KBRA Affirms Ratings for Conifer Holdings, Inc. and Insurance Subsidiaries

KBRA affirms the insurance financial strength rating (IFSR) of BBB+ for the insurance subsidiaries of Conifer Holdings, Inc. (Conifer Holdings) (NASDAQ: CNFR), Conifer Insurance Company (CIC), and White Pine Insurance Company (WPIC) (together, referred to as Conifer). Additionally, KBRA affirms the issuer rating of BB+ of Conifer Holdings and the rating of BBB- of CIC’s surplus notes held by WPIC. The Outlooks for all ratings remain Negative.

Key Credit Considerations

The ratings reflect the organization's niche market expertise, pricing flexibility, adequate risk adjusted capitalization, and conservative investment portfolio. Conifer underwrites specialty insurance products which includes property, general liability, liquor liability, commercial automobile, and low value dwelling policies to unique and potentially underserved market segments. The organization is licensed to write insurance on both an admitted and an excess and surplus basis, affording it flexibility in a variety of markets and pricing scenarios. Conifer’s seasoned management team brings extensive knowledge and longstanding relationships with experienced agents and underwriters.

Offsetting these strengths are the company's unfavorable loss experience, unfavorable pricing and reserving track record, elevated expense ratio, and significant ongoing adverse loss reserve development. The company’s expense ratio is elevated relative to similarly sized and specialty-focused insurers. However, KBRA notes this is largely due to the scaling of operations in prior years, and the intentional reduction in personal lines premium. Conifer reported unfavorable loss reserve development in each of the last five years. Management executed a Loss Portfolio Transfer in October 2022 for all of its liability lines for accident years 2019 and prior to mitigate the negative impacts from further adverse loss reserve development for these accident years on its operating results.

Rating Sensitivities

A rating upgrade is not expected in the near term but could occur if Conifer demonstrates long-term positive earnings supported by improved underwriting results and expense improvements, sustained increases in surplus from organic growth, and consistent and favorable reserve development.

Continued operating losses and any resulting surplus erosion, additional material adverse loss reserve development, an adverse change in distribution relationships, failure to achieve business plan targets, or departures of key members of the management team could result in a downgrade.

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