GlobeNewswire Inc | Aug 12, 2020 04:01PM EDT

August 12, 2020

BIRMINGHAM, Mich., Aug. 12, 2020 (GLOBE NEWSWIRE) -- Conifer Holdings, Inc. (Nasdaq: CNFR) (Conifer or the Company) today announced results for the second quarter ended June 30, 2020.

Second Quarter 2020 Financial Highlights (compared to the prior year period)

-- Gross written premium increased 9.4% to $27.5 million -- The Companys overall combined ratio was 100.5% (accident year combined ratio was 86.6%) -- Commercial lines represented approximately 93% of gross written premium -- Commercial Lines combined ratio improved 6 percentage points to 101.7% (accident year combined ratio was 86.5%) -- Personal Lines combined ratio was 85.7% (accident year combined ratio was 86.9%) -- Net income of $1.5 million, or $0.16 per share, based on 9.6 million average shares outstanding -- Book value per share of $4.51 as of June 30, 2020, an improvement of 18.4% sequentially from $3.81 at March 31, 2020

Management Comments James Petcoff, Chairman and CEO, commented, We are pleased to report solid financial results for the period, and a return to profitability, led by growth in our core lines of business. We are continuing to take a conservative approach during an uncertain period due to the global pandemic, but we believe that our continued focus on our core specialty lines has produced anticipated positive results. We remain focused on improving our overall expense structure, and growing steadily in the lines of business where Conifer can be a profitable market leader.

2020 Second Quarter Financial Results Overview

At and for the At and for the Three Months Ended June 30, Six Months Ended June 30, 2020 2019 % 2020 2019 % Change Change (dollars in thousands, except share and per share amounts) Gross written $ 27,545 $ 25,169 9.4% $ 52,629 $ 49,385 6.6%premiumsNet written 23,065 21,434 7.6% 44,116 41,756 5.7%premiumsNet earned 21,758 21,349 1.9% 43,775 43,036 1.7%premiums Net investment 863 1,051 -17.9% 1,817 1,961 -7.3%incomeNet realized 245 715 ** 1,173 734 **investment gainsChange in fairvalue of equity 1,576 (915 ) ** (1,510 ) 350 investmentsOther gains 145 - ** 260 - ** Net income 1,505 (2,884 ) ** (3,220 ) (3,564 ) **(loss)Net income(loss) per $ 0.16 $ (0.34 ) $ (0.34 ) $ (0.42 ) share, diluted Adjustedoperating income (461 ) (5,597 ) ** (3,143 ) (9,844 ) **(loss)*Adjustedoperating income $ (0.04 ) $ (0.67 ) ** $ (0.33 ) $ (1.17 ) **(loss) pershare, diluted* Book value percommon share $ 4.51 $ 4.89 $ 4.51 $ 4.89 outstanding Weighted averagesharesoutstanding, 9,595,668 8,370,782 9,594,221 8,411,835 basic anddiluted Underwriting ratios:Loss ratio (1) 54.6 % 67.1 % 59.6 % 66.8 % Expense ratio 45.9 % 45.9 % 46.5 % 43.7 % (2)Combined ratio 100.5 % 113.0 % 106.1 % 110.5 % (3) * The "Definitions of Non-GAAP Measures" section of this release defines andreconciles data that are not based on generally accepted accounting principles.** Percentage is not meaningful(1) The loss ratio is the ratio, expressed as a percentage, of net losses andloss adjustment expenses to net earned premiums and income from underwritingoperations.(2) The expense ratio is the ratio, expressed as a percentage, of policyacquisition costs and other underwriting expenses to net earned premiums andother income from underwriting operations.(3) The combined ratio is the sum of the loss ratio and the expense ratio. Acombined ratio under 100% indicates an underwriting profit. A combined ratioover 100% indicates an underwriting loss.

2020 Second Quarter PremiumsGross Written PremiumsGross written premiums increased 9.4% in the second quarter of 2020 to $27.5 million, compared to $25.2 million in the prior year period. The increase was largely due to growth in commercial specialty lines, as retention levels remain higher than historical averages in addition to improved rate activity. The overall premium increase was supplemented by continued growth in the Companys personal lines, driven by its low-value dwelling line of business.

Net Earned PremiumsNet earned premiums increased 1.9% to $21.8 million for the second quarter of 2020, compared to $21.3 million for the prior year period.

Commercial Lines Financial and Operational Review

Commercial Lines Financial Review Three Months Ended June 30, Six Months Ended June 30, 2020 2019 % 2020 2019 % Change Change (dollars in thousands) Grosswritten $ 25,600 $ 23,459 9.1% $ 49,044 $ 46,043 6.5%premiumsNet written 21,377 20,178 5.9% 41,064 39,484 4.0%premiumsNet earned 20,105 20,154 -0.2% 40,536 40,852 -0.8%premiums Underwriting ratios:Loss ratio 55.9 % 62.1 % 60.8 % 61.3 % Expense 45.8 % 45.6 % 46.5 % 43.0 % ratioCombined 101.7 % 107.7 % 107.3 % 104.3 % ratio Contributionto combined ratio fromnet(favorable)adverse 15.2 % 7.2 % 16.6 % 5.8 % prior yeardevelopment Accidentyear 86.5 % 100.5 % 90.7 % 98.5 % combinedratio (1) (1) The accident year combined ratio is the sum of the loss ratio and theexpense ratio, less changes in net ultimate loss estimates from prior accidentyear loss reserves. The accident year combined ratio provides management withan assessment of the specific policy year's profitability and assistsmanagement in their evaluation of product pricing levels and quality ofbusiness written.

The Companys commercial lines of business, representing 93% of total gross written premium in the second quarter of 2020, primarily consists of property and liability coverage offered to owner-operated small- to mid-sized businesses. Commercial lines gross written premium increased 9.1% in the second quarter of 2020, as the Company continues to shift its mix towards more profitable specialty lines.

Commercial lines combined ratio was 101.7% for the three months ended June 30, 2020, compared to 107.7% in the prior year period, largely due to a 6.2 percentage point improvement in the loss ratio. Commercial lines accident year combined ratio was 86.5% for the quarter.

Personal Lines Financial and Operational Review

Personal Lines Financial Review Three Months Ended June 30, Six Months Ended June 30, 2020 2019 % 2020 2019 % Change Change (dollars in thousands) Grosswritten $ 1,945 $ 1,710 13.7% $ 3,585 $ 3,342 7.3%premiumsNet written 1,688 1,256 34.4% 3,052 2,272 34.3%premiumsNet earned 1,653 1,195 38.3% 3,239 2,184 48.3%premiums Underwriting ratios:Loss ratio 39.6 % 147.8 % 44.6 % 165.7 % Expense 46.1 % 50.1 % 46.6 % 57.4 % ratioCombined 85.7 % 197.9 % 91.2 % 223.1 % ratio Contributionto combined ratio fromnet(favorable)adverse (1.2 )% 74.8 % 1.4 % 88.5 % prior yeardevelopment Accidentyear 86.9 % 123.1 % 89.8 % 134.6 % combinedratio

Personal lines, representing 7% of total gross written premium for the second quarter of 2020, consists largely of low-value dwelling homeowners insurance. Personal lines gross written premium increased 13.7% to $2.0 million in the second quarter of 2020 compared to the prior year period, largely due to renewed growth in the Companys low-value dwelling line of business.

Personal lines combined ratio was 85.7% for the three months ended June 30, 2020, compared to 197.9% in the prior year period. Personal lines loss ratio for the three months ended June 30, 2020 improved considerably to 39.6%, compared to 147.8% in the prior year period, largely driven by significantly lower losses from wind-exposed homeowners lines (specifically Florida homeowners).

The personal lines accident year combined ratio was 86.9% for the quarter.

Combined Ratio Analysis

Three Months Ended Six Months Ended June 30, June 30, 2020 2019 2020 2019 (dollars in thousands) Underwriting ratios: Loss ratio 54.6 % 67.1 % 59.6 % 66.8 %Expense ratio 45.9 % 45.9 % 46.5 % 43.7 %Combined ratio 100.5 % 113.0 % 106.1 % 110.5 % Contribution to combined ratio from net (favorable)adverse prior year development 13.9 % 11.2 % 15.4 % 10.1 % Accident year combined ratio 86.6 % 101.8 % 90.7 % 100.4 %

Combined RatioThe Company's combined ratio was 100.5% for the quarter ended June 30, 2020, compared to 113.0% for the same period in 2019. The Companys accident year combined ratio for the quarter ended June 30, 2020 was 86.6%, compared to 101.8% in the prior year period.

Loss Ratio The Companys losses and loss adjustment expenses were $11.9 million for the three months ended June 30, 2020, compared to $14.4 million in the prior year period. This resulted in a lower loss ratio of 54.6%, compared to 67.1% in the prior year period.

Expense Ratio:The expense ratio was 45.9% for the second quarter of 2020, remaining flat compared to the prior year period.

Net Investment IncomeNet investment income was $863,000 during the quarter ended June 30, 2020, compared to $1.1 million in the prior year period. Net realized gains during the second quarter were $245,000, compared to net realized gain of $715,000 in the prior year period.

Change in Fair Value of Equity SecuritiesDuring the quarter, the Company reported a gain from change in fair value of equity investments of $1.6 million, compared to a loss of $0.9 million in the prior year period, and a loss of $3.1 million in the first quarter of 2020. This increase was largely related to a recovery in the equity markets following a decline in the first quarter related to the COVID-19 pandemic.

Net Income (Loss) In the second quarter of 2020, the Company reported net income of $1.5 million, or $0.16 per share, compared to a net loss of $2.9 million, or $0.34 per share, in the prior year period.

Adjusted Operating Income (Loss)In the second quarter of 2020, the Company reported adjusted operating loss of $0.5 million, or $0.04 per share, compared to adjusted operating loss of $5.6 million, or $0.67 per share, for the same period in 2019. See Definitions of Non-GAAP Measures.

Earnings Conference Call with Accompanying Slide PresentationThe Company will hold a conference call/webcast on Thursday, August 13, 2020 at 8:30 a.m. ET to discuss results for the second quarter ended June 30, 2020.

Investors, analysts, employees and the general public are invited to listen to the conference call via:

Webcast: On the Event Calendar atIR.CNFRH.comConference Call: 844-868-8843 (domestic) or 412-317-6589 (international)

The webcast will be archived on the Conifer Holdings website and available for replay for at least one year.

About the CompanyConifer Holdings, Inc. is a Michigan-based insurance holding company. Through its operating subsidiaries, Conifer offers customized coverage solutions tailored to the needs of our specialty niche insureds. Across all 50 states, we utilize a multi-channel distribution approach, but largely market through independent agents. Conifer is traded on the Nasdaq Global Market (Nasdaq: CNFR), and additional information is available on the Companys website at www.CNFRH.com.

Definitions of Non-GAAP MeasuresConifer prepares its public financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP). Statutory data is prepared in accordance with statutory accounting rules as defined by the National Association of Insurance Commissioners' (NAIC) Accounting Practices and Procedures Manual, and therefore is not reconciled to GAAP data.

We believe that investors understanding of Conifers performance is enhanced by our disclosure of adjusted operating income. Our method for calculating this measure may differ from that used by other companies and therefore comparability may be limited. We define adjusted operating income (loss), a non-GAAP measure, as net income (loss) excluding net realized investment gains and losses, after-tax, excluding the tax impact of changes in unrealized gains and losses, and including the net change in deferred gain on losses ceded to the Adverse Development Cover (ADC). We use adjusted operating income as an internal performance measure in the management of our operations because we believe it gives our management and other users of our financial information useful insight into our results of operations and our underlying business performance.

Reconciliations of adjusted operating income and adjusted operating income per share:

Three Months Ended Six Months Ended June 30, June 30, 2020 2019 2020 2019 (dollar in thousands, except share and per share amounts) Net income $ 1,505 $ (2,884 ) $ (3,220 ) $ (3,564 )(loss)Less: Netrealizedgains and 390 715 1,433 734 othergains, netof taxChange infair valueof equity 1,576 (915 ) (1,510 ) 350 securities,net of taxNetdecrease(Increase) in deferredgain onlossesceded toADC, net of - 2,913 - 5,196 taxAdjustedoperating $ (461 ) $ (5,597 ) $ (3,143 ) $ (9,844 )income(loss) Weightedaveragecommon 9,595,668 8,370,782 9,594,221 8,411,835 shares,diluted Dilutedincome(loss) per commonshare:Net income $ 0.16 $ (0.34 ) $ (0.34 ) $ (0.42 )(loss)Less: Netrealizedgains and 0.04 0.09 0.15 0.09 othergains, netof taxChange infair valueof equity 0.16 (0.11 ) (0.16 ) 0.04 securities,net of taxNetdecrease(increase) in deferredgain onlosses ceded toADC, net of - 0.35 - 0.62 taxAdjustedoperatingincome $ (0.04 ) $ (0.67 ) $ (0.33 ) $ (1.17 )(loss), pershare

Forward-Looking StatementThis press release contains forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements give current expectations or forecasts of future events or our future financial or operating performance, and include Conifers expectations regarding premiums, earnings, its capital position, expansion, and growth strategies. The forward-looking statements contained in this press release are based on managements good-faith belief and reasonable judgment based on current information. The forward-looking statements are qualified by important factors, risks and uncertainties, many of which are beyond our control, that could cause our actual results to differ materially from those in the forward-looking statements, including those described in our form 10-K (Item 1A Risk Factors) filed with the SEC on March 12, 2020 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.

Conifer Holdings, Inc. and SubsidiariesConsolidated Balance Sheets(In thousands, except share data) June 30, December 31, 2020 2019Assets (Unaudited) Investment securities: Debt securities, at fair value (amortized $ 146,888 $ 131,000 cost of $141,951 and $129,313, respectively) Equity securities, at fair value (cost of 12,859 7,306 $13,617 and $6,554, respectively) Short-term investments, at fair value 10,869 31,426 Total investments 170,616 169,732 Cash and cash equivalents 4,812 7,464 Premiums and agents' balances receivable, net 22,275 20,168 Receivable from Affiliate 281 313 Reinsurance recoverables on unpaid losses 20,892 22,579 Reinsurance recoverables on paid losses 5,463 5,155 Prepaid reinsurance premiums 4,194 1,250 Deferred policy acquisition costs 11,693 11,906 Other assets 9,787 8,698 Total assets $ 250,013 $ 247,265 Liabilities and Shareholders' Equity Liabilities: Unpaid losses and loss adjustment expenses $ 106,734 $ 107,246 Unearned premiums 52,120 51,503 Debt 38,842 35,824 Accounts payable and accrued expenses 9,037 9,967 Total liabilities 206,733 204,540 Commitments and contingencies - - Shareholders' equity: Common stock, no par value (100,000,000 shares authorized; 9,598,155 and 9,592,861 issued and 92,275 91,816 outstanding, respectively) Accumulated deficit (52,800 ) (49,580 ) Accumulated other comprehensive income (loss) 3,805 489 Total shareholders' equity 43,280 42,725 Total liabilities and shareholders' $ 250,013 $ 247,265 equity

Conifer Holdings, Inc. and SubsidiariesConsolidated Statements of Operations (Unaudited)(In thousands, except share and per share data) Three Months Ended Six Months Ended June 30, June 30, 2020 2019 2020 2019 Revenue Premiums Gross earned $ 25,959 $ 25,082 $ 52,012 $ 50,632 premiums Ceded earned (4,201 ) (3,733 ) (8,237 ) (7,596 ) premiums Net earned 21,758 21,349 43,775 43,036 premiums Net investment 863 1,051 1,817 1,961 income Net realized investment 245 715 1,173 734 gains Change in fair value of 1,576 (915 ) (1,510 ) 350 equity securities Other gains 145 - 260 - Other income 713 581 1,371 1,003 Total 25,300 22,781 46,886 47,084 revenue Expenses Losses and loss 11,945 14,382 26,214 28,838 adjustment expenses, net Policy acquisition 6,395 6,210 12,698 11,799 costs Operating 4,859 4,340 9,904 8,663 expenses Interest 731 725 1,462 1,435 expense Total 23,930 25,657 50,278 50,735 expenses Income (loss)before equityearnings in 1,370 (2,876 ) (3,392 ) (3,651 )Affiliate andincome taxes Equity earnings (losses) of 179 (8 ) 229 98 Affiliate, net of tax Income tax (benefit) 44 - 57 11 expenseNet income (loss) 1,505 (2,884 ) (3,220 ) (3,564 ) Earnings (loss) per common share, basic and $ 0.16 $ (0.34 ) $ (0.34 ) $ (0.42 ) diluted Weighted averagecommon shares outstanding, basic and 9,595,668 8,370,782 9,594,221 8,411,835 diluted

For Further Information:Jessica Gulis, 248.559.0840ir@cnfrh.com