CNFRL Conifer Holdings Inc

Conifer Holdings, Inc. (Nasdaq: CNFR) (“Conifer” or the “Company”) today announced results for the fourth quarter and year ended December 31, 2021.

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

• Gross written premium increased 14.5% to $33.0 million
• Net earned premiums increased 13.4% to $26.2 million
• Loss ratio improved by 420 basis points to 62.5%

Year End 2021 Financial Highlights (compared to the prior year period)

• Gross written premium increased 18.6% to $132.1 million
• Net earned premium increased 10.9% to $98.8 million, driving expense ratio improvement
• Net loss of $1.1 million, or $0.11 per share, based on 9.7 million average shares outstanding
• Book value per share of $4.17 as of December 31, 2021

Management Comments James Petcoff, Chairman and CEO, commented, “For Conifer, top line growth was the highlight for 2021. Year over year, gross written premiums were up a solid 19%. Roughly half of our growth for the full year period owed to rate increases averaging 9% across the board. We were pleased to see double digit growth in our net earned premiums as well. We expect both of these to trend positively leading to profitability in 2022 and beyond.”

2021 Fourth Quarter Financial Results Overview

		At and for the Three Months Ended December 31,											At and for the Year Ended December 31,
			2021				2020			% Change				2021				2020			% Change
		(dollars in thousands, except share and per share amounts)
Gross written premiums		$	33,037			$	28,865			14.5	%		$	132,095			$	111,335			18.6	%
Net written premiums			22,345				23,781			-6.0	%			101,429				92,940			9.1	%
Net earned premiums			26,188				23,101			13.4	%			98,802				89,103			10.9	%
Net investment income			419				563			-25.6	%			1,968				3,156			-37.6	%
Net realized investment gains			(1,005	)			3,637			**				2,878				8,126			**
Change in fair value of equity investments			1,214				2,094			**				(2,020	)			228
Other gains			(24	)			-			**				11,664				260			**
Net income (loss)			(801	)			3,274			**				(1,094	)			595			**
	Net income (loss) per share, diluted	$	(0.08	)		$	0.34						$	(0.11	)		$	0.06
Adjusted operating income (loss)*			(986	)			(2,457	)		**				(13,616	)			(8,019	)		**
	Adjusted operating income (loss) per share, diluted*	$	(0.10	)		$	(0.26	)		**			$	(1.40	)		$	(0.83	)		**
Book value per common share outstanding		$	4.17			$	4.59						$	4.17			$	4.59
Weighted average shares outstanding, basic and diluted			9,707,203				9,680,521							9,691,998				9,625,059
Underwriting ratios:
	Loss ratio (1)		62.5	%			66.7	%						70.5	%			62.8	%
	Expense ratio (2)		41.4	%			43.9	%						42.4	%			45.6	%
	Combined ratio (3)		103.9	%			110.6	%						112.9	%			108.4	%
* 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 not meaningful
(1) The loss ratio is the ratio, expressed as a percentage, of net losses and loss adjustment expenses to net earned premiums and other income from underwriting operations.
(2) The expense ratio is the ratio, expressed as a percentage, of policy acquisition 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. A combined ratio under 100% indicates an underwriting profit. A combined ratio over 100% indicates an underwriting loss.

2021 Fourth Quarter Premiums

Gross Written PremiumsGross written premiums increased 14.5% in the fourth quarter of 2021 to $33.0 million, compared to $28.9 million in the prior year period. The overall premium increase was achieved through a combination of rate increases and continued emphasis on growth in specialty lines, specifically in the Company’s small business programs. Further supporting this increase, the Company saw continued growth in personal lines, driven by its low-value dwelling line of business.

Net Earned PremiumsNet earned premiums increased 13.4% to $26.2 million for the fourth quarter of 2021, compared to $23.1 million for the prior year period. This increase is in line with the Company’s plan to drive sustained expense ratio improvement through a combination of careful expense management and increased net earned premium. The Company expects gross earned premium increases to continue throughout 2022 as the growth in gross written premiums achieved in 2021 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,
		2021				2020			% Change				2021				2020			% Change
	(dollars in thousands)
Gross written premiums	$	29,058			$	26,422			10.0	%		$	117,075			$	102,763			13.9	%
Net written premiums		18,622				21,558			-13.6	%			87,307				85,385			2.3	%
Net earned premiums		22,890				21,287			7.5	%			87,759				82,409			6.5	%
Underwriting ratios:
Loss ratio		66.6	%			67.2	%						72.6	%			64.4	%
Expense ratio		41.3	%			44.1	%						42.4	%			45.6	%
Combined ratio		107.9	%			111.3	%						115.0	%			110.0	%
Contribution to combined ratio from net
(favorable) adverse prior year development		16.4	%			18.1	%						21.0	%			18.4	%
Accident year combined ratio (1)		91.5	%			93.2	%						94.0	%			91.6	%
(1) The accident year combined ratio is the sum of the loss ratio and the expense ratio, less changes in net ultimate loss estimates from prior accident year loss reserves. The accident year combined ratio provides management with an assessment of the specific policy year's profitability and assists management in their evaluation of product pricing levels and quality of business written.

The Company’s commercial lines of business, representing 88.0% of total gross written premium in the fourth quarter of 2021, primarily consists of property and liability coverage offered to owner-operated small- to mid-sized businesses, where the Company has deep underwriting knowledge and experience, and has established strong relationships with retail agents who specialize in these unique classes.

Commercial lines gross written premium increased 10.0% in the fourth quarter of 2021 to $29.1 million, as the Company continues to emphasize growing its most profitable specialty lines.

The Commercial lines combined ratio was 107.9% for the three months ended December 31, 2021, compared to 111.3% in the prior year period.   The loss ratio was 66.6% for the three months ended December 31, 2021, compared with 67.2% in the prior year period, while the expense ratio was 41.3% in the current year period, compared with 44.1% during the prior year period.

Commercial lines accident year combined ratio was 91.5% for the fourth quarter of 2021.

Personal Lines Financial and Operational Review

Personal Lines Financial Review
	Three Months Ended December 31,												Year Ended December 31,
		2021				2020			% Change				2021				2020			% Change
	(dollars in thousands)
Gross written premiums	$	3,979			$	2,443			62.9	%		$	15,020			$	8,572			75.2	%
Net written premiums		3,723				2,223			67.5	%			14,122				7,555			86.9	%
Net earned premiums		3,298				1,814			81.8	%			11,043				6,694			65.0	%
Underwriting ratios:
Loss ratio		34.2	%			61.0	%						53.6	%			43.3	%
Expense ratio		42.4	%			42.3	%						41.7	%			45.5	%
Combined ratio		76.6	%			103.3	%						95.3	%			88.8	%
Contribution to combined ratio from net
(favorable) adverse prior year development		0.9	%			13.2	%						8.6	%			5.1	%
Accident year combined ratio		75.7	%			90.1	%						86.7	%			83.7	%

Personal lines, representing 12.0% of total gross written premium for the fourth quarter of 2021, consists largely of low-value dwelling homeowner’s insurance.

Personal lines gross written premium increased 62.9% to $4.0 million in the fourth quarter of 2021 compared to the prior year period, led by growth in the Company’s low-value dwelling line of business in Texas.

Personal lines combined ratio was 76.6% for the three months ended December 31, 2021, compared to 103.3% in the prior year period. Personal lines loss ratio improved considerably to 34.2%, compared to 61.0% in the prior year period; this was largely driven by significantly lower losses due to the Company’s decision to move out of wind-exposed business, and to focus instead on growing its low-value dwelling line of business.

For the full year 2021, the personal lines combined ratio was 95.3% compared to 88.8% in the prior year period.

The personal lines accident year combined ratio was 75.7% for the fourth quarter of 2021.

Combined Ratio Analysis

		Three Months Ended December 31,							Year Ended December 31,
		2021			2020				2021			2020
		(dollars in thousands)
Underwriting ratios:
	Loss ratio	62.5	%		66.7	%			70.5	%		62.8	%
	Expense ratio	41.4	%		43.9	%			42.4	%		45.6	%
	Combined ratio	103.9	%		110.6	%			112.9	%		108.4	%
Contribution to combined ratio from net (favorable)
	adverse prior year development	14.5	%		17.7	%			19.6	%		17.4	%
Accident year combined ratio		89.4	%		92.9	%			93.3	%		91.0	%

Combined Ratio:The Company's combined ratio was 103.9% for the quarter ended December 31, 2021, compared to 110.6% for the same period in 2020. The combined ratio was 112.9% for the twelve months ended December 31, 2021, compared to 108.4% for the same period in 2020. The Company’s accident year combined ratio for the quarter ended December 31, 2021 was 89.4%, compared to 92.9% in the prior year period.

Loss Ratio: The Company’s losses and loss adjustment expenses were $16.4 million for the three months ended December 31, 2021, compared to $15.5 million in the prior year period. The loss ratio was 62.5% in the fourth quarter of 2021, compared to 66.7% in the prior year period, due to improved current accident year results.

Expense Ratio: The expense ratio was 41.4% for the fourth quarter of 2021, down from 43.9% in the prior year period, due to the increase in net earned premiums as well as continuing expense reduction efforts.

Net Investment IncomeNet investment income was $419,000 during the quarter ended December 31, 2021, compared to $563,000 in the prior year period.

Net Realized Investment (Losses) GainsNet realized investment losses during the fourth quarter of 2021 were $1.0 million, compared to net realized investment gains of $3.6 million 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 $1.2 million, compared to a gain of $2.1 million in the prior year period.

Net Income (Loss) In the fourth quarter of 2021, the Company reported a net loss of $801,000, or $0.08 per share, compared to net income of $3.3 million, or $0.34 per share, in the prior year period.

Adjusted Operating Income (Loss)

In the fourth quarter of 2021, the Company reported an adjusted operating loss of $986,000, or $0.10 per share, compared to an adjusted operating loss of $2.5 million, or $0.26 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, March 3, 2022 at 8:30 a.m. ET to discuss results for the fourth quarter and year ended December 31, 2021.

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

	Webcast:	On the Event Calendar at IR.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 Conifer HoldingsConifer Holdings, Inc. is a specialty insurance holding company, offering customized coverage solutions tailored to the needs of our 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 Company’s 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 Conifer’s 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 the after-tax amounts of: 1) net realized investment gains and losses, 2) change in fair value of equity securities and 3) other gains and losses. 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,
		2021				2020				2021				2020
	(dollar in thousands, except share and per share amounts)
Net income (loss)	$	(801	)		$	3,274			$	(1,094	)		$	595
Less:
Net realized investment gains (losses), net of tax		(1,005	)			3,637				2,878				8,126
Other gains (losses), net of tax		(24	)			-				11,664				260
Change in fair value of equity securities, net of tax		1,214				2,094				(2,020	)			228
Adjusted operating income (loss)	$	(986	)		$	(2,457	)		$	(13,616	)		$	(8,019	)
Weighted average common shares, diluted		9,707,203				9,680,521				9,691,998				9,625,059
Diluted income (loss) per common share:
Net income (loss)	$	(0.08	)		$	0.34			$	(0.11	)		$	0.06
Less:
Net realized investment gains (losses), net of tax		(0.10	)			0.38				0.30				0.84
Other gains (losses), net of tax		-				-				1.20				0.03
Change in fair value of equity securities, net of tax		0.12				0.22				(0.21	)			0.02
Adjusted operating income (loss), per share	$	(0.10	)		$	(0.26	)		$	(1.40	)		$	(0.83	)

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 Conifer’s expectations regarding premiums, earnings, its capital position, expansion, and growth strategies. The forward-looking statements contained in this press release are based on management’s 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 Subsidiaries
Consolidated Balance Sheets
(dollars in thousands)
					December 31,				December 31,
						2021				2020
Assets					(Unaudited)
Investment securities:
	Debt securities, at fair value (amortized cost of $150,732 and				$	149,783			$	151,999
		$149,954, respectively)
	Equity securities, at fair value (cost of $10,972 and $16,912, respectively)					9,931				17,891
	Short-term investments, at fair value					23,013				13,317
		Total investments				182,727				183,207
Cash and cash equivalents						9,913				8,193
Premiums and agents' balances receivable, net						21,197				20,162
Receivable from Affiliate						5,784				8
Reinsurance recoverables on unpaid losses						40,344				24,218
Reinsurance recoverables on paid losses						1,347				2,138
Prepaid reinsurance premiums						8,301				1,316
Deferred policy acquisition costs						12,267				12,243
Other assets						8,524				10,112
			Total assets		$	290,404			$	261,597
Liabilities and Shareholders' Equity
Liabilities:
	Unpaid losses and loss adjustment expenses				$	139,085			$	111,270
	Unearned premiums					65,269				56,224
	Reinsurance premiums payable					5,318				-
	Debt					33,564				40,997
	Accounts payable and accrued expenses					6,665				8,693
			Total liabilities			249,901				217,184
Commitments and contingencies						-				-
Shareholders' equity:
	Common stock, no par value (100,000,000 shares authorized; 9,707,817 and
		9,681,728 issued and outstanding, respectively)				92,692				92,486
	Accumulated deficit					(50,079	)			(48,985	)
	Accumulated other comprehensive income (loss)					(2,110	)			912
		Total shareholders' equity				40,503				44,413
			Total liabilities and shareholders' equity		$	290,404			$	261,597

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,
						2021				2020				2021				2020
Revenue and Other Income
	Premiums
		Gross earned premiums			$	32,805			$	27,730			$	123,050			$	106,614
		Ceded earned premiums				(6,617	)			(4,629	)			(24,248	)			(17,511	)
			Net earned premiums			26,188				23,101				98,802				89,103
	Net investment income					419				563				1,968				3,156
	Net realized investment gains (losses)					(1,005	)			3,637				2,878				8,126
	Change in fair value of equity securities					1,214				2,094				(2,020	)			228
	Other gains (losses)					(24	)			-				11,664				260
	Other income					697				602				2,671				2,615
			Total revenue and other income			27,489				29,997				115,963				103,488
Expenses
	Losses and loss adjustment expenses, net					16,414				15,461				69,861				56,228
	Policy acquisition costs					7,632				6,924				28,451				26,105
	Operating expenses					3,741				4,027				16,509				18,468
	Interest expense					698				740				2,852				2,925
			Total expenses			28,485				27,152				117,673				103,726
Income (loss) before equity earnings in Affiliate and income taxes						(996	)			2,845				(1,710	)			(238	)
	Equity earnings in Affiliate, net of tax					212				422				824				839
	Income tax expense (benefit)					17				(7	)			208				6
Net income (loss)						(801	)			3,274				(1,094	)			595
Earnings (loss) per common share,
	basic and diluted				$	(0.08	)		$	0.34			$	(0.11	)		$	0.06
Weighted average common shares outstanding,
	basic and diluted					9,707,203				9,680,521				9,691,998				9,625,059

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