GlobeNewswire Inc | Feb 23, 2021 04:01PM EST

February 23, 2021

BIRMINGHAM, Mich., Feb. 23, 2021 (GLOBE NEWSWIRE) -- Conifer Holdings, Inc. (Nasdaq: CNFR) (Conifer or the Company) today announced results for the fourth quarter and year ended December 31, 2020.

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

-- Gross written premium increased 13.7% to $28.9 million -- Commercial Lines gross written premium increased 13.3% to $26.4 million -- Personal Lines gross written premium increased 18.5% to $2.4 million -- Net income of $3.3 million, or $0.34 per share, based on 9.7 million average shares outstanding

Year End 2020 Financial Highlights (compared to the prior year period)

-- Gross written premium increased 9.3% to $111.3 million -- Net income of $595,000, or $0.06 per share, based on 9.6 million average shares outstanding -- Book value per share of $4.59 as of December 31, 2020

Management Comments James Petcoff, Chairman and CEO, commented, Despite the pandemic-driven unpredictability in 2020, we were able to close out the year on a positive note, growing gross written premiums by 9% for the year and just under 14% for the fourth quarter. This growth was achieved through a balanced mix of rate and market share expansion in both the commercial and personal lines segments. Overall, our book value improved year over year to $4.59 at December 31, 2020.

2020 Fourth Quarter Financial Results Overview

At and for the Three Months Ended December At and for the Year Ended December 31, 31, 2020 2019 % 2020 2019 % Change Change (dollars in thousands, except share and per share amounts) Grosswritten $ 28,865 $ 25,391 13.7 % $ 111,335 $ 101,853 9.3 % premiumsNet written 23,781 22,162 7.3 % 92,940 87,724 5.9 % premiumsNet earned 23,101 23,278 -0.8 % 89,103 89,089 0.0 % premiums Netinvestment 563 860 -34.5 % 3,156 4,031 -21.7 % incomeNet realizedinvestment 3,637 72 ** 8,126 1,196 ** gainsChange infair value 2,094 288 ** 228 (427 ) of equityinvestmentsOther gains - - ** 260 - ** Net income 3,274 (3,028 ) ** 595 (7,822 ) ** (loss) Net income (loss) $ 0.34 $ (0.32 ) $ 0.06 $ (0.88 ) per share, diluted Adjustedoperating (2,457 ) (3,394 ) ** (8,019 ) (15,092 ) ** income(loss)* Adjusted operating income (loss) $ (0.26 ) $ (0.35 ) ** $ (0.83 ) $ (1.69 ) ** per share, diluted* Book valueper common $ 4.59 $ 4.45 $ 4.59 $ 4.45 shareoutstanding Weightedaverageshares 9,680,521 9,591,387 9,625,059 8,880,107 outstanding,basic anddiluted Underwriting ratios: Loss 66.7 % 68.6 % 62.8 % 66.8 % ratio (1) Expense 43.9 % 44.3 % 45.6 % 44.0 % ratio (2) Combined 110.6 % 112.9 % 108.4 % 110.8 % ratio (3) * The "Definitions of Non-GAAP Measures" section of this release defines and reconciles data that are not based on generally accepted accounting principles.**Percentage is notmeaningful(1) The loss ratio is the ratio, expressed as a percentage, of net losses andloss adjustment expenses to net earned premiums and income from underwriting operations.(2) The expense ratio is the ratio, expressed as a percentage, of policyacquisition costs and other underwriting expenses to net earned premiums and other income from underwriting operations.(3) The combined ratio is the sum of the loss ratio and the expense ratio. Acombined ratio under 100% indicates an underwriting profit. A combined ratio over 100% indicates an underwriting loss.

2020 Fourth Quarter PremiumsGross Written PremiumsGross written premiums increased 13.7% in the fourth quarter of 2020 to $28.9 million, compared to $25.4 million in the prior year period. The increase was achieved through a combination of rate increases and growth of policies-in-force, specifically in the Companys specialty commercial markets. 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 decreased 0.8% to $23.1 million for the fourth quarter of 2020, compared to $23.3 million for the prior year period. This was mainly due to slightly higher reinsurance costs. The Company expects net earned premiums to increase throughout 2021 as the growth in gross written premiums achieved in the second half of 2020 are earned ratably in the coming year.

Commercial Lines Financial and Operational Review

Commercial Lines Financial Review Three Months Ended December 31, Year Ended December 31, 2020 2019 % 2020 2019 % Change Change (dollars in thousands) Gross written $ 26,422 $ 23,330 13.3 % $ 102,763 $ 94,391 8.9 % premiumsNet written 21,558 20,387 5.7 % 85,385 81,966 4.2 % premiumsNet earned 21,287 21,567 -1.3 % 82,409 83,858 -1.7 % premiums Underwriting ratios: Loss ratio 67.2 % 67.7 % 64.4 % 63.3 % Expense 44.1 % 43.6 % 45.6 % 43.3 % ratio Combined 111.3 % 111.3 % 110.0 % 106.6 % ratio Contributionto combined ratio from net (favorable) adverse 18.1 % 13.3 % 18.4 % 9.0 % prior year development Accident yearcombined ratio 93.2 % 98.0 % 91.6 % 97.6 % (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 with an 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 91.5% of total gross written premium in the fourth 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 13.3% in the fourth quarter of 2020 to $26.4 million, as the Company continues to shift its mix towards more profitable specialty lines.

The Commercial lines combined ratio was 111.3% for the three months ended December 31, 2020, compared to 111.3% in the prior year period. The loss ratio was 67.2% for the three months ended December 31, 2020, compared with 67.7% in the prior year period while the expense ratio was 44.1% in the current year period, compared with 43.6% during the prior year period.

Commercial lines accident year combined ratio was 93.2% for the quarter.

Personal Lines Financial and Operational Review

Personal Lines Financial Review Three Months Ended December 31, Year Ended December 31, 2020 2019 % 2020 2019 % Change Change (dollars in thousands) Gross written $ 2,443 $ 2,061 18.5 % $ 8,572 $ 7,462 14.9 % premiumsNet written 2,223 1,775 25.2 % 7,555 5,758 31.2 % premiumsNet earned 1,814 1,711 6.0 % 6,694 5,231 28.0 % premiums Underwriting ratios: Loss ratio 61.0 % 80.5 % 43.3 % 120.7 % Expense 42.3 % 52.0 % 45.5 % 55.4 % ratio Combined 103.3 % 132.5 % 88.8 % 176.1 % ratio Contributionto combined ratio from net (favorable) adverse 13.2 % 34.0 % 5.1 % 55.5 % prior year development Accident year 90.1 % 98.5 % 83.7 % 120.6 % combined ratio

Personal lines, representing 8.5% of total gross written premium for the fourth quarter of 2020, consists largely of low-value dwelling homeowners insurance.

Personal lines gross written premium increased 18.5% to $2.4 million in the fourth quarter of 2020 compared to the prior year period, led by growth in the Companys low-value dwelling line of business in Texas.

Personal lines combined ratio was 103.3% for the three months ended December 31, 2020, compared to 132.5% in the prior year period. Personal lines loss ratio improved considerably to 61.0%, compared to 80.5% in the prior year period, largely driven by significantly lower losses from the low-value dwelling line of business.

For the full year 2020, the personal lines combined ratio was 88.8% compared to 176.1% in the prior year period.

The personal lines accident year combined ratio was 90.1% for the quarter.

Combined Ratio Analysis

Three Months Ended Year Ended December December 31, 31, 2020 2019 2020 2019 (dollars in thousands) Underwriting ratios: Loss ratio 66.7 % 68.6 % 62.8 % 66.8 % Expense ratio 43.9 % 44.3 % 45.6 % 44.0 % Combined ratio 110.6 % 112.9 % 108.4 % 110.8 % Contribution to combinedratio from net (favorable) adverse prior year 17.7 % 14.8 % 17.4 % 11.8 % development Accident year combined 92.9 % 98.1 % 91.0 % 99.0 % ratio

Combined RatioThe Company's combined ratio was 110.6% for the quarter ended December 31, 2020, compared to 112.9% for the same period in 2019. The combined ratio was 108.4% for the twelve months ended December 31, 2020, compared to 110.8% for the same period in 2019. The Companys accident year combined ratio for the quarter ended December 31, 2020 was 92.9%, compared to 98.1% in the prior year period.

Loss Ratio The Companys losses and loss adjustment expenses were $15.5 million for the three months ended December 31, 2020, compared to $16.0 million in the prior year period. This resulted in a loss ratio of 66.7%, compared to 68.6% in the prior year period.

Expense Ratio:The expense ratio was 43.9% for the fourth quarter of 2020, compared to 44.3% in the prior year period.

Net Investment IncomeNet investment income was $563,000 during the quarter ended December 31, 2020, compared to $860,000 in the prior year period. Net realized investment gains during the fourth quarter were $3.6 million, compared to net realized investment gains of $72,000 in the prior year period.

Change in Fair Value of Equity SecuritiesDuring the quarter, the Company reported a gain from the change in fair value of equity investments of $2.1 million, compared to a gain of $288,000 in the prior year period.

Net Income (Loss) In the fourth quarter of 2020, the Company reported net income of $3.3 million, or $0.34 per share, compared to a net loss of $3.0 million, or $0.32 per share, in the prior year period.

Adjusted Operating Income (Loss)In the fourth quarter of 2020, the Company reported an adjusted operating loss of $2.5 million, or $0.26 per share, compared to an adjusted operating loss of $3.4 million, or $0.35 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 Wednesday, February 24, 2021 at 8:30 a.m. ET to discuss results for the fourth quarter and year ended December 31, 2020.

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

Webcast:On the Event Calendar at IR.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 after-tax net realized investment gains and losses, excluding the tax effect of changes in unrealized gains and losses, excluding the after-tax change in fair value of equity securities, 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 December 31, Year Ended December 31, 2020 2019 2020 2019 (dollar in thousands, except share and per share amounts) Net income (loss) $ 3,274 $ (3,028 ) $ 595 $ (7,822 ) Less: Net realizedinvestment gains and 3,637 72 8,386 1,196 other gains, net oftaxTax effect ofunrealized gains and - 6 - 824 losses on investmentsChange in fair valueof equity securities, 2,094 288 228 (427 ) net of taxNet (increase)decrease in deferred gain on losses ceded to ADC, net - - - 5,677 of taxAdjusted operating $ (2,457 ) $ (3,394 ) $ (8,019 ) $ (15,092 ) income (loss) Weighted average 9,680,521 9,591,387 9,625,059 8,880,107 common shares, diluted Diluted income (loss) per common share: Net income (loss) $ 0.34 $ (0.32 ) $ 0.06 $ (0.88 ) Less: Net realized investment gains 0.38 - 0.87 0.13 and other gains, net of tax Tax effect of unrealized gains - - - 0.09 and losses on investments Change in fair value of equity 0.22 0.03 0.02 (0.05 ) securities, net of tax Net (increase) decrease in deferred gain on losses ceded - - - 0.64 to ADC, net of tax Adjusted operating income (loss), per $ (0.26 ) $ (0.35 ) $ (0.83 ) $ (1.69 ) share

Forward-Looking Statement

This press release contains forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements give current expectations or forecasts of future events or our future financial or operating performance, and include 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 Subsidiaries Consolidated Balance Sheets (dollars in thousands) December 31, December 31, 2020 2019 Assets (Unaudited) Investment securities: Debt securities, at fair value $ 151,999 $ 131,000 (amortized cost of $149,954 and $129,313, respectively) Equity securities, at fair value (cost of 17,891 7,306 $16,912 and $6,554, respectively) Short-term investments, at fair value 13,317 31,426 Total investments 183,207 169,732 Cash and cash equivalents 8,193 7,464 Premiums and agents' balances receivable, 20,162 20,168 netReceivable from Affiliate 8 313 Reinsurance recoverables on unpaid losses 24,218 22,579 Reinsurance recoverables on paid losses 2,138 5,155 Prepaid reinsurance premiums 1,316 1,250 Deferred policy acquisition costs 12,243 11,906 Other assets 10,112 8,698 Total assets $ 261,597 $ 247,265 Liabilities and Shareholders' Equity Liabilities: Unpaid losses and loss adjustment $ 111,270 $ 107,246 expenses Unearned premiums 56,224 51,503 Debt 40,997 35,824 Accounts payable and accrued expenses 8,693 9,967 Total liabilities 217,184 204,540 Commitments and contingencies - - Shareholders' equity: Common stock, no par value (100,000,000 shares authorized; 9,681,728 and 9,592,861 issued and 92,486 91,816 outstanding, respectively) Accumulated deficit (48,985 ) (49,580 ) Accumulated other comprehensive income 912 489 (loss) Total shareholders' equity 44,413 42,725 Total liabilities and $ 261,597 $ 247,265 shareholders' equity

Conifer Holdings, Inc. and Subsidiaries Consolidated Statements of Operations (Unaudited) (dollars in thousands, except share and per share data) Three Months Ended Year Ended December 31, December 31, 2020 2019 2020 2019 Revenue Premiums Gross earned $ 27,730 $ 26,609 $ 106,614 $ 103,203 premiums Ceded earned (4,629 ) (3,331 ) (17,511 ) (14,114 ) premiums Net earned 23,101 23,278 89,103 89,089 premiums Net investment 563 860 3,156 4,031 income Net realized investment 3,637 72 8,126 1,196 gains Change in fair value of 2,094 288 228 (427 ) equity securities Other gains - - 260 - Other income 602 542 2,615 2,109 Total 29,997 25,040 103,488 95,998 revenue Expenses Losses and loss 15,461 16,049 56,228 59,744 adjustment expenses, net Policy acquisition 6,924 6,959 26,105 24,911 costs Operating 4,027 4,622 18,468 17,582 expenses Interest 740 727 2,925 2,882 expense Total 27,152 28,357 103,726 105,119 expenses Income (loss)before equityearnings in 2,845 (3,317 ) (238 ) (9,121 ) Affiliate andincome taxes Equity earnings in 422 167 839 386 Affiliate, net of tax Income tax (benefit) (7 ) (122 ) 6 (913 ) expenseNet income (loss) 3,274 (3,028 ) 595 (7,822 ) Earnings (loss) per common share, basic and $ 0.34 $ (0.32 ) $ 0.06 $ (0.88 ) diluted Weighted averagecommon shares outstanding, basic and 9,680,521 9,591,387 9,625,059 8,880,107 diluted

For Further Information:

Jessica Gulis, 248.559.0840ir@cnfrh.com