GlobeNewswire Inc | Nov 10, 2021 04:01PM EST

November 10, 2021

BIRMINGHAM, Mich., Nov. 10, 2021 (GLOBE NEWSWIRE) -- Conifer Holdings, Inc. (Nasdaq: CNFR) (Conifer or the Company) today announced results for the third quarter ended September 30, 2021.

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

-- Gross written premium increased 12.9% to $33.7 million -- Commercial Lines gross written premium increased 9.3% to $29.8 million -- Personal Lines gross written premium increased 51.5% to $3.9 million -- Net loss of $1.2 million, or $0.12 per share, based on 9.7 million average shares outstanding -- Book value per share of $4.34 as of September 30, 2021

James Petcoff, Chairman and CEO, commented, We were pleased to report top line growth in the quarter with premiums increasing roughly 13% for the period. Our gross written premiums have improved by double-digit percentages for several quarters, which will help drive greater economies of scale going forward. And, while we reported additional development from prior years, our change in business mix has gained traction, as we implement steady rate increases across our book. For the remainder of 2021, our focus will continue to be on generating profitable premium growth while continuing to refine our business mix in our core specialty markets.

2021 Third Quarter Financial Results Overview

At and for the At and for the Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 % 2021 2020 % Change Change (dollars in thousands, except share and per share amounts) Grosswritten $ 33,704 $ 29,841 12.9% $ 99,058 $ 82,470 20.1%premiumsNet written 26,069 25,043 4.1% 79,084 69,159 14.4%premiumsNet earned 24,941 22,227 12.2% 72,614 66,002 10.0%premiums Netinvestment 514 776 -33.8% 1,549 2,593 -40.3%incomeNet realizedinvestment (101 ) 3,316 ** 3,883 4,489 **gainsChange infair value (2,169 ) (356 ) ** (3,234 ) (1,866 ) of equityinvestmentsOther gains 2,778 - ** 11,688 260 ** Net income (1,209 ) 541 ** (293 ) (2,679 ) **(loss) Net income (loss) $ (0.12 ) $ 0.06 $ (0.03 ) $ (0.28 ) per share, diluted Adjustedoperating (1,717 ) (2,419 ) ** (12,630 ) (5,562 ) **income(loss)* Adjusted operating income (loss) $ (0.18 ) $ (0.24 ) ** $ (1.30 ) $ (0.58 ) ** per share, diluted* Book valueper common $ 4.34 $ 4.40 $ 4.34 $ 4.40 shareoutstanding Weightedaverageshares 9,692,150 9,630,600 9,686,874 9,606,436 outstanding,basic anddiluted Underwriting ratios: Loss 64.6% 65.2% 73.3% 61.5% ratio (1) Expense 42.3% 45.5% 42.7% 46.2% ratio (2) Combined 106.9% 110.7% 116.0% 107.7% 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 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 Third Quarter Premiums

Gross Written Premiums

Gross written premiums increased 12.9% in the third quarter of 2021 to $33.7 million, compared to $29.8 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 12.2% to $24.9 million for the third quarter of 2021, compared to $22.2 million for the prior year period. The Company expects net earned premiums to increase throughout 2021 as gross written premium growth over the past several quarters continues to be earned ratably through the year.

Commercial Lines Financial and Operational Review

Commercial Lines Financial Review Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 % 2021 2020 % Change Change (dollars in thousands) Gross written $ 29,849 $ 27,297 9.3% $ 88,017 $ 76,341 15.3%premiumsNet written 22,456 22,763 -1.3% 68,685 63,827 7.6%premiumsNet earned 21,975 20,586 6.7% 64,869 61,122 6.1%premiums Underwriting ratios: Loss ratio 66.7% 68.8% 74.7% 63.5% Expense 42.7% 45.4% 42.9% 46.1% ratio Combined 109.4% 114.2% 117.6% 109.6% ratio Contributionto combined ratio from net (favorable) adverse 15.2% 22.4% 22.6% 18.5% prior year development Accident yearcombined ratio 94.2% 91.8% 95.0% 91.1% (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 88.6% of total gross written premium in the third 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 9.3% in the third quarter of 2021 to $29.8 million, as the Company continues to emphasize growth of its specialty lines business.

The Commercial lines combined ratio was 109.4% for the three months ended September 30, 2021, compared to 114.2% in the prior year period. The loss ratio was 66.7% for the three months ended September 30, 2021, compared with 68.8% in the prior year period while the expense ratio was 42.7% in the current year period, compared with 45.4% during the prior year period.

Commercial lines accident year combined ratio was 94.2% for the quarter.

Personal Lines Financial and Operational Review

Personal Lines Financial Review Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 % 2021 2020 % Change Change (dollars in thousands) Gross written $ 3,855 $ 2,544 51.5% $ 11,041 $ 6,129 80.1%premiumsNet written 3,613 2,280 58.5% 10,399 5,332 95.0%premiumsNet earned 2,966 1,641 80.7% 7,745 4,880 58.7%premiums Underwriting ratios: Loss ratio 48.8% 21.3% 61.8% 36.7% Expense 39.2% 46.8% 41.4% 46.7% ratio Combined 88.0% 68.1% 103.2% 83.4% ratio Contributionto combined ratio from net (favorable) adverse 9.7% 3.8% 11.8% 2.2% prior year development Accident year 78.3% 64.3% 91.4% 81.2% combined ratio

Personal lines, representing 11.4% of total gross written premium for the third quarter of 2021, consists largely of low-value dwelling homeowners insurance.

Personal lines gross written premium increased 51.5% to $3.9 million in the third 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 88.0% for the three months ended September 30, 2021, compared to 68.1% in the prior year period. Personal lines loss ratio was 48.8%, compared to 21.3% in the prior year period.

The personal lines accident year combined ratio was 78.3% for the quarter.

Combined Ratio Analysis

Three Months Ended Nine Months September 30, Ended September 30, 2021 2020 2021 2020 (dollars in thousands) Underwriting ratios: Loss ratio 64.6% 65.2% 73.3% 61.5% Expense ratio 42.3% 45.5% 42.7% 46.2% Combined ratio 106.9% 110.7% 116.0% 107.7% Contribution to combined ratio from net (favorable) adverse prior year development 14.6% 21.0% 21.4% 17.3% Accident year combined ratio 92.3% 89.7% 94.6% 90.4%

Combined RatioThe Company's combined ratio was 106.9% for the quarter ended September 30, 2021, compared to 110.7% for the same period in 2020. The Companys accident year combined ratio for the quarter ended September 30, 2021 was 92.3%, compared to 89.7% in the prior year period.

Loss Ratio The Companys losses and loss adjustment expenses were $16.2 million for the three months ended September 30, 2021, compared to $14.6 million in the prior year period. This resulted in a loss ratio of 64.6%, compared to 65.2% in the prior year period.

Expense Ratio:The expense ratio was 42.3% for the third quarter of 2021, compared to 45.5% in the prior year period.

Net Investment IncomeNet investment income was $514,000 during the quarter ended September 30, 2021, compared to $776,000 in the prior year period.

Net Realized Investment (Losses) GainsNet realized investment losses during the third quarter were $101,000, compared to net realized investment gains of $3.3 million 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 $2.2 million, compared to a loss of $356,000 in the prior year period.

Net Income (Loss) In the third quarter of 2021, the Company reported a net loss of $1.2 million, or $0.12 per share, compared to net income of $0.5 million, or $0.06 per share, in the prior year period.

Adjusted Operating Income (Loss)In the third quarter of 2021, the Company reported an adjusted operating loss of $1.7 million, or $0.18 per share, compared to an adjusted operating loss of $2.4 million, or $0.24 per share, for the same period in 2020. The Company excluded $2.8 million in other gains from the adjusted operating loss in the third quarter of 2021, related to the forgiveness of the Paycheck Protection Program (PPP) loan. The Company also excluded a $2.2 million loss from the change in fair value of equity investments from the adjusted operating loss in the third quarter of 2021. See Definitions of Non-GAAP Measures.

Earnings Conference Call with Accompanying Slide PresentationThe Company will hold a conference call/webcast on Thursday, November 11, 2021 at 8:30 a.m. ET to discuss results for the third quarter ended September 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 Nine Months Ended September 30, September 30, 2021 2020 2021 2020 (dollar in thousands, except share and per share amounts) Net income $ (1,209 ) $ 541 $ (293 ) $ (2,679 )(loss)Less: Net realizedinvestmentgains and 2,677 3,316 15,571 4,749 other gains,net of taxChange in fairvalue ofequity (2,169 ) (356 ) (3,234 ) (1,866 )securities,net of taxAdjustedoperating $ (1,717 ) $ (2,419 ) $ (12,630 ) $ (5,562 )income (loss) Weightedaverage common 9,692,150 9,630,600 9,686,874 9,606,436 shares,diluted Diluted income(loss) per common share: Net income $ (0.12 ) $ 0.06 $ (0.03 ) $ (0.28 ) (loss) Less: Net realized investment gains and 0.28 0.34 1.61 0.49 other gains, net of tax Change in fair value of equity (0.22 ) (0.04 ) (0.33 ) (0.19 ) securities, net of tax Adjusted operating income $ (0.18 ) $ (0.24 ) $ (1.30 ) $ (0.58 ) (loss), per 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 11, 2021 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, 2021 2020 Assets (Unaudited) Investment securities: Debt securities, at fair value (amortized cost of $146,831 and$149,954, $ 146,710 $ 151,999 respectively) Equity securities, at fair value (cost of 19,687 17,891 $21,942 and $16,912, respectively) Short-term investments, at fair value 10,142 13,317 Total investments 176,539 183,207 Cash and cash equivalents 7,507 8,193 Premiums and agents' balances receivable, net 22,252 20,162 Receivable from Affiliate 8,940 8 Reinsurance recoverables on unpaid losses 23,056 24,218 Reinsurance recoverables on paid losses 4,340 2,138 Prepaid reinsurance premiums 4,225 1,316 Deferred policy acquisition costs 13,611 12,243 Other assets 8,465 10,112 Total assets $ 268,935 $ 261,597 Liabilities and Shareholders' Equity Liabilities: Unpaid losses and loss adjustment expenses $ 119,854 $ 111,270 Unearned premiums 65,036 56,224 Reinsurance premiums payable 750 - Debt 34,486 40,997 Accounts payable and accrued expenses 6,701 8,693 Total liabilities 226,827 217,184 Commitments and contingencies - - Shareholders' equity: Common stock, no par value (100,000,000 shares authorized; 9,706,156 92,659 92,486 and9,681,728 issued and outstanding, respectively) Accumulated deficit (49,278 ) (48,985 ) Accumulated other comprehensive income (1,273 ) 912 (loss) Total shareholders' equity 42,108 44,413 Total liabilities and shareholders' $ 268,935 $ 261,597 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, 2021 2020 2021 2020 Revenue and Other Income Premiums Gross earned $ 31,770 $ 26,872 $ 90,245 $ 78,884 premiums Ceded earned (6,829 ) (4,645 ) (17,631 ) (12,882 ) premiums Net earned 24,941 22,227 72,614 66,002 premiums Net investment 514 776 1,549 2,593 income Net realized investment (101 ) 3,316 3,883 4,489 gains (losses) Change in fair value of (2,169 ) (356 ) (3,234 ) (1,866 ) equity securities Other gains 2,778 - 11,688 260 Other income 752 642 1,974 2,013 Total revenue and 26,715 26,605 88,474 73,491 other income Expenses Losses and loss 16,159 14,553 53,447 40,767 adjustment expenses, net Policy acquisition 7,173 6,483 20,819 19,181 costs Operating 4,077 4,537 12,768 14,441 expenses Interest 701 723 2,154 2,185 expense Total 28,110 26,296 89,188 76,574 expenses Income (loss)before equityearnings in (1,395 ) 309 (714 ) (3,083 )Affiliate andincome taxes Equity earnings in 184 188 612 417 Affiliate, net of tax Income tax expense (2 ) (44 ) 191 13 (benefit)Net income (loss) (1,209 ) 541 (293 ) (2,679 ) Earnings (loss) per common share, basic and $ (0.12 ) $ 0.06 $ (0.03 ) $ (0.28 ) diluted Weighted averagecommon shares outstanding, basic and 9,692,150 9,630,600 9,686,874 9,606,436 diluted

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