KBRA Downgrades and Withdraws Ratings for Conifer Holdings, Inc. and Subsidiaries

KBRA downgrades the insurance financial strength ratings (IFSR) of the insurance subsidiaries of Conifer Holdings Inc. (Conifer Holdings) (NASDAQ: CNFR): to BB- from BBB for Conifer Insurance Company (CIC) and to B from BBB- for White Pine Insurance Company (WPIC) (together referred to as Conifer). Additionally, KBRA downgrades the issuer rating of Conifer Holdings to CCC from BB and downgrades the rating of CIC's surplus notes to CCC+ from BB+. The Outlooks for all ratings are revised to Negative from Stable. KBRA subsequently withdraws all ratings at the companies' request.

The downgrades reflect the further deterioration in underwriting results in the fourth quarter driven by significant amount of adverse reserve development which negatively impacted policyholder surplus levels, driving risk-based capital for both companies to fall below Michigan's minimum risk based capital levels and subjecting both companies to capital action plans. Year-end results fell significantly short of management projections previously provided to KBRA. The change in Outlook from Stable to Negative reflects KBRA’s concerns regarding the future adequacy of policyholder surplus,the potential for further strengthening of reserves, the adverse implications of the company’s year-end risk based capital declining below regulatory action levels, and the uncertain prospects for Conifer to continue as an ongoing operating insurance enterprise. Any additional need to strengthen reserves will likely cause further strain on policyholder surplus which, without capital contributions, will negatively impact already stressed RBC ratios. The Outlook further reflects the anticipated deterioration in the holding company’s financial leverage metrics which, in turn, may reduce the company’s financial flexibility to support its operations.

Key Credit Considerations

The ratings reflect Conifer's conservative investment portfolio and the fact that the organization is licensed to write insurance on both an admitted and excess and surplus basis, affording it flexibility in a variety of markets and pricing scenarios.

Offsetting these strengths are the company's weak risk adjusted capitalization, significant ongoing adverse loss reserve development, poor underwriting performance, unfavorable pricing and reserving track record, and high expense ratio which is elevated relative to similarly sized and specialty-focused insurers. Conifer reported unfavorable loss reserve development in each of the last five years.

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