GlobeNewswire Inc | Nov 11, 2020 04:01PM EST

November 11, 2020

BIRMINGHAM, Mich., Nov. 11, 2020 (GLOBE NEWSWIRE) -- Conifer Holdings, Inc. (Nasdaq: CNFR) (Conifer or the Company) today announced results for the third quarter ended September 30, 2020.

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

-- Gross written premium increased 10.2% to $29.8 million, -- Commercial Lines gross written premium increased 9.1% to $27.3 million -- Personal Lines gross written premium increased 23.6% to $2.5 million -- Commercial Lines combined ratio was 114.2% -- Personal Lines combined ratio was 68.1% -- Net income of $0.5 million, or $0.06 per share, based on 9.6 million average shares outstanding -- Book value per share of $4.40 as of September 30, 2020, compared to $4.51 as of June 30, 2020, and $3.81 at March 31, 2020

Management Comments James Petcoff, Chairman and CEO, commented, We were pleased to report double digit growth in the top line during the quarter, largely driven by higher premiums in our core specialty commercial lines of business. Continued growth in our written premiums will drive more efficient scale for our business overall. We continue to see favorable pricing trends in our core markets and feel well positioned for the coming year. Reserve development did impact the Companys combined ratio for the period. This was partially offset by exceptional performance in our personal lines business and favorable realized investment gains, which led to profitable operations for the period.

2020 Third Quarter Financial Results Overview

At and for the At and for the Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 % 2020 2019 % Change Change (dollars in thousands, except share and per share amounts) Grosswritten $ 29,841 $ 27,077 10.2% $ 82,470 $ 76,462 7.9%premiumsNet written 25,043 23,806 5.2% 69,159 65,562 5.5%premiumsNet earned 22,227 22,775 -2.4% 66,002 65,811 0.3%premiums Netinvestment 776 1,210 -35.9% 2,593 3,171 -18.2%incomeNet realizedinvestment 3,316 390 ** 4,489 1,124 **gainsChange infair value (356 ) (1,065 ) ** (1,866 ) (715 ) of equityinvestmentsOther gains - - ** 260 - ** Net income 541 (1,230 ) ** (2,679 ) (4,794 ) **(loss)Net income(loss) per $ 0.06 $ (0.13 ) $ (0.28 ) $ (0.55 ) share,diluted Adjustedoperating (2,419 ) (1,854 ) ** (5,562 ) (11,698 ) **income(loss)*Adjustedoperatingincome $ (0.24 ) $ (0.18 ) ** $ (0.58 ) $ (1.35 ) **(loss) pershare,diluted* Book valueper common $ 4.40 $ 4.74 $ 4.40 $ 4.74 shareoutstanding Weightedaverageshares 9,630,600 9,543,535 9,606,436 8,640,409 outstanding,basic anddiluted Underwriting ratios:Loss ratio 65.2% 64.9% 61.5% 66.1% (1)Expense 45.5% 44.3% 46.2% 43.9% ratio (2)Combined 110.7% 109.2% 107.7% 110.0% ratio (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 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 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 Third Quarter PremiumsGross Written PremiumsGross written premiums increased 10.2% in the third quarter of 2020 to $29.8 million, compared to $27.1 million in the prior year period. The increase was largely due to both rate and policy growth across several lines, 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 2.4% to $22.2 million for the third quarter of 2020, compared to $22.8 million for the prior year period. This was mainly due to slightly higher reinsurance costs.

Commercial Lines Financial and Operational Review

Commercial Lines Financial Review Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 % 2020 2019 % Change Change (dollars in thousands) Grosswritten $ 27,297 $ 25,018 9.1% $ 76,341 $ 71,061 7.4%premiumsNet written 22,763 22,095 3.0% 63,827 61,579 3.7%premiumsNet earned 20,586 21,439 -4.0% 61,122 62,291 -1.9%premiums Underwriting ratios:Loss ratio 68.8% 62.8% 63.5% 61.8% Expense 45.4% 43.5% 46.1% 43.2% ratioCombined 114.2% 106.3% 109.6% 105.0% ratio Contributionto combined ratio fromnet(favorable)adverse 22.4% 10.7% 18.5% 7.5% prior yeardevelopment Accidentyear 91.8% 95.6% 91.1% 97.5% 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 91% of total gross written premium in the third 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 third quarter of 2020 to $27.3 million, as the Company continues to shift its mix towards more profitable specialty lines.

The Commercial lines combined ratio was 114.2% for the three months ended September 30, 2020, compared to 106.3% in the prior year period, largely due to a 22.4 percentage point contribution to the combined ratio from adverse prior year development. The development was due to higher than anticipated losses, mostly in the hospitality lines in the 2018 and prior accident years.

Commercial lines accident year combined ratio was 91.8% for the quarter.

Personal Lines Financial and Operational Review

Personal Lines Financial Review Three Months Ended September Nine Months Ended September 30, 30, 2020 2019 % 2020 2019 % Change Change (dollars in thousands) Grosswritten $ 2,544 $ 2,059 23.6% $ 6,129 $ 5,401 13.5%premiumsNet written 2,280 1,711 33.3% 5,332 3,983 33.9%premiumsNet earned 1,641 1,336 22.8% 4,880 3,520 38.6%premiums Underwriting ratios:Loss ratio 21.3% 97.9% 36.7% 140.1% Expense 46.8% 56.6% 46.7% 57.0% ratioCombined 68.1% 154.5% 83.4% 197.1% ratio Contributionto combined ratio fromnet(favorable)adverse 3.8% 28.7% 2.2% 65.9% prior yeardevelopment Accidentyear 64.3% 125.8% 81.2% 131.2% combinedratio

Personal lines, representing 9% of total gross written premium for the third quarter of 2020, consists largely of low-value dwelling homeowners insurance.

Personal lines gross written premium increased 23.6% to $2.5 million in the third quarter of 2020 compared to the prior year period, largely due to renewed growth in the Companys low-value dwelling line of business across several geographic regions.

Personal lines combined ratio was 68.1% for the three months ended September 30, 2020, compared to 154.5% in the prior year period. Personal lines loss ratio improved considerably to 21.3%, compared to 97.9% in the prior year period, largely driven by significantly lower losses from the Florida homeowners line of business and favorable performance in the Companys current lines of business.

The personal lines accident year combined ratio was 64.3% for the quarter.

Combined Ratio Analysis

Three Months Nine Months Ended Ended September 30, September 30, 2020 2019 2020 2019 (dollars in thousands) Underwriting ratios: Loss ratio 65.2% 64.9% 61.5% 66.1%Expense ratio 45.5% 44.3% 46.2% 43.9%Combined ratio 110.7% 109.2% 107.7% 110.0% Contribution to combined ratio from net (favorable)adverse prior year development 21.0% 11.8% 17.3% 10.7% Accident year combined ratio 89.7% 97.4% 90.4% 99.3%

Combined RatioThe Company's combined ratio was 110.7% for the quarter ended September 30, 2020, compared to 109.2% for the same period in 2019. The combined ratio was 107.7% for the nine months ended September 30, 2020, compared to 110.0% for the same period in 2019. The Companys accident year combined ratio for the quarter ended September 30, 2020 was 89.7%, compared to 97.4% in the prior year period.

Loss Ratio The Companys losses and loss adjustment expenses were $14.6 million for the three months ended September 30, 2020, compared to $14.9 million in the prior year period. This resulted in a loss ratio of 65.2%, compared to 64.9% in the prior year period.

Expense Ratio:The expense ratio was 45.5% for the third quarter of 2020, compared to 44.3% in the prior year period.

Net Investment IncomeNet investment income was $0.8 million during the quarter ended September 30, 2020, compared to $1.2 million in the prior year period. Net realized gains during the third quarter were $3.3 million, compared to net realized gain of $0.4 million in the prior year period.

Change in Fair Value of Equity SecuritiesDuring the quarter, the Company reported a loss from change in fair value of equity investments of $0.4 million, compared to a loss of $1.1 million in the prior year period.

Net Income (Loss) In the third quarter of 2020, the Company reported net income of $0.5 million, or $0.06 per share, compared to a net loss of $1.2 million, or $0.13 per share, in the prior year period.

Adjusted Operating Income (Loss)In the third quarter of 2020, the Company reported adjusted operating loss of $2.4 million, or $0.24 per share, compared to adjusted operating loss of $1.8 million, or $0.18 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, November 12, 2020 at 8:30 a.m. ET to discuss results for the third quarter ended September 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 Nine Months Ended September 30, September 30, 2020 2019 2020 2019 (dollar in thousands, except share and per share amounts) Net income $ 541 $ (1,230 ) $ (2,679 ) $ (4,794 )(loss)Less: Netrealizedinvestmentgains and 3,316 390 4,749 1,124 othergains, netof taxTax effectofinvestment - 818 - 818 unrealizedgains oninvestmentsChange infair valueof equity (356 ) (1,065 ) (1,866 ) (715 )securities,net of taxNetdecrease(Increase) in deferredgain onlossesceded toADC, net of - 481 - 5,677 taxAdjustedoperating $ (2,419 ) $ (1,854 ) $ (5,562 ) $ (11,698 )income(loss) Weightedaveragecommon 9,630,600 9,543,535 9,606,436 8,640,409 shares,diluted Dilutedincome(loss) per commonshare:Net income $ 0.06 $ (0.13 ) $ (0.28 ) $ (0.55 )(loss)Less: Netrealizedinvestmentgains and 0.34 0.04 0.49 0.13 othergains, netof taxTax effectofinvestment - 0.09 - 0.09 unrealizedgains oninvestmentsChange infair valueof equity (0.04 ) (0.12 ) (0.19 ) (0.08 )securities,net of taxNetdecrease(increase) in deferredgain onlossesceded toADC, net of - 0.04 - 0.66 taxAdjustedoperatingincome $ (0.24 ) $ (0.18 ) $ (0.58 ) $ (1.35 )(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(dollars in thousands) September 30, December 31, 2020 2019Assets (Unaudited) Investment securities: Debt securities, at fair value (amortized $ 139,441 $ 131,000 cost of $135,883 and $129,313, respectively) Equity securities, at fair value (cost of 15,913 7,306 $17,027 and $6,554, respectively) Short-term investments, at fair value 24,898 31,426 Total investments 180,252 169,732 Cash and cash equivalents 7,550 7,464 Premiums and agents' balances receivable, net 20,137 20,168 Receivable from Affiliate 12 313 Reinsurance recoverables on unpaid losses 18,564 22,579 Reinsurance recoverables on paid losses 3,496 5,155 Prepaid reinsurance premiums 4,543 1,250 Deferred policy acquisition costs 12,277 11,906 Other assets 13,062 8,698 Total assets $ 259,893 $ 247,265 Liabilities and Shareholders' Equity Liabilities: Unpaid losses and loss adjustment expenses $ 103,684 $ 107,246 Unearned premiums 55,089 51,503 Debt 40,920 35,824 Accounts payable and accrued expenses 17,614 9,967 Total liabilities 217,307 204,540 Commitments and contingencies - - Shareholders' equity: Common stock, no par value (100,000,000 shares authorized; 9,678,463 and 9,592,861 issued and 92,417 91,816 outstanding, respectively) Accumulated deficit (52,259 ) (49,580 ) Accumulated other comprehensive income (loss) 2,428 489 Total shareholders' equity 42,586 42,725 Total liabilities and shareholders' $ 259,893 $ 247,265 equity

Conifer Holdings, Inc. and SubsidiariesConsolidated Statements of Operations (Unaudited)(dollars in thousands, except share and per share data) Three Months Ended Nine Months Ended September 30, September 30, 2020 2019 2020 2019 Revenue Premiums Gross earned $ 26,872 $ 25,962 $ 78,884 $ 76,594 premiums Ceded earned (4,645 ) (3,187 ) (12,882 ) (10,783 ) premiums Net earned 22,227 22,775 66,002 65,811 premiums Net investment 776 1,210 2,593 3,171 income Net realized investment 3,316 390 4,489 1,124 gains Change in fair value of (356 ) (1,065 ) (1,866 ) (715 ) equity securities Other gains - - 260 - Other income 642 564 2,013 1,567 Total 26,605 23,874 73,491 70,958 revenue Expenses Losses and loss 14,553 14,857 40,767 43,695 adjustment expenses, net Policy acquisition 6,483 6,153 19,181 17,952 costs Operating 4,537 4,297 14,441 12,960 expenses Interest 723 720 2,185 2,155 expense Total 26,296 26,027 76,574 76,762 expenses Income (loss)before equityearnings in 309 (2,153 ) (3,083 ) (5,804 )Affiliate andincome taxes Equity earnings (losses) of 188 121 417 219 Affiliate, net of tax Income tax (benefit) (44 ) (802 ) 13 (791 ) expenseNet income (loss) 541 (1,230 ) (2,679 ) (4,794 ) Earnings (loss) per common share, basic and $ 0.06 $ (0.13 ) $ (0.28 ) $ (0.55 ) diluted Weighted averagecommon shares outstanding, basic and 9,630,600 9,543,535 9,606,436 8,640,409 diluted

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