
75.0%
|
| |
|
| |
|
Expense ratio(2)
|
| |
37.3%
|
| |
37.5%
|
| |
|
| |
|
Combined ratio(3)
|
| |
99.5%
|
| |
112.5%
|
| |
|
| |
|
(1)
|
The loss ratio is the ratio, expressed as a percentage, of net losses and loss adjustment expenses to net earned premiums and
other income from underwriting operations.
|
(2)
|
The expense ratio is the ratio, expressed as a percentage, of policy acquisition costs and other underwriting expenses to net
earned premiums and other income from underwriting operations.
|
(3)
|
The combined ratio is the sum of the loss ratio and the expense ratio. A combined ratio under 100% indicates an underwriting
profit. A combined ratio over 100% indicates an underwriting loss.
|
*
|
Percentage change is not meaningful.
|
|
| |
Three Months Ended
March 31,
|
| |
|
| |
|
|||
|
| |
2023
|
| |
2022
|
| |
$ Change
|
| |
% Change
|
Gross written premiums
|
| |
|
| |
|
| |
|
| |
|
Commercial lines
|
| |
$28,975
|
| |
$28,586
|
| |
$389
|
| |
1.4%
|
Personal lines
|
| |
7,239
|
| |
4,378
|
| |
2,861
|
| |
65.3%
|
Total
|
| |
$36,214
|
| |
$32,964
|
| |
$3,250
|
| |
9.9%
|
|
| |
|
| |
|
| |
|
| |
|
Net written premiums
|
| |
|
| |
|
| |
|
| |
|
Commercial lines
|
| |
$12,241
|
| |
$14,340
|
| |
$(2,099)
|
| |
(14.6)%
|
Personal lines
|
| |
6,101
|
| |
3,681
|
| |
2,420
|
| |
65.7%
|
Total
|
| |
$18,342
|
| |
$18,021
|
| |
$321
|
| |
1.8%
|
|
| |
|
| |
|
| |
|
| |
|
Net earned premiums
|
| |
|
| |
|
| |
|
| |
|
Commercial lines
|
| |
$17,123
|
| |
$20,524
|
| |
$(3,401)
|
| |
(16.6)%
|
Personal lines
|
| |
4,829
|
| |
3,431
|
| |
1,398
|
| |
40.7%
|
Total
|
| |
$21,952
|
| |
$23,955
|
| |
$(2,003)
|
| |
(8.4)%
|
Three months ended March 31, 2023
|
| |
Commercial
Lines
|
| |
Personal
Lines
|
| |
Total
|
Accident year net losses and LAE
|
| |
$11,364
|
| |
$3,562
|
| |
$14,926
|
Net (favorable) adverse development
|
| |
(817)
|
| |
(396)
|
| |
(1,213)
|
Calendar year net losses and LAE
|
| |
$10,547
|
| |
$3,166
|
| |
$13,713
|
|
| |
|
| |
|
| |
|
Accident year loss ratio
|
| |
66.2%
|
| |
73.4%
|
| |
67.8%
|
Net (favorable) adverse development
|
| |
(4.8)%
|
| |
(8.1)%
|
| |
(5.6)%
|
Calendar year loss ratio
|
| |
61.4%
|
| |
65.3%
|
| |
62.2%
|
Three months ended March 31, 2022
|
| |
Commercial
Lines
|
| |
Personal
Lines
|
| |
Total
|
Accident year net losses and LAE
|
| |
$10,870
|
| |
$1,627
|
| |
$12,497
|
Net (favorable) adverse development
|
| |
5,740
|
| |
(219)
|
| |
5,521
|
Calendar year net losses and LAE
|
| |
$16,610
|
| |
$1,408
|
| |
$18,018
|
|
| |
|
| |
|
| |
|
Accident year loss ratio
|
| |
52.8%
|
| |
47.3%
|
| |
52.0%
|
Net (favorable) adverse development
|
| |
27.9%
|
| |
(6.3)%
|
| |
23.0%
|
Calendar year loss ratio
|
| |
80.7%
|
| |
41.0%
|
| |
75.0%
|
|
| |
Three Months Ended
March 31,
|
|||
|
| |
2023
|
| |
2022
|
Commercial Lines
|
| |
|
| |
|
Policy acquisition costs
|
| |
18.6%
|
| |
21.2%
|
Operating expenses
|
| |
17.6%
|
| |
15.3%
|
Total
|
| |
36.2%
|
| |
36.5%
|
Personal Lines
|
| |
|
| |
|
Policy acquisition costs
|
| |
28.6%
|
| |
31.8%
|
Operating expenses
|
| |
12.2%
|
| |
11.7%
|
Total
|
| |
40.8%
|
| |
43.5%
|
Total Underwriting
|
| |
|
| |
|
Policy acquisition costs
|
| |
20.8%
|
| |
22.7%
|
Operating expenses
|
| |
16.5%
|
| |
14.8%
|
Total
|
| |
37.3%
|
| |
37.5%
|
Segment Gain (Loss)
|
| |
Three Months Ended
March 31,
|
| |
|
|||
|
| |
2023
|
| |
2022
|
| |
$ Change
|
Commercial Lines
|
| |
$404
|
| |
$(3,533)
|
| |
$3,937
|
Personal Lines
|
| |
(295)
|
| |
534
|
| |
(829)
|
Total Underwriting
|
| |
109
|
| |
(2,999)
|
| |
3,108
|
Wholesale Agency
|
| |
(21)
|
| |
62
|
| |
(83)
|
Corporate
|
| |
(235)
|
| |
(158)
|
| |
(77)
|
Eliminations
|
| |
12
|
| |
106
|
| |
(94)
|
Total segment gain (loss)
|
| |
$(135)
|
| |
$(2,989)
|
| |
$2,854
|
•
|
Case reserves, which are unpaid loss and LAE amounts that have been reported; and
|
•
|
Incurred but not reported (“IBNR”) reserves, which are (1) unpaid loss and LAE amounts that have been incurred but not yet
reported; and (2) the expected development on case reserves.
|
•
|
The type of loss;
|
•
|
The severity of injury or damage;
|
•
|
Our knowledge of the circumstances surrounding the claim;
|
•
|
The jurisdiction of the occurrence;
|
•
|
Policy provisions related to the claim;
|
•
|
Expenses intended to cover the ultimate cost of settling claims, including investigation and defense of lawsuits resulting
from such claims, costs of outside adjusters and experts, and all other expenses which are identified to the case; and
|
•
|
Any other information considered pertinent to estimating the indemnity and expense exposure presented by the claim.
|
•
|
Written and earned premiums;
|
•
|
Paid and reported losses and LAE;
|
•
|
Expected initial loss and LAE ratio, which is the ratio of incurred losses and LAE to earned premiums; and
|
•
|
Expected claim reporting and payout patterns based on our own loss experience and supplemented with insurance industry data
where applicable.
|
•
|
Loss ratio method—This method uses loss and LAE ratios for prior accident years, adjusted for current trends, to determine an
appropriate expected loss and LAE ratio for a given accident year;
|
•
|
Loss development methods—Loss development methods assume that the losses and LAE yet to emerge for an accident year are
proportional to the paid or reported loss and LAE amounts observed to-date. The paid loss development method uses losses and LAE paid to date, while the reported loss development method uses losses and LAE reported to date;
|
•
|
Bornheutter-Ferguson method—This method is a combination of the loss ratio and loss development methods, where the loss
development factor is given more weight as an accident year matures; and
|
•
|
Frequency/severity method—This method projects claim counts and average cost per claim on a paid or reported basis for high
frequency, low severity products.
|
•
|
Actuarial projections of what we, at a given time, expect to be the cost of the ultimate settlement and administration of
claims reflecting facts and circumstances then known;
|
•
|
Estimates of future trends in claims severity and frequency;
|
•
|
Assessment of asserted theories of liability; and
|
•
|
Analysis of other factors, such as variables in claims handling procedures, economic factors, and judicial and legislative
trends and actions.
|
Line of Business
|
| |
Case
Reserves
|
| |
IBNR
Reserves
|
| |
Total
Reserves
|
| |
Ratio of
IBNR to
Total
Reserves
|
Commercial Lines
|
| |
$36,354
|
| |
$41,903
|
| |
$78,257
|
| |
53.5%
|
Personal Lines
|
| |
2,944
|
| |
1,687
|
| |
4,631
|
| |
36.4%
|
Total Lines
|
| |
$39,298
|
| |
$43,590
|
| |
$82,888
|
| |
52.6%
|
|
| |
As of December 31,
2022
|
| |
Impact
|
|||||||||
|
| |
Net Ultimate
Loss and
LAE(1)
|
| |
Net Loss and
LAE
Reserves(1)
|
| |
Ultimate
Loss and
LAE
Sensitivity
Factor
|
| |
Pre-
Tax Income(2)
|
| |
Shareholders'
Equity(2)
|
Increased Ultimate Losses & LAE
|
| |
|
| |
|
| |
|
| |
|
| |
|
Accident Year 2022
|
| |
$57,136
|
| |
$36,262
|
| |
10.0%
|
| |
$(5,714)
|
| |
$(4,514)
|
Accident Year 2021
|
| |
52,152
|
| |
22,840
|
| |
5.0%
|
| |
(2,608)
|
| |
(2,060)
|
Accident Year 2020
|
| |
46,128
|
| |
16,142
|
| |
2.5%
|
| |
(1,153)
|
| |
(911)
|
Prior to 2020 Accident Years
|
| |
—
|
| |
7,645
|
| |
—%
|
| |
—
|
| |
—
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
Decreased Ultimate Losses & LAE
|
| |
|
| |
|
| |
|
| |
|
| |
|
Accident Year 2022
|
| |
57,136
|
| |
36,262
|
| |
(10.0)%
|
| |
5,714
|
| |
4,514
|
Accident Year 2021
|
| |
52,152
|
| |
22,840
|
| |
(5.0)%
|
| |
2,608
|
| |
2,060
|
Accident Year 2020
|
| |
46,128
|
| |
16,142
|
| |
(2.5)%
|
| |
1,153
|
| |
911
|
Prior to 2020 Accident Years
|
| |
—
|
| |
7,645
|
| |
—%
|
| |
—
|
| |
—
|
(1)
|
Represents amounts as of December 31, 2022.
|
(2)
|
Represents how pre-tax income and shareholders' equity would change if the Net Ultimate Loss and LAE were to change by the
percentage in the Ultimate Loss and LAE Sensitivity Factor column.
|
•
|
Hospitality, such as restaurants, bars and taverns (that require, among other lines, liquor liability insurance), as well as
small grocery and convenience stores;
|
•
|
Artisan contractors, such as plumbers, painters, carpenters, electricians and other independent contractors; and
|
•
|
Security service providers, such as companies that provide security guard services and private investigative services.
|
|
| |
Gross Written Premium by Segment
|
|||||||||||||||
|
| |
2022
|
| |
%
|
| |
2021
|
| |
%
|
| |
2020
|
| |
%
|
Commercial
|
| |
$116,868
|
| |
85%
|
| |
$117,075
|
| |
89%
|
| |
$102,763
|
| |
92%
|
Personal
|
| |
21,151
|
| |
15%
|
| |
15,020
|
| |
11%
|
| |
8,572
|
| |
8%
|
Total
|
| |
$138,019
|
| |
100%
|
| |
$132,095
|
| |
100%
|
| |
$111,335
|
| |
100%
|
|
| |
Gross Written Premium by State
|
|||||||||||||||
|
| |
2022
|
| |
%
|
| |
2021
|
| |
%
|
| |
2020
|
| |
%
|
Michigan
|
| |
$33,739
|
| |
24.5%
|
| |
$29,314
|
| |
22.2%
|
| |
$23,304
|
| |
20.9%
|
Texas
|
| |
14,236
|
| |
10.3%
|
| |
12,062
|
| |
9.1%
|
| |
10,243
|
| |
9.2%
|
Florida
|
| |
13,705
|
| |
9.9%
|
| |
13,727
|
| |
10.4%
|
| |
13,573
|
| |
12.2%
|
California
|
| |
12,967
|
| |
9.4%
|
| |
11,805
|
| |
8.9%
|
| |
8,140
|
| |
7.3%
|
Oklahoma
|
| |
11,882
|
| |
8.6%
|
| |
7,695
|
| |
5.8%
|
| |
2,264
|
| |
2.2%
|
New York
|
| |
10,622
|
| |
7.7%
|
| |
7,893
|
| |
6.0%
|
| |
6,386
|
| |
5.7%
|
Pennsylvania
|
| |
4,499
|
| |
3.3%
|
| |
4,863
|
| |
3.7%
|
| |
4,846
|
| |
4.4%
|
Ohio
|
| |
4,378
|
| |
3.2%
|
| |
4,123
|
| |
3.1%
|
| |
3,823
|
| |
3.4%
|
Indiana
|
| |
3,232
|
| |
2.3%
|
| |
3,692
|
| |
2.8%
|
| |
3,559
|
| |
3.2%
|
Colorado
|
| |
3,010
|
| |
2.2%
|
| |
2,917
|
| |
2.2%
|
| |
2,832
|
| |
2.5%
|
Illinois
|
| |
2,644
|
| |
1.9%
|
| |
2,457
|
| |
1.9%
|
| |
1,818
|
| |
1.6%
|
All Other States
|
| |
23,105
|
| |
16.7%
|
| |
31,547
|
| |
23.9%
|
| |
30,547
|
| |
27.4%
|
Total
|
| |
$138,019
|
| |
100.0%
|
| |
$132,095
|
| |
100.0%
|
| |
$111,335
|
| |
100.0%
|
•
|
Focus on under-served markets. We focus on providing specialty insurance products
to targeted policyholders in under-served markets. We believe that most of our small business customers, many of which are owner-operated, value the efficiency of dealing with a single insurer for multiple products. By targeting small-
to medium-sized accounts, we add value to the business owner directly without competing solely on price.
|
•
|
Strong relationships with our agents. We develop strong relationships with our
independent agents providing them with responsive service, attractive commissions and competitive products to offer policyholders. We believe our agents understand that we view them as key partners in risk selection that help us serve
our ultimate client - the insured.
|
•
|
Deep understanding of the business and regulatory landscapes of our markets. The
competition for insurance business and the regulatory operating environment vary significantly from state to state. We focus on tailoring our business to concentrate on the geographic markets and regulatory environments with the
greatest opportunities for growth and profitability. Our business plan centers on identification of market opportunities in jurisdictions where our insurance products can profitably suit the needs of our potential customers.
|
•
|
Emphasis on flexibility. We offer coverage to our insureds both on an E&S and
admitted basis. We believe this flexibility enables us to pivot effectively between E&S and admitted policies as customer needs and regulatory conditions dictate.
|
•
|
Conservative risk management with an emphasis on lowering volatility. We focus on
the risk/reward of insurance underwriting, while maintaining a prudent investment policy. We employ conservative risk management practices and opportunistically purchase reinsurance to minimize our exposure to liability for individual
risks. In addition, we seek to maintain a diversified liquid investment portfolio to reduce overall balance sheet volatility. As of December 31, 2022, our investments primarily consisted of fixed income investments with an average
credit rating of “AA+” and an option adjusted duration of 3.5 years.
|
•
|
Talented underwriters with broad expertise. Our underwriters have significant
experience managing account profitability across market cycles. With an average of over 36 years of experience, our senior underwriters possess the required expertise to respond appropriately to market forces.
|
•
|
Controlled and disciplined underwriting. We
underwrite substantially all policies to our specific guidelines with our experienced, in-house underwriting team. We customize the coverages we offer, and continually monitor our markets and respond to changes in our markets by
adjusting our pricing, product structures and underwriting guidelines. By tailoring the terms and conditions of our policies, we align our actual underwriting risk with the profit of each insurance account that we write.
|
•
|
Proactive claims handling. We employ a proactive claims handling philosophy that
utilizes an internal team of experienced in-house attorneys to manage and supervise our claims from inception until resolution. We pay what we owe, contest what we don't, and make sound judgment for those claims that fall in between.
Our proactive handling of claims reinforces our relationships with our customers and agents by demonstrating our willingness to defend our insureds aggressively and help them mitigate losses.
|
•
|
Proven management team. Our senior management team has an average of over 26 years
of experience in the insurance industry. Our senior management team has successfully created, managed and grown numerous insurance companies and books of business, and has longstanding relationships with many independent agents and
policyholders in our targeted markets.
|
•
|
Ability to leverage technology to drive efficiency. We utilize a web-based
information technology system that creates greater organizational efficiency in our company. Leveraging the infrastructure of programmers and support staff of third-party vendors allows our in-house business analysts to focus on new
product development and roll-out. We believe this capability reduces our time to market for new products, enhances services for insureds, increases our ability to capture data, and reduces cost.
|
|
| |
Year Ended December 31,
|
||||||||||||||||||||||||||||||
|
| |
2012
|
| |
2013
|
| |
2014
|
| |
2015
|
| |
2016
|
| |
2017
|
| |
2018
|
| |
2019
|
| |
2020
|
| |
2021
|
| |
2022 (1)
|
Net liability for losses and loss expenses
|
| |
$17,547
|
| |
$24,956
|
| |
$28,307
|
| |
$30,017
|
| |
$47,993
|
| |
$67,830
|
| |
$63,122
|
| |
$84,667
|
| |
$87,052
|
| |
$98,741
|
| |
$82,888
|
Liability re-estimated as of:
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
One year later
|
| |
13,508
|
| |
23,763
|
| |
29,321
|
| |
40,239
|
| |
57,452
|
| |
71,186
|
| |
79,351
|
| |
100,261
|
| |
106,482
|
| |
123,668
|
| |
|
Two years later
|
| |
13,601
|
| |
25,521
|
| |
33,274
|
| |
52,321
|
| |
60,453
|
| |
87,536
|
| |
94,786
|
| |
118,116
|
| |
129,665
|
| |
|
| |
|
Three years later
|
| |
13,821
|
| |
26,560
|
| |
38,569
|
| |
58,251
|
| |
69,833
|
| |
95,367
|
| |
108,022
|
| |
137,327
|
| |
|
| |
|
| |
|
Four years later
|
| |
13,860
|
| |
27,784
|
| |
40,822
|
| |
62,185
|
| |
74,381
|
| |
102,335
|
| |
117,607
|
| |
|
| |
|
| |
|
| |
|
Five years later
|
| |
13,980
|
| |
27,920
|
| |
42,274
|
| |
64,547
|
| |
76,860
|
| |
106,705
|
| |
|
| |
|
| |
|
| |
|
| |
|
Six years later
|
| |
14,048
|
| |
28,339
|
| |
42,967
|
| |
66,072
|
| |
79,622
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Seven years later
|
| |
13,982
|
| |
28,655
|
| |
43,341
|
| |
66,883
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Eight years later
|
| |
14,050
|
| |
28,880
|
| |
43,771
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Nine years later
|
| |
14,133
|
| |
29,487
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Ten years later
|
| |
14,626
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Net cumulative redundancy (deficiency)
|
| |
$2,921
|
| |
$(4,531)
|
| |
$(15,464)
|
| |
$(36,866)
|
| |
$(31,629)
|
| |
$(38,875)
|
| |
$(54,485)
|
| |
$(52,660)
|
| |
$(42,613)
|
| |
$(24,927)
|
| |
$82,888
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Cumulative amount of net liability paid as of:
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
One year later
|
| |
5,186
|
| |
$13,245
|
| |
$16,091
|
| |
$20,200
|
| |
$29,533
|
| |
$44,521
|
| |
$29,520
|
| |
$40,244
|
| |
$39,187
|
| |
$51,129
|
| |
|
Two years later
|
| |
9,106
|
| |
19,711
|
| |
24,060
|
| |
35,972
|
| |
56,962
|
| |
62,369
|
| |
57,864
|
| |
70,478
|
| |
79,965
|
| |
|
| |
|
Three years later
|
| |
11,444
|
| |
23,241
|
| |
32,699
|
| |
50,676
|
| |
61,168
|
| |
77,409
|
| |
78,861
|
| |
103,770
|
| |
|
| |
|
| |
|
Four years later
|
| |
13,015
|
| |
26,056
|
| |
37,474
|
| |
58,317
|
| |
66,556
|
| |
87,587
|
| |
100,377
|
| |
|
| |
|
| |
|
| |
|
Five years later
|
| |
13,522
|
| |
27,217
|
| |
40,438
|
| |
61,349
|
| |
70,945
|
| |
99,544
|
| |
|
| |
|
| |
|
| |
|
| |
|
Six years later
|
| |
13,903
|
| |
27,780
|
| |
41,979
|
| |
63,814
|
| |
76,563
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Seven years later
|
| |
13,878
|
| |
28,384
|
| |
42,428
|
| |
65,654
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Eight years later
|
| |
13,923
|
| |
28,555
|
| |
43,025
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Nine years later
|
| |
13,927
|
| |
29,199
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Ten years later
|
| |
14,395
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Gross liability-end of year
|
| |
24,843
|
| |
28,909
|
| |
31,532
|
| |
35,423
|
| |
54,651
|
| |
87,896
|
| |
92,807
|
| |
107,246
|
| |
111,270
|
| |
139,085
|
| |
165,539
|
Reinsurance recoverable on unpaid losses
|
| |
7,296
|
| |
3,952
|
| |
3,225
|
| |
5,405
|
| |
6,658
|
| |
20,066
|
| |
29,685
|
| |
22,579
|
| |
24,218
|
| |
40,344
|
| |
82,651
|
Net liability-end of year
|
| |
17,547
|
| |
24,957
|
| |
28,307
|
| |
30,018
|
| |
47,993
|
| |
67,830
|
| |
63,122
|
| |
84,667
|
| |
87,052
|
| |
98,741
|
| |
82,888
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Gross liability reestimated - latest
|
| |
20,671
|
| |
35,702
|
| |
52,783
|
| |
84,930
|
| |
115,658
|
| |
174,272
|
| |
177,075
|
| |
173,828
|
| |
164,154
|
| |
167,738
|
| |
|
Reinsurance recoverable on unpaid losses re-estimated -
latest
|
| |
6,044
|
| |
6,216
|
| |
9,012
|
| |
18,047
|
| |
36,036
|
| |
67,566
|
| |
59,468
|
| |
36,501
|
| |
34,490
|
| |
44,070
|
| |
|
Net liability re-estimated - latest
|
| |
14,627
|
| |
29,486
|
| |
43,771
|
| |
66,883
|
| |
79,622
|
| |
106,706
|
| |
117,607
|
| |
137,327
|
| |
129,664
|
| |
123,668
|
| |
|
Gross cumulative redundancy (deficiency)
|
| |
$4,172
|
| |
$(6,793)
|
| |
$(21,251)
|
| |
$(49,507)
|
| |
$(61,007)
|
| |
$(86,376)
|
| |
$(84,268)
|
| |
$(66,582)
|
| |
$(52,884)
|
| |
$(28,653)
|
| |
|
(1)
|
The 2022 column includes $25.9 million of reinsurance recoverables from the loss portfolio transfer (“LPT”) described in Item
6: Selected Consolidated Financial Data. All previous years do not reflect any recoverables from the LPT.
|
•
|
Claims being settled for amounts different from the original estimates;
|
•
|
Reserves being increased or decreased for individual claims that remain open as more information becomes known about those
individual claims; and
|
•
|
More or fewer claims being reported after the related year end, than had been expected to be reported before that date.
|
•
|
Prior approval of the acquisition of control of an insurance company or of any company controlling an insurance company;
|
•
|
Regulation of certain transactions entered into by such insurance company subsidiary with any of its affiliates;
|
•
|
Approval of premium rates, forms and policies used for many lines of admitted insurance;•Standards of solvency and minimum
amounts of capital and surplus that must be maintained;
|
•
|
Limitations on types and concentration of investments;
|
•
|
Licensing of insurers and agents;
|
•
|
Deposits of securities for the benefit of policyholders; and
|
•
|
The filing of periodic reports with state insurance regulators with respect to financial condition and other matters.
|
Accident year
|
| |
The annual calendar accounting period in which loss events occurred,
regardless of when the losses are actually reported, booked or paid.
|
|
| |
|
Accident year combined ratio
|
| |
The accident year combined ratio is an insurance industry measure that
excludes changes in net ultimate loss estimates from prior accident year loss reserves. The accident year combined ratio provides management with an assessment of the specific policy year’s profitability (which matches policy pricing
with related losses) and assists management in their evaluation of product pricing levels and quality of business written. Management uses accident year combined ratio as one component to assess the Company's current year performance
and as a measure to evaluate, and if necessary, adjust current year pricing and underwriting.
|
|
| |
|
Adjusted operating income (loss)
|
| |
Net income (loss) excluding net realized investment and other gains
(losses), net of tax, the effects of tax reform, the tax effect of changes in unrealized gains to the extent included in net income, the change in the fair value of equity securities, net of tax, and the capitalization and amortization
of deferred gains from the adverse development cover (ADC).
|
|
| |
|
Adjusted operating income (loss), per share
|
| |
Adjusted operating income (loss) on a per share basis.
|
|
| |
|
Assignment of Benefits
|
| |
A legal tool that allows a third party to assert a claim and be paid for
services performed for an insured who would normally be reimbursed directly by the insurance company after making a claim themselves.
|
|
| |
|
Book value per share
|
| |
Total common shareholders' equity divided by the number of common shares
outstanding.
|
|
| |
|
Case reserves
|
| |
Estimates of anticipated future payments to be made on each specific
reported claim.
|
|
| |
|
Combined Ratio based on accounting principles generally accepted in the United
States of America (“GAAP”)
|
| |
The combined ratio is the sum of the loss ratio and the expense ratio. These
ratios differ from statutory ratios to reflect GAAP accounting, as management evaluates the performance of our underwriting operations using the GAAP combined ratio.
|
|
| |
|
Combined Ratio based on statutory accounting practices (“SAP”)
|
| |
The combined ratio based on SAP, expressed as a percentage, is the key
measure of underwriting profitability traditionally used in the property and casualty insurance business. The combined ratio is a statutory accounting measurement, which represents the sum of (i) the ratio of losses and loss expenses to
net earned premiums (loss ratio), plus (ii) the ratio of underwriting expenses to net written premiums (expense ratio).
|
|
| |
|
Combined Ratio (Overall)
|
| |
When the combined ratio is under 100%, underwriting results are generally
considered profitable; when the combined ratio is over 100%, underwriting results are generally considered unprofitable.
|
|
| |
|
Deferred policy acquisition costs
|
| |
Primarily commissions and premium-related taxes that vary with, and are
primarily related to, the production of new contracts and are deferred and amortized to achieve a matching of revenues and expenses when reported in financial statements prepared in accordance with GAAP.
|
|
| |
|
Deficiency
|
| |
With regard to reserves for a given liability, a deficiency exists when it
is estimated or determined that the reserves are insufficient to pay the ultimate settlement value of the related liabilities. Where the deficiency is the result of an estimate, the estimated amount of deficiency (or even the finding of
whether or not a deficiency exists) may change as new information becomes available.
|
|
| |
|
Expense Ratio
|
| |
For GAAP, it is the ratio of GAAP underwriting expenses incurred to net
earned premiums plus other income. For SAP, it is the ratio of Statutory underwriting expenses incurred to net written premiums.
|
|
| |
|
Incurred but not reported (IBNR) reserves
|
| |
Reserves for estimated losses and LAE that have been incurred but not yet
reported to the insurer. This includes amounts for unreported claims, development on known cases, and re-opened claims.
|
|
| |
|
Lender
|
| |
The Huntington National Bank
|
|
| |
|
Loss
|
| |
An occurrence that is the basis for submission and/or payment of a claim.
Losses may be covered, limited or excluded from coverage, depending on the terms of the policy.
|
|
| |
|
Loss adjustment expenses (LAE)
|
| |
The expenses of settling claims, including legal and other fees and the
portion of general expenses allocated to claim settlement costs.
|
|
| |
|
Loss ratio
|
| |
The ratio of incurred losses and loss adjustment expenses to net earned
premiums plus other income.
|
|
| |
|
Loss reserves
|
| |
Liabilities established by insurers and reinsurers to reflect the estimated
cost of claims incurred that the insurer or reinsurer will ultimately be required to
|
|
| |
pay in respect of insurance or reinsurance it has written. Reserves are
established for losses and for LAE, and consist of case reserves and IBNR reserves. As the term is used in this document, “loss reserves” is meant to include reserves for both losses and LAE, unless stated otherwise.
|
|
| |
|
Loss reserve development
|
| |
The increase or decrease in Losses or LAE as a result of the re-estimation
of claims and claim adjustment expense reserves at successive valuation dates for a given group of claims. Loss reserve development may be related to prior year or current year development.
|
|
| |
|
Losses incurred
|
| |
The total losses sustained by an insurance company under a policy or
policies, whether paid or unpaid. Incurred losses include a provision for IBNR.
|
|
| |
|
NAIC-IRIS ratios
|
| |
Financial ratios calculated by the NAIC to assist state insurance
departments in monitoring the financial condition of insurance companies.
|
|
| |
|
Policyholders' surplus
|
| |
As determined under SAP, the amount remaining after all liabilities are
subtracted from all admitted assets. Admitted assets are assets of an insurer prescribed or permitted by a state to be recognized on the statutory balance sheet. Policyholders' surplus is also referred to as “surplus” or “statutory
surplus” for statutory accounting purposes.
|
|
| |
|
Premium leverage ratio
|
| |
The ratio of written premium (gross or net) to consolidated statutory
surplus.
|
|
| |
|
Redundancy
|
| |
With regard to reserves for a given liability, a redundancy exists when it
is estimated or determined that the reserves are greater than what will be needed to pay the ultimate settlement value of the related liabilities. Where the redundancy is the result of an estimate, the estimated amount of redundancy (or
even the finding of whether or not a redundancy exists) may change as new information becomes available.
|
|
| |
|
Risk-Based Capital (RBC)
|
| |
A measure adopted by the NAIC and enacted by states for determining the
minimum statutory policyholders' surplus requirements of insurers. Insurers having total adjusted capital less than that required by the RBC calculation will be subject to varying degrees of regulatory action.
|
|
| |
|
Statutory accounting practices (SAP)
|
| |
The practices and procedures prescribed or permitted by domiciliary state
insurance regulatory authorities in the United States for recording transactions and preparing financial statements.
|
|
| |
|
Underwriting gain or loss
|
| |
Net earned premiums plus other income, less losses, LAE, commissions, and
operating expenses.
|
Directors
|
| |
Age
|
| |
Position
|
Timothy Lamothe(1)(3)
|
| |
67
|
| |
Director
|
Isolde O'Hanlon(1)(2)
|
| |
64
|
| |
Director
|
Nicholas Petcoff
|
| |
41
|
| |
Director, Co-CEO
|
James Petcoff
|
| |
67
|
| |
Director, Executive Chairman, and Co-CEO
|
Jeffrey Hakala(2)(3)
|
| |
49
|
| |
Director
|
John Melstrom(1)
|
| |
82
|
| |
Director
|
Joseph Sarafa(2)(3)
|
| |
68
|
| |
Director
|
R. Jamison Williams, Jr.(1)
|
| |
81
|
| |
Director
|
Gerald Hakala
|
| |
51
|
| |
Director
|
Executive Officers
|
| |
|
| |
|
Brian Roney
|
| |
58
|
| |
President
|
Harold Meloche
|
| |
61
|
| |
Chief Financial Officer and Treasurer
|
(1)
|
Member of the Audit Committee
|
(2)
|
Member of the Compensation Committee
|
(3)
|
Member of the Nominating and Corporate Governance Committee
|
•
|
each of our directors and nominees for director;
|
•
|
each of our named executive officers;
|
•
|
all of our current directors and named executive officers as a group; and
|
•
|
each person or group, who beneficially owned more than 5% of our common stock.
|
Name of Beneficial Owner
|
| |
Number of
Shares
Beneficially
Owned
|
| |
Percentage
of Shares
Beneficially
Owned
|
Named Executive Officers and Directors:
|
| |
|
| |
|
James Petcoff(1)
|
| |
4,008,968
|
| |
32.5%
|
Brian Roney(4)
|
| |
581,232
|
| |
4.7%
|
Nicholas Petcoff(1)(5)
|
| |
366,314
|
| |
3.0%
|
Harold Meloche(6)
|
| |
62,588
|
| |
*
|
Timothy Lamothe
|
| |
17,351
|
| |
*
|
Joseph Sarafa
|
| |
250,000
|
| |
2.0%
|
R. Jamison Williams, Jr.
|
| |
440,752
|
| |
3.6%
|
Isolde O'Hanlon
|
| |
5,000
|
| |
*
|
John Melstrom
|
| |
25,000
|
| |
*
|
Jeffrey Hakala(2)
|
| |
1,753,895
|
| |
14.3%
|
Gerald Hakala(2)
|
| |
1,753,895
|
| |
14.3%
|
All named executive officers and directors as a group (11 persons)(7)
|
| |
8,898,681
|
| |
71.7%
|
|
| |
|
| |
|
Other Beneficial Owners
|
| |
|
| |
|
Clarkston Ventures, LLC(3)
|
| |
3,635,769
|
| |
29.7%
|
*
|
Represents less than 1%.
|
(1)
|
James Petcoff, Nicholas Petcoff and Andrew Petcoff entered into a voting agreement on August 8, 2022 that permits James
Petcoff to vote all of the Issuer's shared owned by James Petcoff, Nicholas Petcoff and Andrew Petcoff.
|
(2)
|
The shares are held directly by Clarkston Ventures, LLC (“CV”) and indirectly by Jeffrey Hakala and Gerald Hakala, who are
both Co-Chief Investment Officers of CV. Jeffry Hakala and Gerald Hakala disclaim beneficial ownership in the shares held by CV except to the extent of their pecuniary ownership therein.
|
(3)
|
Based solely on information contained in the Form 4 filed with the SEC on August 12, 2022 by CV. The address of CV is 81 West
Long Lake Road, Bloomfield Hills, MI, 48304.
|
(4)
|
Includes 71,000 shares underlying outstanding stock options.
|
(5)
|
Includes 91,000 shares underlying outstanding stock options.
|
(6)
|
Includes 12,000 shares underlying outstanding stock options.
|
(7)
|
Includes 192,000 shares underlying outstanding stock options.
|
Name and Principal Position
|
| |
Year
|
| |
Salary
($)
|
| |
Option
Awards
($)(1)
|
| |
All Other
Compensation
($)(2)
|
| |
Total
Compensation
($)
|
James Petcoff
Co-Chief Executive Officer and
Executive Chairman of the Board
of Directors of the Corporation
|
| |
2022
|
| |
600,000
|
| |
—
|
| |
12,200
|
| |
612,200
|
|
2021
|
| |
550,000
|
| |
—
|
| |
11,200
|
| |
561,200
|
||
|
| |
|
| |
|
| |
|
| |
|
| |
|
Nicholas Petcoff
Co-Chief Executive Officer and
Director of the Corporation
|
| |
2022
|
| |
425,000
|
| |
354,303
|
| |
12,200
|
| |
791,503
|
|
2021
|
| |
425,000
|
| |
—
|
| |
11,200
|
| |
436,200
|
||
|
| |
|
| |
|
| |
|
| |
|
| |
|
Brian Roney
President of the Corporation
|
| |
2022
|
| |
425,000
|
| |
257,233
|
| |
12,200
|
| |
694,433
|
|
2021
|
| |
425,000
|
| |
—
|
| |
11,200
|
| |
436,200
|
(1)
|
In accordance with SEC rules, in the case of time-based equity awards, this column reflects the aggregate grant date fair
value of such equity awards, as computed in accordance with FASB ASC Topic 718, which is consistent with the estimate of aggregate compensation cost to be recognized over the service period determined as of the grant date under FASB ASC
Topic 718. Assumptions used in the calculation of these amounts are included in the notes to our financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2022. These amounts do not reflect the
actual economic value that will be realized by our named executive officers upon the vesting of such equity awards or the sale of the common stock underlying such awards.
|
(2)
|
Other compensation for James Petcoff consisted of $12,200 and $11,200 of employer matches on contributions to the Company's
401(k) employee benefit plan in 2022 and 2021. Other compensation for Nicholas Petcoff consisted of $12,200 and $11,200 of employer matches on contributions to the Company's 401(k) employee benefit plan in 2022 and 2021. Other
compensation for Brian Roney consisted of $12,200 and $11,200 of employer matches on contributions to the Company's 401(k) employee benefit plan in 2022 and 2021.
|
|
| |
Option Awards
|
|||||||||
Name
|
| |
Number of securities
underlying unexercised options
exercisable (#)
|
| |
Number of
securities
underlying
unexercised options
unexercisable (#)
|
| |
Option
exercise
price ($)
|
| |
Option
expiration
date
|
James Petcoff
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
Nicholas Petcoff(1)
|
| |
12,000
|
| |
18,000
|
| |
$3.81
|
| |
6/30/2030
|
Brian Roney(1)
|
| |
12,000
|
| |
18,000
|
| |
$3.81
|
| |
6/30/2030
|
Nicholas Petcoff(2)
|
| |
—
|
| |
365,000
|
| |
$4.53
|
| |
3/8/2032
|
Brian Roney(2)
|
| |
—
|
| |
265,000
|
| |
$4.53
|
| |
3/8/2032
|
(1)
|
30,000 options were granted on June 30, 2020 to Mr. Nicholas Petcoff and Mr. Roney, respectively. These options vest in five
equal annual installments beginning on the first anniversary of the date of grant.
|
(2)
|
365,000 and 265,000 options were granted on March 8, 2022 to Mr. Nicholas Petcoff and Mr. Roney, respectively. These options
vest in five equal annual installments beginning on the first anniversary of the date of grant.
|
Plan category
|
| |
Number of securities to
be issued upon exercise of
outstanding options,
warrants and rights (a)
|
| |
Weighted-average
exercise price of
outstanding options,
warrants and rights (b)
|
| |
Number of securities remaining
available for future issuance under
equity compensation plans
(excluding securities reflected in
column (a))(c)
|
Equity compensation plans approved by security holders
|
| |
892,000
|
| |
$4.32
|
| |
18,572
|
Equity compensation plans not approved by security holders
|
| |
—
|
| |
—
|
| |
—
|
Total
|
| |
892,000
|
| |
$4.32
|
| |
18,572
|
Name
|
| |
Fees Earned or Paid in Cash
|
Joseph Sarafa
|
| |
$20,000
|
R. Jamison Williams, Jr.
|
| |
20,000
|
Isolde O'Hanlon
|
| |
20,000
|
Jeffrey Hakala
|
| |
20,000
|
John Melstrom
|
| |
20,000
|
Timothy Lamothe (elected in 2020)
|
| |
20,000
|
Gerald Hakala (appointed in 2022)
|
| |
5,000
|
Andrew Petcoff (resigned in 2022)
|
| |
—
|
Total Fees
|
| |
$ 125,000
|
•
|
Class I directors, whose term will expire at the Annual Meeting of Shareholders to be held in fiscal year 2025, consist of
Mr. Sarafa, Mr. Williams, Jr., Mr. Melstrom, and Mr. Gerald Hakala;
|
•
|
Class II directors, whose term will expire at the Annual Meeting of Shareholders to be held in fiscal year 2023, consist of
Mr. Nicholas Petcoff, Mr. Lamothe, and Ms. O'Hanlon; and
|
•
|
Class III directors, whose term will expire at the Annual Meeting of Shareholders to be held in fiscal year 2024, consist of
Mr. Jeffrey Hakala and Mr. James Petcoff.
|
•
|
the integrity of our financial statements and our financial reporting process;
|
•
|
internal and external auditing and the independent registered public accounting firm’s qualifications and independence;
|
•
|
the performance of an internal audit function and our independent registered public accounting firm;
|
•
|
the integrity of our systems of internal accounting and financial controls; and
|
•
|
our compliance with legal and regulatory requirements.
|
•
|
identifies, evaluates and recommends nominees, including shareholder nominees, to our Board of Directors and committees of
our Board of Directors;
|
•
|
conducts searches for appropriate directors;
|
•
|
evaluates the performance of our Board of Directors and of individual directors;
|
•
|
considers and makes recommendations to our Board of Directors regarding the composition of our Board of Directors and its
committees and related compensation;
|
•
|
reviews developments in corporate governance practices;
|
•
|
evaluates the adequacy of our corporate governance practices and reporting; and
|
•
|
makes recommendations to our Board of Directors concerning corporate governance matters.
|
•
|
honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and
professional relationships;
|
•
|
full, fair, accurate, timely and understandable disclosure in reports and documents that we file with, or submit to, the SEC
and in other public communications made by us;
|
•
|
compliance with applicable governmental laws, rules and regulations;
|
•
|
prompt internal reporting to an appropriate person or persons identified in the Code of Business Conduct and Ethics of
violations of the Code of Business Conduct and Ethics;
|
•
|
accountability for adherence to the Code of Business Conduct and Ethics; and
|
•
|
compliance with our Whistleblower Policy.
|
|
| |
Per Note
|
| |
Total
|
Public Offering Price(1)
|
| |
$
|
| |
$
|
Placement Agent Fees
|
| |
$
|
| |
$
|
Proceeds, before expenses, to us
|
| |
$
|
| |
$
|
(1)
|
Plus accrued interest, if any, from , 2023.
|
|
| |
Page No.
|
| | ||
| | ||
| | ||
| | ||
| | ||
| |
|
| |
March 31,
2023
|
| |
December 31,
2022
|
|
| |
(Unaudited)
|
| |
|
Assets
|
| |
|
| |
|
Investment securities:
|
| |
|
| |
|
Debt securities, at fair value (amortized cost of $
|
| |
$
|
| |
$
|
Equity securities, at fair value (cost of $
|
| |
|
| |
|
Short-term investments, at fair value
|
| |
|
| |
|
Total investments
|
| |
|
| |
|
|
| |
|
| |
|
Cash and cash equivalents
|
| |
|
| |
|
Premiums and agents' balances receivable, net
|
| |
|
| |
|
Receivable from Affiliate
|
| |
|
| |
|
Reinsurance recoverables on unpaid losses
|
| |
|
| |
|
Reinsurance recoverables on paid losses
|
| |
|
| |
|
Prepaid reinsurance premiums
|
| |
|
| |
|
Deferred policy acquisition costs
|
| |
|
| |
|
Other assets
|
| |
|
| |
|
Total assets
|
| |
$
|
| |
$
|
|
| |
|
| |
|
Liabilities and Shareholders' Equity
|
| |
|
| |
|
Liabilities:
|
| |
|
| |
|
Unpaid losses and loss adjustment expenses
|
| |
$
|
| |
$
|
Unearned premiums
|
| |
|
| |
|
Reinsurance premiums payable
|
| |
|
| |
|
Debt
|
| |
|
| |
|
Accounts payable and accrued expenses
|
| |
|
| |
|
Total liabilities
|
| |
|
| |
|
|
| |
|
| |
|
Commitments and contingencies
|
| |
|
| |
|
|
| |
|
| |
|
Shareholders' equity:
|
| |
|
| |
|
Common stock,
|
| |
|
| |
|
Accumulated deficit
|
| |
(
|
| |
(
|
Accumulated other comprehensive income (loss)
|
| |
(
|
| |
(
|
Total shareholders' equity
|
| |
|
| |
|
Total liabilities and shareholders' equity
|
| |
$
|
| |
$
|
|
| |
Three Months Ended
March 31,
|
|||
|
| |
2023
|
| |
2022
|
Revenue and Other Income
|
| |
|
| |
|
Premiums
|
| |
|
| |
|
Gross earned premiums
|
| |
$
|
| |
|
Ceded earned premiums
|
| |
(
|
| |
(
|
Net earned premiums
|
| |
|
| |
|
Net investment income
|
| |
|
| |
|
Net realized investment gains (losses)
|
| |
|
| |
(
|
Change in fair value of equity securities
|
| |
|
| |
|
Other gains (losses)
|
| |
|
| |
(
|
Other income
|
| |
|
| |
|
Total revenue and other income
|
| |
|
| |
|
|
| |
|
| |
|
Expenses
|
| |
|
| |
|
Losses and loss adjustment expenses, net
|
| |
|
| |
|
Policy acquisition costs
|
| |
|
| |
|
Operating expenses
|
| |
|
| |
|
Interest expense
|
| |
|
| |
|
Total expenses
|
| |
|
| |
|
|
| |
|
| |
|
Income (loss) before equity earnings in Affiliate and income taxes
|
| |
|
| |
(
|
Equity earnings (loss) in Affiliate, net of tax
|
| |
(
|
| |
|
Income tax expense (benefit)
|
| |
|
| |
(
|
|
| |
|
| |
|
Net income (loss)
|
| |
$
|
| |
$(
|
|
| |
|
| |
|
Earnings (loss) per common share, basic and diluted
|
| |
$
|
| |
$(
|
|
| |
|
| |
|
Weighted average common shares outstanding, basic and
diluted
|
| |
|
| |
|
|
| |
Three Months Ended
March 31,
|
|||
|
| |
2023
|
| |
2022
|
Net income (loss)
|
| |
$
|
| |
$(
|
|
| |
|
| |
|
Other comprehensive income (loss), net of tax:
|
| |
|
| |
|
Unrealized investment gains (losses):
|
| |
|
| |
|
Unrealized investment gains (losses) during the period
|
| |
|
| |
(
|
Income tax (benefit) expense
|
| |
|
| |
|
Unrealized investment gains (losses), net of tax
|
| |
|
| |
(
|
|
| |
|
| |
|
Less: reclassification adjustments to:
|
| |
|
| |
|
Net realized investment gains (losses) included in net income (loss)
|
| |
|
| |
|
Income tax (benefit) expense
|
| |
|
| |
|
Total reclassifications included in net income (loss), net of tax
|
| |
|
| |
|
|
| |
|
| |
|
Other comprehensive income (loss)
|
| |
|
| |
(
|
|
| |
|
| |
|
Total comprehensive income (loss)
|
| |
$
|
| |
$(
|
|
| |
No Par, Common Stock
|
| |
Accumulated
Deficit
|
| |
Accumulated
Other
Comprehensive
Income
(Loss)
|
| |
Total
Shareholders'
Equity
|
|||
|
| |
Shares
|
| |
Amount
|
| ||||||||
Balances at December 31, 2022
|
| |
|
| |
$
|
| |
$(
|
| |
$(
|
| |
$
|
Net income (loss)
|
| |
—
|
| |
—
|
| |
|
| |
—
|
| |
|
Stock-based compensation expense
|
| |
—
|
| |
|
| |
—
|
| |
—
|
| |
|
Other comprehensive income (loss)
|
| |
—
|
| |
—
|
| |
—
|
| |
|
| |
|
Balances at March 31, 2023
|
| |
|
| |
$
|
| |
$(
|
| |
$(
|
| |
$
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
Balances at December 31, 2021
|
| |
|
| |
$
|
| |
$(
|
| |
$(
|
| |
$
|
Net income (loss)
|
| |
—
|
| |
—
|
| |
(
|
| |
—
|
| |
(
|
Stock-based compensation expense
|
| |
—
|
| |
|
| |
—
|
| |
—
|
| |
|
Other comprehensive income (loss)
|
| |
—
|
| |
—
|
| |
—
|
| |
(
|
| |
(
|
Balances at March 31, 2022
|
| |
|
| |
$
|
| |
$(
|
| |
$(
|
| |
$
|
|
| |
Three Months Ended
March 31,
|
|||
|
| |
2023
|
| |
2022
|
Cash Flows From Operating Activities
|
| |
|
| |
|
Net income (loss)
|
| |
$
|
| |
$(
|
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
|
| |
|
| |
|
Depreciation and amortization
|
| |
|
| |
|
Amortization of bond premium and discount, net
|
| |
(
|
| |
|
Net realized investment (gains) losses
|
| |
—
|
| |
|
Change in fair value of equity securities
|
| |
(
|
| |
(
|
Stock-based compensation expenses
|
| |
|
| |
|
Equity loss (earnings) in Affiliate, net of tax
|
| |
|
| |
(
|
Changes in operating assets and liabilities:
|
| |
|
| |
|
(Increase) decrease in:
|
| |
|
| |
|
Premiums and agents' balances and other receivables
|
| |
(
|
| |
|
Reinsurance recoverables
|
| |
|
| |
(
|
Prepaid reinsurance premiums
|
| |
(
|
| |
(
|
Deferred policy acquisition costs
|
| |
|
| |
|
Other assets
|
| |
(
|
| |
(
|
Increase (decrease) in:
|
| |
|
| |
|
Unpaid losses and loss adjustment expenses
|
| |
(
|
| |
|
Unearned premiums
|
| |
|
| |
|
Reinsurance premiums payable
|
| |
(
|
| |
(
|
Accounts payable and other liabilities
|
| |
(
|
| |
(
|
Net cash provided by (used in) operating activities
|
| |
(
|
| |
(
|
Cash Flows From Investing Activities
|
| |
|
| |
|
Purchase of investments
|
| |
(
|
| |
(
|
Proceeds from maturities and redemptions of investments
|
| |
|
| |
|
Proceeds from sales of investments
|
| |
|
| |
|
Obligation to SSU
|
| |
(
|
| |
—
|
Net cash provided by (used in) investing activities
|
| |
(
|
| |
|
Cash Flows From Financing Activities
|
| |
|
| |
|
Borrowings under line of credit
|
| |
—
|
| |
|
Net cash provided by (used in) financing activities
|
| |
—
|
| |
|
Net increase (decrease) in cash
|
| |
(
|
| |
(
|
Cash at beginning of period
|
| |
|
| |
|
Cash at end of period
|
| |
$
|
| |
$
|
Supplemental Disclosure of Cash Flow Information:
|
| |
|
| |
|
Interest paid
|
| |
$
|
| |
$
|
Income taxes paid (refunded), net
|
| |
—
|
| |
(
|
|
| |
March 31, 2023
|
|||||||||
|
| |
Cost or
Amortized
Cost
|
| |
Gross Unrealized
|
| |
Estimated
Fair Value
|
|||
|
| |
Gains
|
| |
Losses
|
| |||||
Debt Securities:
|
| |
|
| |
|
| |
|
| |
|
U.S. Government
|
| |
$
|
| |
$
|
| |
$(
|
| |
$
|
State and local government
|
| |
|
| |
|
| |
(
|
| |
|
Corporate debt
|
| |
|
| |
|
| |
(
|
| |
|
Asset-backed securities
|
| |
|
| |
|
| |
(
|
| |
|
|
| |
March 31, 2023
|
|||||||||
|
| |
Cost or
Amortized
Cost
|
| |
Gross Unrealized
|
| |
Estimated
Fair Value
|
|||
|
| |
Gains
|
| |
Losses
|
| |||||
Mortgage-backed securities
|
| |
|
| |
|
| |
(
|
| |
|
Commercial mortgage-backed securities
|
| |
|
| |
|
| |
(
|
| |
|
Collateralized mortgage obligations
|
| |
|
| |
|
| |
(
|
| |
|
Total debt securities available for sale
|
| |
$
|
| |
$
|
| |
$(
|
| |
$
|
|
| |
December 31, 2022
|
|||||||||
|
| |
Cost or
Amortized
Cost
|
| |
Gross Unrealized
|
| |
Estimated
Fair Value
|
|||
|
| |
Gains
|
| |
Losses
|
| |||||
Debt Securities:
|
| |
|
| |
|
| |
|
| |
|
U.S. Government
|
| |
$
|
| |
$
|
| |
$(
|
| |
$
|
State and local government
|
| |
|
| |
|
| |
(
|
| |
|
Corporate debt
|
| |
|
| |
|
| |
(
|
| |
|
Asset-backed securities
|
| |
|
| |
|
| |
(
|
| |
|
Mortgage-backed securities
|
| |
|
| |
|
| |
(
|
| |
|
Commercial mortgage-backed securities
|
| |
|
| |
|
| |
(
|
| |
|
Collateralized mortgage obligations
|
| |
|
| |
|
| |
(
|
| |
|
Total debt securities available for sale
|
| |
$
|
| |
$
|
| |
$(
|
| |
$
|
|
| |
March 31, 2023
|
||||||||||||||||||||||||
|
| |
Less than 12 months
|
| |
Greater than 12 months
|
| |
Total
|
||||||||||||||||||
|
| |
No. of
Issues
|
| |
Fair Value of
Investments
with
Unrealized
Losses
|
| |
Gross
Unrealized
Losses
|
| |
No. of
Issues
|
| |
Fair Value of
Investments
with
Unrealized
Losses
|
| |
Gross
Unrealized
Losses
|
| |
No. of
Issues
|
| |
Fair Value of
Investments
with
Unrealized
Losses
|
| |
Gross
Unrealized
Losses
|
Debt Securities:
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
U.S. Government
|
| |
|
| |
$
|
| |
$(
|
| |
|
| |
$
|
| |
$(
|
| |
|
| |
$
|
| |
$(
|
State and local government
|
| |
|
| |
|
| |
(
|
| |
|
| |
|
| |
(
|
| |
|
| |
|
| |
(
|
Corporate debt
|
| |
|
| |
|
| |
(
|
| |
|
| |
|
| |
(
|
| |
|
| |
|
| |
(
|
Asset-backed securities
|
| |
|
| |
|
| |
(
|
| |
|
| |
|
| |
(
|
| |
|
| |
|
| |
(
|
Mortgage-backed securities
|
| |
|
| |
|
| |
(
|
| |
|
| |
|
| |
(
|
| |
|
| |
|
| |
(
|
Commercial mortgage-backed securities
|
| |
|
| |
|
| |
(
|
| |
|
| |
|
| |
(
|
| |
|
| |
|
| |
(
|
Collateralized mortgage obligations
|
| |
|
| |
|
| |
(
|
| |
|
| |
|
| |
(
|
| |
|
| |
|
| |
(
|
Total debt securities available for sale
|
| |
|
| |
$
|
| |
$(
|
| |
|
| |
$
|
| |
$(
|
| |
|
| |
$
|
| |
$(
|
|
| |
December 31, 2022
|
||||||||||||||||||||||||
|
| |
Less than 12 months
|
| |
Greater than 12 months
|
| |
Total
|
||||||||||||||||||
|
| |
No. of
Issues
|
| |
Fair Value of
Investments
with
Unrealized
Losses
|
| |
Gross
Unrealized
Losses
|
| |
No. of
Issues
|
| |
Fair Value of
Investments
with
Unrealized
Losses
|
| |
Gross
Unrealized
Losses
|
| |
No. of
Issues
|
| |
Fair Value of
Investments
with
Unrealized
Losses
|
| |
Gross
Unrealized
Losses
|
Debt Securities:
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
U.S. Government
|
| |
|
| |
$
|
| |
$(
|
| |
|
| |
$
|
| |
$(
|
| |
|
| |
$
|
| |
$(
|
State and local government
|
| |
|
| |
|
| |
(
|
| |
|
| |
|
| |
(
|
| |
|
| |
|
| |
(
|
Corporate debt
|
| |
|
| |
|
| |
(
|
| |
|
| |
|
| |
(
|
| |
|
| |
|
| |
(
|
Asset-backed securities
|
| |
|
| |
|
| |
(
|
| |
|
| |
|
| |
(
|
| |
|
| |
|
| |
(
|
Mortgage-backed securities
|
| |
|
| |
|
| |
(
|
| |
|
| |
|
| |
(
|
| |
|
| |
|
| |
(
|
Commercial mortgage-backed securities
|
| |
|
| |
|
| |
(
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
(
|
Collateralized mortgage obligations
|
| |
|
| |
|
| |
(
|
| |
|
| |
|
| |
(
|
| |
|
| |
|
| |
(
|
Total debt securities available for sale
|
| |
|
| |
$
|
| |
$(
|
| |
|
| |
$
|
| |
$(
|
| |
|
| |
$
|
| |
$(
|
|
| |
Three Months Ended
March 31,
|
|||
|
| |
2023
|
| |
2022
|
Debt securities
|
| |
$
|
| |
$
|
Equity securities
|
| |
|
| |
|
Cash, cash equivalents and short-term investments
|
| |
|
| |
|
Total investment income
|
| |
|
| |
|
Investment expenses
|
| |
(
|
| |
(
|
Net investment income
|
| |
$
|
| |
$
|
|
| |
Three Months Ended
March 31,
|
|||
|
| |
2023
|
| |
2022
|
Debt securities:
|
| |
|
| |
|
Gross realized gains
|
| |
$
|
| |
$
|
Gross realized losses
|
| |
|
| |
|
Total debt securities
|
| |
|
| |
|
Equity securities:
|
| |
|
| |
|
Gross realized gains
|
| |
$
|
| |
|
Gross realized losses
|
| |
|
| |
(
|
Total equity securities
|
| |
|
| |
(
|
Total net realized investment gains (losses)
|
| |
$
|
| |
$(
|
|
| |
Amortized
Cost
|
| |
Estimated
Fair Value
|
Due in one year or less
|
| |
$
|
| |
$
|
Due after one year through five years
|
| |
|
| |
|
Due after five years through ten years
|
| |
|
| |
|
Due after ten years
|
| |
|
| |
|
Securities with contractual maturities
|
| |
|
| |
|
Asset-backed securities
|
| |
|
| |
|
Mortgage-backed securities
|
| |
|
| |
|
Commercial mortgage-backed securities
|
| |
|
| |
|
Collateralized mortgage obligations
|
| |
|
| |
|
Total debt securities
|
| |
$
|
| |
$
|
|
| |
March 31, 2023
|
|||||||||
|
| |
Fair Value Measurements
|
|||||||||
|
| |
Total
|
| |
Level 1
|
| |
Level 2
|
| |
Level 3
|
Assets:
|
| |
|
| |
|
| |
|
| |
|
Debt Securities:
|
| |
|
| |
|
| |
|
| |
|
U.S. Government
|
| |
$
|
| |
$
|
| |
$
|
| |
$
|
State and local government
|
| |
|
| |
|
| |
|
| |
|
Corporate debt
|
| |
|
| |
|
| |
|
| |
|
Asset-backed securities
|
| |
|
| |
|
| |
|
| |
|
Mortgage-backed securities
|
| |
|
| |
|
| |
|
| |
|
Commercial mortgage-backed securities
|
| |
|
| |
|
| |
|
| |
|
Collateralized mortgage obligations
|
| |
|
| |
|
| |
|
| |
|
Total debt securities
|
| |
|
| |
|
| |
|
| |
|
Equity Securities
|
| |
|
| |
|
| |
|
| |
|
Short-term investments
|
| |
|
| |
|
| |
|
| |
|
Total marketable investments measured at fair value
|
| |
$
|
| |
$
|
| |
$
|
| |
$
|
|
| |
|
| |
|
| |
|
| |
|
Investments measured at NAV:
|
| |
|
| |
|
| |
|
| |
|
Investment in limited partnership
|
| |
|
| |
|
| |
|
| |
|
Total assets measured at fair value
|
| |
$
|
| |
|
| |
|
| |
|
|
| |
|
| |
|
| |
|
| |
|
Liabilities:
|
| |
|
| |
|
| |
|
| |
|
Senior Unsecured Notes*
|
| |
$
|
| |
$
|
| |
$
|
| |
$
|
Subordinated Notes*
|
| |
|
| |
|
| |
|
| |
|
Total Liabilities (non-recurring fair value measure)
|
| |
$
|
| |
$
|
| |
$
|
| |
$
|
*
|
Carried at face value of debt net of unamortized debt issuance costs on the consolidated balance sheets
|
|
| |
December 31, 2022
|
|||||||||
|
| |
Fair Value Measurements
|
|||||||||
|
| |
Total
|
| |
Level 1
|
| |
Level 2
|
| |
Level 3
|
Assets:
|
| |
|
| |
|
| |
|
| |
|
Debt Securities:
|
| |
|
| |
|
| |
|
| |
|
U.S. Government
|
| |
$
|
| |
$
|
| |
$
|
| |
$
|
State and local government
|
| |
|
| |
|
| |
|
| |
|
Corporate debt
|
| |
|
| |
|
| |
|
| |
|
Asset-backed securities
|
| |
|
| |
|
| |
|
| |
|
Mortgage-backed securities
|
| |
|
| |
|
| |
|
| |
|
Commercial mortgage-backed securities
|
| |
|
| |
|
| |
|
| |
|
Collateralized mortgage obligations
|
| |
|
| |
|
| |
|
| |
|
Total debt securities
|
| |
|
| |
|
| |
|
| |
|
Equity securities
|
| |
|
| |
|
| |
|
| |
|
Short-term investments
|
| |
|
| |
|
| |
|
| |
|
Total marketable investments measured at fair value
|
| |
$
|
| |
$
|
| |
$
|
| |
$
|
|
| |
|
| |
|
| |
|
| |
|
|
| |
December 31, 2022
|
|||||||||
|
| |
Fair Value Measurements
|
|||||||||
|
| |
Total
|
| |
Level 1
|
| |
Level 2
|
| |
Level 3
|
Investments measured at NAV:
|
| |
|
| |
|
| |
|
| |
|
Investment in limited partnership
|
| |
|
| |
|
| |
|
| |
|
Total assets measured at fair value
|
| |
$
|
| |
|
| |
|
| |
|
|
| |
|
| |
|
| |
|
| |
|
Liabilities:
|
| |
|
| |
|
| |
|
| |
|
Senior Unsecured Notes*
|
| |
$
|
| |
$
|
| |
$
|
| |
$
|
Subordinated Notes*
|
| |
|
| |
|
| |
|
| |
|
Total Liabilities (non-recurring fair value measure)
|
| |
$
|
| |
$
|
| |
$
|
| |
$
|
*
|
Carried at face value of debt net of unamortized debt issuance costs on the consolidated balance sheets
|
|
| |
Three Months Ended
March 31,
|
|||
|
| |
2023
|
| |
2022
|
Balance at beginning of period
|
| |
$
|
| |
$
|
|
| |
|
| |
|
Deferred policy acquisition costs
|
| |
|
| |
|
Amortization of policy acquisition costs
|
| |
(
|
| |
(
|
Net change
|
| |
(
|
| |
(
|
|
| |
|
| |
|
Balance at end of period
|
| |
$
|
| |
$
|
|
| |
Three months ended
March 31,
|
|||
|
| |
2023
|
| |
2022
|
Gross reserves - beginning of period
|
| |
$
|
| |
$
|
Less: reinsurance recoverables on unpaid losses
|
| |
(
|
| |
(
|
Net reserves - beginning of period
|
| |
|
| |
|
Add: incurred losses and LAE, net of reinsurance:
|
| |
|
| |
|
Current period
|
| |
|
| |
|
Prior period
|
| |
(
|
| |
|
Total net incurred losses and LAE
|
| |
|
| |
|
Deduct: loss and LAE payments, net of reinsurance:
|
| |
|
| |
|
Current period
|
| |
|
| |
|
Prior period
|
| |
|
| |
|
Total net loss and LAE payments
|
| |
|
| |
|
Net reserves - end of period
|
| |
|
| |
|
Plus: reinsurance recoverables on unpaid losses
|
| |
|
| |
|
Gross reserves - end of period
|
| |
$
|
| |
$
|
|
| |
Three Months Ended
March 31,
|
|||
|
| |
2023
|
| |
2022
|
Written premiums:
|
| |
|
| |
|
Direct
|
| |
$
|
| |
$
|
Assumed
|
| |
|
| |
|
Ceded
|
| |
(
|
| |
(
|
Net written premiums
|
| |
$
|
| |
$
|
|
| |
|
| |
|
Earned premiums:
|
| |
|
| |
|
Direct
|
| |
$
|
| |
$
|
Assumed
|
| |
|
| |
|
Ceded
|
| |
(
|
| |
(
|
Net earned premiums
|
| |
$
|
| |
$
|
|
| |
|
| |
|
Losses and LAE:
|
| |
|
| |
|
Direct
|
| |
$
|
| |
$
|
Assumed
|
| |
|
| |
|
Ceded
|
| |
|
| |
(
|
Net Losses and LAE
|
| |
$
|
| |
$
|
|
| |
March 31,
2023
|
| |
December 31,
2022
|
Senior unsecured notes
|
| |
$
|
| |
$
|
Subordinated notes
|
| |
|
| |
|
Total
|
| |
$
|
| |
$
|
|
| |
Three months ended
March 31,
|
|||
|
| |
2023
|
| |
2022
|
Balance at beginning of period
|
| |
$(
|
| |
$(
|
Other comprehensive income (loss) before reclassifications, net of tax
|
| |
|
| |
(
|
Less: amounts reclassified from accumulated other comprehensive income (loss),
net of tax
|
| |
|
| |
|
Net other comprehensive income (loss)
|
| |
|
| |
(
|
Balance at end of period
|
| |
$(
|
| |
$(
|
|
| |
Three Months Ended
March 31,
|
|||
|
| |
2023
|
| |
2022
|
Net income (loss)
|
| |
$
|
| |
$(
|
|
| |
|
| |
|
Weighted average common shares, basic and diluted*
|
| |
|
| |
|
|
| |
|
| |
|
Earnings (loss) per common share, basic and diluted
|
| |
$
|
| |
$(
|
*
|
|
Three months ended March 31, 2023
|
| |
Commercial
Lines
|
| |
Personal
Lines
|
| |
Total
Underwriting
|
| |
Wholesale
Agency
|
| |
Corporate
|
| |
Eliminations
|
| |
Total
|
Gross written premiums
|
| |
$
|
| |
$
|
| |
$
|
| |
$—
|
| |
$—
|
| |
$—
|
| |
$
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Net written premiums
|
| |
$
|
| |
$
|
| |
$
|
| |
$—
|
| |
$—
|
| |
$—
|
| |
$
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Net earned premiums
|
| |
$
|
| |
$
|
| |
$
|
| |
$—
|
| |
$—
|
| |
$—
|
| |
$
|
Other income
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
(
|
| |
|
Segment revenue
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
(
|
| |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Losses and LAE, net
|
| |
|
| |
|
| |
|
| |
—
|
| |
—
|
| |
—
|
| |
|
Policy acquisition costs
|
| |
|
| |
|
| |
|
| |
|
| |
—
|
| |
(
|
| |
|
Operating expenses
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
—
|
| |
|
Segment expenses
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
(
|
| |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Segment gain (loss)
|
| |
$
|
| |
$(
|
| |
$
|
| |
$(
|
| |
$(
|
| |
$
|
| |
$(
|
Investment income
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Net realized investment gains (losses)
|
| |
|
| |
|
| |
|
| |
|
| |
—
|
| |
|
| |
|
Change in fair value of equity securities
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Other gains (losses)
|
| |
|
| |
|
| |
|
| |
|
| |
—
|
| |
|
| |
|
Interest expense
|
| | | | | | | | | |
(
|
| | | |
(
|
|||||
Income (loss) before equity earnings in
Affiliate and income taxes
|
| |
$
|
| |
$(
|
| |
$
|
| |
$(
|
| |
$
|
| |
$
|
| |
$
|
Three months ended March 31, 2022
|
| |
Commercial
Lines
|
| |
Personal
Lines
|
| |
Total
Underwriting
|
| |
Wholesale
Agency
|
| |
Corporate
|
| |
Eliminations
|
| |
Total
|
Gross written premiums
|
| |
$
|
| |
$
|
| |
$
|
| |
$—
|
| |
$—
|
| |
$—
|
| |
$
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Net written premiums
|
| |
$
|
| |
$
|
| |
$
|
| |
$—
|
| |
$—
|
| |
$—
|
| |
$
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Net earned premiums
|
| |
$
|
| |
$
|
| |
$
|
| |
$—
|
| |
$—
|
| |
$—
|
| |
$
|
Other income
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
(
|
| |
|
Segment revenue
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
(
|
| |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Losses and LAE, net
|
| |
|
| |
|
| |
|
| |
—
|
| |
—
|
| |
—
|
| |
|
Policy acquisition costs
|
| |
|
| |
|
| |
|
| |
|
| |
—
|
| |
(
|
| |
|
Operating expenses
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
—
|
| |
|
Segment expenses
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
(
|
| |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Segment gain (loss)
|
| |
$(
|
| |
$
|
| |
$(
|
| |
$
|
| |
$(
|
| |
$
|
| |
$(
|
Investment income
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Net realized investment gains (losses)
|
| |
|
| |
|
| |
|
| |
|
| |
(
|
| |
|
| |
(
|
Change in fair value of equity securities
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Other gains
|
| |
|
| |
|
| |
|
| |
|
| |
(
|
| |
|
| |
(
|
Interest expense
|
| | | | | | | | | |
(
|
| | | |
(
|
|||||
Income (loss) before equity earnings in
Affiliate and income taxes
|
| |
$(
|
| |
$
|
| |
$(
|
| |
$
|
| |
$(
|
| |
$
|
| |
$(
|
|
| |
|
| |
Page No.
|
1.
|
| |
List of Financial Statements
|
| |
|
|
| | | | ||
|
| | | | ||
|
| | | | ||
|
| | | | ||
|
| | | | ||
|
| | | | ||
|
| | | | ||
2.
|
| |
Financial Statement Schedules
|
| |
|
|
| |
Schedule I – Summary of Investments Other Than Investments in Related
Parties – Omitted as information is included in the consolidated financial statements or notes thereto - See Note 4 ~ Investments
|
| |
|
|
| | | | ||
|
| |
Schedule III – Supplementary Insurance Information – Omitted as information
is included in the consolidated financial statements or notes thereto - See Note 19 ~ Segment Information
|
| |
|
|
| |
Schedule IV – Reinsurance – Omitted as information is included in the
consolidated financial statements or notes thereto See Note 8 ~ Reinsurance
|
| |
|
|
| | | | ||
|
| |
Schedule VI – Supplemental Information Concerning Property and Casualty
Insurance Operations – Omitted as information is included in the consolidated financial statements and notes thereto
|
| |
|
•
|
We obtained an understanding and evaluated the design of key controls over the process and data used by management to
estimate the liability for unpaid losses and LAE, including those controls related to the estimation of and management’s review of the estimated liability of unpaid losses and LAE.
|
•
|
We tested the completeness, integrity, and accuracy of the underlying data used by the Company’s and their engaged actuary,
such as paid loss data, case reserve data, loss adjustment expense data, and loss development tables.
|
•
|
With assistance from our engaged actuarial specialist, we reviewed the reasonableness of the methods and assumptions used by
the Company and their engaged actuary to develop their unpaid losses and LAE reserve estimate.
|
•
|
We evaluated management’s prior year estimate for unpaid losses and LAE and the factors leading to changes in the estimate
recognized in the current year.
|
•
|
We reviewed all supporting transaction documents for the VSRM Transaction related to the step acquisition that resulted from
the purchase of additional ownership interest and obtaining control of VSRM and documents related to the sale of producer business assets to an outside third party.
|
•
|
We obtained an understanding of the business purpose of the VSRM Transaction.
|
•
|
We obtained an understanding of internal controls over the process and data used by the Company in the determination of the
fair value of the assets acquired and liabilities assumed in the VSRM acquisition including the related revaluation gain.
|
•
|
We tested the completeness and accuracy of the underlying internal financial data and supporting documents that were used by
the Company to estimate the fair value of VSRM on the acquisition date and the resulting gain from obtaining control prior to the sale of the business producer assets.
|
•
|
We assessed the fair value of the individual assets and liabilities that were acquired when the Company obtained control of
VSRM, which included reviewing the valuation model and key inputs used by management for reasonableness.
|
•
|
With the assistance of our internal valuation specialists, we evaluated the judgments made by the Company in determining the
fair value of the assets acquired, including identified intangible assets and goodwill, and liabilities assumed.
|
•
|
We reviewed the asset purchase agreement related to the sale of the VSRM business and agreed the assets and liabilities
included in the sale to those derecognized by management of the Company at the disposal date.
|
•
|
We evaluated the overall completeness and accuracy of the VSRM Transaction disclosures within the footnotes to the financial
statements.
|
•
|
We considered changes to the Company in the current year, including:
|
○
|
Changes to the nature of insurance policies written in the current year, such as changes in
retentions, limits and types of insurance risks inherent in the policies.
|
○
|
Changes in the Company’s mix of business written, by state.
|
○
|
Changes in the Company’s operations, including those related to changes in claim handling
practices, changes in case reserving practices, and pricing changes that could impact the predictability of the trends and patterns observed in the historical data.
|
•
|
We tested the completeness and accuracy of the underlying claims data used by the Company to develop its expected loss and
LAE ratios and loss development factors.
|
•
|
With the assistance of our actuarial specialists, we evaluated the reasonableness of the recorded unpaid losses and LAE by:
|
○
|
Evaluating the actuarial methods and weights given to these methods by management to develop
the estimate of the reserve for unpaid losses and LAE.
|
○
|
Developing an independent estimate of the reserve for unpaid losses and LAE, based on actuarial
methodologies.
|
○
|
Performing a retrospective analysis of management’s estimated claims emergence in comparison to
actual results.
|
•
|
Tested the completeness and accuracy of the underlying data used by the Company to develop the forecasted financial
information utilized in the valuation.
|
•
|
Evaluated the reasonableness of the Company’s forecasted financial information by benchmarking the Company’s forecasts of
future revenues and EBITDA to the industry and peer companies.
|
•
|
Performed a sensitivity analysis of the key fair value assumptions impacting the discounted cash flow valuation method.
|
•
|
With the assistance of our fair valuation specialists, we evaluated:
|
○
|
the appropriateness of the valuation methods, the EBITDA multiple and the discount rate used in
the third-party valuation.
|
○
|
the reasonableness of the recorded valuation of the portion of the business sold by performing
an independent range of the valuation estimates.
|
|
| |
December 31,
|
|||
|
| |
2022
|
| |
2021
|
Assets
|
| |
|
| |
|
Investment securities:
|
| |
|
| |
|
Debt securities, at fair value (amortized cost of $
|
| |
$
|
| |
$
|
Equity securities, at fair value (cost of $
|
| |
|
| |
|
Short-term investments, at fair value
|
| |
|
| |
|
Total investments
|
| |
|
| |
|
|
| |
|
| |
|
Cash and cash equivalents
|
| |
|
| |
|
Premiums and agents' balances receivable, net
|
| |
|
| |
|
Receivable from Affiliate
|
| |
|
| |
|
Reinsurance recoverables on unpaid losses
|
| |
|
| |
|
Reinsurance recoverables on paid losses
|
| |
|
| |
|
Prepaid reinsurance premiums
|
| |
|
| |
|
Deferred policy acquisition costs
|
| |
|
| |
|
Other assets
|
| |
|
| |
|
Total assets
|
| |
$
|
| |
$
|
Liabilities and Shareholders' Equity
|
| |
|
| |
|
Liabilities:
|
| |
|
| |
|
Unpaid losses and loss adjustment expenses
|
| |
$
|
| |
$
|
Unearned premiums
|
| |
|
| |
|
Reinsurance premium payable
|
| |
|
| |
|
Debt
|
| |
|
| |
|
Accounts payable and accrued expenses
|
| |
|
| |
|
Total liabilities
|
| |
|
| |
|
|
| |
|
| |
|
Commitments and contingencies
|
| |
|
| |
|
|
| |
|
| |
|
Shareholders' equity:
|
| |
|
| |
|
Common stock,
|
| |
|
| |
|
Accumulated deficit
|
| |
(
|
| |
(
|
Accumulated other comprehensive income (loss)
|
| |
(
|
| |
(
|
Total shareholders' equity
|
| |
|
| |
|
Total liabilities and shareholders' equity
|
| |
$
|
| |
$
|
|
| |
Year Ended December 31,
|
||||||
|
| |
2022
|
| |
2021
|
| |
2020
|
Revenue and Other Income
|
| |
|
| |
|
| |
|
Gross earned premiums
|
| |
$
|
| |
$
|
| |
$
|
Ceded earned premiums
|
| |
(
|
| |
(
|
| |
(
|
Net earned premiums
|
| |
|
| |
|
| |
|
Net investment income
|
| |
|
| |
|
| |
|
Net realized investment gains (losses)
|
| |
(
|
| |
|
| |
|
Change in fair value of equity securities
|
| |
|
| |
(
|
| |
|
Gain from VSRM Transaction
|
| |
|
| |
|
| |
|
Loss portfolio transfer risk fee
|
| |
(
|
| |
|
| |
|
Other gains (losses)
|
| |
|
| |
|
| |
|
Other income
|
| |
|
| |
|
| |
|
Total revenue and other income
|
| |
|
| |
|
| |
|
Expenses
|
| |
|
| |
|
| |
|
Losses and loss adjustment expenses, net
|
| |
|
| |
|
| |
|
Policy acquisition costs
|
| |
|
| |
|
| |
|
Operating expenses
|
| |
|
| |
|
| |
|
Interest expense
|
| |
|
| |
|
| |
|
Total expenses
|
| |
|
| |
|
| |
|
Income (loss) before income taxes
|
| |
(
|
| |
(
|
| |
(
|
Equity earnings in Affiliate, net of tax
|
| |
|
| |
|
| |
|
Income tax expense (benefit)
|
| |
(
|
| |
|
| |
|
Net income (loss)
|
| |
$(
|
| |
$(
|
| |
$
|
|
| |
|
| |
|
| |
|
Net income (loss) per share, basic and diluted
|
| |
$(
|
| |
$(
|
| |
$
|
|
| |
|
| |
|
| |
|
Weighted average common shares
outstanding, basic and diluted
|
| |
|
| |
|
| |
|
|
| |
Year Ended December 31,
|
||||||
|
| |
2022
|
| |
2021
|
| |
2020
|
Net income (loss)
|
| |
$(
|
| |
$(
|
| |
$
|
|
| |
|
| |
|
| |
|
Other comprehensive income (loss), net of tax:
|
| |
|
| |
|
| |
|
Unrealized investment gains (losses):
|
| |
|
| |
|
| |
|
Unrealized investment gains (losses) during the period
|
| |
(
|
| |
(
|
| |
|
Income tax expense (benefit)
|
| |
|
| |
|
| |
|
Unrealized investment gains (losses), net of tax
|
| |
(
|
| |
(
|
| |
|
Less: reclassification adjustments to:
|
| |
|
| |
|
| |
|
Net realized investment gains (losses) included in net
income (loss)
|
| |
|
| |
|
| |
|
Income tax expense (benefit)
|
| |
|
| |
|
| |
|
Total reclassifications included in net income (loss), net of tax
|
| |
|
| |
|
| |
|
Other comprehensive income (loss)
|
| |
(
|
| |
(
|
| |
|
Total comprehensive income (loss)
|
| |
$(
|
| |
$(
|
| |
$
|
|
| |
No Par, Common
Stock
|
| |
Retained
Earnings
(Accumulated
deficit)
|
| |
Accumulated
Other
Comprehensive
Income (Loss)
|
| |
Total
Shareholders'
Equity
|
|||
|
| |
Shares
|
| |
Amount
|
| ||||||||
Balances at January 1, 2020
|
| |
|
| |
$
|
| |
$(
|
| |
$
|
| |
$
|
Net income (loss)
|
| |
—
|
| |
—
|
| |
|
| |
—
|
| |
|
Repurchase of common stock
|
| |
(
|
| |
(
|
| |
—
|
| |
—
|
| |
(
|
Stock-based compensation expense
|
| |
|
| |
|
| |
—
|
| |
—
|
| |
|
Other comprehensive income
|
| |
—
|
| |
—
|
| |
—
|
| |
|
| |
|
Balances at December 31, 2020
|
| |
|
| |
|
| |
(
|
| |
|
| |
|
Net income (loss)
|
| |
—
|
| |
—
|
| |
(
|
| |
—
|
| |
(
|
Repurchase of common stock
|
| |
(
|
| |
(
|
| |
—
|
| |
—
|
| |
(
|
Stock-based compensation expense
|
| |
|
| |
|
| |
—
|
| |
—
|
| |
|
Other comprehensive income (loss)
|
| |
—
|
| |
—
|
| |
—
|
| |
(
|
| |
(
|
Balances at December 31, 2021
|
| |
|
| |
$
|
| |
$(
|
| |
$(
|
| |
$
|
Net income (loss)
|
| |
—
|
| |
—
|
| |
(
|
| |
—
|
| |
(
|
Repurchase of common stock
|
| |
(
|
| |
|
| |
—
|
| |
—
|
| |
|
Issuance of common stock private placement
|
| |
|
| |
|
| |
—
|
| |
—
|
| |
|
Stock-based compensation expense
|
| |
|
| |
|
| |
—
|
| |
—
|
| |
|
Other comprehensive income (loss)
|
| |
—
|
| |
—
|
| |
—
|
| |
(
|
| |
(
|
Balances at December 31, 2022
|
| |
|
| |
$
|
| |
$(
|
| |
$(
|
| |
$
|
|
| |
Year Ended December 31,
|
||||||
|
| |
2022
|
| |
2021
|
| |
2020
|
Cash Flows from Operating Activities
|
| |
|
| |
|
| |
|
Net income (loss)
|
| |
$(
|
| |
$(
|
| |
$
|
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
|
| |
|
| |
|
| |
|
Gain upon consolidation of VSRM (1) and sale of agency business
|
| |
(
|
| |
—
|
| |
—
|
Gain on sale of agency business
|
| |
—
|
| |
(
|
| |
—
|
Depreciation and amortization
|
| |
|
| |
|
| |
|
Amortization of bond premium and discount, net
|
| |
|
| |
|
| |
|
Net realized investment (gains) losses
|
| |
|
| |
(
|
| |
(
|
Change in fair value of equity securities
|
| |
(
|
| |
|
| |
(
|
Loss on sale of fixed assets
|
| |
|
| |
—
|
| |
—
|
Deferred Income tax expense
|
| |
(
|
| |
|
| |
|
Stock-based compensation expenses
|
| |
|
| |
|
| |
|
Equity earnings in Affiliate, net of tax
|
| |
(
|
| |
(
|
| |
(
|
PPP Loan forgiveness
|
| |
—
|
| |
(
|
| |
|
Other
|
| |
|
| |
|
| |
(
|
Changes in operating assets and liabilities:
|
| |
|
| |
|
| |
|
(Increase) decrease in:
|
| |
|
| |
|
| |
|
Premiums, agents' balances and other receivables
|
| |
(
|
| |
(
|
| |
|
Reinsurance recoverables
|
| |
(
|
| |
(
|
| |
|
Prepaid reinsurance premiums
|
| |
(
|
| |
(
|
| |
(
|
Deferred policy acquisition costs
|
| |
|
| |
(
|
| |
(
|
Other assets
|
| |
(
|
| |
|
| |
|
Increase (decrease) in:
|
| |
|
| |
|
| |
|
Unpaid losses and loss adjustment expenses
|
| |
|
| |
|
| |
|
Unearned premiums
|
| |
|
| |
|
| |
|
Reinsurance premiums payable
|
| |
|
| |
|
| |
—
|
Accounts payable and other liabilities
|
| |
|
| |
(
|
| |
(
|
Net cash provided by operating activities
|
| |
(
|
| |
|
| |
|
Cash Flows From Investing Activities
|
| |
|
| |
|
| |
|
Purchases of investments
|
| |
(
|
| |
(
|
| |
(
|
Proceeds from maturities and redemptions of investments
|
| |
|
| |
|
| |
|
Proceeds from sales of investments
|
| |
|
| |
|
| |
|
Proceeds from sale of agency business, net of $
|
| |
|
| |
|
| |
—
|
Purchase of VSRM, net of $
|
| |
(
|
| |
—
|
| |
—
|
Deconsolidation of SSU(1)
|
| |
(
|
| |
—
|
| |
—
|
Dividends from Affiliate
|
| |
—
|
| |
|
| |
—
|
Other purchases
|
| |
—
|
| |
(
|
| |
(
|
Net cash provided by (used in) investing activities
|
| |
|
| |
|
| |
(
|
Cash Flows From Financing Activities
|
| |
|
| |
|
| |
|
Proceeds received from issuance of shares of common stock
|
| |
|
| |
—
|
| |
—
|
Repurchase of common stock
|
| |
|
| |
(
|
| |
(
|
Borrowings under lines of credit
|
| |
|
| |
|
| |
|
Repayment of lines of credit
|
| |
(
|
| |
(
|
| |
(
|
Paydown of long-term debt
|
| |
(
|
| |
—
|
| |
—
|
Net cash provided by (used in) financing activities
|
| |
|
| |
(
|
| |
|
Net increase (decrease) in cash
|
| |
|
| |
|
| |
|
Cash at beginning of period
|
| |
|
| |
|
| |
|
Cash at end of period
|
| |
$
|
| |
$
|
| |
$
|
|
| |
Year Ended December 31,
|
||||||
|
| |
2022
|
| |
2021
|
| |
2020
|
Supplemental Disclosure of Cash Flow Information:
|
| |
|
| |
|
| |
|
Interest paid
|
| |
$
|
| |
$
|
| |
$
|
Income taxes paid (refunded), net
|
| |
$(
|
| |
$
|
| |
$(
|
Increase in note receivable from sale of agency business
|
| |
$—
|
| |
$
|
| |
$—
|
(1)
|
|
Cash
|
| |
$
|
Trade receivables
|
| |
|
Customer relationship intangible assets
|
| |
|
Other assets
|
| |
|
Total assets
|
| |
$
|
|
| |
|
Trade and other payables
|
| |
|
Deferred tax liability
|
| |
|
Note payable to Affiliate
|
| |
|
Senior debt
|
| |
|
Total Liabilities
|
| |
$
|
|
| |
|
Fair value of net assets acquired
|
| |
$
|
Carrying value of equity method investment in VSRM
|
| |
$
|
Fair value of investment in VSRM
|
| |
|
Gain on step acquisition
|
| |
$
|
Cash at closing
|
| |
$
|
Net liabilities transferred
|
| |
|
Hold back
|
| |
|
Stock of acquirer
|
| |
|
Total purchase price
|
| |
$
|
|
| |
|
Cash
|
| |
$
|
Premiums transferred to buyer
|
| |
|
Intangible assets
|
| |
|
Trade payables and accrued liabilities assumed by buyer
|
| |
(
|
Net assets disposed of
|
| |
|
Net gain
|
| |
|
Broker fee transaction costs
|
| |
(
|
Net gain
|
| |
$—
|
Gross gains
|
| |
$
|
Broker fee
|
| |
(
|
Net gain
|
| |
$
|
Cash
|
| |
$
|
Receivable from VSRM
|
| |
|
Trade receivables
|
| |
|
Intangible asset
|
| |
|
Other assets
|
| |
|
Total assets
|
| |
$
|
|
| |
|
Payable to Affiliates
|
| |
|
Trade payables
|
| |
|
Note payable
|
| |
|
Other liabilities
|
| |
|
Total Liabilities
|
| |
$
|
|
| |
December 31, 2022
|
|||||||||
|
| |
Cost or
Amortized
Cost
|
| |
Gross Unrealized
|
| |
Estimated
Fair Value
|
|||
|
| |
Gains
|
| |
Losses
|
| |||||
Debt securities:
|
| |
|
| |
|
| |
|
| |
|
U.S. Government
|
| |
$
|
| |
$
|
| |
$(
|
| |
$
|
State and local government
|
| |
|
| |
|
| |
(
|
| |
|
Corporate debt
|
| |
|
| |
|
| |
(
|
| |
|
Asset-backed securities
|
| |
|
| |
|
| |
(
|
| |
|
Mortgage-backed securities
|
| |
|
| |
|
| |
(
|
| |
|
Commercial mortgage-backed securities
|
| |
|
| |
|
| |
(
|
| |
|
Collateralized mortgage obligations
|
| |
|
| |
|
| |
(
|
| |
|
Total debt securities available for sale
|
| |
$
|
| |
$
|
| |
$(
|
| |
$
|
|
| |
December 31, 2021
|
|||||||||
|
| |
Cost or
Amortized
Cost
|
| |
Gross Unrealized
|
| |
Estimated
Fair Value
|
|||
|
| |
Gains
|
| |
Losses
|
| |||||
Debt securities:
|
| |
|
| |
|
| |
|
| |
|
U.S. Government
|
| |
$
|
| |
$
|
| |
$(
|
| |
$
|
State and local government
|
| |
|
| |
|
| |
(
|
| |
|
Corporate debt
|
| |
|
| |
|
| |
(
|
| |
|
Asset-backed securities
|
| |
|
| |
|
| |
(
|
| |
|
Mortgage-backed securities
|
| |
|
| |
|
| |
(
|
| |
|
Commercial mortgage-backed securities
|
| |
|
| |
|
| |
|
| |
|
Collateralized mortgage obligations
|
| |
|
| |
|
| |
(
|
| |
|
Total debt securities available for sale
|
| |
$
|
| |
$
|
| |
$(
|
| |
$
|
|
| |
December 31, 2022
|
||||||||||||||||||||||||
|
| |
Less than 12 months
|
| |
12 months or More
|
| |
Total
|
||||||||||||||||||
|
| |
No.
of
Issues
|
| |
Fair Value of
Investments
with
Unrealized
Losses
|
| |
Gross
Unrealized
Losses
|
| |
No.
of
Issues
|
| |
Fair Value of
Investments
with
Unrealized
Losses
|
| |
Gross
Unrealized
Losses
|
| |
No.
of
Issues
|
| |
Fair Value of
Investments
with
Unrealized
Losses
|
| |
Gross
Unrealized
Losses
|
Debt securities:
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
U.S. Government
|
| |
|
| |
$
|
| |
$(
|
| |
|
| |
$
|
| |
$(
|
| |
|
| |
$
|
| |
$(
|
State and local government
|
| |
|
| |
|
| |
(
|
| |
|
| |
|
| |
(
|
| |
|
| |
|
| |
(
|
Corporate debt
|
| |
|
| |
|
| |
(
|
| |
|
| |
|
| |
(
|
| |
|
| |
|
| |
(
|
Asset-backed securities
|
| |
|
| |
|
| |
(
|
| |
|
| |
|
| |
(
|
| |
|
| |
|
| |
(
|
Mortgage-backed securities
|
| |
|
| |
|
| |
(
|
| |
|
| |
|
| |
(
|
| |
|
| |
|
| |
(
|
Commercial mortgage -backed securities
|
| |
|
| |
|
| |
(
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
(
|
Collateralized mortgage obligations
|
| |
|
| |
|
| |
(
|
| |
|
| |
|
| |
(
|
| |
|
| |
|
| |
(
|
Total debt securities available for
sale
|
| |
|
| |
|
| |
(
|
| |
|
| |
|
| |
(
|
| |
|
| |
|
| |
(
|
|
| |
December 31, 2021
|
||||||||||||||||||||||||
|
| |
Less than 12 months
|
| |
12 months or More
|
| |
Total
|
||||||||||||||||||
|
| |
No.
of
Issues
|
| |
Fair Value of
Investments
with
Unrealized
Losses
|
| |
Gross
Unrealized
Losses
|
| |
No.
of
Issues
|
| |
Fair Value of
Investments
with
Unrealized
Losses
|
| |
Gross
Unrealized
Losses
|
| |
No.
of
Issues
|
| |
Fair Value of
Investments
with
Unrealized
Losses
|
| |
Gross
Unrealized
Losses
|
Debt securities:
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
U.S. Government
|
| |
|
| |
$
|
| |
$(
|
| |
|
| |
$
|
| |
$(
|
| |
|
| |
$
|
| |
$(
|
State and local government
|
| |
|
| |
|
| |
(
|
| |
|
| |
|
| |
(
|
| |
|
| |
|
| |
(
|
Corporate debt
|
| |
|
| |
|
| |
(
|
| |
|
| |
|
| |
(
|
| |
|
| |
|
| |
(
|
Asset-backed securities
|
| |
|
| |
|
| |
(
|
| |
|
| |
|
| |
(
|
| |
|
| |
|
| |
(
|
Mortgage-backed securities
|
| |
|
| |
|
| |
(
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
(
|
Commercial mortgage -backed securities
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Collateralized mortgage obligations
|
| |
|
| |
|
| |
(
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
(
|
Total debt securities available for
sale
|
| |
|
| |
$
|
| |
$(
|
| |
|
| |
$
|
| |
$(
|
| |
|
| |
$
|
| |
$(
|
|
| |
December 31,
|
||||||
|
| |
2022
|
| |
2021
|
| |
2020
|
Debt securities
|
| |
$
|
| |
$
|
| |
$
|
Equity securities
|
| |
|
| |
|
| |
|
Cash, cash equivalents, and short-term investments
|
| |
|
| |
|
| |
|
Total investment income
|
| |
|
| |
|
| |
|
Investment expenses
|
| |
(
|
| |
(
|
| |
(
|
Net investment income
|
| |
$
|
| |
$
|
| |
$
|
|
| |
December 31,
|
||||||
|
| |
2022
|
| |
2021
|
| |
2020
|
Debt securities:
|
| |
|
| |
|
| |
|
Gross realized gains
|
| |
$
|
| |
$
|
| |
$
|
Gross realized losses
|
| |
(
|
| |
(
|
| |
(
|
Total debt securities
|
| |
(
|
| |
|
| |
|
Equity securities:
|
| |
|
| |
|
| |
|
Gross realized gains
|
| |
|
| |
|
| |
|
Gross realized losses
|
| |
(
|
| |
(
|
| |
(
|
Total equity securities
|
| |
(
|
| |
|
| |
|
Total net realized investment gains
|
| |
$(
|
| |
$
|
| |
$
|
|
| |
Amortized
Cost
|
| |
Estimated
Fair Value
|
Due in one year or less
|
| |
$
|
| |
$
|
Due after one year through five years
|
| |
|
| |
|
Due after five years through ten years
|
| |
|
| |
|
|
| |
Amortized
Cost
|
| |
Estimated
Fair Value
|
Due after ten years
|
| |
|
| |
|
Securities with contractual maturities
|
| |
|
| |
|
Asset-backed securities
|
| |
|
| |
|
Mortgage-backed securities
|
| |
|
| |
|
Commercial mortgage-backed securities
|
| |
|
| |
|
Collateralized mortgage obligations
|
| |
|
| |
|
Total debt securities
|
| |
$
|
| |
$
|
|
| |
December 31, 2022
|
|||||||||
|
| |
Fair Value Measurements Using
|
|||||||||
|
| |
Total
|
| |
Level 1
|
| |
Level 2
|
| |
Level 3
|
Assets:
|
| |
|
| |
|
| |
|
| |
|
Debt Securities:
|
| |
|
| |
|
| |
|
| |
|
U.S. Government
|
| |
$
|
| |
$
|
| |
$
|
| |
$
|
State and local government
|
| |
|
| |
|
| |
|
| |
|
Corporate debt
|
| |
|
| |
|
| |
|
| |
|
Asset-backed securities
|
| |
|
| |
|
| |
|
| |
|
Mortgage-backed securities
|
| |
|
| |
|
| |
|
| |
|
Commercial mortgage-backed securities
|
| |
|
| |
|
| |
|
| |
|
Collateralized mortgage obligations
|
| |
|
| |
|
| |
|
| |
|
Total debt securities
|
| |
|
| |
|
| |
|
| |
|
Equity Securities
|
| |
|
| |
|
| |
|
| |
|
Short-term investments
|
| |
|
| |
|
| |
|
| |
|
Total marketable investments measured
at fair value
|
| |
$
|
| |
$
|
| |
$
|
| |
$
|
Investments measured at NAV:
|
| |
|
| |
|
| |
|
| |
|
Investment in limited partnership
|
| |
|
| |
|
| |
|
| |
|
Total assets measured at fair value
|
| |
$
|
| |
|
| |
|
| |
|
Liabilities:
|
| |
|
| |
|
| |
|
| |
|
Senior Unsecured Notes*
|
| |
$
|
| |
$
|
| |
$
|
| |
$
|
Subordinated Notes*
|
| |
|
| |
|
| |
|
| |
|
Total Liabilities (non-recurring fair value measure
|
| |
$
|
| |
$
|
| |
$
|
| |
$
|
*
|
Carried at face value of debt net of unamortized debt issuance costs on the consolidated balance sheet
|
|
| |
December 31, 2021
|
|||||||||
|
| |
Fair Value Measurements Using
|
|||||||||
|
| |
Total
|
| |
Level 1
|
| |
Level 2
|
| |
Level 3
|
Assets:
|
| |
|
| |
|
| |
|
| |
|
Debt Securities:
|
| |
|
| |
|
| |
|
| |
|
U.S. Government
|
| |
$
|
| |
$
|
| |
$
|
| |
$
|
State and local government
|
| |
|
| |
|
| |
|
| |
|
Corporate debt
|
| |
|
| |
|
| |
|
| |
|
Asset-backed securities
|
| |
|
| |
|
| |
|
| |
|
Mortgage-backed securities
|
| |
|
| |
|
| |
|
| |
|
Commercial mortgage-backed securities
|
| |
|
| |
|
| |
|
| |
|
Collateralized mortgage obligations
|
| |
|
| |
|
| |
|
| |
|
Total debt securities
|
| |
|
| |
|
| |
|
| |
|
Equity Securities
|
| |
|
| |
|
| |
|
| |
|
Short-term investments
|
| |
|
| |
|
| |
—
|
| |
|
Total marketable investments measured
at fair value
|
| |
$
|
| |
$
|
| |
$
|
| |
$
|
Investments measured at NAV:
|
| |
|
| |
|
| |
|
| |
|
Investment in limited partnership
|
| |
|
| |
|
| |
|
| |
|
Total assets measured at fair value
|
| |
$
|
| |
|
| |
|
| |
|
|
| |
December 31, 2021
|
|||||||||
|
| |
Fair Value Measurements Using
|
|||||||||
|
| |
Total
|
| |
Level 1
|
| |
Level 2
|
| |
Level 3
|
Liabilities:
|
| |
|
| |
|
| |
|
| |
|
Senior Unsecured Notes*
|
| |
$
|
| |
$
|
| |
$
|
| |
$
|
Subordinated Notes*
|
| |
|
| |
|
| |
|
| |
|
Total Liabilities measured at fair value
|
| |
$
|
| |
$
|
| |
$
|
| |
$
|
*
|
Carried at face value of debt net of unamortized debt issuance costs on the consolidated balance sheet
|
|
| |
December 31,
|
||||||
|
| |
2022
|
| |
2021
|
| |
2020
|
Balance at beginning of period
|
| |
$
|
| |
$
|
| |
$
|
Deferred policy acquisition costs
|
| |
|
| |
|
| |
|
Amortization of policy acquisition costs
|
| |
(
|
| |
(
|
| |
(
|
Net change
|
| |
(
|
| |
|
| |
|
Balance at end of period
|
| |
$
|
| |
$
|
| |
$
|
|
| |
December 31,
|
||||||
|
| |
2022
|
| |
2021
|
| |
2020
|
Gross reserves - beginning of period
|
| |
$
|
| |
$
|
| |
$
|
Less: reinsurance recoverables on unpaid losses
|
| |
|
| |
|
| |
|
Net reserves - beginning of period
|
| |
|
| |
|
| |
|
Add: incurred losses and loss adjustment expenses, net of
reinsurance Current period
|
| |
|
| |
|
| |
|
Prior period
|
| |
|
| |
|
| |
|
Total net incurred losses and loss adjustment expenses
|
| |
|
| |
|
| |
|
|
| |
December 31,
|
||||||
|
| |
2022
|
| |
2021
|
| |
2020
|
Deduct: loss and loss adjustment expense payments, net of
reinsurance Current period
|
| |
|
| |
|
| |
|
Prior period
|
| |
|
| |
|
| |
|
Total net loss and loss adjustment expense payments
|
| |
|
| |
|
| |
|
Net reserves - end of period
|
| |
|
| |
|
| |
|
Plus: reinsurance recoverables on unpaid losses
|
| |
|
| |
|
| |
|
Gross reserves - end of period
|
| |
$
|
| |
$
|
| |
$
|
Commercial Lines
|
||||||||||||||||||||||||||||||||||||
Accident
Year
|
| |
Incurred loss and allocated loss adjustment expenses, net of reinsurance
|
| |
Total
IBNR
|
| |
Cumulative
number of
reported
claims
|
|||||||||||||||||||||||||||
|
2013*
|
| |
2014*
|
| |
2015*
|
| |
2016*
|
| |
2017*
|
| |
2018*
|
| |
2019*
|
| |
2020*
|
| |
2021*
|
| |
2022
|
| |
2022
|
| |
2022
|
||
2013
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
2014
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
2015
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
2016
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
2017
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
2018
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
2019
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
2020
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
2021
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
2022
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Total
|
| |
$
|
| |
$
|
| |
|
Commercial lines
|
||||||||||||||||||||||||||||||
Cumulative paid loss and allocated loss adjustment expenses, net of
reinsurance
|
||||||||||||||||||||||||||||||
Accident
Year
|
| |
2013*
|
| |
2014*
|
| |
2015*
|
| |
2016*
|
| |
2017*
|
| |
2018*
|
| |
2019*
|
| |
2020*
|
| |
2021*
|
| |
2022
|
2013
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
2014
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
2015
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
2016
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
2017
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
2018
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
2019
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
2020
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
2021
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
2022
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Total
|
| |
$
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Net Unpaid losses and ALAE, years 2013 through 2022
|
| |
$
|
|||||||||||||||||||||||||||
Unpaid losses and ALAE, prior to 2013*
|
| |
|
|||||||||||||||||||||||||||
Unpaid Losses, LPT
|
| |
(
|
|||||||||||||||||||||||||||
Unpaid losses and ALAE, net of reinsurance
|
| |
$
|
*
|
Presented as unaudited required supplementary information.
|
Personal Lines
|
||||||||||||||||||||||||||||||||||||
|
| |
Incurred loss and allocated loss adjustment expenses, net of reinsurance
|
| |
Total
IBNR
|
| |
Cumulative
number of
reported
claims
|
|||||||||||||||||||||||||||
Accident
Year
|
| |
For the years ended December 31,
|
|||||||||||||||||||||||||||||||||
|
2013*
|
| |
2014*
|
| |
2015*
|
| |
2016*
|
| |
2017*
|
| |
2018*
|
| |
2019*
|
| |
2020*
|
| |
2021*
|
| |
2022
|
| |
2022
|
| |
2022
|
||
2013
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
2014
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
2015
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
2016
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
2017
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
2018
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
2019
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
2020
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
2021
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
2022
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Total
|
| |
$
|
| |
$
|
| |
|
Personal lines
|
||||||||||||||||||||||||||||||
Cumulative paid loss and allocated loss adjustment expenses, net of
reinsurance
|
||||||||||||||||||||||||||||||
Accident
Year
|
| |
For the years ended December 31,
|
|||||||||||||||||||||||||||
|
2013*
|
| |
2014*
|
| |
2015*
|
| |
2016*
|
| |
2017*
|
| |
2018*
|
| |
2019*
|
| |
2020*
|
| |
2021*
|
| |
2022
|
||
2013
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
2014
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
2015
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
2016
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
2017
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
2018
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
2019
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
2020
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Personal lines
|
||||||||||||||||||||||||||||||
Cumulative paid loss and allocated loss adjustment expenses, net of
reinsurance
|
||||||||||||||||||||||||||||||
Accident
Year
|
| |
For the years ended December 31,
|
|||||||||||||||||||||||||||
|
2013*
|
| |
2014*
|
| |
2015*
|
| |
2016*
|
| |
2017*
|
| |
2018*
|
| |
2019*
|
| |
2020*
|
| |
2021*
|
| |
2022
|
||
2021
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
2022
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Total
|
| |
$
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
| |
|
| |
|
| |
|
| |
Net Unpaid losses and ALAE, years 2013 through 2022
|
| |
$
|
|||||||||||||||
|
| |
|
| |
|
| |
|
| |
|
| |
Unpaid losses and ALAE, prior to 2013*
|
| |
—
|
||||||||||||
|
| |
|
| |
|
| |
|
| |
Unpaid losses and ALAE, net of reinsurance
|
| |
$
|
*
|
Presented as unaudited required supplementary information.
|
Total Lines
|
||||||||||||||||||||||||||||||||||||
Incurred loss and allocated loss adjustment expenses, net of reinsurance
|
| |
Total
IBNR
|
| |
Cumulative
number of
reported
claims
|
||||||||||||||||||||||||||||||
Accident
Year
|
| |
For the years ended December 31,
|
|||||||||||||||||||||||||||||||||
|
2013*
|
| |
2014*
|
| |
2015*
|
| |
2016*
|
| |
2017*
|
| |
2018*
|
| |
2019*
|
| |
2020*
|
| |
2021*
|
| |
2022
|
| |
2022
|
| |
2022
|
||
2013
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
2014
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
2015
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
2016
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
2017
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
2018
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
2019
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
2020
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
2021
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
2022
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Total
|
| |
|
| |
|
| |
|
Total lines
|
||||||||||||||||||||||||||||||
Cumulative paid loss and allocated loss adjustment expenses, net of
reinsurance
|
||||||||||||||||||||||||||||||
Accident
Year
|
| |
For the years ended December 31,
|
|||||||||||||||||||||||||||
|
2013*
|
| |
2014*
|
| |
2015*
|
| |
2016*
|
| |
2017*
|
| |
2018*
|
| |
2019*
|
| |
2020*
|
| |
2021*
|
| |
2022
|
||
2013
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
2014
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
2015
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
2016
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
2017
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
2018
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
2019
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
2020
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
2021
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
2022
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Total
|
| |
$
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
| |
Net Unpaid losses and ALAE, years 2013 through 2022
|
| |
$
|
||||||||||||||||||||||||
|
| |
Unpaid losses and ALAE, prior to 2013*
|
| |
|
||||||||||||||||||||||||
|
| |
Unpaid losses, LPT
|
| |
(
|
||||||||||||||||||||||||
|
| |
Unpaid losses and ALAE, net of reinsurance
|
| |
$
|
*
|
Presented as unaudited required supplementary information.
|
|
| |
December 31,
2022
|
Net unpaid losses claims and ALAE
|
| |
|
Commercial Lines
|
| |
$
|
Personal Lines
|
| |
|
Total unpaid losses and LAE, net of reinsurance
|
| |
|
Reinsurance recoverable on losses and LAE
|
| |
|
Commercial Lines
|
| |
|
Personal Lines
|
| |
|
Total reinsurance recoverable on unpaid losses and LAE
|
| |
|
ULAE expense
|
| |
|
Total gross unpaid losses and LAE
|
| |
$
|
|
| |
Average annual percentage payout of incurred losses by age, net of
reinsurance
|
|||||||||||||||||||||||||||
|
| |
Year 1
|
| |
Year 2
|
| |
Year 3
|
| |
Year 4
|
| |
Year 5
|
| |
Year 6
|
| |
Year 7
|
| |
Year 8
|
| |
Year 9
|
| |
Year 10+
|
Commercial Lines
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Personal Lines
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Total Lines
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
•
|
Clash coverage is a type of reinsurance that provides additional coverage in the event that one casualty loss event results
in two or more claims and recovery under the reinsurance treaties may otherwise be limited due to the amount, type or number of claims. Clash reinsurance further protects the balance sheet as it reduces the potential maximum loss on
either a single risk or a large number of risks.
|
•
|
Effective January 1, 2022 through December 31, 2022, the company was party to a workers’ compensation and casualty clash
reinsurance treaty with a limit of $
|
•
|
Effective January 1, 2019 through December 31, 2021, the Company was party to a workers' compensation and casualty clash
reinsurance treaty with a limit of $
|
•
|
The Company was party to a facultative reinsurance agreement with a large reinsurer for commercial auto physical damage risks
primarily in excess of $
|
•
|
The Company was party to a facultative reinsurance agreement with a large reinsurer for property risks with total insured
values above the other reinsurance treaty limits.
|
•
|
Effective January 1, 2019 through December 31, 2022, the Company was party to an excess of loss reinsurance treaty for
commercial liability coverage with a limit of $
|
•
|
Effective January 1, 2020 through December 31, 2022, the Company was party to an excess of loss reinsurance treaty for
personal property coverage with a limit of $
|
•
|
Effective January 1, 2022 through December 31, 2022, the Company was party to an excess of loss reinsurance treaty for
commercial property coverage with a limit of $
|
•
|
Effective January 1, 2021 through December 31, 2021, the Company was party to an excess of loss reinsurance treaty for
commercial property coverage with a limit of $
|
•
|
Effective January 1, 2020 through December 31, 2020, the Company was party to an excess of loss reinsurance treaty for
commercial property coverage with a limit of $
|
•
|
At December 31, 2022, the Company was covered for property catastrophe losses up to $
|
•
|
At December 31, 2021, the Company was covered for property catastrophe losses up to $
|
•
|
At December 31, 2020, the Company was covered for property catastrophe losses up to $
|
•
|
Effective January 1, 2019 through December 31, 2021, the Company was party to a multi-line excess of loss treaty that covers
commercial property and casualty losses up to $
|
•
|
The Company cedes
|
•
|
On November 1, 2022, the Company entered into a loss portfolio transfer (“LPT”) reinsurance agreement with Fleming
Reinsurance Ltd (“Fleming Re”). Under the agreement, Fleming Re will cover an aggregate limit of $
|
•
|
The Company ceded
|
|
| |
Year Ended December 31,
|
||||||
|
| |
2022
|
| |
2021
|
| |
2020
|
Written premiums:
|
| |
|
| |
|
| |
|
Direct
|
| |
$
|
| |
$
|
| |
$
|
Assumed
|
| |
|
| |
|
| |
|
Ceded
|
| |
(
|
| |
(
|
| |
(
|
Net written premiums
|
| |
$
|
| |
$
|
| |
$
|
|
| |
|
| |
|
| |
|
Earned premiums:
|
| |
|
| |
|
| |
|
Direct
|
| |
$
|
| |
$
|
| |
$
|
Assumed
|
| |
|
| |
|
| |
|
Ceded
|
| |
(
|
| |
(
|
| |
(
|
Net earned premiums
|
| |
$
|
| |
$
|
| |
$
|
|
| |
|
| |
|
| |
|
Loss and loss adjustment expenses:
|
| |
|
| |
|
| |
|
Direct
|
| |
$
|
| |
$
|
| |
$
|
Assumed
|
| |
|
| |
|
| |
|
Ceded
|
| |
(
|
| |
(
|
| |
(
|
Net loss and LAE
|
| |
$
|
| |
$
|
| |
$
|
|
| |
December 31,
|
|||
|
| |
2022
|
| |
2021
|
Senior unsecured notes
|
| |
$
|
| |
$
|
Subordinated notes
|
| |
|
| |
|
Total
|
| |
$
|
| |
$
|
|
| |
Year Ended December 31,
|
||||||
|
| |
2022
|
| |
2021
|
| |
2020
|
Current tax expense (benefit)
|
| |
$(
|
| |
$
|
| |
$
|
Deferred tax expense (benefit)
|
| |
(
|
| |
|
| |
|
Total income tax expense (benefit)
|
| |
$(
|
| |
$
|
| |
$
|
|
| |
Year Ended December 31,
|
||||||
|
| |
2022
|
| |
2021
|
| |
2020
|
Income (loss) before income taxes
|
| |
$(
|
| |
$(
|
| |
$(
|
Statutory U.S. federal income tax rate
|
| |
(
|
| |
(
|
| |
(
|
State income taxes, net of federal benefit
|
| |
(
|
| |
|
| |
|
Tax-exempt investment income and dividend received deduction
|
| |
(
|
| |
(
|
| |
(
|
Nondeductible meals and entertainment
|
| |
|
| |
|
| |
|
Valuation allowance on deferred tax assets
|
| |
|
| |
|
| |
(
|
Equity-earnings from Affiliate
|
| |
|
| |
|
| |
|
Net gain from sale of agency assets
|
| |
(
|
| |
|
| |
|
Utilization of state NOLs
|
| |
(
|
| |
|
| |
|
PPP Loan forgiveness
|
| |
|
| |
(
|
| |
|
Other
|
| |
|
| |
|
| |
|
Income tax expense (benefit)
|
| |
$(
|
| |
$
|
| |
$
|
Effective tax rate
|
| |
|
| |
(
|
| |
(
|
|
| |
December 31,
|
|||
|
| |
2022
|
| |
2021
|
Deferred tax assets:
|
| |
|
| |
|
Discounted unpaid losses and loss adjustment expenses
|
| |
$
|
| |
$
|
Unearned premiums
|
| |
|
| |
|
Net operating loss carryforwards
|
| |
|
| |
|
Net unrealized losses on investments
|
| |
|
| |
|
State net operating loss carryforwards
|
| |
|
| |
|
Other
|
| |
|
| |
|
Gross deferred tax assets
|
| |
|
| |
|
Less valuation allowance
|
| |
(
|
| |
(
|
Total deferred tax assets, net of allowance
|
| |
|
| |
|
Deferred tax liabilities:
|
| |
|
| |
|
Investment basis difference
|
| |
|
| |
|
Tax rate change transition discounting
|
| |
|
| |
|
Equity investment in Affiliate
|
| |
|
| |
|
Net unrealized gains on investments
|
| |
|
| |
|
Deferred policy acquisition costs
|
| |
|
| |
|
Intangible assets
|
| |
|
| |
|
Property and equipment
|
| |
|
| |
|
Other
|
| |
|
| |
|
Total deferred tax liabilities
|
| |
|
| |
|
Net deferred tax liability
|
| |
$
|
| |
$
|
|
| |
CIC
|
| |
WPIC
|
2022
|
| |
|
| |
|
Statutory capital and surplus
|
| |
$
|
| |
$
|
RBC authorized control level
|
| |
|
| |
|
Statutory net income (loss)
|
| |
(
|
| |
(
|
RBC %
|
| |
|
| |
|
|
| |
CIC
|
| |
WPIC
|
2021
|
| |
|
| |
|
Statutory capital and surplus
|
| |
$
|
| |
$
|
RBC authorized control level
|
| |
|
| |
|
Statutory net income (loss)
|
| |
(
|
| |
(
|
RBC %
|
| |
|
| |
|
|
| |
CIC
|
| |
WPIC
|
2020
|
| |
|
| |
|
Statutory capital and surplus
|
| |
$
|
| |
$
|
RBC authorized control level
|
| |
|
| |
|
Statutory net income (loss)
|
| |
|
| |
|
RBC %
|
| |
|
| |
|
|
| |
Year Ended
December 31,
|
|||
|
| |
2022
|
| |
2021
|
Balance at beginning of period
|
| |
$(
|
| |
$
|
Other comprehensive income (loss) before reclassifications
|
| |
(
|
| |
(
|
Less: amounts reclassified from accumulated other comprehensive income (loss)
|
| |
|
| |
|
Net current period other comprehensive income (loss)
|
| |
(
|
| |
(
|
Balance at end of period
|
| |
$(
|
| |
$(
|
|
| |
Year Ended
December 31,
|
||||||
|
| |
2022
|
| |
2021
|
| |
2020
|
Net income (loss)
|
| |
$(
|
| |
$(
|
| |
$
|
Weighted average common shares, basic and diluted*
|
| |
|
| |
|
| |
|
Earnings (loss) per share, basic and diluted
|
| |
(
|
| |
$(
|
| |
$
|
*
|
The non-vested shares of the restricted stock units and stock options were anti-dilutive as of December 31, 2022, 2021, and
2020. Therefore, the non-vested shares are excluded from earnings (loss) per share for the years ended December 31, 2022, 2021, and 2020.
|
|
| |
Net Earned Premium
|
||||||
|
| |
2022
|
| |
2021
|
| |
2020
|
Commercial
|
| |
|
| |
|
| |
|
Personal
|
| |
|
| |
|
| |
|
Total
|
| |
|
| |
|
| |
|
Year Ended December 31, 2022
|
| |
Commercial
Lines
|
| |
Personal
Lines
|
| |
Under-
writing
|
| |
Wholesale
Agency
|
| |
Corp-
orate
|
| |
Elim-
inations
|
| |
Total
|
Gross written premiums
|
| |
$
|
| |
$
|
| |
$
|
| |
$—
|
| |
$—
|
| |
$—
|
| |
$
|
Net written premiums
|
| |
$
|
| |
$
|
| |
$
|
| |
$—
|
| |
$—
|
| |
$—
|
| |
$
|
Net earned premiums
|
| |
$
|
| |
$
|
| |
$
|
| |
$—
|
| |
$—
|
| |
$—
|
| |
$
|
Other income
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
(
|
| |
|
Segment revenue
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
(
|
| |
|
Loss and loss adjustment expenses, net
|
| |
|
| |
|
| |
|
| |
—
|
| |
—
|
| |
—
|
| |
|
Policy acquisition costs
|
| |
|
| |
|
| |
|
| |
|
| |
—
|
| |
(
|
| |
|
Operating expenses
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
(
|
| |
|
Loss portfolio transfer risk fee
|
| |
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
|
Segment expenses
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
(
|
| |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Year Ended December 31, 2022
|
| |
Commercial
Lines
|
| |
Personal
Lines
|
| |
Under-
writing
|
| |
Wholesale
Agency
|
| |
Corp-
orate
|
| |
Elim-
inations
|
| |
Total
|
Segment underwriting gain (loss)
|
| |
(
|
| |
(
|
| |
(
|
| |
(
|
| |
(
|
| |
|
| |
(
|
Net investment income
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Net realized investment gains (losses)
|
| |
|
| |
|
| |
|
| |
|
| |
(
|
| |
|
| |
(
|
Change in fair value of equity securities
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Gain from VSRM Transaction
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Other gains
|
| |
|
| |
|
| |
|
| |
(
|
| |
|
| |
|
| |
|
Interest expense
|
| |
|
| |
|
| |
|
| |
(
|
| |
(
|
| |
|
| |
(
|
Income (loss) before income taxes
|
| |
$(
|
| |
$(
|
| |
$(
|
| |
$(
|
| |
$
|
| |
$
|
| |
$(
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Selected Balance Sheet Data:
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Deferred policy acquisition costs
|
| |
$
|
| |
$
|
| |
|
| |
|
| |
|
| |
$(
|
| |
$
|
Unearned premiums
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Unpaid losses and loss adjustment expenses
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Year Ended December 31, 2021
|
| |
Commercial
Lines
|
| |
Personal
Lines
|
| |
Under-
writing
|
| |
Wholesale
Agency
|
| |
Corp-
orate
|
| |
Elim-
inations
|
| |
Total
|
Gross written premiums
|
| |
$
|
| |
$
|
| |
$
|
| |
$—
|
| |
$—
|
| |
$—
|
| |
$
|
Net written premiums
|
| |
$
|
| |
$
|
| |
$
|
| |
$—
|
| |
$—
|
| |
$—
|
| |
$
|
Net earned premiums
|
| |
$
|
| |
$
|
| |
$
|
| |
$—
|
| |
$—
|
| |
$—
|
| |
$
|
Other income
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
(
|
| |
|
Segment revenue
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
(
|
| |
|
Loss and loss adjustment expenses, net
|
| |
|
| |
|
| |
|
| |
—
|
| |
—
|
| |
—
|
| |
|
Policy acquisition costs
|
| |
|
| |
|
| |
|
| |
|
| |
—
|
| |
(
|
| |
|
Operating expenses
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
—
|
| |
|
Segment expenses
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
(
|
| |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Segment underwriting gain (loss)
|
| |
(
|
| |
|
| |
(
|
| |
(
|
| |
(
|
| |
$
|
| |
(
|
Net investment income
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Net realized investment gains
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Change in fair value of equity securities
|
| |
|
| |
|
| |
|
| |
|
| |
(
|
| |
|
| |
(
|
Other gains
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Interest expense
|
| |
|
| |
|
| |
|
| |
|
| |
(
|
| |
|
| |
(
|
Income (loss) before income taxes
|
| |
$(
|
| |
$
|
| |
$(
|
| |
$(
|
| |
$
|
| |
$
|
| |
$(
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Selected Balance Sheet Data:
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Deferred policy acquisition costs
|
| |
$
|
| |
$
|
| |
|
| |
|
| |
|
| |
$(
|
| |
$
|
Unearned premiums
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Unpaid losses and loss adjustment expenses
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Year Ended December 31, 2020
|
| |
Commercial
Lines
|
| |
Personal
Lines
|
| |
Under-
writing
|
| |
Wholesale
Agency
|
| |
Corp-
orate
|
| |
Elim-
inations
|
| |
Total
|
Gross written premiums
|
| |
$
|
| |
$
|
| |
$
|
| |
$—
|
| |
$—
|
| |
$—
|
| |
$
|
Year Ended December 31, 2020
|
| |
Commercial
Lines
|
| |
Personal
Lines
|
| |
Under-
writing
|
| |
Wholesale
Agency
|
| |
Corp-
orate
|
| |
Elim-
inations
|
| |
Total
|
Net written premiums
|
| |
$
|
| |
$
|
| |
$
|
| |
$—
|
| |
$—
|
| |
$—
|
| |
$
|
Net earned premiums
|
| |
$
|
| |
$
|
| |
$
|
| |
$—
|
| |
$—
|
| |
$—
|
| |
$
|
Other income
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
(
|
| |
|
Segment revenue
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
(
|
| |
|
Loss and loss adjustment expenses, net
|
| |
|
| |
|
| |
|
| |
—
|
| |
—
|
| |
—
|
| |
|
Policy acquisition costs
|
| |
|
| |
|
| |
|
| |
|
| |
—
|
| |
(
|
| |
|
Operating expenses
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
—
|
| |
|
Segment expenses
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
(
|
| |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Segment underwriting gain (loss)
|
| |
(
|
| |
|
| |
(
|
| |
(
|
| |
(
|
| |
$
|
| |
(
|
Net investment income
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Net realized investment gains
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Change in fair value of equity securities
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Other gains
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Interest expense
|
| |
|
| |
|
| |
|
| |
|
| |
(
|
| |
|
| |
(
|
Income (loss) before income taxes
|
| |
$(
|
| |
$
|
| |
$(
|
| |
$(
|
| |
$
|
| |
$
|
| |
$(
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Selected Balance Sheet Data:
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Deferred policy acquisition costs
|
| |
$
|
| |
$
|
| |
|
| |
|
| |
|
| |
$(
|
| |
$
|
Unearned premiums
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Unpaid losses and loss adjustment expenses
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
| |
December 31,
|
|||
|
| |
2022
|
| |
2021
|
Assets
|
| |
|
| |
|
Investment in subsidiaries
|
| |
$
|
| |
$
|
Cash
|
| |
|
| |
|
Due from subsidiaries
|
| |
(
|
| |
(
|
Due from Affiliate
|
| |
|
| |
|
Other assets
|
| |
|
| |
|
Total assets
|
| |
$
|
| |
$
|
Liabilities and Shareholders' Equity
|
| |
|
| |
|
Liabilities:
|
| |
|
| |
|
Debt
|
| |
$
|
| |
$
|
Other liabilities
|
| |
|
| |
|
Total liabilities
|
| |
|
| |
|
Shareholders' equity:
|
| |
|
| |
|
Common stock,
|
| |
|
| |
|
Accumulated deficit
|
| |
(
|
| |
(
|
Accumulated other comprehensive income (loss)
|
| |
(
|
| |
(
|
Total shareholders' equity
|
| |
|
| |
|
Total liabilities and shareholders' equity
|
| |
$
|
| |
$
|
|
| |
Year Ended December 31,
|
||||||
|
| |
2022
|
| |
2021
|
| |
2020
|
Revenue
|
| |
|
| |
|
| |
|
Management fees from subsidiaries
|
| |
$
|
| |
$
|
| |
$
|
Other income
|
| |
|
| |
|
| |
|
Total revenue
|
| |
|
| |
|
| |
|
Expenses
|
| |
|
| |
|
| |
|
Operating expenses
|
| |
|
| |
|
| |
|
Interest expense
|
| |
|
| |
|
| |
|
Total expenses
|
| |
|
| |
|
| |
|
Income (loss) before equity in earnings (losses) of
subsidiaries and income tax expense (benefit)
|
| |
(
|
| |
|
| |
(
|
Income tax expense (benefit)
|
| |
(
|
| |
|
| |
(
|
Income (loss) before equity earnings (losses) of subsidiaries
|
| |
(
|
| |
|
| |
(
|
Equity earnings (losses) in subsidiaries
|
| |
(
|
| |
(
|
| |
|
Net income (loss)
|
| |
(
|
| |
(
|
| |
|
Other Comprehensive Income
|
| |
|
| |
|
| |
|
Equity in other comprehensive income (loss) of subsidiaries
|
| |
(
|
| |
(
|
| |
|
Total Comprehensive income (loss)
|
| |
$(
|
| |
$(
|
| |
$
|
|
| |
Year Ended December 31,
|
||||||
|
| |
2022
|
| |
2021
|
| |
2020
|
Cash Flows from Operating Activities
|
| |
|
| |
|
| |
|
Net income (loss)
|
| |
$(
|
| |
$(
|
| |
$
|
Adjustments to reconcile net income (loss) to net cash
used in operating activities:
|
| |
|
| |
|
| |
|
Depreciation and amortization
|
| |
|
| |
|
| |
|
Equity in undistributed (income) loss of subsidiaries
|
| |
|
| |
|
| |
(
|
Stock-based compensation expense
|
| |
|
| |
|
| |
|
Deferred income tax expense
|
| |
|
| |
—
|
| |
—
|
Other (gain) loss
|
| |
—
|
| |
(
|
| |
(
|
Changes in operating assets and liabilities:
|
| |
|
| |
|
| |
|
Due from subsidiaries
|
| |
|
| |
|
| |
(
|
Due from Affiliate
|
| |
|
| |
(
|
| |
|
Current income tax recoverable
|
| |
|
| |
|
| |
|
Other assets
|
| |
|
| |
|
| |
|
Other liabilities
|
| |
(
|
| |
(
|
| |
(
|
Net cash provided by (used in) operating activities
|
| |
(
|
| |
|
| |
(
|
Cash Flows From Investing Activities
|
| |
|
| |
|
| |
|
Contributions to subsidiaries
|
| |
|
| |
(
|
| |
(
|
Dividends received from subsidiaries
|
| |
|
| |
|
| |
|
Purchases of investments
|
| |
|
| |
|
| |
(
|
Purchases of property and equipment
|
| |
|
| |
(
|
| |
|
Net cash provided by (used in) investing activities
|
| |
|
| |
(
|
| |
(
|
Cash Flows From Financing Activities
|
| |
|
| |
|
| |
|
Proceeds received from issuance of shares of common stock
|
| |
|
| |
|
| |
|
Repurchase of common stock
|
| |
|
| |
(
|
| |
(
|
Borrowings under debt arrangements
|
| |
|
| |
|
| |
|
Repayment of borrowings under debt arrangements
|
| |
(
|
| |
(
|
| |
(
|
Stock and debt issuance costs
|
| |
|
| |
|
| |
|
Net cash provided by financing activities
|
| |
|
| |
(
|
| |
|
Net increase (decrease) in cash
|
| |
|
| |
(
|
| |
|
Cash at beginning of period
|
| |
|
| |
|
| |
|
Cash at end of period
|
| |
$
|
| |
$
|
| |
$
|
Supplemental Disclosure of Cash Flow Information:
|
| |
|
| |
|
| |
|
Interest paid
|
| |
$
|
| |
$
|
| |
$
|
|
| |
Balance at
Beginning of
Period
|
| |
Charged to
Expense
|
| |
Decrease to
Other
Comprehensive
Income
|
| |
Deductions from
Allowance
Account
|
| |
Balance at
End of Period
|
Valuation for Deferred Tax Assets
|
| |
|
| |
|
| |
|
| |
|
| |
|
2022
|
| |
|
| |
|
| |
|
| |
|
| |
|
2021
|
| |
|
| |
|
| |
|
| |
|
| |
|
2020
|
| |
|
| |
(
|
| |
(
|
| |
|
| |
|
Item 13.
|
Other Expenses of Issuance and Distribution.
|
SEC Registration Fee
|
| |
$
|
FINRA filing fee
|
| |
|
NASDAQ listing fee
|
| |
|
Legal Fees and Expenses
|
| |
|
Accounting Fees and Expenses
|
| |
|
Printing Fees and Expenses
|
| |
|
Trustee Fees
|
| |
|
Miscellaneous Expenses
|
| | |
Total
|
| |
$
|
Item 15.
|
Recent Sales of Unregistered Securities.
|
Item 20.
|
Indemnification of Directors and Officers.
|
Item 21.
|
Exhibits and Financial Statement Schedules.
|
(a)
|
Exhibit List
|
Exhibit
Number
|
| |
Description
|
1.1**
|
| |
Dealer Manager Agreement
|
|
| |
|
1.2**
|
| |
Placement Agent Agreement
|
|
| |
|
| |
Second Amended and Restated Articles of Incorporation of Conifer Holdings,
Inc. (incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K filed on August 28, 2015)
|
|
|
| |
|
| |
Amended and Restated Bylaws of Conifer Holdings, Inc. (incorporated by
reference to Exhibit 3.4 of the Company’s Registration Statement Form S-1/A filed on July 30, 2015)
|
|
|
| |
|
| |
Form of Common Stock Certificate (incorporated by reference to Exhibit 4.1
of the Company’s Registration Statement Form S-1/A filed on July 30, 2015)
|
|
|
| |
|
| |
2018 Indenture (incorporated by reference to Exhibit 4.1 of the Company’s
Current Report on Form 8-K filed on September 24, 2018)
|
|
|
| |
|
| |
2018 Supplemental Indenture (incorporated by reference to Exhibit 4.2 of the
Company’s Current Report on Form 8-K filed on September 24, 2018)
|
|
|
| |
|
| |
Form of 2018 Note (incorporated by reference to Exhibit 4.4 of the Company’s
Registration Statement on Form S-1/A filed on September 10, 2018)
|
|
|
| |
|
4.5**
|
| |
Form of New Notes Supplemental Indenture
|
|
| |
|
4.6**
|
| |
Form of New Note
|
|
| |
|
5.1**
|
| |
Opinion of Honigman LLP
|
|
| |
|
| |
2015 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.2 of
the Company’s Registration Statement Form S-1 filed on July 2, 2015)
|
|
|
| |
|
| |
Lease Agreement, dated September 18, 2013, as amended (incorporated by
reference to Exhibit 10.3 to the Company’s S-1 filed on July 2, 2015)
|
|
|
| |
|
| |
Employment Agreements with Nicholas J. Petcoff, James G. Petcoff, Andrew D.
Petcoff and Brian J. Roney (incorporated by reference to Exhibit 10.13 of the Company’s Annual Report on Form 10-K filed on March 15, 2017)
|
|
|
| |
|
Exhibit
Number
|
| |
Description
|
| |
Note Purchase Agreement dated September 29, 2017 between the Company and
Elanus Capital Investments Master SP Series 3 (incorporated by reference to Exhibit 10.14 of the Company’s Quarterly Report on Form 10-Q filed on November 8, 2017)
|
|
|
| |
|
| |
First Amendment to Note Purchase Agreement dated as of June 21, 2018 between
the Company and Elanus Capital Investments Master SP Series 3 3 (incorporated by reference to Exhibit 10.16 of the Company’s Annual Report on Form 10-K filed on March 13, 2019)
|
|
|
| |
|
| |
Credit Agreement dated as of June 21, 2018 between the Company and The
Huntington National Bank (incorporated by reference to Exhibit 10.15 of the Company’s Annual Report on Form 10-K filed on March 13, 2019)
|
|
|
| |
|
| |
First Amendment to Credit Agreement dated as of December 27, 2018 between
the Company and the Huntington National Bank (incorporated by reference to Exhibit 10.20 of the Company’s Annual Report on Form 10-K filed on March 13, 2019)
|
|
|
| |
|
| |
Second Amendment to Credit Agreement dated as of June 21, 2019 between the
Company and The Huntington National Bank (incorporated by reference to Exhibit 10.22 of the Company’s Annual Report on Form 10-K filed on March 12, 2020)
|
|
|
| |
|
| |
Third Amendment to Credit Agreement dated as of April 24, 2020 between the
Company and The Huntington National Bank (incorporated by reference to Exhibit 10.24 of the Company’s Quarterly Report on Form 10-Q filed on May 13, 2020)
|
|
|
| |
|
| |
Fourth Amendment to Credit Agreement dated as of June 19, 2020 between the
Company and The Huntington National Bank (incorporated by reference to Exhibit 10.26 of the Company’s Quarterly Report on Form 10-Q filed on August 12, 2020)
|
|
|
| |
|
| |
Fifth Amendment to Credit Agreement dated as of June 18, 2021 between the
Company and the Huntington National Bank (incorporated by reference to Exhibit 10.28 of the Company’s Quarterly Report on Form 10-Q filed on August 11, 2021)
|
|
|
| |
|
| |
Six Amendment to Credit Agreement dated as of August 8, 2022 between the
Company and the Huntington National Bank (incorporated by reference to Exhibit 10.29 of the Company’s Quarterly Report on Form 10-Q filed on August 11, 2022)
|
|
|
| |
|
| |
Amended and Restated Note Purchase Agreement dated September 25, 2018
between the Company and Elanus Capital Investments Master SP Series 3 (incorporated by reference to Exhibit 10.17 of the Company’s Annual Report on Form 10-K filed on March 13, 2019)
|
|
|
| |
|
| |
First Amendment to Amended and Restated Note Purchase Agreement dated as of
December 13, 2018 between the Company and Elanus Capital Investments Master SP Series 3 (incorporated by reference to Exhibit 10.19 of the Company’s Annual Report on Form 10-K filed on March 13, 2019)
|
|
|
| |
|
| |
Second Amendment to Amended and Restated Note Purchase Agreement dated as of
June 21, 2019 between the Company and Elanus Capital Investments Master SP Series 3 (incorporated by reference to Exhibit 10.21 of the Company’s Annual Report on Form 10-K filed on March 12, 2020)
|
|
|
| |
|
| |
Third Amendment to Amended and Restated Note Purchase Agreement dated as of
May 9, 2022 between the Company and Elanus Capital Investments Master SP Series 3
|
|
|
| |
|
Exhibit
Number
|
| |
Description
|
| |
Waiver and Consent from The Huntington National Bank dated as of October 31,
2018 regarding the Amended and Restated Note Purchase Agreement between the Company and Elanus Capital Investments Master SP Series 3 (incorporated by reference to Exhibit 10.18 of the Company’s Annual Report on Form 10-K filed on
March 13, 2019)
|
|
|
| |
|
| |
Amendment to Promissory Note dated as of June 18, 2021 between the Company
and The Huntington National Bank (incorporated by reference to Exhibit 10.27 of the Company’s Quarterly Report on Form 10-Q filed on August 11, 2021.
|
|
|
| |
|
| |
List of Subsidiaries of the Company (incorporated by reference to Exhibit
21.1 of the Company’s Annual Report on Form 10-K filed on March 27, 2023)
|
|
|
| |
|
| |
Consent of Plante & Moran, PLLC, Independent Registered Public Accounting
Firm
|
|
|
| |
|
| |
Consent of Deloitte & Touche LLP
|
|
|
| |
|
23.3**
|
| |
Consent of Honigman LLP (included in Exhibit 5.1)
|
|
| |
|
| |
Power of Attorney (included on signature page)
|
|
|
| |
|
25.1**
|
| |
Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939, as
amended, by the trustee under the Indenture
|
|
| |
|
| |
Filing Fee Table
|
|
|
| |
|
101.INS
|
| |
inline XBRL Instance Document
|
|
| |
|
101.SCH
|
| |
inline XBRL Taxonomy Extension Schema Document
|
|
| |
|
101.CAL
|
| |
inline XBRL Taxonomy Extension Calculation Linkbase
|
|
| |
|
101.DEF
|
| |
inline XBRL Taxonomy Extension Definition Linkbase
|
|
| |
|
101.LAB
|
| |
inline XBRL Taxonomy Extension Label Linkbase
|
|
| |
|
101.PRE
|
| |
inline XBRL Taxonomy Extension Presentation Linkbase
|
*
|
Filed Herewith.
|
**
|
To be completed by the amendment.
|
Item 22.
|
Undertakings.
|
(1)
|
To file, during any period in which offers or sales are being made, a post-effective amendment to this registration
statement:
|
(i)
|
To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;
|
(ii)
|
To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in the
amount of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of
prospectus filed with the SEC pursuant to Rule 424(b) under the Securities Act if, in the aggregate, the changes in volume and price represent no more than 20% change in the maximum aggregate offering price set forth in the “Calculation
of Registration Fee” table in the effective registration statement;
|
(iii)
|
To include any material information with respect to the plan of distribution not previously disclosed in the registration
statement or any material change to such information in the registration statement;
|
(2)
|
That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall
be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering
thereof;
|
(3)
|
To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold
at the termination of the offering;
|
(4)
|
That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser: if the Company is subject
to Rule 430C, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A,
shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no
statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the
registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration
statement or made in any such document immediately prior to such date of first use; and
|
(5)
|
That, for the purpose of determining liability of the Company under the Securities Act of 1933 to any purchaser in the
initial distribution of the securities, the undersigned Company undertakes that in a primary offering of securities of the undersigned Company pursuant to this registration statement, regardless of the underwriting method used to sell
the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned Company will be a seller to the purchaser and will be considered to offer or sell
such securities to such purchaser:
|
(i)
|
Any preliminary prospectus or prospectus of the undersigned Company relating to the offering required to be filed pursuant to
Rule 424;
|
(ii)
|
Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned Company or used or referred
to by the undersigned Company;
|
(iii)
|
The portion of any other free writing prospectus relating to the offering containing material information about the
undersigned Company or its securities provided by or on behalf of the undersigned Company; and
|
(iv)
|
Any other communication that is an offer in the offering made by the undersigned Company to the purchaser.
|
(2)
|
The Company undertakes that every prospectus (i) that is filed pursuant to paragraph (b)(1) immediately preceding, or
(ii) that purports to meet the requirements of Section 10(a)(3) of the Securities Act of 1933 and is used in connection with an offering of securities subject to Rule 415, will be filed as part of an amendment to the registration
statement and will not be used until such an amendment is effective, and that, for purposes of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
|
By:
|
| |
/s/ James G. Petcoff
|
|
| |
James G. Petcoff
|
|
| |
Executive Chairman and Co-Chief Executive Officer (Principal Executive Officer)
|
Name
|
| |
Title
|
| |
Date
|
|
| |
|
| |
|
/s/ James G. Petcoff
|
| |
Executive Chairman and Co-Chief Executive Officer (Principal Executive Officer)
|
| |
May 25, 2023
|
James G. Petcoff
|
| |||||
|
| |
|
| |
|
/s/ Nicholas J. Petcoff
|
| |
Co-Chief Executive Officer
|
| |
May 25, 2023
|
Nicholas J. Petcoff
|
| |
|
| ||
|
| |
|
| |
|
/s/ Harold J. Meloche
|
| |
Chief Financial Officer and Treasurer
(Principal Accounting and Financial Officer)
|
| |
May 25, 2023
|
Harold J. Meloche
|
| |||||
|
| |
|
| |
|
/s/ Gerald W. Hakala
|
| |
Director
|
| |
May 25, 2023
|
Gerald W. Hakala
|
| |||||
|
| |
|
| |
|
/s/ Jeffrey Hakala
|
| |
Director
|
| |
May 25, 2023
|
Jeffrey Hakala
|
| |||||
|
| |
|
| |
|
/s/ Timothy Lamothe
|
| |
Director
|
| |
May 25, 2023
|
Timothy Lamothe
|
| |||||
|
| |
|
| |
|
/s/ Richard J. Williams, Jr.
|
| |
Director
|
| |
May 25, 2023
|
Richard J. Williams, Jr.
|
| |||||
|
| |
|
| |
|