GlobeNewswire Inc | Aug 11, 2021 04:01PM EDT

August 11, 2021

BIRMINGHAM, Mich., Aug. 11, 2021 (GLOBE NEWSWIRE) -- Conifer Holdings, Inc. (Nasdaq: CNFR) (Conifer or the Company) today announced results for the second quarter ended June 30, 2021.

Second Quarter 2021 Financial Highlights (compared to the prior year period)

-- Gross written premium increased 27.0% to $35.0 million -- Commercial Lines gross written premium increased 20.9% to $30.9 million -- Personal Lines gross written premium increased 107.4% to $4.0 million -- Other gains were $8.9 million, which consisted of the sale of certain agency business within its wholly owned Sycamore Insurance Agency, Inc. (Sycamore) as described below -- Net income of $5.6 million, or $0.57 per share, based on 9.7 million average shares outstanding -- Book value per share of $4.53 as of June 30, 2021

James Petcoff, Chairman and CEO, commented, We were pleased to report strong premium growth in the quarter and in the first half of 2021, produced through both expansion in our niche commercial markets as well as an improving rate environment. We continued to see challenges in development from prior years, but feel that our improved business mix over the last several years should help alleviate development as we continue to push rate and transition our business away from certain geographic regions. In addition to our growth in the quarter, our on-going expense reduction efforts generated our lowest recorded expense ratio in six years. Our goal remains to drive profitable top line growth which, coupled with efficiencies throughout our organization, we feel will lead to a consistently improving bottom line over time.

2021 Second Quarter Financial Results Overview

At and for the At and for the Three Months Ended June 30, Six Months Ended June 30, 2021 2020 % 2021 2020 % Change Change (dollars in thousands, except share and per share amounts) Gross written $ 34,981 $ 27,545 27.0% $ 65,354 $ 52,629 24.2%premiumsNet written 28,532 23,065 23.7% 53,015 44,116 20.2%premiumsNet earned 24,838 21,758 14.2% 47,673 43,775 8.9%premiums Net investment 503 863 -41.7% 1,035 1,817 -43.0%incomeNet realized 1,060 245 ** 3,984 1,173 **investment gainsChange in fairvalue of equity (525 ) 1,576 ** (1,065 ) (1,510 ) investmentsOther gains 8,910 145 ** 8,910 260 ** Net income 5,552 1,505 ** 916 (3,220 ) **(loss)Net income(loss) per $ 0.57 $ 0.16 $ 0.09 $ (0.34 ) share, diluted Adjustedoperating income (3,893 ) (461 ) ** (10,913 ) (3,143 ) **(loss)*Adjustedoperating income $ (0.40 ) $ (0.04 ) ** $ (1.13 ) $ (0.33 ) **(loss) pershare, diluted* Book value percommon share $ 4.53 $ 4.51 $ 4.53 $ 4.51 outstanding Weighted averagesharesoutstanding, 9,686,631 9,595,668 9,684,193 9,594,221 basic anddiluted Underwriting ratios:Loss ratio (1) 71.9 % 54.6 % 77.9 % 59.6 % Expense ratio 41.3 % 45.9 % 42.9 % 46.5 % (2)Combined ratio 113.2 % 100.5 % 120.8 % 106.1 % (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 other income fromunderwriting operations.(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.

2021 Second Quarter Premiums

Gross Written Premiums

Gross written premiums increased 27.0% in the second quarter of 2021 to $35.0 million, compared to $27.5 million in the prior year period. The increase was the result of growth in both Commercial and Personal Lines business as general economic and business conditions began to improve following pandemic-related softness.

Net Earned PremiumsNet earned premiums increased 14.2% to $24.8 million for the second quarter of 2021, compared to $21.8 million for the prior year period. The Company expects net earned premiums to increase throughout 2021 as the gross written premium growth achieved in the second half of 2020 continues to be earned ratably through the year.

Commercial Lines Financial and Operational Review

Commercial Lines Financial Review

Three Months Ended June 30, Six Months Ended June 30, 2021 2020 % 2021 2020 % Change Change (dollars in thousands) Gross written $ 30,947 $ 25,600 20.9% $ 58,168 $ 49,044 18.6%premiumsNet written 24,672 21,377 15.4% 46,229 41,064 12.6%premiumsNet earned 22,188 20,105 10.4% 42,894 40,536 5.8%premiums Underwriting ratios:Loss ratio 76.2 % 55.9 % 78.8 % 60.8 % Expense ratio 41.2 % 45.8 % 42.9 % 46.5 % Combined ratio 117.4 % 101.7 % 121.7 % 107.3 % Contributionto combined ratio from net(favorable)adverse prior 27.8 % 15.2 % 26.4 % 16.6 % yeardevelopment Accident yearcombined ratio 89.6 % 86.5 % 95.3 % 90.7 % (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 88.5% of total gross written premium in the second quarter of 2021, primarily consists of property and liability coverage offered to owner-operated small- to mid-sized businesses.

Commercial lines gross written premium increased 20.9% in the second quarter of 2021 to $30.9 million, as the Company continues to emphasize growth of its specialty lines business.

The Commercial lines combined ratio was 117.4% for the three months ended June 30, 2021, compared to 101.7% in the prior year period. The loss ratio was 76.2% for the three months ended June 30, 2021, compared with 55.9% in the prior year period while the expense ratio was 41.2% in the current year period, compared with 45.8% during the prior year period.

Commercial lines accident year combined ratio was 89.6% for the quarter.

Personal Lines Financial and Operational Review

Personal Lines Financial Review

Three Months Ended June 30, Six Months Ended June 30, 2021 2020 % 2021 2020 % Change Change (dollars in thousands) Gross written $ 4,034 $ 1,945 107.4% $ 7,186 $ 3,585 100.4%premiumsNet written 3,860 1,688 128.7% 6,786 3,052 122.3%premiumsNet earned 2,650 1,653 60.3% 4,779 3,239 47.5%premiums Underwriting ratios:Loss ratio 36.6 % 39.6 % 69.8 % 44.6 % Expense ratio 42.0 % 46.1 % 42.8 % 46.6 % Combined ratio 78.6 % 85.7 % 112.6 % 91.2 % Contributionto combined ratio from net(favorable)adverse prior 0.9 % (1.2 )% 13.1 % 1.4 % yeardevelopment Accident year 77.7 % 86.9 % 99.5 % 89.8 % combined ratio

Personal lines, representing 11.5% of total gross written premium for the second quarter of 2021, consists largely of low-value dwelling homeowners insurance.

Personal lines gross written premium increased 107.4% to $4.0 million in the second quarter of 2021 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 78.6% for the three months ended June 30, 2021, compared to 85.7% in the prior year period. Personal lines loss ratio improved to 36.6%, compared to 39.6% in the prior year period.

The personal lines accident year combined ratio was 77.7% for the quarter.

Sale of New and Renewal Rights of Sycamore Insurance Agency, Inc.

Details of Transaction

Sycamore, a wholly owned subsidiary of Conifer, is a managing general agent and wholesale broker that underwrites and distributes various property and casualty insurance products for Conifer Holdings and various other insurance markets.

On June 30, 2021, Sycamore Insurance Agency sold to Venture Holdings, Inc. select customer accounts and other related assets of some of its personal and commercial lines of business. Sycamore will continue to produce various personal and commercial lines that it did not sell; lines which are substantially all produced for, and underwritten by, Conifers Insurance Company Subsidiaries. Conifer recognized an $8.9 million gain on the sale.

The assets sold included the customer accounts of substantially all of the personal lines business and a small subset of the commercial lines business underwritten by our Insurance Company Subsidiaries, and all of the customer accounts Sycamore produced for third-party insurers. The business will roll over to Venture as it produces new or renewal business effective July 1, 2021.

We expect our Insurance Company Subsidiaries will continue to underwrite substantially all of the business we sold to Venture (that we underwrote prior to the transaction). And we expect Venture to be able to grow both the business we underwrite, plus the third-party business more effectively as a separate entity outside of CHIs group. As of June 30, 2021, we had a non-controlling 50% interest in Venture.

Combined Ratio Analysis

Three Months Ended Six Months Ended June 30, June 30, 2021 2020 2021 2020 (dollars in thousands) Underwriting ratios: Loss ratio 71.9% 54.6% 77.9% 59.6%Expense ratio 41.3% 45.9% 42.9% 46.5%Combined ratio 113.2% 100.5% 120.8% 106.1% Contribution to combined ratio from net (favorable)adverse prior year development 24.9% 13.9% 25.0% 15.4% Accident year combined ratio 88.3% 86.6% 95.8% 90.7%

Combined RatioThe Company's combined ratio was 113.2% for the quarter ended June 30, 2021, compared to 100.5% for the same period in 2020. The Companys accident year combined ratio for the quarter ended June 30, 2021 was 88.3%, compared to 86.6% in the prior year period.

Loss Ratio The Companys losses and loss adjustment expenses were $17.9 million for the three months ended June 30, 2021, compared to $11.9 million in the prior year period. This resulted in a loss ratio of 71.9%, compared to 54.6% in the prior year period.

Expense Ratio:The expense ratio was 41.3% for the second quarter of 2021, compared to 45.9% in the prior year period.

Net Investment IncomeNet investment income was $503,000 during the quarter ended June 30, 2021, compared to $863,000 in the prior year period.

Net Realized Investment GainsNet realized investment gains during the second quarter were $1.1 million, compared to net realized investment gains of $245,000 in the prior year period.

Change in Fair Value of Equity SecuritiesDuring the quarter, the Company reported a loss from the change in fair value of equity investments of $525,000, compared to a gain of $1.6 million in the prior year period.

Net Income (Loss) In the second quarter of 2021, the Company reported net income of $5.6 million, or $0.57 per share, compared to net income of $1.5 million, or $0.16 per share, in the prior year period.

Adjusted Operating Income (Loss)In the second quarter of 2021, the Company reported an adjusted operating loss of $3.9 million, or $0.40 per share, compared to an adjusted operating loss of $461,000, or $0.04 per share, for the same period in 2020. See Definitions of Non-GAAP Measures.

Earnings Conference Call with Accompanying Slide PresentationThe Company will hold a conference call/webcast on Thursday, August 12, 2021 at 8:30 a.m. ET to discuss results for the second quarter ended June 30, 2021.

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

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

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

About the CompanyConifer Holdings, Inc. is an insurance holding company, offering customized coverage solutions tailored to the needs of our specialty insureds. Nationwide, Conifer markets largely through independent agents, and is traded on the NASDAQ exchange under the symbol CNFR. 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. 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, 2021 2020 2021 2020 (dollar in thousands, except share and per share amounts) Net income $ 5,552 $ 1,505 $ 916 $ (3,220 )(loss)Less: Netrealizedinvestmentgains and 9,970 390 12,894 1,433 othergains, netof taxChange infair valueof equity (525 ) 1,576 (1,065 ) (1,510 )securities,net of taxAdjustedoperating $ (3,893 ) $ (461 ) $ (10,913 ) $ (3,143 )income(loss) Weightedaveragecommon 9,686,631 9,595,668 9,684,193 9,594,221 shares,diluted Dilutedincome(loss) per commonshare:Net income $ 0.57 $ 0.16 $ 0.09 $ (0.34 )(loss)Less: Netrealizedinvestmentgains and 1.03 0.04 1.33 0.15 othergains, netof taxChange infair valueof equity (0.06 ) 0.16 (0.11 ) (0.16 )securities,net of taxAdjustedoperatingincome $ (0.40 ) $ (0.04 ) $ (1.13 ) $ (0.33 )(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) June 30, December 31, 2021 2020 Assets (Unaudited) Investment securities: Debt securities, at fair value (amortized $ 149,188 $ 151,999 cost of $148,699 and$149,954, respectively)Equity securities, at fair value (cost of 19,994 17,891 $20,080 and $16,912, respectively)Short-term investments, at fair value 11,435 13,317 Total investments 180,617 183,207 Cash and cash equivalents 4,668 8,193 Premiums and agents' balances receivable, net 22,887 20,162 Receivable from Affiliate 9,002 8 Reinsurance recoverables on unpaid losses 22,824 24,218 Reinsurance recoverables on paid losses 3,269 2,138 Prepaid reinsurance premiums 4,964 1,316 Deferred policy acquisition costs 13,121 12,243 Other assets 8,383 10,112 Total assets $ 269,735 $ 261,597 Liabilities and Shareholders' Equity Liabilities: Unpaid losses and loss adjustment expenses $ 117,852 $ 111,270 Unearned premiums 63,103 56,224 Debt 37,153 40,997 Accounts payable and accrued expenses 7,743 8,693 Total liabilities 225,851 217,184 Commitments and contingencies - - Shareholders' equity: Common stock, no par value (100,000,000shares authorized; 9,689,421 and9,681,728 92,612 92,486 issued and outstanding, respectively)Accumulated deficit (48,069 ) (48,985 )Accumulated other comprehensive income (loss) (659 ) 912 Total shareholders' equity 43,884 44,413 Total liabilities and shareholders' equity $ 269,735 $ 261,597

Conifer Holdings, Inc. and SubsidiariesConsolidated Statements of Operations (Unaudited)(dollars in thousands, except share and per share data) Three Months Ended Six Months Ended June 30, June 30, 2021 2020 2021 2020 Revenue and Other IncomePremiums Gross earned $ 30,228 $ 25,959 $ 58,475 $ 52,012 premiumsCeded earned (5,390 ) (4,201 ) (10,802 ) (8,237 )premiumsNet earned 24,838 21,758 47,673 43,775 premiumsNetinvestment 503 863 1,035 1,817 incomeNet realizedinvestment 1,060 245 3,984 1,173 gainsChange infair value (525 ) 1,576 (1,065 ) (1,510 )of equitysecuritiesOther gains 8,910 145 8,910 260 Other income 666 713 1,222 1,371 Totalrevenue and 35,452 25,300 61,759 46,886 other income Expenses Losses andlossadjustment 17,926 11,945 37,288 26,214 expenses,netPolicyacquisition 6,896 6,395 13,646 12,698 costsOperating 4,342 4,859 8,691 9,904 expensesInterest 732 731 1,453 1,462 expenseTotal 29,896 23,930 61,078 50,278 expenses Income(loss)beforeequity 5,556 1,370 681 (3,392 )earnings inAffiliateand incometaxesEquityearnings in 180 179 428 229 Affiliate,net of taxIncome tax 184 44 193 57 expenseNet income 5,552 1,505 916 (3,220 )(loss) Earnings(loss) per commonshare,basic and $ 0.57 $ 0.16 $ 0.09 $ (0.34 )diluted Weightedaveragecommon sharesoutstanding,basic and 9,686,631 9,595,668 9,684,193 9,594,221 diluted

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