News Release
For Further Information:
Jessica Gulis, 248.559.0840
ir@cnfrh.com
For Immediate Release
Conifer Holdings Reports 2017 Second Quarter Financial Results
Company to Host Conference Call at 8:30 AM ET on Thursday, August 10, 2017
Birmingham, MI, August 9, 2017 - Conifer Holdings, Inc. (Nasdaq: CNFR) (“Conifer” or the
“Company”) today announced results for the second quarter ended June 30, 2017.
Second Quarter 2017 Highlights (all comparisons to prior year period)
• Gross written premiums decreased by 9.2% to $27.0 million
• Net earned premiums increased 13% to $24.5 million
• Combined ratio was 110.4%, compared to 109.7% in the prior year period and 109.1% in the
first quarter of 2017.
• Net loss of $1.1 million, or $0.14 per diluted share based on 7.6 million weighted average
common diluted shares outstanding.
Management Comments
James Petcoff, Chairman and CEO, commented, “For the second quarter of 2017, we continued the
efforts begun in the first quarter of deemphasizing the lines of business where the underwriting
performance has not been aligned with our goals. Because of this shift, gross written premiums in
both our commercial and personal lines of business were negatively impacted overall, but this
decline was primarily offset by growth in our core specialty niche insurance products such as liquor
liability and security guards. We are positioning the Company for favorable long-term underwriting
performance and expect to see a return to our historical growth trends in the coming quarters.”
Mr. Petcoff continued, “The second quarter did include higher than anticipated losses (mainly
surrounding our personal lines business and more specifically Florida homeowners). We have been
proactive in taking the necessary steps to properly address and resolve the issues causing these
losses, and hope to minimize its affect as soon as possible. For the quarter, we reported continued
improvements in our expense ratio (43.4% in the second quarter of 2017) that we believe provide a
solid indicator of the underwriting potential for our business.”
Conifer Holdings, Inc. Page 2
August 9, 2017
2017 Second Quarter Financial Results Overview
Second Quarter 2017 Premiums
Gross Written Premiums
Gross written premiums decreased 9.2% in the second quarter of 2017 to $27.0 million, compared
to $29.7 million in the prior year period, largely due to a 32.8% reduction in wind-exposed
homeowners line of business compared to the prior year period.
Net Written Premiums
Net written premiums were $23.0 million in the second quarter of 2017, compared to $26.2 million
in the prior year period. This decrease was caused by a lower volume of gross written premiums
compared to the prior year period.
Net Earned Premiums
Net earned premiums increased 13.0% to $24.5 million for the second quarter of 2017, compared to
$21.7 million for the prior year period. This was largely due to a 21.9% increase in net earned
premiums in the commercial lines business compared to the prior year period.
2017 2016 % Change 2017 2016 % Change
Gross written premiums 26,981$ 29,725$ -9.2% 53,455$ 55,118$ -3.0%
Net written premiums 23,082 26,176 -11.8% 45,407 48,226 -5.8%
Net earned premiums 24,497 21,675 13.0% 48,637 41,784 16.4%
Net investment income 663 528 25.6% 1,240 1,065 16.4%
Net realized investment gains - 541 ** (8) 533 **
Other gains 750 - ** 750 - **
Net income (loss) (1,067) (513) ** (2,866) (2,541) **
Net income (loss) per share, diluted (0.14)$ (0.07)$ (0.38)$ (0.33)$
Adjusted operating income (loss)* (2,098) (1,639) ** (3,889) (3,659) **
Adjusted operating income (loss) per share, diluted* (0.28)$ (0.22)$ (0.52)$ (0.48)$
Book value per common share outstanding 8.64$ 10.03$ 8.64$ 10.03$
Weighted average shares outstanding, basic and diluted 7,633,069 7,594,862 7,633,069 7,616,821
Underwriting ratios:
Loss ratio (1) 67.0% 61.7% 65.7% 62.0%
Expense ratio (2) 43.4% 48.0% 44.2% 48.9%
Combined ratio (3) 110.4% 109.7% 109.9% 110.9%
** 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
principles.
(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 June 30,
At and for the
Six Months Ended June 30,
(dollars in thousands, except share and per share amounts)
Conifer Holdings, Inc. Page 3
August 9, 2017
Commercial Lines Financial and Operational Review
2017 2016 % Change 2017 2016 % Change
Gross written premiums 21,106$ 22,821$ -7.5% 42,750$ 41,965$ 1.9%
Net written premiums 18,916 20,548 -7.9% 38,395 37,536 2.3%
Net earned premiums 20,094 16,484 21.9% 39,782 31,763 25.2%
Underwriting ratios:
Loss ratio 58.1% 56.4% 60.4% 56.3%
Expense ratio 36.7% 36.1% 37.2% 37.9%
Combined ratio 94.8% 92.5% 97.6% 94.2%
(favorable) adverse prior year development 12.1% 4.7% 13.2% 3.6%
Accident year combined ratio (1) 82.7% 87.8% 84.4% 90.6%
Commercial Lines Financial Review
(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.
Contribution to combined ratio from net
Three Months Ended June 30, Six Months Ended June 30,
(dollars in thousands)
The Company’s commercial lines of business, which represented 78% of total gross written
premiums in the second quarter of 2017, primarily consists of property, liability 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 decreased by 7.5% to $21.1 million in the second quarter
of 2017. This was largely due to a 6.7% decrease in the gross written premiums for the hospitality
lines of business compared to the prior year period.
Mainly as a result of the reserve strengthening in the commercial property & liability lines, the
commercial lines combined ratio was 94.8% for the second quarter of 2017, 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 82.7%.
Conifer Holdings, Inc. Page 4
August 9, 2017
Personal Lines Financial and Operational Review
Personal lines, which consist of low-value dwelling and wind-exposed homeowners insurance,
represented 22% of total gross written premiums for the second quarter of 2017. Personal lines
gross written premiums decreased 14.9% to $5.9 million in the second quarter of 2017 compared to
the prior year period. This was mainly due to a 32.8% decline in wind-exposed homeowners gross
written premiums due to a reduction in exposure in the Florida and Texas businesses. Conifer’s
low-value dwelling products gross written premiums increased by 16.0% during the second quarter
of 2017, compared to the prior year period.
During the second quarter of 2017, the Company increased its reserves in its Florida homeowners
business, which contributed to a personal lines loss ratio for the quarter of 107.5%. The Company
has reduced exposure, ceased seeking additional growth in this market and has begun to examine
potential strategic options for the Florida homeowners business. The Company reported a
combined ratio in personal lines of 151.7% in the second quarter of 2017, compared to 122.8% in
the prior year period.
2017 2016 % Change 2017 2016 % Change
Gross written premiums 5,875$ 6,904$ -14.9% 10,705$ 13,153$ -18.6%
Net written premiums 4,166 5,628 -26.0% 7,012 10,690 -34.4%
Net earned premiums 4,403 5,191 -15.2% 8,855 10,021 -11.6%
Underwriting ratios:
Loss ratio 107.5% 78.0% 89.1% 79.9%
Exp nse ratio 44.2% 44.8% 44.0% 45.5%
Combined ratio 151.7% 122.8% 133.1% 125.4%
(favorable) adverse prior year development 39.9% 13.5% 22.5% 18.9%
Accident year combined ratio 111.8% 109.3% 110.6% 106.5%
(dollars in thousands)
Contribution to combined ratio from net
Personal Lines Financial Review
Three Months Ended June 30, Six Months Ended June 30,
Conifer Holdings, Inc. Page 5
August 9, 2017
Combined Ratio Analysis
Combined Ratio
The Company's combined ratio was 110.4% for the three months ended June 30, 2017, compared to
109.7% for the same period in 2016.
Excluding additional reserve strengthening, the 2017 second quarter accident year combined ratio
was 93.2%, compared to 102.8% in the prior year period.
Loss Ratio: The Company's loss ratio was impacted by an increase of reserves in the Florida
homeowners, commercial property and commercial liability lines of business. The Company
continues to tighten underwriting guidelines, increase rates, and selectively write in the most
profitable geographies. For the second quarter of 2017, the Company’s loss ratio was 67.0%,
compared to 61.7% in the prior year period.
Expense Ratio: The expense ratio was 43.4% for the second quarter of 2017, compared to 48.0%
in the prior year period, marking the sixth consecutive quarter over quarter improvement as the
Company continues to leverage the infrastructure investments necessary to support the
Company’s continued growth rate. The Company believes this ratio will continue to decline over
time as the Company grows to efficient operating scale.
2017 2016 2017 2016
Underwriting ratios:
Loss ratio 67.0% 61.7% 65.7% 62.0%
Expense ratio 43.4% 48.0% 44.2% 48.9%
Combined ratio 110.4% 109.7% 109.9% 110.9%
adverse prior year development 17.2% 6.9% 14.9% 7.3%
Accident year combined ratio 93.2% 102.8% 95.0% 103.6%
Three Months Ended
June 30,
(dollars in thousands)
Contribution to combined ratio from net (favorable)
Six Months Ended
June 30,
Conifer Holdings, Inc. Page 6
August 9, 2017
The table below details the impact of the reserve strengthening on the Company’s loss ratio:
Net development of reserves for losses incurred in prior accident years for all lines of business had
increased the Company’s loss ratio for the second quarter of 2017 by 17.2%, largely due to reserve
strengthening in the Florida homeowners line of business, as well as liability reserve development
from older claims in the hospitality lines.
Net Income (Loss)
In the second quarter of 2017, the Company reported a net loss of $1.1 million, or $0.14 per diluted
share based on 7.6 million weighted average common diluted shares outstanding, compared to net
loss of $513,000, or $0.07 per diluted share, based on 7.6 million weighted average common diluted
shares outstanding in the prior year period.
Adjusted Operating Income (Loss)
In the second quarter of 2017, the Company reported an adjusted operating loss of $2.1 million, or
$0.28 per share, compared to adjusted operating loss of $1.6 million, or $0.22 per share, for the
same period in 2016. See Definitions of Non-GAAP Measures.
2017 2016 2017 2016
Loss ratio 67.0% 61.7% 65.7% 62.0%
Less loss ratio impact from:
Florida homeowners reserve strengthening 5.3% 3.2% 3.3% 3.4%
C mmercial automobile reserve strengthening 1.0% 2.8% 0.7% 3.5%
Commercial liability reserve development 6.4% 0.0% 5.9% 0.0%
Commercial property reserve development 2.5% 0.0% 4.6% 0.0%
Personal automobile; in run-off -0.8% -0.3% 0.0% 1.2%
Other net reserve (favorable) development 2.8% 1.2% 0.4% -0.8%
Accident year loss ratio 49.8% 54.8% 50.8% 54.7%
Three Months Ended
June 30,
Six Months Ended
June 30,
Conifer Holdings, Inc. Page 7
August 9, 2017
Balance Sheet/Investment Overview
The Company maintains a prudent investment approach with 96% of the portfolio invested in fixed-
income securities (with an average credit quality of AA) and short-term investments. Only 4% of
the portfolio is invested in equities.
Outlook for the Second Half of 2017
Mr. Petcoff concluded, “We continue to proactively pursue measures to curtail the challenging loss
trends we have experienced, particularly in personal lines. We continue to lessen our exposure
through limited new policy writing in certain geographic regions, while increasing our business in
the areas where our strategic value proposition gives Conifer a tangible advantage over its
competitors. We have been pleased to grow the business incrementally throughout this process
until this current period, and expect to see a return to historical growth trends in the coming
quarters. We are solidly focused on returning to profitability by concentrating on the steady, niche
commercial markets Conifer’s team has successfully underwritten for decades.”
June 30, December 31,
2017 2016
Cash and invested assets 147,052$ 141,023$
Reinsurance recoverables on paid and unpaid losses 12,475 7,498
Goodwill and intangible assets 997 1,007
Total assets 211,403 203,701
Unpaid losses and loss adjustment expenses 66,917 54,651
Unearned premiums 54,979 58,126
Senior debt 16,375 17,750
Total liabilities 145,436 135,907
Total shareholders' equity 65,967 67,794
Book value per share 8.64$ 8.88$
Net written premium-to-statutory capital and
surplus ratio 1.6 1.6
Debt-to-total capitalization ratio 0.2 0.2
Average tax-equivalent book yield 2.3 2.2
Average fixed maturity duration 3.1 3.2
(dollars in thousands, except per share amounts)
(Unaudited)
Conifer Holdings, Inc. Page 8
August 9, 2017
Earnings Conference Call
The Company will hold a conference call/webcast on Thursday, August 10, 2017 at 8:30 a.m. ET to
discuss results for the second quarter ended June 30, 2017.
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 customized insurance coverage solutions in both specialty commercial
and specialty personal product lines marketing mainly 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) excluding net realized investment gains and losses,
and other gains and losses, after-tax, and excluding the tax impact of changes in unrealized gains
and losses. We use adjusted 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
August 9, 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, 2017 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.
2017 2016 2017 2016
(1,067)$ (513)$ (2,866)$ (2,541)$
Net realized gains and other gains (losses), net of tax 750 541 742 533
Tax effect of investment unrealized gains and losses 281 585 281 585
Adjusted operating income (loss) (2,098)$ (1,639)$ (3,889)$ (3,659)$
Weighted average common shares, diluted 7,633,069 7,594,862 7,633,069 7,616,821
Diluted income (loss) per common share:
Net income (loss) (0.14)$ (0.07)$ (0.38)$ (0.33)$
Net realized gains and other gains (losses), net of tax 0.10 0.07 0.10 0.07$
Tax effect of investment unrealized gains and losses 0.04 0.08 0.04 0.08$
Adjusted operating income (loss) per share (0.28)$ (0.22)$ (0.52)$ (0.48)$
Three Months Ended
June 30,
Six Months Ended
June 30,
(dollars in thousands, except share and per share amounts)
Net income (loss)
Conifer Holdings, Inc. Page 10
August 9, 2017
June 30, December 31,
2017 2016
(Unaudited)
Investment securities:
Fixed maturity securities, at fair value (amortized cost of $116,418 and 116,276$ 113,163$
$113,915, respectively)
Equity securities, at fair value (cost of $4,456 and $4,283, respectively) 4,969 4,579
Short-term investments, at fair value 14,944 10,788
Total investments 136,189 128,530
Cash 10,863 12,493
Premiums and agents' balances receivable, net 23,018 24,538
Receivable from affiliate 724 1,751
Reinsurance recoverables on unpaid losses 10,552 6,658
Reinsurance recoverables on paid losses 1,923 840
Ceded unearned premiums 4,103 4,120
Deferred policy acquisition costs 12,649 13,290
Other assets 11,382 11,481
Total assets 211,403$ 203,701$
Liabilities:
Unpaid losses and loss adjustment expenses 66,917$ 54,651$
Unearned premiums 54,979 58,126
Senior debt 16,375 17,750
Accounts payable and other liabilities 7,165 5,380
Total liabilities 145,436 135,907
Commitments and contingencies - -
Shareholders' equity:
Common stock, no par value (100,000,000 shares authorized;
7,633,069 and 7,633,070 issued and outstanding, respectively) 80,808 80,342
Accumulated deficit (14,334) (11,468)
Accumulated other comprehensive loss (507) (1,080)
Total shareholders' equity 65,967 67,794
Total liabilities and shareholders' equity 211,403$ 203,701$
Conifer Holdings, Inc. and Subsidiaries
Consolidated Balance Sheets
(dollars in thousands, except share data)
Assets
Liabilities and Shareholders' Equity
Conifer Holdings, Inc. Page 11
August 9, 2017
2017 2016 2017 2016
Revenue
Premiums
Gross earned premiums 28,338$ 25,258$ 56,602$ 48,804$
Ceded earned premiums (3,841) (3,583) (7,965) (7,020)
Net earned premiums 24,497 21,675 48,637 41,784
Net investment income 663 528 1,240 1,065
Net realized investment gains (losses) - 541 (8) 533
Other gains 750 - 750 -
Other income 372 283 726 528
Total revenue 26,282 23,027 51,345 43,910
Expenses
Losses and loss adjustment expenses, net 16,674 13,541 32,407 26,240
Policy acquisition costs 6,428 6,014 12,900 12,017
Operating expenses 4,370 4,536 8,900 8,675
Interest expense 219 143 443 300
Total expenses 27,691 24,234 54,650 47,232
Income (loss) before equity earnings and income taxes (1,409) (1,207) (3,305) (3,322)
Equity earnings of affiliates, net of tax 60 71 164 158
Income tax benefit (282) (623) (275) (623)
Net income (loss) (1,067) (513) (2,866) (2,541)
Earnings (loss) per common share,
basic and diluted (0.14)$ (0.07)$ (0.38)$ (0.33)$
Weighted average common shares outstanding,
basic and diluted 7,633,069 7,594,862 7,633,069 7,616,821
Conifer Holdings, Inc. and Subsidiaries
Consolidated Statements of Operations (Unaudited)
(dollars in thousands, except share and per share data)
June 30,June 30,
Six Months EndedThree Months Ended