News Release
For Further Information:
Sarah Miller, 248.559.0840
ir@cnfrh.com
For Immediate Release
Conifer Holdings Reports 2016 Fourth Quarter and Year End Financial Results
Company to Host Conference Call at 8:30 AM ET on Thursday, March 2, 2017
Birmingham, MI, March 1, 2017 - Conifer Holdings, Inc. (Nasdaq: CNFR) (“Conifer” or the
“Company”) today announced results for the fourth quarter and year ended December 31, 2016.
Fourth Quarter 2016 Highlights (all comparisons to prior year period)
• Gross written premiums increased 24.0% to $31.3 million
• Net earned premiums increased 26.9% to $24.5 million
• Combined ratio was 118.7%, compared to 113.3% in the prior year period and 107.9% in the
third quarter of 2016; largely due to reserve strengthening on prior claims
• Net loss of $4.4 million, or $0.58 per diluted share
Annual 2016 Highlights (all comparisons to prior year)
Gross written premiums increased 22.6% to $114.9 million
Net earned premiums increased 34.2% to $89.6 million
Combined ratio was 112.2% for the year ended December 31, 2016, compared to 102.1% in the
prior year
Net loss of $8.4 million, or $1.11 per diluted share
Book value per share of $8.88 at December 31, 2016, compared to $10.11 at December 31, 2015
Management Comments
James Petcoff, Chairman and CEO, commented, “Largely as a result of the underwriting initiatives we
began in the latter half of 2015, Conifer achieved strong top line organic growth throughout 2016
with premiums up roughly 23% on the year. Our growth was led by Conifer’s core commercial
insurance products which encompass all major lines of business as we grew our specialty premiums
to all 50 states.”
Conifer Holdings, Inc. Page 2
March 1, 2017
Mr. Petcoff continued, “Throughout 2016, Conifer focused on growing our lines of business that
produced the best underwriting results. Our core commercial lines performed well, with a 98%
combined ratio for the year. However, the overall underwriting performance, was affected mainly by
unfavorable loss trends in the homeowner’s lines of business in Florida, and much like the P&C
industry at large in our commercial auto business. As a result, Conifer took a conservative approach
to reserving in the fourth quarter, which impacted short-term operating results, but positioned the
Company for a return to profitability in 2017. The Company began to benefit from a number of
policy adjustments and rate increases implemented in 2016, but understands that the full impact of
these positive changes will continue over the next 12 months.”
2016 Fourth Quarter and Year End Financial Results Overview
2016 2015 % Change 2016 2015 % Change
Gross written premiums 31,308$ 25,245$ 24.0% 114,923$ 93,750$ 22.6%
Net written premiums 27,069 21,467 26.1% 99,929 79,674 25.4%
Net earned premiums 24,463 19,274 26.9% 89,627 66,765 34.2%
Net investment income 548 442 24.0% 2,173 1,902 14.2%
Net realized investment gains 761 47 ** 1,365 285 **
Other gains (losses) (400) - ** (400) 104 **
Net income (loss) (4,421) (2,304) ** (8,437) (17) **
Net income (loss) attributable to Conifer (4,421) (2,304) ** (8,437) 64 **
Net income (loss) allocable to common shareholders (4,421) (2,304) ** (8,437) (476) **
Net income (loss) per share, diluted (0.58)$ (0.30)$ (1.11)$ (0.09)$
Adjusted operating income allocable to common shareholders* (4,279) (2,351) ** (9,549) (865) **
Adjusted operating income (loss) per share, diluted* (0.56)$ (0.31)$ (1.26)$ (0.16)$
Book value per common share outstanding 8.88$ 10.11$ 8.88$ 10.11$
Weighted average shares outstanding, basic and diluted 7,632,390 7,644,492 7,618,588 5,369,960
Underwriting ratios:
Loss ratio (1) 73.4% 59.2% 65.0% 56.8%
Expense ratio (2) 45.3% 54.1% 47.2% 45.3%
Combined ratio (3) 118.7% 113.3% 112.2% 102.1%
** Percentage is not meaningful
* The "Definitions of Non-GAAP Measures" section of this release defines and reconciles data that are not based on generally accepted accounting
p inciples.
(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.
(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.
(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.
At and for the
Three Months Ended December 31,
At and for the
Year Ended December 31,
(dollars in thousands, except share and per share amounts)
Conifer Holdings, Inc. Page 3
March 1, 2017
Fourth Quarter 2016 Premiums
Gross Written Premiums
Gross written premiums increased 24.0% in the fourth quarter of 2016 to $31.3 million, compared
to $25.2 million in the prior year period, largely due to strong growth in the Company’s specialty
commercial lines business, partially offset by a decline in the growth of the personal lines business
as wind-exposed homeowners premiums decreased.
Gross written premiums increased 22.6% for the year ended December 31, 2016 compared to 2015,
largely driven by a 29.4% increase in Conifer’s commercial lines business.
Net Earned Premiums
Net earned premiums increased 26.9% to $24.5 million for the fourth quarter of 2016, compared to
$19.3 million for the prior year period. Net earned premiums for the year ended December 31, 2016
increased 34.2%, largely due to the increase in gross written premiums.
Commercial Lines Operational Review
The Company’s commercial lines of business, which represented 82% of total gross written
premiums in the fourth quarter of 2016, primarily consists of property, liability, automobile and
other miscellaneous coverage offered to owner-operated small and mid-sized businesses,
professional organizations and hospitality businesses such as restaurants, bars and taverns.
Commercial lines gross written premiums grew by 46.0% to $25.5 million in the fourth quarter of
2016. The majority of this growth came largely from expansion in the hospitality and security guard
product lines.
2016 2015 % Change 2016 2015 % Change
Gross written premiums 25,517$ 17,475$ 46.0% 88,242$ 68,197$ 29.4%
Net written premiums 22,671 14,994 51.2% 78,439 58,157 34.9%
Net earned premiums 19,394 14,808 31.0% 68,921 48,586 41.9%
U derwriting ratios:
Loss ratio 76.4% 53.2% 61.2% 51.8%
Expense ratio 34.2% 39.3% 36.5% 34.0%
Combined ratio 110.6% 92.5% 97.7% 85.8%
(f vorable) adverse prior year development 19.9% 4.3% 9.8% 0.7%
Accident year combined ratio (1) 90.7% 88.2% 87.9% 85.1%
(1) The accident year combined ratio is the sum of the loss ratio and the expense ratio, less 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 and assists management in their evaluation of product pricing levels and quality of business written.
Contribu ion to combined ratio from net
Three Months Ended December 31, Year Ended December 31,
(dollars in thousands)
Commercial Lines Financial Review
Conifer Holdings, Inc. Page 4
March 1, 2017
For the year ended December 31, 2016, commercial lines gross written premiums grew by 29.4% to
$88.2 million.
As a result of the reserve strengthening in the commercial auto line, coupled with increases in
operating costs not yet offset by the Company’s continued progression to efficient operating scale,
the commercial lines combined ratio was 110.6% in the fourth quarter of 2016 compared to 92.5%
in the prior year period. Excluding the contribution to the combined ratio from prior year adverse
development, the accident year combined ratio on commercial lines, for the quarter, was 90.7%.
For the year ended December 31, 2016, commercial lines combined ratio was 97.7%, compared to
85.8% in the prior year.
Personal Lines Operational Review
Personal lines, which consist of low-value dwelling and wind-exposed homeowners insurance,
represented 18% of total gross written premiums for the fourth quarter of 2016. Personal lines
gross written premiums decreased 25.5% to $5.8 million in the fourth quarter of 2016 compared to
the prior year period. This was mainly due to a 42.9% decline in wind-exposed homeowners
premiums due to the exiting of one Texas program and a reduction in Florida homeowners
premiums. Conifer’s low-value dwelling and other wind-exposed homeowners products grew by
23.4% during the fourth quarter of 2016.
For the year ended December 31, 2016, personal lines gross written premiums increased 4.4% from
the prior year. This was largely driven by a 38.2% increase in the Company’s low-value dwelling
programs, partially offset by lower premiums in the wind-exposed homeowners programs.
2016 2015 % Change 2016 2015 % Change
Gross writt n premiums 5,789$ 7,770$ -25.5% 26,681$ 25,553$ 4.4%
Net written premiums 4,397 6,473 -32.1% 21,490 21,517 -0.1%
Net earned premiums 5,096 4,466 14.1% 20,706 18,179 13.9%
Underwriting ratios:
Loss ratio 62.7% 78.8% 77.9% 70.5%
Expense ratio 50.4% 65.4% 45.3% 40.4%
Combined ratio 113.1% 144.2% 123.2% 110.9%
(favorable) adverse prior year development 12.5% 15.1% 16.1% 5.9%
Accident year combined ratio 100.6% 129.1% 107.1% 105.0%
(dollars in thousands)
Contribution to combined ratio from net
Personal Lines Financial Review
Three Months Ended December 31, Year Ended December 31,
Conifer Holdings, Inc. Page 5
March 1, 2017
During the fourth quarter of 2016, the Company increased its reserves in its Florida homeowners
business, which contributed to a personal lines loss ratio for the quarter of 62.7%. The Company
has reduced exposure, ceased seeking additional growth in this market and has begun to examine
potential strategic options for the Florida homeowners business.
The Company’s personal lines expense ratio has continued to improve throughout the year, as the
corresponding higher gross written premiums have begun to balance additional expenses related to
the expansion of its underwriting teams in the second half of 2015. The Company expects to see
consistent declines in the coming year due to the infrastructure investments already in place. The
Company reported a quarter to date combined ratio in personal lines of 113.1%, compared to
144.2% in the prior year period. For the year ended December 31, 2016, the Company’s personal
lines combined ratio was 123.2%, compared to 110.9% in the prior year.
Combined Ratio Analysis
Combined Ratio
The Company's combined ratio was 118.7% for the three months ended December 31, 2016,
compared to 113.3% for the same period in 2015, and 112.2% for the year ended December 31,
2016 compared to 102.1% in the prior year.
Excluding additional reserve strengthening, the quarter to date accident year combined ratio was
100.4%, compared to 106.4% in the prior year period. For the year ended December 31, 2016, the
accident year combined ratio was 100.9%, compared to 100.0% in the prior year.
Loss Ratio: The Company's loss ratio was impacted by increased reserves in the Florida
homeowners, commercial auto and other commercial liability lines of business. The Company
continues to tighten underwriting guidelines, increase rates, and selectively write in the most
profitable geographies, particularly in commercial auto. For the fourth quarter of 2016, the
Company’s loss ratio was 73.4%, compared to 59.2% in the prior year period. For the year, the
Company’s loss ratio was 65.0% compared to 56.8% the prior year.
2016 2015 2016 2015
Underwriting ratios:
Loss ratio 73.4% 59.2% 65.0% 56.8%
Ex ense ratio 45.3% 54.1% 47.2% 45.3%
Combined ratio 118.7% 113.3% 112.2% 102.1%
adverse prior year development 18.3% 6.9% 11.3% 2.1%
Accident year combined ratio 100.4% 106.4% 100.9% 100.0%
Three Months Ended
December 31,
Year Ended
December 31,
(dollars in thousands)
Contribution to combined ratio from net (favorable)
Conifer Holdings, Inc. Page 6
March 1, 2017
Expense Ratio: The expense ratio was 45.3% for the fourth quarter of 2016, compared to 54.1%
in the prior year period, marking the fourth consecutive quarter over quarter improvement as
the Company began to leverage the infrastructure investments necessary to support the
Company’s continued growth rate. The 2016 fourth quarter expense ratio resulted in a 1.0
percentage point improvement from the 46.3% expense ratio reported for the third quarter of
2016. The Company believes this ratio will continue to decline over time as the Company grows
to efficient operating scale.
For the year ended December 31, 2016, the Company’s expense ratio was 47.2% compared to
45.3% (inclusive of quota-share impact ) in the prior year.
The table below details the impact of the reserve strengthening on the Company’s loss ratio:
Net Income (Loss) Allocable to Common Shareholders
In the fourth quarter of 2016, the Company reported a net loss of $4.4 million, or $0.58 per diluted
share based on 7.6 million weighted average common diluted shares outstanding, compared to net
loss of $2.3 million, or $0.30 per diluted share, based on 7.6 million weighted average common
diluted shares outstanding in the prior year period.
For the year ended December 31, 2016, the Company reported a net loss of $8.4 million, or $1.11
per diluted share based on 7.6 million weighted average common diluted shares outstanding,
compared to net loss of $476,000, or $0.09 per diluted share, based on 5.4 million weighted average
common diluted shares outstanding in the prior year period.
Adjusted Operating Income (Loss)
The Company defines adjusted operating income (loss), a non-GAAP measure, as net income (loss)
allocable to common shareholders excluding net realized investment gains and losses, and other
gains and losses, after tax. In the fourth quarter of 2016, the Company reported an adjusted
operating loss of $4.3 million, or $0.56 per share, compared to adjusted operating loss of $2.4
million, or $0.31 per share, for the same period in 2015.
2016 2015 2016 2015
Loss ratio 73.4% 59.2% 65.0% 56.8%
Less loss ratio impact from:
Florida homeowners reserve strengthening 1.2% 0.0% 2.9% 0.0%
Commercial automobile reserve strengthening 2.5% 0.7% 2.9% 1.2%
Commercial liability reserve development 14.9% 2.4% 4.0% 0.0%
Personal automobile; in run-off 1.0% 3.4% 0.8% 1.7%
Other net reserve (favorable) development -1.3% 0.2% 0.7% -0.7%
Accident year loss ratio 55.1% 52.3% 53.7% 54.7%
Three Months Ended
December 31,
Year Ended
December 31,
Conifer Holdings, Inc. Page 7
March 1, 2017
For the year ended December 31, 2016, the Company reported an adjusted operating loss of $9.6
million, or $1.26 per share, compared to an adjusted operating loss of $865,000, or $0.16 per share,
in the prior year.
Balance Sheet/Investment Overview
The Company maintains a prudent investment approach with 97% of the portfolio invested in fixed-
income securities (with an average credit quality of AA) and short-term investments. Only 3% of
the portfolio is invested in equities.
Outlook for 2017
Mr. Petcoff concluded, “Our goal for 2017 is to build upon the growth in gross written premiums in
core markets where Conifer’s underwriting teams have historically produced favorable
underwriting results. The shift in strategy regarding the Florida homeowners business created
challenges throughout 2016 in the form of adverse development and an elevated expense ratio due
to an infrastructure build out in advance of premiums that ultimately were not in the best interest of
our Company or its shareholders. We have identified and isolated any problematic lines and our
entire team has worked diligently to better position the Company for sustained, profitable growth in
2017.”
December 31, December 31,
2016 2015
Cash and invested assets 141,023$ 130,427$
Reinsurance recoverables on paid and unpaid losses 7,498 7,044
Goodwill and intangible assets 1,007 1,427
Total assets 203,701 177,927
Unpaid losses and loss adjustment expenses 54,651 35,422
Unearned premiums 58,126 47,916
Senior debt 17,750 12,750
Total liabilities 135,907 100,665
Total shareholders' equity 67,794 77,262
Net written premium-to-statutory capital and
surplus ratio 1.6 1.1
Debt-to-total capitalization ratio 0.2 0.1
Average tax-equivalent book yield 2.2 2.1
Average fixed maturity duration 3.2 3.1
(dollars in thousands)
(Unaudited)
Conifer Holdings, Inc. Page 8
March 1, 2017
Earnings Conference Call
The Company will hold a conference call/webcast on Thursday, March 2, 2017 at 8:30 a.m. ET to
discuss results for the fourth quarter and year ended December 31, 2016.
Investors, analysts, employees and the general public are invited to listen to the conference call via:
Webcast: On the Event Calendar at IR.CNFRH.com
Conference Call: 844-868-8843 (domestic) or 412-317-6589 (international)
The webcast will be archived on the Conifer Holdings website and available for replay for at least
one year.
About the Company
Conifer Holdings, Inc. is a Michigan-based insurance holding company formed in 2009. Through its
subsidiaries, Conifer offers insurance coverage in both specialty commercial and specialty personal
product lines marketing through independent agents in all 50 states. The Company completed its
initial public offering in August 2015 and is traded on the Nasdaq Global Market (Nasdaq:
CNFR). Additional information is available on the Company’s website at www.CNFRH.com.
Definitions of Non-GAAP Measures
Conifer prepares its public financial statements in conformity with accounting principles generally
accepted in the United States of America (GAAP). Statutory data is prepared in accordance with
statutory accounting rules as defined by the National Association of Insurance Commissioners'
(NAIC) Accounting Practices and Procedures Manual, and therefore is not reconciled to GAAP data.
We believe that investors’ understanding of Conifer’s performance is enhanced by our disclosure of
adjusted operating income. Our method for calculating this measure may differ from that used by
other companies and therefore comparability may be limited. We define adjusted operating income
(loss), a non-GAAP measure, as net income (loss) allocable to common shareholders excluding net
realized investment gains and losses, and other gains and losses, after-tax. We use adjusting
operating income as an internal performance measure in the management of our operations
because we believe it gives our management and other users of our financial information useful
insight into our results of operations and our underlying business performance.
Conifer Holdings, Inc. Page 9
March 1, 2017
Reconciliations of adjusted operating income and adjusted operating income per share:
Forward-Looking Statement
This press release contains forward-looking statements made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements give
current expectations or forecasts of future events or our future financial or operating performance,
and include Conifer’s expectations regarding premiums, earnings, its capital position, expansion,
and growth strategies. The forward-looking statements contained in this press release are based on
management’s good-faith belief and reasonable judgment based on current information. The
forward-looking statements are qualified by important factors, risks and uncertainties, many of
which are beyond our control, that could cause our actual results to differ materially from those in
the forward-looking statements, including those described in our form 10-K (“Item 1A Risk
Factors”) filed with the SEC on March 15, 2016 and subsequent reports filed with or furnished to the
SEC. Any forward-looking statement made by us in this report speaks only as of the date hereof or
as of the date specified herein. We undertake no obligation to publicly update any forward-looking
statement, whether as a result of new information, future developments or otherwise, except as may
be required by any applicable laws or regulations.
2016 2015 2016 2015
(4,421)$ (2,304)$ (8,437)$ (476)$
Net realized gains and other gains (losses), net of tax 508 47 1,112 389
Tax effect of investment unrealized gains and losses (650) - - -
Adjusted operating income (loss) allocable to
common shareholders (4,279)$ (2,351)$ (9,549)$ (865)$
Weighted average common shares, diluted 7,632,390 7,644,492 7,618,588 5,369,960
Diluted income (loss) per common share:
Net income (loss) allocable to common shareholders, per share (0.58)$ (0.30)$ (1.11)$ (0.09)$
Net realized gains and other gains (losses), net of tax, per share 0.07 0.01 0.15 0.07
Tax effect of investment unrealized gains and losses, per share (0.09) - - -
Adjusted operating income (loss) allocable to common
shareholders, per share (0.56)$ (0.31)$ (1.26)$ (0.16)$
Three Months Ended
December 31,
Year Ended
December 31,
(dollar in thousands, except share and per share amounts)
Net income (loss) allocable to common shareholders
Conifer Holdings, Inc. Page 10
March 1, 2017
December 31, December 31,
2016 2015
(Unaudited)
Investment securities:
Fixed maturity securities, at fair value (amortized cost of $113,915 and 113,163$ 107,093$
$107,213, respectively)
Equity securities, at fair value (cost of $4,283 and $3,341, respectively) 4,579$ 4,240
Short-term investments, at fair value 10,788 6,391
Total investments 128,530 117,724
Cash 12,493 12,703
Premiums and agents' balances receivable, net 24,538 18,010
Receivable from affiliate 1,751 1,792
Reinsurance recoverables on unpaid losses 6,658 5,405
Reinsurance recoverables on paid losses 840 1,639
Ceded unearned premiums 4,120 3,483
Deferred policy acquisition costs 13,290 12,102
Other assets 11,481 5,069
Total assets 203,701$ 177,927$
Liabilities:
Unpaid losses and loss adjustment expenses 54,651$ 35,422$
Unearned premiums 58,126 47,916
Reinsurance premiums payable - 1,069
Senior debt 17,750 12,750
Accounts payable and accrued expenses 4,879 2,758
Other liabilities 501 750
Total liabilities 135,907 100,665
Commitments and contingencies - -
Shareholders' equity:
Common stock, no par value (100,000,000 shares authorized;
7,633,070 and 7,644,492 issued and outstanding, respectively) 80,342 80,111
Accumulated deficit (11,468) (3,031)
Accumulated other comprehensive (loss) income (1,080) 182
Total shareholders' equity 67,794 77,262
Total liabilities and shareholders' equity 203,701$ 177,927$
Conifer Holdings, Inc. and Subsidiaries
Consolidated Balance Sheets
(In thousands, except share data)
Assets
Liabilities and Shareholders' Equity
Conifer Holdings, Inc. Page 11
March 1, 2017
2016 2015 2016 2015
Revenue
Premiums
Gross earned premiums 28,656$ 23,013$ 104,713$ 89,216$
Ceded earned premiums (4,193) (3,739) (15,086) (22,451)
Net earned premiums 24,463 19,274 89,627 66,765
Net investment income 548 442 2,173 1,902
Net realized investment gains 761 47 1,365 285
Other gains (losses) (400) - (400) 104
Other income 287 175 1,118 1,667
Total revenue 25,659 19,938 93,883 70,723
Expenses
Losses and loss adjustment expenses, net 18,181 11,523 59,003 38,882
Policy acquisition costs 6,997 6,344 25,280 16,183
Operating expenses 4,211 4,170 17,596 14,806
Interest expense 179 105 647 769
Total expenses 29,568 22,142 102,526 70,640
Income (loss) before equity earnings and income taxes (3,909) (2,204) (8,643) 83
Equity earnings (losses) of affiliates, net of tax 18 (52) 129 (52)
Income tax (benefit) expense 530 48 (77) 48
Net income (loss) (4,421) (2,304) (8,437) (17)
Less net (loss) income attributable to noncontrolling interest - - - (81)
Net income (loss) attributable to Conifer (4,421)$ (2,304)$ (8,437)$ 64$
Net income (loss) allocable to common shareholders (4,421)$ (2,304)$ (8,437)$ (476)$
Earnings (loss) per common share,
basic and diluted (0.58)$ (0.30)$ (1.11)$ (0.09)$
Weighted average common shares outstanding,
basic and diluted 7,632,390 7,644,492 7,618,588 5,369,960
Conifer Holdings, Inc. and Subsidiaries
Consolidated Statements of Operations (Unaudited)
(In thousands, except share and per share data)
December 31,December 31,
Year EndedThree Months Ended