10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

☑ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year EndedDecember 31, 2019

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                 to

Commission file number 001-37536

Conifer Holdings, Inc.

(Exact name of registrant as specified in its charter)

Michigan	27-1298795
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
550 West Merrill Street, Suite 200
Birmingham, Michigan	48009
(Address of principal executive offices)	(Zip code)

(248) 559-0840

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, no par value	CNFR	The Nasdaq Stock Market LLC

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.       Yes ☐ No ☑

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☑

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☑ Emerging growth company ☑

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☑

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

The aggregate market value of the registrant’s Common Stock held by non-affiliates at June 28, 2019 was approximately $21.3 million, based on the Nasdaq closing price for such shares on that date.  The registrant has no non-voting common equity.

The number of outstanding shares of the registrant’s common stock, no par value, as of March 12, 2020, was 9,592,861.

CONIFER HOLDINGS, INC. AND SUBSIDIARIES

Form 10-K

INDEX

		Page No.
Part I
Item 1.	Business	1
Item 1A.	Risk Factors	13
Item 1B.	Unresolved Staff Comments	30
Item 2.	Properties	30
Item 3.	Legal Proceedings	30
Item 4.	Mine Safety Disclosures	30
Part II
Item 5.	Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	31
Item 6.	Selected Consolidated Financial Data	33
Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations	35
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	57
Item 8.	Financial Statements and Supplementary Data	58
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	58
Item 9A.	Controls and Procedures	58
Item 9B.	Other Information	58
Part III
Items 10-14.		60
Part IV
Item 15.	Exhibits and Financial Statement Schedules	60
Signatures		105

CONIFER HOLDINGS, INC. AND SUBSIDIARIES

PART I

ITEM 1. BUSINESS

Legal Organization

Conifer Holdings, Inc. (Nasdaq: CNFR) is a Michigan‑domiciled insurance holding company formed in 2009.  Our principal executive offices are located at 550 W. Merrill, Suite 200, Birmingham, MI 48009 (telephone number: (248) 559-0840).  Our corporate website address is www.cnfrh.com.

As used in this Form 10-K, references to “Conifer,” “Conifer Holdings,” “the Company,” “our Company,” “we,” “us,” and “our” refer to Conifer Holdings, Inc., a Michigan corporation, and its wholly owned subsidiaries Conifer Insurance Company (“CIC”), Red Cedar Insurance Company (“RCIC”), White Pine Insurance Company (“WPIC”), American Colonial Insurance Services and Sycamore Insurance Agency, Inc. (“SIA”).  CIC, RCIC and WPIC are collectively referred to as the "Insurance Company Subsidiaries."  On a stand-alone basis Conifer Holdings, Inc. is referred to as the "Parent Company."  

Business Overview

The Company is engaged in the sale of property and casualty insurance products and has organized its business model around three classes of insurance businesses: commercial lines, personal lines, and wholesale agency business.  Within these three businesses, the company offers various insurance products and insurance agency services.  

Through our Insurance Company Subsidiaries, we offer insurance coverage in specialty commercial and specialty personal product lines.  Currently, we are authorized to write insurance as an excess and surplus lines (“E&S”) carrier in 45 states including the District of Columbia.  We are also licensed to write insurance as an admitted carrier in 42 states, including the District of Columbia, and we offer our insurance products in all 50 states.

Our revenues are primarily derived from premiums earned from our insurance operations.  We also generate other revenues through investment income and other income which mainly consists of: installment fees and policy issuance fees generally related to the policies we write, as well as commission revenue to our wholesale agency business from third-party insurers.

Many of our products are targeted to traditionally profitable classes of policyholders that we believe are under-served by other insurers.  We market and sell these insurance products through a growing network of over 7,200 independent agents that distribute our policies through approximately 2,200 sales offices.  We are focused on growing our business in non‑commoditized property and casualty insurance markets, while maintaining underwriting discipline and a conservative investment strategy.

We have substantial expertise in serving the unique commercial insurance needs of owner‑operated businesses in the following markets:

• Hospitality, such as restaurants, bars, taverns, and bowling centers (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, security alarm products and services, and private investigative services.

In our commercial lines business, we seek to differentiate ourselves and provide value to small business owner‑operators by bundling different insurance products that meet a significant portion of their insurance needs.  For example, in the hospitality market we offer property, casualty, and liquor liability, as well as, in some jurisdictions, workers’ compensation coverage.  The breadth of our specialty commercial insurance products enables our agents and their small business clients to avoid the administrative costs and time required to seek coverage for each of these items from separate insurers.  As such, we

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compete for commercial lines business based on our flexible product offerings and customer service, rather than on pricing alone.  Our target commercial lines customer has an average account size of $5,500 in premium.

We also have substantial expertise in providing specialty homeowners insurance products to targeted customers that are often under-served by other homeowners' insurance carriers.  Our personal lines products primarily include low-value dwelling insurance tailored for owners of lower valued homes, which we currently offer in Illinois, Indiana, Louisiana and Texas.

In our personal lines business, we target homeowners in need of specific catastrophe coverage or dwelling insurance that are currently under-served by the insurance market, due to the modest value of their homes or the exposure to natural catastrophes in their geographic area.  Because these homeowners are under-served, this portion of the market is typically subject to less pricing pressure from larger nationwide insurers that offer a more commoditized product.  We believe our underwriting expertise enables us to compete effectively in these markets by evaluating and appropriately pricing risk.  In addition, we believe our willingness to meet these under-served segments of the personal lines insurance market fosters deeper relationships with, and increased loyalty from, the agents who distribute our products.  Our target personal lines customer has an average account size of $1,100 in premium.

Overall, we structure the multi-line distribution of our premium between commercial and personal lines to better diversify our business and mitigate the potential cyclical nature of either market.  In serving these markets, we write business on both an “admitted” and “E&S” basis.  As of December 31, 2019, approximately 46.3% of our gross written premiums were admitted, and approximately 53.7% were E&S.  Insurance companies writing on an admitted basis are licensed by the states in which they sell policies and are required to offer policies using premium rates and forms that are typically filed with state insurance regulators.  Carriers writing in the E&S market are not bound by most of the rate and form regulations imposed on standard market companies, allowing them the flexibility to change the coverage offered and the rate charged without the time constraints and financial costs associated with the filing process.  Our corporate structure allows us to offer both admitted and E&S products in select markets through either CIC or WPIC.  Our experience with specialty insurance products enables us to react to new market opportunities and underwrite multiple specialty lines.

The wholesale agency business provides non-risk bearing revenue through commissions and policy fees.  The wholesale agency business increases the product options to the Company’s independent retail agents by offering both insurance products from the Insurance Company Subsidiaries as well as products offered by other insurers.  This segment has expanded during 2019.  

Geographic Diversity and Mix of Business

Over the past several years, we have increased our focus on specific core commercial lines of business.  As part of this business strategy, we have deemphasized our Florida homeowners' business and other wind-exposed business in Texas and Hawaii.  We plan to continue to shift focus to low-value dwelling lines of business in order to bring personal lines premium levels back up and to maintain a strategic balance of commercial and personal lines of business.

While we pursue top line premium growth, we do not do so at the expense of losing underwriting discipline.  Our underwriters have the experience and institutional flexibility to recognize when to exit certain products in favor of more profitable opportunities as insurance market conditions dictate.  The following tables summarize our gross written premiums by segment and state for the years indicated therein (dollars in thousands):

	Gross Written Premium by Segment
	2019		%			2018		%			2017		%
Commercial	$	94,391		93	%	$	97,694		94	%	$	92,112		81	%
Personal		7,462		7	%		6,674		6	%		22,172		19	%
Total	$	101,853		100	%	$	104,368		100	%	$	114,284		100	%

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	Gross Written Premiums by State
	2019		%			2018		%			2017		%
Michigan	$	19,346		19.0	%	$	19,822		19.0	%	$	21,099		18.5	%
Florida		16,993		16.7	%		23,389		22.4	%		26,562		23.1	%
Texas		8,236		8.1	%		6,509		6.2	%		12,910		11.3	%
New York		7,955		7.8	%		3,845		3.7	%		3,095		2.7	%
California		7,037		6.9	%		5,691		5.5	%		2,218		1.9	%
Pennsylvania		6,015		5.9	%		6,503		6.2	%		8,859		7.8	%
Ohio		4,129		4.1	%		4,025		3.9	%		3,850		3.4	%
Indiana		3,937		3.9	%		3,914		3.8	%		4,356		3.8	%
Colorado		3,044		3.0	%		2,835		2.7	%		2,998		2.6	%
New Jersey		2,051		2.0	%		4,884		4.7	%		3,960		3.5	%
Montana		1,945		1.9	%		2,433		2.3	%		2,409		2.1	%
All Other States		21,165		20.7	%		20,518		19.6	%		21,968		19.3	%
Total	$	101,853		100.0	%	$	104,368		100.0	%	$	114,284		100.0	%

The Conifer Approach

We have built our business in a manner that is designed to adapt to changing market conditions and deliver predictable results over time.  The following highlights key aspects of our model that contribute to our balanced approach:

• 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, 2019, our investments primarily consisted of fixed income investments with an average credit rating of “AA” and a duration-to-worst average of 3.0 years.

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Our Competitive Strengths

We believe the following competitive strengths have allowed us to grow our business and will continue to support our strategic growth initiatives:

• Talented underwriters with broad expertise.  Our underwriters have significant experience managing account profitability across market cycles.  With an average of over 26 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.

Marketing and Distribution

Independent agents are our main distribution source.  The selection of an insurance company by a business or individual is strongly influenced by the business or individual’s agent.  We seek to maintain favorable relationships with our select group of agents.  Our distribution philosophy is to treat our agents as partners, and we provide them with competitive products, personal service and attractive commissions.  We believe these factors contribute to our positive agency retention.

In 2019, our top six independent agencies accounted for approximately 33% of our gross written premiums in our commercial lines, and our top four independent agencies accounted for approximately 27% of our gross written premiums in our personal lines.  We have long term relationships with each of these agencies.  We anticipate our concentration in these agencies will decrease in future periods as we establish relationships with additional agencies, as part of our strategic growth plan.  Our Insurance Company Subsidiaries market and distribute their products mainly through an independent agency network, however we utilize managing general agents and certain key wholesalers when appropriate.

We recruit our producers through referrals from our existing network of agents, word‑of‑mouth, advertisement, as well as direct contacts initiated by potential agents.  Our marketing efforts are directed through our offices in Michigan, Florida and Pennsylvania.

We view our agents as key partners in risk selection.  We actively solicit their input regarding potential improvements to our business methods and consult with them in developing new products and entering new customer markets.  At the same time, we take careful measure to appropriately control and monitor our agents’ operations.  Controls include frequent review of the quality of business, loss experience and other mechanisms.  We retain sole binding authority on the majority of our business.  Binding authority is only granted to select long-term agents.  When binding authority is granted, we restrict this authority to a specific set of guidelines that are provided to each agent.  Moreover, our experienced underwriters review each risk to ensure the guidelines are followed.

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In addition to marketing to individual agents, our Sycamore Insurance Agency reviews specific opportunities to write select business on a direct basis.  SIA also owns 50% of a small insurance agency that places small commercial risks, mainly for alarm and security guard markets.

Underwriting

We are focused on underwriting profitability and effective enterprise risk management.  With an average of over 26 years of experience, our senior underwriters have the experience to properly manage account profitability across market cycles.

Our underwriting philosophy for our specialty commercial risks in the hospitality industry is to look at each risk individually and selectively before writing any policies.  We remain focused on small- to medium-sized businesses where the owner is often on site and in a better position to efficiently and safely run the overall operations.  We understand the risks associated with the smaller enterprises and, due to lighter competition, believe we can receive a fair premium to compensate for the risk taken.

With respect to commercial property coverages, we believe it is important to focus on the profitability of the insureds’ business, as well as the traditional risk factors.  Therefore, in addition to obtaining inspections on commercial risks, we strive to understand the insureds’ business operations and bottom line to verify the underlying business is an acceptable risk.

All commercial and personal policy applications are underwritten according to established guidelines that have been provided to our independent agency force.  These guidelines have been integrated into our information technology system framework and only policies that meet our guidelines are accepted by our system.  Our underwriting staff has substantial industry experience in matching policy terms, conditions, and pricing to the risk profiles of our policyholders and therefore strengthens our ability to achieve profitability in the product lines we write.

Commercial Lines.  In writing commercial lines policies, we frequently employ tailored limiting endorsements, rating surcharges and customized limits to align our product offerings to the risk profile of the class and the specific policyholder being underwritten.  Furthermore, we consistently monitor our markets so that we are able to quickly implement changes in pricing, underwriting guidelines and product offerings as necessary to remain competitive.  We do not pursue commercial product lines where competition is based primarily on price.  We augment our own internally developed pricing models with benchmark rates and policy terms set forth by the Insurance Services Office, or ISO.  The ISO system is a widely recognized industry resource for common and centralized rates and forms.  It provides advisory ratings, statistical and actuarial services, sample policy provisions and other services to its members.

Personal Lines.  We employ internal product managers to review our position relative to our competition, create better segmentation of pricing and originate premium rate changes as appropriate.  Consistent with industry practice, we grant our personal lines agents limited binding authority within our specific guidelines.  Once a completed application and premium payment are submitted to us, the application is placed in a bound status, and reviewed for final approval.  If the agent has underwritten and submitted the account according to our guidelines, we process the application as complete.  If our guidelines have not been followed, the application may be cancelled or updated and re‑submitted for further underwriting review.

Claims

We believe that effective claims management is vitally important to our success, allowing us to cost effectively pay valid claims, while vigorously defending those claims that lack merit.  Our claims department consists of experienced claims professionals located in Michigan, Florida, Pennsylvania and Texas. We utilize a proactive claims handling philosophy to internally manage or supervise all of our claims from inception through final disposition. By handling our claims internally, we can quickly assess claims, improve communication with our policyholders and claimants and better control our claims management costs.

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We have several in‑house attorneys with considerable legal experience in trying cases in the lines of business we write.  Included among these attorneys is our head in‑house litigator, who consults on all trials and has 26 years of litigation experience.  We also have numerous seasoned property and liability adjusters which allow us to manage our claims exposures more carefully, across all markets.  In addition, our claims professionals utilize a network of independent local adjusters and appraisers to assist with specific aspects of claims investigations, such as securing witness statements and conducting initial appraisals in states where it is practical to do so.  These outside vendors are mainly compensated based on pre‑negotiated fee schedules to control overall costs.

Claims personnel are organized by line of business, with specific managers assigned as supervisors for each line of business.  Reserving and payment authority levels of claims personnel are set by our Senior Vice President of claims and our Executive Vice President.  Those limits of authority are integrated into our claims information technology systems to ensure strict compliance.

Initial claim reserves are determined and set using our statistical averages of paid indemnity and loss adjustment expenses by line of business.  After reviewing statistical data and consulting with our internal actuary, our senior vice president of claims, together with other members of management, set initial reserves by line of business.  Once initial reserves have been set, reserves are evaluated periodically as specific claim information changes to generate management’s overall best estimate of reserves.  In addition, claim reviews with in‑house adjusters and attorneys provide a regular opportunity to review the adequacy of reserves.  Changes to claims reserves are made by senior management based on claim developments and input from these attorneys and adjusters.  We utilize an in‑house, experienced and fully credentialed actuary to support our financial efforts.

Reinsurance

We routinely purchase reinsurance for our commercial and personal lines to reduce volatility by limiting our exposure to large losses and to provide capacity for growth.  In a reinsurance transaction, an insurance company transfers, or cedes, all or part of its exposure in return for a portion of the premium.  We remain legally responsible for the entire obligation to policyholders, irrespective of any reinsurance coverage we may purchase.

On September 28, 2017, the Company entered into an adverse development cover (ADC) reinsurance agreement to cover loss development of up to $17.5 million in excess of stated reserves as of June 30, 2017, for accident years 2005 through 2016.  The agreement attaches when net losses exceed $1.4 million of the $36.6 million carried reserves at June 30, 2017, and extends to $19.5 million in coverage up to $57.5 million.  The company retains a 10% co-participation for any development in excess of the retention.

Information relating to our reinsurance structure and treaty information is included within Note 6 ~ Reinsurance.

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Loss Reserve Development

The following table presents the development of our loss and loss adjustment expenses ("LAE") reserves from 2010 through 2019, net of reinsurance recoverables (dollars in thousands).

	Year Ended December 31,
	2010		2011		2012		2013			2014			2015			2016			2017			2018			2019
Net liability for losses and   loss expenses	$	18,795	$	17,164	$	17,547	$	24,956		$	28,307		$	30,017		$	47,993		$	67,830		$	63,122		$	84,667
Liability re-estimated as of:
One year later		16,565		12,807		13,508		23,763			29,321			40,239			57,452			71,186			79,351
Two years later		13,071		9,870		13,601		25,521			33,274			52,321			60,453			87,536
Three years later		10,300		10,038		13,821		26,560			38,569			58,251			69,833
Four years later		10,698		10,064		13,860		27,784			40,822			62,185
Five years later		10,926		10,227		13,980		27,920			42,274
Six years later		11,215		10,414		14,048		28,339
Seven years later		11,402		10,471		13,982
Eight years later		11,463		10,404
Nine years later		11,396
Ten years later
Net cumulative redundancy   (deficiency)		7,399		6,760		3,565		(3,383	)		(13,967	)		(32,168	)		(21,840	)		(19,706	)		(16,229	)
Deferred gain on ADC		—		—		—		—			—			—			(5,677	)		(5,677	)		(5,677	)
Net cumulative redundancy   (deficiency)	$	7,399	$	6,760	$	3,565	$	(3,383	)	$	(13,967	)	$	(32,168	)	$	(16,163	)	$	(14,029	)	$	(10,552	)
Cumulative amount of net   liability paid as of:
One year later	$	4,112	$	3,383	$	5,186	$	13,245		$	16,091		$	20,020		$	29,533		$	44,521			29,520
Two years later		6,277		6,092		9,106		19,711			24,060			35,972			56,962			62,369
Three years later		8,302		7,917		11,444		23,241			32,699			50,676			61,168
Four years later		9,372		8,788		13,015		26,056			37,474			58,317
Five years later		9,971		9,730		13,522		27,217			40,438
Six years later		10,799		10,167		13,903		27,280
Seven years later		11,219		10,398		13,878
Eight years later		11,416		10,373
Nine years later		11,387
Ten years later
Gross liability-end of year		32,047		29,574		24,843		28,909			31,532			35,423			54,651			87,896			92,807			107,246
Reinsurance recoverable on   unpaid losses		13,252		12,410		7,296		3,952			3,225			5,405			6,658			20,066			29,685			22,579
Net liability-end of year		18,795		17,164		17,547		24,957			28,307			30,018			47,993			67,830			63,122			84,667
Gross liability re-estimated   -latest		21,928		18,453		20,055		34,570			50,697			78,588			103,066			140,980			124,581
Reinsurance recoverable on   unpaid losses re-estimated   -latest		10,532		8,049		6,073		6,230			8,423			16,402			33,233			53,444			45,230
Net liability re-estimated   -latest		11,396		10,404		13,982		28,340			42,274			62,186			69,833			87,536			79,351
Gross cumulative   redundancy (deficiency)	$	10,119	$	11,121	$	4,788	$	(5,661	)	$	(19,165	)	$	(43,165	)	$	(48,415	)	$	(53,084	)	$	(31,774	)

The first line of the table presents the unpaid loss and LAE reserves at December 31 for each year, including the incurred but not reported ("IBNR") reserve.  The next section of the table sets forth the re‑estimates of incurred losses from later years, including payments, for the years indicated.  The increase/decrease from the original estimate would generally be a combination of factors, including, but not limited to:

• 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

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• More or fewer claims being reported after the related year end, than had been expected to be reported before that date.

As our historical data for a particular line of business increases, both in terms of the number of years of loss experience and the size of our data pool, we will increasingly rely upon our own loss experience rather than industry loss experience in establishing our loss and LAE reserves.  We plan to continue to apply reserving practices consistent with historical methodologies.

Additional information relating to our reserves is included within the Losses and Loss Adjustment Expenses section of Note 1 ~ Summary of Significant Accounting Policies and Note 5 ~ Unpaid Losses and Loss Adjustment Expenses of the Notes to the Consolidated Financial Statements, as well as in the Critical Accounting Policies: Loss and Loss Adjustment Expense Reserves section of Item 7, Management’s Discussion and Analysis.

Regulation

Insurance Company Regulation

Our Insurance Company Subsidiaries are subject to regulation in the states where they conduct business.  State insurance regulations generally are designed to protect the interests of policyholders, consumers or claimants rather than shareholders or other investors. The nature and extent of such state regulation varies by jurisdiction, but generally involves:

• 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.

In addition, state regulatory examiners perform periodic examinations of our Insurance Company Subsidiaries.  The results of these examinations can give rise to regulatory orders requiring remedial, injunctive or other corrective action.

Insurance Holding Company Regulation

We operate as an insurance holding company and are subject to regulation in the jurisdictions in which we conduct business.  These regulations require that each of our Insurance Company Subsidiaries register with the insurance department of its state of domicile and furnish information concerning the operations of companies within the holding company system that may materially affect the operations, management or financial condition of the insurers within the system.  The insurance laws similarly provide that all transactions among members of a holding company system must be fair and reasonable.  Certain types of transactions between our Insurance Company Subsidiaries and the Company and our other affiliates generally must be disclosed to the state regulators, and prior approval of the state insurance regulator generally is required for any material or extraordinary transaction.  In addition, a change of control of a domestic insurer or of any controlling person requires the prior approval of the state of domicile insurance regulator.

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Various State and Federal Regulations

Insurance companies are also affected by a variety of state and federal legislative and regulatory measures and judicial decisions that define and extend the risks and benefits for which insurance is sought and provided.  In addition, for some classes of insureds individual state insurance departments may prevent premium rates for some classes of insureds from reflecting the level of risk assumed by the insurer for those classes.  Such developments may adversely affect the profitability of various lines of insurance.  In some cases, if permitted by applicable regulations, these adverse effects on profitability can be minimized through repricing of coverages or limitations or cessation of the affected business.

Reinsurance Intermediary

Our reinsurance intermediaries are also subject to regulation.  Under applicable regulations, an intermediary is responsible, as a fiduciary, for funds received on account of the parties to the reinsurance transaction.  The intermediaries are required to hold such funds in appropriate bank accounts subject to restrictions on withdrawals and prohibitions on commingling.

Licensing and Agency Contracts

We, or certain of our designated employees, must be licensed to act as agents by regulatory authorities in the states in which we conduct business.  Regulations and licensing laws vary in each state and are often complex.

Insurance licenses are issued by state insurance regulators upon application and may be of perpetual duration or may require periodic renewal.  There are often requirements to obtain appropriate new licenses before we can begin writing or offer new coverages in a new state.  The requirements are more stringent when writing on an admitted basis, as opposed to on an E&S basis where there is greater form and rate flexibility.

Insurers operating on an admitted basis must file premium rate schedules and policy or coverage forms for review and approval by the insurance regulators.  In many states, rates and policy forms must be approved prior to use, and insurance regulators have broad discretion in judging whether or not an insurer’s rates are adequate, excessive and unfairly discriminatory.

The applicable licensing laws and regulations in all states are subject to amendment or reinterpretation by state regulatory authorities, and such authorities are vested in most cases with relatively broad discretion as to the granting, revocation, suspension and renewal of licenses.  We, or our employees, could be excluded, or temporarily suspended, from continuing with some or all of our activities in, or otherwise subjected to penalties by, a particular state.

Membership in Insolvency Funds and Associations, Mandatory Pools and Insurance Facilities

Most states require admitted property and casualty insurers to become members of insolvency funds or associations, which generally protect policyholders against the insolvency of insurers.  Members of the fund or association must contribute to the payment of certain claims made against insolvent insurers.  The Company's assessments from insolvency funds were minimal for the years ended December 31, 2019, 2018, and 2017.

Our Insurance Company Subsidiaries are also required to participate in various mandatory insurance facilities or in funding mandatory pools, which are generally designed to provide insurance coverage for consumers who are unable to obtain insurance in the voluntary insurance market.  Among the pools participated in are those established in certain states to provide windstorm and other similar types of property coverage.  These pools typically require all companies writing applicable lines of insurance in the state for which the pool has been established to fund deficiencies experienced by the pool based upon each company’s relative premium writings in that state, with any excess funding typically distributed to the participating companies on the same basis.  To the extent that reinsurance treaties do not cover these assessments, they may have an adverse effect on the Company.  For the years ended December 31, 2019, 2018, and 2017, total assessments paid to all such facilities were minimal.

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Restrictions on Dividends and Risk-Based Capital

For information on Restrictions on Dividends and Risk-based Capital that affect us please refer to Note 9 ~ Statutory Financial Data, Risk-Based Capital and Dividend Restrictions of the Notes to the Consolidated Financial Statements and the Regulatory and Rating Issues section within Item 7, Management’s Discussion and Analysis.

NAIC-IRIS Ratios

The National Association of Insurance Commissioners’ (“NAIC”) Insurance Regulatory Information System (“IRIS”) was developed by a committee of state insurance regulators and is primarily intended to assist state insurance departments in executing their statutory mandates to oversee the financial condition of insurance companies operating in their respective states.  IRIS identifies thirteen industry ratios and specifies “usual values” for each ratio.  Departure from the usual values on four or more ratios generally leads to inquiries or possible further review from individual state insurance commissioners.  However, the generation of ratios outside of the usual values does not necessarily indicate a financial problem.  For example, premium growth, alone, can trigger one or more unusual values.  Refer to the Regulatory and Rating Issues section within Item 7, Management’s Discussion and Analysis.

Effect of Federal Legislation

The Terrorism Risk Insurance Act, (“TRIA”), was enacted in November 2002.  After several extensions, Congress enacted the Terrorism Risk Insurance Program Reauthorization of 2015 (“Act”).  The Act extends the Federal Terrorism Insurance Program until December 31, 2020.  The Act continues to require insurance companies to offer terrorism coverage.  There is minimal exposure to this coverage as most of our policyholders decline this coverage option.

Employees

At December 31, 2019, we had 147 employees.  Substantially all of our employees are full-time.  Our employees are not subject to any collective bargaining agreement, and we are not aware of any current efforts to implement such an agreement.  We believe we have good working relations with our employees.

Available Information

We maintain an internet website at http://www.cnfrh.com, where we make available, free of charge, our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, Statements of Beneficial Ownership (Forms 3, 4, and 5), and any amendments to those reports, as soon as reasonably practicable after we electronically file such material with, or furnish to, the SEC.  In addition, the SEC maintains an Internet site that contains reports, proxy statements, and other information that we file at www.sec.gov.  The public may read and copy any materials we file with the Commission at the SEC's Public Reference Room at 100 F Street, NE., Washington, DC 20549, on official business days during the hours of 10 a.m. to 3 p.m.  The public may obtain information on the operation of the Public Reference Room by calling the Commission at 1-800-SEC-0330.  Information found on our website or any other website is not part of this annual report on Form 10-K or any other report we file with, or furnish to the SEC.

Glossary

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.

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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 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.
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.

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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 Loss 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.

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ITEM 1A. RISK FACTORS

Summary Risk Factors

You should read the following risk factors carefully in connection with evaluating our business and the forward-looking information contained in this Annual Report on Form 10-K.  Any of the following risks could materially and adversely affect our business, operating results, financial condition and the actual outcome of matters as to which forward-looking statements are made in this Annual Report on Form 10-K.  While we believe we have identified and discussed below the key risk factors affecting our business, there may be additional risks and uncertainties that are not presently known or that are not currently believed to be significant that may adversely affect our business, operating results or financial condition in the future.

Our actual incurred losses may be greater than our loss and loss adjustment expense reserves, which could have a material adverse effect on our financial condition and results of operations.

Insurance companies’ financial condition and results of operations depend upon their ability to accurately assess the potential losses and loss adjustment expenses under the terms of the insurance policies they underwrite.  Reserves do not represent an exact calculation of liability.  Rather, reserves represent an estimate of what the expected ultimate settlement and administration of claims will cost, and the ultimate liability may be greater or less than the current estimate. In the insurance industry, there is always the risk that reserves may prove inadequate as it is possible for insurance companies to underestimate the cost of claims.

We base our estimates on our assessment of known facts and circumstances, as well as estimates of future trends in claim severity, claim frequency, judicial theories of liability and other factors.  These variables are affected by both internal and external events that could increase our exposure to losses, including changes in actuarial projections, claims handling procedures, inflation, severe weather, climate change, economic and judicial trends, and legislative changes.  We continually monitor reserves using new information on reported claims and a variety of statistical techniques to update our current estimate.  Our estimates could prove to be inadequate, and this underestimation could have a material adverse effect on our financial strength.

Among the uncertainties we encounter in establishing our reserves for losses and related expenses in connection with our insurance businesses are as follows:

• When we write “occurrence” policies, we are obligated to pay covered claims, up to the contractually agreed amount, for 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;

• Even when a claim is received (irrespective of whether the policy is a "claims-made,” which requires claims to be reported during the policy period, or an “occurrence” based form), 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;

• New theories of liability are enforced retroactively from time to time by courts;

• 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;

• If claims became more frequent, even if we had no liability for those claims, the cost of evaluating these potential claims could escalate beyond the amount of the reserves we have established.  If 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

• 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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If any of our insurance reserves should prove to be inadequate for the reasons discussed above, or for any other reason, we will be required to increase reserves, resulting in a reduction in our net income and shareholders’ equity in the period in which the deficiency is identified.  Future loss experience substantially in excess of established reserves could also have a material adverse effect on future earnings and liquidity and financial rating, which would affect our ability to attract business and could affect our ability to retain or hire qualified personnel.

If we are unable to underwrite risks accurately and charge competitive yet profitable rates to our policyholders, our business, financial condition and results of operations will be adversely affected.

In general, the premiums for our insurance policies are established at the time a policy is issued and, therefore, before all of our underlying costs are known.  Like other insurance companies, we rely on estimates and assumptions in setting our premium rates.  Establishing adequate premium rates is necessary, together with investment income, to generate sufficient revenue to offset losses, LAE and other underwriting costs and to earn a profit.  If we do not accurately assess the risks that we underwrite, we may not charge adequate premiums to cover our losses and expenses, which would adversely affect our results of operations and our profitability.  Alternatively, we could set our premiums too high, which could reduce our competitiveness and lead to lower revenues.

Pricing involves the acquisition and analysis of historical loss data and the projection of future trends, loss costs and expenses, and inflation trends, among other factors, for each of our products in multiple risk tiers and many different markets.  In order to accurately price our policies, we:

• Collect and properly analyze a substantial volume of data from our insureds;

• Develop, test and apply appropriate actuarial projections and rating formulas;

• Closely monitor and timely recognize changes in trends; and

• Project both frequency and severity of our insureds’ losses with reasonable accuracy.

We seek to implement our pricing accurately in accordance with our assumptions.  Our ability to undertake these efforts successfully and, as a result, accurately price our policies, is subject to a number of risks and uncertainties, including:

• Insufficient or unreliable data;

• Incorrect or incomplete analysis of available data;

• Uncertainties generally inherent in estimates and assumptions;

• Our failure to implement appropriate actuarial projections and rating formulas or other pricing methodologies;

• Regulatory constraints on rate increases; and

• 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.

In addition, as a result of current industry non-weather factors, such as the increase in litigation surrounding the Assignment of Benefits claims and lawsuits in Florida, in particular, we may experience additional losses that could adversely affect our financial position or results of operations.

We operate in a highly competitive environment and we may not continue to be able to compete effectively against larger or more well‑established business rivals.

We compete with a large number of other companies in our selected lines of business.  Many of our competitors are substantially larger and may enjoy better name recognition, substantially greater financial resources, higher financial strength ratings by rating agencies, broader and more diversified product lines and more widespread agency relationships than us.  Insurers in our markets generally compete on the basis of price, consumer recognition, coverages offered, claims handling, financial stability, customer service and geographic coverage.  Although pricing is influenced to some degree by that of our competitors, it is not in our best interests to compete solely on price, and we may from time-to-time experience a loss of

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market share during periods of intense price competition.  A number of new, proposed or potential legislative or industry developments could further increase competition in our industry including, but not limited to:

• 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;

• 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

• 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 was to be significantly altered by changes in the way products were marketed, including, without limitation, through use of the Internet, it could have a material adverse effect on our premiums, underwriting results and profits.

There is no assurance that we will be able to continue to compete successfully in the insurance market.  Increased competition in our market could result in a change in the supply and/or demand for insurance, affect our ability to price our products at risk‑adequate rates and retain existing business, or underwrite new business on favorable terms.  If this increased competition so limits our ability to transact business, our operating results could be adversely affected.

Our ability to meet ongoing cash requirements, service debt and pay dividends may be limited by our holding company structure and regulatory constraints restricting dividends or other distributions by our Insurance Company Subsidiaries.

We are a holding company that transacts the majority of our business through our Insurance Company Subsidiaries.  Our ability to meet our obligations on our outstanding debt, and to pay our expenses and shareholder dividends, depends upon the dividend paying capacity of our Insurance Company Subsidiaries.  We will be limited by the earnings of our Insurance Company Subsidiaries, and the distribution or other payment of such earnings to it in the form of dividends, loans, advances or the reimbursement of expenses.  Payments of dividends to us by our Insurance Company Subsidiaries are subject to various business considerations and restricted by state insurance laws, including laws establishing minimum solvency and liquidity thresholds, and could be subject to revised restrictions in the future.  The ability to pay ordinary and extraordinary dividends must be reviewed in relation to the impact on key financial measurement ratios, including RBC ratios.  The Insurance Company Subsidiaries’ ability to pay future dividends without advance regulatory approval is dependent upon maintaining a positive level of unassigned surplus.  As a result, at times, we may not be able to receive dividends from our Insurance Company Subsidiaries in amounts necessary to meet our debt obligations, to pay shareholder dividends on our capital stock or to pay corporate expenses.  Therefore, the inability of our Insurance Company Subsidiaries to pay dividends or make other distributions could have a material adverse effect on our business and financial condition.

The price of our common stock may be volatile and limited public float and low trading volume for our shares may have an adverse impact on the share price or make it difficult to liquidate.

The trading price of our common stock is likely to be highly volatile and could be subject to wide fluctuations in response to various factors, some of which are beyond our control and may not be related to our operating performance.  These fluctuations could be significant and could cause a loss in the amount invested in our shares of common stock.

In addition, the stock market in general, and the market for insurance companies in particular, has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of those companies.  Securities class action litigation has often been instituted against companies following periods of volatility in the overall market and in the market price of a company’s securities.  This litigation, if instituted against us, could result in substantial costs, divert our management’s attention and resources, and harm our business, operating results, and financial condition.

As a result of these factors, investors in our common stock may not be able to resell their shares at or above their purchase price or may not be able to resell them at all.  These market and industry factors may materially reduce the market

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price of our common stock, regardless of our operating performance.  In addition, price volatility may be greater if the public float and the trading volume of our common stock remain low.

Our investment portfolio is subject to significant market and credit risks, which could result in an adverse impact on our financial conditions or results of operations.

Our results of operations depend, in part, on the performance of our investment portfolio.  We seek to hold a diversified portfolio of investments that is managed by professional investment advisory management firms in accordance with our investment policy and routinely reviewed by our Investment Committee.  However, our investments are subject to general economic conditions and market risks as well as risks inherent to particular securities.

The value of our investment portfolio is subject to the risk that certain investments may default or become impaired due to deterioration in the financial condition of one or more issuers of the securities held, or due to deterioration in the financial condition of an insurer that guarantees an issuer’s payments of such investments.  Such defaults and impairments could reduce our net investment income and result in realized investment losses.

Risks for all types of securities are managed through application of our investment policy, which establishes investment parameters that include but are not limited to maximum percentages of investment in certain types of securities and minimum levels of credit quality, which we believe are within guidelines established by the NAIC and various state insurance departments, as applicable.

A severe economic downturn could cause us to incur substantial realized and unrealized investment losses in future periods, which would have an adverse impact on our financial condition, results of operations, debt and financial strength ratings, Insurance Company Subsidiaries’ capital liquidity and ability to access capital markets.

Although we seek to preserve our capital, we cannot be certain that our investment objectives will be achieved, and results may vary substantially over time.  In addition, although we seek to employ investment strategies that are not correlated with our insurance exposures, losses in our investment portfolio may occur at the same time as underwriting losses and, therefore, exacerbate the adverse effect of the losses on us.

We may be adversely affected by interest rate changes.

Our investment portfolio is predominantly comprised of fixed income securities.  These securities are sensitive to changes in interest rates.  An increase in interest rates typically reduces the fair market value of fixed income securities.  In addition, if interest rates decline, investment income earned from future investments in fixed income securities will be lower.   We generally hold our fixed income securities to maturity, so our interest rate exposure does not usually result in realized losses.  However, as noted above, rising interest rates could result in a significant reduction of our book value.  A low investment yield environment could adversely impact our net earnings, as a result of fixed income securities maturing and being replaced with lower yielding securities which impact investing results.

Interest rates are highly sensitive to many factors beyond our control including general economic conditions, governmental monetary policy, and political conditions.  As discussed above, fluctuations in interest rates may adversely impact our business.  See Item 7A ~ Qualitative and Quantitative Disclosures About Market Risk for further discussion on interest rate risk.

A decline in our financial strength rating may result in a reduction of new or renewal business.

Participants in the insurance industry use ratings from independent ratings agencies, such as A.M.  Best Company, Inc. (“A.M. Best”) and Kroll Bond Rating Agency ("Kroll") as an important means of assessing the financial strength and quality of insurers.  In setting their ratings, A.M. Best and Kroll utilize a quantitative and qualitative analysis of a company’s balance sheet strength, operating performance and business profile.  These analyses include comparisons to peers and industry standards as well as assessments of operating plans, philosophy and management.  For A.M. Best, the ratings range from A++, or superior, to F for in liquidation.  Kroll's ratings range from AAA (extremely strong) to R (under regulatory supervision).  As of the date of this Form 10-K, A.M. Best has assigned financial strength ratings of B++ (Good) for CIC and WPIC.  A rating of B++ means A.M. Best considers both companies to have a “good” ability to meet ongoing financial

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obligations.  Kroll has given CIC and WPIC an insurance financial strength rating of BBB+ with a stable outlook (fourth highest rating level out of eleven) as of the date of this Form 10-K.  A BBB+ rating indicates that the insurer's financial condition is adequate.

A.M. Best and Kroll assign ratings that are intended to provide an independent opinion of an insurance company’s ability to meet its financial obligations to policyholders and such ratings are not evaluations directed to investors.  A.M. Best and Kroll periodically review our ratings and may revise ratings downward or revoke them at their sole discretion based primarily on their analyses of our balance sheet strength (including capital adequacy and loss and loss adjustment expense reserve adequacy), operating performance and business profile.  Factors that could affect such analyses include but are not limited to:

• If we change our business practices from our organizational business plan in a manner that no longer supports A.M. Best’s or Kroll's rating;

• If unfavorable financial, regulatory or market trends affect us, including excess market capacity;

• If we incur operating losses;

• If we have unresolved issues with government regulators;

• If we are unable to retain our senior management or other key personnel;

• If our investment portfolio incurs significant losses; or

• If A.M. Best or Kroll alters its capital adequacy assessment methodology in a manner that would adversely affect our rating.

These and other factors could result in a downgrade of our rating.  A downgrade of our rating could cause our current and future agents, retail brokers and insureds to choose other, more highly‑rated competitors.  A downgrade of this rating could also increase the cost or reduce the availability of reinsurance to us.

In addition, in view of the earnings and capital pressures recently experienced by many financial institutions, including insurance companies, it is possible that rating organizations will heighten the level of scrutiny that they apply to such institutions and may increase the capital and other requirements employed in the rating organizations’ models for maintenance of certain ratings levels.  It is possible that such reviews of us may result in adverse ratings consequences, which could have a material adverse effect on our financial condition and results of operations.  A downgrade or withdrawal of any rating could severely limit or prevent us from writing new and renewal insurance contracts.

Increased information technology security threats and more sophisticated computer crimes pose a risk to our systems, networks, products and services.

Our business is dependent upon the uninterrupted functioning of our information technology and telecommunication systems.  We rely upon our systems, as well as the systems of our vendors, to underwrite and process our business; make claim payments; provide customer service; provide policy administration services, such as endorsements, cancellations and premium collections; comply with insurance regulatory requirements; and perform actuarial and other analytical functions necessary for pricing and product development.  We have established security policies, processes and layers of defense designed to help identify and protect against intentional and unintentional misappropriation or corruption of our systems and information and disruption of our operations.  Our security measures are focused on the prevention, detection and remediation of damage from computer viruses, natural disasters, unauthorized access, cyber-attack and other similar disruptions.

Despite these efforts, our systems may be damaged, disrupted, or shut down due to attacks by unauthorized access, malicious software, undetected intrusion, hardware failures, or other events, and in these circumstances our disaster recovery planning may be ineffective or inadequate.  Information technology security threats from user error to cybersecurity attacks are increasing in frequency and sophistication.  Cybersecurity attacks may range from random attempts to coordinated and targeted attacks, including sophisticated computer crime and advanced threats.  These threats pose a risk to the security of our systems and networks and the confidentiality, availability and integrity of our data.  The potential consequences of a material cybersecurity attack include reputational damage, litigation with third parties, and increased cybersecurity protection and

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remediation costs.  A sustained business interruption or system failure could adversely impact our ability to process our business, provide customer service, pay claims in a timely manner or perform other necessary business functions.  We could also be subject to fines and penalties from a security breach.  The cost to remedy a severe breach could be substantial.

Severe weather conditions and other catastrophes are inherently unpredictable and may have a material adverse effect on our financial results and financial condition.

Our property insurance business is exposed to the risk of severe weather conditions and other catastrophes.  Catastrophes can be caused by various events, including natural events such as hurricanes, winter weather, tornadoes, windstorms, earthquakes, hailstorms, severe thunderstorms, fires and other non-natural events such as explosions or riots.

The incidence and severity of catastrophes and severe weather conditions are inherently unpredictable.  The extent of losses from a catastrophe is a function of both the total amount of insured exposure in the area affected by the event and the severity of the event.  Severe weather conditions and catastrophes can cause greater losses in our property lines and cause our liquidity and financial condition to deteriorate.  In addition, our inability to obtain reinsurance coverage at reasonable rates and in amounts adequate to mitigate the risks associated with severe weather conditions and other catastrophes could have a material adverse effect on our business and results of operations.

We distribute our insurance products through a select group of agents, several of which account for a significant portion of our business, and there can be no assurance that such relationships will continue, or if they do continue, that the relationship will be on favorable terms to us. In addition, reliance on agents subjects us to their credit risk.

Our distribution model depends almost entirely on the agencies that distribute our products.  In 2019, our top six independent agencies accounted for approximately 33% of our gross written premiums in our commercial lines, and our top four independent agencies, accounted for approximately 27% of our gross written premiums in our personal lines.  We cannot assure you that these relationships, or our relationships with any of our agencies will continue.  Even if the relationships do continue, they may not be on terms that are profitable for us.  The termination of a relationship with one or more significant agents could result in lower direct written premiums and could have a material adverse effect on our results of operations or business prospects.

Certain premiums from policyholders, where the business is produced by agents, are collected directly by the agents and forwarded to our Insurance Company Subsidiaries.  In certain jurisdictions, when the insured pays its policy premium to these agents for payment on behalf of our Insurance Company Subsidiaries, the premiums might be considered to have been paid under applicable insurance laws and regulations.  Accordingly, the insured would no longer be liable to us for those amounts, whether or not we have actually received the premiums from that agent.  Consequently, we assume a degree of credit risk associated with agents.  There may be instances where agents collect premiums but do not remit them to us and we may be required under applicable law to provide the coverage set forth in the policy despite the absence of premiums.  If we are unable to collect premiums from agents in the future, underwriting profits may decline and our financial condition and results of operations could be materially and adversely affected.

The property and casualty insurance business is historically cyclical in nature, and we may experience periods with excess underwriting capacity and unfavorable premium rates, which could adversely affect our business.

Historically, insurers have experienced significant fluctuations in operating results due to competition, frequency and severity of catastrophic events, levels of capacity, adverse litigation trends, regulatory constraints, general economic conditions and other factors.  The supply of insurance is related to prevailing prices, the level of insured losses and the level of capital available to the industry that, in turn, may fluctuate in response to changes in rates of return on investments being earned in the insurance industry.  As a result, the insurance business historically has been a cyclical industry characterized by periods of intense price competition due to excessive underwriting capacity as well as periods when shortages of capacity increased premium levels.  Demand for insurance depends on numerous factors, including the frequency and severity of catastrophic events, levels of capacity, the introduction of new capital providers, and general economic conditions.  All of these factors fluctuate and may contribute to price declines generally in the insurance industry.

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We cannot predict with certainty whether market conditions will improve, remain constant or deteriorate.  Negative market conditions may impair our ability to underwrite insurance at rates we consider appropriate and commensurate relative to the risk assumed.  If we cannot underwrite insurance at appropriate rates, our ability to transact business will be materially and adversely affected.  Any of these factors could lead to an adverse effect on our business, financial condition and results of operations.

Adverse economic factors, including recession, inflation, periods of high unemployment or lower economic activity could result in the sale of fewer policies than expected or an increase infrequency or severity of claims and premium defaults or both, which, in turn, could affect our growth and profitability.

Factors, such as business revenue, economic conditions, the volatility and strength of the capital markets and inflation can all affect the business and economic environment in which we operate.  These same factors affect our ability to generate revenue and profits.  In an economic downturn that is characterized by higher unemployment, declining spending and reduced corporate revenues, the demand for insurance products is adversely affected, which directly affects our premium levels and profitability.  Negative economic factors may also affect our ability to receive the appropriate rate for the risk we insure with our policyholders and may adversely affect the number of policies we can write, including with respect to our opportunities to underwrite profitable business.  In an economic downturn, our customers may have less need for insurance coverage, cancel existing insurance policies, modify their coverage or not renew with us.  Existing policyholders may exaggerate or even falsify claims to obtain higher claims payments.  These outcomes would reduce our underwriting profit to the extent these factors are not reflected in the rates we charge.

We are subject to extensive regulation, which may adversely affect our ability to achieve our business objectives. In addition, if we fail to comply with these regulations, we may be subject to penalties, including fines and suspensions, which may adversely affect our financial condition and results of operations.

As a holding company which owns insurance companies domiciled in the United States, we and our admitted Insurance Company Subsidiaries are subject to extensive regulation, primarily by Michigan (the domiciliary state for CIC and WPIC) and to a lesser degree, the other jurisdictions in which we operate.  Most insurance regulations are designed to protect the interests of insurance policyholders, as opposed to the interests of shareholders.  These regulations generally are administered by a department of insurance in each state and relate to, among other things, authorizations to write certain lines of business, capital and surplus requirements, reserve requirements, rate and form approvals, investment and underwriting limitations, affiliate transactions, dividend limitations, cancellation and non‑renewal of policies, changes in control, solvency and a variety of other financial and non‑financial aspects of our business.  These laws and regulations are regularly re‑examined and any changes in these laws and regulations or new laws may be more restrictive, could make it more expensive to conduct business or otherwise adversely affect our operations.  State insurance departments also conduct periodic examinations of the affairs of insurance companies and require the filing of annual and other reports relating to financial condition, holding company issues and other matters.  These regulatory requirements may impose timing and expense or other constraints that could adversely affect our ability to achieve some or all of our business objectives.

In addition, regulatory authorities have broad discretion to deny or revoke licenses for various reasons, including the violation of regulations.  In some instances, where there is uncertainty as to applicability, we follow practices based on our interpretations of regulations or practices that we believe are generally followed by the industry.  These practices may turn out to be different from the interpretations of regulatory authorities.  If we do not have the requisite licenses and approvals or do not comply with applicable regulatory requirements, insurance regulatory authorities could preclude or temporarily suspend us from carrying on some or all of our activities or otherwise penalize us.  This could adversely affect our ability to operate our business.

The admitted market is subject to more state regulation than the E&S market, particularly with regard to rate and form filing requirements, restrictions on the ability to exit lines of business, premium tax payments and membership in various state associations, such as guaranty associations.  Some states have deregulated their commercial insurance markets.  We cannot predict the effect that further deregulation would have on our business, financial condition or results of operations.

The NAIC has developed a system to test the adequacy of statutory capital of U.S.‑based insurers, known as Risk-Based Capital ("RBC"), that many states have adopted.  This system establishes the minimum amount of RBC necessary for a company to support its overall business operations.  It identifies property‑casualty insurers that may be inadequately capitalized by looking at certain inherent risks of each insurer’s assets and liabilities and its mix of premiums.  Insurers falling below a calculated threshold may be subject to varying degrees of regulatory action, including supervision,

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rehabilitation or liquidation.  Failure to maintain adequate RBC at the required levels could adversely affect the ability of our Insurance Company Subsidiaries to maintain regulatory authority to conduct their business.

In addition, the various state insurance regulators have increased their focus on risks within an insurer’s holding company system that may pose enterprise risk to the insurer.  In 2012, the NAIC adopted significant changes to the insurance holding company act and regulations (the “NAIC Amendments”).  The NAIC Amendments, when adopted by the various states, are designed to respond to perceived gaps in the regulation of insurance holding company systems in the United States.  One of the major changes is a requirement that an insurance holding company system’s ultimate controlling person submit annually to its lead state insurance regulator an “enterprise risk report” that identifies activities, circumstances or events involving one or more affiliates of an insurer that, if not remedied properly, are likely to have a material adverse effect upon the financial condition or liquidity of the insurer or its insurance holding company system as a whole.  Other changes include requiring a controlling person to submit prior notice to its domiciliary insurance regulator of a divestiture of control, having detailed minimum requirements for cost sharing and management agreements between an insurer and its affiliates and expanding of the agreements between an insurer and its affiliates to be filed with its domiciliary insurance regulator.  The NAIC Amendments must be adopted by the individual state legislatures and insurance regulators in order to be effective.   Michigan (i.e., our main domiciliary state for both our CIC and WPIC subsidiaries), requires a form of the enterprise risk report.

In 2012, the NAIC also adopted the Risk Management and Own Risk and Solvency Assessment Model Act (the “ORSA Model Act”).  The ORSA Model Act, when adopted by the various states, will require an insurance holding company system’s Chief Risk Officer to submit annually to its lead state insurance regulator an Own Risk and Solvency Assessment Summary Report (“ORSA”).  The ORSA is a confidential internal assessment appropriate to the nature, scale and complexity of an insurer, conducted by that insurer of the material and relevant risks identified by the insurer associated with an insurer’s current business plan and the sufficiency of capital resources to support those risks.  The ORSA Model Act must be adopted by the individual state legislature and insurance regulators in order to be effective.  Michigan has adopted the ORSA Model Act.  ORSA filings were required in Michigan starting in 2018.  The Company is currently exempt from providing an ORSA summary report as it does not meet the minimum premium requirements.

We cannot predict the impact, if any, that the NAIC Amendments, compliance with the ORSA Model Act or any other regulatory requirements may have on our business, financial condition or results of operations.

We may become subject to additional government or market regulation which may have a material adverse impact on our business.

Market disruptions like those experienced during the credit‑driven financial market collapse in 2008, as well as the dramatic increase in the capital allocated to alternative asset management during recent years, have led to increased governmental as well as self‑regulatory scrutiny of the insurance industry in general.  In addition, certain legislation proposing greater regulation of the industry is periodically considered by governing bodies of some jurisdictions, and the credit‑driven equity market collapse may increase the likelihood that some increased regulation of the industry is mandated.

Our business could be adversely affected by changes in state laws, including those relating to asset and reserve valuation requirements, surplus requirements, limitations on investments and dividends, enterprise risk and RBC requirements and, at the federal level, by laws and regulations that may affect certain aspects of the insurance industry, including proposals for preemptive federal regulation.  The U.S. federal government generally has not directly regulated the insurance industry except for certain areas of the market, such as insurance for flood, nuclear and terrorism risks.  However, the federal government has undertaken initiatives or considered legislation in several areas that may affect the insurance industry, including tort reform and corporate governance.  The Dodd‑Frank Wall Street Reform and Consumer Protection Act (the “Dodd‑Frank Act”) also established the Federal Insurance Office, which is authorized to study, monitor and report to Congress on the insurance industry and to recommend that the Financial Stability Oversight Council (the “FSOC”) designate an insurer as an entity posing risks to U.S. financial stability in the event of the insurer’s material financial distress or failure.  In December 2013, the Federal Insurance Office issued a report on alternatives to modernize and improve the system of insurance regulation in the United States, including increasing national uniformity through either a federal charter or effective action by the states.  Any additional regulations established as a result of the Dodd‑Frank Act or actions in response to the Federal Insurance Office Report could increase our costs of compliance or lead to disciplinary action.  In addition, legislation has been introduced from time to time that, if enacted, could result in the federal government assuming a more direct role in the regulation of the insurance industry, including federal licensing in addition to or in lieu of state licensing and reinsurance

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for natural catastrophes.  We are unable to predict whether any legislation will be enacted or any regulations will be adopted, or the effect any such developments could have on our business, financial condition or results of operations.

It is impossible to predict what, if any, changes in the regulations applicable to us, the markets in which we operate, trade and invest or the counterparties with which we do business may be instituted in the future.  Any such regulation could have a material adverse impact on our business.

The effect of emerging claim and coverage issues on our business is uncertain.

As industry practices and legal, judicial, social and other environmental conditions change, unexpected and unintended issues related to claims and coverage may emerge.  These issues may adversely affect our business by either broadening coverage beyond our underwriting intent or by increasing the number or size of claims.  In some instances, these changes may not become apparent until sometime after we have issued insurance contracts that are affected by the changes.  As a result, the full extent of liability under our insurance contracts may not be known for many years after a contract is issued.

We may be unable to obtain reinsurance coverage at reasonable prices or on terms that provide us adequate protection.

We purchase reinsurance in many of our lines of business to help manage our exposure to insurance risks that we underwrite and to reduce volatility in our results.

The availability and cost of reinsurance are subject to prevailing market conditions, both in terms of price and available capacity, each of which can affect our business volume and profitability.  The availability of reasonably affordable reinsurance is a critical element of our business plan.  One important way we utilize reinsurance is to reduce volatility in claims payments by limiting our exposure to losses from large risks.  Another way we use reinsurance is to purchase substantial protection against concentrated losses when we enter new markets.  As a result, our ability to manage volatility and avoid significant losses, expand into new markets or grow by offering insurance to new kinds of enterprises may be limited by the unavailability of reasonably priced reinsurance.  We may not be able to obtain reinsurance on acceptable terms or from entities with satisfactory creditworthiness.  In such event, if we are unwilling to accept the terms or credit risk of potential reinsurers, we would have to reduce the level of our underwriting commitments, which would reduce our revenues.

Many reinsurance companies have begun to exclude certain coverages from, or alter terms in, the reinsurance contracts we enter into with them.  Some exclusions relate to risks that we cannot in turn exclude from the policies we write due to business or regulatory constraints.  In addition, reinsurers are imposing terms, such as lower per occurrence and aggregate limits, on direct insurers that do not wholly cover the risks written by these direct insurers.  As a result, we, like other direct insurance companies, write insurance policies which to some extent do not have the benefit of reinsurance protection.  These gaps in reinsurance protection expose us to greater risk and greater potential losses.  For example, certain reinsurers have excluded coverage for terrorist acts or priced such coverage at unreasonably high rates.

If we are unable to retain key management and employees or recruit other qualified personnel, we may be adversely affected.

We believe that our future success depends, in large part, on our ability to retain our experienced management team and key employees, particularly our chairman and chief executive officer, James G. Petcoff. There can be no assurance that we can attract and retain the necessary employees to conduct our business activities on a timely basis or at all.  Our competitors may offer more favorable compensation arrangements to our key management or employees to incentivize them to leave our Company.  Furthermore, our competitors may make it more difficult for us to hire their personnel by offering excessive compensation arrangements to certain employees to induce them not to leave their current employment and bringing litigation against employees who do leave (and possibly us as well) to join us.  The loss of any of our executive officers or other key personnel, or our inability to recruit and retain additional qualified personnel as we grow, could materially and adversely affect our business and results of operations, and could prevent us from fully implementing our growth strategies.

We may require additional capital in the future, which may not be available or available only on unfavorable terms.

Our future capital requirements depend on many factors, including our ability to write new and renewal business successfully and to establish premium rates and reserves at levels sufficient to cover losses.  Our ability to underwrite

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depends largely upon the expected quality of our claims paying process and our perceived financial strength as estimated by potential insureds, agents, brokers, other intermediaries and independent rating agencies.  To the extent that our existing capital is insufficient to fund our future operating requirements, cover claim losses, or satisfy ratings agencies in order to maintain a satisfactory rating, we may need to raise additional capital in the future through offerings of debt or equity securities or otherwise to:

• Fund liquidity needs caused by underwriting or investment losses;

• Replace capital lost in the event of significant reinsurance losses or adverse reserve developments;

• Satisfy letters of credit or guarantee bond requirements that may be imposed by our clients or by regulators;

• Meet rating agency or regulatory capital requirements; or

• Respond to competitive pressures.

Any equity or debt financing, if available at all, may be on terms that are unfavorable to us.  Further, any additional capital raised through the sale of equity could dilute your ownership interest in the Company and may cause the value of our shares to decline.  Additional capital raised through the issuance of debt may result in creditors having rights, preferences and privileges senior or otherwise superior to those of the holders of our shares and may limit our flexibility in operating our business and make it more difficult to obtain capital in the future.  Disruptions, uncertainty, or volatility in the capital and credit markets may also limit our access to capital required to operate our business.  If we are not able to obtain adequate capital, our business, financial condition and results of operations could be materially adversely affected.

We are subject to credit risk with regard to our reinsurance counterparties.

Although reinsurance makes the assuming reinsurer liable to us to the extent of the risk ceded, we are not relieved of our primary liability to our insureds as the direct insurer.  We cannot be sure that our reinsurers will pay all reinsurance claims on a timely basis or at all.  For example, reinsurers may default in their financial obligations to us as the result of insolvency, lack of liquidity, operational failure, fraud, asserted defenses based on agreement wordings or the principle of utmost good faith, asserted deficiencies in the documentation of agreements or other reasons.  The failure of a reinsurer to pay us does not lessen our contractual obligations to insureds.  If a reinsurer fails to pay the expected portion of a claim or claims, our net losses might increase substantially and adversely affect our financial condition.  Any disputes with reinsurers regarding coverage under reinsurance contracts could be time‑consuming, costly and uncertain of success.

Downgrades to the credit ratings of our reinsurance counterparties may result in the reduction of rating agency capital credit provided by those reinsurance contracts and could, therefore, result in a downgrade of our own credit ratings.  We evaluate each reinsurance claim based on the facts of the case, historical experience with the reinsurer on similar claims and existing case law and include any amounts deemed uncollectible from the reinsurer in our reserve for uncollectible reinsurance.

Our Insurance Company Subsidiaries are subject to minimum capital and surplus requirements.  Failure to meet these requirements could subject us to regulatory action.

Our Insurance Company Subsidiaries are subject to minimum capital and surplus requirements imposed under the laws of their respective states of domicile and each state in which they issue policies.  As of December 31, 2019, our Insurance Company Subsidiaries were in compliance with all such reserves. Any failure by one of our Insurance Company Subsidiaries to meet minimum capital and surplus requirements imposed by applicable state law will subject it to corrective action.  This may include requiring adoption of a comprehensive financial plan, revocation of its license to sell insurance products or placing the subsidiary under state regulatory control.  A decline in the risk based capital ratios of our Insurance Company Subsidiaries could limit their ability to make a dividend to us and could be a factor in causing rating agencies to downgrade our ratings.  Any new minimum capital and surplus requirements adopted in the future may require us to increase the capital and surplus of our Insurance Company Subsidiaries, which we may not be able to do.

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Any debt service obligations will reduce the funds available for other business purposes, and the terms and covenants relating to our current and future indebtedness could adversely impact our financial performance and liquidity.

As of December 31, 2019, we had $25.3 million of senior unsecured notes (the “Notes”) outstanding, $10.5 million of subordinated notes (the "Subordinated Notes") outstanding, and $2.0 million outstanding on our line of credit.  We are subject to risks typically associated with debt financing, such as insufficient cash flow to meet required debt service payment obligations and the inability to refinance existing indebtedness.

The Subordinated Notes contain various restrictive covenants that relate to the Company’s tangible net worth, fixed-charge coverage ratios, dividend paying capacity, reinsurance retentions, and RBC ratios.  If we are unable to meet debt covenant requirements or to obtain future waivers regarding such failures, we could be in breach of our credit agreement.  Any such breach could cause significant disruption to our operations, including a requirement to immediately repay our indebtedness, and would have severe adverse effects on our liquidity and financial flexibility.

The failure of any of the loss limitations or exclusions we employ, or changes in other claims or coverage issues, could have a material adverse effect on our financial condition or results of operations.

Although we seek to mitigate our loss exposure through a variety of methods, the future is inherently unpredictable.  It is difficult to predict the timing, frequency and severity of losses with statistical certainty.  It is not possible to completely eliminate our exposure to un‑forecasted or unpredictable events and, to the extent that losses from such risks occur, our financial condition and results of operations could be materially adversely affected.

For instance, various provisions of our policies, such as limitations or exclusions from coverage or choice of forum, which have been negotiated to limit our risks, may not be enforceable in the manner we intend.  At the present time, we employ a variety of endorsements to our policies that limit exposure to known risks.  As industry practices and legal, judicial, social and other conditions change, unexpected and unintended issues related to claims and coverage may emerge.  These issues may adversely affect our business by either extending coverage beyond the underwriting intent or by increasing the size or number of claims.

In addition, we design our policy terms to manage our exposure to expanding theories of legal liability like those which have given rise to claims for lead paint, asbestos, mold, construction defects and environmental matters.  Many of the policies we issue also include conditions requiring the prompt reporting of claims to us and entitle us to decline coverage in the event of a violation of that condition.  Also, many of our policies limit the period during which a policyholder may bring a claim under the policy, which in many cases is shorter than the statutory period under which such claims can be brought against our policyholders.  While these exclusions and limitations help us assess and reduce our loss exposure and help eliminate known exposures to certain risks, it is possible that a court or regulatory authority could nullify or void an exclusion or legislation could be enacted modifying or barring the use of such endorsements and limitations.  These types of governmental actions could result in higher than anticipated losses and loss adjustment expenses, which could have a material adverse effect on our financial condition or results of operations.  In some instances, these changes may not become apparent until sometime after we have issued insurance policies that are affected by the changes.  As a result, the full extent of liability under our insurance contracts may not be known for many years after a contract is issued.

We rely on our systems and employees, and those of certain third‑party vendors and service providers in conducting our operations, and certain failures, including internal or external fraud, operational errors, or systems malfunctions, could materially adversely affect our operations.

We are exposed to many types of operational risk, including the risk of fraud by employees and outsiders, clerical and recordkeeping errors and computer or telecommunications systems malfunctions.  Our business depends on our ability to process a large number of increasingly complex transactions.  If any of our operational, accounting, or other data processing systems fail or have other significant shortcomings, we could be materially adversely affected.  Similarly, we depend on our employees.  We could be materially adversely affected if one or more of our employees cause a significant operational breakdown or failure, either as a result of human error or intentional sabotage or fraudulent manipulation of our operations or systems.

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Third parties with whom we do business, including vendors that provide services or security solutions for our operations, could also be sources of operational and information security risk to us, including from breakdowns, failures, or capacity constraints of their own systems or employees.  Any of these occurrences could diminish our ability to operate our business, or cause financial loss, potential liability to insureds, inability to secure insurance, reputational damage or regulatory intervention, which could materially adversely affect us.

We may not be able to manage our growth effectively.

We intend to continue to grow our business, which could require additional capital, systems development and skilled personnel.  We cannot assure you that we will be able to locate profitable business opportunities, meet our capital needs, expand our systems and our internal controls effectively, allocate our human resources optimally, identify qualified employees or agents or incorporate effectively the components of any businesses we may acquire in our effort to achieve growth.  The failure to manage our growth effectively and maintain underwriting discipline could have a material adverse effect on our business, financial condition and results of operations.

Our geographic concentration ties our performance to the business, economic, natural perils, man-made perils, and regulatory conditions within our most concentrated region.

Our revenues and profitability are subject to the prevailing regulatory, legal, economic, political, demographic, competitive, weather and other conditions in the principal states in which we do business.  Changes in any of these conditions could make it less attractive for us to do business in such states and would have a more pronounced effect on us compared to companies that are more geographically diversified.  In addition, our exposure to severe losses from localized perils, such as earthquakes, hurricanes, tropical storms, tornadoes, wind, ice storms, hail, fires, terrorism, riots and explosions, is increased in those areas where we have written significant numbers of insurance policies.

Litigation and legal proceedings against our subsidiaries could have a material adverse effect on our business, financial condition and/or results of operations.

As an insurance holding company, our subsidiaries are named as defendants in various legal actions in the ordinary course of business.  We believe that the outcome of presently pending matters, individually and in the aggregate, will not have a material adverse effect on our consolidated financial position, operating results or liquidity.  However, the outcomes of lawsuits cannot be predicted and, if determined adversely, could require us to pay significant damage amounts or to change aspects of our operations, which could have a material adverse effect on our financial results.

We are subject to assessments and other surcharges from state guaranty funds, and mandatory state insurance facilities, which may reduce our profitability.

Our Insurance Company Subsidiaries are subject to assessments in most states where we are licensed for the provision of funds necessary for the settlement of covered claims under certain policies provided by impaired, insolvent or failed insurance companies.  These assessments are levied by guaranty associations within the state in proportion to the premiums written by member insures in the lines of business in which the impaired, insolvent or failed insurer was engaged.  Maximum contributions required by law in any one year vary by state, and have historically been less than one percent of annual premiums written. We cannot predict with certainty the amount of future assessments because they depend on factors outside our control, such as insolvencies of other insurance companies.  Significant assessments could have a material adverse effect on our financial condition and results of operations.

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Risks Related to Ownership of Our Common Stock

We incur significant increased costs as a result of operating as a public company, and our management will be required to devote substantial time to new compliance initiatives.

As a public company, we incur significant legal, accounting and other expenses that we did not incur as a private company.  In addition, we are subject to the reporting requirements of the Exchange Act, which require, among other things, that we file with the SEC, annual, quarterly and current reports with respect to our business and financial condition.  We are also subject to other reporting and corporate governance requirements, including certain requirements of Nasdaq and provisions of the Sarbanes‑Oxley Act and the regulations promulgated thereunder, which will impose significant compliance obligations upon us.

The Sarbanes‑Oxley Act and the Dodd‑Frank Act, as well as new rules subsequently implemented by the SEC and Nasdaq, have increased regulation of, and imposed enhanced disclosure and corporate governance requirements on, public companies.  Our efforts to comply with these laws, regulations and standards have increased our operating costs and may divert management’s time and attention from revenue‑generating activities.

Other expenses associated with being a public company include increases in auditing, accounting and legal fees and expenses, investor relations expenses, increased directors’ fees and director and officer liability insurance costs, registrar and transfer agent fees and listing fees, as well as other expenses.

Certain provisions of our corporate governance documents and Michigan law could discourage, delay or prevent a merger or acquisition at a premium price.

Our amended and restated articles of incorporation and bylaws will contain provisions that may make the acquisition of our Company more difficult without the approval of our board of directors (our “Board”).  These include provisions that, among other things:

• 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);

• Provide that the authorized number of directors may be fixed only by the Board in accordance with our amended and restated bylaws;

• 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);

• 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;

• Prohibit removal of directors without cause;

• Prohibit shareholders from calling special meetings of shareholders;

• Requires unanimous consent for shareholders to take action by written consent without approval of the action by our Board;

• 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;

• Require at least 80% supermajority shareholder approval to alter, amend or repeal certain provisions of our amended and restated articles of incorporation; and

• 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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These provisions may frustrate or prevent any attempts by our shareholders to replace or remove our current management by making it more difficult for shareholders to replace members of the Board of Directors, which is responsible for appointing members of our management.

In addition, the 2015 Omnibus Incentive Plan permits the Board or a committee thereof to accelerate, vest or cause the restrictions to lapse with respect to outstanding equity awards, in the event of, or immediately prior to, a change in control.  Such vesting or acceleration could discourage the acquisition of our Company.

We could also become subject to certain anti‑takeover provisions under Michigan law which may discourage, delay or prevent someone from acquiring us or merging with us, whether or not an acquisition or merger is desired by or beneficial to our shareholders.  If a corporation’s board of directors chooses to “opt in” to certain provisions of Michigan Law, such corporation may not, in general, engage in a business combination with any beneficial owner, directly or indirectly, of 10% of the corporation’s outstanding voting shares unless the holder has held the shares for five years or more or, among other things, the board of directors has approved the business combination.  Our Board of Directors has not elected to be subject to this provision, but could do so in the future.  Any provision of our amended and restated articles of incorporation or bylaws or Michigan law that has the effect of delaying or deterring a change in control could limit the opportunity for our shareholders to receive a premium for their shares, and could also affect the price that some investors are willing to pay for our common stock otherwise.

We cannot assure you that we will declare or pay dividends on our common shares in the future so any returns may be limited to the value of our stock.

We currently anticipate that we will retain future earnings for the development, operation and expansion of our business and do not anticipate declaring or paying any cash dividends for the foreseeable future.  Any return to shareholders will therefore be limited to appreciation in value of their stock, if any.

In addition, any determination to declare or pay future dividends to our shareholders will be at the discretion of our board of directors and will depend on a variety of factors, including (1) our financial condition, liquidity, results of operations (including our ability to generate cash flow in excess of expenses and our expected or actual net income), retained earnings and collateral and capital requirements, (2) general business conditions, (3) legal, tax and regulatory limitations, (4) contractual prohibitions and other restrictions, (5) the effect of a dividend or dividends upon our financial strength ratings and (6) any other factors that our board of directors deems relevant.

Our principal shareholders and management own a significant percentage of our stock and will be able to exert significant control over matters subject to shareholder approval.

As of December 31, 2019, our executive officers, directors, 5% shareholders and their affiliates owned approximately 71.6% of our voting stock.  Therefore, these shareholders will have the ability to influence us through their ownership position.  These shareholders may be able to significantly influence all matters requiring shareholder approval.  For example, these shareholders may be able to significantly influence elections of directors, amendments of our organizational documents, or approval of any merger, sale of assets, or other major corporate transaction.  This may prevent or discourage unsolicited acquisition proposals or offers for our common stock that you may feel are in your best interest as one of our shareholders.

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Risks Related to Ownership of Our Publicly Traded Debt

Our ability to meet our obligations on our outstanding debt, including making principal and interest payments on the Notes and the Subordinated Notes, may be limited by our holding company structure and regulatory constraints restricting dividends or other distributions by our Insurance Company Subsidiaries.

We are a holding company that transacts the majority of our business through our Insurance Company Subsidiaries and, as a result, our principal sources of funds are dividends and other payments from our Insurance Company Subsidiaries, including intercompany service fees.  Our ability to meet our obligations on our outstanding debt obligations, including making principal and interest payments on the Notes, depends on continuing to receive sufficient funds from our Insurance Company Subsidiaries.  We have met, and expect to continue to meet our outstanding debt obligations, including making principal and interest payments on the Notes, primarily through intercompany service fees we receive.  We also may use dividends paid to us by our Insurance Company Subsidiaries to meet part or all of our debt obligations, including making principal and interest payments on the Notes.  State insurance laws, however, limit the ability of our Insurance Company Subsidiaries to pay dividends and require them to maintain specified minimum levels of statutory capital and surplus.  The aggregate maximum amount of dividends permitted by law to be paid by an insurance company does not necessarily define an insurance company’s actual ability to pay dividends.  The actual ability to pay dividends may be further constrained by business and regulatory considerations, such as the impact of dividends on surplus, by our competitive position and by the amount of premiums that we can write.  As a result, our ability to use dividends as a source of funds to meet part or all of our debt obligations, including making principal and interest payments on the Notes, may be significantly limited.  Any significant reduction in the intercompany service fees we receive, and any regulatory and other limitations on the payment of dividends to us by our Insurance Company Subsidiaries, may adversely affect our ability to pay interest on the Notes as it comes due and the principal of the Notes at their maturity.

Servicing our indebtedness will require a significant amount of cash.  Our ability to generate sufficient cash depends on many factors, some of which are not within our control.

Our ability to make payments on our indebtedness (including the Notes) will depend on our ability to generate cash in the future.  To a certain extent, this is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control.  If we are unable to generate sufficient cash flow to service our debt and meet our other commitments, we may need to restructure or refinance all or a portion of our debt, sell material assets or operations or raise additional debt or equity capital.  We may not be able to effect any of these actions on a timely basis, on commercially reasonable terms or at all, and these actions may not be sufficient to meet our capital requirements.  In addition, the terms of our existing or future debt arrangements may restrict us from effecting any of these alternatives.

There are limited covenants in the Indenture.

In addition to our currently outstanding indebtedness and other liabilities, the Indenture does not restrict us or our subsidiaries from incurring additional debt or other liabilities, including additional senior debt or secured debt under our secured credit facilities.  If we incur additional debt or liabilities, our ability to pay the obligations on the Notes could be adversely affected.

Our indebtedness, including the indebtedness we or our subsidiaries may incur in the future, could have important consequences for the holders of the Notes, including:

• limiting our ability to satisfy our obligations with respect to the Notes;

• increasing our vulnerability to general adverse economic and industry conditions;

• limiting our ability to obtain additional financing to fund future working capital, capital expenditures, and other general corporate requirements;

• 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.

In addition, we have limited restrictions under the Indenture from granting security interests in our assets, paying dividends or issuing or repurchasing securities.

Moreover, the Indenture does not require us to maintain any financial ratios or specific levels of net worth, revenues, income, cash flow or liquidity and, accordingly, does not protect holders of the Notes in the event that we experience material adverse changes in our financial condition or results of operations.  Holders of the Notes have limited protection under the Indenture in the event of a highly leveraged transaction, reorganization, default under our existing indebtedness, restructuring, merger or similar transaction.

For these reasons, you should not consider the covenants in the Indenture a significant factor in evaluating whether to invest in the Notes.

The Notes will be structurally subordinated to the indebtedness and other liabilities of our subsidiaries.

The Notes are obligations exclusively of Conifer Holdings, Inc. and not of any of our subsidiaries.  None of our subsidiaries is a guarantor of the Notes and the Notes are not required to be guaranteed by any subsidiary we may acquire or create in the future.  Any assets of our subsidiaries will not be directly available to satisfy the claims of our creditors, including holders of the Notes.  Except to the extent we are a creditor with recognized claims against our subsidiaries, all claims of creditors of our subsidiaries will have priority over our equity interests in such subsidiaries (and therefore the claims of our creditors, including holders of the Notes) with respect to the assets of such subsidiaries.  Even if we are recognized as a creditor of one or more of our subsidiaries, our claims would still be effectively subordinated to any security interests in the assets of any such subsidiary and to any indebtedness or other liabilities of any such subsidiary senior to our claims.  Consequently, the Notes will be structurally subordinated to all indebtedness and other liabilities of any of our subsidiaries and any subsidiaries that we may in the future acquire or establish.  Our subsidiaries may incur substantial indebtedness in the future, all of which would be structurally senior to the Notes.

We may be able to incur substantially more debt.

Conifer may be able to incur substantial indebtedness in the future and such debt may be secured debt or debt of its subsidiaries.  The terms of the Indenture governing the notes will not prohibit Conifer or its subsidiaries from incurring unsecured debt and the limitation on incurring secured debt is subject to important limitations, qualifications and exceptions.  If Conifer incurs any secured debt (including secured revolving loans under our Senior Credit Facility) or any of its subsidiaries incur any debt, all such debt will be effectively senior to the Notes either to the extent of the value of the collateral securing such debt or structurally, and if Conifer incurs any additional indebtedness that ranks equally with the Notes, the holders of that debt will be entitled to share ratably with the holders of the Notes in any proceeds distributed in connection with any insolvency, liquidation, reorganization, dissolution or other winding up of Conifer.  If new debt is added to Conifer’s current debt levels, or Conifer’s subsidiaries incur additional debt, the related risks Conifer faces will increase.

Although the Notes may be listed on the NASDAQ, an active trading market for the Notes may not develop, which could limit the market price of the Notes or your ability to sell them.

Although the Notes may be listed on the NASDAQ, we cannot provide any assurances that an active trading market will develop for the Notes or that you will be able to sell your Notes.  If the Notes are traded after their initial issuance, they may trade at a discount from their initial offering price depending on prevailing interest rates, the market for similar securities, our credit ratings, general economic conditions, our financial condition, performance and prospects and other factors.  The underwriters have advised us that they intend to make a market in the Notes, but they are not obligated to do so.  The underwriters may discontinue any market-making in the Notes at any time at their sole discretion.  Accordingly, we cannot assure you that a liquid trading market will develop for the Notes, that you will be able to sell your Notes at a particular time or that the price you receive when you sell will be favorable.  To the extent an active trading market does not develop, the liquidity and trading price for the Notes may be harmed.  Accordingly, you may be required to bear the financial risk of an investment in the Notes for an indefinite period of time.

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No market currently exists for the Notes and an active trading market may not develop.

The Notes are securities with no established trading market.  We have applied for listing of the Notes on the Nasdaq Global Market, but no assurance can be given as to the approval of the Notes for listing or, if listed, the continued listing for the term of the Notes, or the liquidity or trading market for the Notes.  There can be no assurance that a secondary market for the Notes will develop.  We are not required to maintain a listing on the Nasdaq Global Market or any other exchange.  Even if the listing of the Notes on the Nasdaq Global Market is approved, we cannot assure you that a market will develop, or continue, or that you will be able to sell your Notes easily.

The liquidity of any market for the Notes will depend upon various factors, including:

• the number of holders of the Notes;

• the interest of securities dealers in making a market for the Notes;

• the overall market for debt securities;

• our financial performance and prospects; and

• the prospects for companies in our industry generally.

Accordingly, we cannot assure you that an active trading market will develop, or continue, for the Notes.  If the Notes are traded after their initial issuance, they may trade at a discount from their initial offering price, depending upon prevailing interest rates and other factors, including those listed above.

Volatility in the market price and trading volume of our common stock could adversely impact the trading price of the Notes.

The stock market in recent years has experienced significant price and volume fluctuations that have often been unrelated to the operating performance of companies.  In addition, the market price of our common stock historically has been volatile.  The market price of our common stock could fluctuate significantly for many reasons, including in response to the risks described in this section or in our Annual Report for the fiscal year ended December 31, 2019, or our subsequently filed quarterly reports on Form 10-Q or elsewhere in this prospectus for reasons unrelated to our operations, such as reports by industry analysts, investor perceptions or negative announcements by our customers, competitors or suppliers regarding their own performance, as well as industry conditions and general financial, economic and political instability.  A decrease in the market price of our common stock would likely adversely impact the trading price of the Notes.  The market price of our common stock could also be affected by possible sales of our common stock by investors who view the Notes as a more attractive means of equity participation in us and by hedging or arbitrage trading activity that may develop involving our common stock.  This trading activity could, in turn, affect the trading price of the Notes.  This volatility in the market price of our common stock may affect the price at which you could sell the shares of our common stock you receive upon conversion of your Notes, if any, and the sale of substantial amounts of our common stock could adversely affect the price of our common stock and the value of your Notes.

If we default on our obligations to pay our other indebtedness, we may not be able to make payments on the Notes.

Any default under the agreements governing our indebtedness, including other indebtedness to which we may be a party that is not waived by the required lenders, and the remedies sought by the holders of such indebtedness could make us unable to pay principal, premium, if any, and interest on the Notes and substantially decrease the market value of the Notes.  If we are unable to generate sufficient cash flow and are otherwise unable to obtain funds necessary to meet required payments of principal, premium, if any, and interest on our indebtedness, or if we otherwise fail to comply with the various covenants, including financial and operating covenants, in the instruments governing our indebtedness, we could be in default under the terms of the agreements governing such indebtedness.  In the event of such default, the holders of such indebtedness could elect to declare all the funds borrowed thereunder to be due and payable, together with accrued and unpaid interest, the lenders under any other debt we may incur in the future could elect to terminate their commitments, cease making further loans and institute foreclosure proceedings against our assets, and we could be forced into bankruptcy or liquidation.  If our operating performance declines, we may in the future need to seek to obtain waivers from the required lenders under other

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debt that we may incur in the future to avoid being in default.  If we breach our covenants under other debt and seek a waiver, we may not be able to obtain a waiver from the required lenders.  If this occurs, we would be in default under other debt, the lenders could exercise their rights as described above, and we could be forced into bankruptcy or liquidation.  If we are unable to repay debt, lenders having secured obligations could proceed against the collateral securing the debt.

The price at which holders will be able to sell their Notes prior to maturity will depend on a number of factors and may be substantially less than the amount originally invested.

We believe that the value of the Notes in any secondary market will be affected by the supply and demand of the Notes, the interest rate, their ranking and a number of other factors.  The following factors, among others, may have an impact on the market value of the Notes:

• United States interest rates.  We expect that the market value of the 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 Notes may decrease.

• 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 Notes.

• 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 Notes.

• General economic conditions.  General economic conditions may affect the market value of the Notes.

• Market for similar securities.  The market for similar securities may affect the market value of the Notes.

Some of these factors are interrelated in complex ways.  As a result, the effect of any one factor, such as an increase in United States interest rates, may be offset or magnified by the effect of one or more other factors.

We may redeem the Notes before maturity, and holders of the redeemed Notes may be unable to reinvest the proceeds at the same or a higher rate of return.

We may redeem all or a portion of the Notes.  If redemption does occur, holders of the redeemed Notes may be unable to reinvest the money received in the redemption at a rate that is equal to or higher than the rate of return on the Notes.

ITEM 1B.  UNRESOLVED STAFF COMMENTS

None.

ITEM 2.  PROPERTIES

We lease office space in Birmingham, Michigan, where our principal executive office is located.  We also lease offices in Southfield, Michigan; Jacksonville, Orlando and Miami, Florida; and Somerset, Pennsylvania.  We believe that our facilities are adequate for our current needs and that suitable additional or substitute space will be available as needed.

ITEM 3.  LEGAL PROCEEDINGS

We are party to legal proceedings which arise in the ordinary course of business.  We believe that the outcome of such matters, individually and in the aggregate, will not have a material adverse effect on our consolidated financial position, operating results or liquidity.

ITEM 4.  MINE SAFETY DISCLOSURES

Not Applicable.

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PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

Shareholder Information Corporate Headquarters	Transfer Agent & Registrar
550 W. Merrill Street	American Stock Transfer & Trust Co, LLC
Birmingham, MI 48009	6201 15th Avenue
Phone: (248) 559-0840	Brooklyn, NY 11219
Corporate Counsel
Honigman Miller Schwartz and Cohn,  LLP
600 Woodward Avenue
2290 First National Building
Detroit, MI 48226-3506

Shareholder Relations and Form 10-K

A copy of our 2019 Annual Report and Form 10-K, as filed with the Securities and Exchange Commission, may be obtained upon written request to our Financial Reporting Department at our corporate headquarters at ir@cnfrh.com.

Share Price and Dividend Information

Our common stock is traded on the Nasdaq under the symbol “CNFR.” The following table sets forth the high and low sale prices of our common shares as reported by the Nasdaq for each period shown:

	High		Low
2019
First Quarter		4.86		3.70
Second Quarter		4.80		3.42
Third Quarter		4.00		3.20
Fourth Quarter		4.50		3.50
2018
First Quarter		6.85		5.15
Second Quarter		6.40		5.60
Third Quarter		7.20		5.60
Fourth Quarter		5.90		3.06

Neither Michigan law nor our amended and restated articles of incorporation requires our board of directors to declare dividends on our common stock.  Conifer Holdings, Inc. is a holding company that has no substantial revenues of its own, and relies primarily on intercompany service fees, cash dividends or distributions from its subsidiaries to pay operating expenses, service debts, and pay dividends to shareholders.  The payment of dividends by the Insurance Company Subsidiaries is limited under the laws and regulations of their respective state of domicile.  These regulations stipulate the maximum amount of annual dividends or other distributions available to shareholders without prior approval of the relevant regulatory authorities.  Any future determination to declare cash dividends on our common stock will be made at the discretion of the board of directors and will depend on the financial condition, results of operations, capital requirements, general business conditions and other factors that the board of directors may deem relevant.  The Parent Company has not historically paid dividends and does not anticipate paying cash dividends on its common stock for the foreseeable future.

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For additional information regarding dividend restrictions, refer to the Liquidity and Capital Resources section of Management’s Discussion and Analysis.

Shareholders of Record

As of March 12, 2020, there were 29 shareholders of record of our common stock.  A substantially greater number of holders are beneficial owners whose shares are held of record by banks, brokers and other nominees.

Repurchases of Company's Stock

On December 5, 2018, the Company's Board of Directors authorized a stock repurchase program, under which the Company may repurchase up to one million shares of the Company's common stock.  Shares may be purchased in the open market or through negotiated transactions.  The program may be terminated or suspended at any time, at the discretion of the Company.  The Company may in the future enter into a Rule 10b5-1 trading plan to effect a portion of the authorized purchases, if criteria set forth in the plan are met.  Such a plan would enable the Company to repurchase its shares during periods outside of its normal trading windows, when the Company typically would not be active in the market.  The timing of purchases, and the exact number of any shares to be purchased, will depend on market conditions.  The repurchase program does not include specific price targets or timetables.  For the year ended December 31, 2018 the Company had repurchased 129,175 shares of stock valued at approximately $584,000 related to the stock repurchase program. The Company also repurchased 8,053 shares of stock valued at approximately $52,000 related to the vesting of the Company’s restricted stock units.  For the year ended December 31, 2019, the Company had repurchased 154,208 shares of stock valued at approximately $638,000 related to the stock repurchase program.  Upon the repurchase of the Company's shares, the shares remain authorized, but not issued or outstanding.

Recent Sales of Unregistered Securities

In the past three years, we have sold and issued the following unregistered securities:

In June 2019, the Company issued $5.0 million of common equity through a private placement for 1,176,471 shares priced at $4.25 per share. The participants in the private placement consisted of members of the Company's Board of Directors. The Company used the proceeds for growth capital in the Company's specialty core business segments.

On September 27, 2017, the Company’s Board of Directors authorized a private placement stock purchase offering wherein the Company was authorized to sell a maximum of $7.0 million of the Company’s common stock, no par value per share, pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended, and Rule 506(b) of Regulation D as promulgated under the Securities Act and in accordance with applicable federal securities laws, including Rule 10b5-1 and 10b-18 of the Securities Exchange Act of 1934 as amended.  The participants in the private placement consisted mainly of members of the Company’s management team and Board of Directors, including the Company’s Chairman and CEO, James Petcoff.

Under this private placement offering, the Company issued $5.0 million of common equity consisting of 800,000 shares at the price of $6.25 per share on September 28, 2017.  The Company’s common stock closing market price on the Nasdaq Stock Market on September 28, 2017, was $6.05 per share.  The offering was made to accredited investors only.  No commissions or other remuneration were paid in connection with the issuance.  The actual timing, number and value of shares to be issued under the private placement offering was determined by management in its discretion and depended on a number of factors, including the market price of the Company’s stock, general marketing conditions, and other factors.  The Company used the proceeds from the issuance to strengthen its balance sheet through contributions to the Insurance Company Subsidiaries to support future growth, as well as to cover the cost of the ADC and reserve strengthening.

No underwriters were involved in the foregoing sales of securities.  The issuances of the securities described above were deemed to be exempt from registration under the Securities Act in reliance on Section 4(2) of the Securities Act as transactions by an issuer not involving a public offering.

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ITEM 6.  SELECTED CONSOLIDATED FINANCIAL DATA

The following tables set forth selected consolidated historical financial information of Conifer Holdings, Inc. and Subsidiaries as of the dates and for the periods indicated.  The selected financial data for the years ended December 31, 2019, 2018, 2017, 2016, and 2015 were derived from our audited consolidated financial statements and related notes thereto.

These historical results are not necessarily indicative of results to be expected for any future period.  The following financial information should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and the related notes thereto included elsewhere in this report (dollars in thousands, except for per share data).

	Year Ended December 31,
	2019			2018			2017			2016			2015
Operating Results:
Gross written premiums	$	101,853		$	104,368		$	114,284		$	114,923		$	93,750
Ceded written premiums		(14,129	)		(15,282	)		(23,044	)		(14,994	)		(14,076	)
Net written premiums	$	87,724		$	89,086		$	91,240		$	99,929		$	79,674
Net earned premiums	$	89,089		$	93,811		$	91,729		$	89,627		$	66,765
Net investment income		4,031			3,336			2,728			2,173			1,902
Net realized investment gains		1,196			61			70			1,365			285
Change in fair value of equity securities		(427	)		121			—			—			—
Other gains (losses) (1)		—			—			750			(400	)		104
Other income		2,109			1,582			1,560			1,118			1,667
Total revenue		95,998			98,911			96,837			93,883			70,723
Losses and loss adjustment expenses, net		59,744			62,515			73,917			59,003			38,882
Policy acquisition costs		24,911			25,534			26,245			25,280			16,183
Operating expenses		17,582			17,683			17,367			17,596			14,806
Interest expense		2,882			2,644			1,362			647			769
Total expenses		105,119			108,376			118,891			102,526			70,640
Income (loss) before income taxes		(9,121	)		(9,465	)		(22,054	)		(8,643	)		83
Equity earnings (losses) in affiliates, net of tax		386			290			65			129			(52	)
Income tax expense (benefit)		(913	)		52			(447	)		(77	)		48
Net income (loss)		(7,822	)		(9,227	)		(21,542	)		(8,437	)		(17	)
Less net income (loss) for non-controlling		—			—			—			—			(81	)
Net income (loss) for Conifer	$	(7,822	)	$	(9,227	)	$	(21,542	)	$	(8,437	)	$	64
Net income (loss) allocable to common shareholders	$	(7,822	)	$	(9,227	)	$	(21,542	)	$	(8,437	)	$	(476	)
Net income (loss) per share allocable to common   shareholders, basic and diluted	$	(0.88	)	$	(1.08	)	$	(2.74	)	$	(1.11	)	$	(0.09	)
Weighted average common shares outstanding,   basic and diluted		8,880,107			8,543,876			7,867,344			7,618,588			5,369,960

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	Year Ended December 31,
	2019		2018		2017		2016		2015
Balance Sheet Data:
Cash and invested assets	$	177,196	$	150,894	$	169,518	$	141,023	$	130,427
Reinsurance recoverables		27,734		34,745		24,539		7,498		7,044
Total assets		247,265		232,752		239,032		203,701		177,927
Unpaid losses and loss adjustment expenses		107,246		92,807		87,896		54,651		35,422
Unearned premiums		51,503		52,852		57,672		58,126		47,916
Debt		35,824		33,502		29,027		17,750		12,750
Total liabilities		204,540		190,589		186,206		135,907		100,665
Total shareholders’ equity attributable to Conifer		42,725		42,163		52,826		67,794		77,262
Other Data:
Shareholders’ equity per common share outstanding	$	4.45	$	4.97	$	6.20	$	8.88	$	10.11
Regulatory capital and surplus (2)		59,561		63,993		62,451		62,189		71,153

	2019			2018			2017			2016			2015
Underwriting Ratios:
Loss ratio		66.8	%		66.4	%		79.9	%		65.0	%		56.8	%
Expense ratio		44.0	%		45.9	%		44.8	%		47.2	%		45.3	%
Combined ratio		110.8	%		112.3	%		124.7	%		112.2	%		102.1	%

(1) In 2017, the Company recognized a $750,000 gain on the sale of the renewal rights of a portion of the low value dwelling book of business to another insurer.  In 2016, the value of intangible assets recorded for insurance licenses were written off when two affiliated insurance subsidiaries were merged.  In 2015, the Company recognized a gain as a result of the deconsolidation of an affiliate.

(2) For our Insurance Company Subsidiaries, the excess of assets over liabilities are determined in accordance with statutory accounting principles as determined by the domiciliary state for each Insurance Company Subsidiary.  In 2018, CIC issued a surplus note to WPIC for $10.0 million.  The regulatory capital and surplus balance as of year ended December 31, 2019 eliminates the $10.0 million surplus note from the consolidated balance.

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ITEM 7.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following Management’s Discussion and Analysis of financial condition and results of operations should be read in conjunction with the Consolidated Financial Statements, related notes and other financial information appearing elsewhere in this Annual Report on Form 10-K, filed with the U. S. Securities and Exchange Commission (“SEC”).

Forward-Looking Statements

Certain statements contained in this Annual Report on Form 10-K, which are not statements of historical fact, are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, as Section 21E of the Securities Exchange Act of 1934, as amended.  Forward-looking statements give current expectations or forecasts of future events or our future financial or operating performance.  Words such as “anticipate,” “believe,” “estimate,” “expect,” "will," “intend,” “may,” “plan,” “seek” and similar terms and phrases, or the negative thereof, may be used to identify forward-looking statements.

The forward-looking statements contained in this report 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, which could cause our actual results to differ materially from those in the forward-looking statements, including those described above in Item 1A Risk Factors 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.

Business Overview

We are an insurance holding company that markets and services our product offerings through specialty commercial and specialty personal insurance business lines.  Our growth has been significant since our founding in 2009.  Currently, we are authorized to write insurance as an excess and surplus lines carrier in 45 states, including the District of Columbia.  We are licensed to write insurance as an admitted carrier in 42 states, including the District of Columbia, and we offer our insurance products in all 50 states.

Our revenues are primarily derived from premiums earned from our insurance operations.  We also generate other revenues through investment income and other income which mainly consists of: installment fees and policy issuance fees generally related to the policies we write.

Our expenses consist primarily of losses and loss adjustment expenses, agents’ commissions, and other underwriting and administrative expenses.  We organize our operations in three insurance businesses: commercial insurance lines, personal lines, and agency business.  Together, the commercial and personal lines refer to “underwriting” operations that take insurance risk, and the agency business refers to non-risk insurance business.  

Through our commercial insurance lines, we offer coverage for both commercial property and commercial liability.  We also offer coverage for commercial automobiles and workers’ compensation.  Our insurance policies are sold to targeted small and mid-sized businesses on a single or multiple-coverage basis.

Through our personal insurance lines, we offer homeowners insurance and dwelling fire insurance products to individuals in several states.  Our specialty homeowners insurance product line is primarily comprised of low-value dwelling insurance tailored for owners of lower valued homes, which we offer in Illinois, Indiana and Texas.  Due to recent Florida-based industry events, we have been de-emphasizing our Florida homeowners’ business and reducing our exposures in that state, as well as other wind-exposed states like Texas and Hawaii.  

Through our wholesale agency business segment, we offer commercial and personal lines insurance products for our Insurance Company Subsidiaries as well as third-party insurers.  We have expanded the wholesale agency business to develop more non-risk revenue streams, and to provide our agents with more insurance product options.  

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Critical Accounting Policies and Estimates

General

We identified the accounting estimates below as critical to the understanding of our financial position and results of operations.  Critical accounting estimates are defined as those estimates that are both important to the portrayal of our financial condition and results of operations and which require us to exercise significant judgment.  We use significant judgment concerning future results and developments in applying these critical accounting estimates and in preparing our consolidated financial statements. These judgments and estimates affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of material contingent assets and liabilities.  Actual results may differ materially from the estimates and assumptions used in preparing the consolidated financial statements.  We evaluate our estimates regularly using information that we believe to be relevant.  See the Consolidated Financial Statements Note 1 ~ Summary of Significant Accounting Policies, for further details.

Loss and Loss Adjustment Expense Reserves

Our recorded loss and loss adjustment expenses ("LAE") reserves represent management’s best estimate of unpaid loss and LAE at each balance sheet date, based on information, facts and circumstances known at such time.  Our loss and LAE reserves reflect our estimates at the balance sheet date of:

• 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.

We do not discount the loss and LAE reserves for the time value of money.

Case reserves are initially set by our claims personnel.  When a claim is reported to us, our claims department completes a case‑basis valuation and establishes a case reserve for the estimated amount of the probable ultimate losses and LAE associated with that claim.  Our claims department updates their case‑basis valuations upon receipt of additional information and reduces case reserves as claims are paid.  The case reserve is based primarily upon an evaluation of the following factors:

• 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.

IBNR reserves are determined by subtracting case reserves and paid loss and LAE from the estimated ultimate loss and LAE.  Our actuarial department develops estimated ultimate loss and LAE on a quarterly basis.  Our Reserve Review Committee (which includes our Chief Executive Officer, President, Chief Financial Officer, other members of executive management, and key actuarial, underwriting and claims personnel) meets each quarter to review our actuaries’ estimated ultimate expected loss and LAE.

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We use several generally accepted actuarial methods to develop estimated ultimate loss and LAE estimates by line of business and accident year.  This process relies on the basic assumption that past experience, adjusted for the effects of current developments and likely trends, is a reasonable basis for predicting future outcomes.  These methods utilize various inputs, including:

• 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.

The principal standard actuarial methods used by our actuaries for their comprehensive reviews include:

• 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.

Our actuaries give different weights to each of these methods based upon the amount of historical experience data by line of business and by accident year, and based on judgment as to what method is believed to result in the most accurate estimate.  The application of each method by line of business and by accident year may change in the future if it is determined that a different emphasis for each method would result in more accurate estimates.

Our actuaries also analyze several diagnostic measures by line of business and accident year, including but not limited to: reported and closed frequency and severity, claim reporting and claim closing patterns, paid and incurred loss ratio development, and ratios of paid loss and LAE to incurred loss and LAE.  After the actuarial methods and diagnostic measures have been performed and analyzed, our actuaries use their judgment and expertise to select an estimated ultimate loss and LAE by line of business and by accident year.

Our actuaries estimate an IBNR reserve for our unallocated LAE not specifically identified to a particular claim, namely our internal claims department salaries and associated general overhead and administrative expenses associated with the adjustment and processing of claims.  These estimates, which are referred to as unallocated loss adjustment expense ("ULAE") reserves, are based on internal cost studies and analyses reflecting the relationship of ULAE paid to actual paid and incurred losses.  We select factors that are applied to case reserves and IBNR reserve estimates in order to estimate the amount of ULAE reserves applicable to estimated loss reserves at the balance sheet date.

We allocate the applicable portion of our estimated loss and LAE reserves to amounts recoverable from reinsurers under reinsurance contracts and report those amounts separately from our loss and LAE reserves as an asset on our balance sheet.

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The estimation of ultimate liability for losses and LAE is a complex, imprecise and inherently uncertain process, and therefore involves a considerable degree of judgment and expertise.  Our loss and LAE reserves do not represent an exact measurement of liability, but are estimates based upon various factors, including but not limited to:

• 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.

Most or all of these factors are not directly or precisely quantifiable, particularly on a prospective basis, and are subject to a significant degree of variability over time.  In addition, the establishment of loss and LAE reserves makes no provision for the broadening of coverage by legislative action or judicial interpretation or for the extraordinary future emergence of new types of losses not sufficiently represented in our historical experience or which cannot yet be quantified.  As a result, an integral component of our loss and LAE reserving process is the use of informed subjective estimates and judgments about our ultimate exposure to losses and LAE.  Accordingly, the ultimate liability may vary significantly from the current estimate.  The effects of change in the estimated loss and LAE reserves are included in the results of operations in the period in which the estimate is revised.

Our reserves consist entirely of reserves for property and liability losses, consistent with the coverages provided for in the insurance policies directly written or assumed by us under reinsurance contracts.  Several years may elapse between the occurrence of an insured loss, the reporting of the loss to us and our payment of the loss.  The level of IBNR reserves in relation to total reserves depends upon the characteristics of the specific line of business, particularly related to the speed with which claims are reported and outstanding claims are paid.  Lines of business for which claims are reported slowly will have a higher percentage of IBNR reserves than lines of business that report and settle claims more quickly.

The following table shows the ratio of IBNR reserves to total reserves net of reinsurance recoverables as of December 31, 2019 (dollars in thousands):

Line of Business	Case Reserves		IBNR Reserves		Total Reserves		Ratio of IBNR to Total Reserves
Commercial Lines	$	43,299	$	38,501	$	81,800		47.1	%
Personal Lines		1,802		1,065		2,867		37.1	%
Total Lines	$	45,101	$	39,566	$	84,667		46.7	%

Although we believe that our reserve estimates are reasonable, it is possible that our actual loss and LAE experience may not conform to our assumptions and may, in fact, vary significantly from our assumptions.  Accordingly, the ultimate settlement of losses and the related LAE may vary significantly from the estimates included in our financial statements.  We continually review our estimates and adjust them as we believe appropriate as our experience develops or new information becomes known to us.  Such adjustments are included in current operations.

Our loss and LAE reserves do not represent an exact measurement of liability, but are estimates.  The most significant assumptions affecting our IBNR reserve estimates are the loss development factors applied to paid losses and case reserves to develop IBNR by line of business and accident year.  Although historical loss development provides us with an indication of future loss development, it typically varies from year to year.  Thus, for each accident year within each line of business we select one loss development factor out of a range of historical factors.

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We generated a sensitivity analysis of our net reserves which represents reasonably likely levels of variability in our selected loss development factors.  We believe the most meaningful approach to the sensitivity analysis is to vary the loss development factors that drive the ultimate loss and LAE estimates.  We applied this approach on an accident year basis, reflecting the reasonably likely differences in variability by level of maturity of the underlying loss experience for each accident year.  Generally, the most recent accident years are characterized by more unreported losses and less information available for settling claims, and have more inherent uncertainty than the reserve estimates for more mature accident years.  Therefore, we used variability factors of plus or minus 10% for the most recent accident year, 5% for the preceding accident year, and 2.5% for the second preceding accident year.  There is minimal expected variability for accident years at four or more years’ maturity.

The following table displays ultimate net loss and LAE and net loss and LAE reserves by accident year for the year ended December 31, 2019.  We applied the sensitivity factors to each accident year amount and have calculated the amount of potential net loss and LAE reserve change and the impact on 2019 reported pre-tax income and on net income and shareholders’ equity at December 31, 2019.  We believe it is not appropriate to sum the illustrated amounts as it is not reasonably likely that each accident year’s reserve estimate assumptions will vary simultaneously in the same direction to the full extent of the sensitivity factor.  We also believe that such changes to our reserve balance would not have a material impact on our operating results, financial position, or liquidity. The net income and shareholders' equity amounts include an income tax rate assumption of 21%.  The dollar amounts in the table are in thousands.

				December 31, 2019				Potential Impact on 2019
	Ultimate Loss and LAE Sensitivity Factor			Net Ultimate Loss and LAE		Net Loss and LAE Reserves		Pre- Tax Income			Shareholders' Equity
Increased Ultimate Losses & LAE
Accident Year 2019		10.0	%	$	49,128	$	34,835	$	4,913		$	3,881
Accident Year 2018		5.0	%		53,080		24,664		2,654			2,097
Accident Year 2017		2.5	%		69,977		16,502		1,749			1,382
Prior to 2017 Accident Years		—	%		—		8,665		—			—
Decreased Ultimate Losses & LAE
Accident Year 2019		(10.0	)%		49,128		34,835		(4,913	)		(3,881	)
Accident Year 2018		(5.0	)%		53,080		24,664		(2,654	)		(2,097	)
Accident Year 2017		(2.5	)%		69,977		16,502		(1,749	)		(1,382	)
Prior to 2017 Accident Years							8,665		—			—

Investment Valuation and Impairment

We carry debt securities classified as available‑for‑sale at fair value, and unrealized gains and losses on such securities, net of any deferred taxes, are reported as a separate component of accumulated other comprehensive income.  Our equity securities that do not result in consolidation and are not accounted for under the equity method are measured at fair value and any changes in fair value are recognized in net income.  We carry other equity investments that do not have a readily determinable fair value at cost, less impairment and adjusted for observable price changes under the measurement alternative provided under GAAP. We review these investments for impairment during each reporting period.  We do not have any securities classified as trading or held‑to‑maturity.

We evaluate our available‑for‑sale investments regularly to determine whether there have been declines in value that are other‑than‑temporary.  Our outside investment managers assist us in this evaluation.  When we determine that a security has experienced an other‑than‑temporary impairment, the impairment loss is recognized as a realized investment loss.

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We consider a number of factors in assessing whether an impairment is other‑than‑temporary, including (1) the amount and percentage that current fair value is below cost or amortized cost, (2) the length of time that the fair value has been below cost or amortized cost and (3) recent corporate developments or other factors that may impact an issuer’s near term prospects.  In addition, for debt securities, we consider the credit quality ratings for the securities, with a special emphasis on securities downgraded to below investment grade.  We also consider our intent to sell available‑for‑sale debt securities in an unrealized loss position, and if it is more likely than not that we will be required to sell these securities before a recovery in fair value to their cost or amortized cost basis.

Fair values are measured in accordance with ASC 820, Fair Value Measurements.  The guidance establishes a framework for measuring fair value and a three‑level hierarchy based upon the quality of inputs used to measure fair value.  The three levels of the fair value hierarchy are: (1) Level 1: inputs are based on quoted prices (unadjusted) in active markets for identical assets or liabilities, (2) Level 2: inputs are other than quoted prices that are observable for the asset or liabilities, either directly or indirectly, for substantially the full term of the asset or liability and (3) Level 3: unobservable inputs that are supported by little or no market activity.  The unobservable inputs represent the Company’s best assumption of how market participants would price the assets or liabilities.  The Company also has investment company limited partnership investments, which are measured at net asset value (NAV).  The fair value of these investments is based on the capital account balances reported by the investment funds subject to their management review and adjustment.  The capital account balances reflect the fair value of the investment funds.

The fair values of debt and equity securities have been determined using fair value prices provided by our investment managers, who utilize internationally recognized independent pricing services.  The prices provided by the independent pricing services are generally based on observable market data in active markets (e.g., broker quotes and prices observed for comparable securities).

The values for publicly‑traded equity securities are generally based on Level 1 inputs which use the market approach valuation technique.  The values for debt securities generally incorporate significant Level 2 inputs.  The carrying value of cash and short‑term investments approximate their fair values due to their short‑term maturity.

We review fair value prices provided by our outside investment managers for reasonableness by comparing the fair values provided by the managers to those provided by our investment custodian.  We also review and monitor changes in unrealized gains and losses.  We obtain an understanding of the methods, models and inputs used by our investment managers and independent pricing services, and controls are in place to validate that prices provided represent fair values.  Our control process includes initial and ongoing evaluation of the methodologies used, a review of specific securities and an assessment for proper classification within the fair value hierarchy.

Income Taxes

Our income tax expense, deferred tax assets and liabilities, and liabilities for unrecognized tax benefits reflect management’s best assessment of estimated current and future taxes to be paid.  We are subject to income taxes in the United States and numerous state jurisdictions.  Significant judgment is required in determining the consolidated income tax expense.

On December 22, 2017, the U.S. federal government enacted H.R. 1, “An Act to Provide for Reconciliation Pursuant to Titles II and V of the Concurrent Resolution on the Budget for Fiscal Year 2018” (the “Act”).  The Act provided for significant changes to corporate taxation including the decrease of the corporate tax rate from 34% to 21%.  

In 2018, the Company recognized a measurement period adjustment of $42,735 related to loss reserve discounting, which reduced deferred tax expense.  The Company also recognized a measurement period adjustment of $42,735 related to the loss reserve discounting transitional adjustment, which increased deferred tax expense.  The measurement period adjustments were based upon obtaining additional information about facts and circumstances that existed as of the enactment date that, if known, would have affected the income tax effects initially reported as provisional amounts under the Act.  The measurement period adjustments had no effect on the effective tax rate for the year ending December 31, 2018.  The accounting for the income tax effects of the Act pursuant to SAB 118 has been completed as of the end of the December 22, 2018, measurement period and for the year ended December 31, 2018.

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Deferred income taxes arise from temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements, which will result in taxable or deductible amounts in the future.  In evaluating our ability to recover our deferred tax assets within the jurisdiction from which they arise, we consider all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax‑planning strategies, and results of recent operations.  In projecting future taxable income, we begin with historical results and incorporate assumptions about the amount of future state and federal pretax operating income adjusted for items that do not have tax consequences.  The assumptions about future taxable income require significant judgment and are consistent with the plans and estimates we are using to manage the underlying businesses.  In evaluating the objective evidence that historical results provide, we consider three years of cumulative operating income or loss.

As of December 31, 2019, we have federal and state income tax net operating loss (“NOL”) carryforwards of $60.0 million and $17.7 million, respectively.  Of the NOL carryforwards, $50.0 million will expire in tax years 2020 through 2039 and $10.0 million will never expire.  Of the federal NOL amount, $14.1 million are subject to limitations under Section 382 of the Internal Revenue Code.  These net NOL carryforwards are limited in the amount that can be utilized in any one year and may expire before they are realized.  At this time we do not expect that any of the remaining NOL carryforwards will expire before utilized.

The carrying value of our gross deferred tax asset for the NOL carryforwards is equal to the total NOL carryforward amount times the applicable federal and state tax rates, and was $13.5 million and $10.7 million as of December 31, 2019 and 2018, respectively.  Total gross deferred tax assets were $17.2 million and $15.4 million as of December 31, 2019 and 2018.  A valuation allowance of $13.6 million and $12.6 million has been recorded against the gross deferred tax assets as of December 31, 2019 and 2018, respectively, as the Company has recognized a three-year cumulative loss as of December 31, 2019 which is significant negative evidence to support the lack of recoverability of those deferred tax assets in accordance with ASC 740, Income Taxes.  If the $13.6 million valuation allowance as of December 31, 2019 were reversed in the future, it would increase book value by $1.41.  The net deferred tax liabilities were zero and $115,000 as of December 31, 2019 and 2018.

If, in the future, we determine we can support the recoverability of a portion or all of the deferred tax assets under the guidance, the tax benefits relating to any reversal of the valuation allowance on deferred tax assets will be accounted for as a reduction of income tax expense and result in an increase in equity.  Changes in tax laws and rates may affect recorded deferred tax assets and liabilities and our effective tax rate in the future.

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Non-GAAP Financial Measures

Adjusted Operating Income (Loss) and Adjusted Operating Income (Loss) Per Share

Adjusted operating income (loss) and adjusted operating income (loss) per share are non-GAAP measures that represent net income allocable to common shareholders 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 ADC.  The most directly comparable financial GAAP measures to adjusted operating income and adjusted operating income per share are net income and net income per share, respectively.  Adjusted operating income and adjusted operating income per share are intended as supplemental information and are not meant to replace net income or net income per share.  Adjusted operating income and adjusted operating income per share should be read in conjunction with the GAAP financial results.  Our definition of adjusted operating income may be different from that used by other companies.  The following is a reconciliation of net income to adjusted operating income (dollars in thousands), as well as net income per share to adjusted operating income per share:

	For the Years Ended December 31,
	2019			2018			2017
Net income (loss)	$	(7,822	)	$	(9,227	)	$	(21,542	)
Less:
Net realized investment gains and other gains, net    of tax		1,196			61			820
Effect of tax law change		—			—			63
Tax effect of unrealized gains and losses on    investments		824			—			356
Change in fair value of equity securities, net of tax		(427	)		121			—
Net (increase) decrease in deferred gain on losses ceded to ADC, net of tax		5,677			(5,677	)		—
Adjusted operating income (loss)	$	(15,092	)	$	(3,732	)	$	(22,781	)
Weighted average common shares, diluted		8,880,107			8,543,876			7,867,344
Diluted (loss) per common share:
Net income (loss)	$	(0.88	)	$	(1.08	)	$	(2.74	)
Net realized investment gains and other gains, net    of tax		0.13			0.01			0.10
Effect of tax law change		0.09			—			0.01
Tax effect of unrealized gains and losses on    investments		—			—			0.05
Change in fair value of equity securities, net of tax		(0.05	)		0.01			—
Net (increase) decrease in deferred gain on losses ceded to ADC, net of tax		0.64			(0.66	)		—
Adjusted operating (loss) per share	$	(1.69	)	$	(0.44	)	$	(2.90	)

We use adjusted operating income and adjusted operating income per share, in conjunction with other financial measures, to assess our performance and to evaluate the results of our business.  We believe these measures provide investors with valuable information relating to our ongoing performance that may be obscured by the effect of investment gains and losses as a result of our market risk sensitive instruments, which primarily relate to fixed income securities that are available-for-sale and not held for trading purposes.  Realized investment gains and losses may vary significantly between periods and are generally driven by external economic developments, such as capital market conditions.  Accordingly, adjusted operating income excludes the effect of items that tend to be highly variable from period to period and highlights the results from our ongoing business operations and the underlying loss or profitability of our business.  We believe that it is useful for investors to evaluate adjusted operating income and adjusted operating income per share, along with net income and net income per share, when reviewing and evaluating our performance.

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Executive Overview

For the year ended December 31, 2019, we continued to expand our commercial lines in areas where we have had the most success, reduced exposure in the more challenging areas, and repositioned our personal lines of business.  Our commercial lines gross written premiums decreased by $3.3 million, or 3.4%, to $94.4 million in 2019, compared to $97.7 million in 2018.  Personal lines gross written premiums increased by $788,000, or 11.8% to $7.5 million in 2019, compared to $6.7 million in 2018.  

The Company reported a net loss of $7.8 million, or $0.88 per share, in 2019, compared to a net loss of $9.2 million, or $1.08 per share, in 2018.  

Adjusted operating loss, a non-GAAP measure, was $15.1 million, or $1.69 per share, for the year ended December 31, 2019, compared to an adjusted operating loss of $3.7 million, or $0.44 per share, for the year ended December 31, 2018.

The 2019 results were mainly driven by $10.6 million of adverse development.  The largest difference between net loss and adjusted operating loss is related to the ADC (described below) in which the $5.7 million deferred gain as of December 31, 2018 was fully utilized in 2019.

In 2019, there was $313,000 of loss development on Hurricane Harvey and $495,000 of catastrophe reinsurance statement costs relating to Hurricane Irma.  In 2018, there was $583,000 of loss development on Hurricane Harvey and $1.0 million of catastrophe reinsurance reinstatement costs relating to Hurricane Irma.  The reinstatement costs, plus a short-term reduction in net earned premiums as we repositioned our business profile, contributed to a slightly higher expense ratio.

In an effort to reduce interest costs, we restructured our debt during 2018 by issuing $25.3 million of public senior unsecured notes (the "Notes") and paid down $19.5 million of our subordinated notes to $10.5 million.

In 2017, we entered into the ADC to protect against loss development of up to $17.5 million in excess of stated reserves as of June 30, 2017.  The agreement provides up to $17.5 million of reinsurance for adverse net loss reserve development for accident years 2005 through 2016.  The agreement attaches when net losses exceed $1.4 million of the $36.6 million carried reserves at June 30, 2017, and extends to $19.5 million in coverage up to $57.5 million (inclusive of a 10% co-participation).

The 2017 results were mainly driven by adverse development on prior-year reserves, the cost of the ADC, and losses from Hurricanes Irma and Harvey.

Adverse Development Cover

In 2017, we purchased the ADC to greatly reduce our exposure to prior-year adverse development.  In 2017, we recorded $7.2 million in ceded premiums under the ADC, and ceded $7.2 million in losses.  The benefits of the ADC can be seen during 2018 wherein we ceded $10.3 million of adverse development to the ADC.  Of the $10.3 million of ceded losses, $4.6 million was amortized in 2018, and reduced losses and LAE expense.  The remaining $5.7 million was recognized in 2019.  As of December 31, 2019, the deferred gain from the ADC was fully utilized.  

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Results of Operations - 2019 Compared to 2018

The following table summarizes our operating results for the years indicated (dollars in thousands):

Summary Operating Results

	Years Ended December 31,
	2019			2018			$ Change			% Change
Gross written premiums	$	101,853		$	104,368		$	(2,515	)		(2.4	%)
Net written premiums	$	87,724		$	89,086		$	(1,362	)		(1.5	%)
Net earned premiums	$	89,089		$	93,811		$	(4,722	)		(5.0	%)
Other income		2,109			1,582			527			33.3	%
Losses and loss adjustment expenses, net		59,744			62,515			(2,771	)		(4.4	%)
Policy acquisition costs		24,911			25,534			(623	)		(2.4	%)
Operating expenses		17,582			17,683			(101	)		(0.6	%)
Underwriting gain (loss)		(11,039	)		(10,339	)		(700	)	*
Net investment income		4,031			3,336			695			20.8	%
Net realized investment gains		1,196			61			1,135		*
Change in fair value of equity securities		(427	)		121			(548	)	*
Interest expense		2,882			2,644			238			9.0	%
Income (loss) before income taxes		(9,121	)		(9,465	)		344		*
Equity earnings (losses) in affiliates, net of tax		386			290			96			33.1	%
Income tax expense (benefit)		(913	)		52			(965	)	*
Net income (loss)	$	(7,822	)	$	(9,227	)	$	1,405		*
Underwriting Ratios:
Loss ratio (1)		66.8	%		66.4	%
Expense ratio (2)		44.0	%		45.9	%
Combined ratio (3)		110.8	%		112.3	%

(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.  The 2018 ratios have been recast to reflect the new presentation.  Refer to Note 17 ~ Segment Information for further details.  

(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.  The 2018 ratios have been recast to reflect the new presentation.  Refer to Note 17 ~ Segment Information for further details.  

(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

Premiums

Earned premiums are earned ratably over the term of the policy, whereas written premiums are reflected on the effective date of the policy.  Almost all commercial lines and homeowners products have annual policies, under which premiums are earned evenly over one year.  Almost all personal automobile policies are six month term policies under which premiums are earned evenly over a six-month period.  The resulting net earned premiums are impacted by the gross and ceded written premiums, earned ratably over time.

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Our premiums are presented below for the years ended December 31, 2019 and 2018 (dollars in thousands):

Summary of Premium Revenue

	Years Ended December 31,
	2019		2018		$ Change			% Change
Gross written premiums
Commercial lines	$	94,391	$	97,694	$	(3,303	)		(3.4	%)
Personal lines		7,462		6,674		788			11.8	%
Total	$	101,853	$	104,368	$	(2,515	)		(2.4	%)
Net written premiums
Commercial lines	$	81,966	$	87,038	$	(5,072	)		(5.8	%)
Personal lines		5,758		2,048		3,710			181.2	%
Total	$	87,724	$	89,086	$	(1,362	)		(1.5	%)
Net Earned premiums
Commercial lines	$	83,858	$	83,352	$	506			0.6	%
Personal lines		5,231		10,459		(5,228	)		(50.0	%)
Total	$	89,089	$	93,811	$	(4,722	)		(5.0	%)

Gross written premiums decreased by $2.5 million, or 2.4%, to $101.9 million for the year ended December 31, 2019, as compared to $104.4 for the year ended December 31, 2018.  The decrease was attributable to a reduction in written premium in our hospitality programs, which was slightly offset by an increase in written premium in our small business programs.  

Commercial lines gross written premiums decreased $3.3 million, or 3.4%, to $94.4 million for the year ended December 31, 2019, as compared to $97.7 million for the year ended December 31, 2018.  Our hospitality programs’ gross written premiums decreased $6.6 million, or 12.0%, to $48.4 million for the year ended December 31, 2019, as compared to $55.0 million for the year ended December 31, 2018.  However, gross written premiums for our small business programs increased by $3.3 million, or 7.7%, to $46.0 million for the year ended December 31, 2019, as compared to $42.7 million for the year ended December 31, 2018.

Personal lines gross written premiums increased $788,000, or 11.8%, to $7.5 million for the year ended December 31, 2019, as compared to $6.7 million for the same period in 2018.  This was largely driven by an increase in our low value dwelling business.

Net written premiums decreased $1.4 million, or 1.5%, to $87.7 million, for the year ended December 31, 2019, as compared to $89.1 million for the year ended December 31, 2018.  The decrease was primarily due to the reduction in the commercial lines business.  

Other Income

Other income consists primarily of fees charged to policyholders by the Company for services outside of the premium charge, such as installment billings or policy issuance costs.  Commission income is also received by the Company’s insurance agencies for writing policies for third party insurance companies.  Other income increased by $527,000, or 33.3%, to $2.1 million for the year ended December 31, 2019, as compared to $1.6 million in 2018.  The increase in other income was primarily due to additional commission income in the Agency operations as well as increased fees charged on existing business.  

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Losses and Loss Adjustment Expenses

The tables below detail our losses and LAE and loss ratios for the years ended December 31, 2019 and 2018 (dollars in thousands).  

We have changed the calculation to remove wholesale agency operations and corporate headquarters operations to provide a better measure of the underwriting operations’ efficiency.  The loss ratio calculation excludes other income from wholesale agency and Corporate.  The 2018 ratios have been recast to reflect the new presentation.  Refer to Note 17 ~ Segment Information for further details.

Year Ended December 31, 2019	Commercial Lines			Personal Lines			Total
Accident year net losses and LAE	$	45,690		$	3,502		$	49,192
Net (favorable) adverse development		7,566			2,986			10,552
Calendar year net loss and LAE	$	53,256		$	6,488		$	59,744
Accident year loss ratio		54.3	%		65.2	%		55.0	%
Net (favorable) adverse development		9.0	%		55.5	%		11.8	%
Calendar year loss ratio		63.3	%		120.7	%		66.8	%

Year Ended December 31, 2018	Commercial Lines			Personal Lines			Total
Accident year net losses and LAE	$	46,816		$	6,665		$	53,481
Net (favorable) adverse development		6,249			2,785			9,034
Calendar year net loss and LAE	$	53,065		$	9,450		$	62,515
Accident year loss ratio		56.1	%		62.3	%		56.8	%
Net (favorable) adverse development		7.5	%		26.1	%		9.6	%
Calendar year loss ratio		63.6	%		88.4	%		66.4	%

Net losses and LAE decreased by $2.7 million, or 4.4%, for the year ended December 31, 2019, as compared to the same period in 2018.  The calendar year loss ratios were 66.8% and 66.4% for the years ended December 31, 2019 and 2018, respectively.

The $10.6 million of adverse development in 2019 consisted of $7.6 million from commercial lines and $3.0 million from personal lines and mostly related to the 2017 and 2016 accident years.  

The $9.0 million of adverse development in 2018 consisted of $6.2 million from commercial lines and $2.8 million from personal lines and mostly related to the 2016 and 2015 accident years.

Expense Ratio

Our expense ratio is a measure of the efficiency and performance of the commercial and personal lines of business (our risk-bearing underwriting operations).  It is calculated by dividing the sum of policy acquisition costs and other underwriting expenses by the sum of net earned premiums and other income of the underwriting business.  Costs that cannot be readily identifiable as a direct cost of a segment or product line remain in Corporate for segment reporting purposes.  The expense ratio excludes wholesale agency and Corporate expenses.  In prior periods the wholesale agency operations and Corporate expenses were included in expense ratio calculation.  We have changed the calculation to remove wholesale agency operations and Corporate expenses to provide a better measure of the underwriting operations’ efficiency.  The 2018 ratios have been recast to reflect the new presentation. Refer to Note 17 ~ Segment Information for further details.

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The table below provides the expense ratio by major component:

	Years Ended December 31,
	2019			2018
Commercial Lines
Policy acquisition costs		28.0	%		28.2	%
Operating expenses		15.3	%		17.6	%
Total		43.3	%		45.8	%
Personal Lines
Policy acquisition costs		32.4	%		36.0	%
Operating expenses		23.0	%		10.2	%
Total		55.4	%		46.2	%
Total Underwriting
Policy acquisition costs		28.2	%		29.2	%
Operating expenses		15.8	%		16.7	%
Total		44.0	%		45.9	%

Our expense ratio decreased by 1.9%, to 44.0% for the year ended December 31, 2019, as compared to the same period in 2018.  The decrease in the expense ratio was primarily due to lower operating and reinsurance costs in 2019 compared to 2018.  The reduction in the expense ratio was partially offset by lower net earned premium in 2019 compared to 2018.  

Policy acquisition costs are costs we incur to issue policies, which include commissions, premium taxes, underwriting reports and underwriter compensation costs.  The Company offsets direct commissions with ceded commissions from reinsurers.  The percentage of policy acquisition costs to net earned premiums and other income decreased by 1.0%, from 29.2% in 2018, to 28.2% in 2019.

Operating expenses consist primarily of employee compensation, information technology and occupancy costs, such as rent and utilities.  Operating expenses as a percent of net earned premiums and other income was 15.8% and 16.7% for the years ended December 31, 2019 and 2018, respectively.

Underwriting Results

We measure the performance of our consolidated results, in part, based on our underwriting gain or loss.  The following table provides the underwriting gain or loss for the years ended December 31, 2019 and 2018 (dollars in thousands):

Underwriting Gain (Loss)

	Years Ended December 31,
	2019			2018			Change
Commercial Lines	$	(5,574	)	$	(7,858	)	$	2,284
Personal Lines		(4,091	)		(3,700	)		(391	)
Total Underwriting		(9,665	)		(11,558	)		1,893
Wholesale Agency		830			1,432			(602	)
Corporate		(1,064	)		(213	)		(851	)
Eliminations		(1,140	)		—			(1,140	)
Total underwriting income (loss)	$	(11,039	)	$	(10,339	)	$	(700	)

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Investment Income

Net investment income increased by $695,000, or 20.8%, to $4.0 million for the year ended December 31, 2019, as compared to $3.3 million for the year ended December 31, 2018.  This increase was mainly due to an increase in average invested assets during 2019.  Average invested assets as of December 31, 2019 were $154.9 million, compared to $148.9 million as of December 31, 2018, an increase of $6.0 million, or 4.0%.  As of December 31, 2019, the average invested asset balance was comprised of 81.1% debt securities, 5.8% equity securities and 13.1% short-term investments, compared to the December 31, 2018 mix of 86.3% debt securities, 6.9% equity securities and 6.8% short term investments.

The portfolio’s average quality was AA at December 31, 2019 and 2018.  The portfolio produced a tax-equivalent book yield of 2.6% and 2.8% for the years ended December 31, 2019 and 2018, respectively.  The duration-to-worst average of the debt securities portfolio was 3.0 years and 3.1 years at December 31, 2019 and 2018, respectively.

The Company received a one-time dividend from an investment for $213,000 in the third quarter of 2019.  

Interest Expense

Interest expense was $2.9 million and $2.6 million for the years ended December 31, 2019 and 2018, respectively.  We issued $22.0 million of public senior unsecured notes (the "Notes") in the third quarter of 2018.  We issued an additional $3.3 million of the Notes in the fourth quarter of 2018.  Proceeds from the notes were used to pay down $19.5 million of the $30.0 million of subordinated notes that were issued in the third quarter of 2017.  Interest expense includes the amortization of debt issuance costs relating to the new Notes which is $260,000 per annum over the 5-year life of the Notes.  The interest expense relating to the amortization of debt issuance costs for the existing $10.5 million of the subordinated notes is $50,000 per annum over the 20-year life of the subordinated notes.  

The Company has a $10.0 million line of credit, which it drew upon and paid down at various times throughout 2019, and which contributed to interest expense.

Income Tax Expense (Benefit)

For the year ended December 31, 2019, the Company reported $0 of current federal income tax expense and $27,000 of current state income tax expense.  The Company reported a deferred tax benefit of $940,000 and $0 for the years ended December 31, 2019 and 2018, respectively.  The increase in the deferred tax benefit in 2019 was a result of the change in the net deferred tax asset valuation allowance related to the changes in unrealized gains.

There is a $13.6 million valuation allowance against 100% of the net deferred tax assets at December 31, 2019, which would increase book value by $1.41 per share if reversed in the future.  The valuation allowance was $12.6 million as of December 31, 2018. As of December 31, 2019, the Company has net operating loss carryforwards for federal income tax purposes of $60.0 million, of which $50.0 million expire in tax years 2020 through 2039 and $10.0 million never expire.  Of this amount, $14.1 million are limited in the amount that can be utilized in any one year and may expire before they are realized under Section 382 of the Internal Revenue Code.  The Company has state net operating loss carryforwards of $17.7 million, which expire in tax years 2021 through 2039.

In 2018, the Company recognized a measurement period adjustment of $42,735 related to loss reserve discounting, which reduced deferred tax expense.  The Company also recognized a measurement period adjustment of $42,735 related to the loss reserve discounting transitional adjustment, which increased deferred tax expense.  The measurement period adjustments were based upon obtaining additional information about facts and circumstances that existed as of the enactment date that, if known, would have affected the income tax effects initially reported as provisional amounts under the Act.  The measurement period adjustments had no effect on the effective tax rate for the year ended December 31, 2018.  The accounting for the income tax effects of the Act pursuant to SAB 118 has been completed as of the end of the December 22, 2018, measurement period and for the year ended December 31, 2018.

Results of Operations - 2018 Compared to 2017

The following table summarizes our operating results for the years indicated (dollars in thousands):

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Summary Operating Results

	Years Ended December 31,
	2018			2017			$ Change			% Change
Gross written premiums	$	104,368		$	114,284		$	(9,916	)		(8.7	%)
Net written premiums	$	89,086		$	91,240		$	(2,154	)		(2.4	%)
Net earned premiums	$	93,811		$	91,729		$	2,082			2.3	%
Other income		1,582			1,560			22			1.4	%
Losses and loss adjustment expenses, net		62,515			73,917			(11,402	)		(15.4	%)
Policy acquisition costs		25,534			26,245			(711	)		(2.7	%)
Operating expenses		17,683			17,367			316			1.8	%
Underwriting gain (loss)		(10,339	)		(24,240	)		13,901		*
Net investment income		3,336			2,728			608			22.3	%
Net realized investment gains		61			70			(9	)		(12.86	%)
Change in fair value of equity securities		121			—			121		*
Other gains (losses)		—			750			(750	)	*
Interest expense		2,644			1,362			1,282			94.1	%
Income (loss) before income taxes		(9,465	)		(22,054	)		12,589		*
Income tax expense (benefit)		52			(447	)		499		*
Equity earnings (losses) in affiliates, net of tax		290			65			225		*
Net income (loss)	$	(9,227	)	$	(21,542	)	$	12,315		*
Underwriting Ratios:
Loss ratio (1)		66.4	%		79.9	%
Expense ratio (2)		45.9	%		44.8	%
Combined ratio (3)		112.3	%		124.7	%

(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.  The 2018 and 2017 ratios have been recast to reflect the new presentation.  Refer to Note 17 ~ Segment Information for further details.

(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.  The 2018 and 2017 ratios have been recast to reflect the new presentation.  Refer to Note 17 ~ Segment Information for further details.  

(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

Premiums

Earned premiums are earned ratably over the term of the policy, whereas written premiums are reflected on the effective date of the policy. All commercial lines and homeowners products have annual policies, under which premiums are earned evenly over one year.  Almost all personal automobile policies are six-month term policies under which premiums are earned evenly over a six-month period.  The resulting net earned premiums are impacted by the gross and ceded written premiums, earned ratably over time.

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Our premiums are presented below for the years ended December 31, 2018and 2017 (dollars in thousands):

Summary of Premium Revenue

	Years Ended December 31,
	2018		2017		$ Change			% Change
Gross written premiums
Commercial lines	$	97,694	$	92,112	$	5,582			6.1	%
Personal lines		6,674		22,172		(15,498	)		(69.9	)%
Total	$	104,368	$	114,284	$	(9,916	)		(8.7	)%
Net written premiums
Commercial lines	$	87,038	$	78,217	$	8,821			11.3	%
Personal lines		2,048		13,023		(10,975	)		(84.3	)%
Total	$	89,086	$	91,240	$	(2,154	)		(2.4	)%
Net Earned premiums
Commercial lines	$	83,352	$	76,786	$	6,566			8.6	%
Personal lines		10,459		14,943		(4,484	)		(30.0	)%
Total	$	93,811	$	91,729	$	2,082			2.3	%

Gross written premiums decreased by $9.9 million, or 8.7%, to $104.4 million for the year ended December 31, 2018, as compared to $114.3 million for the year ended December 31, 2017.  These results reflect our continued execution of our growth initiatives in the niche commercial insurance markets and our strategic change in the mix of business of our personal lines.

Commercial lines gross written premiums increased $5.6 million, or 6.1%, to $97.7 million for the year ended December 31, 2018, as compared to $92.1 million for the year ended December 31, 2017.  This increase was seen across many commercial product lines as a result of our continued strategic expansion efforts.

Personal lines gross written premiums decreased $15.5 million, or 69.9%, to $6.7 million for the year ended December 31, 2018, as compared to $22.2 million for the same period in 2017.  This was largely driven by a reduction in wind-exposed homeowners business in both Hawaii and Florida.

Net written premiums decreased $2.2 million, or 2.4%, to $89.1 million for the year ended December 31, 2018, as compared to $91.2 million for the year ended December 31, 2017.  The decrease was primarily due to the reduction in wind-exposed homeowners business.

Other Income

Other income consists primarily of fees charged to policyholders by the Company for services outside of the premium charge, such as installment billings or policy issuance costs.  Commission income is also received by the Company’s insurance agencies for writing policies for third party insurance companies.  Other income for the year December 31, 2018 and December 31, 2017 remained flat at $1.6 million.

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Losses and Loss Adjustment Expenses

The tables below detail our losses and LAE and loss ratios for the years ended December 31, 2018 and 2017 (dollars in thousands).

We have changed the calculation to remove wholesale agency operations and Corporate expenses to provide a better measure of the underwriting operations’ efficiency.  The loss ratio calculation excludes other income from wholesale agency and Corporate.  The 2018 and 2017 ratios have been recast to reflect the new presentation.  Refer to Note 17 ~ Segment Information for further details.

Year Ended December 31, 2018	Commercial Lines			Personal Lines			Total
Accident year net losses and LAE	$	46,816		$	6,665		$	53,481
Net (favorable) adverse development		6,249			2,785			9,034
Calendar year net loss and LAE	$	53,065		$	9,450		$	62,515
Accident year loss ratio		56.1	%		62.4	%		56.8	%
Net (favorable) adverse development		7.5	%		26.1	%		9.6	%
Calendar year loss ratio		63.6	%		88.5	%		66.4	%

Year Ended December 31, 2017	Commercial Lines			Personal Lines			Total
Accident year net losses and LAE	$	48,520		$	15,937		$	64,457
Net (favorable) adverse development		7,181			2,279			9,460
Calendar year net loss and LAE	$	55,701		$	18,216		$	73,917
Accident year loss ratio		63.0	%		102.7	%		69.7	%
Net (favorable) adverse development		9.3	%		14.7	%		10.2	%
Calendar year loss ratio		72.3	%		117.4	%		79.9	%

Net losses and LAE decreased by $11.4 million, or 15.4%, for the year ended December 31, 2018, as compared to the same period in 2017.  The calendar year loss ratios were 66.4% and 79.9% for the years ended December 31, 2018 and 2017, respectively.

The $9.0 million of adverse development in 2018 consisted of $6.2 million from commercial lines and $2.8 million from personal lines and mostly related to the 2016 and 2015 accident years.

The $9.5 million of adverse development in 2017 consisted of $7.2 million from commercial lines and $2.3 million from personal lines and mostly related to the 2016 and 2015 accident years.  This development primarily consisted of $5.1 million from commercial liability business, $1.6 million from the commercial property, $1.7 million from Florida homeowners and $0.5 million from commercial auto business.

Expense Ratio

Our expense ratio is a measure of the efficiency and performance of the commercial and personal lines of business (our risk-bearing underwriting operations).  It is calculated by dividing the sum of policy acquisition costs and other underwriting expenses by the sum of net earned premiums and other income of the underwriting business.  Costs that cannot be readily identifiable as a direct cost of a segment or product line remain in Corporate for segment reporting purposes.  The expense ratio excludes wholesale agency and Corporate expenses.  In prior periods the wholesale agency operations and Corporate expenses were included in expense ratio calculation.  We have changed the calculation to remove wholesale agency operations and Corporate expenses to provide a better measure of the underwriting operations’ efficiency.  The 2018 and 2017 ratios have been recast to reflect the new presentation. Refer to Note 17 ~ Segment Information for further details.

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The table below provides the expense ratio by major component:

	Years Ended December 31,
	2018	2017
Commercial Lines
Policy acquisition costs	28.2%	29.0%
Operating expenses	17.6%	13.7%
Total	45.8%	42.7%
Personal Lines
Policy acquisition costs	36.0%	42.1%
Operating expenses	10.2%	12.5%
Total	46.2%	54.6%
Total Underwriting
Policy acquisition costs	29.2%	31.3%
Operating expenses	16.7%	13.5%
Total	45.9%	44.8%

Our expense ratio increased by 1.1%, to 45.9 for the year ended December 31, 2018, as compared to the same period in 2017.  The increase in the expense ratio was due to lower net earned premium in 2018 in our personal lines of business, as much of the wind-exposed homeowners business rolled off.

Policy acquisition costs are costs we incur to issue policies, which include commissions, premium taxes, underwriting reports and underwriter compensation costs.  The Company offsets direct commissions with ceded commissions from reinsurers.  The percentage of policy acquisition costs to net earned premiums and other income decreased by 2.1 percentage points from 31.3% in 2017, to 29.2% in 2018.

Operating expenses consist primarily of employee compensation, information technology and occupancy costs, such as rent and utilities.  Operating expenses as a percent of net earned premiums and other income were 16.7% and 13.5% for the years ended December 31, 2018 and 2017, respectively.

Underwriting Results

We measure the performance of our consolidated results, in part, based on our underwriting gain or loss.  The following table provides the underwriting gain or loss for the years ended December 31, 2018 and 2017 (dollars in thousands):

Underwriting Gain (Loss)

	Years Ended December 31,
	2018			2017			Change
Commercial Lines	$	(7,858	)	$	(11,645	)	$	3,787
Personal Lines		(3,700	)		(11,176	)		7,476
Total Underwriting		(11,558	)		(22,821	)		11,263
Wholesale Agency		1,432			1,046			386
Corporate		(213	)		(2,465	)		2,252
Eliminations		—			—			—
Total underwriting income (loss)	$	(10,339	)	$	(24,240	)	$	13,901

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Investment Income

Net investment income increased by $608,000, or 22.3%, to $3.3 million for the year ended December 31, 2018, as compared to 2.7 million for the year ended December 31, 2017.  This increase was mainly due to an increase in interest rates and average invested assets during 2018.  Average invested assets as of December 31, 2018, were $148.9 million as compared to $143.1 million at December 31, 2017, an increase of $5.8 million, or 4.1%.  As of December 31, 2018, the average invested asset balance was comprised of 86.3% debt securities, 6.9% equity securities and 6.8% short-term investments, compared to the December 31, 2017 mix of 87.3% debt securities, 5.0% equity securities and 7.9% short term investments.

The portfolio’s average quality was AA at December 31, 2018 and 2017.  The portfolio produced a tax-equivalent book yield of 2.8% and 2.5% for the years ended December 31, 2018 and 2017, respectively.  The duration-to-worst average of the debt securities portfolio was 3.1 years and 3.2 years at December 31, 2018 and 2017, respectively.

Other Gains (Losses)

There were no other gains in 2018.  In 2017, we recognized a $750,000 gain on the sale of the renewal rights of a portion of the low-value dwelling book of business to another insurer.

Interest Expense

Interest expense was $2.6 million and $1.4 million for the years ended December 31, 2018 and 2017, respectively.  Interest expense increased due to the increase in outstanding debt throughout the year.  We issued $22.0 million of public senior unsecured notes (the "Notes") in the third quarter of 2018.  We issued an additional $3.3 million of the Notes in the fourth quarter of 2018.  Proceeds from the notes were used to pay down $19.5 million of the $30.0 million of subordinated notes that were issued in the third quarter of 2017.  Interest expense includes the amortization of debt issuance costs relating to the new Notes which is $260,000 per annum over the 5-year life of the Notes.  The interest expense relating to the amortization of debt issuance costs for the existing $10.5 million of the subordinated notes is $50,000 per annum over the 20-year life of the subordinated notes.

Income Tax Expense (Benefit)

On December 22, 2017, the U.S. federal government enacted H.R. 1, “An Act to Provide for Reconciliation Pursuant to Titles II and V of the Concurrent Resolution on the Budget for Fiscal Year 2018” (the “Act”).  The Act provided for significant changes to corporate taxation including the decrease of the corporate tax rate from 34% to 21%.  In 2017, the Company completed an analysis of the impact of the Act and followed the additional guidance provided by the Security and Exchange Commission’s Staff Accounting Bulletin No. 118 (“SAB 118”).  There were no material provisional balances as of December 31, 2017.

In 2018, the Company recognized a measurement period adjustment of $42,735 related to loss reserve discounting, which reduced deferred tax expense.  The Company also recognized a measurement period adjustment of $42,735 related to the loss reserve discounting transitional adjustment, which increased deferred tax expense.  The measurement period adjustments were based upon obtaining additional information about facts and circumstances that existed as of the enactment date that, if known, would have affected the income tax effects initially reported as provisional amounts under the Act.  The measurement period adjustments had no effect on the effective tax rate for the year ended December 31, 2018.  The accounting for the income tax effects of the Act pursuant to SAB 118 has been completed as of the end of the December 22, 2018, measurement period and for the year ending December 31, 2018.

For the year ended December 31, 2018, the Company reported $0 of current federal income tax expense and $52,000 of current state income tax expense.  The Company also reported a deferred tax benefit of $0.  For the year ended December 31, 2017, the Company reported $16,000 of current federal income tax benefit and $12,000 of current state income tax benefit.  For the year ended December 31, 2017, the Company also reported a deferred tax benefit of $419,000 which was largely the result of changes in the net deferred tax asset valuation allowance related to changes in unrealized gains.

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There is a $12.6 million valuation allowance against 100% of the net deferred tax assets at December 31, 2018, which would increase book value by $1.49 per share if reversed in the future.  The valuation allowance was $9.9 million for 2017.  As of December 31, 2018, the Company has net operating loss carryforwards for federal income tax purposes of $48.3 million, of which $43.3 million expire in tax years 2019 through 2038 and $5.0 million never expire.  Of this amount, $14.1 million are limited in the amount that can be utilized in any one year and may expire before they are realized under Section 382 of the Internal Revenue Code.  The Company has state net operating loss carryforwards of $11.9 million, which expire in tax years 2021 through 2038.

Liquidity and Capital Resources

Sources and Uses of Funds

At December 31, 2019, we had $38.9 million in cash, cash equivalents, and short-term investments.  Our principal sources of funds are insurance premiums, investment income, proceeds from maturity and sale of invested assets and other income.  These funds are primarily used to pay claims, commissions, employee compensation, taxes and other operating expenses, and service debt.

We believe that our existing cash, cash equivalents, short-term investments and investment securities balances will be adequate to meet our capital and liquidity needs and the needs of our subsidiaries on a short-term and long-term basis.

We conduct our business operations primarily through our Insurance Company Subsidiaries.  Our ability to service debt, and pay administrative expenses is primarily reliant upon our intercompany service fees paid by the Insurance Company Subsidiaries to the holding company for management, administrative, and information technology services provided to the Insurance Company Subsidiaries by the Parent Company.  Secondarily, the Parent Company may receive dividends from the Insurance Company Subsidiaries; however, this is not the primary means in which the holding company supports its funding as state insurance laws restrict the ability of our Insurance Company Subsidiaries to declare dividends to the Parent Company.  Generally, the limitations are based on the greater of statutory net income for the preceding year or 10% of statutory surplus at the end of the preceding year.  No dividends were paid from our Insurance Company Subsidiaries in 2019, 2018 or 2017.

We contributed $3.9 million to our Insurance Company Subsidiaries in 2019.  No contributions to our Insurance Company Subsidiaries were made in 2018.  We contributed $20.9 million to our Insurance Company Subsidiaries in 2017.  We believe that the current statutory surplus levels and the funds available at the holding company level will provide the necessary statutory capital to support our premium volume growth over the next two years.

We are aware that our outstanding debt securities are currently trading at a substantial discount to their face amount.  In order to reduce future cash interest payments, as well as future amounts due at maturity or upon redemption, we may, from time to time, purchase such debt for cash, in exchange for common stock, or for a combination of cash and common stock, in open market or privately negotiated transactions.  We will evaluate any such transactions in light of then-existing market conditions, taking into account our current liquidity and prospects for future access to capital.  The amounts involved in such transactions, individually or in the aggregate, may be material.

Cash Flows

Operating Activities.  Cash provided by operating activities for the year ended December 31, 2019, was $15.4 million as compared to cash used in operating activities of $17.0 million for the year ended December 31, 2018.  The $32.4 million increase in cash from operations was mostly due to a $28.4 million increase in cash received from reinsurers due to ceded losses, including $12.5 million of cash received in 2019 from the ADC.  Also, ceded premiums paid to reinsurers decreased by $2.6 million in 2019 compared to 2018.  

Cash used in operating activities for the year ended December 31, 2018, was $17.0 million as compared to cash provided by operating activities of $9.1 million for the year ended December 31, 2017.  The $26.1 million fluctuation in cash from operations was due to a $10.0 million decrease in cash collected on gross premiums, mostly due to the reduction in wind-exposed homeowners premiums, a $2.8M increase in paid ceded premiums due to the ceded premiums paid on the ADC and

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reinstatement premiums, and a $10.1 million increase in net paid losses due, in part, to losses incurred from the 2017 hurricanes.  

Investing Activities. Cash used in investing activities for the year ended December 31, 2019, was $25.0 million as compared to cash provided by investing activities of $12.2 million for the year ended December 31, 2018.  The increase in funds used in investing activities was due to an increase in funds available to be invested in our investment portfolio in the insurance subsidiaries.  

Cash provided by investing activities for the year ended December 31, 2018, was $12.2 million as compared to $26.0 million used in investing activities for the same period in 2017.  The increase in funds provided by investing activities was due to a decrease in funds available to be invested in our investment portfolios in the insurance subsidiaries as cash collections decreased and paid losses increased from operating activities.

Financing Activities.  Cash provided by financing activities for the years ended December 31, 2019 and 2018, were $6.3 million and $3.7 million, respectively.  The $2.6 million increase in 2019 compared to 2018 was largely due to a $5.0 million issuance of common stock in 2019, and no issuance of common stock in 2018.  

Cash provided by financing activities for the years ended December 31, 2018 and 2017, were $3.7 million and $16.2 million, respectively.  There was a $5.0 million issuance of common stock in 2017 and none in 2018.  Also, there was $6.9 million greater cash flow from debt, net of repayments and debt issuance costs in 2017, than in 2018.

Outstanding Debt

In September and October 2018, we issued $25.3 million of public senior unsecured notes (the “Notes”).  The Notes mature on September 30, 2023, and bear interest, payable quarterly, at the annual rate of 6.75%.  We used a portion of the proceeds from the Notes to pay down $19.5 million of the $30.0 million subordinated notes originally entered into on September 29, 2017 (“Subordinated Notes”).  Effective September 24, 2018, the Subordinated Notes agreement was amended.  Under the new terms, the Subordinated Notes carry a principle value of $10.5 million, mature on September 30, 2038, and bear an annual interest rate of 7.5% until September 30, 2023, and 12.5% thereafter. Interest is payable quarterly. Beginning September 30, 2021, the Company may redeem the Subordinated Notes, in whole or in part, or any quarter thereafter, for a call premium of $1.1 million. The call premium escalates quarterly to $1.75 million on September 30, 2023, then steps up to $3.05 million on December 31, 2023, and increases quarterly at a 12.5% per annum rate thereafter. The debt covenants are consistent with the existing Subordinated Note terms.  A $105,000 loan origination fee was paid on the effective date.

The carrying value of the Notes and Subordinated Notes are offset by $2.3 million of debt issuance costs that will be amortized through interest expense over the life of the loans.  Refer to Note 7 ~ Debt of the Notes to the Consolidated Financial Statements, for additional information regarding our outstanding debt.

On June 21, 2018, the Company entered into a $10.0 million line of credit.  The line of credit bears interest at the London Interbank rate ("LIBOR") plus 2.75% per annum, payable monthly.  The agreement includes several covenants, including but not limited to a minimum tangible net worth, a minimum fixed-charge coverage ratio, and minimum statutory risk-based capital levels.  As of December 31, 2019, the Company had $2.0 million outstanding on the line of credit, and was in compliance with all of its debt financial covenants.

55

Contractual Obligations and Commitments

The following table is a summary of our contractual obligations and commitments as of December 31, 2019 (dollars in thousands):

	Payments due by period
	Total		Less than one year		One to three years		Three to five years		More than five years
Senior unsecured notes	$	25,300	$	—	$	—	$	25,300	$	—
Interest on senior unsecured notes		6,404		1,708		3,415		1,281		—
Subordinated notes		10,500		—		—		—		10,500
Interest on subordinated notes		22,969		788		1,575		2,231		18,375
Lease obligations		3,498		864		1,598		1,036		—
Line of credit		2,000		2,000
Loss and loss adjustment expense (1)		107,246		40,495		47,132		14,791		4,828
Purchase Obligations (2)		990		360		630		—		—
Total	$	178,907	$	46,215	$	54,350	$	44,639	$	33,703

(1) The estimated unpaid loss and loss adjustment expense payments were made using estimates based on historical payment patterns.  However, future payments may be different than historical payment patterns.

(2) Includes estimated future payments under the software license agreement relating to our policy issuance system.  This agreement requires minimum monthly payments of $30,000, and is variable with premium volume.  The future payment assumptions are based on the minimum monthly payments.  The software license agreement expires on September 30, 2022.

Regulatory and Rating Issues

The NAIC has a RBC formula to be applied to all property and casualty insurance companies.  The formula measures required capital and surplus based on an insurance company’s products and investment portfolio and is used as a tool to evaluate the capital adequacy of regulated companies.  The RBC formula is used by state insurance regulators to monitor trends in statutory capital and surplus for the purpose of initiating regulatory action. In general, an insurance company must submit a calculation of its RBC formula to the insurance department of its state of domicile as of the end of the previous calendar year.  These laws require increasing degrees of regulatory oversight and intervention as an insurance company’s RBC declines.

At December 31, 2019, all of our Insurance Company Subsidiaries were in excess of any minimum threshold at which corrective action would be required.

Insurance operations are subject to various leverage tests (e.g., premium-to-statutory surplus ratios), which are evaluated by regulators and rating agencies.  As of December 31, 2019, on a trailing twelve-month statutory combined basis, the gross written and net written premium leverage ratios were 1.7 to 1.0 and 1.5 to 1.0, respectively.

The NAIC’s Insurance Regulatory Information System (“IRIS”) was developed to assist state insurance departments in executing their statutory mandates to oversee the financial condition of insurance companies operating in their respective states.  IRIS identifies thirteen industry ratios and specifies “usual values” for each ratio.  State insurance regulators review the IRIS ratio results to determine if an insurer is in need of further regulatory scrutiny or action.  While the ratios, individually and collectively, are useful tools for identifying companies that may be experiencing financial difficulty, they are only a guide for regulators and should not be considered an absolute indicator of a Company's financial condition.  While inquiries from regulators are not uncommon, our Insurance Company Subsidiaries have not experienced any regulatory actions due to their IRIS ratio results or otherwise.

56

Recently Issued Accounting Pronouncements

Refer to Note 1 ~ Summary of Significant Accounting Policies: Recently Issued Accounting Guidance of the Notes to the Consolidated Financial Statements for detailed information.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk is the risk of loss arising from adverse changes in market rates and prices such as interest rates, other relevant market rates or price changes.  The volatility and liquidity in the markets in which the underlying assets are traded directly influence market risk.  The following is a discussion of our primary risk exposures and how those exposures are currently managed as of December 31, 2019.  Our market risk sensitive instruments are primarily related to fixed income securities, which are available-for-sale and not held for trading purposes.

Interest Rate Risk

At December 31, 2019 and 2018, the fair value of our investment portfolio, excluding cash and cash equivalents, was $169.7 million and $140.1 million, respectively.  Our investment portfolio consists principally of investment-grade, fixed-income securities, classified as debt securities.  Accordingly, the primary market risk exposure to our debt portfolio is interest rate risk.  In general, the fair market value of a portfolio of fixed-income securities increases or decreases inversely with changes in market interest rates, while net investment income realized from future investments in fixed-income securities increases or decreases along with interest rates.  We attempt to mitigate interest rate risks by investing in securities with varied maturity dates and by managing the duration of our investment portfolio to a defined range of three to four years.  The duration-to-worst average of the debt securities portfolio was 3.0 and 3.1 years as of December 31, 2019 and 2018, respectively.

The table below summarizes our interest rate risk.  The table also illustrates the sensitivity of the fair value of our investments, classified as debt securities and short-term investments, to selected hypothetical changes in interest rates as of December 31, 2019.  The selected scenarios are not predictions of future events, but rather illustrate the effect that events may have on the fair value of the fixed-income portfolio and shareholders’ equity (dollars in thousands).

						Hypothetical Percentage Increase (Decrease) in
Hypothetical Change in Interest Rates As of December 31, 2019	Estimated Fair Value		Estimated Change in Fair Value			Fair Value			Shareholders' Equity
200 basis point increase	$	152,599	$	(9,827	)		(6.05	)%		(23.0	)%
100 basis point increase		157,569		(4,857	)		(2.99	)%		(11.4	)%
No change		162,426		—			—			—	%
100 basis point decrease		166,698		4,272			2.63	%		10.0	%
200 basis point decrease		170,028		7,602			4.68	%		17.8	%

Credit Risk

An additional exposure to our debt securities portfolio is credit risk.  We manage our credit risk by investing only in investment-grade securities.  In addition, we comply with applicable statutory requirements which limit the portion of our total investment portfolio that we can invest in any one security.

We are subject to credit risks with respect to our reinsurers.  Although a reinsurer is liable for losses to the extent of the coverage which it assumes, our reinsurance contracts do not discharge our insurance companies from primary liability to each policyholder for the full amount of the applicable policy, and consequently our insurance companies remain obligated to pay claims in accordance with the terms of the policies regardless of whether a reinsurer fulfills or defaults on its obligations under the related reinsurance agreement.  To mitigate our credit risk to reinsurance companies, we attempt to select financially strong reinsurers with an A.M.  Best rating of "A-" or better and continue to evaluate their financial condition throughout the duration of our agreements.

At December 31, 2019 and 2018, the net amount due to the Company from reinsurers, including prepaid reinsurance, was $29.0 million and $36.6 million, respectively.  We believe all amounts recorded as due from reinsurers are recoverable.

57

Effects of Inflation

We do not believe that inflation has a material effect on our results of operations, except for the effect that inflation may have on interest rates and claims costs.  We consider the effects of inflation in pricing and estimating reserves for unpaid losses and LAE.  The actual effects of inflation on our results are not known until claims are ultimately settled.  In addition to general price inflation, we are exposed to a long-term upward trend in the cost of judicial awards for damages.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Refer to list of Financial Statement Schedules (including the Report of Independent Registered Public Accounting Firm referenced therein) set forth in Item 15 of this Annual Report on Form 10-K and Note 18 ~ Quarterly Financial Data (Unaudited) of the Notes to the Consolidated Financial Statements.

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A.  CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

The Company’s management, including its Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures, as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act") as of December 31, 2019.  Based on such evaluations, the Chief Executive Officer and Chief Financial Officer have concluded the Company’s disclosure controls and procedures are effective in recording, processing, summarizing, and reporting, on a timely basis, information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act, and that information is accumulated and communicated to the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Management’s Annual Report on Internal Control over Financial Reporting

The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f).  The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s internal control over financial reporting based on the framework in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.  Based on this evaluation, the Company’s management has concluded that, as of December 31, 2019, the Company’s internal control over financial reporting was effective.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  Also, projections of any evaluation of effectiveness to future periods are subject to risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

There was no change in internal controls over financial reporting during the quarter ended December 31, 2019 that has materially affected, or is reasonably likely to materially effect, our internal controls over financial reporting.

Attestation Report of the Registered Public Accounting Firm

This Annual Report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting as required by Section 404(c) of the Sarbanes Oxley Act of 2002.  Because we qualify as an emerging growth company under the JOBS Act, management's report was not subject to attestation by our independent registered public accounting firm.

ITEM 9B.  OTHER INFORMATION

None.

58

PART III

Certain information required by Part III is omitted from this Report in that the Registrant will file a definitive Proxy Statement pursuant to Regulation 14A (the “Proxy Statement”) not later than 120 days after the end of the fiscal year covered by this report and certain information included therein is incorporated herein by reference.  Only those sections of the Proxy Statement that specifically address the items set forth herein are incorporated by reference.

ITEMS 10 to 14

Items 10 through 14 (inclusive) of this Part III are not included herein because the Company will file a definitive Proxy Statement with the SEC that will include the information required by such Items, and such information is incorporated herein by reference.  The Company’s Proxy Statement will be filed with the SEC and delivered to stockholders in connection with the Annual Meeting of Shareholders to be held on May 20, 2020 and the information under the following captions is included in such incorporation by reference: “Information about the Nominees, the Incumbent Directors and Other Executive Officers,” “Corporate Governance,” “Code of Conduct,” “Report of the Audit Committee,” “Section 16(a) Beneficial Ownership Reporting Compliance,”“Compensation of Executive Officers,” “Director Compensation,” “Report of the Compensation Committee of the Board on Executive Compensation,”“Compensation Committee Interlocks and Insider Participation”,“Security Ownership of Certain Beneficial Owners and Management”, “Certain Relationships and Related Party Transactions,” “Independence Determination,” and “The Second Proposal on Which You are Voting on Ratification of Appointment of Independent Registered Public Accounting Firm." Our Code of Business Conduct and Ethics can be found on our website www.cnfrh.com.

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CONIFER HOLDINGS, INC. AND SUBSIDIARIES

PART IV

ITEM 15.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES

The following documents are filed as part of this Report:

		Page No.
1.	List of Financial Statements
	Report of Independent Registered Public Accounting Firm on Financial Statements	61
	Consolidated Balance Sheets – December 31, 2019 and 2018	62
	Consolidated Statements of Operations – For Years Ended December 31, 2019, 2018 and 2017	63
	Consolidated Statements of Comprehensive Income (Loss) – For Years Ended December 31, 2019, 2018 and 2017	64
	Consolidated Statement of Changes in Shareholders’ Equity – For Years Ended December 31, 2019, 2018 and 2017	65
	Consolidated Statements of Cash Flows – For Years Ended December 31, 2019, 2018 and 2017	66
	Notes to Consolidated Financial Statements	67
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 2 ~ Investments
	Schedule II – Condensed Financial Information of Registrant	98
	Schedule III – Supplementary Insurance Information – Omitted as information is included in the consolidated financial statements or notes thereto - See Note 17 ~ Segment Information
	Schedule IV – Reinsurance –  Omitted as information is included in the consolidated financial statements or notes thereto See Note 6 ~ Reinsurance
	Schedule V – Valuation and Qualifying Accounts	102
	Schedule VI – Supplemental Information Concerning Property and Casualty Insurance Operations –  Omitted as information is included in the consolidated financial statements or notes thereto
3.	Exhibits – The Exhibits listed on the accompanying Exhibit Index immediately following the Financial Statement Schedules are filed as part of, or incorporated by reference into, this Form 10-K	103

60

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and the Board of Directors of Conifer Holdings, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Conifer Holdings, Inc. and subsidiaries (the "Company") as of December 31, 2019 and 2018, the related consolidated statements of operations, comprehensive income (loss), changes in shareholders' equity, and cash flows, for each of the three years in the period ended December 31, 2019, and the related notes and the schedules listed in the Index at Item 15 (collectively referred to as the "financial statements").  In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2019, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company's management.  Our responsibility is to express an opinion on the Company's financial statements based on our audits.  We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.  The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.  As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.  Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.  Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.  We believe that our audits provide a reasonable basis for our opinion.

/s/ Deloitte & Touche LLP

Detroit, Michigan

March 12, 2020

We have served as the Company's auditor since 2010.

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CONIFER HOLDINGS, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

(dollars in thousands)

	December 31,
	2019			2018
Assets
Investment securities:
Debt securities, at fair value (amortized cost of $129,313 and $122,678,    respectively)	$	131,000		$	120,440
Equity securities, at fair value (cost of $6,554 and $9,559, respectively)		7,306			10,737
Short-term investments, at fair value		31,426			8,925
Total investments		169,732			140,102
Cash and cash equivalents		7,464			10,792
Premiums and agents' balances receivable, net		20,168			21,247
Receivable from Affiliate		313			3,582
Reinsurance recoverables on unpaid losses		22,579			29,685
Reinsurance recoverables on paid losses		5,155			5,060
Prepaid reinsurance premiums		1,250			1,829
Deferred policy acquisition costs		11,906			12,011
Other assets		8,698			8,444
Total assets	$	247,265		$	232,752
Liabilities and Shareholders' Equity
Liabilities:
Unpaid losses and loss adjustment expenses	$	107,246		$	92,807
Unearned premiums		51,503			52,852
Debt		35,824			33,502
Deferred gain on ADC		—			5,677
Accounts payable and accrued expenses		9,967			5,751
Total liabilities		204,540			190,589
Commitments and contingencies		—			—
Shareholders' equity:
Common stock, no par value (100,000,000 shares authorized; 9,592,861 and 8,478,202 issued and outstanding, respectively)		91,816			86,533
Accumulated deficit		(49,580	)		(41,758	)
Accumulated other comprehensive income (loss)		489			(2,612	)
Total shareholders' equity		42,725			42,163
Total liabilities and shareholders' equity	$	247,265		$	232,752

The accompanying notes are an integral part of the Consolidated Financial Statements.

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CONIFER HOLDINGS, INC. AND SUBSIDIARIES

Consolidated Statements of Operations

(dollars in thousands, except per share data)

	Year Ended December 31,
	2019			2018			2017
Revenue
Gross earned premiums	$	103,203		$	109,188		$	114,737
Ceded earned premiums		(14,114	)		(15,377	)		(23,008	)
Net earned premiums		89,089			93,811			91,729
Net investment income		4,031			3,336			2,728
Net realized investment gains		1,196			61			70
Change in fair value of equity securities		(427	)		121			—
Other gains (losses)		—			—			750
Other income		2,109			1,582			1,560
Total revenue		95,998			98,911			96,837
Expenses
Losses and loss adjustment expenses, net		59,744			62,515			73,917
Policy acquisition costs		24,911			25,534			26,245
Operating expenses		17,582			17,683			17,367
Interest expense		2,882			2,644			1,362
Total expenses		105,119			108,376			118,891
Income (loss) before income taxes		(9,121	)		(9,465	)		(22,054	)
Equity earnings in Affiliate, net of tax		386			290			65
Income tax expense (benefit)		(913	)		52			(447	)
Net income (loss)	$	(7,822	)	$	(9,227	)	$	(21,542	)
Net income (loss) per share, basic and diluted	$	(0.88	)	$	(1.08	)	$	(2.74	)
Weighted average common shares outstanding, basic and   diluted		8,880,107			8,543,876			7,867,344

The accompanying notes are an integral part of the Consolidated Financial Statements.

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CONIFER HOLDINGS, INC. AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income (Loss)

(dollars in thousands)

	Year Ended December 31,
	2019			2018			2017
Net income (loss)	$	(7,822	)	$	(9,227	)	$	(21,542	)
Other comprehensive income (loss), net of tax:
Unrealized investment gains (losses):
Unrealized investment gains (losses) during the period		3,725			(1,825	)		1,151
Income tax expense (benefit)		824			—			356
Unrealized investment gains (losses), net of tax		2,901			(1,825	)		795
Less: reclassification adjustments to:
Net realized investment gains (losses) included in net    income (loss)		(200	)		(55	)		78
Income tax expense (benefit)		—			—			—
Total reclassifications included in net income (loss),    net of tax		(200	)		(55	)		78
Other comprehensive income (loss)		3,101			(1,770	)		717
Total comprehensive income (loss)	$	(4,721	)	$	(10,997	)	$	(20,825	)

The accompanying notes are an integral part of the Consolidated Financial Statements.

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CONIFER HOLDINGS, INC. AND SUBSIDIARIES

Consolidated Statement of Changes in Shareholders' Equity

(dollars in thousands)

	No Par, Common Stock						Retained Earnings			Accumulated Other			Total
	Shares			Amount			(Accumulated deficit)			Comprehensive Income (Loss)			Shareholders' Equity
Balances at December 31, 2016		7,633,070		$	80,342		$	(11,468	)	$	(1,080	)	$	67,794
Net loss		—			—			(21,542	)		—			(21,542	)
Issuance of common stock in private placement		800,000			5,000			—			—			5,000
Common stock issuance costs					(38	)		—			—			(38	)
Restricted stock units expense, net		87,258			895			—			—			895
Other comprehensive income		—			—			—			717			717
Balances at December 31, 2017		8,520,328		$	86,199		$	(33,010	)	$	(363	)	$	52,826
Cumulative effect of adoption of ASU No. 2016-01,    net of taxes		—			—			556			(556	)		—
Cumulative effect of adoption of ASU No. 2018-02,    net of taxes		—			—			(77	)		77			—
Balances after cumulative effects		8,520,328		$	86,199		$	(32,531	)	$	(842	)	$	52,826
Net loss		—			—			(9,227	)		—			(9,227	)
Repurchase of common stock		(137,228	)		(636	)		—			—			(636	)
Restricted stock units expense		95,102			970			—			—			970
Other comprehensive loss		—			—			—			(1,770	)		(1,770	)
Balances at December 31, 2018		8,478,202		$	86,533		$	(41,758	)	$	(2,612	)	$	42,163
Net loss		—			—			(7,822	)		—			(7,822	)
Repurchase of common stock		(163,527	)		(676	)		—			—			(676	)
Issuance of common stock in private placement		1,176,471			5,000			—			—			5,000
Restricted stock units expense		101,715			959			—			—			959
Other comprehensive income		—			—			—			3,101			3,101
Balances at December 31, 2019		9,592,861		$	91,816		$	(49,580	)	$	489		$	42,725

The accompanying notes are an integral part of the Consolidated Financial Statements.

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CONIFER HOLDINGS, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(dollars in thousands)

	Year Ended December 31,
	2019			2018			2017
Cash Flows from Operating Activities
Net income (loss)	$	(7,822	)	$	(9,227	)	$	(21,542	)
Adjustments to reconcile net income (loss) to net cash    provided by (used in) operating activities:
Depreciation and amortization		453			386			372
Amortization of bond premium and discount, net		568			455			532
Net realized investment gains		(1,196	)		(61	)		(70	)
Change in fair value of equity securities		427			(121	)		—
Restricted stock unit expenses		959			970			895
Other		(1,210	)		(290	)		(484	)
Changes in operating assets and liabilities:
(Increase) decrease in:
Premiums, agents' balances and other receivables		4,348			(789	)		2,249
Reinsurance recoverables		7,011			(10,206	)		(17,041	)
Prepaid reinsurance premiums		579			(748	)		3,039
Deferred policy acquisition costs		105			770			509
Other assets		(489	)		(1,252	)		4,239
Increase (decrease) in:
Unpaid losses and loss adjustment expenses		14,439			4,911			33,245
Unearned premiums		(1,349	)		(4,820	)		(454	)
Reinsurance premiums payable		—			(3,299	)		3,299
Accounts payable and other liabilities		(1,462	)		6,313			302
Net cash provided by (used in) operating activities		15,361			(17,008	)		9,090
Cash Flows From Investing Activities
Purchases of investments		(157,235	)		(91,293	)		(218,492	)
Proceeds from maturities and redemptions of investments		22,401			22,827			25,213
Proceeds from sales of investments		109,882			80,774			167,338
Purchases of property and equipment		(61	)		(86	)		(13	)
Net cash provided by (used in) investing activities		(25,013	)		12,222			(25,954	)
Cash Flows From Financing Activities
Proceeds received from issuance of shares of common stock		5,000			—			5,000
Repurchase of common stock		(676	)		(636	)		—
Borrowings under debt arrangements		2,100			25,300			32,000
Repayment of borrowings under debt arrangements		(100	)		(19,500	)		(19,750	)
Stock and debt issuance costs		—			(1,454	)		(1,011	)
Net cash provided by financing activities		6,324			3,710			16,239
Net increase (decrease) in cash		(3,328	)		(1,076	)		(625	)
Cash at beginning of period		10,792			11,868			12,493
Cash at end of period	$	7,464		$	10,792		$	11,868
Supplemental Disclosure of Cash Flow Information:
Interest paid	$	2,547		$	3,116		$	876
Net income taxes paid (refunded)		35			(83	)		—
Increase (decrease) in net payable for securities		1,579			(3,642	)		2,691

The accompanying notes are an integral part of the Consolidated Financial Statements.

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CONIFER HOLDINGS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

1. Summary Of Significant Accounting Policies

Basis of Presentation and Management Representation

The consolidated financial statements include accounts, after elimination of intercompany accounts and transactions, of Conifer Holdings, Inc. (the “Company” or “Conifer”), its wholly owned subsidiaries Conifer Insurance Company ("CIC"), Red Cedar Insurance Company ("RCIC"), White Pine Insurance Company ("WPIC"), and Sycamore Insurance Agency, Inc. ("SIA").  CIC, WPIC, and RCIC are collectively referred to as the "Insurance Company Subsidiaries."  On a stand-alone basis Conifer Holdings, Inc is referred to as the "Parent Company."  

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”), which differ from statutory accounting practices prescribed or permitted for insurance companies by regulatory authorities.

Business

The Company is engaged in the sale of property and casualty insurance products and has organized its principal operations into three types of insurance businesses: commercial lines, personal lines, and agency business.  The Company underwrites a variety of specialty insurance products, including property, general liability, liquor liability, automobile, and homeowners and dwelling policies.  The Company markets and sells its insurance products through a network of independent agents, including managing general agents, whereby policies are written in all 50 states in the United States (“U.S.”).  The Company’s corporate headquarters are located in Birmingham, Michigan with additional office facilities in Florida and Pennsylvania.

Public Debt Offering

In September and October of 2018, the Company completed a public debt offering of $25.3 million of senior unsecured notes.  Refer to Note 7 ~ Debt for further details.

Summary of Significant Accounting Policies

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  While management believes the amounts included in the consolidated financial statements reflect management's best estimates and assumptions, actual results may differ from these estimates.

Cash, Cash Equivalents, and Short-term Investments

Cash consists of cash deposits in banks, generally in operating accounts.  Cash equivalents consist of money-market funds that are specifically used as overnight investments tied to cash deposit accounts.  Short-term investments, consisting of money-market funds, are classified as investments in the consolidated balance sheets as they relate to the Company’s investment activities.

LeaseAccounting

Effective January 1, 2019, the Company adopted FASB Accounting Standards Update ("ASU") No. 2016-02, Leases (Topic 842), which addresses the financial reporting of leasing transactions. This update required the recognition of a right-of-use asset and a corresponding lease liability, discounted to the present value, for all leases that extend beyond 12 months. For operating leases, the asset and liability will be amortized over the lease term on a straight-line basis, with all cash flows included in the operating section of the consolidated statement of cash flows. We do not have any financing leases. The Company elected to use the transition option of practical expedients permitted within the new standard, which allows for the

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adoption of the new standard at the effective date without adjusting the comparative prior periods presented. Our operating leases consist primarily of real estate utilized in the operation of our businesses with lease terms ranging from 5 to 10 years. Management has determined the appropriate discount rate to use in calculating the right-to-use asset and lease liability is 6.75%. The Company recorded a right-of-use asset of $3.9 million and lease liabilities of $3.9 million included in Other Assets and Other Liabilities in the Consolidated Balance Sheets on January 1, 2019.

Investment Securities

Debt securities are classified as available-for-sale and reported at fair value.  The Company determines the fair value using the market approach, which uses quoted prices or other relevant data based on market transactions involving identical or comparable assets.  The Company purchases the available-for-sale debt securities with the expectation that they will be held to maturity, however the Company may sell them if market conditions or credit‑related risk warrant earlier sales.  The Company does not have any securities classified as held-to-maturity or trading.

The change in unrealized gain and loss on debt securities is recorded as a component of accumulated other comprehensive income (loss), net of the related deferred tax effect, until realized.

The debt securities portfolio includes structured securities.  The Company recognizes income from these securities using a constant effective yield based on anticipated prepayments and the estimated economic life of the securities.  When actual prepayments differ significantly from anticipated prepayments, the estimated economic life is recalculated and the remaining unamortized premium or discount is amortized prospectively over the remaining economic life.  Premiums and discounts on structured securities are amortized or accreted over the life of the related available‑for‑sale security as an adjustment to yield using the effective interest method.  Such amortization and accretion is included in interest income in the consolidated statements of operations.  Dividend and interest income are recognized when earned.

Realized gains and losses from the sale of available-for-sale securities are determined on a specific-identification basis and included in earnings on the trade date.

Equity securities that do not result in consolidation and are not accounted for under the equity method are measured at fair value and any changes in fair value are recognized in net income in the Consolidated Statements of Operations.

Mutual fund and similar investments are measured at their net asset value, which approximates fair value. Any changes in the net asset value are recognized in net income in the Consolidated Statements of Operations.  This policy was effective in 2018 and 2017 amounts were not recasted.  

The Company carries other equity investments that do not have a readily determinable fair value at cost, less impairment and adjusted for observable price changes under the measurement alternative provided under GAAP.  We review these investments for impairment during each reporting period.  These investments are a component of Other Assets in the Consolidated Balance Sheets.

Other-than-Temporary Impairments

The Company reviews its impaired securities for possible other-than-temporary impairment ("OTTI") at each quarter-end.  A security has an impairment loss when its fair value is less than its cost or amortized cost at the balance sheet date.  The Company considers the following factors in performing its review: (i) the amount by which the security’s fair value is less than its cost, (ii) length of time the security has been impaired, (iii) whether management has the intent to sell the security, (iv) if it is more likely than not that management will be required to sell the security before recovery of its amortized cost basis, (v) whether the impairment is due to an issuer‑specific event, credit issues or change in market interest rates, (vi) the security’s credit rating and any recent downgrades or (vii) stress testing of expected cash flows under different scenarios.  If the Company cannot assert these conditions, an OTTI loss is recorded through the Consolidated Statements of Operations in the current period.

For all other impaired securities, the Company will assess whether the net present value of the cash flows expected to be collected from the security is less than its amortized cost basis.  Such a shortfall in cash flows is referred to as a “credit loss.”  For any such security, the Company separates the impairment loss into: (i) the credit loss and (ii) the non-credit loss, which is

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the amount related to all other factors such as interest rate changes, fluctuations in exchange rates and market conditions.  The credit loss charge is recorded to the current period statements of operations and the non-credit loss is recorded to accumulated other comprehensive income (loss), within shareholders’ equity, on an after-tax basis.  A security’s cost basis is permanently reduced by the amount of a credit loss.  Income is accreted over the remaining life of a security based on the interest rate necessary to discount the expected future cash flows to the new basis.  If the security is non-income producing, any cash proceeds are applied as a reduction of principal when received.

Recognition of Premium Revenues

All of the property and casualty policies written by our insurance companies are considered short-duration contracts.  These policy premiums are earned on a daily pro-rata basis, net of reinsurance, over the term of the policy, which are six or twelve months in duration.  The portion of premiums written that relate to the unexpired terms of policies in force are deferred and reported as unearned premium at the balance sheet date.

Reinsurance

Reinsurance premiums, commissions, losses and loss adjustment expenses ("LAE") on reinsured business are accounted for on a basis consistent with that used in accounting for the original policies issued and the terms of the reinsurance contracts.  The amounts reported as reinsurance recoverables include amounts billed to reinsurers on losses and LAE paid as well as estimates of amounts expected to be recovered from reinsurers on insurance liabilities that have not yet been paid. Reinsurance recoverables on unpaid losses and LAE are estimated based upon assumptions consistent with those used in establishing the gross liabilities as they are applied to the underlying reinsured contracts.  The Company records an allowance for uncollectible reinsurance recoverables based on an assessment of the reinsurer’s creditworthiness and collectability of the recorded amounts.  Management believes an allowance for uncollectible recoverable from its reinsurers was not necessary for the periods presented.

The Company receives ceding commissions in connection with certain ceded reinsurance.  The ceding commissions are recorded as a reduction of operating expenses.

In 2017, the Company entered into an adverse development cover reinsurance agreement (the "ADC").  The ADC is a retroactive reinsurance contract.  If the cumulative losses and loss adjustment expenses ceded under the ADC exceed the consideration paid, the resulting gain from such excess is deferred and amortized into earnings in future periods using the interest method.  In any period in which there is a gain position and a revised estimate of claim and allocated claim adjustment expenses, a portion of the deferred gain is cumulatively recognized in earnings as if the revised estimate was available at the inception date of the ADC.  As of December 31, 2019, the deferred gain on the ADC was fully recognized.

Deferred Policy Acquisition Costs

Costs incurred which are incremental and directly related to the successful acquisition of new or renewal insurance business is deferred.  These deferred costs consist of commissions paid to agents, premium taxes, and underwriting costs, including compensation and payroll related benefits. Proceeds from reinsurance transactions that represent recovery of acquisition costs reduce applicable unamortized acquisition costs in such a manner that net acquisition costs are capitalized and charged to expense.  Amortization of such policy acquisition costs is charged to expense in proportion to premium earned over the estimated policy term.

To the extent that unearned premiums on existing policies are not adequate to cover the sum of expected losses and LAE, unamortized acquisition costs and policy maintenance costs, unamortized deferred policy acquisition costs are charged to expense to the extent required to eliminate the premium deficiency.  If the premium deficiency is greater than the unamortized policy acquisition costs, a liability is recorded for any such deficiency.  The Company considers anticipated investment income in determining whether a premium deficiency exists.  Management performs this evaluation at each insurance product line level.

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Unpaid Losses and Loss Adjustment Expenses

The liability for unpaid losses and LAE in the Consolidated Balance Sheets represents the Company’s estimate of the amount it expects to pay for the ultimate cost of all losses and LAE incurred that remain unpaid at the balance sheet date.  The liability is recorded on an undiscounted basis, except for the liability for unpaid losses and LAE assumed related to acquired companies which are initially recorded at fair value.  The process of estimating the liability for unpaid losses and LAE is a complex process that requires a high degree of judgment.

The liability for unpaid losses and LAE represent the accumulation of individual case estimates for reported losses and LAE, and actuarially determined estimates for incurred but not reported losses and LAE.  The liability for unpaid losses and LAE is intended to include the ultimate net cost of all losses and LAE incurred but unpaid as of the balance sheet date.  The liability is stated net of anticipated deductibles, salvage and subrogation, and gross of reinsurance ceded.  The estimate of the unpaid losses and LAE liability is continually reviewed and updated.  Although management believes the liability for losses and LAE is reasonable, the ultimate liability may be more or less than the current estimate.

The estimation of ultimate liability for unpaid losses and LAE is a complex, imprecise and inherently uncertain process, and therefore involves a considerable degree of judgment and expertise.  The Company utilizes various actuarially‑accepted reserving methodologies in deriving the continuum of expected outcomes and ultimately determining its estimated liability amount.  These methodologies utilize various inputs, including but not limited to 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 (including company-specific and industry data).  The liability for unpaid loss and LAE does not represent an exact measurement of liability, but is an estimate that is not directly or precisely quantifiable, particularly on a prospective basis, and is subject to a significant degree of variability over time.  In addition, the establishment of the liability for unpaid losses and LAE makes no provision for the broadening of coverage by legislative action or judicial interpretation or for the extraordinary future emergence of new types of losses not sufficiently represented in the Company’s historical experience or which cannot yet be quantified.  As a result, an integral component of estimating the liability for unpaid losses and LAE is the use of informed subjective estimates and judgments about the ultimate exposure to unpaid losses and LAE.  The effects of changes in the estimated liability are included in the results of operations in the period in which the estimates are revised.

The Company allocates the applicable portion of the unpaid losses and LAE to amounts recoverable from reinsurers under reinsurance contracts and reports those amounts separately as assets on the consolidated balance sheets.

Income Taxes

Income taxes are accounted for under the asset and liability method.  Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax-credit carryforwards.  Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.  The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

Deferred tax assets are recognized to the extent that there is sufficient positive evidence, as allowed under the Accounting Standard Codification ("ASC") 740, Income Taxes, to support the recoverability of those deferred tax assets.  The Company establishes a valuation allowance to the extent that there is insufficient evidence to support the recoverability of the deferred tax asset under ASC 740.  In making such a determination, management considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax‑planning strategies, and results of recent operations.  If it is determined that the deferred tax assets would be realizable in the future in excess of their net recorded amount, an adjustment would be made to the deferred tax asset valuation allowance, which would reduce the provision for income taxes.

As of December 31, 2019 and 2018, the Company did not have any unrecognized tax benefits and had no accrued interest or penalties related to uncertain tax positions.

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Other Income

Other income consists primarily of fees charged to policyholders by the Company for services outside of the premium charge, such as installment billings or policy issuance costs.  Commission income is also received by the Company’s insurance agencies for writing policies for third party insurance companies.  The Company recognizes commission income on the later of the effective date of the policy, the date when the premium can be reasonably established, or the date when substantially all services related to the insurance placement have been rendered.

Operating Expenses

Operating expenses consist primarily of other underwriting, compensation and benefits, information technology, facility and other administrative expenses.

Recently Issued Accounting Guidance

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326), which amends the current methodology and timing for recognizing credit losses.  This amendment will replace the current GAAP "incurred loss" methodology for credit losses with a methodology based on expected credit losses.  The new guidance will also require expanded consideration of a broader range of reasonable and increased supportable information for the credit loss estimates.  This ASU is effective for annual and interim reporting periods beginning after December 15, 2022.  Management is currently evaluating the impact of the guidance.

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820), which modifies the disclosure requirements for assets and liabilities measured at fair value.  The requirements to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, the policy for timing of transfers between levels and the valuation processes for Level 3 fair value measurements have all been removed.  However, the changes in unrealized gains and losses included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period must be disclosed along with the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements (or other quantitative information if it is more reasonable).  Finally, for investments measured at net asset value, the requirements have been modified so that the timing of liquidation and the date when restrictions from redemption might lapse are only disclosed if the investee has communicated the timing to the entity or announced the timing publicly.  This ASU is effective for annual and interim reporting periods beginning after December 15, 2019.  Early adoption is permitted upon the issuance of this update.  Management does not expect the new guidance to have a material impact on the Company’s consolidated financial statements.

2. Investments

The cost or amortized cost, gross unrealized gain or loss, and estimated fair value of the investments in securities classified as available-for-sale at December 31, 2019 and 2018 were as follows (dollars in thousands):

	December 31, 2019
	Cost or		Gross Unrealized
	Amortized Cost		Gains		Losses			Estimated Fair Value
Debt securities:
U.S. Government	$	9,392	$	66	$	(6	)	$	9,452
State and local government		14,388		545		—			14,933
Corporate debt		39,550		865		(21	)		40,394
Asset-backed securities		19,549		81		(55	)		19,575
Mortgage-backed securities		31,389		238		(112	)		31,515
Commercial mortgage-backed securities		9,972		116		(45	)		10,043
Collateralized mortgage obligations		5,073		29		(14	)		5,088
Total debt securities available for sale	$	129,313	$	1,940	$	(253	)	$	131,000

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	December 31, 2018
	Cost or		Gross Unrealized
	Amortized Cost		Gains		Losses			Estimated Fair Value
Debt securities:
U.S. Government	$	15,360	$	3	$	(178	)	$	15,185
State and local government		15,847		115		(174	)		15,788
Corporate debt		30,423		74		(651	)		29,846
Asset-backed securities		24,468		24		(208	)		24,284
Mortgage-backed securities		30,377		18		(1,155	)		29,240
Commercial mortgage-backed securities		4,025		5		(77	)		3,953
Collateralized mortgage obligations		2,178		9		(43	)		2,144
Total debt securities available for sale	$	122,678	$	248	$	(2,486	)	$	120,440

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The following table summarizes the aggregate fair value and gross unrealized losses, by security type, of the available-for-sale securities in unrealized loss positions. The table segregates the holdings based on the length of time that individual securities have been in a continuous unrealized loss position (dollars in thousands):

	December 31, 2019
	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		-	$	-	$	-			4	$	1,047	$	(6	)		4	$	1,047	$	(6	)
State and local government		-		-		-			-		-		-			-		-		-
Corporate debt		7		3,720		(17	)		3		1,697		(4	)		10		5,417		(21	)
Asset-backed securities		3		2,596		(1	)		18		11,836		(54	)		21		14,432		(55	)
Mortgage-backed securities		3		715		(1	)		13		7,812		(111	)		16		8,527		(112	)
Commercial mortgage   -backed securities		6		6,837		(45	)		-		-		-			6		6,837		(45	)
Collateralized mortgage   obligations		8		2,081		(14	)		-		-		-			8		2,081		(14	)
Total debt securities   available for sale		27		15,949		(78	)		38		22,392		(175	)		65		38,341		(253	)

	December 31, 2018
	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		1	$	2,470	$	(24	)		16	$	11,725	$	(154	)		17	$	14,195	$	(178	)
State and local government		21		4,935		(40	)		16		4,273		(134	)		37		9,208		(174	)
Corporate debt		36		12,096		(140	)		25		11,993		(511	)		61		24,089		(651	)
Asset-backed securities		25		17,743		(148	)		9		4,166		(60	)		34		21,909		(208	)
Mortgage-backed securities		20		5,474		(138	)		30		21,715		(1,017	)		50		27,189		(1,155	)
Commercial mortgage   -backed securities		4		1,082		(12	)		3		2,632		(65	)		7		3,714		(77	)
Collateralized mortgage   obligations		4		116		(1	)		6		1,587		(42	)		10		1,703		(43	)
Total debt securities   available for sale		111		43,916		(503	)		105		58,091		(1,983	)		216		102,007		(2,486	)

The Company analyzed its investment portfolio in accordance with its OTTI review procedures and determined the Company did not need to record a credit-related OTTI loss, nor recognize a non credit-related OTTI loss in other comprehensive income for the years ended December 31, 2019, 2018, and 2017.

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The Company’s sources of net investment income are as follows (dollars in thousands):

	December 31,
	2019			2018			2017
Debt securities	$	3,476		$	3,419		$	2,757
Equity securities		352			129			124
Cash, cash equivalents, and short-term investments		487			85			122
Total investment income		4,315			3,633			3,003
Investment expenses		(284	)		(297	)		(275	)
Net investment income	$	4,031		$	3,336		$	2,728

The following table summarizes the gross realized gains and losses from sales or maturities of available-for-sale debt securities and equity securities, as follows (dollars in thousands):

	December 31,
	2019			2018			2017
Debt securities:
Gross realized gains	$	269		$	54		$	32
Gross realized losses		(54	)		(256	)		(8	)
Total debt securities		215			(202	)		24
Equity securities:
Gross realized gains		1,020			337			76
Gross realized losses		(39	)		(74	)		(30	)
Total equity securities		981			263			46
Total net investment realized gains	$	1,196		$	61		$	70

Proceeds from the sales of available-for-sale securities were $33.7 million, $14.6 million and $1.8 million for the years ended December 31, 2019, 2018, and 2017, respectively.  The gross realized gains from sales of available-for-sale securities for the years ended December 31, 2019, 2018, and 2017 were $274,000, $7,000, and $106,000, respectively.  The gross realized losses from sales of available-for-sale securities for the years ended December 31, 2019, 2018, and 2017 were $53,000, $199,000, and $37,000, respectively.  The year ended December 31, 2017 has not been recast to confirm to the current presentation of ASU No. 2016-01.  Refer to Note 1 ~ Summary of Significant Accounting Policies for further details.  

The Company carries other equity investments that do not have a readily determinable fair value at cost, less impairment or observable changes in price.  We review these investments for impairment during each reporting period.  There was no impairment or observable changes in price recorded during 2019 related to the Company's equity securities without readily determinable fair value.  These investments are a component of Other Assets in the Consolidated Balance Sheets.  The value of these investments as of December 31, 2019 were $665,000.

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The table below summarizes the amortized cost and fair value of available-for-sale debt securities by contractual maturity at December 31, 2019.  Actual maturities may differ from contractual maturities because certain borrowers have the right to call or prepay obligations with or without call or prepayment penalties (dollars in thousands):

	Amortized Cost		Estimated Fair Value
Due in one year or less	$	7,276	$	7,293
Due after one year through five years		31,575		32,152
Due after five years through ten years		15,237		15,767
Due after ten years		9,242		9,567
Securities with contractual maturities		63,330		64,779
Asset-backed securities		19,549		19,575
Mortgage-backed securities		31,389		31,515
Commercial mortgage-backed securities		9,972		10,043
Collateralized mortgage obligations		5,073		5,088
Total debt securities	$	129,313	$	131,000

At December 31, 2019 and 2018, the Insurance Companies Subsidiaries had an aggregate of $8.0 million and $8.5 million, respectively, on deposit in trust accounts to meet the deposit requirements of various state insurance departments.  At December 31, 2019 and 2018, the Company had $58.4 million and $45.4 million held in trust accounts to meet collateral requirements with other third-party insurers, relating to various fronting arrangements.  There are withdrawal and other restrictions on these deposits, including the type of investments that may be held, however, the Company may generally invest in high-grade bonds and short-term investments and earn interest on the funds.

3. Fair Value Measurements

The Company’s financial instruments include assets carried at fair value, as well as debt carried at face value, net of unamortized debt issuance costs, but disclosed at fair value in this note.  Fair value is defined as the price that would be received for an asset or paid to transfer a liability in the principal most advantageous market for the asset or liability in an orderly transaction between market participants.  In determining fair value, the Company applies the market approach, which uses prices and other relevant data based on market transactions involving identical or comparable assets and liabilities.  The inputs to valuation techniques used to measure fair value are prioritized into a three-level hierarchy.  The hierarchy gives the highest priority to quoted prices from sources independent of the reporting entity (“observable inputs”) and the lowest priority to prices determined by the reporting entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (“unobservable inputs”).  The fair value hierarchy is as follows:

Level 1—Valuations that are based on quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2—Valuations that are based on observable inputs (other than Level 1 prices) such as quoted prices for similar assets or liabilities at the measurement date; quoted prices in markets that are not active; or other inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability.

Level 3—Unobservable inputs that are supported by little or no market activity.  The unobservable inputs represent the Company’s best assumption of how market participants would price the assets or liabilities.

NAV—The fair values of investment company limited partnership investments are based on the capital account balances reported by the investment funds subject to their management review and adjustment. These capital account balances reflect the fair value of the investment funds.

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The following tables present the Company’s assets and liabilities measured at fair value, classified by the valuation hierarchy as of December 31, 2019 and 2018 (dollars in thousands):

	December 31, 2019
	Fair Value Measurements Using
	Total		Level 1		Level 2		Level 3
Assets:
Debt Securities:
U.S. Government	$	9,452	$	—	$	9,452	$	—
State and local government		14,933		—		14,933		—
Corporate debt		40,394		—		40,394		—
Asset-backed securities		19,575		—		19,575		—
Mortgage-backed securities		31,515		—		31,515		—
Commercial mortgage-backed securities		10,043		—		10,043		—
Collateralized mortgage obligations		5,088		—		5,088		—
Total debt securities		131,000		—		131,000		—
Equity Securities		6,599		6,335		264		—
Short-term investments		31,426		31,426		—		—
Total marketable investments measured    at fair value	$	169,025	$	37,761	$	131,264	$	—
Investments measured at NAV:
Investment in limited partnership		707
Total assets measured at fair value	$	169,732
Liabilities:
Senior Unsecured Notes *	$	22,669	$	—	$	22,669	$	—
Subordinated Notes *		11,222		—		—		11,222
Total Liabilities measured at fair value	$	33,891	$	—	$	22,669	$	11,222

*  Carried at face value of debt net of unamortized debt issuance costs on the consolidated balance sheet

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	December 31, 2018
	Fair Value Measurements Using
	Total		Level 1		Level 2		Level 3
Assets:
Debt Securities:
U.S. Government	$	15,185	$	—	$	15,185	$	—
State and local government		15,788		—		15,788		—
Corporate debt		29,846		—		29,846		—
Asset-backed securities		24,284		—		24,284		—
Mortgage-backed securities		29,240		—		29,240		—
Commercial mortgage-backed securities		3,953		—		3,953		—
Collateralized mortgage obligations		2,144		—		2,144		—
Total debt securities		120,440		—		120,440		—
Equity Securities		6,587		6,323		264		—
Short-term investments		8,925		8,925		—		—
Total marketable investments measured at fair value	$	135,952	$	15,248	$	120,704	$	—
Investments measured at NAV:
Investment in limited partnership		4,150
Total assets measured at fair value	$	140,102
Liabilities:
Senior Unsecured Notes *	$	21,252	$	—	$	21,252	$	—
Subordinated Notes *		10,640		—		—		10,640
Total Liabilities measured at fair value	$	31,892	$	—	$	21,252	$	10,640

*  Carried at face value of debt net of unamortized debt issuance costs on the consolidated balance sheet

Level 1 investments consist of equity securities traded in an active exchange market.  The Company uses unadjusted quoted prices for identical instruments to measure fair value.  Level 1 also includes money market funds and other interest-bearing deposits at banks, which are reported as short-term investments.  The fair value measurements that were based on Level 1 inputs comprise 22.2% of the fair value of the total investment portfolio as of December 31, 2019.

Level 2 investments include debt securities and equity securities, which consist of U.S. government agency securities, state and local municipal bonds (including those held as restricted securities), corporate debt securities, mortgage-backed and asset-backed securities.  The fair value of securities included in the Level 2 category were based on the market values obtained from a third party pricing service that were evaluated using pricing models that vary by asset class and incorporate available trade, bid and other observable market information.  The third party pricing service monitors market indicators, as well as industry and economic events.  The fair value measurements that were based on Level 2 inputs comprise 77.3% of the fair value of the total investment portfolio as of December 31, 2019.

The Company obtains pricing for each security from independent pricing services, investment managers or consultants to assist in determining fair value for its Level 2 investments.  To validate that these quoted prices are reasonable estimates of fair value, the Company performs various quantitative and qualitative procedures, such as (i) evaluation of the underlying methodologies, (ii) analysis of recent sales activity, (iii) analytical review of our fair values against current market prices and (iv) comparison of the pricing services’ fair value to other pricing services’ fair value for the same investment.  No markets for the investments were determined to be inactive at period-ends.  Based on these procedures, the Company did not adjust the prices or quotes provided from independent pricing services, investment managers or consultants.

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As of December 31, 2019and 2018, Level 3 liabilities are entirely comprised of the Company's subordinated notes.  In determining the fair value of the subordinated debt outstanding at December 31, 2019 and 2018, the security attributes (issue date, maturity, coupon, calls, etc.) and market rates on September 24, 2018 (the date of the restated and amended agreement which was repriced at that time) were fed into a valuation model.  A lognormal trinomial interest rate lattice was created within the model to compute the option adjusted spread (“OAS”) which is the amount, in basis points, of interest rate required to be paid under the debt agreement over the risk-free U.S. Treasury rates. The OAS was then fed back into the model along with the December 31, 2019and 2018, U.S. Treasury rates, respectively.  A new lattice was generated and the fair value was computed from the OAS.  There were no changes in assumptions of credit risk from the issuance date.

The Company’s policy on recognizing transfers between hierarchy levels is applied at the end of each reporting period.  There were no transfers between Levels 1, 2 and 3 for the years ended December 31, 2019 and 2018, respectively.

4. Deferred Policy Acquisition Costs

The Company defers costs incurred which are incremental and directly related to the successful acquisition of new or renewal insurance business, net of corresponding amounts of ceded reinsurance commissions.  Net deferred policy acquisition costs are amortized and charged to expense in proportion to premium earned over the estimated policy term.  The Company anticipates that its deferred policy acquisition costs will be fully recoverable and there were no premium deficiencies for the years December 31, 2019, 2018, and 2017.  The activity in deferred policy acquisition costs, net of reinsurance transactions, is as follows (dollars in thousands):

	December 31,
	2019			2018			2017
Balance at beginning of period	$	12,011		$	12,781		$	13,290
Deferred policy acquisition costs		24,806			24,764			25,736
Amortization of policy acquisition costs		(24,911	)		(25,534	)		(26,245	)
Net change		(105	)		(770	)		(509	)
Balance at end of period	$	11,906		$	12,011		$	12,781

5. Unpaid Losses and Loss Adjustment Expenses

The Company establishes reserves for unpaid losses and LAE which represent the estimated ultimate cost of all losses incurred that were both reported and unreported (i.e., incurred but not yet reported losses, or “IBNR”) and LAE incurred that remain unpaid at the balance sheet date.  The Company’s reserving process takes into account known facts and interpretations of circumstances and factors including the Company’s experience with similar cases, actual claims paid, historical trends involving claim payment patterns and pending levels of unpaid claims, loss management programs, product mix and contractual terms, changes in law and regulation, judicial decisions, and economic conditions.  In the normal course of business, the Company may also supplement its claims processes by utilizing third party adjusters, appraisers, engineers, inspectors, and other professionals and information sources to assess and settle catastrophe and non-catastrophe related claims.  The effects of inflation are implicitly considered in the reserving process.

Reserves are estimates of unpaid portions of losses that have occurred, including IBNR losses, therefore the establishment of appropriate reserves, is an inherently uncertain and complex process.  The ultimate cost of losses may vary materially from recorded amounts, which are based on management’s best estimates.  The highest degree of uncertainty is associated with reserves for losses incurred in the current reporting period as it contains the greatest proportion of losses that have not been reported or settled.  The Company regularly updates its reserve estimates as new information becomes available and as events unfold that may affect the resolution of unsettled claims.  Changes in prior year reserve estimates, which may be material, are reported in the results of operations in the period such changes are determined to be needed and recorded.

Management believes that the reserve for losses and LAE, net of reinsurance recoverables, is appropriately established in the aggregate and adequate to cover the ultimate net cost of reported and unreported claims arising from losses which had

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occurred by the date of the consolidated financial statements based on available facts and in accordance with applicable laws and regulations.

The table below provides the changes in the reserves for losses and LAE, net of recoverables from reinsurers, for the periods indicated (dollars in thousands):

	December 31,
	2019			2018			2017
Gross reserves - beginning of period	$	92,807		$	87,896		$	54,651
Less: reinsurance recoverables on unpaid losses		29,685			20,066			6,658
Plus: deferred gain on ADC		(5,677	)		—			—
Net reserves - beginning of period		68,799			67,830			47,993
Add: incurred losses and loss adjustment expenses, net   of reinsurance
Current period		49,192			53,482			64,458
Prior period		10,552			9,033			9,459
Total net incurred losses and loss adjustment   expenses		59,744			62,515			73,917
Deduct: loss and loss adjustment expense payments,   net of reinsurance
Current period		14,357			17,025			24,547
Prior period		29,519			44,521			29,533
Total net loss and loss adjustment expense   payments		43,876			61,546			54,080
Net reserves - end of period		84,667			68,799			67,830
Plus: reinsurance recoverables on unpaid losses		22,579			29,685			20,066
Less: deferred gain on ADC		—			(5,677	)		—
Gross reserves - end of period	$	107,246		$	92,807		$	87,896

There was $10.6 million, $9.0 million, and $9.5 million of adverse development on prior accident year reserves in 2019, 2018 and 2017, respectively.  There were no significant changes in the key methods utilized in the analysis and calculations of the Company’s reserves during 2019, 2018 or 2017.

In 2019, the adverse development consisted of $7.6 million from commercial lines and $3.0 million from personal lines.  Of the $7.6 million of adverse development in commercial lines, the company experienced $11.0 million and $2.4 million of adverse development in its hospitality and small business lines of business, respectively.  This was partially offset by the remaining $5.7 million of benefit from the ADC that was recognized in 2019. Of the $3.0 million of adverse development in personal lines in 2019, $1.7 million was related to Florida homeowners business.

In 2018, the adverse development consisted of $6.2 million from commercial lines and $2.8 million from personal lines.  Of the $6.2 million of adverse development in commercial lines, $4.2 million was related to the commercial liability business.  Of the $2.8 million of adverse development in personal lines, $2.0 million and $727,000 were related to the Florida homeowners and Texas homeowners business, respectively.  This included $960,000 of adverse development related to hurricanes Harvey and Irma.

In 2017, the adverse development consisted of $7.2 million from commercial lines and $2.3 million from personal lines and was mostly related to the 2016 and 2015 accident years.  This development consisted of $5.1 million from the commercial liability business, $1.6 million from commercial property, $1.7 million from Florida homeowners and $0.5 million from commercial auto business.

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On September 28, 2017, the Company entered into an ADC reinsurance agreement to cover loss development of up to $17.5 million in excess of stated reserves as of June 30, 2017, for accident years 2005 through 2016.  The agreement attaches when net losses exceed $1.4 million of the $36.6 million carried reserves at June 30, 2017, and extends to $19.5 million in coverage up to $57.5 million.  The company retains a 10% co-participation for any development in excess of the retention.

As of December 31, 2019, the deferred gain from the ADC was fully utilized.  In 2018, the Company ceded $10.3 million of losses under the ADC.  Of the $10.3 million, $4.6 million was recognized as a benefit, reducing losses and LAE expense, and $5.7 million was deferred (recorded as a liability on the Consolidated Balance Sheets) and was amortized into income as a benefit in future periods.  As of December 31, 2018, the Company had ceded to the limit of the ADC.  In 2017, $7.2 million of adverse development was ceded to the ADC.  Discussion of adverse development is net of benefits recognized under the ADC in that period.

Incurred losses during 2018 also included $583,000 in net catastrophe losses in the current calendar year related to Hurricane Harvey in Texas.  Of the $583,000 in net catastrophe losses, personal lines accounted for $960,000 of the losses while commercial lines saw $377,000 of favorable development in calendar year 2018.  Losses from Hurricane Irma were in excess of the Company’s $4.0 million retention on its catastrophe reinsurance treaty which resulted in $10.0 million of losses being ceded to the treaty during 2018.  This also resulted in a $1.0 million charge for catastrophe reinstatement premiums which was recorded as ceded premiums in 2018.

In 2017, incurred losses included $5.4 million in net catastrophe losses related to Hurricane Harvey in Texas and Hurricane Irma in Florida.  Approximately 34% of the losses were generated in Commercial Lines and 66% in Personal lines.  Losses from Hurricane Irma were in excess of the Company’s $4.0 million retention on its catastrophe reinsurance treaty which resulted in $5.2 million of losses being ceded to the treaty as of December 31, 2017.  This also resulted in a $806,000 charge for catastrophe reinstatement premiums which was recorded as ceded premiums in 2017.

Loss Development Tables

The following tables represent cumulative incurred loss and allocated loss adjustment expenses ("ALAE"), net of reinsurance, by accident year and cumulative paid loss and ALAE, net of reinsurance, by accident year, for the years ended December 31, 2009 to 2019, as well as total IBNR and the cumulative number of reported claims for the year ended December 31, 2019, by reportable segment and accident year (dollars in thousands).

Commercial Lines
			Incurred loss and allocated loss adjustment expenses, net of reinsurance																				Total IBNR		Cumulative number of reported claims
Accident
Year	2009*		2010*		2011*		2012*		2013*		2014*		2015*		2016		2017		2018		2019		2019		2019
2009	$	11,400	$	12,066	$	10,312	$	8,943	$	8,232	$	8,403	$	8,359	$	8,414	$	8,442	$	8,441	$	8,441	$	—		877
2010				7,346		8,568		7,255		6,357		6,170		6,074		6,207		6,292		6,312		6,312		—		771
2011						6,753		5,758		5,326		5,049		4,932		4,903		4,935		4,933		4,933		—		590
2012								7,745		6,421		6,288		6,384		6,253		6,190		6,209		6,209		—		560
2013										10,018		9,435		9,893		10,237		11,252		11,218		11,624		50		608
2014												19,709		19,907		22,711		26,367		28,145		28,766		100		1,752
2015														22,442		26,633		31,861		34,478		36,372		200		2,352
2016																32,396		34,935		40,440		44,355		1,125		3,544
2017																		44,251		44,495		49,749		3,658		5,776
2018																				42,624		42,432		8,619		5,993
2019																						41,286		20,265		5,774
																	Total				$	280,479	$	34,018

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Cumulative paid loss and allocated loss adjustment expenses, net of reinsurance
Accident			For the years ended December 31,
Year	2009*		2010*		2011*		2012*		2013*		2014*		2015*		2016		2017		2018		2019
2009	$	4,436	$	5,942	$	6,410	$	7,233	$	7,800	$	7,867	$	7,933	$	8,321	$	8,441	$	8,441	$	8,441
2010				3,066		4,488		5,219		5,910		6,040		6,065		6,166		6,258		6,312		6,312
2011						2,645		3,534		3,964		4,449		4,641		4,744		4,872		4,903		4,907
2012								2,325		3,703		4,696		5,558		5,994		6,065		6,209		6,209
2013										3,979		6,211		7,643		8,622		10,147		10,650		11,137
2014												8,715		13,977		17,458		22,446		25,609		27,544
2015														10,470		17,817		22,549		30,475		34,497
2016																10,255		19,135		27,785		37,967
2017																		12,448		23,020		34,205
2018																				10,375		19,799
2019																						10,078
																	Total				$	201,096
							Unpaid losses and ALAE - years 2009 through 2019														$	79,383
							Unpaid losses and ALAE - prior to 2009 (1)*															8
							Unpaid ADC															(2,075	)
							Unpaid losses and ALAE, net of reinsurance														$	77,316

*  Presented as unaudited required supplementary information.

(1) The Company's formation was in 2009, however, as a result of the acquisition of WPIC in 2010, incurred losses prior to the 2009 accident year remain outstanding.

Personal Lines
			Incurred loss and allocated loss adjustment expenses, net of reinsurance																				Total IBNR		Cumulative number of reported claims
Accident					For the years ended December 31,
Year	2009*		2010*		2011*		2012*		2013*		2014*		2015*		2016		2017		2018		2019		2019		2019
2009	$	667	$	639	$	634	$	634	$	634	$	634	$	634	$	634	$	634	$	634	$	634	$	—		65
2010				320		188		184		184		184		184		184		184		184		184		—		77
2011						1,678		1,758		1,981		2,031		2,030		2,045		2,027		2,024		2,024		—		717
2012								9,960		11,690		11,740		12,159		12,390		12,365		12,357		12,369		—		3,338
2013										18,034		17,996		18,925		19,138		19,167		19,202		19,222		—		5,206
2014												17,951		17,471		17,735		17,880		17,929		18,082		—		3,730
2015														10,877		13,445		14,721		15,285		15,364		—		2,141
2016																11,619		13,418		14,949		15,550		—		1,813
2017																		14,058		13,550		14,493		—		2,852
2018																				5,893		6,378		321		800
2019																						3,099		609		305
																	Total				$	107,399	$	929

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			Cumulative paid loss and allocated loss adjustment expenses, net of reinsurance
Accident					For the years ended December 31,
Year	2009*		2010*		2011*		2012*		2013*		2014*		2015*		2016		2017		2018		2019
2009	$	537	$	634	$	634	$	634	$	634	$	634	$	634	$	634	$	634	$	634	$	634
2010				151		174		184		184		184		184		184		184		184		184
2011						787		1,292		1,633		1,859		1,983		2,021		2,024		2,024		2,024
2012								5,665		9,251		10,844		11,777		12,202		12,306		12,329		12,349
2013										9,955		15,883		18,052		18,600		19,014		19,174		19,214
2014												12,819		16,515		17,260		17,746		17,855		18,047
2015														7,771		11,873		13,844		15,159		15,250
2016																7,119		11,238		14,442		15,110
2017																		8,320		12,944		14,004
2018																				4,296		5,618
2019																						2,119
																	Total				$	104,553
											Unpaid losses and ALAE - years 2009 through 2019										$	2,846
											Unpaid losses and ALAE - prior to 2009 (1)*											—
											Unpaid ADC											(112	)
											Unpaid losses and ALAE, net of reinsurance										$	2,734

*  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			For the years ended December 31,
Year	2009*		2010*		2011*		2012*		2013*		2014*		2015*		2016		2017		2018		2019		2019		2019
2009		12,066		12,705		10,946		9,577		8,866		9,037		8,993		9,048		9,076		9,075		9,075		—		942
2010				7,666		8,756		7,439		6,541		6,354		6,258		6,391		6,476		6,496		6,496		—		848
2011						8,431		7,517		7,307		7,081		6,963		6,949		6,964		6,957		6,957		—		1,307
2012								17,705		18,111		18,028		18,544		18,642		18,554		18,566		18,578		—		3,898
2013										28,052		27,431		28,817		29,375		30,419		30,420		30,846		50		5,814
2014												37,660		37,378		40,446		44,247		46,074		46,848		100		5,482
2015														33,319		40,078		46,581		49,763		51,736		200		4,493
2016																44,015		48,353		55,389		59,905		1,125		5,357
2017																		58,309		58,045		64,242		3,658		8,628
2018																				48,517		48,810		8,940		6,793
2019																						44,385		20,874		6,079
																	Total					387,878		34,947

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Cumulative paid loss and allocated loss adjustment expenses, net of reinsurance
Accident			For the years ended December 31,
Year	2009*		2010*		2011*		2012*		2013*		2014*		2015*		2016		2017		2018		2019
2009	$	4,973	$	6,576	$	7,043	$	7,867	$	8,434	$	8,501	$	8,567	$	8,955	$	9,075	$	9,075	$	9,075
2010				3,217		4,662		5,403		6,094		6,223		6,248		6,350		6,442		6,496		6,496
2011						3,432		4,826		5,597		6,308		6,624		6,766		6,897		6,927		6,931
2012								7,990		12,954		15,540		17,335		18,195		18,369		18,538		18,558
2013										13,934		22,094		25,695		27,223		29,162		29,824		30,351
2014												21,534		30,492		34,718		40,192		43,464		45,591
2015														18,241		29,690		36,393		45,634		49,747
2016																17,374		30,373		42,227		53,077
2017																		20,768		35,964		48,209
2018																				14,671		25,417
2019																						12,197
																	Total				$	305,649
							Unpaid losses and ALAE - years 2009 through 2019														$	82,229
							Unpaid losses and ALAE - prior to 2009 (1)*															8
							Unpaid ADC															(2,187	)
							Unpaid losses and ALAE, net of reinsurance														$	80,050

*  Presented as unaudited required supplementary information.

The following table reconciles the loss development information to the consolidated balance sheet for the year ended December 31, 2019, by reportable segment (dollars in thousands).

	December 31, 2019
Net unpaid losses claims and ALAE
Commercial Lines	$	77,316
Personal Lines		2,734
Total unpaid losses and LAE, net of reinsurance		80,050
Reinsurance recoverable on losses and LAE
Commercial Lines		20,051
Personal Lines		2,528
Total reinsurance recoverable on unpaid losses and LAE		22,579
Unpaid ULAE		4,617
Total gross unpaid losses and LAE	$	107,246

Loss Duration Disclosure (unaudited)

The following table represents the average annual percentage payout of incurred losses by age, net of reinsurance, for each reportable segment.

	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	35.7%	26.9%	18.4%	9.5%	4.8%	2.3%	1.3%	0.7%	0.3%	0.1%
Personal Lines	79.5%	11.8%	5.5%	1.9%	1.0%	0.3%	—%	—%	—%	—%
Total Lines	37.7%	26.2%	17.8%	9.2%	4.6%	2.2%	1.2%	0.7%	0.3%	0.1%

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6. Reinsurance

In the normal course of business, the Company participates in reinsurance agreements in order to limit losses that may arise from catastrophes or other individually severe events.  The Company primarily ceded all specific commercial liability risks in excess of $400,000 in 2019 and $500,000 in 2018 and 2017, and ceded all specific commercial property risks in excess of $400,000 in 2019, $300,000 in 2018, and $500,000 in 2017.  The Company ceded homeowners specific risks in excess of $300,000 in 2019, 2018 and 2017.  A "treaty" is a reinsurance agreement in which coverage is provided for a class of risks and does not require policy by policy underwriting of the reinsurer.  "Facultative" reinsurance is where a reinsurer negotiates an individual reinsurance agreement for every policy it will reinsure on a policy by policy basis.  A loss is covered under a reinsurance contract if the loss occurs within the effective dates of the agreement notwithstanding when the loss is reported.

Reinsurance does not discharge the Company, as the direct insurer, from liability to its policyholders.  Failure of reinsurers to honor their obligations could result in losses to the Company.  The Company evaluates the financial condition of its reinsurers and monitors the concentration of credit risk arising from similar geographic regions, activities, or economic characteristics of the reinsurers to minimize its exposure to significant losses from reinsurer insolvencies.  To date, the Company has not experienced any significant difficulties in collecting reinsurance recoverables.  The Company's current reinsurance structure includes the following primary categories:

Casualty Clash

• Effective January 1, 2019 through December 31, 2019, the Company was party to a workers' compensation and casualty clash reinsurance treaty with limits up to $19.0 million in excess of a $1.0 million retention.  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, 2015 through December 31, 2018, the Company was party to a casualty clash reinsurance treaty with limits up to $18.0 million in excess of a $2.0 million retention.

Facultative

• 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.

Liability

• Effective January 1, 2019 through December 31, 2019, the Company was party to an excess of loss reinsurance treaty for commercial liability coverage with limits up to $600,000 in excess of $400,000.  

Property

• Effective November 1, 2014 through December 31, 2019, the Company was party to an excess of loss reinsurance treaty for personal property coverage with limits up to $2.7 million in excess of $300,000, for homeowners' and dwelling fire business.  

• Effective January 1, 2019 through December 31, 2019, the Company was party to an excess of loss reinsurance treaty for commercial property coverage with limits up to $3.7 million in excess of $300,000.  

• Effective January 1, 2018 through December 31, 2018, the Company was party to an excess of loss reinsurance treaty for commercial property coverage with limits up to $200,000 in excess of $300,000.  

• Effective July 1, 2015 through December 31, 2018, the Company was party to an excess of loss reinsurance agreement for commercial property coverage with limits up to $2.0 million in excess of $2.0 million.  

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• At December 31, 2019, the Company was covered for property catastrophe losses up to $28.0 million in excess of a $2.0 million retention for the first event.  This treaty terminates on June 1, 2020.

• At December 31, 2018, the Company was covered for property catastrophe losses up to $96.0 million in excess of a $4.0 million retention for the first event.  The treaty terminated on June 1, 2019.

• At December 31, 2017, the Company was covered for property catastrophe losses up to $106.0 million in excess of a $4.0 million retention for the first event.  The treaty terminated on June 1, 2018.

Multiple Line

• Effective January 1, 2019 through December 31, 2019, the Company was party to a multi-line excess of loss treaty that covers commercial property and casualty losses up to $600,000 in excess of a $400,000 retention.

• Effective January 1, 2015 through December 31, 2018, the Company was party to a multi-line excess of loss treaty that covers commercial property and casualty losses up to $1.5 million in excess of a $500,000 retention.

Quota Share

• The Company cedes 90% to 100% of its commercial umbrella coverages under quota share treaties.  Under a quota share agreement, the reinsurer pays a percentage of all losses the insurer sustains in return for a similar percent of the premiums written on that risk.  A ceding commission is paid by the reinsurer to the insurer to cover acquisition and operating expenses.

Adverse Development Cover

• Effective September 28, 2017, the Company entered into an ADC to cover loss development of up to $17.5 million in excess of stated reserves as of June 30, 2017.  The consideration for the ADC was $7.2 million, which resulted in a one-time charge to ceded premiums fully earned in the third quarter.  The agreement provided up to $17.5 million of reinsurance for adverse net loss reserve development for accident years 2005 through 2016.  As of December 31, 2019, the Company had fully utilized the ADC.

Equipment Breakdown, Employment Practice Liability, and Data Compromise and Identity Recovery

• The Company ceded 100% of a small number of equipment breakdown, employment practices liability, and data compromise coverages that are occasionally bundled with other products under a quota share agreement with a reinsurer.

The Company assumes written premiums under a few fronting arrangements.  The fronting arrangements are with unaffiliated insurers who write on behalf of the Company in markets that require a higher A.M.  Best rating than the Company’s rating, or where the policies are written in a state where the Company is not licensed or for other strategic reasons.  

The Company assumed $33.5 million, $31.1 million, and $28.0 million of written premiums under the insurance fronting arrangements for the years ended December 31, 2019,  2018, and 2017, respectively.

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The following table presents the effects of reinsurance and assumption transactions on written premiums, earned premiums and losses and LAE (dollars in thousands). The 2019, 2018 and 2017 ceded written and earned premium amounts include $495,000, $1.0 million and $806,000 of reinsurance reinstatement costs relating to Hurricane Irma, respectively.

	Year Ended December 31,
	2019			2018			2017
Written premiums:
Direct	$	68,394		$	73,290		$	86,251
Assumed		33,459			31,078			28,033
Ceded		(14,129	)		(15,282	)		(23,044	)
Net written premiums	$	87,724		$	89,086		$	91,240
Earned premiums:
Direct	$	70,911		$	80,691		$	87,656
Assumed		32,292			28,497			27,081
Ceded		(14,114	)		(15,377	)		(23,008	)
Net earned premiums	$	89,089		$	93,811		$	91,729
Loss and loss adjustment expenses:
Direct	$	66,256		$	65,284		$	79,035
Assumed		25,510			20,671			19,524
Ceded		(32,022	)		(23,440	)		(24,642	)
Net loss and LAE	$	59,744		$	62,515		$	73,917
Percentage of Assumed Written Premiums to Net Written Premiums		38.1	%		34.9	%		30.7	%

7. Debt

At December 31, 2019, the Company's debt was comprised of three instruments: $25.3 million of publicly traded senior unsecured notes which were issued in September and October of 2018, a $10.0 million line of credit which commenced in June 2018, and $10.5 million of privately placed subordinated notes (the “Subordinated Notes”).  A summary of the Company's outstanding debt is as follows (dollars in thousands):

	December 31,
	2019		2018
Senior unsecured notes	$	24,288	$	24,018
Subordinated notes		9,536		9,484
Line of credit		2,000		—
Total	$	35,824	$	33,502

On September 24, 2018, the Company issued $22.0 million of public senior unsecured notes (the "Notes").  Maturing on September 30, 2023, the Notes bear interest at a rate of 6.75% per annum, payable quarterly at the end of March, June, September and December.  The Company may redeem the Notes, in whole or in part, at face value at any time after September 30, 2021.

On October 12, 2018 the Company issued an additional $3.3 million of the Notes as the underwriters fully exercised their over-allotment option.  The total aggregate principal amount of Notes sold by the Company in the public offering increased to $25.3 million.  Proceeds from the Notes were primarily used to pay down $19.5 million of the Subordinated Notes.

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Effective September 24, 2018, the Company amended the terms of the Subordinated Notes to reduce the principle value to $10.5 million, change the maturity to September 30, 2038 and modify the call provisions.  The amended Subordinated Notes bear interest at a rate of 7.5% per annum until September 30, 2023, and 12.5% thereafter, and allow for four quarterly interest payment deferrals.  Interest is payable quarterly at the end of March, June, September and December.  Beginning September 30, 2021, the Company may redeem the Subordinated Notes, in whole or in part, for a call premium of $1.1 million.  The call premium escalates each quarter to ultimately $1.75 million on September 30, 2023, then steps up to $3.05 million on December 31, 2023, and increases quarterly at a 12.5% per annum rate thereafter.  The debt covenants are consistent with the original Subordinated Note terms.  The Company paid a $105,000 loan origination fee on the effective date.  The company recorded the Subordinated Notes amendment as a debt modification and retained the unamortized debt issuance costs from the original loan which will be amortized over the 20-year life of the amended Subordinated Notes in conjunction with the $105,000 origination fee.

The carrying value of the Notes and Subordinated Notes are offset by $1.0 million and $965,000 of debt issuance costs, respectively.  The debt issuance costs will be amortized through interest expense over the life of the loans.

The Subordinated Notes contain various restrictive covenants that relate to the Company’s minimum tangible net worth, minimum fixed-charge coverage ratios, dividend paying capacity, reinsurance retentions, and risk-based capital ratios.  At December 31, 2019, the Company was in compliance with all of its debt financial covenants.

On June 21, 2018, the Company entered into a $10.0 million line of credit.  The line of credit bears interest at the London Interbank rate ("LIBOR") plus 2.75% per annum, payable monthly.  The agreement includes several covenants, including but not limited to a minimum tangible net worth, a minimum fixed-charge coverage ratio, and minimum statutory risk-based capital levels.  As of December 31, 2019, the Company had $2.0 million outstanding on the line of credit, and was in compliance with all of its debt financial covenants.

On September 29, 2017, the Company executed $30.0 million of Subordinated Notes.  These Subordinated Notes were amended as described, above.  These Subordinated Notes had a maturity date of September 29, 2032, bore interest, payable quarterly at a fixed annual rate of 8.0%, and allowed for up to four quarterly interest deferrals.  On the fifth and tenth anniversary of the notes, the interest rate reset to 1,250 basis points and 1,500 basis points, respectively, above the 5-year mid-swap rate.

8.  Income Taxes

At December 31, 2019 and 2018, the Company had current income taxes receivable of $87,000 and $79,000, respectively, included in other assets in the consolidated balance sheets.

The income tax expense (benefit) is comprised of the following (dollars in thousands):

	Year Ended December 31,
	2019			2018		2017
Current tax expense (benefit)	$	27		$	52	$	(28	)
Deferred tax expense (benefit)		(940	)		—		(419	)
Total income tax expense (benefit)	$	(913	)	$	52	$	(447	)

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The income tax expense (benefit) differed from the amounts computed by applying the statutory U.S. federal income tax rate of 21% in 2019 and 2018 and 34% in 2017to pretax income as a result of the following (dollars in thousands):

	Year Ended December 31,
	2019			2018			2017
Income (loss) before income taxes	$	(9,121	)	$	(9,465	)	$	(22,054	)
Statutory U.S. federal income tax rate		(1,915	)		(1,988	)		(7,498	)
State income taxes, net of federal benefit		(230	)		(156	)		(106	)
Tax‑exempt investment income and dividend received deduction		(79	)		(70	)		(123	)
Nondeductible meals and entertainment		38			38			54
Valuation allowance on deferred tax assets		966			2,331			1,515
Change in federal tax rate		—			—			5,612
Other		307			(103	)		99
Income tax expense (benefit)	$	(913	)	$	52		$	(447	)
Effective tax rate		10.0	%		(0.5	)%		2.0	%

On December 22, 2017, the U.S. federal government enacted H.R. 1, “An Act to Provide for Reconciliation Pursuant to Titles II and V of the Concurrent Resolution on the Budget for Fiscal Year 2018” (the “Act”).  The Act provided for significant changes to corporate taxation including the decrease of the corporate tax rate from 34% to 21%.  In 2017, the Company completed an analysis of the impact of the Act and followed the additional guidance provided by the Security and Exchange Commission’s Staff Accounting Bulletin No. 118 (“SAB 118”).  There were no material provisional balances as of December 31, 2017.

In 2018, the Company recognized a measurement period adjustment of $42,735 related to loss reserve discounting, which reduced deferred tax expense.  The Company also recognized a measurement period adjustment of $42,735 related to the loss reserve discounting transitional adjustment, which increased deferred tax expense.  The measurement period adjustments were based upon obtaining additional information about facts and circumstances that existed as of the enactment date that, if known, would have affected the income tax effects initially reported as provisional amounts under the Act.  The measurement period adjustments had no effect on the effective tax rate for the year ending December 31, 2018.  The accounting for the income tax effects of the Act pursuant to SAB 118 has been completed as of the end of the December 22, 2018, measurement period and for the year ending December 31, 2018.

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The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are presented below (dollars in thousands):

	December 31,
	2019			2018
Deferred tax assets:
Discounted unpaid losses and loss adjustment expenses	$	1,264		$	937
Unearned premiums		2,266			2,329
Net operating loss carryforwards		12,593			10,144
Net unrealized losses on investments		—			222
State net operating loss carryforwards		873			567
Deferred gain from ADC		—			1,254
Other		248			123
Gross deferred tax assets		17,244			15,576
Less valuation allowance		(13,572	)		(12,606	)
Total deferred tax assets, net of allowance		3,672			2,970
Deferred tax liabilities:
Investment basis difference		28			22
Net unrealized gains on investments		512			—
Deferred policy acquisition costs		2,500			2,522
Intangible assets		115			112
Property and equipment		57			63
Other		460			366
Total deferred tax liabilities		3,672			3,085
Net deferred tax liability	$	—		$	(115	)

The net deferred tax liability is recorded in accounts payable and accrued expenses in the consolidated balance sheets.

As of December 31, 2019, the Company has net operating loss carryforwards for federal income tax purposes of $60.0 million, of which $50.0 million expire in tax years 2020 through 2039 and $10.0 million never expire. Of this amount, $14.1 million are limited in the amount that can be utilized in any one year and may expire before they are realized under Section 382 of the Internal Revenue Code.  The Company has state net operating loss carryforwards of $17.7 million, which expire in tax years 2021 through 2039.

Management assesses the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit the use of the existing deferred tax assets under the guidance of ASC 740.  A significant piece of objective negative evidence evaluated was the cumulative loss incurred over the three‑year period ended December 31, 2019.  Such objective evidence limits the Company's ability to consider other subjective evidence, such as management's projections for future growth.

Based on its evaluation, the Company has recorded a valuation allowance of $13.6 million and $12.6 million at December 31, 2019 and 2018, respectively, to reduce the deferred tax assets to an amount that is more likely than not to be realized based on the provisions in ASC 740.  The amount of the deferred tax assets considered realizable, however, could be adjusted if estimates of future taxable income during the carryforward period are reduced or if objective negative evidence in the form of cumulative losses is no longer present, and additional weight may be given to subjective evidence, such as the Company’s projections for growth.

The Company files consolidated federal income tax returns.  For the years before 2016, the Company is no longer subject to U.S. federal examinations; however, the Internal Revenue Service has the ability to review years prior to 2016 to the extent the Company utilized tax attributes carried forward from those prior years.  The statute of limitations on state filings is generally three to four years.

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9.  Statutory Financial Data, Risk-Based Capital and Dividend Restrictions

U.S. state insurance laws and regulations prescribe accounting practices for determining statutory net income and capital and surplus for insurance companies.  In addition, state regulators may permit statutory accounting practices that differ from prescribed practices.  Statutory accounting practices prescribed or permitted by regulatory authorities for the Company’s Insurance Company Subsidiaries differ from GAAP.  The principal differences between statutory accounting practices ("SAP") and GAAP as they relate to the financial statements of the Company’s Insurance Company Subsidiaries are (i) policy acquisition costs are expensed as incurred under SAP, whereas they are deferred and amortized under GAAP, (ii) deferred tax assets are subject to more limitations regarding what amounts can be recorded under SAP and (iii) bonds are recorded at amortized cost under SAP and fair value under GAAP.

Risk-Based Capital ("RBC") requirements as promulgated by the National Association of Insurance Commissioners (‘‘NAIC’’) require property and casualty insurers to maintain minimum capitalization levels determined based on formulas incorporating various business risks (e.g., investment risk, underwriting profitability, etc.) of the Insurance Company Subsidiaries.  As of December 31, 2019, 2018, and 2017, the Insurance Company Subsidiaries’ adjusted capital and surplus exceeded their authorized control level as determined by the NAIC’s risk-based capital models.

Summarized 2019, 2018, and 2017 statutory basis information for the non-captive Insurance Company Subsidiaries, which differs from generally accepted accounting principles, is as follows (dollars in thousands).

	CIC			WPIC
2019
Statutory capital and surplus	$	46,206		$	23,261
RBC authorized control level		12,868			4,266
Statutory net income (loss)		(3,627	)		(3,652	)
RBC %		359	%		545	%

	CIC			WPIC
2018
Statutory capital and surplus	$	47,121		$	26,588
RBC authorized control level		11,901			4,682
Statutory net income (loss)		1,244			834
RBC %		396	%		568	%

	CIC			WPIC
2017
Statutory capital and surplus	$	35,848		$	26,075
RBC authorized control level		8,873			6,224
Statutory net income (loss)		(6,993	)		(13,737	)
RBC %		404	%		419	%

Dividend Restrictions

The state insurance statutes in which the Insurance Company Subsidiaries are domiciled limit the amount of dividends that they may pay annually without first obtaining regulatory approval.  Generally, the limitations are based on the greater of statutory net income for the preceding year or 10% of statutory surplus at the end of the preceding year.  The Company must receive regulatory approval in order to pay dividends to the Parent Company from its Insurance Company Subsidiaries in 2019.

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10.Shareholders’ Equity

Common Stock

In June 2019, the Company issued $5.0 million of common equity through a private placement for 1,176,471 shares priced at $4.25 per share. The participants in the private placement consisted of members of the Company's Board of Directors. The Company used the proceeds for growth capital in the Company's specialty core business segments.

On December 5, 2018, the Company's Board of Directors authorized a stock repurchase program, under which the Company may repurchase up to one million shares of the Company's common stock.  Shares may be purchased in the open market or through negotiated transactions.  The program may be terminated or suspended at any time, at the discretion of the Company.  The Company may in the future enter into a Rule 10b5-1 trading plan to effect a portion of the authorized purchases, if criteria set forth in the plan are met.  Such a plan would enable the Company to repurchase its shares during periods outside of its normal trading windows, when the Company typically would not be active in the market.  The timing of purchases, and the exact number of any shares to be purchased, will depend on market conditions.  The repurchase program does not include specific price targets or timetables. For the year ended December 31, 2018 the Company had repurchased 129,175 shares of stock valued at approximately $584,000 related to the stock repurchase program. The Company also repurchased 8,053 shares of stock valued at approximately $52,000 related to the vesting of the Company’s restricted stock units.  For the year ended December 31, 2019, the Company had repurchased 154,208 shares of stock valued at approximately $638,000 related to the stock repurchase program. The Company also repurchased 9,319 shares of stock valued at approximately $38,000 related to the vesting of the Company’s restricted stock units.  Upon the repurchase of the Company's shares, the shares remain authorized, but not issued or outstanding.    

In September 2017, the Company issued $5.0 million of common equity through a private placement for 800,000 shares priced at $6.25.  The participants in the private placement consisted mainly of members of the Company’s management team and insiders, including Chairman and CEO James Petcoff.  The Company used the proceeds to strengthen its balance sheet through contributions to the Insurance Company Subsidiaries to support their future growth, and to cover the cost of the ADC and reserve strengthening.

As of December 31, 2019, 2018, and 2017, the Company had 9,592,861, 8,478,202, and 8,520,328 issued and outstanding shares of common stock, respectively.

Holders of common stock are entitled to one vote per share and to receive dividends only when and if declared by the board of directors.  The holders have no preemptive, conversion or subscription rights.

11. Accumulated Other Comprehensive Income (Loss)

The following table presents changes in accumulated other comprehensive income (loss) for unrealized gains and losses on available-for-sale securities (dollars in thousands):

	Year Ended December 31,
	2019			2018
Balance at beginning of period	$	(2,612	)	$	(363	)
Cumulative effect of adoption of ASU No. 2016-01,    net of taxes		—			(556	)
Cumulative effect of adoption of ASU No. 2018-02,    net of taxes		—			77
Balance after cumulative effects		(2,612	)		(842	)
Other comprehensive income (loss) before   reclassifications		2,901			(1,825	)
Less: amounts reclassified from accumulated other   comprehensive income (loss)		(200	)		(55	)
Net current period other comprehensive income (loss)		3,101			(1,770	)
Balance at end of period	$	489		$	(2,612	)

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12. EarningsPer Share

Basic and diluted earnings (loss) per share are computed by dividing net income by the weighted average number of common shares outstanding during the period.  The following table presents the calculation of basic and diluted earnings (loss) per common share, as follows (dollars in thousands, except share and per share amounts):

	Year Ended December 31,
	2019			2018			2017
Net income (loss)	$	(7,822	)	$	(9,227	)	$	(21,542	)
Weighted average common shares, basic and diluted*		8,880,107			8,543,876			7,867,344
Earnings (loss) per share, basic and diluted	$	(0.88	)	$	(1.08	)	$	(2.74	)

*  The non-vested shares of the restricted stock units were anti-dilutive as of December 31, 2019, 2018, and 2017.  Therefore, the non-vested shares are excluded from earnings (loss) per share in December 31, 2019, 2018, and 2017.

13. Stock-based Compensation

In 2015, the Company established the Conifer Holdings, Inc. 2015 Omnibus Incentive Plan (“2015 Plan”), which permits the granting of stock options, stock appreciation rights, restricted stock units ("RSU") and other stock-based awards.  The 2015 Plan authorizes up to 1,377,000 shares of common stock for awards to be issued to employees, directors or consultants of the Company.  The RSUs are issued at no less than the market price on the date the awards are granted.  The awards vest in five annual installments, commencing on the first anniversary from the date of grant.  The Company will expense the grant date fair value of the RSUs as compensation expense on a straight-line basis over the requisite service period.  Upon vesting, each RSU will convert into one share of common stock.  The unvested RSUs are subject to forfeiture in the event the employee is involuntarily or voluntarily terminated.  If the employee is terminated by the Company for cause, the Company has the option to forfeit the terminated employees’ vested shares for no consideration and to cause the employee to have no further rights or interest in the vested RSUs.

The following summarizes our RSU activity (units in thousands):

	Number of Units			Weighted Average Grant-Date Fair Value
Outstanding at December 31, 2016		416		$	9.87
Units vested		(95	)		9.97
Units forfeited		(14	)		9.94
Outstanding at December 31, 2017		307		$	9.84
Units granted		70			5.76
Units vested		(95	)		9.84
Units forfeited		(18	)		8.96
Outstanding at December 31, 2018		264		$	8.91
Units vested		(102	)		9.47
Units forfeited		(6	)		7.37
Outstanding at December 31, 2019		156		$	8.45

The scheduled vesting for the restricted stock units at December 31, 2019, was as follows (units in thousands):

	2020		2021		2022		2023		Total
Scheduled vesting - RSUs		102		31		13		10		156

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In 2015, the Company issued 390,352 RSUs to executive officers and other employees to be settled in shares of common stock.  The total RSUs were valued at $4.1 million on the date of grant.  In 2016, the Company issued 111,281 RSUs to executive officers and other employees valued at $909,000 on the date of grant.  In 2018, the Company issued 70,000 RSUs to executive officers and other employees valued at $404,000 on the dates of grant.

The Company recorded $959,000, $970,000, and $948,000 of compensation expense related to the RSUs for the years ended December 31, 2019, 2018 and 2017, respectively.  The total compensation cost related to the non-vested portion of the restricted stock units which has not been recognized as of December 31, 2019 was $1.3 million.

14. Related Party Transactions

The Company employs B. Matthew Petcoff as Vice President of SIA. B. Matthew Petcoff is the brother of the Chairman and Chief Executive Officer, James G. Petcoff.

The Company employs Nicholas J. Petcoff as its Executive Vice President and a director, Andrew D. Petcoff as its Senior Vice President of Personal Lines, President of SIA and a director, and Hilary Petcoff as its Vice President of Enterprise Risk Management.  Nicholas J. Petcoff and Andrew D. Petcoff have been employed with the Company since 2009.  They are the sons of the Company's Chairman and Chief Executive Officer, James G. Petcoff. Hilary Petcoff has been employed with the Company since 2009 and was appointed as its Vice President of Enterprise Risk Management in May 2018. Ms. Petcoff is the daughter of the Company’s Chairman and Chief Executive Officer, James G. Petcoff.

15. Employee Benefit Plans

The Company maintains a retirement savings plan under section 401(k) of the Internal Revenue Code (the “Plan”) for certain eligible employees.  Eligible employees electing to participate in the 401(k) plan may defer and contribute from 1% to 100% of their compensation on a pre‑tax or post-tax basis, subject to statutory limits.  The Company will match the employees’ contributions up to the first 4% of their compensation.  The Company’s Plan expense amounted to $501,000, $479,000 and $432,000 for the years ended December 31, 2019, 2018 and 2017, respectively.

16. Commitments and Contingencies

Legal proceedings

The Company and its subsidiaries are subject at times to various claims, lawsuits and proceedings relating principally to alleged errors or omissions in the placement of insurance, claims administration, and other business transactions arising in the ordinary course of business.  Where appropriate, the Company vigorously defends such claims, lawsuits and proceedings.  Some of these claims, lawsuits and proceedings seek damages, including consequential, exemplary or punitive damages, in amounts that could, if awarded, be significant.  Most of the claims, lawsuits and proceedings arising in the ordinary course of business are covered by the insurance policy at issue.  We account for such activity through the establishment of unpaid losses and LAE reserves.  In accordance with accounting guidance, if it is probable that a liability has been incurred as of the date of the financial statements and the amount of loss is reasonably estimable; then an accrual for the costs to resolve these claims is recorded by the Company in the accompanying consolidated balance sheets.  Periodic expenses related to the defense of such claims are included in the accompanying consolidated statements of operations.  On the basis of current information, the Company does not believe that there is a reasonable possibility that any material loss exceeding amounts already accrued, if any, will result from any of the claims, lawsuits and proceedings to which the Company is subject to, either individually, or in the aggregate.

Commitments

The Company is party to an agreement with an unaffiliated company to provide a policy administration, billing, and claims system for the Company.  The scope of work and fee structure has changed over time.  Currently, the agreement requires a minimum monthly payment of $30,000 with a fee schedule that is scalable with the premium volume, and expires on September 30, 2022.

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17. Segment Information

The Company is engaged in the sale of property and casualty insurance products and has organized its business model around three classes of insurance businesses: commercial lines, personal lines, and wholesale agency business. Within these three businesses, the Company offers various insurance products and insurance agency services. Such insurance businesses are engaged in underwriting and marketing insurance coverages, and administering claims processing for such policies. The Company views the commercial and personal lines segments as underwriting business (business that takes on insurance underwriting risk). The wholesale agency business provides non-risk bearing revenue through commissions and policy fees. The wholesale agency business increases the product options to the Company’s independent retail agents by offering both insurance products from the Insurance Company Subsidiaries as well as products offered by other insurers. This segment has expanded in 2019, resulting in its separate disclosure. Prior periods have been recast to reflect the separate disclosure of the wholesale agency segment.

The Company defines its operating segments as components of the business where separate financial information is available and used by the chief operating decision maker in deciding how to allocate resources to its segments and in assessing its performance. In assessing performance of its operating segments, the Company’s chief operating decision maker, the Chief Executive Officer, reviews a number of financial measures including gross written premiums, net earned premiums, losses and LAE, net of reinsurance recoveries, and other revenue and expenses. The primary measure used for making decisions about resources to be allocated to an operating segment and assessing its performance is segment underwriting gain or loss which is defined as segment revenues, consisting of net earned premiums and other income, less segment expenses, consisting of losses and LAE, policy acquisition costs and operating expenses of the operating segments. Operating expenses primarily include compensation and related benefits for personnel, policy issuance and claims systems, rent and utilities.  The Company markets, distributes and sells its insurance products through its own insurance agencies and a network of independent agents.  All of the Company’s insurance activities are conducted in the United States with a concentration of activity in Florida, Michigan, Texas and New York.  For the years ended December 31, 2019, 2018, and 2017, gross written premiums attributable to these four states were 51.6%, 51.3%, and 55.7% respectively, of the Company’s total gross written premiums.

The following table summarizes our net earned premiums:

	Net Earned Premium
	2019			2018			2017
Commercial		94	%		89	%		84	%
Personal		6	%		11	%		16	%
Total		100	%		100	%		100	%

The following provides a description of the Company’s two insurance businesses and product offerings within these businesses:

• Commercial lines—offers coverage for property, liability, automobile and other miscellaneous coverage primarily to owner-operated small and mid-sized businesses, professional organizations and hospitality businesses such as restaurants, bars and taverns.

• Personal lines—offers coverage for low-value dwelling, and wind-exposed homeowners.

The Agency business sells insurance products on behalf of the Company’s commercial and personal lines businesses as well as to third-party insurers. Certain acquisition costs incurred by the commercial and personal lines businesses are reflected as commission revenue for the Agency business and are eliminated in the Eliminations category.

In addition to the reportable segments, the Company maintains a Corporate and Other category to reconcile segment results to the consolidated totals.  The Corporate and Other category includes: (i) corporate operating expenses such as salaries and related benefits of the Company’s executive management team, some finance and information technology

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personnel, and other corporate headquarters expenses, (ii) interest expense on the Company’s debt obligations; (iii) depreciation and amortization on property and equipment, and (iv) all investment income activity.  All investment income activity is reported within net investment income, net realized investment gains, and change in fair value of equity securities on the consolidated statements of operations.  The Company’s assets on the consolidated balance sheet are not allocated to the reportable segments.

The following tables present information by reportable segment (dollars in thousands):

Year Ended December 31, 2019	Commercial Lines			Personal Lines			Under-writing			Wholesale Agency		Corp-orate			Elim-inations			Total
Gross written premiums	$	94,391		$	7,462		$	101,853		$	—	$	—		$	—		$	101,853
Net written premiums	$	81,966		$	5,758		$	87,724		$	—	$	—		$	—		$	87,724
Net earned premiums	$	83,858		$	5,231		$	89,089		$	—	$	—		$	—		$	89,089
Other income		216			143			359			9,073		224			(7,547	)		2,109
Segment revenue		84,074			5,374			89,448			9,073		224			(7,547	)		91,198
Loss and loss adjustment expenses, net		53,256			6,488			59,744			—		—			—			59,744
Policy acquisition costs		23,511			1,744			25,255			6,063		—			(6,407	)		24,911
Operating expenses		12,881			1,233			14,114			2,180		1,288			—			17,582
Segment expenses		89,648			9,465			99,113			8,243		1,288			(6,407	)		102,237
Segment underwriting gain (loss)		(5,574	)		(4,091	)		(9,665	)		830		(1,064	)		(1,140	)		(11,039	)
Investment income													4,031						4,031
Net realized investment gains													1,196						1,196
Change in fair value of equity securities													(427	)					(427	)
Interest expense													(2,882	)					(2,882	)
Income (loss) before income taxes	$	(5,574	)	$	(4,091	)	$	(9,665	)	$	830	$	854		$	(1,140	)	$	(9,121	)
Selected Balance Sheet Data:
Deferred policy acquisition costs	$	12,033		$	1,007										$	(1,134	)	$	11,906
Unearned premiums		47,674			3,829														51,503
Unpaid losses and loss adjustment expenses		101,850			5,396														107,246

95

Year Ended December 31, 2018	Commercial Lines			Personal Lines			Under-writing			Wholesale Agency		Corp-orate			Elim-inations			Total
Gross written premiums	$	97,694		$	6,674		$	104,368		$	—	$	—		$	—		$	104,368
Net written premiums	$	87,038		$	2,048		$	89,086		$	—	$	—		$	—		$	89,086
Net earned premiums	$	83,352		$	10,459		$	93,811		$	—	$	—		$	—		$	93,811
Other income		101			225			326			9,251		156			(8,151	)		1,582
Segment revenue		83,453			10,684			94,137			9,251		156			(8,151	)		95,393
Loss and loss adjustment expenses, net		53,065			9,450			62,515			—		—			—			62,515
Policy acquisition costs		23,584			3,846			27,430			6,255		—			(8,151	)		25,534
Operating expenses		14,662			1,088			15,750			1,564		369			—			17,683
Segment expenses		91,311			14,384			105,695			7,819		369			(8,151	)		105,732
Segment underwriting gain (loss)		(7,858	)		(3,700	)		(11,558	)		1,432		(213	)	$	—			(10,339	)
Investment income													3,336						3,336
Net realized investment gains													61						61
Change in fair value of equity securities													121						121
Interest expense													(2,644	)					(2,644	)
Income (loss) before income taxes	$	(7,858	)	$	(3,700	)	$	(11,558	)	$	1,432	$	661		$	—		$	(9,465	)
Selected Balance Sheet Data:
Deferred policy acquisition costs	$	11,258		$	753													$	12,011
Unearned premiums		49,549			3,303														52,852
Unpaid losses and loss adjustment expenses		87,643			5,164														92,807

Year Ended December 31, 2017	Commercial Lines			Personal Lines			Under-writing			Wholesale Agency		Corp-orate			Elim-inations			Total
Gross written premiums	$	92,112		$	22,172		$	114,284		$	—	$	—		$	—		$	114,284
Net written premiums	$	78,217		$	13,023		$	91,240		$	—	$	—		$	—		$	91,240
Net earned premiums	$	76,786		$	14,943		$	91,729		$	—	$	—		$	—		$	91,729
Other income		221			573			794			10,380		130			(9,744	)		1,560
Segment revenue		77,007			15,516			92,523			10,380		130			(9,744	)		93,289
Loss and loss adjustment expenses, net		55,701			18,216			73,917			—		—			—			73,917
Policy acquisition costs		22,366			6,537			28,903			7,086		—			(9,744	)		26,245
Operating expenses		10,585			1,939			12,524			2,248		2,595			—			17,367
Segment expenses		88,652			26,692			115,344			9,334		2,595			(9,744	)		117,529
Segment underwriting gain (loss)		(11,645	)		(11,176	)		(22,821	)		1,046		(2,465	)	$	—			(24,240	)
Investment income													2,728						2,728
Net realized investment gains													70						70
Other gains (losses)													750						750
Interest expense													(1,362	)					(1,362	)
Income (loss) before income taxes	$	(11,645	)	$	(11,176	)	$	(22,821	)	$	1,046	$	(279	)	$	—		$	(22,054	)
Selected Balance Sheet Data:
Deferred policy acquisition costs	$	10,116		$	2,665													$	12,781
Unearned premiums		45,951			11,721														57,672
Unpaid losses and loss adjustment expenses		76,586			11,310														87,896

96

18. Quarterly Financial Data (Unaudited)

The following is a summary of quarterly results of operations for 2019 and 2018 (in thousands, except per share and ratio data).  The fluctuations between periods and changes in reserves, as disclosed in Note 5, are due to the normal fluctuations in operations from quarter to quarter.  The combined ratios in 2018 have been recast as a result of the addition of the wholesale agency segment.  See Note 17 ~ Segment Information for further details.  

	1st Quarter			2nd Quarter			3rd Quarter			4th Quarter
2019
Gross written premiums	$	24,216		$	25,169		$	27,077		$	25,391
Net written premiums	$	20,322		$	21,434		$	23,806		$	22,162
Net earned premiums	$	21,687		$	21,349		$	22,775		$	23,278
Net investment income		910			1,051			1,210			860
Net realized gains		19			715			390			72
Change in fair value of equity securities		1,265			(915	)		(1,065	)		288
Other income		422			581			564			542
Losses and loss adjustment expenses, net		14,456			14,382			14,857			16,049
Policy acquisition costs		5,589			6,210			6,153			6,959
Operating expenses		4,323			4,340			4,297			4,622
Interest expense		710			725			720			727
Income tax expense (benefit)		11			—			(802	)		(122	)
Equity earnings (losses) in affiliates, net of tax		106			(8	)		121			167
Net income (loss)	$	(680	)	$	(2,884	)	$	(1,230	)	$	(3,028	)
Net income (loss) per share, basic and diluted (1)	$	(0.08	)	$	(0.34	)	$	(0.13	)	$	(0.32	)
Combined ratio		108.1	%		113.0	%		109.2	%		112.9	%
2018
Gross written premiums	$	23,737		$	26,562		$	26,629		$	27,440
Net written premiums	$	19,845		$	22,595		$	22,846		$	23,800
Net earned premiums	$	23,800		$	23,938		$	23,450		$	22,623
Net investment income		802			837			786			911
Net realized gains (losses)		161			12			(21	)		(91	)
Change in fair value of equity securities		(297	)		29			152			237
Other income		357			450			405			370
Losses and loss adjustment expenses, net		13,328			15,068			16,554			17,565
Policy acquisition costs		6,513			6,472			6,452			6,097
Operating expenses		4,187			4,303			4,786			4,407
Interest expense		619			617			598			810
Income tax expense (benefit)		18			10			24			—
Equity earnings in affiliates, net of tax		55			89			93			53
Net income (loss)	$	213		$	(1,113	)	$	(3,551	)	$	(4,776	)
Net income (loss) per share, basic and diluted (1)	$	0.02		$	(0.13	)	$	(0.42	)	$	(0.56	)
Combined ratio		99.7	%		108.8	%		118.2	%		123.0	%

(1) Due to changes in the outstanding shares of the Company (Note 10 ~ Shareholders' Equity)the weighted average common shares outstanding has fluctuated over the past two years and therefore the quarterly earnings (loss) per common share does not total the full-year earnings (loss) per common share stated on the face of the Consolidated Statements of Operations.

97

Schedule II

Conifer Holdings, Inc.

Condensed Financial Information of Registrant

Balance Sheets – Parent Company Only

(dollars in thousands)

	December 31,
	2019			2018
Assets
Investment in subsidiaries	$	75,607		$	72,419
Cash		506			1,133
Due from subsidiaries		893			403
Due from affiliate		214			445
Other assets		4,840			1,822
Total assets	$	82,060		$	76,222
Liabilities and Shareholders' Equity
Liabilities:
Debt	$	35,824		$	33,502
Other liabilities		3,511			557
Total liabilities		39,335			34,059
Shareholders' equity:
Common stock, no par value (100,000,000 shares authorized; 9,592,861   and 8,478,202 issued and outstanding, respectively)		91,816			86,533
Accumulated deficit		(49,580	)		(41,758	)
Accumulated other comprehensive income (loss)		489			(2,612	)
Total shareholders' equity		42,725			42,163
Total liabilities and shareholders' equity	$	82,060		$	76,222

98

Schedule II

Conifer Holdings, Inc.

Condensed Financial Information of Registrant

Statements of Comprehensive Income (Loss) – Parent Company Only

(dollars in thousands)

	Year Ended December 31,
	2019			2018			2017
Revenue
Management fees from subsidiaries	$	11,621		$	13,567		$	15,905
Other income		167			73			826
Total revenue		11,788			13,640			16,731
Expenses
Operating expenses		14,433			17,336			13,496
Interest expense		2,880			2,644			1,362
Total expenses		17,313			19,980			14,858
Income (loss) before equity in earnings (losses) of subsidiaries and   income tax expense (benefit)		(5,525	)		(6,340	)		1,873
Income tax expense (benefit)		30			(581	)		859
Income (loss) before equity earnings (losses) of subsidiaries		(5,555	)		(5,759	)		1,014
Equity earnings (losses) in subsidiaries		(2,267	)		(3,468	)		(22,556	)
Net income (loss)		(7,822	)		(9,227	)		(21,542	)
Other Comprehensive Income
Equity in other comprehensive income (loss) of subsidiaries		3,101			(1,770	)		717
Total Comprehensive income (loss)	$	(4,721	)	$	(10,997	)	$	(20,825	)

99

Schedule II

Conifer Holdings, Inc.

Condensed Financial Information of Registrant

Statement of Cash Flows – Parent Company Only

(dollars in thousands)

	Year Ended December 31,
	2019			2018			2017
Cash Flows from Operating Activities
Net income (loss)	$	(7,822	)	$	(9,227	)	$	(21,542	)
Adjustments to reconcile net income (loss) to net cash used in   operating activities:
Depreciation and amortization		447			379			347
Equity in undistributed (income) loss of subsidiaries		2,267			3,468			22,556
Incentive awards expenses - vesting of RSUs		959			970			895
Changes in operating assets and liabilities:
Due from subsidiaries		(490	)		110			(513	)
Due from affiliates		231			(97	)		598
Current income tax recoverable		21			(488	)		(485	)
Other assets		(3,098	)		(229	)		532
Other liabilities		2,954			(360	)		590
Net cash provided by (used in) operating activities		(4,531	)		(5,474	)		2,978
Cash Flows From Investing Activities
Contributions to subsidiaries		(3,854	)		—			(20,860	)
Dividends received from subsidiaries		1,500			—			—
Purchases of investments		—			400			(400	)
Purchases of property and equipment		(66	)		(86	)		(13	)
Net cash provided by (used in) investing activities		(2,420	)		314			(21,273	)
Cash Flows From Financing Activities
Proceeds received from issuance of shares of common stock		5,000			—			5,000
Repurchase of common stock		(676	)		(636	)		—
Borrowings under debt arrangements		2,000			25,300			32,000
Repayment of borrowings under debt arrangements		—			(19,500	)		(19,750	)
Stock and debt issuance costs		—			(1,454	)		(1,011	)
Net cash provided by financing activities		6,324			3,710			16,239
Net increase (decrease) in cash		(627	)		(1,450	)		(2,056	)
Cash at beginning of period		1,133			2,583			4,639
Cash at end of period	$	506		$	1,133		$	2,583
Supplemental Disclosure of Cash Flow Information:
Interest paid	$	2,547		$	3,116		$	876

100

Conifer Holding, Inc.

Condensed Financial Information of Registrant

Parent Company Only

Notes to Condensed Financial Statements

1. Accounting Policies

Organization

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

Basis of Presentation

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

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

Estimates and Assumptions

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

Dividends

The Parent received $1.5 million in cash dividends from its subsidiaries in 2019 and no cash dividends in 2018 and 2017.

2. Guarantees

The Parent has guaranteed the principal and interest obligations of a $10 million surplus note issued by Conifer Insurance Company to White Pine Insurance Company (both wholly owned subsidiaries). The note pays interest annually at a per annum rate of 4% and has no maturity. 

101

Schedule V

Conifer Holdings, Inc. and Subsidiaries

Valuation and Qualifying Accounts

For the Years Ended December 31, 2019, 2018 and 2017

(dollars in thousands)

	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
2019		12,606		966		—		—		13,572
2018		9,904		2,331		371		—		12,606
2017		8,389		1,515		—		—		9,904

102

CONIFER HOLDINGS, INC.

Exhibit Index

		Incorporated by Reference
Exhibit Number	Exhibit Description	Form	Period Ending	Exhibit / Appendix   Number	Filing Date	Filed / Furnished Herewith
3.1	Second Amended and Restated Articles of Incorporation of Conifer Holdings, Inc.	8-K	September 30, 2015	3.1	August 28, 2015
3.4	Amended and Restated Bylaws of Conifer Holdings, Inc.	S-1A	September 30, 2015	3.4	July 30, 2015
10.6	2015 Omnibus Incentive Plan	S-1		10.2	July 2, 2015
10.7	Lease Agreement, dated September 18, 2013, as amended	S-1		10.3	July 2, 2015
10.13	Employment agreements - Nicholas J. Petcoff, James G. Petcoff Andrew D. Petcoff, Brian J. Roney	10-K	December 31, 2016	10.13	March 15, 2017
10.14	Note Purchase Agreement dated September 29, 2017 between the Company and Elanus Capital Investments Master SP Series 3	10-Q	September 30, 2017	10.14	November 11, 2017
10.15	Credit Agreement Dated as of June 21, 2018 with The Huntington National Bank	10-K	December 31, 2018	10.15	March 13, 2019
10.16	First Amendment to Note Purchase Agreement dated as of June 21, 2018 between the Company and Elanus Capital Investments Master SP Series 3	10-K	December 31, 2018	10.16	March 13, 2019
10.17	Amended and Restated Note Purchase Agreement dated September 25, 2018 between the Company and Elanus Capital Investments Master SP Series 3	10-K	December 31, 2018	10.17	March 13, 2019
10.18	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	10-K	December 31, 2018	10.18	March 13, 2019
10.19	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	10-K	December 31, 2018	10.19	March 13, 2019
10.20	First Amendment to Credit Agreement dated as of December 27, 2018 between the Company and The Huntington National Bank	10-K	December 31, 2018	10.20	March 13, 2019

103

10.21	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	*
10.22	Second Amendment to Credit Agreement dated as of June 21, 2019 between the Company and The Huntington National Bank	*
21.1	List of Subsidiaries of the Company	*
23.1	Consent of Deloitte & Touche LLP, Independent Registered Public Accounting Firm	*
31.1	Section 302 Certification — CEO	*
31.2	Section 302 Certification — CFO	*
32.1*	Section 906 Certification — CEO	*
32.2*	Section 906 Certification — CFO	*
101.INS	XBRL Instance Document	*
101.SCH	XBRL Taxonomy Extension Schema Document	*
101.CAL	XBRL Taxonomy Extension Calculation Linkbase	*
101.DEF	XBRL Taxonomy Extension Definition Linkbase	*
101.LAB	XBRL Taxonomy Extension Label Linkbase	*
101.PRE	XBRL Taxonomy Extension Presentation Linkbase	*

*  This certification is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.

104

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

CONIFER HOLDINGS, INC.
By:	/s/ James G. Petcoff
	James G. Petcoff
	Chairman and Chief Executive Officer
	(Principal Executive Officer)
By:	/s/ Harold J. Meloche
	Harold J. Meloche
	Chief Financial Officer and Treasurer
	(Principal Accounting and  Financial Officer)

Dated:   March 12, 2020

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature	Title	Date
/s/ James G. Petcoff	Chairman and Chief Executive Officer	March 12, 2020
James G. Petcoff	(Principal Executive Officer)
/s/ Harold J. Meloche	Chief Financial Officer and Treasurer	March 12, 2020
Harold J. Meloche	(Principal Accounting and  Financial Officer)
/s/ Jeffrey Hakala	Director	March 12, 2020
Jeffrey Hakala
/s/ Nicholas J. Petcoff	Director	March 12, 2020
Nicholas J. Petcoff
/s/ Jorge Morales	Director	March 12, 2020
Jorge Morales
/s/ Richard J. Williams, Jr.	Director	March 12, 2020
Richard J. Williams, Jr.
/s/ Joseph D. Sarafa	Director	March 12, 2020
Joseph D. Sarafa
/s/ Isolde O'Hanlon	Director	March 12, 2020
Isolde O'Hanlon
/s/ Andrew Petcoff	Director	March 12, 2020
Andrew Petcoff
/s/ John Melstrom	Director	March 12, 2020
John Melstrom

105

EX-10.21

Exhibit 10.21

CONIFER HOLDINGS, INC.

___________________________________

SECOND AMENDMENT

Dated as of June 21, 2019

to the

AMENDED AND Restated NOTE PURCHASE AGREEMENT

Dated as of September 29, 2017

___________________________________

RE:$30,000,000 8% Subordinated Notes due 2032

SECOND Amendment to the Note Purchase Agreement

This Second Amendmentdated as of June 21, 2019 (the or this “First Amendment”) to the Note Purchase Agreement dated as of September 29, 2017, is between Conifer Holdings, Inc., a Michigan corporation (the “Company”), and each of the institutions which is a signatory to this First Amendment (collectively, the “Noteholders”).

Recitals:

A.The Company and each of the Purchasers listed on Schedule A to the Note Purchase Agreement (defined below) have heretofore entered into the Note Purchase Agreement dated as of September 29, 2017 (the “Note Purchase Agreement”).  The Company and each of the Purchasers listed on Schedule A to the Note Purchase Agreement (defined below) have heretofore also entered into the First Amendment to the Note Purchase Agreement dated as of September 29, 2017 on June 21, 2018, (the “First Amendment to the Note Purchase Agreement”).  The Company has heretofore issued $30,000,000 aggregate principal amount of its 8% Subordinated Notes due September 29, 2032 (the “Notes”) pursuant to the Note Purchase Agreement and the First Amendment to the Note Purchase Agreement.  The Noteholders constitute the Required Holders as defined in the Note Purchase Agreement.

B.The Company and the Noteholders now desire to amend the Note Purchase Agreement again, in the respects, but only in the respects, hereinafter set forth.

C.Capitalized terms used herein shall have the respective meanings ascribed thereto in the Note Purchase Agreement unless herein defined or the context shall otherwise require.

NOW, THEREFORE, upon the full and complete satisfaction of the conditions precedent to the effectiveness of this First Amendment set forth in Section 3.1 hereof, and in consideration of good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the Company and the Noteholders do hereby agree as follows:

Section 1. Amendments.

Section 1.1.The following definitions set forth in Schedule B of the Note Purchase Agreement are amended and restated in their entireties to read as follows:

“Indebtedness” means, with respect to any Person, (a) all indebtedness for borrowed money (excluding trade liabilities incurred in the ordinary course of business and payable in accordance with customary practices) which is evidenced by a note, bond, debenture or similar instrument, (b) all obligations under Capital Leases, (c) all obligations in respect of letters of credit, acceptances or similar obligations issued or created for the account of the Company or any of its Subsidiaries as of such date, other than insurance contracts issued by the Company or any of its Subsidiaries in the ordinary course of business, (d) net obligations in respect of interest rate or currency obligation swaps, hedges or similar arrangements (the amount of any such obligation to be equal at any time to the termination value of such agreement or arrangement giving rise to such

obligation that would be payable by such Person at such time), (e) amounts owed as deferred purchase price for the purchase of any property or services (other than trade payables incurred in the ordinary course of business), (f) all indebtedness of others secured by any Lien on property owned or acquired by such Person, whether or not the indebtedness secured thereby has been assumed, (g) all liabilities of Company or any Subsidiary under any securitization, any so-called “synthetic lease” or “tax ownership operating lease” or any other off balance sheet transaction which is the functional equivalent of or takes the place of borrowing but which does not constitute a liability on a balance sheet of such Person, based on the outstanding amount of such liability if it had been structured as a financing on the balance sheet of such Person, (h) all obligations of such Person to purchase, redeem, retire, void or otherwise make any payment in respect of any mandatorily redeemable capital stock, and (i) obligations to guarantee any of the foregoing obligations on behalf of any Person other than the Company and its Subsidiaries; provided that standard trust accounts, deposit requirements or obligations of regulatory agencies and any collateral requirements or obligations of other insurance business partners in the normal course of business shall not constitute Indebtedness.

“Insurance Subsidiary” means any Subsidiary of the Company, the ability of which to pay dividends is regulated by an Insurance Regulatory Authority or that is otherwise required to be regulated thereby in accordance with the applicable insurance rules and regulations of its state of domicile.

“Permitted Liens” means, with respect to any Person, (A) to the extent incurred in the normal course of business (i) rights of third parties with respect to standard trust accounts, (ii) deposit requirements or similar obligations of regulatory agencies, and (iii) any collateral requirements or obligations of other insurance business partners including the Federal Home Loan Bank of Indiana relating to loans issued to the Insurance Subsidiaries, (B) Liens securing Indebtedness permitted in Section 10.2(b), Section 10.2(c) or Section 10.2(e), (C) Liens for taxes, fees, assessments or other governmental charges which are not past due or remain payable without penalty or which are disputed in good faith and in appropriate proceedings, and for which the Company or a Subsidiary has established  adequate reserves therefor in accordance with GAAP on the books of the Company or such Subsidiary, (D) mechanics’, materialmen’s, banker’s, carriers’, warehousemen’s and similar liens and encumbrances arising in the ordinary course of business and securing obligations of such Person that are not overdue for a period of more than sixty (60) days or are disputed in good faith by appropriate proceedings, provided that in the case of any such dispute (i) any proceedings commenced for the enforcement of such liens and encumbrances shall have been duly suspended and (ii) such provision for the payment of such liens and encumbrances has been made in accordance with GAAP on the books of such Person, (E) liens arising in connection with worker’s compensation, unemployment insurance, old age pensions and social security benefits and similar statutory obligations which are not overdue or are disputed in good faith by appropriate proceedings, provided that in the case of any such dispute (i) any proceedings commenced for the enforcement of such liens shall have been duly suspended and (ii) such provision for the payment of such liens has been made in accordance with GAAP on the books of such Person, (F)(i) liens incurred in the ordinary course of business to secure the performance of statutory obligations arising in connection with progress payments or advance payments due under contracts with the United States government or any agency thereof entered into in the ordinary course of business and (ii) liens incurred or deposits made in the ordinary course of business to secure the performance of statutory obligations, bids, leases, fee and

2

expense arrangements with trustees and fiscal agents and other similar obligations (exclusive of obligations incurred in connection with the borrowing of money, any lease-purchase arrangements or the payment of the deferred purchase price of property), provided that full provision for the payment of all such obligations set forth in clauses (i) and (ii) has been made in accordance with GAAP on the books of such Person, (G) minor survey exceptions or minor encumbrances, easements or reservations, or rights of others for rights-of-way, utilities and other similar purposes, or zoning or other restrictions as to the use of real properties, which to not materially interfere with the business of such Person, (H) liens in respect of judgments that do not constitute an Event of Default under clause (i) of Section 12 and (I) other Liens incurred in the ordinary course or which are not material in amount or nature and which do not secure Indebtedness.

“Tangible Net Worth” means as of any date Net Worth less the Intangible Assets of the Company and its consolidated Subsidiaries, excluding the cumulative impact to Tangible Net Worth from changes in net unrealized gains or losses from investments since December 31, 2017, and plus the amount of liabilities recorded on the balance sheet attributable to deferred gains from the Adverse Development Cover, all determined as of such date.  For purposes of this Agreement, “Intangible Assets” means the amount (to the extent reflected in determining such Net Worth) of goodwill, patents, trademarks, service marks, trade names, customer lists, renewal rights, copyrights, organization, and research and/or development expenses.  For purposes of this definition, net unrealized gains or losses shall have the meaning as applied in GAAP without giving effect to the Financial Accounting Standards Board’s Accounting Standards Update No. 2016-01, Financial Instruments (Topic 825): Recognition and Measurement of Financial Assets and Financial Liabilities.

Section 1.2.The following shall be added as new definitions in alphabetical order to Schedule B of the Note Purchase Agreement:

“Adverse Development Cover” means the Swiss Re Adverse Development Cover as described in the document “ADC Binding Quote Conifer 2017 08 31.”

“Hedging Contract” means any foreign exchange contract, currency swap agreement, futures contract, commodities hedge agreement, interest rate protection agreement, interest rate future agreement, interest rate swap agreement, interest rate cap agreement, interest rate collar agreement, option agreement or any other similar hedging agreement or arrangement entered into by a Person in the ordinary course of business.

“Senior Loan Agreement” means that certain Credit Agreement dated as of June 21, 2018, between the Company and The Huntington National Bank, as the same may be amended or modified from time to time.

Section 1.3.Section 10.2 of the Note Purchase Agreement is amended and restated in its entirety to read as follows:

10.2Indebtedness.

The Company will not, and will not permit its Subsidiaries to, become or remain obligated for any Indebtedness, except:

3

(a) Indebtedness to each holder of a Note;

(b)Indebtedness of the Company under Capital Leases for office machinery in existence as of the Closing Date not to exceed in the aggregate $100,000;

(c)Indebtedness of the Company arising under the Senior Loan Agreement or any replacement or refinancing thereof in a principal amount not to exceed $10,000,000 in the aggregate;

(d)Indebtedness existing as of the Closing Date and listed on Schedule 10.2;

(e)Indebtedness (including purchase money indebtedness) incurred in connection with the acquisition, construction or improvement of fixed or capital assets (whether pursuant to a loan or a Capital Lease) in an aggregate amount not exceeding $1,000,000 during any single fiscal year of the Company and $3,000,000 in the aggregate during the term of this Agreement at any time outstanding, and any renewals or refinancing of such Indebtedness, on substantially the same terms or terms that are not more burdensome on the Company as in effect on the date of incurrence of such Indebtedness and otherwise in compliance with this Agreement, provided that no Default or Event of Default has occurred and is continuing, both before and after giving effect to the incurrence, renewal or refinancing thereof; provided, further, that the principal amount of such renewed or refinanced Indebtedness shall not exceed the principal amount of the Indebtedness so renewed or refinanced and shall in no event exceed the caps set forth above:

(f)Indebtedness in respect of Hedging Contracts authorized as required under Section 8.9 of the Senior Loan Agreement and Hedging Contracts entered into in the ordinary course of business related loans from the Federal Home Loan Bank of Indiana for interest rate management and not for speculative purposes.

(g)Guaranty Obligations to the extent permitted under Section 10.7;

(h)Indebtedness incurred in the ordinary course of business with respect to surety and appeal bonds, performance and return-of-money bonds and other similar obligations or to or for the benefit of any Person providing workers’ compensation, health, disability or other employee benefits or property, casualty or liability insurance, all in the ordinary course of business in accordance with customary industry practices, in amounts and for the purposes customary in the Company’s industry;

(i)additional unsecured Indebtedness of the Company and its Subsidiaries not otherwise described above, not in excess of $1,500,000 in aggregate principal amount at any one time outstanding, provided that no Default or Event of Default shall have occurred and be continuing at the time of incurring such Indebtedness or shall result from the incurrence of such Indebtedness; and

(j)Loans from the Federal Home Loan Bank of Indiana issued or created for the account of the Insurance Subsidiaries.

4

Section 1.4.Section 10.7 of the Note Purchase Agreement is amended and restated in its entirety to read as follows:

10.7Restriction on Guarantees.

The Company will not, and will not permit its Subsidiaries to, enter into any Guaranty of any Indebtedness of any other Person, except (i) by endorsement for deposit in the ordinary course of business, (ii) guarantees of Indebtedness otherwise permitted pursuant to Section 10.2, (iii) any guarantees required by regulatory authorities and (iv) guarantees of Indebtedness of other Persons (including joint ventures) to the extent such indebtedness is permitted hereunder and under the Senior Loan Agreement and such guarantees constitute investments permitted under Section 9.10 of the Senior Loan Agreement.

Section 1.5.Section 11.1 of the Note Purchase Agreement is amended and restated in its entirety to read as follows:

11.1Tangible Net Worth.

Maintain as of the end of each fiscal quarter of the Company a Tangible Net Worth of not less than $45,000,000 as of June 30, 2018 and each fiscal quarter thereafter.

Section 1.6.The section heading of Section 11.6 of the Note Purchase Agreement is amended and restated in its entirety to read as follows: “Consolidated Debt to Capital.”

Section 1.7.Section 11.6 of the Note Purchase Agreement is amended and restated in its entirety to read as follows:

Commencing with the fiscal quarter ending June 30, 2018, not permit the ratio of the total Consolidated Indebtedness (excluding from the calculation of Consolidated Indebtedness any loans from the Federal Home Loan Bank of Indiana the proceeds of which were used solely to make investments as permitted under Section 9.10(a) of the Senior Loan Agreement and Indebtedness under Hedging Contracts related to such Indebtedness) to the Total Capital to exceed 0.45 to 1.00.  For purposes of the foregoing calculation, solely with respect to any revolving credit facility of the Company permitted to be incurred hereunder, only amounts drawn or otherwise outstanding thereunder shall be considered Indebtedness.

Section 2. Representations and Warranties of the Company.

Section 2.1.To induce the Noteholders to execute and deliver this First Amendment (which representations shall survive the execution and delivery of this First Amendment), the Company represents and warrants to the Noteholders that:

(a)this First Amendment has been duly authorized, executed and delivered by the Company and this First Amendment constitutes the legal, valid and binding obligation, contract and agreement of the Company enforceable against the Company in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency,

5

reorganization, moratorium or similar laws or equitable principles relating to or limiting creditors’ rights generally;

(b)the execution, delivery and performance by the Company of this First Amendment (i) have been duly authorized by all requisite corporate action and, if required, shareholder action and (ii) do not require the consent or approval of any governmental or regulatory body or agency; and

(c)as of the date hereof and after giving effect to this First Amendment, no Default or Event of Default has occurred which is continuing.

Section 3. Conditions to Effectiveness of This First Amendment.

Section 3.1.This First Amendment shall not become effective until, and shall become effective when, each and every one of the following conditions shall have been satisfied:

(a)executed counterparts of this First Amendment, duly executed by the Company and the holders of at least 50% of the outstanding principal of the Notes, shall have been delivered to the holders of Notes;

(b)the holders of Notes shall have received evidence satisfactory to them that the Company has entered into the Senior Loan Agreement; and

(c)the recitals set forth above and the representations and warranties of the Company set forth in Section 2 hereof are true and correct on and with respect to the date hereof; and

(d)the Noteholders shall have been reimbursed for all reasonable and documented expenses incurred relating to this First Amendment.

Upon receipt of all of the foregoing, this First Amendment shall become effective.

Section 4. Miscellaneous.

Section 4.1.This First Amendment shall be construed in connection with and as part of the Note Purchase Agreement, and except as modified and expressly amended by this First Amendment, all terms, conditions and covenants contained in the Note Purchase Agreement and the Notes are hereby ratified and shall be and remain in full force and effect.

Section 4.2.Any and all notices, requests, certificates and other instruments executed and delivered after the execution and delivery of this First Amendment may refer to the Note Purchase Agreement without making specific reference to this First Amendment but nevertheless all such references shall include this First Amendment unless the context otherwise requires.

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Section 4.3.The descriptive headings of the various Sections or parts of this First Amendment are for convenience only and shall not affect the meaning or construction of any of the provisions hereof.

Section 4.4.This First Amendment shall be governed by and construed in accordance with New York law, excluding choice-of-law principles of the law of such State that would permit the application of the laws of a jurisdiction other than such State.

Section 4.5.The execution hereof by you shall constitute a contract between us for the uses and purposes hereinabove set forth, and this First Amendment may be executed in any number of counterparts, each executed counterpart constituting an original, but all together only one agreement.

[Signature Pages to Follow]

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IN WITNESS WHEREOF, the parties hereto have caused their duly authorized officers to execute and deliver this Second Amendment as of the date first set forth above.

CONIFER HOLDINGS, INC.

By

  Brian Roney

Its:  President

[Signature Page to Second Amendment]

Accepted and agreed to on the date first written above:

Elanus Capital Investments Master SP Series 3

By

Matthew Moniot

Its:Sole Director

[Signature Page to Second Amendment]

EX-10.22

Exhibit 10.22

SECOND AMENDMENT TO CREDIT AGREEMENT

THIS SECOND AMENDMENT TO CREDIT AGREEMENT (“Amendment”), is made as of the ____ day of June, 2019 (and is effective as of June 21, 2019), by and among CONIFER HOLDINGS, INC. (“Borrower”) and THE HUNTINGTON NATIONAL BANK (“Bank”).

RECITALS:

A.Borrower and Bank entered into a Credit Agreement dated as of June 21, 2018, as amended by a First Amendment to Credit Agreement dated December 27, 2018 (“Agreement”).

B.Borrower and Bank desire to amend the Agreement, all as set forth below.

NOW, THEREFORE, the parties agree as follows:

1.The definitions of Revolving Credit Maturity Date and Tangible Net Worth in Section 1.1 of the Agreement are amended to read as follows:

“Revolving Credit Maturity Date” shall mean June 19, 2020.

“Tangible Net Worth” means as of any date Net Worth less the Intangible Assets of the Borrower and its consolidated Subsidiaries, plus the amount of liabilities recorded on the balance sheet attributable to deferred gains from the Adverse Development Cover, all determined as of such date.  For purposes of this Agreement, “Intangible Assets” means the amount (to the extent reflected in determining such Net Worth) of goodwill, patents, trademarks, service marks, trade names, customer lists, renewal rights, copyrights, organization, and research and/or development expenses.”

2.The following definitions are added to Section 1.1 of the Agreement to read as follows:

“Beneficial Ownership Certification” shall mean a certification regarding beneficial ownership as required by the Beneficial Ownership Regulation.

“Beneficial Ownership Regulation” shall mean 31 CFR § 1010.230.

“CC Reserve” shall mean Fifty Thousand Dollars ($50,000).”

3.Section 2.3(v) of the Agreement is amended to read as follows:

“(v) after giving effect to such Advance, the aggregate principal amount of the outstanding Advances plus the Letter of Credit

Reserve, plus the CC Reserve does not exceed the Borrowing Limit; and”

4.Section 2.7 of the Agreement is amended to read as follows:

“2.7 Reduction of Obligations. If at any time and for any reason the aggregate outstanding principal amount of Advances hereunder to Borrower plus the Letter of Credit Reserve plus the CC Reserve, shall exceed the lesser of (i) the Revolving Credit Commitment and (ii) the Borrowing Limit, then Borrower shall immediately reduce any pending request for an Advance on such day by the amount of such excess and, to the extent any excess remains thereafter, immediately repay an amount of the Obligations equal to such excess. Borrower acknowledges that, in connection with any repayment required hereunder, it shall also be responsible for the reimbursement of any prepayment or other costs required under the terms of the Revolving Credit Note.”

5.Section 2.10 of the Agreement is amended to read as follows:

“2.10 Unused Fee. From the Effective Date to the payment in full in cash of all Advances under the Revolving Credit Note and the termination of any obligation under this Agreement or any Loan Document on the part of Bank to extend Advances under the Revolving Credit Note to Borrower, Borrower shall pay to Bank, an unused fee quarterly commencing on July 1, 2019, and on the first day of each quarter thereafter for the previous quarter. The unused fee payable to Bank shall be determined by multiplying twenty five (25) basis points per annum times the daily unused amount of the Revolving Credit Commitment (which shall reflect a reduction for the aggregate undrawn face amount of all issued, outstanding and undrawn Letters of Credit) each day during the relevant period or portion thereof. The unused fee shall be computed in the same manner as interest is computed in the Revolving Credit Note. Whenever any payment of the unused fee shall be due on a day which is not a Business Day, the date for payment thereof shall be extended to the next Business Day. It is expressly understood that the unused fee described in this Section 2.10 shall not be refundable under any circumstances.”

6.Section 8.16 is added to the Agreement to read as follows:

“8.16 Beneficial Ownership Certificate and Other Additional Information. Borrower shall promptly provide information and documentation reasonably requested by Bank for purposes of compliance with applicable “know your customer” and anti-money laundering rules and regulations, including, without limitation, the Patriot Act and the Beneficial Ownership Regulation, if applicable.”

7.Sections 8.15(a) and (f) of the Agreement are amended to read as follows:

2

“(a) Borrower shall maintain as of the end of each fiscal quarter (commencing June 30, 2019) of Borrower a Tangible Net Worth of not less than $30,000,000.

(f) Borrower shall, commencing with the fiscal quarter ending June 30, 2019, not permit the ratio of the total Consolidated Indebtedness (excluding from the calculation of Consolidated Indebtedness any FHLB Debt the proceeds of which were used solely to make investments of the types permitted under Section 9.10(a) and Indebtedness under Hedging Contracts related to such Indebtedness) to the Total Capital to exceed 0.55 to 1.00. For purposes of the foregoing calculation, outstanding Advances shall be considered Indebtedness.”

8.Borrower hereby represents and warrants that, after giving effect to the amendments contained herein, (a) execution, delivery and performance of this Amendment and any other documents and instruments required under this Amendment or the Agreement are within its corporate powers, have been duly authorized, are not in contravention of law or the terms of such Borrower’s Articles of Incorporation or Bylaws and do not require the consent or approval of any governmental body, agency, or authority; and this Amendment and any other documents and instruments required under this Amendment or the Agreement, will be valid and binding in accordance with their terms; (b) the continuing representations and warranties of Borrower set forth in the Agreement are true and correct on and as of the date hereof with the same force and effect as made on and as of the date hereof; (c) except as previously disclosed by Borrower to Bank, no Event of Default (as defined in the Agreement) or condition or event which, with the giving of notice or the running of time, or both, would constitute an Event of Default under the Agreement, as hereby amended, has occurred and is continuing as of the date hereof.

9.Borrower hereby waives, discharges, and forever releases Bank, Bank’s employees, officers, directors, attorneys, stockholders and successors and assigns, from and of any and all claims, causes of action, allegations or assertions that Borrower has or may have had at any time up through and including the date of this Amendment, against any or all of the foregoing, regardless of whether any such claims, causes of action, allegations or assertions arose as a result of Bank’s actions or omissions in connection with the Agreement, or any amendments, extensions or modifications thereto, or Bank’s administration of debt evidenced by the Agreement or otherwise.

10.Except as expressly provided herein, all of the terms and conditions of the Agreement remain unchanged and in full force and effect.

11.This Amendment shall be effective as of June 21, 2019 upon (a) execution of this Amendment by Borrower and Bank and (b) [discuss Amendment to Subordinated Notes].

3

IN WITNESS the due execution hereof as of the day and year first above written.

THE HUNTINGTON NATIONAL BANK CONIFER HOLDINGS, INC.

By:By:

Andrew R. CraigBrian Roney

Its: Senior Vice PresidentIts:President

By:

Nicholas Petcoff

Its:

[Signature Page to Second Amendment to Credit Agreement (16131097)

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration Statement No. 333-206355 on Form S-8 and Registration Statement No. 333-226778 on Form S-1 of our report dated March 12, 2020, relating to the consolidated financial statements and financial statement schedules of Conifer Holdings, Inc., appearing in this Annual Report on Form 10-K of Conifer Holdings, Inc. for the year ended December 31, 2019.

/s/ Deloitte & Touche LLP

Detroit, MI
March 12, 2020

EX-31.1

Exhibit 31.1

CHIEF EXECUTIVE OFFICER’S 302 CERTIFICATION

I, James G. Petcoff, certify that:

1.I have reviewed this Annual Report on Form 10-K of Conifer Holdings, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 12, 2020

/s/ James G. Petcoff

James G. Petcoff

Chief Executive Officer

(principal executive officer)

EX-31.2

Exhibit 31.2

CHIEF FINANCIAL OFFICER’S 302 CERTIFICATION

I, Harold J. Meloche, certify that:

1.I have reviewed this Annual Report on Form 10-K of Conifer Holdings, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 12, 2020

/s/ Harold J. Meloche

Harold J. Meloche

Chief Financial Officer

(principal financial officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Conifer Holdings, Inc. (the “Company”) on Form 10-K for the year ended December 31, 2019, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, James G. Petcoff, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: March 12, 2020

/s/ James G. Petcoff

James G. Petcoff

Chief Executive Officer

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Conifer Holdings, Inc. (the “Company”) on Form 10-K for the year ended December 31, 2019, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Harold J. Meloche, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: March 12, 2020

/s/ Harold J. Meloche

Harold J. Meloche

Chief Financial Officer

XML

Earnings Per Share - Basic and Diluted Income (Loss) Per Common Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2019	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Earnings Per Share [Abstract]
Net income (loss)	$ (3,028)	$ (1,230)	$ (2,884)	$ (680)	$ (4,776)	$ (3,551)	$ (1,113)	$ 213	$ (7,822)	$ (9,227)	$ (21,542)
Weighted average common shares outstanding, basic and diluted									8,880,107	8,543,876	7,867,344
Earnings (loss) per share, basic and diluted	$ (0.32)	$ (0.13)	$ (0.34)	$ (0.08)	$ (0.56)	$ (0.42)	$ (0.13)	$ 0.02	$ (0.88)	$ (1.08)	$ (2.74)

XML

Statutory Financial Data, Risk-Based Capital and Dividend Restrictions - Summary of Statutory Basis Information (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
CIC
Statutory Accounting Practices [Line Items]
Statutory capital and surplus	$ 46,206	$ 47,121	$ 35,848
RBC authorized control level	12,868	11,901	8,873
Statutory net income (loss)	$ (3,627)	$ 1,244	$ (6,993)
RBC %	359.00%	396.00%	404.00%
WPIC
Statutory Accounting Practices [Line Items]
Statutory capital and surplus	$ 23,261	$ 26,588	$ 26,075
RBC authorized control level	4,266	4,682	6,224
Statutory net income (loss)	$ (3,652)	$ 834	$ (13,737)
RBC %	545.00%	568.00%	419.00%

XML

Income Taxes - Narrative (Details) - USD ($)	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Operating Loss Carryforwards [Line Items]
Current income taxes receivable	$ 87,000	$ 79,000
Effective income tax rate	21.00%	21.00%	34.00%
Reduction in deferred tax expense related to loss reserve discounting		$ 42,735,000
Increase in deferred tax expense related to transitional loss reserve discounting		42,735,000
Valuation allowance	$ 13,572,000	$ 12,606,000
Domestic Tax Authority | Internal Revenue Service (IRS)
Operating Loss Carryforwards [Line Items]
Net operating loss carryforwards	60,000,000
Net operating loss carryforwards, subject to expiration	50,000,000
Net operating loss carryforwards, not subject to expiration	10,000,000
Net operating loss carryforwards subject to limitations	14,100,000
State Tax Authority
Operating Loss Carryforwards [Line Items]
Net operating loss carryforwards	$ 17,700,000
State Tax Authority | Minimum
Operating Loss Carryforwards [Line Items]
Income tax statute of limitations period	3 years
State Tax Authority | Maximum
Operating Loss Carryforwards [Line Items]
Income tax statute of limitations period	4 years

XML

Consolidated Statement of Changes in Shareholders' Equity - USD ($) $ in Thousands	Total	No Par, Common Stock	Retained Earnings (Accumulated deficit)	Accumulated Other Comprehensive Income (Loss)
Balance at beginning of period at Dec. 31, 2016	$ 67,794	$ 80,342	$ (11,468)	$ (1,080)
Balance at end of period (in shares) at Dec. 31, 2016		7,633,070
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net loss	(21,542)		(21,542)
Issuance of common stock in private placement	5,000	$ 5,000
Issuance of common stock in private placement (in shares)		800,000
Common stock issuance costs	(38)	$ (38)
Restricted stock units expense, net	895	$ 895
Restricted stock units expense, net (in shares)		87,258
Other comprehensive income (loss)	717			717
Balance at end of period at Dec. 31, 2017	52,826	$ 86,199	(33,010)	(363)
Balance at end of period (in shares) at Dec. 31, 2017		8,520,328
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Cumulative effect of adoption of ASU, net of taxes | ASU No. 2016-01			556	(556)
Cumulative effect of adoption of ASU, net of taxes | ASU No. 2018-02			(77)	77
Balances after cumulative effects	52,826	$ 86,199	(32,531)	(842)
Net loss	(9,227)		(9,227)
Repurchase of common stock	(636)	$ (636)
Repurchase of common stock (in shares)		(137,228)
Restricted stock units expense	970	$ 970
Restricted stock units expense (in shares)		95,102
Other comprehensive income (loss)	(1,770)			(1,770)
Balance at end of period at Dec. 31, 2018	42,163	$ 86,533	(41,758)	(2,612)
Balance at end of period (in shares) at Dec. 31, 2018		8,478,202
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net loss	(7,822)		(7,822)
Repurchase of common stock	(676)	$ (676)
Repurchase of common stock (in shares)		(163,527)
Issuance of common stock in private placement	5,000	$ 5,000
Issuance of common stock in private placement (in shares)		1,176,471
Restricted stock units expense	959	$ 959
Restricted stock units expense (in shares)		101,715
Other comprehensive income (loss)	3,101			3,101
Balance at end of period at Dec. 31, 2019	$ 42,725	$ 91,816	$ (49,580)	$ 489
Balance at end of period (in shares) at Dec. 31, 2019		9,592,861

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Summary of Significant Accounting Policies - Narrative (Details)	12 Months Ended
	Dec. 31, 2019 USD ($) class_business state	Jan. 01, 2019 USD ($)	Dec. 31, 2018 USD ($)	Oct. 13, 2018 USD ($)	Oct. 12, 2018 USD ($)	Sep. 30, 2018 USD ($)
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Number of types of business | class_business	3
Number of states in which entity operates | state	50
Discount rate	6.75%
Unrecognized tax benefits	$ 0		$ 0
Income tax penalties and interest accrued	$ 0		$ 0
Accounting Standards Update 2016-02
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Right-of-use asset		$ 3,900,000
Lease liability		$ 3,900,000
Minimum
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Lease term	5 years
Maximum
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Lease term	10 years
Senior Unsecured Notes | Senior Unsecured Notes
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Face amount of debt	$ 25,300,000			$ 25,300,000	$ 25,300,000	$ 25,300,000

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Investments - Gross Realized Gains and Losses (Details) - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2019	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Debt securities:
Gross realized gains									$ 269	$ 54	$ 32
Gross realized losses									(54)	(256)	(8)
Total debt securities									215	(202)	24
Equity securities:
Gross realized gains									1,020	337	76
Gross realized losses									(39)	(74)	(30)
Total equity securities									981	263	46
Total net investment realized gains	$ 72	$ 390	$ 715	$ 19	$ (91)	$ (21)	$ 12	$ 161	$ 1,196	$ 61	$ 70

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Consolidated Balance Sheets - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
Investment securities:
Debt securities, at fair value (amortized cost of $129,313 and $122,678, respectively)	$ 131,000	$ 120,440
Equity securities, at fair value (cost of $6,554 and $9,559, respectively)	7,306	10,737
Short-term investments, at fair value	31,426	8,925
Total investments	169,732	140,102
Cash and cash equivalents	7,464	10,792
Premiums and agents' balances receivable, net	20,168	21,247
Receivable from Affiliate	313	3,582
Reinsurance recoverables on unpaid losses	22,579	29,685
Reinsurance recoverables on paid losses	5,155	5,060
Prepaid reinsurance premiums	1,250	1,829
Deferred policy acquisition costs	11,906	12,011
Other assets	8,698	8,444
Total assets	247,265	232,752
Liabilities:
Unpaid losses and loss adjustment expenses	107,246	92,807
Unearned premiums	51,503	52,852
Debt	35,824	33,502
Deferred gain on ADC	0	5,677
Accounts payable and accrued expenses	9,967	5,751
Total liabilities	204,540	190,589
Commitments and contingencies	0	0
Shareholders' equity:
Common stock, no par value (100,000,000 shares authorized; 9,592,861 and 8,478,202 issued and outstanding, respectively)	91,816	86,533
Accumulated deficit	(49,580)	(41,758)
Accumulated other comprehensive income (loss)	489	(2,612)
Total shareholders' equity	42,725	42,163
Total liabilities and shareholders' equity	$ 247,265	$ 232,752

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Schedule V - Valuation and Qualifying Accounts

12 Months Ended

Dec. 31, 2019

Valuation And Qualifying Accounts [Abstract]

Schedule V - Valuation and Qualifying Accounts

	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
2019		12,606		966		—		—		13,572
2018		9,904		2,331		371		—		12,606
2017		8,389		1,515		—		—		9,904

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Commitments and Contingencies

12 Months Ended

Dec. 31, 2019

Commitments And Contingencies Disclosure [Abstract]

Commitments and Contingencies

16. Commitments and Contingencies

Legal proceedings

The Company and its subsidiaries are subject at times to various claims, lawsuits and proceedings relating principally to alleged errors or omissions in the placement of insurance, claims administration, and other business transactions arising in the ordinary course of business.  Where appropriate, the Company vigorously defends such claims, lawsuits and proceedings.  Some of these claims, lawsuits and proceedings seek damages, including consequential, exemplary or punitive damages, in amounts that could, if awarded, be significant.  Most of the claims, lawsuits and proceedings arising in the ordinary course of business are covered by the insurance policy at issue.  We account for such activity through the establishment of unpaid losses and LAE reserves.  In accordance with accounting guidance, if it is probable that a liability has been incurred as of the date of the financial statements and the amount of loss is reasonably estimable; then an accrual for the costs to resolve these claims is recorded by the Company in the accompanying consolidated balance sheets.  Periodic expenses related to the defense of such claims are included in the accompanying consolidated statements of operations.  On the basis of current information, the Company does not believe that there is a reasonable possibility that any material loss exceeding amounts already accrued, if any, will result from any of the claims, lawsuits and proceedings to which the Company is subject to, either individually, or in the aggregate.

Commitments

The Company is party to an agreement with an unaffiliated company to provide a policy administration, billing, and claims system for the Company.  The scope of work and fee structure has changed over time.  Currently, the agreement requires a minimum monthly payment of $30,000 with a fee schedule that is scalable with the premium volume, and expires on September 30, 2022.

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Unpaid Losses and Loss Adjustment Expenses (Tables)

12 Months Ended

Dec. 31, 2019

Insurance Loss Reserves [Abstract]

Schedule of the Changes in the Reserves for Losses and Loss Adjustment Expense

The table below provides the changes in the reserves for losses and LAE, net of recoverables from reinsurers, for the periods indicated (dollars in thousands):

	December 31,
	2019			2018			2017
Gross reserves - beginning of period	$	92,807		$	87,896		$	54,651
Less: reinsurance recoverables on unpaid losses		29,685			20,066			6,658
Plus: deferred gain on ADC		(5,677	)		—			—
Net reserves - beginning of period		68,799			67,830			47,993
Add: incurred losses and loss adjustment expenses, net   of reinsurance
Current period		49,192			53,482			64,458
Prior period		10,552			9,033			9,459
Total net incurred losses and loss adjustment   expenses		59,744			62,515			73,917
Deduct: loss and loss adjustment expense payments,   net of reinsurance
Current period		14,357			17,025			24,547
Prior period		29,519			44,521			29,533
Total net loss and loss adjustment expense   payments		43,876			61,546			54,080
Net reserves - end of period		84,667			68,799			67,830
Plus: reinsurance recoverables on unpaid losses		22,579			29,685			20,066
Less: deferred gain on ADC		—			(5,677	)		—
Gross reserves - end of period	$	107,246		$	92,807		$	87,896

Short-duration Insurance Contracts, Claims Development

The following tables represent cumulative incurred loss and allocated loss adjustment expenses ("ALAE"), net of reinsurance, by accident year and cumulative paid loss and ALAE, net of reinsurance, by accident year, for the years ended December 31, 2009 to 2019, as well as total IBNR and the cumulative number of reported claims for the year ended December 31, 2019, by reportable segment and accident year (dollars in thousands).

Commercial Lines
			Incurred loss and allocated loss adjustment expenses, net of reinsurance																				Total IBNR		Cumulative number of reported claims
Accident
Year	2009*		2010*		2011*		2012*		2013*		2014*		2015*		2016		2017		2018		2019		2019		2019
2009	$	11,400	$	12,066	$	10,312	$	8,943	$	8,232	$	8,403	$	8,359	$	8,414	$	8,442	$	8,441	$	8,441	$	—		877
2010				7,346		8,568		7,255		6,357		6,170		6,074		6,207		6,292		6,312		6,312		—		771
2011						6,753		5,758		5,326		5,049		4,932		4,903		4,935		4,933		4,933		—		590
2012								7,745		6,421		6,288		6,384		6,253		6,190		6,209		6,209		—		560
2013										10,018		9,435		9,893		10,237		11,252		11,218		11,624		50		608
2014												19,709		19,907		22,711		26,367		28,145		28,766		100		1,752
2015														22,442		26,633		31,861		34,478		36,372		200		2,352
2016																32,396		34,935		40,440		44,355		1,125		3,544
2017																		44,251		44,495		49,749		3,658		5,776
2018																				42,624		42,432		8,619		5,993
2019																						41,286		20,265		5,774
																	Total				$	280,479	$	34,018

Cumulative paid loss and allocated loss adjustment expenses, net of reinsurance
Accident			For the years ended December 31,
Year	2009*		2010*		2011*		2012*		2013*		2014*		2015*		2016		2017		2018		2019
2009	$	4,436	$	5,942	$	6,410	$	7,233	$	7,800	$	7,867	$	7,933	$	8,321	$	8,441	$	8,441	$	8,441
2010				3,066		4,488		5,219		5,910		6,040		6,065		6,166		6,258		6,312		6,312
2011						2,645		3,534		3,964		4,449		4,641		4,744		4,872		4,903		4,907
2012								2,325		3,703		4,696		5,558		5,994		6,065		6,209		6,209
2013										3,979		6,211		7,643		8,622		10,147		10,650		11,137
2014												8,715		13,977		17,458		22,446		25,609		27,544
2015														10,470		17,817		22,549		30,475		34,497
2016																10,255		19,135		27,785		37,967
2017																		12,448		23,020		34,205
2018																				10,375		19,799
2019																						10,078
																	Total				$	201,096
							Unpaid losses and ALAE - years 2009 through 2019														$	79,383
							Unpaid losses and ALAE - prior to 2009 (1)*															8
							Unpaid ADC															(2,075	)
							Unpaid losses and ALAE, net of reinsurance														$	77,316

*  Presented as unaudited required supplementary information.

(1) The Company's formation was in 2009, however, as a result of the acquisition of WPIC in 2010, incurred losses prior to the 2009 accident year remain outstanding.

Personal Lines
			Incurred loss and allocated loss adjustment expenses, net of reinsurance																				Total IBNR		Cumulative number of reported claims
Accident					For the years ended December 31,
Year	2009*		2010*		2011*		2012*		2013*		2014*		2015*		2016		2017		2018		2019		2019		2019
2009	$	667	$	639	$	634	$	634	$	634	$	634	$	634	$	634	$	634	$	634	$	634	$	—		65
2010				320		188		184		184		184		184		184		184		184		184		—		77
2011						1,678		1,758		1,981		2,031		2,030		2,045		2,027		2,024		2,024		—		717
2012								9,960		11,690		11,740		12,159		12,390		12,365		12,357		12,369		—		3,338
2013										18,034		17,996		18,925		19,138		19,167		19,202		19,222		—		5,206
2014												17,951		17,471		17,735		17,880		17,929		18,082		—		3,730
2015														10,877		13,445		14,721		15,285		15,364		—		2,141
2016																11,619		13,418		14,949		15,550		—		1,813
2017																		14,058		13,550		14,493		—		2,852
2018																				5,893		6,378		321		800
2019																						3,099		609		305
																	Total				$	107,399	$	929

			Cumulative paid loss and allocated loss adjustment expenses, net of reinsurance
Accident					For the years ended December 31,
Year	2009*		2010*		2011*		2012*		2013*		2014*		2015*		2016		2017		2018		2019
2009	$	537	$	634	$	634	$	634	$	634	$	634	$	634	$	634	$	634	$	634	$	634
2010				151		174		184		184		184		184		184		184		184		184
2011						787		1,292		1,633		1,859		1,983		2,021		2,024		2,024		2,024
2012								5,665		9,251		10,844		11,777		12,202		12,306		12,329		12,349
2013										9,955		15,883		18,052		18,600		19,014		19,174		19,214
2014												12,819		16,515		17,260		17,746		17,855		18,047
2015														7,771		11,873		13,844		15,159		15,250
2016																7,119		11,238		14,442		15,110
2017																		8,320		12,944		14,004
2018																				4,296		5,618
2019																						2,119
																	Total				$	104,553
											Unpaid losses and ALAE - years 2009 through 2019										$	2,846
											Unpaid losses and ALAE - prior to 2009 (1)*											—
											Unpaid ADC											(112	)
											Unpaid losses and ALAE, net of reinsurance										$	2,734

*  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			For the years ended December 31,
Year	2009*		2010*		2011*		2012*		2013*		2014*		2015*		2016		2017		2018		2019		2019		2019
2009		12,066		12,705		10,946		9,577		8,866		9,037		8,993		9,048		9,076		9,075		9,075		—		942
2010				7,666		8,756		7,439		6,541		6,354		6,258		6,391		6,476		6,496		6,496		—		848
2011						8,431		7,517		7,307		7,081		6,963		6,949		6,964		6,957		6,957		—		1,307
2012								17,705		18,111		18,028		18,544		18,642		18,554		18,566		18,578		—		3,898
2013										28,052		27,431		28,817		29,375		30,419		30,420		30,846		50		5,814
2014												37,660		37,378		40,446		44,247		46,074		46,848		100		5,482
2015														33,319		40,078		46,581		49,763		51,736		200		4,493
2016																44,015		48,353		55,389		59,905		1,125		5,357
2017																		58,309		58,045		64,242		3,658		8,628
2018																				48,517		48,810		8,940		6,793
2019																						44,385		20,874		6,079
																	Total					387,878		34,947

Cumulative paid loss and allocated loss adjustment expenses, net of reinsurance
Accident			For the years ended December 31,
Year	2009*		2010*		2011*		2012*		2013*		2014*		2015*		2016		2017		2018		2019
2009	$	4,973	$	6,576	$	7,043	$	7,867	$	8,434	$	8,501	$	8,567	$	8,955	$	9,075	$	9,075	$	9,075
2010				3,217		4,662		5,403		6,094		6,223		6,248		6,350		6,442		6,496		6,496
2011						3,432		4,826		5,597		6,308		6,624		6,766		6,897		6,927		6,931
2012								7,990		12,954		15,540		17,335		18,195		18,369		18,538		18,558
2013										13,934		22,094		25,695		27,223		29,162		29,824		30,351
2014												21,534		30,492		34,718		40,192		43,464		45,591
2015														18,241		29,690		36,393		45,634		49,747
2016																17,374		30,373		42,227		53,077
2017																		20,768		35,964		48,209
2018																				14,671		25,417
2019																						12,197
																	Total				$	305,649
							Unpaid losses and ALAE - years 2009 through 2019														$	82,229
							Unpaid losses and ALAE - prior to 2009 (1)*															8
							Unpaid ADC															(2,187	)
							Unpaid losses and ALAE, net of reinsurance														$	80,050

*  Presented as unaudited required supplementary information.

Short-duration Insurance Contracts, Reconciliation of Loss Development to Liability

The following table reconciles the loss development information to the consolidated balance sheet for the year ended December 31, 2019, by reportable segment (dollars in thousands).

	December 31, 2019
Net unpaid losses claims and ALAE
Commercial Lines	$	77,316
Personal Lines		2,734
Total unpaid losses and LAE, net of reinsurance		80,050
Reinsurance recoverable on losses and LAE
Commercial Lines		20,051
Personal Lines		2,528
Total reinsurance recoverable on unpaid losses and LAE		22,579
Unpaid ULAE		4,617
Total gross unpaid losses and LAE	$	107,246

Loss Duration Schedule

The following table represents the average annual percentage payout of incurred losses by age, net of reinsurance, for each reportable segment.

	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	35.7%	26.9%	18.4%	9.5%	4.8%	2.3%	1.3%	0.7%	0.3%	0.1%
Personal Lines	79.5%	11.8%	5.5%	1.9%	1.0%	0.3%	—%	—%	—%	—%
Total Lines	37.7%	26.2%	17.8%	9.2%	4.6%	2.2%	1.2%	0.7%	0.3%	0.1%

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Statutory Financial Data, Risk-Based Capital and Dividend Restrictions (Tables)

12 Months Ended

Dec. 31, 2019

Insurance [Abstract]

Summary of Statutory Basis Information

Summarized 2019, 2018, and 2017 statutory basis information for the non-captive Insurance Company Subsidiaries, which differs from generally accepted accounting principles, is as follows (dollars in thousands).

	CIC			WPIC
2019
Statutory capital and surplus	$	46,206		$	23,261
RBC authorized control level		12,868			4,266
Statutory net income (loss)		(3,627	)		(3,652	)
RBC %		359	%		545	%

	CIC			WPIC
2018
Statutory capital and surplus	$	47,121		$	26,588
RBC authorized control level		11,901			4,682
Statutory net income (loss)		1,244			834
RBC %		396	%		568	%

	CIC			WPIC
2017
Statutory capital and surplus	$	35,848		$	26,075
RBC authorized control level		8,873			6,224
Statutory net income (loss)		(6,993	)		(13,737	)
RBC %		404	%		419	%

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Earnings Per Share

12 Months Ended

Dec. 31, 2019

Earnings Per Share [Abstract]

Earnings Per Share

12. EarningsPer Share

Basic and diluted earnings (loss) per share are computed by dividing net income by the weighted average number of common shares outstanding during the period.  The following table presents the calculation of basic and diluted earnings (loss) per common share, as follows (dollars in thousands, except share and per share amounts):

	Year Ended December 31,
	2019			2018			2017
Net income (loss)	$	(7,822	)	$	(9,227	)	$	(21,542	)
Weighted average common shares, basic and diluted*		8,880,107			8,543,876			7,867,344
Earnings (loss) per share, basic and diluted	$	(0.88	)	$	(1.08	)	$	(2.74	)

*  The non-vested shares of the restricted stock units were anti-dilutive as of December 31, 2019, 2018, and 2017.  Therefore, the non-vested shares are excluded from earnings (loss) per share in December 31, 2019, 2018, and 2017.

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Income Taxes

12 Months Ended

Dec. 31, 2019

Income Tax Disclosure [Abstract]

Income Taxes

8.  Income Taxes

At December 31, 2019 and 2018, the Company had current income taxes receivable of $87,000 and $79,000, respectively, included in other assets in the consolidated balance sheets.

The income tax expense (benefit) is comprised of the following (dollars in thousands):

	Year Ended December 31,
	2019			2018		2017
Current tax expense (benefit)	$	27		$	52	$	(28	)
Deferred tax expense (benefit)		(940	)		—		(419	)
Total income tax expense (benefit)	$	(913	)	$	52	$	(447	)

The income tax expense (benefit) differed from the amounts computed by applying the statutory U.S. federal income tax rate of 21% in 2019 and 2018 and 34% in 2017 to pretax income as a result of the following (dollars in thousands):

	Year Ended December 31,
	2019			2018			2017
Income (loss) before income taxes	$	(9,121	)	$	(9,465	)	$	(22,054	)
Statutory U.S. federal income tax rate		(1,915	)		(1,988	)		(7,498	)
State income taxes, net of federal benefit		(230	)		(156	)		(106	)
Tax‑exempt investment income and dividend received deduction		(79	)		(70	)		(123	)
Nondeductible meals and entertainment		38			38			54
Valuation allowance on deferred tax assets		966			2,331			1,515
Change in federal tax rate		—			—			5,612
Other		307			(103	)		99
Income tax expense (benefit)	$	(913	)	$	52		$	(447	)
Effective tax rate		10.0	%		(0.5	)%		2.0	%

On December 22, 2017, the U.S. federal government enacted H.R. 1, “An Act to Provide for Reconciliation Pursuant to Titles II and V of the Concurrent Resolution on the Budget for Fiscal Year 2018” (the “Act”).  The Act provided for significant changes to corporate taxation including the decrease of the corporate tax rate from 34% to 21%.  In 2017, the Company completed an analysis of the impact of the Act and followed the additional guidance provided by the Security and Exchange Commission’s Staff Accounting Bulletin No. 118 (“SAB 118”).  There were no material provisional balances as of December 31, 2017.

In 2018, the Company recognized a measurement period adjustment of $42,735 related to loss reserve discounting, which reduced deferred tax expense.  The Company also recognized a measurement period adjustment of $42,735 related to the loss reserve discounting transitional adjustment, which increased deferred tax expense.  The measurement period adjustments were based upon obtaining additional information about facts and circumstances that existed as of the enactment date that, if known, would have affected the income tax effects initially reported as provisional amounts under the Act.  The measurement period adjustments had no effect on the effective tax rate for the year ending December 31, 2018.  The accounting for the income tax effects of the Act pursuant to SAB 118 has been completed as of the end of the December 22, 2018, measurement period and for the year ending December 31, 2018.

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are presented below (dollars in thousands):

	December 31,
	2019			2018
Deferred tax assets:
Discounted unpaid losses and loss adjustment expenses	$	1,264		$	937
Unearned premiums		2,266			2,329
Net operating loss carryforwards		12,593			10,144
Net unrealized losses on investments		—			222
State net operating loss carryforwards		873			567
Deferred gain from ADC		—			1,254
Other		248			123
Gross deferred tax assets		17,244			15,576
Less valuation allowance		(13,572	)		(12,606	)
Total deferred tax assets, net of allowance		3,672			2,970
Deferred tax liabilities:
Investment basis difference		28			22
Net unrealized gains on investments		512			—
Deferred policy acquisition costs		2,500			2,522
Intangible assets		115			112
Property and equipment		57			63
Other		460			366
Total deferred tax liabilities		3,672			3,085
Net deferred tax liability	$	—		$	(115	)

The net deferred tax liability is recorded in accounts payable and accrued expenses in the consolidated balance sheets.

As of December 31, 2019, the Company has net operating loss carryforwards for federal income tax purposes of $60.0 million, of which $50.0 million expire in tax years 2020 through 2039 and $10.0 million never expire. Of this amount, $14.1 million are limited in the amount that can be utilized in any one year and may expire before they are realized under Section 382 of the Internal Revenue Code.  The Company has state net operating loss carryforwards of $17.7 million, which expire in tax years 2021 through 2039.

Management assesses the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit the use of the existing deferred tax assets under the guidance of ASC 740.  A significant piece of objective negative evidence evaluated was the cumulative loss incurred over the three‑year period ended December 31, 2019.  Such objective evidence limits the Company's ability to consider other subjective evidence, such as management's projections for future growth.

Based on its evaluation, the Company has recorded a valuation allowance of $13.6 million and $12.6 million at December 31, 2019 and 2018, respectively, to reduce the deferred tax assets to an amount that is more likely than not to be realized based on the provisions in ASC 740.  The amount of the deferred tax assets considered realizable, however, could be adjusted if estimates of future taxable income during the carryforward period are reduced or if objective negative evidence in the form of cumulative losses is no longer present, and additional weight may be given to subjective evidence, such as the Company’s projections for growth.

The Company files consolidated federal income tax returns.  For the years before 2016, the Company is no longer subject to U.S. federal examinations; however, the Internal Revenue Service has the ability to review years prior to 2016 to the extent the Company utilized tax attributes carried forward from those prior years.  The statute of limitations on state filings is generally three to four years.

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Deferred Policy Acquisition Costs

12 Months Ended

Dec. 31, 2019

Deferred Policy Acquisition Costs Disclosures [Abstract]

Deferred Policy Acquisition Costs

4. Deferred Policy Acquisition Costs

The Company defers costs incurred which are incremental and directly related to the successful acquisition of new or renewal insurance business, net of corresponding amounts of ceded reinsurance commissions.  Net deferred policy acquisition costs are amortized and charged to expense in proportion to premium earned over the estimated policy term.  The Company anticipates that its deferred policy acquisition costs will be fully recoverable and there were no premium deficiencies for the years December 31, 2019, 2018, and 2017.  The activity in deferred policy acquisition costs, net of reinsurance transactions, is as follows (dollars in thousands):

	December 31,
	2019			2018			2017
Balance at beginning of period	$	12,011		$	12,781		$	13,290
Deferred policy acquisition costs		24,806			24,764			25,736
Amortization of policy acquisition costs		(24,911	)		(25,534	)		(26,245	)
Net change		(105	)		(770	)		(509	)
Balance at end of period	$	11,906		$	12,011		$	12,781

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Schedule II - Condensed Financial Information of Registrant - Balance Sheets Stock Information (Details) - $ / shares	Dec. 31, 2019	Dec. 31, 2018
Condensed Balance Sheet Statements, Captions [Line Items]
Common stock, par value (in dollars per share)	$ 0	$ 0
Common stock, shares authorized (in shares)	100,000,000	100,000,000
Common stock, shares issued (in shares)	9,592,861	8,478,202
Common stock, shares outstanding (in shares)	9,592,861	8,478,202
Parent Company
Condensed Balance Sheet Statements, Captions [Line Items]
Common stock, par value (in dollars per share)	$ 0	$ 0
Common stock, shares authorized (in shares)	100,000,000	100,000,000
Common stock, shares issued (in shares)	9,592,861	8,478,202
Common stock, shares outstanding (in shares)	9,592,861	8,478,202

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Stock-based Compensation - Narrative (Details) - 2015 Omnibus Incentive Plan - USD ($)	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares authorized (in shares)					1,377,000
Restricted Stock Units (RSUs)
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period					5 years
Number of shares issued upon conversion, per share (in shares)					1
Shares granted in period (in shares)		70,000		111,281	390,352
Shares granted in period		$ 404,000		$ 909,000	$ 4,100,000
Share-based compensation expense	$ 959,000	$ 970,000	$ 948,000
Share-based compensation expense not yet recognized	$ 1,300,000

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Commitments and Contingencies (Details)	Dec. 31, 2019 USD ($)
Agreement to Design and Implement New Systems
Other Commitments [Line Items]
Minimum monthly payment	$ 30,000

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Schedule V - Valuation and Qualifying Accounts (Details) - Valuation for Deferred Tax Assets - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
SEC Schedule, 12-09, Movement in Valuation Allowances and Reserves [Roll Forward]
Balance at Beginning of Period	$ 12,606	$ 9,904	$ 8,389
Charged to Expense	966	2,331	1,515
Decrease to Other Comprehensive Income	0	371	0
Deductions from Allowance Account	0	0	0
Balance at End of Period	$ 13,572	$ 12,606	$ 9,904

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Quarterly Financial Data (Unaudited) (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2019	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Quarterly Financial Information Disclosure [Abstract]
Gross written premiums	$ 25,391	$ 27,077	$ 25,169	$ 24,216	$ 27,440	$ 26,629	$ 26,562	$ 23,737	$ 101,853	$ 104,368	$ 114,284
Net written premiums	22,162	23,806	21,434	20,322	23,800	22,846	22,595	19,845	87,724	89,086	91,240
Net earned premiums	23,278	22,775	21,349	21,687	22,623	23,450	23,938	23,800	89,089	93,811	91,729
Net investment income	860	1,210	1,051	910	911	786	837	802	4,031	3,336	2,728
Net realized gains (losses)	72	390	715	19	(91)	(21)	12	161	1,196	61	70
Change in fair value of equity securities	288	(1,065)	(915)	1,265	237	152	29	(297)	(427)	121	0
Other gains (losses)									0	0	750
Other income	542	564	581	422	370	405	450	357	2,109	1,582	1,560
Losses and loss adjustment expenses, net	16,049	14,857	14,382	14,456	17,565	16,554	15,068	13,328	59,744	62,515	73,917
Policy acquisition costs	6,959	6,153	6,210	5,589	6,097	6,452	6,472	6,513	24,911	25,534	26,245
Operating expenses	4,622	4,297	4,340	4,323	4,407	4,786	4,303	4,187	17,582	17,683	17,367
Interest expense	727	720	725	710	810	598	617	619	2,882	2,644	1,362
Income tax expense (benefit)	(122)	(802)	0	11	0	24	10	18	(913)	52	(447)
Equity earnings (losses) in affiliates, net of tax	167	121	(8)	106	53	93	89	55	386	290	65
Net income (loss)	$ (3,028)	$ (1,230)	$ (2,884)	$ (680)	$ (4,776)	$ (3,551)	$ (1,113)	$ 213	$ (7,822)	$ (9,227)	$ (21,542)
Net income (loss) per share, basic and diluted	$ (0.32)	$ (0.13)	$ (0.34)	$ (0.08)	$ (0.56)	$ (0.42)	$ (0.13)	$ 0.02	$ (0.88)	$ (1.08)	$ (2.74)
Combined ratio (percentage)	112.90%	109.20%	113.00%	108.10%	123.00%	118.20%	108.80%	99.70%

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Reinsurance - Narrative (Details) - USD ($)		3 Months Ended	12 Months Ended			42 Months Ended	48 Months Ended	62 Months Ended
	Sep. 28, 2017	Sep. 30, 2018	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2018	Dec. 31, 2018	Dec. 31, 2019
Effects of Reinsurance [Line Items]
Assumed premiums written			$ 33,459,000	$ 31,078,000	$ 28,033,000
Ceded premium written			14,129,000	15,282,000	23,044,000
Ceded premiums earned			14,114,000	15,377,000	23,008,000
Hurricane
Effects of Reinsurance [Line Items]
Ceded premium written			495,000	1,000,000	806,000
Ceded premiums earned			495,000	1,000,000	806,000
Maximum | Homeowners Lines
Effects of Reinsurance [Line Items]
Amount retained (excess of)			300,000	300,000	300,000
Liability Risk | Maximum
Effects of Reinsurance [Line Items]
Amount retained (excess of)			400,000	500,000	500,000
Property Risk | Maximum
Effects of Reinsurance [Line Items]
Amount retained (excess of)			400,000	300,000	500,000
Workers Compensation and Casualty Clash
Effects of Reinsurance [Line Items]
Amount retained (excess of)			1,000,000
Amount reinsured			19,000,000
Casualty Clash
Effects of Reinsurance [Line Items]
Amount retained (excess of)							$ 2,000,000
Amount reinsured							18,000,000
Liability Reinsurance Policy
Effects of Reinsurance [Line Items]
Amount retained (excess of)			400,000
Amount reinsured			600,000
Property Reinsurance Policy | Property product line
Effects of Reinsurance [Line Items]
Amount retained (excess of)			2,000,000	4,000,000	4,000,000			$ 300,000
Amount reinsured								$ 2,700,000
Insured property value			$ 28,000,000	$ 96,000,000	$ 106,000,000
Termination date			Jun. 01, 2020	Jun. 01, 2019	Jun. 01, 2018
Property Reinsurance Policy | Commercial Lines
Effects of Reinsurance [Line Items]
Amount retained (excess of)			$ 300,000	$ 300,000		$ 2,000,000
Amount reinsured			3,700,000
Insured property value				200,000		$ 2,000,000
Multiple Line Reinsurance Policy | Commercial Lines
Effects of Reinsurance [Line Items]
Amount retained (excess of)			400,000				500,000
Amount reinsured			$ 600,000				$ 1,500,000
Quota Share Reinsurance Agreement | Maximum | Commercial Lines
Effects of Reinsurance [Line Items]
Reinsurance retention policy, co-participation (percentage)			100.00%
Quota Share Reinsurance Agreement | Minimum | Commercial Lines
Effects of Reinsurance [Line Items]
Reinsurance retention policy, co-participation (percentage)			90.00%
Adverse Development Cover Reinsurance Agreement
Effects of Reinsurance [Line Items]
Amount reinsured	$ 17,500,000
Reinsurance retention policy, co-participation (percentage)	10.00%
Ceded premiums earned				10,300,000	$ 7,200,000
Adverse Development Cover Reinsurance Agreement | Maximum
Effects of Reinsurance [Line Items]
Amount reinsured	$ 17,500,000
Consideration for reinsurance		$ 7,200,000
Quota Share Reinsurance Agreement, Other Arrangements | Maximum | Other insurance product line
Effects of Reinsurance [Line Items]
Reinsurance retention policy, co-participation (percentage)			100.00%
Insurance Fronting Arrangement
Effects of Reinsurance [Line Items]
Assumed premiums written			$ 33,500,000	$ 31,100,000	$ 28,000,000

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Unpaid Losses and Loss Adjustment Expenses - Narrative (Details) - USD ($)		3 Months Ended								12 Months Ended
	Sep. 28, 2017	Dec. 31, 2019	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017	Jun. 30, 2017	Dec. 31, 2016
Liability for Claims and Claims Adjustment Expense [Line Items]
Prior year adjustments										$ 10,552,000	$ 9,033,000	$ 9,459,000
Losses and loss adjustment expenses, net		$ 16,049,000	$ 14,857,000	$ 14,382,000	$ 14,456,000	$ 17,565,000	$ 16,554,000	$ 15,068,000	$ 13,328,000	59,744,000	62,515,000	73,917,000
Unpaid losses and loss adjustment expenses		107,246,000				92,807,000				107,246,000	92,807,000	87,896,000		$ 54,651,000
Amount ceded										14,114,000	15,377,000	23,008,000
Ceded losses recognized as a benefit										32,022,000	23,440,000	24,642,000
Deferred ceded losses		$ 0				5,677,000				0	5,677,000
Adverse Development Cover Reinsurance Agreement
Liability for Claims and Claims Adjustment Expense [Line Items]
Amount reinsured	$ 17,500,000
Reinsurance retention policy, co-participation (percentage)	10.00%
Amount ceded											10,300,000	7,200,000
Ceded losses recognized as a benefit											4,600,000
Deferred ceded losses						5,700,000					5,700,000
Catastrophe Reinsurance Treaty
Liability for Claims and Claims Adjustment Expense [Line Items]
Amount reinsured											4,000,000	4,000,000
Amount ceded											10,000,000	5,200,000
Ceded premiums						$ 1,000,000					1,000,000	806,000
Maximum | Adverse Development Cover Reinsurance Agreement
Liability for Claims and Claims Adjustment Expense [Line Items]
Amount reinsured	$ 17,500,000
Reinsurance retention policy carried reserves threshold	19,500,000
Unpaid losses and loss adjustment expenses													$ 57,500,000
Minimum | Adverse Development Cover Reinsurance Agreement
Liability for Claims and Claims Adjustment Expense [Line Items]
Reinsurance retention policy carried reserves threshold	$ 1,400,000
Unpaid losses and loss adjustment expenses													$ 36,600,000
Hurricane
Liability for Claims and Claims Adjustment Expense [Line Items]
Prior year adjustments											960,000
Losses and loss adjustment expenses, net											583,000	5,400,000
Amount ceded										495,000	1,000,000	806,000
Commercial Line
Liability for Claims and Claims Adjustment Expense [Line Items]
Prior year adjustments										7,600,000	6,200,000	$ 7,200,000
Losses and loss adjustment expenses, net										(5,700,000)
Catastrophe losses incurred (percentage)												34.00%
Commercial Line | Hurricane
Liability for Claims and Claims Adjustment Expense [Line Items]
Losses and loss adjustment expenses, net											(377,000)
Personal Line
Liability for Claims and Claims Adjustment Expense [Line Items]
Prior year adjustments										3,000,000	2,800,000	$ 2,300,000
Catastrophe losses incurred (percentage)												66.00%
Personal Line | Hurricane
Liability for Claims and Claims Adjustment Expense [Line Items]
Losses and loss adjustment expenses, net											960,000
Hospitality
Liability for Claims and Claims Adjustment Expense [Line Items]
Prior year adjustments										11,000,000
Small Business Lines
Liability for Claims and Claims Adjustment Expense [Line Items]
Prior year adjustments										2,400,000
Florida Homeowners
Liability for Claims and Claims Adjustment Expense [Line Items]
Prior year adjustments										$ 1,700,000	2,000,000	$ 1,700,000
Commercial Liability Line
Liability for Claims and Claims Adjustment Expense [Line Items]
Prior year adjustments											4,200,000	5,100,000
Texas Homeowners
Liability for Claims and Claims Adjustment Expense [Line Items]
Prior year adjustments											$ 727,000
Commercial Property Line
Liability for Claims and Claims Adjustment Expense [Line Items]
Prior year adjustments												1,600,000
Commercial Automobile Line
Liability for Claims and Claims Adjustment Expense [Line Items]
Prior year adjustments												$ 500,000

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Reinsurance (Tables)

12 Months Ended

Dec. 31, 2019

Reinsurance Disclosures [Abstract]

Summary of the Effects of Reinsurance

The following table presents the effects of reinsurance and assumption transactions on written premiums, earned premiums and losses and LAE (dollars in thousands). The 2019, 2018 and 2017 ceded written and earned premium amounts include $495,000, $1.0 million and $806,000 of reinsurance reinstatement costs relating to Hurricane Irma, respectively.

	Year Ended December 31,
	2019			2018			2017
Written premiums:
Direct	$	68,394		$	73,290		$	86,251
Assumed		33,459			31,078			28,033
Ceded		(14,129	)		(15,282	)		(23,044	)
Net written premiums	$	87,724		$	89,086		$	91,240
Earned premiums:
Direct	$	70,911		$	80,691		$	87,656
Assumed		32,292			28,497			27,081
Ceded		(14,114	)		(15,377	)		(23,008	)
Net earned premiums	$	89,089		$	93,811		$	91,729
Loss and loss adjustment expenses:
Direct	$	66,256		$	65,284		$	79,035
Assumed		25,510			20,671			19,524
Ceded		(32,022	)		(23,440	)		(24,642	)
Net loss and LAE	$	59,744		$	62,515		$	73,917
Percentage of Assumed Written Premiums to Net Written Premiums		38.1	%		34.9	%		30.7	%

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Accumulated Other Comprehensive Income (Loss) (Tables)

12 Months Ended

Dec. 31, 2019

Equity [Abstract]

Schedule of Accumulated Other Comprehensive Income (Loss)

The following table presents changes in accumulated other comprehensive income (loss) for unrealized gains and losses on available-for-sale securities (dollars in thousands):

	Year Ended December 31,
	2019			2018
Balance at beginning of period	$	(2,612	)	$	(363	)
Cumulative effect of adoption of ASU No. 2016-01,    net of taxes		—			(556	)
Cumulative effect of adoption of ASU No. 2018-02,    net of taxes		—			77
Balance after cumulative effects		(2,612	)		(842	)
Other comprehensive income (loss) before   reclassifications		2,901			(1,825	)
Less: amounts reclassified from accumulated other   comprehensive income (loss)		(200	)		(55	)
Net current period other comprehensive income (loss)		3,101			(1,770	)
Balance at end of period	$	489		$	(2,612	)

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Debt

12 Months Ended

Dec. 31, 2019

Debt Disclosure [Abstract]

Debt

7. Debt

At December 31, 2019, the Company's debt was comprised of three instruments: $25.3 million of publicly traded senior unsecured notes which were issued in September and October of 2018, a $10.0 million line of credit which commenced in June 2018, and $10.5 million of privately placed subordinated notes (the “Subordinated Notes”).  A summary of the Company's outstanding debt is as follows (dollars in thousands):

	December 31,
	2019		2018
Senior unsecured notes	$	24,288	$	24,018
Subordinated notes		9,536		9,484
Line of credit		2,000		—
Total	$	35,824	$	33,502

On September 24, 2018, the Company issued $22.0 million of public senior unsecured notes (the "Notes").  Maturing on September 30, 2023, the Notes bear interest at a rate of 6.75% per annum, payable quarterly at the end of March, June, September and December.  The Company may redeem the Notes, in whole or in part, at face value at any time after September 30, 2021.

On October 12, 2018 the Company issued an additional $3.3 million of the Notes as the underwriters fully exercised their over-allotment option.  The total aggregate principal amount of Notes sold by the Company in the public offering increased to $25.3 million.  Proceeds from the Notes were primarily used to pay down $19.5 million of the Subordinated Notes.

Effective September 24, 2018, the Company amended the terms of the Subordinated Notes to reduce the principle value to $10.5 million, change the maturity to September 30, 2038 and modify the call provisions.  The amended Subordinated Notes bear interest at a rate of 7.5% per annum until September 30, 2023, and 12.5% thereafter, and allow for four quarterly interest payment deferrals.  Interest is payable quarterly at the end of March, June, September and December.  Beginning September 30, 2021, the Company may redeem the Subordinated Notes, in whole or in part, for a call premium of $1.1 million.  The call premium escalates each quarter to ultimately $1.75 million on September 30, 2023, then steps up to $3.05 million on December 31, 2023, and increases quarterly at a 12.5% per annum rate thereafter.  The debt covenants are consistent with the original Subordinated Note terms.  The Company paid a $105,000 loan origination fee on the effective date.  The company recorded the Subordinated Notes amendment as a debt modification and retained the unamortized debt issuance costs from the original loan which will be amortized over the 20-year life of the amended Subordinated Notes in conjunction with the $105,000 origination fee.

The carrying value of the Notes and Subordinated Notes are offset by $1.0 million and $965,000 of debt issuance costs, respectively.  The debt issuance costs will be amortized through interest expense over the life of the loans.

The Subordinated Notes contain various restrictive covenants that relate to the Company’s minimum tangible net worth, minimum fixed-charge coverage ratios, dividend paying capacity, reinsurance retentions, and risk-based capital ratios.  At December 31, 2019, the Company was in compliance with all of its debt financial covenants.

On June 21, 2018, the Company entered into a $10.0 million line of credit.  The line of credit bears interest at the London Interbank rate ("LIBOR") plus 2.75% per annum, payable monthly.  The agreement includes several covenants, including but not limited to a minimum tangible net worth, a minimum fixed-charge coverage ratio, and minimum statutory risk-based capital levels.  As of December 31, 2019, the Company had $2.0 million outstanding on the line of credit, and was in compliance with all of its debt financial covenants.

On September 29, 2017, the Company executed $30.0 million of Subordinated Notes.  These Subordinated Notes were amended as described, above.  These Subordinated Notes had a maturity date of September 29, 2032, bore interest, payable quarterly at a fixed annual rate of 8.0%, and allowed for up to four quarterly interest deferrals.  On the fifth and tenth anniversary of the notes, the interest rate reset to 1,250 basis points and 1,500 basis points, respectively, above the 5-year mid-swap rate.

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Fair Value Measurements

12 Months Ended

Dec. 31, 2019

Fair Value Disclosures [Abstract]

Fair Value Measurements

3. Fair Value Measurements

The Company’s financial instruments include assets carried at fair value, as well as debt carried at face value, net of unamortized debt issuance costs, but disclosed at fair value in this note.  Fair value is defined as the price that would be received for an asset or paid to transfer a liability in the principal most advantageous market for the asset or liability in an orderly transaction between market participants.  In determining fair value, the Company applies the market approach, which uses prices and other relevant data based on market transactions involving identical or comparable assets and liabilities.  The inputs to valuation techniques used to measure fair value are prioritized into a three-level hierarchy.  The hierarchy gives the highest priority to quoted prices from sources independent of the reporting entity (“observable inputs”) and the lowest priority to prices determined by the reporting entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (“unobservable inputs”).  The fair value hierarchy is as follows:

Level 1—Valuations that are based on quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2—Valuations that are based on observable inputs (other than Level 1 prices) such as quoted prices for similar assets or liabilities at the measurement date; quoted prices in markets that are not active; or other inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability.

Level 3—Unobservable inputs that are supported by little or no market activity.  The unobservable inputs represent the Company’s best assumption of how market participants would price the assets or liabilities.

NAV—The fair values of investment company limited partnership investments are based on the capital account balances reported by the investment funds subject to their management review and adjustment. These capital account balances reflect the fair value of the investment funds.

The following tables present the Company’s assets and liabilities measured at fair value, classified by the valuation hierarchy as of December 31, 2019 and 2018 (dollars in thousands):

	December 31, 2019
	Fair Value Measurements Using
	Total		Level 1		Level 2		Level 3
Assets:
Debt Securities:
U.S. Government	$	9,452	$	—	$	9,452	$	—
State and local government		14,933		—		14,933		—
Corporate debt		40,394		—		40,394		—
Asset-backed securities		19,575		—		19,575		—
Mortgage-backed securities		31,515		—		31,515		—
Commercial mortgage-backed securities		10,043		—		10,043		—
Collateralized mortgage obligations		5,088		—		5,088		—
Total debt securities		131,000		—		131,000		—
Equity Securities		6,599		6,335		264		—
Short-term investments		31,426		31,426		—		—
Total marketable investments measured    at fair value	$	169,025	$	37,761	$	131,264	$	—
Investments measured at NAV:
Investment in limited partnership		707
Total assets measured at fair value	$	169,732
Liabilities:
Senior Unsecured Notes *	$	22,669	$	—	$	22,669	$	—
Subordinated Notes *		11,222		—		—		11,222
Total Liabilities measured at fair value	$	33,891	$	—	$	22,669	$	11,222

*  Carried at face value of debt net of unamortized debt issuance costs on the consolidated balance sheet

	December 31, 2018
	Fair Value Measurements Using
	Total		Level 1		Level 2		Level 3
Assets:
Debt Securities:
U.S. Government	$	15,185	$	—	$	15,185	$	—
State and local government		15,788		—		15,788		—
Corporate debt		29,846		—		29,846		—
Asset-backed securities		24,284		—		24,284		—
Mortgage-backed securities		29,240		—		29,240		—
Commercial mortgage-backed securities		3,953		—		3,953		—
Collateralized mortgage obligations		2,144		—		2,144		—
Total debt securities		120,440		—		120,440		—
Equity Securities		6,587		6,323		264		—
Short-term investments		8,925		8,925		—		—
Total marketable investments measured at fair value	$	135,952	$	15,248	$	120,704	$	—
Investments measured at NAV:
Investment in limited partnership		4,150
Total assets measured at fair value	$	140,102
Liabilities:
Senior Unsecured Notes *	$	21,252	$	—	$	21,252	$	—
Subordinated Notes *		10,640		—		—		10,640
Total Liabilities measured at fair value	$	31,892	$	—	$	21,252	$	10,640

*  Carried at face value of debt net of unamortized debt issuance costs on the consolidated balance sheet

Level 1 investments consist of equity securities traded in an active exchange market.  The Company uses unadjusted quoted prices for identical instruments to measure fair value.  Level 1 also includes money market funds and other interest-bearing deposits at banks, which are reported as short-term investments.  The fair value measurements that were based on Level 1 inputs comprise 22.2% of the fair value of the total investment portfolio as of December 31, 2019.

Level 2 investments include debt securities and equity securities, which consist of U.S. government agency securities, state and local municipal bonds (including those held as restricted securities), corporate debt securities, mortgage-backed and asset-backed securities.  The fair value of securities included in the Level 2 category were based on the market values obtained from a third party pricing service that were evaluated using pricing models that vary by asset class and incorporate available trade, bid and other observable market information.  The third party pricing service monitors market indicators, as well as industry and economic events.  The fair value measurements that were based on Level 2 inputs comprise 77.3% of the fair value of the total investment portfolio as of December 31, 2019.

The Company obtains pricing for each security from independent pricing services, investment managers or consultants to assist in determining fair value for its Level 2 investments.  To validate that these quoted prices are reasonable estimates of fair value, the Company performs various quantitative and qualitative procedures, such as (i) evaluation of the underlying methodologies, (ii) analysis of recent sales activity, (iii) analytical review of our fair values against current market prices and (iv) comparison of the pricing services’ fair value to other pricing services’ fair value for the same investment.  No markets for the investments were determined to be inactive at period-ends.  Based on these procedures, the Company did not adjust the prices or quotes provided from independent pricing services, investment managers or consultants.

As of December 31, 2019 and 2018, Level 3 liabilities are entirely comprised of the Company's subordinated notes.  In determining the fair value of the subordinated debt outstanding at December 31, 2019 and 2018, the security attributes (issue date, maturity, coupon, calls, etc.) and market rates on September 24, 2018 (the date of the restated and amended agreement which was repriced at that time) were fed into a valuation model.  A lognormal trinomial interest rate lattice was created within the model to compute the option adjusted spread (“OAS”) which is the amount, in basis points, of interest rate required to be paid under the debt agreement over the risk-free U.S. Treasury rates. The OAS was then fed back into the model along with the December 31, 2019 and 2018, U.S. Treasury rates, respectively.  A new lattice was generated and the fair value was computed from the OAS.  There were no changes in assumptions of credit risk from the issuance date.

The Company’s policy on recognizing transfers between hierarchy levels is applied at the end of each reporting period.  There were no transfers between Levels 1, 2 and 3 for the years ended December 31, 2019 and 2018, respectively.

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Accumulated Other Comprehensive Income (Loss)

12 Months Ended

Dec. 31, 2019

Equity [Abstract]

Accumulated Other Comprehensive Income (Loss)

11. Accumulated Other Comprehensive Income (Loss)

The following table presents changes in accumulated other comprehensive income (loss) for unrealized gains and losses on available-for-sale securities (dollars in thousands):

	Year Ended December 31,
	2019			2018
Balance at beginning of period	$	(2,612	)	$	(363	)
Cumulative effect of adoption of ASU No. 2016-01,    net of taxes		—			(556	)
Cumulative effect of adoption of ASU No. 2018-02,    net of taxes		—			77
Balance after cumulative effects		(2,612	)		(842	)
Other comprehensive income (loss) before   reclassifications		2,901			(1,825	)
Less: amounts reclassified from accumulated other   comprehensive income (loss)		(200	)		(55	)
Net current period other comprehensive income (loss)		3,101			(1,770	)
Balance at end of period	$	489		$	(2,612	)

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Schedule II - Condensed Financial Information of Registrant - Balance Sheets (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Assets
Due from affiliate	$ 313	$ 3,582
Other assets	8,698	8,444
Total assets	247,265	232,752
Liabilities:
Debt	35,824	33,502
Total liabilities	204,540	190,589
Shareholders' equity:
Common stock, no par value (100,000,000 shares authorized; 9,592,861 and 8,478,202 issued and outstanding, respectively)	91,816	86,533
Accumulated deficit	(49,580)	(41,758)
Accumulated other comprehensive income (loss)	489	(2,612)
Total shareholders' equity	42,725	42,163	$ 52,826	$ 67,794
Total liabilities and shareholders' equity	247,265	232,752
Parent Company
Assets
Investment in subsidiaries	75,607	72,419
Cash	506	1,133
Due from subsidiaries	893	403
Due from affiliate	214	445
Other assets	4,840	1,822
Total assets	82,060	76,222
Liabilities:
Debt	35,824	33,502
Other liabilities	3,511	557
Total liabilities	39,335	34,059
Shareholders' equity:
Common stock, no par value (100,000,000 shares authorized; 9,592,861 and 8,478,202 issued and outstanding, respectively)	91,816	86,533
Accumulated deficit	(49,580)	(41,758)
Accumulated other comprehensive income (loss)	489	(2,612)
Total shareholders' equity	42,725	42,163
Total liabilities and shareholders' equity	$ 82,060	$ 76,222

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Schedule II - Condensed Financial Information of Registrant - Statements of Comprehensive Income (Loss) (Details) - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2019	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Revenue
Revenue									$ 95,998	$ 98,911	$ 96,837
Other income	$ 542	$ 564	$ 581	$ 422	$ 370	$ 405	$ 450	$ 357	2,109	1,582	1,560
Expenses
Operating expenses	4,622	4,297	4,340	4,323	4,407	4,786	4,303	4,187	17,582	17,683	17,367
Interest expense	727	720	725	710	810	598	617	619	2,882	2,644	1,362
Total expenses									105,119	108,376	118,891
Income tax expense (benefit)	(122)	(802)	0	11	0	24	10	18	(913)	52	(447)
Net income (loss)	$ (3,028)	$ (1,230)	$ (2,884)	$ (680)	$ (4,776)	$ (3,551)	$ (1,113)	$ 213	(7,822)	(9,227)	(21,542)
Other Comprehensive Income
Equity in other comprehensive income (loss) of subsidiaries									3,101	(1,770)	717
Parent Company
Revenue
Revenue									11,788	13,640	16,731
Other income									167	73	826
Expenses
Operating expenses									14,433	17,336	13,496
Interest expense									2,880	2,644	1,362
Total expenses									17,313	19,980	14,858
Income (loss) before equity in earnings (losses) of subsidiaries and income tax expense (benefit)									(5,525)	(6,340)	1,873
Income tax expense (benefit)									30	(581)	859
Income (loss) before equity earnings (losses) of subsidiaries									(5,555)	(5,759)	1,014
Equity earnings (losses) in subsidiaries									(2,267)	(3,468)	(22,556)
Net income (loss)									(7,822)	(9,227)	(21,542)
Other Comprehensive Income
Equity in other comprehensive income (loss) of subsidiaries									3,101	(1,770)	717
Total Comprehensive income (loss)									(4,721)	(10,997)	(20,825)
Parent Company | Management fees from subsidiaries
Revenue
Revenue									$ 11,621	$ 13,567	$ 15,905

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Stock-based Compensation - RSU Activity (Details) - 2015 Omnibus Incentive Plan - Restricted Stock Units (RSUs) - $ / shares	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Number of Units
Beginning period, outstanding (in shares)	264,000	307,000	416,000
Units granted (in shares)		70,000		111,281	390,352
Units vested (in shares)	(102,000)	(95,000)	(95,000)
Units forfeited (in shares)	(6,000)	(18,000)	(14,000)
Ending period, outstanding (in shares)	156,000	264,000	307,000	416,000
Weighted Average Grant-Date Fair Value
Beginning period, outstanding (in dollars per share)	$ 8.91	$ 9.84	$ 9.87
Units granted (in dollars per share)		5.76
Units vested (in dollars per share)	9.47	9.84	9.97
Units forfeited (in dollars per share)	7.37	8.96	9.94
Ending period, outstanding (in dollars per share)	$ 8.45	$ 8.91	$ 9.84	$ 9.87

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Segment Information - Narrative (Details) - business	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Segment Reporting Information [Line Items]
Number of businesses	3
Gross Written Premiums | Geographic Concentration Risk | Florida, Michigan, Texas and New York
Segment Reporting Information [Line Items]
Concentration risk	51.60%	51.30%	55.70%

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Unpaid Losses and Loss Adjustment Expenses - Loss Duration (Details)	Dec. 31, 2019
Short-duration Insurance Contracts, Historical Claims Duration [Line Items]
Year 1	37.70%
Year 2	26.20%
Year 3	17.80%
Year 4	9.20%
Year 5	4.60%
Year 6	2.20%
Year 7	1.20%
Year 8	0.70%
Year 9	0.30%
Year 10, and onwards	0.10%
Commercial Lines
Short-duration Insurance Contracts, Historical Claims Duration [Line Items]
Year 1	35.70%
Year 2	26.90%
Year 3	18.40%
Year 4	9.50%
Year 5	4.80%
Year 6	2.30%
Year 7	1.30%
Year 8	0.70%
Year 9	0.30%
Year 10, and onwards	0.10%
Personal Lines
Short-duration Insurance Contracts, Historical Claims Duration [Line Items]
Year 1	79.50%
Year 2	11.80%
Year 3	5.50%
Year 4	1.90%
Year 5	1.00%
Year 6	0.30%
Year 7	0.00%
Year 8	0.00%
Year 9	0.00%
Year 10, and onwards	0.00%

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Unpaid Losses and Loss Adjustment Expenses - Changes in the Liability for Unpaid Losses and Loss Adjustment Expenses (Details) - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2019	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Liability for Unpaid Claims and Claims Adjustment Expense [Roll Forward]
Gross reserves - beginning of period				$ 92,807				$ 87,896	$ 92,807	$ 87,896	$ 54,651
Less: reinsurance recoverables on unpaid losses				29,685				20,066	29,685	20,066	6,658
Plus: deferred gain on ADC	$ 0				$ (5,677)				0	(5,677)
Net reserves - beginning of period				68,799				67,830	68,799	67,830	47,993
Add: incurred losses and loss adjustment expenses, net of reinsurance
Current period									49,192	53,482	64,458
Prior period									10,552	9,033	9,459
Total net incurred losses and loss adjustment expenses	16,049	$ 14,857	$ 14,382	$ 14,456	17,565	$ 16,554	$ 15,068	$ 13,328	59,744	62,515	73,917
Deduct: loss and loss adjustment expense payments, net of reinsurance
Current period									14,357	17,025	24,547
Prior period									29,519	44,521	29,533
Total net loss and loss adjustment expense payments									43,876	61,546	54,080
Net reserves - end of period	84,667				68,799				84,667	68,799	67,830
Plus: reinsurance recoverables on unpaid losses	22,579				29,685				22,579	29,685	20,066
Gross reserves - end of period	$ 107,246				$ 92,807				$ 107,246	$ 92,807	$ 87,896

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Income Taxes - Components of Deferred Tax Assets and Liabilities (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
Deferred tax assets:
Discounted unpaid losses and loss adjustment expenses	$ 1,264	$ 937
Unearned premiums	2,266	2,329
Net operating loss carryforwards	12,593	10,144
Net unrealized losses on investments		222
State net operating loss carryforwards	873	567
Deferred gain from ADC		1,254
Other	248	123
Gross deferred tax assets	17,244	15,576
Less valuation allowance	(13,572)	(12,606)
Total deferred tax assets, net of allowance	3,672	2,970
Deferred tax liabilities:
Investment basis difference	28	22
Net unrealized gains on investments	512	0
Deferred policy acquisition costs	2,500	2,522
Intangible assets	115	112
Property and equipment	57	63
Other	460	366
Total deferred tax liabilities	$ 3,672	3,085
Net deferred tax liability		$ (115)

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Debt - Outstanding Senior Debt (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
Debt Instrument [Line Items]
Debt	$ 35,824	$ 33,502
Senior Unsecured Notes
Debt Instrument [Line Items]
Debt	24,288	24,018
Subordinated notes
Debt Instrument [Line Items]
Debt	9,536	9,484
Line of credit
Debt Instrument [Line Items]
Debt	$ 2,000	$ 0

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Accumulated Other Comprehensive Income (Loss) - Accumulated Other Comprehensive Income (Loss) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017	Jan. 01, 2019	Jan. 01, 2018
AOCI Attributable to Parent, Net of Tax [Roll Forward]
Balance at beginning of period	$ 42,163	$ 52,826	$ 67,794
Balances after cumulative effects			52,826
Other comprehensive income (loss)	3,101	(1,770)	717
Balance at end of period	42,725	42,163	52,826
Accumulated Other Comprehensive Income (Loss)
AOCI Attributable to Parent, Net of Tax [Roll Forward]
Balance at beginning of period	(2,612)	(363)	(1,080)
Balances after cumulative effects			(842)	$ (2,612)	$ (842)
Other comprehensive income (loss) before reclassifications	2,901	(1,825)
Less: amounts reclassified from accumulated other comprehensive income (loss)	(200)	(55)
Other comprehensive income (loss)	3,101	(1,770)	717
Balance at end of period	$ 489	$ (2,612)	(363)
Accounting Standards Update 2016-01 | Accumulated Other Comprehensive Income (Loss)
AOCI Attributable to Parent, Net of Tax [Roll Forward]
Cumulative effect of adoption of ASU, net of taxes			(556)		(556)
Accounting Standards Update 2018-02 | Accumulated Other Comprehensive Income (Loss)
AOCI Attributable to Parent, Net of Tax [Roll Forward]
Cumulative effect of adoption of ASU, net of taxes			$ 77		$ 77

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Investments - Available-for-sale Securities (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
Schedule Of Available For Sale Securities [Line Items]
Debt securities, Cost or Amortized Cost	$ 129,313	$ 122,678
Debt securities, Gross Unrealized Gain	1,940	248
Debt securities, Gross Unrealized Losses	(253)	(2,486)
Debt securities, Estimated Fair Value	131,000	120,440
U.S. Government
Schedule Of Available For Sale Securities [Line Items]
Debt securities, Cost or Amortized Cost	9,392	15,360
Debt securities, Gross Unrealized Gain	66	3
Debt securities, Gross Unrealized Losses	(6)	(178)
Debt securities, Estimated Fair Value	9,452	15,185
State and local government
Schedule Of Available For Sale Securities [Line Items]
Debt securities, Cost or Amortized Cost	14,388	15,847
Debt securities, Gross Unrealized Gain	545	115
Debt securities, Gross Unrealized Losses		(174)
Debt securities, Estimated Fair Value	14,933	15,788
Corporate debt
Schedule Of Available For Sale Securities [Line Items]
Debt securities, Cost or Amortized Cost	39,550	30,423
Debt securities, Gross Unrealized Gain	865	74
Debt securities, Gross Unrealized Losses	(21)	(651)
Debt securities, Estimated Fair Value	40,394	29,846
Asset-backed securities
Schedule Of Available For Sale Securities [Line Items]
Debt securities, Cost or Amortized Cost	19,549	24,468
Debt securities, Gross Unrealized Gain	81	24
Debt securities, Gross Unrealized Losses	(55)	(208)
Debt securities, Estimated Fair Value	19,575	24,284
Mortgage-backed securities
Schedule Of Available For Sale Securities [Line Items]
Debt securities, Cost or Amortized Cost	31,389	30,377
Debt securities, Gross Unrealized Gain	238	18
Debt securities, Gross Unrealized Losses	(112)	(1,155)
Debt securities, Estimated Fair Value	31,515	29,240
Commercial mortgage-backed securities
Schedule Of Available For Sale Securities [Line Items]
Debt securities, Cost or Amortized Cost	9,972	4,025
Debt securities, Gross Unrealized Gain	116	5
Debt securities, Gross Unrealized Losses	(45)	(77)
Debt securities, Estimated Fair Value	10,043	3,953
Collateralized mortgage obligations
Schedule Of Available For Sale Securities [Line Items]
Debt securities, Cost or Amortized Cost	5,073	2,178
Debt securities, Gross Unrealized Gain	29	9
Debt securities, Gross Unrealized Losses	(14)	(43)
Debt securities, Estimated Fair Value	$ 5,088	$ 2,144

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Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Cash Flows from Operating Activities
Net income (loss)	$ (7,822)	$ (9,227)	$ (21,542)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization	453	386	372
Amortization of bond premium and discount, net	568	455	532
Net realized investment gains	(1,196)	(61)	(70)
Change in fair value of equity securities	427	(121)	0
Restricted stock unit expenses	959	970	895
Other	(1,210)	(290)	(484)
(Increase) decrease in:
Premiums, agents' balances and other receivables	4,348	(789)	2,249
Reinsurance recoverables	7,011	(10,206)	(17,041)
Prepaid reinsurance premiums	579	(748)	3,039
Deferred policy acquisition costs	105	770	509
Other assets	(489)	(1,252)	4,239
Increase (decrease) in:
Unpaid losses and loss adjustment expenses	14,439	4,911	33,245
Unearned premiums	(1,349)	(4,820)	(454)
Reinsurance premiums payable		(3,299)	3,299
Accounts payable and other liabilities	(1,462)	6,313	302
Net cash provided by (used in) operating activities	15,361	(17,008)	9,090
Cash Flows From Investing Activities
Purchases of investments	(157,235)	(91,293)	(218,492)
Proceeds from maturities and redemptions of investments	22,401	22,827	25,213
Proceeds from sales of investments	109,882	80,774	167,338
Purchases of property and equipment	(61)	(86)	(13)
Net cash provided by (used in) investing activities	(25,013)	12,222	(25,954)
Cash Flows From Financing Activities
Proceeds received from issuance of shares of common stock	5,000		5,000
Repurchase of common stock	(676)	(636)
Borrowings under debt arrangements	2,100	25,300	32,000
Repayment of borrowings under debt arrangements	(100)	(19,500)	(19,750)
Stock and debt issuance costs		(1,454)	(1,011)
Net cash provided by financing activities	6,324	3,710	16,239
Net increase (decrease) in cash	(3,328)	(1,076)	(625)
Cash at beginning of period	10,792	11,868	12,493
Cash at end of period	7,464	10,792	11,868
Supplemental Disclosure of Cash Flow Information:
Interest paid	2,547	3,116	876
Net income taxes paid (refunded)	35	(83)
Increase (decrease) in net payable for securities	$ 1,579	$ (3,642)	$ 2,691

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Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
Statement Of Financial Position [Abstract]
Debt securities, amortized cost	$ 129,313	$ 122,678
Equity securities, amortized cost	$ 6,554	$ 9,559
Common stock, par value (in dollars per share)	$ 0	$ 0
Common stock, shares authorized (in shares)	100,000,000	100,000,000
Common stock, shares issued (in shares)	9,592,861	8,478,202
Common stock, shares outstanding (in shares)	9,592,861	8,478,202

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Investments - Narrative (Details) - USD ($)	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Investments Debt And Equity Securities [Abstract]
Proceeds from sale of available-for-sale debt securities	$ 33,700,000	$ 14,600,000	$ 1,800,000
Gross realized gain	274,000	7,000	106,000
Gross realized loss	53,000	199,000	$ 37,000
Other equity investments	665,000,000
Deposits held in trust accounts	8,000,000	8,500,000
Deposits, held in trust for collateral requirements	$ 58,400,000	$ 45,400,000

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Schedule II - Condensed Financial Information of Registrant

12 Months Ended

Dec. 31, 2019

Condensed Financial Information Of Parent Company Only Disclosure [Abstract]

Schedule II - Condensed Financial Information of Registrant

Schedule II

Conifer Holdings, Inc.

Condensed Financial Information of Registrant

Balance Sheets – Parent Company Only

(dollars in thousands)

	December 31,
	2019			2018
Assets
Investment in subsidiaries	$	75,607		$	72,419
Cash		506			1,133
Due from subsidiaries		893			403
Due from affiliate		214			445
Other assets		4,840			1,822
Total assets	$	82,060		$	76,222
Liabilities and Shareholders' Equity
Liabilities:
Debt	$	35,824		$	33,502
Other liabilities		3,511			557
Total liabilities		39,335			34,059
Shareholders' equity:
Common stock, no par value (100,000,000 shares authorized; 9,592,861   and 8,478,202 issued and outstanding, respectively)		91,816			86,533
Accumulated deficit		(49,580	)		(41,758	)
Accumulated other comprehensive income (loss)		489			(2,612	)
Total shareholders' equity		42,725			42,163
Total liabilities and shareholders' equity	$	82,060		$	76,222

Schedule II

Conifer Holdings, Inc.

Condensed Financial Information of Registrant

Statements of Comprehensive Income (Loss) – Parent Company Only

(dollars in thousands)

	Year Ended December 31,
	2019			2018			2017
Revenue
Management fees from subsidiaries	$	11,621		$	13,567		$	15,905
Other income		167			73			826
Total revenue		11,788			13,640			16,731
Expenses
Operating expenses		14,433			17,336			13,496
Interest expense		2,880			2,644			1,362
Total expenses		17,313			19,980			14,858
Income (loss) before equity in earnings (losses) of subsidiaries and   income tax expense (benefit)		(5,525	)		(6,340	)		1,873
Income tax expense (benefit)		30			(581	)		859
Income (loss) before equity earnings (losses) of subsidiaries		(5,555	)		(5,759	)		1,014
Equity earnings (losses) in subsidiaries		(2,267	)		(3,468	)		(22,556	)
Net income (loss)		(7,822	)		(9,227	)		(21,542	)
Other Comprehensive Income
Equity in other comprehensive income (loss) of subsidiaries		3,101			(1,770	)		717
Total Comprehensive income (loss)	$	(4,721	)	$	(10,997	)	$	(20,825	)

Schedule II

Conifer Holdings, Inc.

Condensed Financial Information of Registrant

Statement of Cash Flows – Parent Company Only

(dollars in thousands)

	Year Ended December 31,
	2019			2018			2017
Cash Flows from Operating Activities
Net income (loss)	$	(7,822	)	$	(9,227	)	$	(21,542	)
Adjustments to reconcile net income (loss) to net cash used in   operating activities:
Depreciation and amortization		447			379			347
Equity in undistributed (income) loss of subsidiaries		2,267			3,468			22,556
Incentive awards expenses - vesting of RSUs		959			970			895
Changes in operating assets and liabilities:
Due from subsidiaries		(490	)		110			(513	)
Due from affiliates		231			(97	)		598
Current income tax recoverable		21			(488	)		(485	)
Other assets		(3,098	)		(229	)		532
Other liabilities		2,954			(360	)		590
Net cash provided by (used in) operating activities		(4,531	)		(5,474	)		2,978
Cash Flows From Investing Activities
Contributions to subsidiaries		(3,854	)		—			(20,860	)
Dividends received from subsidiaries		1,500			—			—
Purchases of investments		—			400			(400	)
Purchases of property and equipment		(66	)		(86	)		(13	)
Net cash provided by (used in) investing activities		(2,420	)		314			(21,273	)
Cash Flows From Financing Activities
Proceeds received from issuance of shares of common stock		5,000			—			5,000
Repurchase of common stock		(676	)		(636	)		—
Borrowings under debt arrangements		2,000			25,300			32,000
Repayment of borrowings under debt arrangements		—			(19,500	)		(19,750	)
Stock and debt issuance costs		—			(1,454	)		(1,011	)
Net cash provided by financing activities		6,324			3,710			16,239
Net increase (decrease) in cash		(627	)		(1,450	)		(2,056	)
Cash at beginning of period		1,133			2,583			4,639
Cash at end of period	$	506		$	1,133		$	2,583
Supplemental Disclosure of Cash Flow Information:
Interest paid	$	2,547		$	3,116		$	876

1. Accounting Policies

Organization

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

Basis of Presentation

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

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

Estimates and Assumptions

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

Dividends

The Parent received $1.5 million in cash dividends from its subsidiaries in 2019 and no cash dividends in 2018 and 2017.

2. Guarantees

The Parent has guaranteed the principal and interest obligations of a $10 million surplus note issued by Conifer Insurance Company to White Pine Insurance Company (both wholly owned subsidiaries). The note pays interest annually at a per annum rate of 4% and has no maturity. 

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Employee Benefit Plans

12 Months Ended

Dec. 31, 2019

Compensation And Retirement Disclosure [Abstract]

Employee Benefit Plans

15. Employee Benefit Plans

The Company maintains a retirement savings plan under section 401(k) of the Internal Revenue Code (the “Plan”) for certain eligible employees.  Eligible employees electing to participate in the 401(k) plan may defer and contribute from 1% to 100% of their compensation on a pre‑tax or post-tax basis, subject to statutory limits.  The Company will match the employees’ contributions up to the first 4% of their compensation.  The Company’s Plan expense amounted to $501,000, $479,000 and $432,000 for the years ended December 31, 2019, 2018 and 2017, respectively.

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Statutory Financial Data, Risk-Based Capital and Dividend Restrictions

12 Months Ended

Dec. 31, 2019

Insurance [Abstract]

Statutory Financial Data, Risk-Based Capital and Dividend Restrictions

9.  Statutory Financial Data, Risk-Based Capital and Dividend Restrictions

U.S. state insurance laws and regulations prescribe accounting practices for determining statutory net income and capital and surplus for insurance companies.  In addition, state regulators may permit statutory accounting practices that differ from prescribed practices.  Statutory accounting practices prescribed or permitted by regulatory authorities for the Company’s Insurance Company Subsidiaries differ from GAAP.  The principal differences between statutory accounting practices ("SAP") and GAAP as they relate to the financial statements of the Company’s Insurance Company Subsidiaries are (i) policy acquisition costs are expensed as incurred under SAP, whereas they are deferred and amortized under GAAP, (ii) deferred tax assets are subject to more limitations regarding what amounts can be recorded under SAP and (iii) bonds are recorded at amortized cost under SAP and fair value under GAAP.

Risk-Based Capital ("RBC") requirements as promulgated by the National Association of Insurance Commissioners (‘‘NAIC’’) require property and casualty insurers to maintain minimum capitalization levels determined based on formulas incorporating various business risks (e.g., investment risk, underwriting profitability, etc.) of the Insurance Company Subsidiaries.  As of December 31, 2019, 2018, and 2017, the Insurance Company Subsidiaries’ adjusted capital and surplus exceeded their authorized control level as determined by the NAIC’s risk-based capital models.

Summarized 2019, 2018, and 2017 statutory basis information for the non-captive Insurance Company Subsidiaries, which differs from generally accepted accounting principles, is as follows (dollars in thousands).

	CIC			WPIC
2019
Statutory capital and surplus	$	46,206		$	23,261
RBC authorized control level		12,868			4,266
Statutory net income (loss)		(3,627	)		(3,652	)
RBC %		359	%		545	%

	CIC			WPIC
2018
Statutory capital and surplus	$	47,121		$	26,588
RBC authorized control level		11,901			4,682
Statutory net income (loss)		1,244			834
RBC %		396	%		568	%

	CIC			WPIC
2017
Statutory capital and surplus	$	35,848		$	26,075
RBC authorized control level		8,873			6,224
Statutory net income (loss)		(6,993	)		(13,737	)
RBC %		404	%		419	%

Dividend Restrictions

The state insurance statutes in which the Insurance Company Subsidiaries are domiciled limit the amount of dividends that they may pay annually without first obtaining regulatory approval.  Generally, the limitations are based on the greater of statutory net income for the preceding year or 10% of statutory surplus at the end of the preceding year.  The Company must receive regulatory approval in order to pay dividends to the Parent Company from its Insurance Company Subsidiaries in 2019.

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Unpaid Losses and Loss Adjustment Expenses

12 Months Ended

Dec. 31, 2019

Insurance Loss Reserves [Abstract]

Unpaid Losses and Loss Adjustment Expenses

5. Unpaid Losses and Loss Adjustment Expenses

The Company establishes reserves for unpaid losses and LAE which represent the estimated ultimate cost of all losses incurred that were both reported and unreported (i.e., incurred but not yet reported losses, or “IBNR”) and LAE incurred that remain unpaid at the balance sheet date.  The Company’s reserving process takes into account known facts and interpretations of circumstances and factors including the Company’s experience with similar cases, actual claims paid, historical trends involving claim payment patterns and pending levels of unpaid claims, loss management programs, product mix and contractual terms, changes in law and regulation, judicial decisions, and economic conditions.  In the normal course of business, the Company may also supplement its claims processes by utilizing third party adjusters, appraisers, engineers, inspectors, and other professionals and information sources to assess and settle catastrophe and non-catastrophe related claims.  The effects of inflation are implicitly considered in the reserving process.

Reserves are estimates of unpaid portions of losses that have occurred, including IBNR losses, therefore the establishment of appropriate reserves, is an inherently uncertain and complex process.  The ultimate cost of losses may vary materially from recorded amounts, which are based on management’s best estimates.  The highest degree of uncertainty is associated with reserves for losses incurred in the current reporting period as it contains the greatest proportion of losses that have not been reported or settled.  The Company regularly updates its reserve estimates as new information becomes available and as events unfold that may affect the resolution of unsettled claims.  Changes in prior year reserve estimates, which may be material, are reported in the results of operations in the period such changes are determined to be needed and recorded.

Management believes that the reserve for losses and LAE, net of reinsurance recoverables, is appropriately established in the aggregate and adequate to cover the ultimate net cost of reported and unreported claims arising from losses which had occurred by the date of the consolidated financial statements based on available facts and in accordance with applicable laws and regulations.

The table below provides the changes in the reserves for losses and LAE, net of recoverables from reinsurers, for the periods indicated (dollars in thousands):

	December 31,
	2019			2018			2017
Gross reserves - beginning of period	$	92,807		$	87,896		$	54,651
Less: reinsurance recoverables on unpaid losses		29,685			20,066			6,658
Plus: deferred gain on ADC		(5,677	)		—			—
Net reserves - beginning of period		68,799			67,830			47,993
Add: incurred losses and loss adjustment expenses, net   of reinsurance
Current period		49,192			53,482			64,458
Prior period		10,552			9,033			9,459
Total net incurred losses and loss adjustment   expenses		59,744			62,515			73,917
Deduct: loss and loss adjustment expense payments,   net of reinsurance
Current period		14,357			17,025			24,547
Prior period		29,519			44,521			29,533
Total net loss and loss adjustment expense   payments		43,876			61,546			54,080
Net reserves - end of period		84,667			68,799			67,830
Plus: reinsurance recoverables on unpaid losses		22,579			29,685			20,066
Less: deferred gain on ADC		—			(5,677	)		—
Gross reserves - end of period	$	107,246		$	92,807		$	87,896

There was $10.6 million, $9.0 million, and $9.5 million of adverse development on prior accident year reserves in 2019, 2018 and 2017, respectively.  There were no significant changes in the key methods utilized in the analysis and calculations of the Company’s reserves during 2019, 2018 or 2017.

In 2019, the adverse development consisted of $7.6 million from commercial lines and $3.0 million from personal lines.  Of the $7.6 million of adverse development in commercial lines, the company experienced $11.0 million and $2.4 million of adverse development in its hospitality and small business lines of business, respectively.  This was partially offset by the remaining $5.7 million of benefit from the ADC that was recognized in 2019. Of the $3.0 million of adverse development in personal lines in 2019, $1.7 million was related to Florida homeowners business.

In 2018, the adverse development consisted of $6.2 million from commercial lines and $2.8 million from personal lines.  Of the $6.2 million of adverse development in commercial lines, $4.2 million was related to the commercial liability business.  Of the $2.8 million of adverse development in personal lines, $2.0 million and $727,000 were related to the Florida homeowners and Texas homeowners business, respectively.  This included $960,000 of adverse development related to hurricanes Harvey and Irma.

In 2017, the adverse development consisted of $7.2 million from commercial lines and $2.3 million from personal lines and was mostly related to the 2016 and 2015 accident years.  This development consisted of $5.1 million from the commercial liability business, $1.6 million from commercial property, $1.7 million from Florida homeowners and $0.5 million from commercial auto business.

On September 28, 2017, the Company entered into an ADC reinsurance agreement to cover loss development of up to $17.5 million in excess of stated reserves as of June 30, 2017, for accident years 2005 through 2016.  The agreement attaches when net losses exceed $1.4 million of the $36.6 million carried reserves at June 30, 2017, and extends to $19.5 million in coverage up to $57.5 million.  The company retains a 10% co-participation for any development in excess of the retention.

As of December 31, 2019, the deferred gain from the ADC was fully utilized.  In 2018, the Company ceded $10.3 million of losses under the ADC.  Of the $10.3 million, $4.6 million was recognized as a benefit, reducing losses and LAE expense, and $5.7 million was deferred (recorded as a liability on the Consolidated Balance Sheets) and was amortized into income as a benefit in future periods.  As of December 31, 2018, the Company had ceded to the limit of the ADC.  In 2017, $7.2 million of adverse development was ceded to the ADC.  Discussion of adverse development is net of benefits recognized under the ADC in that period.

Incurred losses during 2018 also included $583,000 in net catastrophe losses in the current calendar year related to Hurricane Harvey in Texas.  Of the $583,000 in net catastrophe losses, personal lines accounted for $960,000 of the losses while commercial lines saw $377,000 of favorable development in calendar year 2018.  Losses from Hurricane Irma were in excess of the Company’s $4.0 million retention on its catastrophe reinsurance treaty which resulted in $10.0 million of losses being ceded to the treaty during 2018.  This also resulted in a $1.0 million charge for catastrophe reinstatement premiums which was recorded as ceded premiums in 2018.

In 2017, incurred losses included $5.4 million in net catastrophe losses related to Hurricane Harvey in Texas and Hurricane Irma in Florida.  Approximately 34% of the losses were generated in Commercial Lines and 66% in Personal lines.  Losses from Hurricane Irma were in excess of the Company’s $4.0 million retention on its catastrophe reinsurance treaty which resulted in $5.2 million of losses being ceded to the treaty as of December 31, 2017.  This also resulted in a $806,000 charge for catastrophe reinstatement premiums which was recorded as ceded premiums in 2017.

Loss Development Tables

The following tables represent cumulative incurred loss and allocated loss adjustment expenses ("ALAE"), net of reinsurance, by accident year and cumulative paid loss and ALAE, net of reinsurance, by accident year, for the years ended December 31, 2009 to 2019, as well as total IBNR and the cumulative number of reported claims for the year ended December 31, 2019, by reportable segment and accident year (dollars in thousands).

Commercial Lines
			Incurred loss and allocated loss adjustment expenses, net of reinsurance																				Total IBNR		Cumulative number of reported claims
Accident
Year	2009*		2010*		2011*		2012*		2013*		2014*		2015*		2016		2017		2018		2019		2019		2019
2009	$	11,400	$	12,066	$	10,312	$	8,943	$	8,232	$	8,403	$	8,359	$	8,414	$	8,442	$	8,441	$	8,441	$	—		877
2010				7,346		8,568		7,255		6,357		6,170		6,074		6,207		6,292		6,312		6,312		—		771
2011						6,753		5,758		5,326		5,049		4,932		4,903		4,935		4,933		4,933		—		590
2012								7,745		6,421		6,288		6,384		6,253		6,190		6,209		6,209		—		560
2013										10,018		9,435		9,893		10,237		11,252		11,218		11,624		50		608
2014												19,709		19,907		22,711		26,367		28,145		28,766		100		1,752
2015														22,442		26,633		31,861		34,478		36,372		200		2,352
2016																32,396		34,935		40,440		44,355		1,125		3,544
2017																		44,251		44,495		49,749		3,658		5,776
2018																				42,624		42,432		8,619		5,993
2019																						41,286		20,265		5,774
																	Total				$	280,479	$	34,018

Cumulative paid loss and allocated loss adjustment expenses, net of reinsurance
Accident			For the years ended December 31,
Year	2009*		2010*		2011*		2012*		2013*		2014*		2015*		2016		2017		2018		2019
2009	$	4,436	$	5,942	$	6,410	$	7,233	$	7,800	$	7,867	$	7,933	$	8,321	$	8,441	$	8,441	$	8,441
2010				3,066		4,488		5,219		5,910		6,040		6,065		6,166		6,258		6,312		6,312
2011						2,645		3,534		3,964		4,449		4,641		4,744		4,872		4,903		4,907
2012								2,325		3,703		4,696		5,558		5,994		6,065		6,209		6,209
2013										3,979		6,211		7,643		8,622		10,147		10,650		11,137
2014												8,715		13,977		17,458		22,446		25,609		27,544
2015														10,470		17,817		22,549		30,475		34,497
2016																10,255		19,135		27,785		37,967
2017																		12,448		23,020		34,205
2018																				10,375		19,799
2019																						10,078
																	Total				$	201,096
							Unpaid losses and ALAE - years 2009 through 2019														$	79,383
							Unpaid losses and ALAE - prior to 2009 (1)*															8
							Unpaid ADC															(2,075	)
							Unpaid losses and ALAE, net of reinsurance														$	77,316

*  Presented as unaudited required supplementary information.

(1) The Company's formation was in 2009, however, as a result of the acquisition of WPIC in 2010, incurred losses prior to the 2009 accident year remain outstanding.

Personal Lines
			Incurred loss and allocated loss adjustment expenses, net of reinsurance																				Total IBNR		Cumulative number of reported claims
Accident					For the years ended December 31,
Year	2009*		2010*		2011*		2012*		2013*		2014*		2015*		2016		2017		2018		2019		2019		2019
2009	$	667	$	639	$	634	$	634	$	634	$	634	$	634	$	634	$	634	$	634	$	634	$	—		65
2010				320		188		184		184		184		184		184		184		184		184		—		77
2011						1,678		1,758		1,981		2,031		2,030		2,045		2,027		2,024		2,024		—		717
2012								9,960		11,690		11,740		12,159		12,390		12,365		12,357		12,369		—		3,338
2013										18,034		17,996		18,925		19,138		19,167		19,202		19,222		—		5,206
2014												17,951		17,471		17,735		17,880		17,929		18,082		—		3,730
2015														10,877		13,445		14,721		15,285		15,364		—		2,141
2016																11,619		13,418		14,949		15,550		—		1,813
2017																		14,058		13,550		14,493		—		2,852
2018																				5,893		6,378		321		800
2019																						3,099		609		305
																	Total				$	107,399	$	929

			Cumulative paid loss and allocated loss adjustment expenses, net of reinsurance
Accident					For the years ended December 31,
Year	2009*		2010*		2011*		2012*		2013*		2014*		2015*		2016		2017		2018		2019
2009	$	537	$	634	$	634	$	634	$	634	$	634	$	634	$	634	$	634	$	634	$	634
2010				151		174		184		184		184		184		184		184		184		184
2011						787		1,292		1,633		1,859		1,983		2,021		2,024		2,024		2,024
2012								5,665		9,251		10,844		11,777		12,202		12,306		12,329		12,349
2013										9,955		15,883		18,052		18,600		19,014		19,174		19,214
2014												12,819		16,515		17,260		17,746		17,855		18,047
2015														7,771		11,873		13,844		15,159		15,250
2016																7,119		11,238		14,442		15,110
2017																		8,320		12,944		14,004
2018																				4,296		5,618
2019																						2,119
																	Total				$	104,553
											Unpaid losses and ALAE - years 2009 through 2019										$	2,846
											Unpaid losses and ALAE - prior to 2009 (1)*											—
											Unpaid ADC											(112	)
											Unpaid losses and ALAE, net of reinsurance										$	2,734

*  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			For the years ended December 31,
Year	2009*		2010*		2011*		2012*		2013*		2014*		2015*		2016		2017		2018		2019		2019		2019
2009		12,066		12,705		10,946		9,577		8,866		9,037		8,993		9,048		9,076		9,075		9,075		—		942
2010				7,666		8,756		7,439		6,541		6,354		6,258		6,391		6,476		6,496		6,496		—		848
2011						8,431		7,517		7,307		7,081		6,963		6,949		6,964		6,957		6,957		—		1,307
2012								17,705		18,111		18,028		18,544		18,642		18,554		18,566		18,578		—		3,898
2013										28,052		27,431		28,817		29,375		30,419		30,420		30,846		50		5,814
2014												37,660		37,378		40,446		44,247		46,074		46,848		100		5,482
2015														33,319		40,078		46,581		49,763		51,736		200		4,493
2016																44,015		48,353		55,389		59,905		1,125		5,357
2017																		58,309		58,045		64,242		3,658		8,628
2018																				48,517		48,810		8,940		6,793
2019																						44,385		20,874		6,079
																	Total					387,878		34,947

Cumulative paid loss and allocated loss adjustment expenses, net of reinsurance
Accident			For the years ended December 31,
Year	2009*		2010*		2011*		2012*		2013*		2014*		2015*		2016		2017		2018		2019
2009	$	4,973	$	6,576	$	7,043	$	7,867	$	8,434	$	8,501	$	8,567	$	8,955	$	9,075	$	9,075	$	9,075
2010				3,217		4,662		5,403		6,094		6,223		6,248		6,350		6,442		6,496		6,496
2011						3,432		4,826		5,597		6,308		6,624		6,766		6,897		6,927		6,931
2012								7,990		12,954		15,540		17,335		18,195		18,369		18,538		18,558
2013										13,934		22,094		25,695		27,223		29,162		29,824		30,351
2014												21,534		30,492		34,718		40,192		43,464		45,591
2015														18,241		29,690		36,393		45,634		49,747
2016																17,374		30,373		42,227		53,077
2017																		20,768		35,964		48,209
2018																				14,671		25,417
2019																						12,197
																	Total				$	305,649
							Unpaid losses and ALAE - years 2009 through 2019														$	82,229
							Unpaid losses and ALAE - prior to 2009 (1)*															8
							Unpaid ADC															(2,187	)
							Unpaid losses and ALAE, net of reinsurance														$	80,050

*  Presented as unaudited required supplementary information.

The following table reconciles the loss development information to the consolidated balance sheet for the year ended December 31, 2019, by reportable segment (dollars in thousands).

	December 31, 2019
Net unpaid losses claims and ALAE
Commercial Lines	$	77,316
Personal Lines		2,734
Total unpaid losses and LAE, net of reinsurance		80,050
Reinsurance recoverable on losses and LAE
Commercial Lines		20,051
Personal Lines		2,528
Total reinsurance recoverable on unpaid losses and LAE		22,579
Unpaid ULAE		4,617
Total gross unpaid losses and LAE	$	107,246

Loss Duration Disclosure (unaudited)

The following table represents the average annual percentage payout of incurred losses by age, net of reinsurance, for each reportable segment.

	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	35.7%	26.9%	18.4%	9.5%	4.8%	2.3%	1.3%	0.7%	0.3%	0.1%
Personal Lines	79.5%	11.8%	5.5%	1.9%	1.0%	0.3%	—%	—%	—%	—%
Total Lines	37.7%	26.2%	17.8%	9.2%	4.6%	2.2%	1.2%	0.7%	0.3%	0.1%

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Deferred Policy Acquisition Costs (Tables)

12 Months Ended

Dec. 31, 2019

Deferred Policy Acquisition Costs Disclosures [Abstract]

Summary of Deferred Policy Acquisition Costs

The activity in deferred policy acquisition costs, net of reinsurance transactions, is as follows (dollars in thousands):

	December 31,
	2019			2018			2017
Balance at beginning of period	$	12,011		$	12,781		$	13,290
Deferred policy acquisition costs		24,806			24,764			25,736
Amortization of policy acquisition costs		(24,911	)		(25,534	)		(26,245	)
Net change		(105	)		(770	)		(509	)
Balance at end of period	$	11,906		$	12,011		$	12,781

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Income Taxes (Tables)

12 Months Ended

Dec. 31, 2019

Income Tax Disclosure [Abstract]

Schedule of Income Tax Expense (Benefit)

The income tax expense (benefit) is comprised of the following (dollars in thousands):

	Year Ended December 31,
	2019			2018		2017
Current tax expense (benefit)	$	27		$	52	$	(28	)
Deferred tax expense (benefit)		(940	)		—		(419	)
Total income tax expense (benefit)	$	(913	)	$	52	$	(447	)

Summary of Income Tax Expense (Benefit) Reconciliation

The income tax expense (benefit) differed from the amounts computed by applying the statutory U.S. federal income tax rate of 21% in 2019 and 2018 and 34% in 2017 to pretax income as a result of the following (dollars in thousands):

	Year Ended December 31,
	2019			2018			2017
Income (loss) before income taxes	$	(9,121	)	$	(9,465	)	$	(22,054	)
Statutory U.S. federal income tax rate		(1,915	)		(1,988	)		(7,498	)
State income taxes, net of federal benefit		(230	)		(156	)		(106	)
Tax‑exempt investment income and dividend received deduction		(79	)		(70	)		(123	)
Nondeductible meals and entertainment		38			38			54
Valuation allowance on deferred tax assets		966			2,331			1,515
Change in federal tax rate		—			—			5,612
Other		307			(103	)		99
Income tax expense (benefit)	$	(913	)	$	52		$	(447	)
Effective tax rate		10.0	%		(0.5	)%		2.0	%

Schedule of Deferred Tax Assets and Liabilities

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are presented below (dollars in thousands):

	December 31,
	2019			2018
Deferred tax assets:
Discounted unpaid losses and loss adjustment expenses	$	1,264		$	937
Unearned premiums		2,266			2,329
Net operating loss carryforwards		12,593			10,144
Net unrealized losses on investments		—			222
State net operating loss carryforwards		873			567
Deferred gain from ADC		—			1,254
Other		248			123
Gross deferred tax assets		17,244			15,576
Less valuation allowance		(13,572	)		(12,606	)
Total deferred tax assets, net of allowance		3,672			2,970
Deferred tax liabilities:
Investment basis difference		28			22
Net unrealized gains on investments		512			—
Deferred policy acquisition costs		2,500			2,522
Intangible assets		115			112
Property and equipment		57			63
Other		460			366
Total deferred tax liabilities		3,672			3,085
Net deferred tax liability	$	—		$	(115	)

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Stock-based Compensation (Tables)

12 Months Ended

Dec. 31, 2019

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Schedule of Nonvested Restricted Stock Units Activity

The following summarizes our RSU activity (units in thousands):

	Number of Units			Weighted Average Grant-Date Fair Value
Outstanding at December 31, 2016		416		$	9.87
Units vested		(95	)		9.97
Units forfeited		(14	)		9.94
Outstanding at December 31, 2017		307		$	9.84
Units granted		70			5.76
Units vested		(95	)		9.84
Units forfeited		(18	)		8.96
Outstanding at December 31, 2018		264		$	8.91
Units vested		(102	)		9.47
Units forfeited		(6	)		7.37
Outstanding at December 31, 2019		156		$	8.45

Vesting Schedule for Restricted Stock Units

The scheduled vesting for the restricted stock units at December 31, 2019, was as follows (units in thousands):

	2020		2021		2022		2023		Total
Scheduled vesting - RSUs		102		31		13		10		156

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Reinsurance - Effects of Reinsurance and Assumption Transactions (Details) - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2019	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Written premiums:
Direct									$ 68,394	$ 73,290	$ 86,251
Assumed									33,459	31,078	28,033
Ceded									(14,129)	(15,282)	(23,044)
Net written premiums	$ 22,162	$ 23,806	$ 21,434	$ 20,322	$ 23,800	$ 22,846	$ 22,595	$ 19,845	87,724	89,086	91,240
Earned premiums:
Direct									70,911	80,691	87,656
Assumed									32,292	28,497	27,081
Ceded									(14,114)	(15,377)	(23,008)
Net earned premiums	23,278	22,775	21,349	21,687	22,623	23,450	23,938	23,800	89,089	93,811	91,729
Loss and loss adjustment expenses:
Direct									66,256	65,284	79,035
Assumed									25,510	20,671	19,524
Ceded									(32,022)	(23,440)	(24,642)
Total net incurred losses and loss adjustment expenses	$ 16,049	$ 14,857	$ 14,382	$ 14,456	$ 17,565	$ 16,554	$ 15,068	$ 13,328	$ 59,744	$ 62,515	$ 73,917
Percentage of Assumed Written Premiums to Net Written Premiums									38.10%	34.90%	30.70%

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Unpaid Losses and Loss Adjustment Expenses - Loss Development (Details) $ in Thousands	Dec. 31, 2019 USD ($) claim	Dec. 31, 2018 USD ($)	Dec. 31, 2017 USD ($)	Dec. 31, 2016 USD ($)	Dec. 31, 2015 USD ($)	Dec. 31, 2014 USD ($)	Dec. 31, 2013 USD ($)	Dec. 31, 2012 USD ($)	Dec. 31, 2011 USD ($)	Dec. 31, 2010 USD ($)	Dec. 31, 2009 USD ($)
Claims Development [Line Items]
Incurred	$ 387,878
Total IBNR	34,947
Cumulative Paid	305,649
Unpaid losses and ALAE - years 2009 through 2019	82,229
Unpaid losses and ALAE - prior to 2009	8
Unpaid ADC	(2,187)
Unpaid losses and ALAE, net of reinsurance	80,050
Commercial Lines
Claims Development [Line Items]
Incurred	280,479
Total IBNR	34,018
Cumulative Paid	201,096
Unpaid losses and ALAE - years 2009 through 2019	79,383
Unpaid losses and ALAE - prior to 2009	8
Unpaid ADC	(2,075)
Unpaid losses and ALAE, net of reinsurance	77,316
Personal Lines
Claims Development [Line Items]
Incurred	107,399
Total IBNR	929
Cumulative Paid	104,553
Unpaid losses and ALAE - years 2009 through 2019	2,846
Unpaid ADC	(112)
Unpaid losses and ALAE, net of reinsurance	2,734
Accident Year 2009
Claims Development [Line Items]
Incurred	9,075	$ 9,075	$ 9,076	$ 9,048	$ 8,993	$ 9,037	$ 8,866	$ 9,577	$ 10,946	$ 12,705	$ 12,066
Total IBNR	$ 0
Cumulative number of reported claims | claim	942
Cumulative Paid	$ 9,075	9,075	9,075	8,955	8,567	8,501	8,434	7,867	7,043	6,576	4,973
Accident Year 2009 | Commercial Lines
Claims Development [Line Items]
Incurred	8,441	8,441	8,442	8,414	8,359	8,403	8,232	8,943	10,312	12,066	11,400
Total IBNR	$ 0
Cumulative number of reported claims | claim	877
Cumulative Paid	$ 8,441	8,441	8,441	8,321	7,933	7,867	7,800	7,233	6,410	5,942	4,436
Accident Year 2009 | Personal Lines
Claims Development [Line Items]
Incurred	634	634	634	634	634	634	634	634	634	639	667
Total IBNR	$ 0
Cumulative number of reported claims | claim	65
Cumulative Paid	$ 634	634	634	634	634	634	634	634	634	634	$ 537
Accident Year 2010
Claims Development [Line Items]
Incurred	6,496	6,496	6,476	6,391	6,258	6,354	6,541	7,439	8,756	7,666
Total IBNR	$ 0
Cumulative number of reported claims | claim	848
Cumulative Paid	$ 6,496	6,496	6,442	6,350	6,248	6,223	6,094	5,403	4,662	3,217
Accident Year 2010 | Commercial Lines
Claims Development [Line Items]
Incurred	6,312	6,312	6,292	6,207	6,074	6,170	6,357	7,255	8,568	7,346
Total IBNR	$ 0
Cumulative number of reported claims | claim	771
Cumulative Paid	$ 6,312	6,312	6,258	6,166	6,065	6,040	5,910	5,219	4,488	3,066
Accident Year 2010 | Personal Lines
Claims Development [Line Items]
Incurred	184	184	184	184	184	184	184	184	188	320
Total IBNR	$ 0
Cumulative number of reported claims | claim	77
Cumulative Paid	$ 184	184	184	184	184	184	184	184	174	$ 151
Accident Year 2011
Claims Development [Line Items]
Incurred	6,957	6,957	6,964	6,949	6,963	7,081	7,307	7,517	8,431
Total IBNR	$ 0
Cumulative number of reported claims | claim	1,307
Cumulative Paid	$ 6,931	6,927	6,897	6,766	6,624	6,308	5,597	4,826	3,432
Accident Year 2011 | Commercial Lines
Claims Development [Line Items]
Incurred	4,933	4,933	4,935	4,903	4,932	5,049	5,326	5,758	6,753
Total IBNR	$ 0
Cumulative number of reported claims | claim	590
Cumulative Paid	$ 4,907	4,903	4,872	4,744	4,641	4,449	3,964	3,534	2,645
Accident Year 2011 | Personal Lines
Claims Development [Line Items]
Incurred	2,024	2,024	2,027	2,045	2,030	2,031	1,981	1,758	1,678
Total IBNR	$ 0
Cumulative number of reported claims | claim	717
Cumulative Paid	$ 2,024	2,024	2,024	2,021	1,983	1,859	1,633	1,292	$ 787
Accident Year 2012
Claims Development [Line Items]
Incurred	18,578	18,566	18,554	18,642	18,544	18,028	18,111	17,705
Total IBNR	$ 0
Cumulative number of reported claims | claim	3,898
Cumulative Paid	$ 18,558	18,538	18,369	18,195	17,335	15,540	12,954	7,990
Accident Year 2012 | Commercial Lines
Claims Development [Line Items]
Incurred	6,209	6,209	6,190	6,253	6,384	6,288	6,421	7,745
Total IBNR	$ 0
Cumulative number of reported claims | claim	560
Cumulative Paid	$ 6,209	6,209	6,065	5,994	5,558	4,696	3,703	2,325
Accident Year 2012 | Personal Lines
Claims Development [Line Items]
Incurred	12,369	12,357	12,365	12,390	12,159	11,740	11,690	9,960
Total IBNR	$ 0
Cumulative number of reported claims | claim	3,338
Cumulative Paid	$ 12,349	12,329	12,306	12,202	11,777	10,844	9,251	$ 5,665
Accident Year 2013
Claims Development [Line Items]
Incurred	30,846	30,420	30,419	29,375	28,817	27,431	28,052
Total IBNR	$ 50
Cumulative number of reported claims | claim	5,814
Cumulative Paid	$ 30,351	29,824	29,162	27,223	25,695	22,094	13,934
Accident Year 2013 | Commercial Lines
Claims Development [Line Items]
Incurred	11,624	11,218	11,252	10,237	9,893	9,435	10,018
Total IBNR	$ 50
Cumulative number of reported claims | claim	608
Cumulative Paid	$ 11,137	10,650	10,147	8,622	7,643	6,211	3,979
Accident Year 2013 | Personal Lines
Claims Development [Line Items]
Incurred	19,222	19,202	19,167	19,138	18,925	17,996	18,034
Total IBNR	$ 0
Cumulative number of reported claims | claim	5,206
Cumulative Paid	$ 19,214	19,174	19,014	18,600	18,052	15,883	$ 9,955
Accident Year 2014
Claims Development [Line Items]
Incurred	46,848	46,074	44,247	40,446	37,378	37,660
Total IBNR	$ 100
Cumulative number of reported claims | claim	5,482
Cumulative Paid	$ 45,591	43,464	40,192	34,718	30,492	21,534
Accident Year 2014 | Commercial Lines
Claims Development [Line Items]
Incurred	28,766	28,145	26,367	22,711	19,907	19,709
Total IBNR	$ 100
Cumulative number of reported claims | claim	1,752
Cumulative Paid	$ 27,544	25,609	22,446	17,458	13,977	8,715
Accident Year 2014 | Personal Lines
Claims Development [Line Items]
Incurred	18,082	17,929	17,880	17,735	17,471	17,951
Total IBNR	$ 0
Cumulative number of reported claims | claim	3,730
Cumulative Paid	$ 18,047	17,855	17,746	17,260	16,515	$ 12,819
Accident Year 2015
Claims Development [Line Items]
Incurred	51,736	49,763	46,581	40,078	33,319
Total IBNR	$ 200
Cumulative number of reported claims | claim	4,493
Cumulative Paid	$ 49,747	45,634	36,393	29,690	18,241
Accident Year 2015 | Commercial Lines
Claims Development [Line Items]
Incurred	36,372	34,478	31,861	26,633	22,442
Total IBNR	$ 200
Cumulative number of reported claims | claim	2,352
Cumulative Paid	$ 34,497	30,475	22,549	17,817	10,470
Accident Year 2015 | Personal Lines
Claims Development [Line Items]
Incurred	15,364	15,285	14,721	13,445	10,877
Total IBNR	$ 0
Cumulative number of reported claims | claim	2,141
Cumulative Paid	$ 15,250	15,159	13,844	11,873	$ 7,771
Accident Year 2016
Claims Development [Line Items]
Incurred	59,905	55,389	48,353	44,015
Total IBNR	$ 1,125
Cumulative number of reported claims | claim	5,357
Cumulative Paid	$ 53,077	42,227	30,373	17,374
Accident Year 2016 | Commercial Lines
Claims Development [Line Items]
Incurred	44,355	40,440	34,935	32,396
Total IBNR	$ 1,125
Cumulative number of reported claims | claim	3,544
Cumulative Paid	$ 37,967	27,785	19,135	10,255
Accident Year 2016 | Personal Lines
Claims Development [Line Items]
Incurred	15,550	14,949	13,418	11,619
Total IBNR	$ 0
Cumulative number of reported claims | claim	1,813
Cumulative Paid	$ 15,110	14,442	11,238	$ 7,119
Accident Year 2017
Claims Development [Line Items]
Incurred	64,242	58,045	58,309
Total IBNR	$ 3,658
Cumulative number of reported claims | claim	8,628
Cumulative Paid	$ 48,209	35,964	20,768
Accident Year 2017 | Commercial Lines
Claims Development [Line Items]
Incurred	49,749	44,495	44,251
Total IBNR	$ 3,658
Cumulative number of reported claims | claim	5,776
Cumulative Paid	$ 34,205	23,020	12,448
Accident Year 2017 | Personal Lines
Claims Development [Line Items]
Incurred	14,493	13,550	14,058
Total IBNR	$ 0
Cumulative number of reported claims | claim	2,852
Cumulative Paid	$ 14,004	12,944	$ 8,320
Accident Year 2018
Claims Development [Line Items]
Incurred	48,810	48,517
Total IBNR	$ 8,940
Cumulative number of reported claims | claim	6,793
Cumulative Paid	$ 25,417	14,671
Accident Year 2018 | Commercial Lines
Claims Development [Line Items]
Incurred	42,432	42,624
Total IBNR	$ 8,619
Cumulative number of reported claims | claim	5,993
Cumulative Paid	$ 19,799	10,375
Accident Year 2018 | Personal Lines
Claims Development [Line Items]
Incurred	6,378	5,893
Total IBNR	$ 321
Cumulative number of reported claims | claim	800
Cumulative Paid	$ 5,618	$ 4,296
Accident Year 2019
Claims Development [Line Items]
Incurred	44,385
Total IBNR	$ 20,874
Cumulative number of reported claims | claim	6,079
Cumulative Paid	$ 12,197
Accident Year 2019 | Commercial Lines
Claims Development [Line Items]
Incurred	41,286
Total IBNR	$ 20,265
Cumulative number of reported claims | claim	5,774
Cumulative Paid	$ 10,078
Accident Year 2019 | Personal Lines
Claims Development [Line Items]
Incurred	3,099
Total IBNR	$ 609
Cumulative number of reported claims | claim	305
Cumulative Paid	$ 2,119

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Fair Value Measurements - Narrative (Details)	Dec. 31, 2019
Level 1
Fair Value, Concentration of Risk, Financial Statement Captions [Line Items]
Investment portfolio percentage	22.20%
Level 2
Fair Value, Concentration of Risk, Financial Statement Captions [Line Items]
Investment portfolio percentage	77.30%

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Schedule II - Condensed Financial Information of Registrant - Additional Information (Details) - USD ($)	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Guarantee of debt
Condensed Cash Flow Statements Captions [Line Items]
Guarantee obligation	$ 10,000,000
Interest rate	4.00%
Parent Company
Condensed Cash Flow Statements Captions [Line Items]
Dividends received from subsidiaries during period	$ 1,500,000	$ 0	$ 0

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Employee Benefit Plans (Details) - USD ($)	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Compensation And Retirement Disclosure [Abstract]
Minimum employee contribution amount, percentage of gross compensation	1.00%
Maximum employee contribution amount, percentage of gross compensation	100.00%
Employee matching contribution, percentage of employee gross compensation	4.00%
Plan expense	$ 501,000	$ 479,000	$ 432,000

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Segment Information - Information by Reportable Segment (Details) - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2019	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Segment Reporting Information [Line Items]
Gross written premiums	$ 25,391	$ 27,077	$ 25,169	$ 24,216	$ 27,440	$ 26,629	$ 26,562	$ 23,737	$ 101,853	$ 104,368	$ 114,284
Net written premiums	22,162	23,806	21,434	20,322	23,800	22,846	22,595	19,845	87,724	89,086	91,240
Net earned premiums	23,278	22,775	21,349	21,687	22,623	23,450	23,938	23,800	89,089	93,811	91,729
Other income	542	564	581	422	370	405	450	357	2,109	1,582	1,560
Segment revenue									91,198	95,393	93,289
Losses and loss adjustment expenses, net	16,049	14,857	14,382	14,456	17,565	16,554	15,068	13,328	59,744	62,515	73,917
Policy acquisition costs	6,959	6,153	6,210	5,589	6,097	6,452	6,472	6,513	24,911	25,534	26,245
Operating expenses	4,622	4,297	4,340	4,323	4,407	4,786	4,303	4,187	17,582	17,683	17,367
Segment expenses									102,237	105,732	117,529
Segment underwriting gain (loss)									(11,039)	(10,339)	(24,240)
Investment income	860	1,210	1,051	910	911	786	837	802	4,031	3,336	2,728
Net realized investment gains	72	390	715	19	(91)	(21)	12	161	1,196	61	70
Other gains (losses)									0	0	750
Change in fair value of equity securities	288	(1,065)	(915)	1,265	237	152	29	(297)	(427)	121	0
Interest expense	(727)	$ (720)	$ (725)	$ (710)	(810)	$ (598)	$ (617)	$ (619)	(2,882)	(2,644)	(1,362)
Income (loss) before income taxes									(9,121)	(9,465)	(22,054)
Deferred policy acquisition costs	11,906				12,011				11,906	12,011	12,781	$ 13,290
Unearned premiums	51,503				52,852				51,503	52,852	57,672
Unpaid losses and loss adjustment expenses	107,246				92,807				107,246	92,807	87,896	$ 54,651
Operating Segments | Commercial Lines
Segment Reporting Information [Line Items]
Gross written premiums									94,391	97,694	92,112
Net written premiums									81,966	87,038	78,217
Net earned premiums									83,858	83,352	76,786
Other income									216	101	221
Segment revenue									84,074	83,453	77,007
Losses and loss adjustment expenses, net									53,256	53,065	55,701
Policy acquisition costs									23,511	23,584	22,366
Operating expenses									12,881	14,662	10,585
Segment expenses									89,648	91,311	88,652
Segment underwriting gain (loss)									(5,574)	(7,858)	(11,645)
Income (loss) before income taxes									(5,574)	(7,858)	(11,645)
Deferred policy acquisition costs	12,033				11,258				12,033	11,258	10,116
Unearned premiums	47,674				49,549				47,674	49,549	45,951
Unpaid losses and loss adjustment expenses	101,850				87,643				101,850	87,643	76,586
Operating Segments | Personal Lines
Segment Reporting Information [Line Items]
Gross written premiums									7,462	6,674	22,172
Net written premiums									5,758	2,048	13,023
Net earned premiums									5,231	10,459	14,943
Other income									143	225	573
Segment revenue									5,374	10,684	15,516
Losses and loss adjustment expenses, net									6,488	9,450	18,216
Policy acquisition costs									1,744	3,846	6,537
Operating expenses									1,233	1,088	1,939
Segment expenses									9,465	14,384	26,692
Segment underwriting gain (loss)									(4,091)	(3,700)	(11,176)
Income (loss) before income taxes									(4,091)	(3,700)	(11,176)
Deferred policy acquisition costs	1,007				753				1,007	753	2,665
Unearned premiums	3,829				3,303				3,829	3,303	11,721
Unpaid losses and loss adjustment expenses	5,396				$ 5,164				5,396	5,164	11,310
Operating Segments | Underwriting
Segment Reporting Information [Line Items]
Gross written premiums									101,853	104,368	114,284
Net written premiums									87,724	89,086	91,240
Net earned premiums									89,089	93,811	91,729
Other income									359	326	794
Segment revenue									89,448	94,137	92,523
Losses and loss adjustment expenses, net									59,744	62,515	73,917
Policy acquisition costs									25,255	27,430	28,903
Operating expenses									14,114	15,750	12,524
Segment expenses									99,113	105,695	115,344
Segment underwriting gain (loss)									(9,665)	(11,558)	(22,821)
Income (loss) before income taxes									(9,665)	(11,558)	(22,821)
Operating Segments | Wholesale Agency
Segment Reporting Information [Line Items]
Other income									9,073	9,251	10,380
Segment revenue									9,073	9,251	10,380
Policy acquisition costs									6,063	6,255	7,086
Operating expenses									2,180	1,564	2,248
Segment expenses									8,243	7,819	9,334
Segment underwriting gain (loss)									830	1,432	1,046
Income (loss) before income taxes									830	1,432	1,046
Corp-orate
Segment Reporting Information [Line Items]
Other income									224	156	130
Segment revenue									224	156	130
Operating expenses									1,288	369	2,595
Segment expenses									1,288	369	2,595
Segment underwriting gain (loss)									(1,064)	(213)	(2,465)
Investment income									4,031	3,336	2,728
Net realized investment gains									1,196	61	70
Other gains (losses)											750
Change in fair value of equity securities									(427)	121
Interest expense									(2,882)	(2,644)	(1,362)
Income (loss) before income taxes									854	661	(279)
Eliminations
Segment Reporting Information [Line Items]
Other income									(7,547)	(8,151)	(9,744)
Segment revenue									(7,547)	(8,151)	(9,744)
Policy acquisition costs									(6,407)	(8,151)	(9,744)
Segment expenses									(6,407)	$ (8,151)	$ (9,744)
Segment underwriting gain (loss)									(1,140)
Income (loss) before income taxes									(1,140)
Deferred policy acquisition costs	$ (1,134)								$ (1,134)

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Consolidated Statements of Comprehensive Income (Loss) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Statement Of Income And Comprehensive Income [Abstract]
Net income (loss)	$ (7,822)	$ (9,227)	$ (21,542)
Unrealized investment gains (losses):
Unrealized investment gains (losses) during the period	3,725	(1,825)	1,151
Income tax expense (benefit)	824	0	356
Unrealized investment gains (losses), net of tax	2,901	(1,825)	795
Less: reclassification adjustments to:
Net realized investment gains (losses) included in net income (loss)	(200)	(55)	78
Income tax expense (benefit)	0	0	0
Total reclassifications included in net income (loss), net of tax	(200)	(55)	78
Other comprehensive income (loss)	3,101	(1,770)	717
Total comprehensive income (loss)	$ (4,721)	$ (10,997)	$ (20,825)

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Quarterly Financial Data (Unaudited) (Tables)

12 Months Ended

Dec. 31, 2019

Quarterly Financial Information Disclosure [Abstract]

Summary of Quarterly Financial Results

The following is a summary of quarterly results of operations for 2019 and 2018 (in thousands, except per share and ratio data).  The fluctuations between periods and changes in reserves, as disclosed in Note 5, are due to the normal fluctuations in operations from quarter to quarter.  The combined ratios in 2018 have been recast as a result of the addition of the wholesale agency segment.  See Note 17 ~ Segment Information for further details.  

	1st Quarter			2nd Quarter			3rd Quarter			4th Quarter
2019
Gross written premiums	$	24,216		$	25,169		$	27,077		$	25,391
Net written premiums	$	20,322		$	21,434		$	23,806		$	22,162
Net earned premiums	$	21,687		$	21,349		$	22,775		$	23,278
Net investment income		910			1,051			1,210			860
Net realized gains		19			715			390			72
Change in fair value of equity securities		1,265			(915	)		(1,065	)		288
Other income		422			581			564			542
Losses and loss adjustment expenses, net		14,456			14,382			14,857			16,049
Policy acquisition costs		5,589			6,210			6,153			6,959
Operating expenses		4,323			4,340			4,297			4,622
Interest expense		710			725			720			727
Income tax expense (benefit)		11			—			(802	)		(122	)
Equity earnings (losses) in affiliates, net of tax		106			(8	)		121			167
Net income (loss)	$	(680	)	$	(2,884	)	$	(1,230	)	$	(3,028	)
Net income (loss) per share, basic and diluted (1)	$	(0.08	)	$	(0.34	)	$	(0.13	)	$	(0.32	)
Combined ratio		108.1	%		113.0	%		109.2	%		112.9	%
2018
Gross written premiums	$	23,737		$	26,562		$	26,629		$	27,440
Net written premiums	$	19,845		$	22,595		$	22,846		$	23,800
Net earned premiums	$	23,800		$	23,938		$	23,450		$	22,623
Net investment income		802			837			786			911
Net realized gains (losses)		161			12			(21	)		(91	)
Change in fair value of equity securities		(297	)		29			152			237
Other income		357			450			405			370
Losses and loss adjustment expenses, net		13,328			15,068			16,554			17,565
Policy acquisition costs		6,513			6,472			6,452			6,097
Operating expenses		4,187			4,303			4,786			4,407
Interest expense		619			617			598			810
Income tax expense (benefit)		18			10			24			—
Equity earnings in affiliates, net of tax		55			89			93			53
Net income (loss)	$	213		$	(1,113	)	$	(3,551	)	$	(4,776	)
Net income (loss) per share, basic and diluted (1)	$	0.02		$	(0.13	)	$	(0.42	)	$	(0.56	)
Combined ratio		99.7	%		108.8	%		118.2	%		123.0	%

(1) Due to changes in the outstanding shares of the Company (Note 10 ~ Shareholders' Equity)the weighted average common shares outstanding has fluctuated over the past two years and therefore the quarterly earnings (loss) per common share does not total the full-year earnings (loss) per common share stated on the face of the Consolidated Statements of Operations.

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Investments - Net Investment Income (Details) - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2019	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Net Investment Income [Line Items]
Investment income									$ 4,315	$ 3,633	$ 3,003
Investment expenses									(284)	(297)	(275)
Net investment income	$ 860	$ 1,210	$ 1,051	$ 910	$ 911	$ 786	$ 837	$ 802	4,031	3,336	2,728
Debt securities
Net Investment Income [Line Items]
Investment income									3,476	3,419	2,757
Equity securities
Net Investment Income [Line Items]
Investment income									352	129	124
Cash, cash equivalents and short-term investments
Net Investment Income [Line Items]
Investment income									$ 487	$ 85	$ 122

XML

Document and Entity Information - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2019	Mar. 12, 2020	Jun. 28, 2019
Cover [Abstract]
Document Type	10-K
Amendment Flag	false
Document Period End Date	Dec. 31, 2019
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	FY
Entity Registrant Name	Conifer Holdings, Inc.
Entity Central Index Key	0001502292
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Interactive Data Current	Yes
Current Fiscal Year End Date	--12-31
Entity Filer Category	Non-accelerated Filer
Entity Well-known Seasoned Issuer	No
Entity Public Float			$ 21.3
Entity Common Stock, Shares Outstanding		9,592,861
Entity Shell Company	false
Entity Small Business	true
Entity Emerging Growth Company	true
Entity Ex Transition Period	true
Title of 12(b) Security	Common Stock, no par value
Trading Symbol	CNFR
Security Exchange Name	NASDAQ
Entity File Number	001-37536
Entity Incorporation, State or Country Code	MI
Entity Tax Identification Number	27-1298795
Entity Address, Address Line One	550 West Merrill Street
Entity Address, Address Line Two	Suite 200
Entity Address, City or Town	Birmingham
Entity Address, State or Province	MI
Entity Address, Postal Zip Code	48009
City Area Code	248
Local Phone Number	559-0840
Document Annual Report	true
Document Transition Report	false

XML

Investments

12 Months Ended

Dec. 31, 2019

Investments Debt And Equity Securities [Abstract]

Investments

2. Investments

The cost or amortized cost, gross unrealized gain or loss, and estimated fair value of the investments in securities classified as available-for-sale at December 31, 2019 and 2018 were as follows (dollars in thousands):

	December 31, 2019
	Cost or		Gross Unrealized
	Amortized Cost		Gains		Losses			Estimated Fair Value
Debt securities:
U.S. Government	$	9,392	$	66	$	(6	)	$	9,452
State and local government		14,388		545		—			14,933
Corporate debt		39,550		865		(21	)		40,394
Asset-backed securities		19,549		81		(55	)		19,575
Mortgage-backed securities		31,389		238		(112	)		31,515
Commercial mortgage-backed securities		9,972		116		(45	)		10,043
Collateralized mortgage obligations		5,073		29		(14	)		5,088
Total debt securities available for sale	$	129,313	$	1,940	$	(253	)	$	131,000

	December 31, 2018
	Cost or		Gross Unrealized
	Amortized Cost		Gains		Losses			Estimated Fair Value
Debt securities:
U.S. Government	$	15,360	$	3	$	(178	)	$	15,185
State and local government		15,847		115		(174	)		15,788
Corporate debt		30,423		74		(651	)		29,846
Asset-backed securities		24,468		24		(208	)		24,284
Mortgage-backed securities		30,377		18		(1,155	)		29,240
Commercial mortgage-backed securities		4,025		5		(77	)		3,953
Collateralized mortgage obligations		2,178		9		(43	)		2,144
Total debt securities available for sale	$	122,678	$	248	$	(2,486	)	$	120,440

The following table summarizes the aggregate fair value and gross unrealized losses, by security type, of the available-for-sale securities in unrealized loss positions. The table segregates the holdings based on the length of time that individual securities have been in a continuous unrealized loss position (dollars in thousands):

	December 31, 2019
	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		-	$	-	$	-			4	$	1,047	$	(6	)		4	$	1,047	$	(6	)
State and local government		-		-		-			-		-		-			-		-		-
Corporate debt		7		3,720		(17	)		3		1,697		(4	)		10		5,417		(21	)
Asset-backed securities		3		2,596		(1	)		18		11,836		(54	)		21		14,432		(55	)
Mortgage-backed securities		3		715		(1	)		13		7,812		(111	)		16		8,527		(112	)
Commercial mortgage   -backed securities		6		6,837		(45	)		-		-		-			6		6,837		(45	)
Collateralized mortgage   obligations		8		2,081		(14	)		-		-		-			8		2,081		(14	)
Total debt securities   available for sale		27		15,949		(78	)		38		22,392		(175	)		65		38,341		(253	)

	December 31, 2018
	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		1	$	2,470	$	(24	)		16	$	11,725	$	(154	)		17	$	14,195	$	(178	)
State and local government		21		4,935		(40	)		16		4,273		(134	)		37		9,208		(174	)
Corporate debt		36		12,096		(140	)		25		11,993		(511	)		61		24,089		(651	)
Asset-backed securities		25		17,743		(148	)		9		4,166		(60	)		34		21,909		(208	)
Mortgage-backed securities		20		5,474		(138	)		30		21,715		(1,017	)		50		27,189		(1,155	)
Commercial mortgage   -backed securities		4		1,082		(12	)		3		2,632		(65	)		7		3,714		(77	)
Collateralized mortgage   obligations		4		116		(1	)		6		1,587		(42	)		10		1,703		(43	)
Total debt securities   available for sale		111		43,916		(503	)		105		58,091		(1,983	)		216		102,007		(2,486	)

The Company analyzed its investment portfolio in accordance with its OTTI review procedures and determined the Company did not need to record a credit-related OTTI loss, nor recognize a non credit-related OTTI loss in other comprehensive income for the years ended December 31, 2019, 2018, and 2017.

The Company’s sources of net investment income are as follows (dollars in thousands):

	December 31,
	2019			2018			2017
Debt securities	$	3,476		$	3,419		$	2,757
Equity securities		352			129			124
Cash, cash equivalents, and short-term investments		487			85			122
Total investment income		4,315			3,633			3,003
Investment expenses		(284	)		(297	)		(275	)
Net investment income	$	4,031		$	3,336		$	2,728

The following table summarizes the gross realized gains and losses from sales or maturities of available-for-sale debt securities and equity securities, as follows (dollars in thousands):

	December 31,
	2019			2018			2017
Debt securities:
Gross realized gains	$	269		$	54		$	32
Gross realized losses		(54	)		(256	)		(8	)
Total debt securities		215			(202	)		24
Equity securities:
Gross realized gains		1,020			337			76
Gross realized losses		(39	)		(74	)		(30	)
Total equity securities		981			263			46
Total net investment realized gains	$	1,196		$	61		$	70

Proceeds from the sales of available-for-sale securities were $33.7 million, $14.6 million and $1.8 million for the years ended December 31, 2019, 2018, and 2017, respectively.  The gross realized gains from sales of available-for-sale securities for the years ended December 31, 2019, 2018, and 2017 were $274,000, $7,000, and $106,000, respectively.  The gross realized losses from sales of available-for-sale securities for the years ended December 31, 2019, 2018, and 2017 were $53,000, $199,000, and $37,000, respectively.  The year ended December 31, 2017 has not been recast to confirm to the current presentation of ASU No. 2016-01.  Refer to Note 1 ~ Summary of Significant Accounting Policies for further details.  

The Company carries other equity investments that do not have a readily determinable fair value at cost, less impairment or observable changes in price.  We review these investments for impairment during each reporting period.  There was no impairment or observable changes in price recorded during 2019 related to the Company's equity securities without readily determinable fair value.  These investments are a component of Other Assets in the Consolidated Balance Sheets.  The value of these investments as of December 31, 2019 were $665,000.

The table below summarizes the amortized cost and fair value of available-for-sale debt securities by contractual maturity at December 31, 2019.  Actual maturities may differ from contractual maturities because certain borrowers have the right to call or prepay obligations with or without call or prepayment penalties (dollars in thousands):

	Amortized Cost		Estimated Fair Value
Due in one year or less	$	7,276	$	7,293
Due after one year through five years		31,575		32,152
Due after five years through ten years		15,237		15,767
Due after ten years		9,242		9,567
Securities with contractual maturities		63,330		64,779
Asset-backed securities		19,549		19,575
Mortgage-backed securities		31,389		31,515
Commercial mortgage-backed securities		9,972		10,043
Collateralized mortgage obligations		5,073		5,088
Total debt securities	$	129,313	$	131,000

At December 31, 2019 and 2018, the Insurance Companies Subsidiaries had an aggregate of $8.0 million and $8.5 million, respectively, on deposit in trust accounts to meet the deposit requirements of various state insurance departments.  At December 31, 2019 and 2018, the Company had $58.4 million and $45.4 million held in trust accounts to meet collateral requirements with other third-party insurers, relating to various fronting arrangements.  There are withdrawal and other restrictions on these deposits, including the type of investments that may be held, however, the Company may generally invest in high-grade bonds and short-term investments and earn interest on the funds.

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Fair Value Measurements - Financial Instruments (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
Assets:
Total debt securities	$ 131,000	$ 120,440
Equity Securities	6,599	6,587
Short-term investments	31,426	8,925
Total marketable investments measured at fair value	169,025	135,952
Total assets measured at fair value	169,732	140,102
Liabilities:
Total Liabilities measured at fair value	33,891	31,892
U.S. Government
Assets:
Total debt securities	9,452	15,185
State and local government
Assets:
Total debt securities	14,933	15,788
Corporate debt
Assets:
Total debt securities	40,394	29,846
Asset-backed securities
Assets:
Total debt securities	19,575	24,284
Mortgage-backed securities
Assets:
Total debt securities	31,515	29,240
Commercial mortgage-backed securities
Assets:
Total debt securities	10,043	3,953
Collateralized mortgage obligations
Assets:
Total debt securities	5,088	2,144
Senior Unsecured Notes
Liabilities:
Debt	22,669	21,252
Subordinated notes
Liabilities:
Debt	11,222	10,640
Partnership interest
Assets:
Investments measured at NAV	707	4,150
Level 1
Assets:
Total debt securities	0	0
Equity Securities	6,335	6,323
Short-term investments	31,426	8,925
Total marketable investments measured at fair value	37,761	15,248
Liabilities:
Total Liabilities measured at fair value	0	0
Level 1 | U.S. Government
Assets:
Total debt securities	0	0
Level 1 | State and local government
Assets:
Total debt securities	0	0
Level 1 | Corporate debt
Assets:
Total debt securities	0	0
Level 1 | Asset-backed securities
Assets:
Total debt securities	0	0
Level 1 | Mortgage-backed securities
Assets:
Total debt securities	0	0
Level 1 | Commercial mortgage-backed securities
Assets:
Total debt securities	0	0
Level 1 | Collateralized mortgage obligations
Assets:
Total debt securities	0	0
Level 1 | Senior Unsecured Notes
Liabilities:
Debt	0	0
Level 1 | Subordinated notes
Liabilities:
Debt	0	0
Level 2
Assets:
Total debt securities	131,000	120,440
Equity Securities	264	264
Short-term investments	0
Total marketable investments measured at fair value	131,264	120,704
Liabilities:
Total Liabilities measured at fair value	22,669	21,252
Level 2 | U.S. Government
Assets:
Total debt securities	9,452	15,185
Level 2 | State and local government
Assets:
Total debt securities	14,933	15,788
Level 2 | Corporate debt
Assets:
Total debt securities	40,394	29,846
Level 2 | Asset-backed securities
Assets:
Total debt securities	19,575	24,284
Level 2 | Mortgage-backed securities
Assets:
Total debt securities	31,515	29,240
Level 2 | Commercial mortgage-backed securities
Assets:
Total debt securities	10,043	3,953
Level 2 | Collateralized mortgage obligations
Assets:
Total debt securities	5,088	2,144
Level 2 | Senior Unsecured Notes
Liabilities:
Debt	22,669	21,252
Level 2 | Subordinated notes
Liabilities:
Debt	0	0
Level 3
Assets:
Total debt securities	0	0
Equity Securities	0	0
Short-term investments	0	0
Total marketable investments measured at fair value	0	0
Liabilities:
Total Liabilities measured at fair value	11,222	10,640
Level 3 | U.S. Government
Assets:
Total debt securities	0	0
Level 3 | State and local government
Assets:
Total debt securities	0	0
Level 3 | Corporate debt
Assets:
Total debt securities	0	0
Level 3 | Asset-backed securities
Assets:
Total debt securities	0	0
Level 3 | Mortgage-backed securities
Assets:
Total debt securities	0	0
Level 3 | Commercial mortgage-backed securities
Assets:
Total debt securities	0	0
Level 3 | Collateralized mortgage obligations
Assets:
Total debt securities	0	0
Level 3 | Senior Unsecured Notes
Liabilities:
Debt	0	0
Level 3 | Subordinated notes
Liabilities:
Debt	$ 11,222	$ 10,640

XML

Statutory Financial Data, Risk-Based Capital and Dividend Restrictions - Narrative (Details)	12 Months Ended
	Dec. 31, 2019
Insurance [Abstract]
Dividend restriction percentage of statutory surplus of preceding year	10.00%

XML

Income Taxes - Income Tax Expense (Benefit) (Details) - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2019	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Income Tax Disclosure [Abstract]
Current tax expense (benefit)									$ 27	$ 52	$ (28)
Deferred tax expense (benefit)									(940)	0	(419)
Total income tax expense (benefit)	$ (122)	$ (802)	$ 0	$ 11	$ 0	$ 24	$ 10	$ 18	$ (913)	$ 52	$ (447)

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Summary of Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2019

Accounting Policies [Abstract]

Basis of Presentation and Management Representation

Basis of Presentation and Management Representation

The consolidated financial statements include accounts, after elimination of intercompany accounts and transactions, of Conifer Holdings, Inc. (the “Company” or “Conifer”), its wholly owned subsidiaries Conifer Insurance Company ("CIC"), Red Cedar Insurance Company ("RCIC"), White Pine Insurance Company ("WPIC"), and Sycamore Insurance Agency, Inc. ("SIA").  CIC, WPIC, and RCIC are collectively referred to as the "Insurance Company Subsidiaries."  On a stand-alone basis Conifer Holdings, Inc is referred to as the "Parent Company."  

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”), which differ from statutory accounting practices prescribed or permitted for insurance companies by regulatory authorities.

Business

Business

The Company is engaged in the sale of property and casualty insurance products and has organized its principal operations into three types of insurance businesses: commercial lines, personal lines, and agency business.  The Company underwrites a variety of specialty insurance products, including property, general liability, liquor liability, automobile, and homeowners and dwelling policies.  The Company markets and sells its insurance products through a network of independent agents, including managing general agents, whereby policies are written in all 50 states in the United States (“U.S.”).  The Company’s corporate headquarters are located in Birmingham, Michigan with additional office facilities in Florida and Pennsylvania.

Public Debt Offering

Public Debt Offering

In September and October of 2018, the Company completed a public debt offering of $25.3 million of senior unsecured notes.  Refer to Note 7 ~ Debt for further details.

Use of Estimates

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  While management believes the amounts included in the consolidated financial statements reflect management's best estimates and assumptions, actual results may differ from these estimates.

Cash, Cash Equivalents, and Short-term Investments

Cash, Cash Equivalents, and Short-term Investments

Cash consists of cash deposits in banks, generally in operating accounts.  Cash equivalents consist of money-market funds that are specifically used as overnight investments tied to cash deposit accounts.  Short-term investments, consisting of money-market funds, are classified as investments in the consolidated balance sheets as they relate to the Company’s investment activities.

Lease Accounting

LeaseAccounting

Effective January 1, 2019, the Company adopted FASB Accounting Standards Update ("ASU") No. 2016-02, Leases (Topic 842), which addresses the financial reporting of leasing transactions. This update required the recognition of a right-of-use asset and a corresponding lease liability, discounted to the present value, for all leases that extend beyond 12 months. For operating leases, the asset and liability will be amortized over the lease term on a straight-line basis, with all cash flows included in the operating section of the consolidated statement of cash flows. We do not have any financing leases. The Company elected to use the transition option of practical expedients permitted within the new standard, which allows for the adoption of the new standard at the effective date without adjusting the comparative prior periods presented. Our operating leases consist primarily of real estate utilized in the operation of our businesses with lease terms ranging from 5 to 10 years. Management has determined the appropriate discount rate to use in calculating the right-to-use asset and lease liability is 6.75%. The Company recorded a right-of-use asset of $3.9 million and lease liabilities of $3.9 million included in Other Assets and Other Liabilities in the Consolidated Balance Sheets on January 1, 2019.

Investment Securities and Other-than-temporary Impairments

Investment Securities

Debt securities are classified as available-for-sale and reported at fair value.  The Company determines the fair value using the market approach, which uses quoted prices or other relevant data based on market transactions involving identical or comparable assets.  The Company purchases the available-for-sale debt securities with the expectation that they will be held to maturity, however the Company may sell them if market conditions or credit‑related risk warrant earlier sales.  The Company does not have any securities classified as held-to-maturity or trading.

The change in unrealized gain and loss on debt securities is recorded as a component of accumulated other comprehensive income (loss), net of the related deferred tax effect, until realized.

The debt securities portfolio includes structured securities.  The Company recognizes income from these securities using a constant effective yield based on anticipated prepayments and the estimated economic life of the securities.  When actual prepayments differ significantly from anticipated prepayments, the estimated economic life is recalculated and the remaining unamortized premium or discount is amortized prospectively over the remaining economic life.  Premiums and discounts on structured securities are amortized or accreted over the life of the related available‑for‑sale security as an adjustment to yield using the effective interest method.  Such amortization and accretion is included in interest income in the consolidated statements of operations.  Dividend and interest income are recognized when earned.

Realized gains and losses from the sale of available-for-sale securities are determined on a specific-identification basis and included in earnings on the trade date.

Equity securities that do not result in consolidation and are not accounted for under the equity method are measured at fair value and any changes in fair value are recognized in net income in the Consolidated Statements of Operations.

Mutual fund and similar investments are measured at their net asset value, which approximates fair value. Any changes in the net asset value are recognized in net income in the Consolidated Statements of Operations.  This policy was effective in 2018 and 2017 amounts were not recasted.  

The Company carries other equity investments that do not have a readily determinable fair value at cost, less impairment and adjusted for observable price changes under the measurement alternative provided under GAAP.  We review these investments for impairment during each reporting period.  These investments are a component of Other Assets in the Consolidated Balance Sheets.

Other-than-Temporary Impairments

The Company reviews its impaired securities for possible other-than-temporary impairment ("OTTI") at each quarter-end.  A security has an impairment loss when its fair value is less than its cost or amortized cost at the balance sheet date.  The Company considers the following factors in performing its review: (i) the amount by which the security’s fair value is less than its cost, (ii) length of time the security has been impaired, (iii) whether management has the intent to sell the security, (iv) if it is more likely than not that management will be required to sell the security before recovery of its amortized cost basis, (v) whether the impairment is due to an issuer‑specific event, credit issues or change in market interest rates, (vi) the security’s credit rating and any recent downgrades or (vii) stress testing of expected cash flows under different scenarios.  If the Company cannot assert these conditions, an OTTI loss is recorded through the Consolidated Statements of Operations in the current period.

For all other impaired securities, the Company will assess whether the net present value of the cash flows expected to be collected from the security is less than its amortized cost basis.  Such a shortfall in cash flows is referred to as a “credit loss.”  For any such security, the Company separates the impairment loss into: (i) the credit loss and (ii) the non-credit loss, which is the amount related to all other factors such as interest rate changes, fluctuations in exchange rates and market conditions.  The credit loss charge is recorded to the current period statements of operations and the non-credit loss is recorded to accumulated other comprehensive income (loss), within shareholders’ equity, on an after-tax basis.  A security’s cost basis is permanently reduced by the amount of a credit loss.  Income is accreted over the remaining life of a security based on the interest rate necessary to discount the expected future cash flows to the new basis.  If the security is non-income producing, any cash proceeds are applied as a reduction of principal when received.

Recognition of Premium Revenues

Recognition of Premium Revenues

All of the property and casualty policies written by our insurance companies are considered short-duration contracts.  These policy premiums are earned on a daily pro-rata basis, net of reinsurance, over the term of the policy, which are six or twelve months in duration.  The portion of premiums written that relate to the unexpired terms of policies in force are deferred and reported as unearned premium at the balance sheet date.

Reinsurance

Reinsurance

Reinsurance premiums, commissions, losses and loss adjustment expenses ("LAE") on reinsured business are accounted for on a basis consistent with that used in accounting for the original policies issued and the terms of the reinsurance contracts.  The amounts reported as reinsurance recoverables include amounts billed to reinsurers on losses and LAE paid as well as estimates of amounts expected to be recovered from reinsurers on insurance liabilities that have not yet been paid. Reinsurance recoverables on unpaid losses and LAE are estimated based upon assumptions consistent with those used in establishing the gross liabilities as they are applied to the underlying reinsured contracts.  The Company records an allowance for uncollectible reinsurance recoverables based on an assessment of the reinsurer’s creditworthiness and collectability of the recorded amounts.  Management believes an allowance for uncollectible recoverable from its reinsurers was not necessary for the periods presented.

The Company receives ceding commissions in connection with certain ceded reinsurance.  The ceding commissions are recorded as a reduction of operating expenses.

In 2017, the Company entered into an adverse development cover reinsurance agreement (the "ADC").  The ADC is a retroactive reinsurance contract.  If the cumulative losses and loss adjustment expenses ceded under the ADC exceed the consideration paid, the resulting gain from such excess is deferred and amortized into earnings in future periods using the interest method.  In any period in which there is a gain position and a revised estimate of claim and allocated claim adjustment expenses, a portion of the deferred gain is cumulatively recognized in earnings as if the revised estimate was available at the inception date of the ADC.  As of December 31, 2019, the deferred gain on the ADC was fully recognized.

Deferred Policy Acquisition Costs

Deferred Policy Acquisition Costs

Costs incurred which are incremental and directly related to the successful acquisition of new or renewal insurance business is deferred.  These deferred costs consist of commissions paid to agents, premium taxes, and underwriting costs, including compensation and payroll related benefits. Proceeds from reinsurance transactions that represent recovery of acquisition costs reduce applicable unamortized acquisition costs in such a manner that net acquisition costs are capitalized and charged to expense.  Amortization of such policy acquisition costs is charged to expense in proportion to premium earned over the estimated policy term.

To the extent that unearned premiums on existing policies are not adequate to cover the sum of expected losses and LAE, unamortized acquisition costs and policy maintenance costs, unamortized deferred policy acquisition costs are charged to expense to the extent required to eliminate the premium deficiency.  If the premium deficiency is greater than the unamortized policy acquisition costs, a liability is recorded for any such deficiency.  The Company considers anticipated investment income in determining whether a premium deficiency exists.  Management performs this evaluation at each insurance product line level.

Unpaid Losses and Loss Adjustment Expenses

Unpaid Losses and Loss Adjustment Expenses

The liability for unpaid losses and LAE in the Consolidated Balance Sheets represents the Company’s estimate of the amount it expects to pay for the ultimate cost of all losses and LAE incurred that remain unpaid at the balance sheet date.  The liability is recorded on an undiscounted basis, except for the liability for unpaid losses and LAE assumed related to acquired companies which are initially recorded at fair value.  The process of estimating the liability for unpaid losses and LAE is a complex process that requires a high degree of judgment.

The liability for unpaid losses and LAE represent the accumulation of individual case estimates for reported losses and LAE, and actuarially determined estimates for incurred but not reported losses and LAE.  The liability for unpaid losses and LAE is intended to include the ultimate net cost of all losses and LAE incurred but unpaid as of the balance sheet date.  The liability is stated net of anticipated deductibles, salvage and subrogation, and gross of reinsurance ceded.  The estimate of the unpaid losses and LAE liability is continually reviewed and updated.  Although management believes the liability for losses and LAE is reasonable, the ultimate liability may be more or less than the current estimate.

The estimation of ultimate liability for unpaid losses and LAE is a complex, imprecise and inherently uncertain process, and therefore involves a considerable degree of judgment and expertise.  The Company utilizes various actuarially‑accepted reserving methodologies in deriving the continuum of expected outcomes and ultimately determining its estimated liability amount.  These methodologies utilize various inputs, including but not limited to 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 (including company-specific and industry data).  The liability for unpaid loss and LAE does not represent an exact measurement of liability, but is an estimate that is not directly or precisely quantifiable, particularly on a prospective basis, and is subject to a significant degree of variability over time.  In addition, the establishment of the liability for unpaid losses and LAE makes no provision for the broadening of coverage by legislative action or judicial interpretation or for the extraordinary future emergence of new types of losses not sufficiently represented in the Company’s historical experience or which cannot yet be quantified.  As a result, an integral component of estimating the liability for unpaid losses and LAE is the use of informed subjective estimates and judgments about the ultimate exposure to unpaid losses and LAE.  The effects of changes in the estimated liability are included in the results of operations in the period in which the estimates are revised.

The Company allocates the applicable portion of the unpaid losses and LAE to amounts recoverable from reinsurers under reinsurance contracts and reports those amounts separately as assets on the consolidated balance sheets.

Income Taxes

Income Taxes

Income taxes are accounted for under the asset and liability method.  Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax-credit carryforwards.  Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.  The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

Deferred tax assets are recognized to the extent that there is sufficient positive evidence, as allowed under the Accounting Standard Codification ("ASC") 740, Income Taxes, to support the recoverability of those deferred tax assets.  The Company establishes a valuation allowance to the extent that there is insufficient evidence to support the recoverability of the deferred tax asset under ASC 740.  In making such a determination, management considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax‑planning strategies, and results of recent operations.  If it is determined that the deferred tax assets would be realizable in the future in excess of their net recorded amount, an adjustment would be made to the deferred tax asset valuation allowance, which would reduce the provision for income taxes.

As of December 31, 2019 and 2018, the Company did not have any unrecognized tax benefits and had no accrued interest or penalties related to uncertain tax positions.

Other Income

Other Income

Other income consists primarily of fees charged to policyholders by the Company for services outside of the premium charge, such as installment billings or policy issuance costs.  Commission income is also received by the Company’s insurance agencies for writing policies for third party insurance companies.  The Company recognizes commission income on the later of the effective date of the policy, the date when the premium can be reasonably established, or the date when substantially all services related to the insurance placement have been rendered.

Operating Expenses

Operating Expenses

Operating expenses consist primarily of other underwriting, compensation and benefits, information technology, facility and other administrative expenses.

Recently Issued Accounting Guidance

Recently Issued Accounting Guidance

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326), which amends the current methodology and timing for recognizing credit losses.  This amendment will replace the current GAAP "incurred loss" methodology for credit losses with a methodology based on expected credit losses.  The new guidance will also require expanded consideration of a broader range of reasonable and increased supportable information for the credit loss estimates.  This ASU is effective for annual and interim reporting periods beginning after December 15, 2022.  Management is currently evaluating the impact of the guidance.

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820), which modifies the disclosure requirements for assets and liabilities measured at fair value.  The requirements to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, the policy for timing of transfers between levels and the valuation processes for Level 3 fair value measurements have all been removed.  However, the changes in unrealized gains and losses included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period must be disclosed along with the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements (or other quantitative information if it is more reasonable).  Finally, for investments measured at net asset value, the requirements have been modified so that the timing of liquidation and the date when restrictions from redemption might lapse are only disclosed if the investee has communicated the timing to the entity or announced the timing publicly.  This ASU is effective for annual and interim reporting periods beginning after December 15, 2019.  Early adoption is permitted upon the issuance of this update.  Management does not expect the new guidance to have a material impact on the Company’s consolidated financial statements.

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Segment Information

12 Months Ended

Dec. 31, 2019

Segment Reporting [Abstract]

Segment Information

17. Segment Information

The Company is engaged in the sale of property and casualty insurance products and has organized its business model around three classes of insurance businesses: commercial lines, personal lines, and wholesale agency business. Within these three businesses, the Company offers various insurance products and insurance agency services. Such insurance businesses are engaged in underwriting and marketing insurance coverages, and administering claims processing for such policies. The Company views the commercial and personal lines segments as underwriting business (business that takes on insurance underwriting risk). The wholesale agency business provides non-risk bearing revenue through commissions and policy fees. The wholesale agency business increases the product options to the Company’s independent retail agents by offering both insurance products from the Insurance Company Subsidiaries as well as products offered by other insurers. This segment has expanded in 2019, resulting in its separate disclosure. Prior periods have been recast to reflect the separate disclosure of the wholesale agency segment.

The Company defines its operating segments as components of the business where separate financial information is available and used by the chief operating decision maker in deciding how to allocate resources to its segments and in assessing its performance. In assessing performance of its operating segments, the Company’s chief operating decision maker, the Chief Executive Officer, reviews a number of financial measures including gross written premiums, net earned premiums, losses and LAE, net of reinsurance recoveries, and other revenue and expenses. The primary measure used for making decisions about resources to be allocated to an operating segment and assessing its performance is segment underwriting gain or loss which is defined as segment revenues, consisting of net earned premiums and other income, less segment expenses, consisting of losses and LAE, policy acquisition costs and operating expenses of the operating segments. Operating expenses primarily include compensation and related benefits for personnel, policy issuance and claims systems, rent and utilities.  The Company markets, distributes and sells its insurance products through its own insurance agencies and a network of independent agents.  All of the Company’s insurance activities are conducted in the United States with a concentration of activity in Florida, Michigan, Texas and New York.  For the years ended December 31, 2019, 2018, and 2017, gross written premiums attributable to these four states were 51.6%, 51.3%, and 55.7% respectively, of the Company’s total gross written premiums.

The following table summarizes our net earned premiums:

	Net Earned Premium
	2019			2018			2017
Commercial		94	%		89	%		84	%
Personal		6	%		11	%		16	%
Total		100	%		100	%		100	%

The following provides a description of the Company’s two insurance businesses and product offerings within these businesses:

• Commercial lines—offers coverage for property, liability, automobile and other miscellaneous coverage primarily to owner-operated small and mid-sized businesses, professional organizations and hospitality businesses such as restaurants, bars and taverns.

• Personal lines—offers coverage for low-value dwelling, and wind-exposed homeowners.

The Agency business sells insurance products on behalf of the Company’s commercial and personal lines businesses as well as to third-party insurers. Certain acquisition costs incurred by the commercial and personal lines businesses are reflected as commission revenue for the Agency business and are eliminated in the Eliminations category.

In addition to the reportable segments, the Company maintains a Corporate and Other category to reconcile segment results to the consolidated totals.  The Corporate and Other category includes: (i) corporate operating expenses such as salaries and related benefits of the Company’s executive management team, some finance and information technology personnel, and other corporate headquarters expenses, (ii) interest expense on the Company’s debt obligations; (iii) depreciation and amortization on property and equipment, and (iv) all investment income activity.  All investment income activity is reported within net investment income, net realized investment gains, and change in fair value of equity securities on the consolidated statements of operations.  The Company’s assets on the consolidated balance sheet are not allocated to the reportable segments.

The following tables present information by reportable segment (dollars in thousands):

Year Ended December 31, 2019	Commercial Lines			Personal Lines			Under-writing			Wholesale Agency		Corp-orate			Elim-inations			Total
Gross written premiums	$	94,391		$	7,462		$	101,853		$	—	$	—		$	—		$	101,853
Net written premiums	$	81,966		$	5,758		$	87,724		$	—	$	—		$	—		$	87,724
Net earned premiums	$	83,858		$	5,231		$	89,089		$	—	$	—		$	—		$	89,089
Other income		216			143			359			9,073		224			(7,547	)		2,109
Segment revenue		84,074			5,374			89,448			9,073		224			(7,547	)		91,198
Loss and loss adjustment expenses, net		53,256			6,488			59,744			—		—			—			59,744
Policy acquisition costs		23,511			1,744			25,255			6,063		—			(6,407	)		24,911
Operating expenses		12,881			1,233			14,114			2,180		1,288			—			17,582
Segment expenses		89,648			9,465			99,113			8,243		1,288			(6,407	)		102,237
Segment underwriting gain (loss)		(5,574	)		(4,091	)		(9,665	)		830		(1,064	)		(1,140	)		(11,039	)
Investment income													4,031						4,031
Net realized investment gains													1,196						1,196
Change in fair value of equity securities													(427	)					(427	)
Interest expense													(2,882	)					(2,882	)
Income (loss) before income taxes	$	(5,574	)	$	(4,091	)	$	(9,665	)	$	830	$	854		$	(1,140	)	$	(9,121	)
Selected Balance Sheet Data:
Deferred policy acquisition costs	$	12,033		$	1,007										$	(1,134	)	$	11,906
Unearned premiums		47,674			3,829														51,503
Unpaid losses and loss adjustment expenses		101,850			5,396														107,246

Year Ended December 31, 2018	Commercial Lines			Personal Lines			Under-writing			Wholesale Agency		Corp-orate			Elim-inations			Total
Gross written premiums	$	97,694		$	6,674		$	104,368		$	—	$	—		$	—		$	104,368
Net written premiums	$	87,038		$	2,048		$	89,086		$	—	$	—		$	—		$	89,086
Net earned premiums	$	83,352		$	10,459		$	93,811		$	—	$	—		$	—		$	93,811
Other income		101			225			326			9,251		156			(8,151	)		1,582
Segment revenue		83,453			10,684			94,137			9,251		156			(8,151	)		95,393
Loss and loss adjustment expenses, net		53,065			9,450			62,515			—		—			—			62,515
Policy acquisition costs		23,584			3,846			27,430			6,255		—			(8,151	)		25,534
Operating expenses		14,662			1,088			15,750			1,564		369			—			17,683
Segment expenses		91,311			14,384			105,695			7,819		369			(8,151	)		105,732
Segment underwriting gain (loss)		(7,858	)		(3,700	)		(11,558	)		1,432		(213	)	$	—			(10,339	)
Investment income													3,336						3,336
Net realized investment gains													61						61
Change in fair value of equity securities													121						121
Interest expense													(2,644	)					(2,644	)
Income (loss) before income taxes	$	(7,858	)	$	(3,700	)	$	(11,558	)	$	1,432	$	661		$	—		$	(9,465	)
Selected Balance Sheet Data:
Deferred policy acquisition costs	$	11,258		$	753													$	12,011
Unearned premiums		49,549			3,303														52,852
Unpaid losses and loss adjustment expenses		87,643			5,164														92,807

Year Ended December 31, 2017	Commercial Lines			Personal Lines			Under-writing			Wholesale Agency		Corp-orate			Elim-inations			Total
Gross written premiums	$	92,112		$	22,172		$	114,284		$	—	$	—		$	—		$	114,284
Net written premiums	$	78,217		$	13,023		$	91,240		$	—	$	—		$	—		$	91,240
Net earned premiums	$	76,786		$	14,943		$	91,729		$	—	$	—		$	—		$	91,729
Other income		221			573			794			10,380		130			(9,744	)		1,560
Segment revenue		77,007			15,516			92,523			10,380		130			(9,744	)		93,289
Loss and loss adjustment expenses, net		55,701			18,216			73,917			—		—			—			73,917
Policy acquisition costs		22,366			6,537			28,903			7,086		—			(9,744	)		26,245
Operating expenses		10,585			1,939			12,524			2,248		2,595			—			17,367
Segment expenses		88,652			26,692			115,344			9,334		2,595			(9,744	)		117,529
Segment underwriting gain (loss)		(11,645	)		(11,176	)		(22,821	)		1,046		(2,465	)	$	—			(24,240	)
Investment income													2,728						2,728
Net realized investment gains													70						70
Other gains (losses)													750						750
Interest expense													(1,362	)					(1,362	)
Income (loss) before income taxes	$	(11,645	)	$	(11,176	)	$	(22,821	)	$	1,046	$	(279	)	$	—		$	(22,054	)
Selected Balance Sheet Data:
Deferred policy acquisition costs	$	10,116		$	2,665													$	12,781
Unearned premiums		45,951			11,721														57,672
Unpaid losses and loss adjustment expenses		76,586			11,310														87,896

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Stock-based Compensation

12 Months Ended

Dec. 31, 2019

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Stock-based Compensation

13. Stock-based Compensation

In 2015, the Company established the Conifer Holdings, Inc. 2015 Omnibus Incentive Plan (“2015 Plan”), which permits the granting of stock options, stock appreciation rights, restricted stock units ("RSU") and other stock-based awards.  The 2015 Plan authorizes up to 1,377,000 shares of common stock for awards to be issued to employees, directors or consultants of the Company.  The RSUs are issued at no less than the market price on the date the awards are granted.  The awards vest in five annual installments, commencing on the first anniversary from the date of grant.  The Company will expense the grant date fair value of the RSUs as compensation expense on a straight-line basis over the requisite service period.  Upon vesting, each RSU will convert into one share of common stock.  The unvested RSUs are subject to forfeiture in the event the employee is involuntarily or voluntarily terminated.  If the employee is terminated by the Company for cause, the Company has the option to forfeit the terminated employees’ vested shares for no consideration and to cause the employee to have no further rights or interest in the vested RSUs.

The following summarizes our RSU activity (units in thousands):

	Number of Units			Weighted Average Grant-Date Fair Value
Outstanding at December 31, 2016		416		$	9.87
Units vested		(95	)		9.97
Units forfeited		(14	)		9.94
Outstanding at December 31, 2017		307		$	9.84
Units granted		70			5.76
Units vested		(95	)		9.84
Units forfeited		(18	)		8.96
Outstanding at December 31, 2018		264		$	8.91
Units vested		(102	)		9.47
Units forfeited		(6	)		7.37
Outstanding at December 31, 2019		156		$	8.45

The scheduled vesting for the restricted stock units at December 31, 2019, was as follows (units in thousands):

	2020		2021		2022		2023		Total
Scheduled vesting - RSUs		102		31		13		10		156

In 2015, the Company issued 390,352 RSUs to executive officers and other employees to be settled in shares of common stock.  The total RSUs were valued at $4.1 million on the date of grant.  In 2016, the Company issued 111,281 RSUs to executive officers and other employees valued at $909,000 on the date of grant.  In 2018, the Company issued 70,000 RSUs to executive officers and other employees valued at $404,000 on the dates of grant.

The Company recorded $959,000, $970,000, and $948,000 of compensation expense related to the RSUs for the years ended December 31, 2019, 2018 and 2017, respectively.  The total compensation cost related to the non-vested portion of the restricted stock units which has not been recognized as of December 31, 2019 was $1.3 million.

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Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2019

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

CONIFER HOLDINGS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

1. Summary Of Significant Accounting Policies

Basis of Presentation and Management Representation

The consolidated financial statements include accounts, after elimination of intercompany accounts and transactions, of Conifer Holdings, Inc. (the “Company” or “Conifer”), its wholly owned subsidiaries Conifer Insurance Company ("CIC"), Red Cedar Insurance Company ("RCIC"), White Pine Insurance Company ("WPIC"), and Sycamore Insurance Agency, Inc. ("SIA").  CIC, WPIC, and RCIC are collectively referred to as the "Insurance Company Subsidiaries."  On a stand-alone basis Conifer Holdings, Inc is referred to as the "Parent Company."  

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”), which differ from statutory accounting practices prescribed or permitted for insurance companies by regulatory authorities.

Business

The Company is engaged in the sale of property and casualty insurance products and has organized its principal operations into three types of insurance businesses: commercial lines, personal lines, and agency business.  The Company underwrites a variety of specialty insurance products, including property, general liability, liquor liability, automobile, and homeowners and dwelling policies.  The Company markets and sells its insurance products through a network of independent agents, including managing general agents, whereby policies are written in all 50 states in the United States (“U.S.”).  The Company’s corporate headquarters are located in Birmingham, Michigan with additional office facilities in Florida and Pennsylvania.

Public Debt Offering

In September and October of 2018, the Company completed a public debt offering of $25.3 million of senior unsecured notes.  Refer to Note 7 ~ Debt for further details.

Summary of Significant Accounting Policies

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  While management believes the amounts included in the consolidated financial statements reflect management's best estimates and assumptions, actual results may differ from these estimates.

Cash, Cash Equivalents, and Short-term Investments

Cash consists of cash deposits in banks, generally in operating accounts.  Cash equivalents consist of money-market funds that are specifically used as overnight investments tied to cash deposit accounts.  Short-term investments, consisting of money-market funds, are classified as investments in the consolidated balance sheets as they relate to the Company’s investment activities.

LeaseAccounting

Effective January 1, 2019, the Company adopted FASB Accounting Standards Update ("ASU") No. 2016-02, Leases (Topic 842), which addresses the financial reporting of leasing transactions. This update required the recognition of a right-of-use asset and a corresponding lease liability, discounted to the present value, for all leases that extend beyond 12 months. For operating leases, the asset and liability will be amortized over the lease term on a straight-line basis, with all cash flows included in the operating section of the consolidated statement of cash flows. We do not have any financing leases. The Company elected to use the transition option of practical expedients permitted within the new standard, which allows for the adoption of the new standard at the effective date without adjusting the comparative prior periods presented. Our operating leases consist primarily of real estate utilized in the operation of our businesses with lease terms ranging from 5 to 10 years. Management has determined the appropriate discount rate to use in calculating the right-to-use asset and lease liability is 6.75%. The Company recorded a right-of-use asset of $3.9 million and lease liabilities of $3.9 million included in Other Assets and Other Liabilities in the Consolidated Balance Sheets on January 1, 2019.

Investment Securities

Debt securities are classified as available-for-sale and reported at fair value.  The Company determines the fair value using the market approach, which uses quoted prices or other relevant data based on market transactions involving identical or comparable assets.  The Company purchases the available-for-sale debt securities with the expectation that they will be held to maturity, however the Company may sell them if market conditions or credit‑related risk warrant earlier sales.  The Company does not have any securities classified as held-to-maturity or trading.

The change in unrealized gain and loss on debt securities is recorded as a component of accumulated other comprehensive income (loss), net of the related deferred tax effect, until realized.

The debt securities portfolio includes structured securities.  The Company recognizes income from these securities using a constant effective yield based on anticipated prepayments and the estimated economic life of the securities.  When actual prepayments differ significantly from anticipated prepayments, the estimated economic life is recalculated and the remaining unamortized premium or discount is amortized prospectively over the remaining economic life.  Premiums and discounts on structured securities are amortized or accreted over the life of the related available‑for‑sale security as an adjustment to yield using the effective interest method.  Such amortization and accretion is included in interest income in the consolidated statements of operations.  Dividend and interest income are recognized when earned.

Realized gains and losses from the sale of available-for-sale securities are determined on a specific-identification basis and included in earnings on the trade date.

Equity securities that do not result in consolidation and are not accounted for under the equity method are measured at fair value and any changes in fair value are recognized in net income in the Consolidated Statements of Operations.

Mutual fund and similar investments are measured at their net asset value, which approximates fair value. Any changes in the net asset value are recognized in net income in the Consolidated Statements of Operations.  This policy was effective in 2018 and 2017 amounts were not recasted.  

The Company carries other equity investments that do not have a readily determinable fair value at cost, less impairment and adjusted for observable price changes under the measurement alternative provided under GAAP.  We review these investments for impairment during each reporting period.  These investments are a component of Other Assets in the Consolidated Balance Sheets.

Other-than-Temporary Impairments

The Company reviews its impaired securities for possible other-than-temporary impairment ("OTTI") at each quarter-end.  A security has an impairment loss when its fair value is less than its cost or amortized cost at the balance sheet date.  The Company considers the following factors in performing its review: (i) the amount by which the security’s fair value is less than its cost, (ii) length of time the security has been impaired, (iii) whether management has the intent to sell the security, (iv) if it is more likely than not that management will be required to sell the security before recovery of its amortized cost basis, (v) whether the impairment is due to an issuer‑specific event, credit issues or change in market interest rates, (vi) the security’s credit rating and any recent downgrades or (vii) stress testing of expected cash flows under different scenarios.  If the Company cannot assert these conditions, an OTTI loss is recorded through the Consolidated Statements of Operations in the current period.

For all other impaired securities, the Company will assess whether the net present value of the cash flows expected to be collected from the security is less than its amortized cost basis.  Such a shortfall in cash flows is referred to as a “credit loss.”  For any such security, the Company separates the impairment loss into: (i) the credit loss and (ii) the non-credit loss, which is the amount related to all other factors such as interest rate changes, fluctuations in exchange rates and market conditions.  The credit loss charge is recorded to the current period statements of operations and the non-credit loss is recorded to accumulated other comprehensive income (loss), within shareholders’ equity, on an after-tax basis.  A security’s cost basis is permanently reduced by the amount of a credit loss.  Income is accreted over the remaining life of a security based on the interest rate necessary to discount the expected future cash flows to the new basis.  If the security is non-income producing, any cash proceeds are applied as a reduction of principal when received.

Recognition of Premium Revenues

All of the property and casualty policies written by our insurance companies are considered short-duration contracts.  These policy premiums are earned on a daily pro-rata basis, net of reinsurance, over the term of the policy, which are six or twelve months in duration.  The portion of premiums written that relate to the unexpired terms of policies in force are deferred and reported as unearned premium at the balance sheet date.

Reinsurance

Reinsurance premiums, commissions, losses and loss adjustment expenses ("LAE") on reinsured business are accounted for on a basis consistent with that used in accounting for the original policies issued and the terms of the reinsurance contracts.  The amounts reported as reinsurance recoverables include amounts billed to reinsurers on losses and LAE paid as well as estimates of amounts expected to be recovered from reinsurers on insurance liabilities that have not yet been paid. Reinsurance recoverables on unpaid losses and LAE are estimated based upon assumptions consistent with those used in establishing the gross liabilities as they are applied to the underlying reinsured contracts.  The Company records an allowance for uncollectible reinsurance recoverables based on an assessment of the reinsurer’s creditworthiness and collectability of the recorded amounts.  Management believes an allowance for uncollectible recoverable from its reinsurers was not necessary for the periods presented.

The Company receives ceding commissions in connection with certain ceded reinsurance.  The ceding commissions are recorded as a reduction of operating expenses.

In 2017, the Company entered into an adverse development cover reinsurance agreement (the "ADC").  The ADC is a retroactive reinsurance contract.  If the cumulative losses and loss adjustment expenses ceded under the ADC exceed the consideration paid, the resulting gain from such excess is deferred and amortized into earnings in future periods using the interest method.  In any period in which there is a gain position and a revised estimate of claim and allocated claim adjustment expenses, a portion of the deferred gain is cumulatively recognized in earnings as if the revised estimate was available at the inception date of the ADC.  As of December 31, 2019, the deferred gain on the ADC was fully recognized.

Deferred Policy Acquisition Costs

Costs incurred which are incremental and directly related to the successful acquisition of new or renewal insurance business is deferred.  These deferred costs consist of commissions paid to agents, premium taxes, and underwriting costs, including compensation and payroll related benefits. Proceeds from reinsurance transactions that represent recovery of acquisition costs reduce applicable unamortized acquisition costs in such a manner that net acquisition costs are capitalized and charged to expense.  Amortization of such policy acquisition costs is charged to expense in proportion to premium earned over the estimated policy term.

To the extent that unearned premiums on existing policies are not adequate to cover the sum of expected losses and LAE, unamortized acquisition costs and policy maintenance costs, unamortized deferred policy acquisition costs are charged to expense to the extent required to eliminate the premium deficiency.  If the premium deficiency is greater than the unamortized policy acquisition costs, a liability is recorded for any such deficiency.  The Company considers anticipated investment income in determining whether a premium deficiency exists.  Management performs this evaluation at each insurance product line level.

Unpaid Losses and Loss Adjustment Expenses

The liability for unpaid losses and LAE in the Consolidated Balance Sheets represents the Company’s estimate of the amount it expects to pay for the ultimate cost of all losses and LAE incurred that remain unpaid at the balance sheet date.  The liability is recorded on an undiscounted basis, except for the liability for unpaid losses and LAE assumed related to acquired companies which are initially recorded at fair value.  The process of estimating the liability for unpaid losses and LAE is a complex process that requires a high degree of judgment.

The liability for unpaid losses and LAE represent the accumulation of individual case estimates for reported losses and LAE, and actuarially determined estimates for incurred but not reported losses and LAE.  The liability for unpaid losses and LAE is intended to include the ultimate net cost of all losses and LAE incurred but unpaid as of the balance sheet date.  The liability is stated net of anticipated deductibles, salvage and subrogation, and gross of reinsurance ceded.  The estimate of the unpaid losses and LAE liability is continually reviewed and updated.  Although management believes the liability for losses and LAE is reasonable, the ultimate liability may be more or less than the current estimate.

The estimation of ultimate liability for unpaid losses and LAE is a complex, imprecise and inherently uncertain process, and therefore involves a considerable degree of judgment and expertise.  The Company utilizes various actuarially‑accepted reserving methodologies in deriving the continuum of expected outcomes and ultimately determining its estimated liability amount.  These methodologies utilize various inputs, including but not limited to 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 (including company-specific and industry data).  The liability for unpaid loss and LAE does not represent an exact measurement of liability, but is an estimate that is not directly or precisely quantifiable, particularly on a prospective basis, and is subject to a significant degree of variability over time.  In addition, the establishment of the liability for unpaid losses and LAE makes no provision for the broadening of coverage by legislative action or judicial interpretation or for the extraordinary future emergence of new types of losses not sufficiently represented in the Company’s historical experience or which cannot yet be quantified.  As a result, an integral component of estimating the liability for unpaid losses and LAE is the use of informed subjective estimates and judgments about the ultimate exposure to unpaid losses and LAE.  The effects of changes in the estimated liability are included in the results of operations in the period in which the estimates are revised.

The Company allocates the applicable portion of the unpaid losses and LAE to amounts recoverable from reinsurers under reinsurance contracts and reports those amounts separately as assets on the consolidated balance sheets.

Income Taxes

Income taxes are accounted for under the asset and liability method.  Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax-credit carryforwards.  Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.  The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

Deferred tax assets are recognized to the extent that there is sufficient positive evidence, as allowed under the Accounting Standard Codification ("ASC") 740, Income Taxes, to support the recoverability of those deferred tax assets.  The Company establishes a valuation allowance to the extent that there is insufficient evidence to support the recoverability of the deferred tax asset under ASC 740.  In making such a determination, management considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax‑planning strategies, and results of recent operations.  If it is determined that the deferred tax assets would be realizable in the future in excess of their net recorded amount, an adjustment would be made to the deferred tax asset valuation allowance, which would reduce the provision for income taxes.

As of December 31, 2019 and 2018, the Company did not have any unrecognized tax benefits and had no accrued interest or penalties related to uncertain tax positions.

Other Income

Other income consists primarily of fees charged to policyholders by the Company for services outside of the premium charge, such as installment billings or policy issuance costs.  Commission income is also received by the Company’s insurance agencies for writing policies for third party insurance companies.  The Company recognizes commission income on the later of the effective date of the policy, the date when the premium can be reasonably established, or the date when substantially all services related to the insurance placement have been rendered.

Operating Expenses

Operating expenses consist primarily of other underwriting, compensation and benefits, information technology, facility and other administrative expenses.

Recently Issued Accounting Guidance

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326), which amends the current methodology and timing for recognizing credit losses.  This amendment will replace the current GAAP "incurred loss" methodology for credit losses with a methodology based on expected credit losses.  The new guidance will also require expanded consideration of a broader range of reasonable and increased supportable information for the credit loss estimates.  This ASU is effective for annual and interim reporting periods beginning after December 15, 2022.  Management is currently evaluating the impact of the guidance.

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820), which modifies the disclosure requirements for assets and liabilities measured at fair value.  The requirements to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, the policy for timing of transfers between levels and the valuation processes for Level 3 fair value measurements have all been removed.  However, the changes in unrealized gains and losses included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period must be disclosed along with the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements (or other quantitative information if it is more reasonable).  Finally, for investments measured at net asset value, the requirements have been modified so that the timing of liquidation and the date when restrictions from redemption might lapse are only disclosed if the investee has communicated the timing to the entity or announced the timing publicly.  This ASU is effective for annual and interim reporting periods beginning after December 15, 2019.  Early adoption is permitted upon the issuance of this update.  Management does not expect the new guidance to have a material impact on the Company’s consolidated financial statements.

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Investments - Available-for-sale Fixed Maturity Securities by Contractual Maturity (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
Amortized Cost
Due in one year or less	$ 7,276
Due after one year through five years	31,575
Due after five years through ten years	15,237
Due after ten years	9,242
Securities with contractual maturities	63,330
Total debt securities	129,313	$ 122,678
Estimated Fair Value
Due in one year or less	7,293
Due after one year through five years	32,152
Due after five years through ten years	15,767
Due after ten years	9,567
Securities with contractual maturities	64,779
Total debt securities	131,000	120,440
Asset-backed securities
Amortized Cost
Total debt securities	19,549	24,468
Estimated Fair Value
Total debt securities	19,575	24,284
Mortgage-backed securities
Amortized Cost
Total debt securities	31,389	30,377
Estimated Fair Value
Total debt securities	31,515	29,240
Commercial mortgage-backed securities
Amortized Cost
Total debt securities	9,972	4,025
Estimated Fair Value
Total debt securities	10,043	3,953
Collateralized mortgage obligations
Amortized Cost
Total debt securities	5,073	2,178
Estimated Fair Value
Total debt securities	$ 5,088	$ 2,144

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Segment Information (Tables)

12 Months Ended

Dec. 31, 2019

Segment Reporting [Abstract]

Schedule of Information by Reportable Segment

The following table summarizes our net earned premiums:

	Net Earned Premium
	2019			2018			2017
Commercial		94	%		89	%		84	%
Personal		6	%		11	%		16	%
Total		100	%		100	%		100	%

The following tables present information by reportable segment (dollars in thousands):

Year Ended December 31, 2019	Commercial Lines			Personal Lines			Under-writing			Wholesale Agency		Corp-orate			Elim-inations			Total
Gross written premiums	$	94,391		$	7,462		$	101,853		$	—	$	—		$	—		$	101,853
Net written premiums	$	81,966		$	5,758		$	87,724		$	—	$	—		$	—		$	87,724
Net earned premiums	$	83,858		$	5,231		$	89,089		$	—	$	—		$	—		$	89,089
Other income		216			143			359			9,073		224			(7,547	)		2,109
Segment revenue		84,074			5,374			89,448			9,073		224			(7,547	)		91,198
Loss and loss adjustment expenses, net		53,256			6,488			59,744			—		—			—			59,744
Policy acquisition costs		23,511			1,744			25,255			6,063		—			(6,407	)		24,911
Operating expenses		12,881			1,233			14,114			2,180		1,288			—			17,582
Segment expenses		89,648			9,465			99,113			8,243		1,288			(6,407	)		102,237
Segment underwriting gain (loss)		(5,574	)		(4,091	)		(9,665	)		830		(1,064	)		(1,140	)		(11,039	)
Investment income													4,031						4,031
Net realized investment gains													1,196						1,196
Change in fair value of equity securities													(427	)					(427	)
Interest expense													(2,882	)					(2,882	)
Income (loss) before income taxes	$	(5,574	)	$	(4,091	)	$	(9,665	)	$	830	$	854		$	(1,140	)	$	(9,121	)
Selected Balance Sheet Data:
Deferred policy acquisition costs	$	12,033		$	1,007										$	(1,134	)	$	11,906
Unearned premiums		47,674			3,829														51,503
Unpaid losses and loss adjustment expenses		101,850			5,396														107,246

Year Ended December 31, 2018	Commercial Lines			Personal Lines			Under-writing			Wholesale Agency		Corp-orate			Elim-inations			Total
Gross written premiums	$	97,694		$	6,674		$	104,368		$	—	$	—		$	—		$	104,368
Net written premiums	$	87,038		$	2,048		$	89,086		$	—	$	—		$	—		$	89,086
Net earned premiums	$	83,352		$	10,459		$	93,811		$	—	$	—		$	—		$	93,811
Other income		101			225			326			9,251		156			(8,151	)		1,582
Segment revenue		83,453			10,684			94,137			9,251		156			(8,151	)		95,393
Loss and loss adjustment expenses, net		53,065			9,450			62,515			—		—			—			62,515
Policy acquisition costs		23,584			3,846			27,430			6,255		—			(8,151	)		25,534
Operating expenses		14,662			1,088			15,750			1,564		369			—			17,683
Segment expenses		91,311			14,384			105,695			7,819		369			(8,151	)		105,732
Segment underwriting gain (loss)		(7,858	)		(3,700	)		(11,558	)		1,432		(213	)	$	—			(10,339	)
Investment income													3,336						3,336
Net realized investment gains													61						61
Change in fair value of equity securities													121						121
Interest expense													(2,644	)					(2,644	)
Income (loss) before income taxes	$	(7,858	)	$	(3,700	)	$	(11,558	)	$	1,432	$	661		$	—		$	(9,465	)
Selected Balance Sheet Data:
Deferred policy acquisition costs	$	11,258		$	753													$	12,011
Unearned premiums		49,549			3,303														52,852
Unpaid losses and loss adjustment expenses		87,643			5,164														92,807

Year Ended December 31, 2017	Commercial Lines			Personal Lines			Under-writing			Wholesale Agency		Corp-orate			Elim-inations			Total
Gross written premiums	$	92,112		$	22,172		$	114,284		$	—	$	—		$	—		$	114,284
Net written premiums	$	78,217		$	13,023		$	91,240		$	—	$	—		$	—		$	91,240
Net earned premiums	$	76,786		$	14,943		$	91,729		$	—	$	—		$	—		$	91,729
Other income		221			573			794			10,380		130			(9,744	)		1,560
Segment revenue		77,007			15,516			92,523			10,380		130			(9,744	)		93,289
Loss and loss adjustment expenses, net		55,701			18,216			73,917			—		—			—			73,917
Policy acquisition costs		22,366			6,537			28,903			7,086		—			(9,744	)		26,245
Operating expenses		10,585			1,939			12,524			2,248		2,595			—			17,367
Segment expenses		88,652			26,692			115,344			9,334		2,595			(9,744	)		117,529
Segment underwriting gain (loss)		(11,645	)		(11,176	)		(22,821	)		1,046		(2,465	)	$	—			(24,240	)
Investment income													2,728						2,728
Net realized investment gains													70						70
Other gains (losses)													750						750
Interest expense													(1,362	)					(1,362	)
Income (loss) before income taxes	$	(11,645	)	$	(11,176	)	$	(22,821	)	$	1,046	$	(279	)	$	—		$	(22,054	)
Selected Balance Sheet Data:
Deferred policy acquisition costs	$	10,116		$	2,665													$	12,781
Unearned premiums		45,951			11,721														57,672
Unpaid losses and loss adjustment expenses		76,586			11,310														87,896

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Consolidated Statements of Operations - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Revenue
Gross earned premiums	$ 103,203	$ 109,188	$ 114,737
Ceded earned premiums	(14,114)	(15,377)	(23,008)
Net earned premiums	89,089	93,811	91,729
Net investment income	4,031	3,336	2,728
Net realized investment gains	1,196	61	70
Change in fair value of equity securities	(427)	121	0
Other gains (losses)	0	0	750
Other income	2,109	1,582	1,560
Total revenue	95,998	98,911	96,837
Expenses
Losses and loss adjustment expenses, net	59,744	62,515	73,917
Policy acquisition costs	24,911	25,534	26,245
Operating expenses	17,582	17,683	17,367
Interest expense	2,882	2,644	1,362
Total expenses	105,119	108,376	118,891
Income (loss) before income taxes	(9,121)	(9,465)	(22,054)
Equity earnings in Affiliate, net of tax	386	290	65
Income tax expense (benefit)	(913)	52	(447)
Net income (loss)	$ (7,822)	$ (9,227)	$ (21,542)
Net income (loss) per share, basic and diluted	$ (0.88)	$ (1.08)	$ (2.74)
Weighted average common shares outstanding, basic and diluted	8,880,107	8,543,876	7,867,344

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Investments - Available-for-sale Securities in Unrealized Loss Positions (Details) $ in Thousands	Dec. 31, 2019 USD ($) security	Dec. 31, 2018 USD ($) security
Debt and Equity Securities, Available-for-sale, Continuous Unrealized Loss Position, Number of Positions [Abstract]
Debt securities, less than 12 months, number of issues | security	27	111
Debt securities, 12 months or More, number of issues | security	38	105
Debt securities, number of issues | security	65	216
Debt and Equity Securities, Available-for-sale, Unrealized Loss Position [Abstract]
Debt securities, less than 12 months, fair value	$ 15,949
Debt securities, 12 months or More, fair value	22,392
Debt securities, fair value	38,341
Debt and Equity Securities, Available-for-sale, Unrealized Loss Position, Accumulated Loss [Abstract]
Debt securities, less than 12 months, unrealized losses	(78)
Debt securities, 12 months or More, unrealized losses	(175)
Debt securities, total unrealized losses	$ (253)
U.S. Government
Debt and Equity Securities, Available-for-sale, Continuous Unrealized Loss Position, Number of Positions [Abstract]
Debt securities, less than 12 months, number of issues | security	0	1
Debt securities, 12 months or More, number of issues | security	4	16
Debt securities, number of issues | security	4	17
Debt and Equity Securities, Available-for-sale, Unrealized Loss Position [Abstract]
Debt securities, less than 12 months, fair value	$ 0	$ 2,470
Debt securities, 12 months or More, fair value	1,047	11,725
Debt securities, fair value	1,047	14,195
Debt and Equity Securities, Available-for-sale, Unrealized Loss Position, Accumulated Loss [Abstract]
Debt securities, less than 12 months, unrealized losses	0	(24)
Debt securities, 12 months or More, unrealized losses	(6)	(154)
Debt securities, total unrealized losses	$ (6)	$ (178)
State and local government
Debt and Equity Securities, Available-for-sale, Continuous Unrealized Loss Position, Number of Positions [Abstract]
Debt securities, less than 12 months, number of issues | security	0	21
Debt securities, 12 months or More, number of issues | security	0	16
Debt securities, number of issues | security	0	37
Debt and Equity Securities, Available-for-sale, Unrealized Loss Position [Abstract]
Debt securities, less than 12 months, fair value	$ 0	$ 4,935
Debt securities, 12 months or More, fair value	0	4,273
Debt securities, fair value	0	9,208
Debt and Equity Securities, Available-for-sale, Unrealized Loss Position, Accumulated Loss [Abstract]
Debt securities, less than 12 months, unrealized losses	0	(40)
Debt securities, 12 months or More, unrealized losses	0	(134)
Debt securities, total unrealized losses	$ 0	$ (174)
Corporate debt
Debt and Equity Securities, Available-for-sale, Continuous Unrealized Loss Position, Number of Positions [Abstract]
Debt securities, less than 12 months, number of issues | security	7	36
Debt securities, 12 months or More, number of issues | security	3	25
Debt securities, number of issues | security	10	61
Debt and Equity Securities, Available-for-sale, Unrealized Loss Position [Abstract]
Debt securities, less than 12 months, fair value	$ 3,720	$ 12,096
Debt securities, 12 months or More, fair value	1,697	11,993
Debt securities, fair value	5,417	24,089
Debt and Equity Securities, Available-for-sale, Unrealized Loss Position, Accumulated Loss [Abstract]
Debt securities, less than 12 months, unrealized losses	(17)	(140)
Debt securities, 12 months or More, unrealized losses	(4)	(511)
Debt securities, total unrealized losses	$ (21)	$ (651)
Asset-backed securities
Debt and Equity Securities, Available-for-sale, Continuous Unrealized Loss Position, Number of Positions [Abstract]
Debt securities, less than 12 months, number of issues | security	3	25
Debt securities, 12 months or More, number of issues | security	18	9
Debt securities, number of issues | security	21	34
Debt and Equity Securities, Available-for-sale, Unrealized Loss Position [Abstract]
Debt securities, less than 12 months, fair value	$ 2,596	$ 17,743
Debt securities, 12 months or More, fair value	11,836	4,166
Debt securities, fair value	14,432	21,909
Debt and Equity Securities, Available-for-sale, Unrealized Loss Position, Accumulated Loss [Abstract]
Debt securities, less than 12 months, unrealized losses	(1)	(148)
Debt securities, 12 months or More, unrealized losses	(54)	(60)
Debt securities, total unrealized losses	$ (55)	$ (208)
Mortgage-backed securities
Debt and Equity Securities, Available-for-sale, Continuous Unrealized Loss Position, Number of Positions [Abstract]
Debt securities, less than 12 months, number of issues | security	3	20
Debt securities, 12 months or More, number of issues | security	13	30
Debt securities, number of issues | security	16	50
Debt and Equity Securities, Available-for-sale, Unrealized Loss Position [Abstract]
Debt securities, less than 12 months, fair value	$ 715	$ 5,474
Debt securities, 12 months or More, fair value	7,812	21,715
Debt securities, fair value	8,527	27,189
Debt and Equity Securities, Available-for-sale, Unrealized Loss Position, Accumulated Loss [Abstract]
Debt securities, less than 12 months, unrealized losses	(1)	(138)
Debt securities, 12 months or More, unrealized losses	(111)	(1,017)
Debt securities, total unrealized losses	$ (112)	$ (1,155)
Commercial mortgage-backed securities
Debt and Equity Securities, Available-for-sale, Continuous Unrealized Loss Position, Number of Positions [Abstract]
Debt securities, less than 12 months, number of issues | security	6	4
Debt securities, 12 months or More, number of issues | security	0	3
Debt securities, number of issues | security	6	7
Debt and Equity Securities, Available-for-sale, Unrealized Loss Position [Abstract]
Debt securities, less than 12 months, fair value	$ 6,837	$ 1,082
Debt securities, 12 months or More, fair value	0	2,632
Debt securities, fair value	6,837	3,714
Debt and Equity Securities, Available-for-sale, Unrealized Loss Position, Accumulated Loss [Abstract]
Debt securities, less than 12 months, unrealized losses	(45)	(12)
Debt securities, 12 months or More, unrealized losses	0	(65)
Debt securities, total unrealized losses	$ (45)	$ (77)
Collateralized mortgage obligations
Debt and Equity Securities, Available-for-sale, Continuous Unrealized Loss Position, Number of Positions [Abstract]
Debt securities, less than 12 months, number of issues | security	8	4
Debt securities, 12 months or More, number of issues | security	0	6
Debt securities, number of issues | security	8	10
Debt and Equity Securities, Available-for-sale, Unrealized Loss Position [Abstract]
Debt securities, less than 12 months, fair value	$ 2,081	$ 116
Debt securities, 12 months or More, fair value	0	1,587
Debt securities, fair value	2,081	1,703
Debt and Equity Securities, Available-for-sale, Unrealized Loss Position, Accumulated Loss [Abstract]
Debt securities, less than 12 months, unrealized losses	(14)	(1)
Debt securities, 12 months or More, unrealized losses	0	(42)
Debt securities, total unrealized losses	$ (14)	(43)
Debt Securities
Debt and Equity Securities, Available-for-sale, Unrealized Loss Position [Abstract]
Debt securities, less than 12 months, fair value		43,916
Debt securities, 12 months or More, fair value		58,091
Debt securities, fair value		102,007
Debt and Equity Securities, Available-for-sale, Unrealized Loss Position, Accumulated Loss [Abstract]
Debt securities, less than 12 months, unrealized losses		(503)
Debt securities, 12 months or More, unrealized losses		(1,983)
Debt securities, total unrealized losses		$ (2,486)

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Shareholders' Equity - Narrative (Details)	1 Months Ended		12 Months Ended
	Jun. 30, 2019 USD ($) $ / shares shares	Sep. 30, 2017 USD ($) $ / shares shares	Dec. 31, 2019 USD ($) vote shares	Dec. 31, 2018 USD ($) shares	Dec. 05, 2018 shares	Dec. 31, 2017 shares
Equity, Class of Treasury Stock [Line Items]
Common stock, shares issued (in shares)			9,592,861	8,478,202
Common stock, shares outstanding (in shares)			9,592,861	8,478,202
Common stock voting rights, number of votes per share | vote			1
Restricted Stock Units (RSUs)
Equity, Class of Treasury Stock [Line Items]
Shares repurchased (in shares)			9,319	8,053
Shares repurchased | $			$ 38,000	$ 52,000
Stock Repurchase Program, December 2018
Equity, Class of Treasury Stock [Line Items]
Number of shares authorized for repurchase (in shares)					1,000,000
Shares repurchased (in shares)			154,208	129,175
Shares repurchased | $			$ 638,000	$ 584,000
Common stocks
Equity, Class of Treasury Stock [Line Items]
Common stock, shares issued (in shares)			9,592,861	8,478,202		8,520,328
Common stock, shares outstanding (in shares)			9,592,861	8,478,202		8,520,328
Private placement | Common stocks
Equity, Class of Treasury Stock [Line Items]
Common equity issued | $	$ 5,000,000	$ 5,000,000
Common equity issued (in shares)	1,176,471	800,000
Offering price per share (in dollars per share) | $ / shares	$ 4.25	$ 6.25

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Income Taxes - Effective Income Tax Reconciliation (Details) - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2019	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Income Tax Disclosure [Abstract]
Income (loss) before income taxes									$ (9,121)	$ (9,465)	$ (22,054)
Statutory U.S. federal income tax rate									(1,915)	(1,988)	(7,498)
State income taxes, net of federal benefit									(230)	(156)	(106)
Tax‑exempt investment income and dividend received deduction									(79)	(70)	(123)
Nondeductible meals and entertainment									38	38	54
Valuation allowance on deferred tax assets									966	2,331	1,515
Change in federal tax rate										0	5,612
Other									307	(103)	99
Total income tax expense (benefit)	$ (122)	$ (802)	$ 0	$ 11	$ 0	$ 24	$ 10	$ 18	$ (913)	$ 52	$ (447)
Effective tax rate									10.00%	(0.50%)	2.00%

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Quarterly Financial Data (Unaudited)

12 Months Ended

Dec. 31, 2019

Quarterly Financial Information Disclosure [Abstract]

Quarterly Financial Data (Unaudited)

18. Quarterly Financial Data (Unaudited)

The following is a summary of quarterly results of operations for 2019 and 2018 (in thousands, except per share and ratio data).  The fluctuations between periods and changes in reserves, as disclosed in Note 5, are due to the normal fluctuations in operations from quarter to quarter.  The combined ratios in 2018 have been recast as a result of the addition of the wholesale agency segment.  See Note 17 ~ Segment Information for further details.  

	1st Quarter			2nd Quarter			3rd Quarter			4th Quarter
2019
Gross written premiums	$	24,216		$	25,169		$	27,077		$	25,391
Net written premiums	$	20,322		$	21,434		$	23,806		$	22,162
Net earned premiums	$	21,687		$	21,349		$	22,775		$	23,278
Net investment income		910			1,051			1,210			860
Net realized gains		19			715			390			72
Change in fair value of equity securities		1,265			(915	)		(1,065	)		288
Other income		422			581			564			542
Losses and loss adjustment expenses, net		14,456			14,382			14,857			16,049
Policy acquisition costs		5,589			6,210			6,153			6,959
Operating expenses		4,323			4,340			4,297			4,622
Interest expense		710			725			720			727
Income tax expense (benefit)		11			—			(802	)		(122	)
Equity earnings (losses) in affiliates, net of tax		106			(8	)		121			167
Net income (loss)	$	(680	)	$	(2,884	)	$	(1,230	)	$	(3,028	)
Net income (loss) per share, basic and diluted (1)	$	(0.08	)	$	(0.34	)	$	(0.13	)	$	(0.32	)
Combined ratio		108.1	%		113.0	%		109.2	%		112.9	%
2018
Gross written premiums	$	23,737		$	26,562		$	26,629		$	27,440
Net written premiums	$	19,845		$	22,595		$	22,846		$	23,800
Net earned premiums	$	23,800		$	23,938		$	23,450		$	22,623
Net investment income		802			837			786			911
Net realized gains (losses)		161			12			(21	)		(91	)
Change in fair value of equity securities		(297	)		29			152			237
Other income		357			450			405			370
Losses and loss adjustment expenses, net		13,328			15,068			16,554			17,565
Policy acquisition costs		6,513			6,472			6,452			6,097
Operating expenses		4,187			4,303			4,786			4,407
Interest expense		619			617			598			810
Income tax expense (benefit)		18			10			24			—
Equity earnings in affiliates, net of tax		55			89			93			53
Net income (loss)	$	213		$	(1,113	)	$	(3,551	)	$	(4,776	)
Net income (loss) per share, basic and diluted (1)	$	0.02		$	(0.13	)	$	(0.42	)	$	(0.56	)
Combined ratio		99.7	%		108.8	%		118.2	%		123.0	%

(1) Due to changes in the outstanding shares of the Company (Note 10 ~ Shareholders' Equity)the weighted average common shares outstanding has fluctuated over the past two years and therefore the quarterly earnings (loss) per common share does not total the full-year earnings (loss) per common share stated on the face of the Consolidated Statements of Operations.

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Related Party Transactions

12 Months Ended

Dec. 31, 2019

Related Party Transactions [Abstract]

Related Party Transactions

14. Related Party Transactions

The Company employs B. Matthew Petcoff as Vice President of SIA. B. Matthew Petcoff is the brother of the Chairman and Chief Executive Officer, James G. Petcoff.

The Company employs Nicholas J. Petcoff as its Executive Vice President and a director, Andrew D. Petcoff as its Senior Vice President of Personal Lines, President of SIA and a director, and Hilary Petcoff as its Vice President of Enterprise Risk Management.  Nicholas J. Petcoff and Andrew D. Petcoff have been employed with the Company since 2009.  They are the sons of the Company's Chairman and Chief Executive Officer, James G. Petcoff. Hilary Petcoff has been employed with the Company since 2009 and was appointed as its Vice President of Enterprise Risk Management in May 2018. Ms. Petcoff is the daughter of the Company’s Chairman and Chief Executive Officer, James G. Petcoff.

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Investments (Tables)

12 Months Ended

Dec. 31, 2019

Investments Debt And Equity Securities [Abstract]

Schedule of Available-for-sale Securities

The cost or amortized cost, gross unrealized gain or loss, and estimated fair value of the investments in securities classified as available-for-sale at December 31, 2019 and 2018 were as follows (dollars in thousands):

	December 31, 2019
	Cost or		Gross Unrealized
	Amortized Cost		Gains		Losses			Estimated Fair Value
Debt securities:
U.S. Government	$	9,392	$	66	$	(6	)	$	9,452
State and local government		14,388		545		—			14,933
Corporate debt		39,550		865		(21	)		40,394
Asset-backed securities		19,549		81		(55	)		19,575
Mortgage-backed securities		31,389		238		(112	)		31,515
Commercial mortgage-backed securities		9,972		116		(45	)		10,043
Collateralized mortgage obligations		5,073		29		(14	)		5,088
Total debt securities available for sale	$	129,313	$	1,940	$	(253	)	$	131,000

	December 31, 2018
	Cost or		Gross Unrealized
	Amortized Cost		Gains		Losses			Estimated Fair Value
Debt securities:
U.S. Government	$	15,360	$	3	$	(178	)	$	15,185
State and local government		15,847		115		(174	)		15,788
Corporate debt		30,423		74		(651	)		29,846
Asset-backed securities		24,468		24		(208	)		24,284
Mortgage-backed securities		30,377		18		(1,155	)		29,240
Commercial mortgage-backed securities		4,025		5		(77	)		3,953
Collateralized mortgage obligations		2,178		9		(43	)		2,144
Total debt securities available for sale	$	122,678	$	248	$	(2,486	)	$	120,440

Schedule of Unrealized Loss Positions

The following table summarizes the aggregate fair value and gross unrealized losses, by security type, of the available-for-sale securities in unrealized loss positions. The table segregates the holdings based on the length of time that individual securities have been in a continuous unrealized loss position (dollars in thousands):

	December 31, 2019
	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		-	$	-	$	-			4	$	1,047	$	(6	)		4	$	1,047	$	(6	)
State and local government		-		-		-			-		-		-			-		-		-
Corporate debt		7		3,720		(17	)		3		1,697		(4	)		10		5,417		(21	)
Asset-backed securities		3		2,596		(1	)		18		11,836		(54	)		21		14,432		(55	)
Mortgage-backed securities		3		715		(1	)		13		7,812		(111	)		16		8,527		(112	)
Commercial mortgage   -backed securities		6		6,837		(45	)		-		-		-			6		6,837		(45	)
Collateralized mortgage   obligations		8		2,081		(14	)		-		-		-			8		2,081		(14	)
Total debt securities   available for sale		27		15,949		(78	)		38		22,392		(175	)		65		38,341		(253	)

	December 31, 2018
	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		1	$	2,470	$	(24	)		16	$	11,725	$	(154	)		17	$	14,195	$	(178	)
State and local government		21		4,935		(40	)		16		4,273		(134	)		37		9,208		(174	)
Corporate debt		36		12,096		(140	)		25		11,993		(511	)		61		24,089		(651	)
Asset-backed securities		25		17,743		(148	)		9		4,166		(60	)		34		21,909		(208	)
Mortgage-backed securities		20		5,474		(138	)		30		21,715		(1,017	)		50		27,189		(1,155	)
Commercial mortgage   -backed securities		4		1,082		(12	)		3		2,632		(65	)		7		3,714		(77	)
Collateralized mortgage   obligations		4		116		(1	)		6		1,587		(42	)		10		1,703		(43	)
Total debt securities   available for sale		111		43,916		(503	)		105		58,091		(1,983	)		216		102,007		(2,486	)

Schedule of Investment Income

The Company’s sources of net investment income are as follows (dollars in thousands):

	December 31,
	2019			2018			2017
Debt securities	$	3,476		$	3,419		$	2,757
Equity securities		352			129			124
Cash, cash equivalents, and short-term investments		487			85			122
Total investment income		4,315			3,633			3,003
Investment expenses		(284	)		(297	)		(275	)
Net investment income	$	4,031		$	3,336		$	2,728

Schedule of Gross Realized Gains and Losses on Securities

The following table summarizes the gross realized gains and losses from sales or maturities of available-for-sale debt securities and equity securities, as follows (dollars in thousands):

	December 31,
	2019			2018			2017
Debt securities:
Gross realized gains	$	269		$	54		$	32
Gross realized losses		(54	)		(256	)		(8	)
Total debt securities		215			(202	)		24
Equity securities:
Gross realized gains		1,020			337			76
Gross realized losses		(39	)		(74	)		(30	)
Total equity securities		981			263			46
Total net investment realized gains	$	1,196		$	61		$	70

Summary of Amortized Cost and Fair Value of Securities

The table below summarizes the amortized cost and fair value of available-for-sale debt securities by contractual maturity at December 31, 2019.  Actual maturities may differ from contractual maturities because certain borrowers have the right to call or prepay obligations with or without call or prepayment penalties (dollars in thousands):

	Amortized Cost		Estimated Fair Value
Due in one year or less	$	7,276	$	7,293
Due after one year through five years		31,575		32,152
Due after five years through ten years		15,237		15,767
Due after ten years		9,242		9,567
Securities with contractual maturities		63,330		64,779
Asset-backed securities		19,549		19,575
Mortgage-backed securities		31,389		31,515
Commercial mortgage-backed securities		9,972		10,043
Collateralized mortgage obligations		5,073		5,088
Total debt securities	$	129,313	$	131,000

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Shareholders' Equity

12 Months Ended

Dec. 31, 2019

Stockholders Equity Note [Abstract]

Shareholders' Equity

10. Shareholders’ Equity

Common Stock

In June 2019, the Company issued $5.0 million of common equity through a private placement for 1,176,471 shares priced at $4.25 per share. The participants in the private placement consisted of members of the Company's Board of Directors. The Company used the proceeds for growth capital in the Company's specialty core business segments.

On December 5, 2018, the Company's Board of Directors authorized a stock repurchase program, under which the Company may repurchase up to one million shares of the Company's common stock.  Shares may be purchased in the open market or through negotiated transactions.  The program may be terminated or suspended at any time, at the discretion of the Company.  The Company may in the future enter into a Rule 10b5-1 trading plan to effect a portion of the authorized purchases, if criteria set forth in the plan are met.  Such a plan would enable the Company to repurchase its shares during periods outside of its normal trading windows, when the Company typically would not be active in the market.  The timing of purchases, and the exact number of any shares to be purchased, will depend on market conditions.  The repurchase program does not include specific price targets or timetables. For the year ended December 31, 2018 the Company had repurchased 129,175 shares of stock valued at approximately $584,000 related to the stock repurchase program. The Company also repurchased 8,053 shares of stock valued at approximately $52,000 related to the vesting of the Company’s restricted stock units.  For the year ended December 31, 2019, the Company had repurchased 154,208 shares of stock valued at approximately $638,000 related to the stock repurchase program.  The Company also repurchased 9,319 shares of stock valued at approximately $38,000 related to the vesting of the Company’s restricted stock units.  Upon the repurchase of the Company's shares, the shares remain authorized, but not issued or outstanding.    

In September 2017, the Company issued $5.0 million of common equity through a private placement for 800,000 shares priced at $6.25.  The participants in the private placement consisted mainly of members of the Company’s management team and insiders, including Chairman and CEO James Petcoff.  The Company used the proceeds to strengthen its balance sheet through contributions to the Insurance Company Subsidiaries to support their future growth, and to cover the cost of the ADC and reserve strengthening.

As of December 31, 2019, 2018, and 2017, the Company had 9,592,861, 8,478,202, and 8,520,328 issued and outstanding shares of common stock, respectively.

Holders of common stock are entitled to one vote per share and to receive dividends only when and if declared by the board of directors.  The holders have no preemptive, conversion or subscription rights.

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Reinsurance

12 Months Ended

Dec. 31, 2019

Reinsurance Disclosures [Abstract]

Reinsurance

6. Reinsurance

In the normal course of business, the Company participates in reinsurance agreements in order to limit losses that may arise from catastrophes or other individually severe events.  The Company primarily ceded all specific commercial liability risks in excess of $400,000 in 2019 and $500,000 in 2018 and 2017, and ceded all specific commercial property risks in excess of $400,000 in 2019, $300,000 in 2018, and $500,000 in 2017.  The Company ceded homeowners specific risks in excess of $300,000 in 2019, 2018 and 2017.  A "treaty" is a reinsurance agreement in which coverage is provided for a class of risks and does not require policy by policy underwriting of the reinsurer.  "Facultative" reinsurance is where a reinsurer negotiates an individual reinsurance agreement for every policy it will reinsure on a policy by policy basis.  A loss is covered under a reinsurance contract if the loss occurs within the effective dates of the agreement notwithstanding when the loss is reported.

Reinsurance does not discharge the Company, as the direct insurer, from liability to its policyholders.  Failure of reinsurers to honor their obligations could result in losses to the Company.  The Company evaluates the financial condition of its reinsurers and monitors the concentration of credit risk arising from similar geographic regions, activities, or economic characteristics of the reinsurers to minimize its exposure to significant losses from reinsurer insolvencies.  To date, the Company has not experienced any significant difficulties in collecting reinsurance recoverables.  The Company's current reinsurance structure includes the following primary categories:

Casualty Clash

• Effective January 1, 2019 through December 31, 2019, the Company was party to a workers' compensation and casualty clash reinsurance treaty with limits up to $19.0 million in excess of a $1.0 million retention.  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, 2015 through December 31, 2018, the Company was party to a casualty clash reinsurance treaty with limits up to $18.0 million in excess of a $2.0 million retention.

Facultative

• 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.

Liability

• Effective January 1, 2019 through December 31, 2019, the Company was party to an excess of loss reinsurance treaty for commercial liability coverage with limits up to $600,000 in excess of $400,000.  

Property

• Effective November 1, 2014 through December 31, 2019, the Company was party to an excess of loss reinsurance treaty for personal property coverage with limits up to $2.7 million in excess of $300,000, for homeowners' and dwelling fire business.  

• Effective January 1, 2019 through December 31, 2019, the Company was party to an excess of loss reinsurance treaty for commercial property coverage with limits up to $3.7 million in excess of $300,000.  

• Effective January 1, 2018 through December 31, 2018, the Company was party to an excess of loss reinsurance treaty for commercial property coverage with limits up to $200,000 in excess of $300,000.  

• Effective July 1, 2015 through December 31, 2018, the Company was party to an excess of loss reinsurance agreement for commercial property coverage with limits up to $2.0 million in excess of $2.0 million.  

• At December 31, 2019, the Company was covered for property catastrophe losses up to $28.0 million in excess of a $2.0 million retention for the first event.  This treaty terminates on June 1, 2020.

• At December 31, 2018, the Company was covered for property catastrophe losses up to $96.0 million in excess of a $4.0 million retention for the first event.  The treaty terminated on June 1, 2019.

• At December 31, 2017, the Company was covered for property catastrophe losses up to $106.0 million in excess of a $4.0 million retention for the first event.  The treaty terminated on June 1, 2018.

Multiple Line

• Effective January 1, 2019 through December 31, 2019, the Company was party to a multi-line excess of loss treaty that covers commercial property and casualty losses up to $600,000 in excess of a $400,000 retention.

• Effective January 1, 2015 through December 31, 2018, the Company was party to a multi-line excess of loss treaty that covers commercial property and casualty losses up to $1.5 million in excess of a $500,000 retention.

Quota Share

• The Company cedes 90% to 100% of its commercial umbrella coverages under quota share treaties.  Under a quota share agreement, the reinsurer pays a percentage of all losses the insurer sustains in return for a similar percent of the premiums written on that risk.  A ceding commission is paid by the reinsurer to the insurer to cover acquisition and operating expenses.

Adverse Development Cover

• Effective September 28, 2017, the Company entered into an ADC to cover loss development of up to $17.5 million in excess of stated reserves as of June 30, 2017.  The consideration for the ADC was $7.2 million, which resulted in a one-time charge to ceded premiums fully earned in the third quarter.  The agreement provided up to $17.5 million of reinsurance for adverse net loss reserve development for accident years 2005 through 2016.  As of December 31, 2019, the Company had fully utilized the ADC.

Equipment Breakdown, Employment Practice Liability, and Data Compromise and Identity Recovery

• The Company ceded 100% of a small number of equipment breakdown, employment practices liability, and data compromise coverages that are occasionally bundled with other products under a quota share agreement with a reinsurer.

The Company assumes written premiums under a few fronting arrangements.  The fronting arrangements are with unaffiliated insurers who write on behalf of the Company in markets that require a higher A.M.  Best rating than the Company’s rating, or where the policies are written in a state where the Company is not licensed or for other strategic reasons.  

The Company assumed $33.5 million, $31.1 million, and $28.0 million of written premiums under the insurance fronting arrangements for the years ended December 31, 2019,  2018, and 2017, respectively.

The following table presents the effects of reinsurance and assumption transactions on written premiums, earned premiums and losses and LAE (dollars in thousands). The 2019, 2018 and 2017 ceded written and earned premium amounts include $495,000, $1.0 million and $806,000 of reinsurance reinstatement costs relating to Hurricane Irma, respectively.

	Year Ended December 31,
	2019			2018			2017
Written premiums:
Direct	$	68,394		$	73,290		$	86,251
Assumed		33,459			31,078			28,033
Ceded		(14,129	)		(15,282	)		(23,044	)
Net written premiums	$	87,724		$	89,086		$	91,240
Earned premiums:
Direct	$	70,911		$	80,691		$	87,656
Assumed		32,292			28,497			27,081
Ceded		(14,114	)		(15,377	)		(23,008	)
Net earned premiums	$	89,089		$	93,811		$	91,729
Loss and loss adjustment expenses:
Direct	$	66,256		$	65,284		$	79,035
Assumed		25,510			20,671			19,524
Ceded		(32,022	)		(23,440	)		(24,642	)
Net loss and LAE	$	59,744		$	62,515		$	73,917
Percentage of Assumed Written Premiums to Net Written Premiums		38.1	%		34.9	%		30.7	%

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Earnings Per Share (Tables)

12 Months Ended

Dec. 31, 2019

Earnings Per Share [Abstract]

Schedule of Earnings Per Share

The following table presents the calculation of basic and diluted earnings (loss) per common share, as follows (dollars in thousands, except share and per share amounts):

	Year Ended December 31,
	2019			2018			2017
Net income (loss)	$	(7,822	)	$	(9,227	)	$	(21,542	)
Weighted average common shares, basic and diluted*		8,880,107			8,543,876			7,867,344
Earnings (loss) per share, basic and diluted	$	(0.88	)	$	(1.08	)	$	(2.74	)

*  The non-vested shares of the restricted stock units were anti-dilutive as of December 31, 2019, 2018, and 2017.  Therefore, the non-vested shares are excluded from earnings (loss) per share in December 31, 2019, 2018, and 2017.

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Fair Value Measurements (Tables)

12 Months Ended

Dec. 31, 2019

Fair Value Disclosures [Abstract]

Summary of Assets and Liabilities Measured at Fair Value

The following tables present the Company’s assets and liabilities measured at fair value, classified by the valuation hierarchy as of December 31, 2019 and 2018 (dollars in thousands):

	December 31, 2019
	Fair Value Measurements Using
	Total		Level 1		Level 2		Level 3
Assets:
Debt Securities:
U.S. Government	$	9,452	$	—	$	9,452	$	—
State and local government		14,933		—		14,933		—
Corporate debt		40,394		—		40,394		—
Asset-backed securities		19,575		—		19,575		—
Mortgage-backed securities		31,515		—		31,515		—
Commercial mortgage-backed securities		10,043		—		10,043		—
Collateralized mortgage obligations		5,088		—		5,088		—
Total debt securities		131,000		—		131,000		—
Equity Securities		6,599		6,335		264		—
Short-term investments		31,426		31,426		—		—
Total marketable investments measured    at fair value	$	169,025	$	37,761	$	131,264	$	—
Investments measured at NAV:
Investment in limited partnership		707
Total assets measured at fair value	$	169,732
Liabilities:
Senior Unsecured Notes *	$	22,669	$	—	$	22,669	$	—
Subordinated Notes *		11,222		—		—		11,222
Total Liabilities measured at fair value	$	33,891	$	—	$	22,669	$	11,222

*  Carried at face value of debt net of unamortized debt issuance costs on the consolidated balance sheet

	December 31, 2018
	Fair Value Measurements Using
	Total		Level 1		Level 2		Level 3
Assets:
Debt Securities:
U.S. Government	$	15,185	$	—	$	15,185	$	—
State and local government		15,788		—		15,788		—
Corporate debt		29,846		—		29,846		—
Asset-backed securities		24,284		—		24,284		—
Mortgage-backed securities		29,240		—		29,240		—
Commercial mortgage-backed securities		3,953		—		3,953		—
Collateralized mortgage obligations		2,144		—		2,144		—
Total debt securities		120,440		—		120,440		—
Equity Securities		6,587		6,323		264		—
Short-term investments		8,925		8,925		—		—
Total marketable investments measured at fair value	$	135,952	$	15,248	$	120,704	$	—
Investments measured at NAV:
Investment in limited partnership		4,150
Total assets measured at fair value	$	140,102
Liabilities:
Senior Unsecured Notes *	$	21,252	$	—	$	21,252	$	—
Subordinated Notes *		10,640		—		—		10,640
Total Liabilities measured at fair value	$	31,892	$	—	$	21,252	$	10,640

*  Carried at face value of debt net of unamortized debt issuance costs on the consolidated balance sheet

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Debt (Tables)

12 Months Ended

Dec. 31, 2019

Debt Disclosure [Abstract]

Schedule of Outstanding Senior Debt

A summary of the Company's outstanding debt is as follows (dollars in thousands):

	December 31,
	2019		2018
Senior unsecured notes	$	24,288	$	24,018
Subordinated notes		9,536		9,484
Line of credit		2,000		—
Total	$	35,824	$	33,502

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Unpaid Losses and Loss Adjustment Expenses - Reconciliation of Loss to the Liability for Claims (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Short-duration Insurance Contracts, Reconciliation of Claims Development to Liability [Line Items]
Unpaid losses and ALAE, net of reinsurance	$ 80,050
Reinsurance recoverables on unpaid losses	22,579	$ 29,685	$ 20,066	$ 6,658
Unpaid ULAE	4,617
Total gross unpaid losses and LAE	107,246	$ 92,807	$ 87,896	$ 54,651
Commercial Lines
Short-duration Insurance Contracts, Reconciliation of Claims Development to Liability [Line Items]
Unpaid losses and ALAE, net of reinsurance	77,316
Reinsurance recoverables on unpaid losses	20,051
Personal Lines
Short-duration Insurance Contracts, Reconciliation of Claims Development to Liability [Line Items]
Unpaid losses and ALAE, net of reinsurance	2,734
Reinsurance recoverables on unpaid losses	$ 2,528

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Deferred Policy Acquisition Costs - Activity in Deferred Policy Acquisition Costs (Details) - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2019	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Movement Analysis of Deferred Policy Acquisition Costs [Roll Forward]
Balance at beginning of period				$ 12,011				$ 12,781	$ 12,011	$ 12,781	$ 13,290
Deferred policy acquisition costs									24,806	24,764	25,736
Amortization of policy acquisition costs	$ (6,959)	$ (6,153)	$ (6,210)	$ (5,589)	$ (6,097)	$ (6,452)	$ (6,472)	$ (6,513)	(24,911)	(25,534)	(26,245)
Net change									(105)	(770)	(509)
Balance at end of period	$ 11,906				$ 12,011				$ 11,906	$ 12,011	$ 12,781

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Debt - Narrative (Details)					12 Months Ended
	Oct. 12, 2018 USD ($)	Sep. 24, 2018 USD ($)	Jun. 21, 2018 USD ($)	Sep. 29, 2017 USD ($)	Dec. 31, 2019 USD ($) debt_instrument	Dec. 31, 2018 USD ($)	Oct. 13, 2018 USD ($)	Sep. 30, 2018 USD ($)
Debt Instrument [Line Items]
Number of debt instruments | debt_instrument					3
Debt					$ 35,824,000	$ 33,502,000
Senior Unsecured Notes
Debt Instrument [Line Items]
Debt					24,288,000	24,018,000
Senior Unsecured Notes | Senior Unsecured Notes
Debt Instrument [Line Items]
Face amount of debt	$ 25,300,000				25,300,000		$ 25,300,000	$ 25,300,000
Debt issued	3,300,000	$ 22,000,000
Maturity date		Sep. 30, 2023
Interest rate		6.75%
Debt issuance costs					1,000,000
Line of credit
Debt Instrument [Line Items]
Borrowing capacity			$ 10,000,000		10,000,000
Debt					2,000,000	0
Line of credit | LIBOR
Debt Instrument [Line Items]
Variable interest rate			2.75%
Subordinated notes
Debt Instrument [Line Items]
Debt					9,536,000	$ 9,484,000
Subordinated notes | Subordinated notes
Debt Instrument [Line Items]
Face amount of debt		$ 10,500,000		$ 30,000,000	$ 10,500,000
Maturity date		Sep. 30, 2038		Sep. 29, 2032
Debt repaid	$ 19,500,000
Interest rate, payment terms					Interest is payable quarterly at the end of March, June, September and December.
Call premium percentage		12.50%
Loan origination fee		$ 105,000,000
Debt term		20 years
Debt issuance costs					$ 965,000
Derivative, basis spread on fixed rate				8.00%
Subordinated notes | Subordinated notes | Swap rate
Debt Instrument [Line Items]
Debt term				5 years
Subordinated notes | Subordinated notes | Swap rate | Period One
Debt Instrument [Line Items]
Derivative, basis spread on fixed rate				1250.00%
Subordinated notes | Subordinated notes | Swap rate | Period Two
Debt Instrument [Line Items]
Derivative, basis spread on variable rate				1500.00%
Subordinated notes | Subordinated notes | Debt Instrument, Redemption, Period One
Debt Instrument [Line Items]
Interest rate		7.50%
Call premium		$ 1,100,000
Subordinated notes | Subordinated notes | Debt Instrument, Redemption, Period Two
Debt Instrument [Line Items]
Interest rate		12.50%
Call premium		$ 1,750,000
Subordinated notes | Subordinated notes | Debt Instrument, Redemption, Period Three
Debt Instrument [Line Items]
Call premium		$ 3,050,000

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Schedule II - Condensed Financial Information of Registrant - Statement of Cash Flows (Details) - USD ($)	3 Months Ended								12 Months Ended
	Dec. 31, 2019	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Cash Flows from Operating Activities
Net income (loss)	$ (3,028,000)	$ (1,230,000)	$ (2,884,000)	$ (680,000)	$ (4,776,000)	$ (3,551,000)	$ (1,113,000)	$ 213,000	$ (7,822,000)	$ (9,227,000)	$ (21,542,000)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization									453,000	386,000	372,000
Incentive awards expenses - vesting of RSUs									959,000	970,000	895,000
Changes in operating assets and liabilities:
Other assets									(489,000)	(1,252,000)	4,239,000
Net cash provided by (used in) operating activities									15,361,000	(17,008,000)	9,090,000
Cash Flows From Investing Activities
Purchases of investments									(157,235,000)	(91,293,000)	(218,492,000)
Purchases of property and equipment									(61,000)	(86,000)	(13,000)
Net cash provided by (used in) investing activities									(25,013,000)	12,222,000	(25,954,000)
Cash Flows From Financing Activities
Proceeds received from issuance of shares of common stock									5,000,000		5,000,000
Repurchase of common stock									(676,000)	(636,000)
Borrowings under debt arrangements									2,100,000	25,300,000	32,000,000
Repayment of borrowings under debt arrangements									(100,000)	(19,500,000)	(19,750,000)
Net cash provided by financing activities									6,324,000	3,710,000	16,239,000
Net increase (decrease) in cash									(3,328,000)	(1,076,000)	(625,000)
Cash at beginning of period				10,792,000				11,868,000	10,792,000	11,868,000	12,493,000
Cash at end of period	7,464,000				10,792,000				7,464,000	10,792,000	11,868,000
Supplemental Disclosure of Cash Flow Information:
Interest paid									2,547,000	3,116,000	876,000
Parent Company
Cash Flows from Operating Activities
Net income (loss)									(7,822,000)	(9,227,000)	(21,542,000)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization									447,000	379,000	347,000
Equity in undistributed (income) loss of subsidiaries									2,267,000	3,468,000	22,556,000
Incentive awards expenses - vesting of RSUs									959,000	970,000	895,000
Changes in operating assets and liabilities:
Due from subsidiaries									(490,000)	110,000	(513,000)
Due from affiliates									231,000	(97,000)	598,000
Current income tax recoverable									21,000	(488,000)	(485,000)
Other assets									(3,098,000)	(229,000)	532,000
Other liabilities									2,954,000	(360,000)	590,000
Net cash provided by (used in) operating activities									(4,531,000)	(5,474,000)	2,978,000
Cash Flows From Investing Activities
Contributions to subsidiaries									(3,854,000)	0	(20,860,000)
Dividends received from subsidiaries									1,500,000	0	0
Purchases of investments									0	400,000	(400,000)
Purchases of property and equipment									(66,000)	(86,000)	(13,000)
Net cash provided by (used in) investing activities									(2,420,000)	314,000	(21,273,000)
Cash Flows From Financing Activities
Proceeds received from issuance of shares of common stock									5,000,000	0	5,000,000
Repurchase of common stock									(676,000)	(636,000)	0
Borrowings under debt arrangements									2,000,000	25,300,000	32,000,000
Repayment of borrowings under debt arrangements									0	(19,500,000)	(19,750,000)
Stock and debt issuance costs									0	(1,454,000)	(1,011,000)
Net cash provided by financing activities									6,324,000	3,710,000	16,239,000
Net increase (decrease) in cash									(627,000)	(1,450,000)	(2,056,000)
Cash at beginning of period				$ 1,133,000				$ 2,583,000	1,133,000	2,583,000	4,639,000
Cash at end of period	$ 506,000				$ 1,133,000				506,000	1,133,000	2,583,000
Supplemental Disclosure of Cash Flow Information:
Interest paid									$ 2,547,000	$ 3,116,000	$ 876,000

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Stock-based Compensation - Vesting Schedule for RSUs (Details) - 2015 Omnibus Incentive Plan - Restricted Stock Units (RSUs) - shares shares in Thousands	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Scheduled vesting - RSUs (in shares)	156	264	307	416
2020
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Scheduled vesting - RSUs (in shares)	102
2021
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Scheduled vesting - RSUs (in shares)	31
2022
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Scheduled vesting - RSUs (in shares)	13
2023
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Scheduled vesting - RSUs (in shares)	10

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Segment Information - Summary of Net Earned Premiums by Segment (Details) - Net Earned Premium - Operating Segments	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Segment Reporting Information [Line Items]
Concentration percentage	100.00%	100.00%	100.00%
Commercial Lines
Segment Reporting Information [Line Items]
Concentration percentage	94.00%	89.00%	84.00%
Personal Lines
Segment Reporting Information [Line Items]
Concentration percentage	6.00%	11.00%	16.00%