AM Best Downgrades Credit Ratings of Conifer Holdings, Inc. and Its Subsidiaries

Rhea-AI Summary

AM Best has downgraded Conifer Holdings' Long-Term Issuer Credit Rating to bb- from bb and the Financial Strength Rating for its subsidiaries to B+ from B++. This reflects challenges in operating performance and elevated underwriting losses. Despite management's remedial actions, improvement has not been achieved, impacting risk-adjusted capitalization. The stable outlook suggests potential for improved results through niche expertise and strategic initiatives aimed at strengthening capital.

Positive

• Stable outlook indicating potential for improved underwriting results.
• Focus on niche lines may enhance underwriting performance.

Negative

• Operating losses fell below expectations, impacting overall performance.
• Increased loss costs and adverse reserve development negatively affecting capital position.
• Marginal assessment of enterprise risk management capabilities.

OLDWICK, N.J.--(BUSINESS WIRE)-- AM Best has downgraded the Long-Term Issuer Credit Rating (Long-Term ICR) to “bb-” (Fair) from “bb” (Fair) of Conifer Holdings, Inc. (CHI) [NASDAQ: CNFR]. Concurrently, AM Best has downgraded the Financial Strength Rating to B+ (Good) from B++ (Good) and the Long-Term ICR to “bbb-” (Good) from “bbb” (Good) of Conifer Insurance Company (CIC) and White Pine Insurance Company (White Pine). CIC and White Pine are subsidiaries of CHI, a publicly traded property/casualty insurance holding company. The outlook of these Credit Ratings (ratings) is stable. All companies are domiciled in Birmingham, MI. Collectively, these companies are referred to as Conifer Insurance Group (the group or Conifer).

The ratings reflect the group’s balance sheet strength, which AM Best assesses as adequate, as well as its marginal operating performance, neutral business profile and marginal enterprise risk management (ERM).

These rating actions follow Conifer’s reported full year earnings announced by management in early March and takes into consideration the group’s underwriting and operating losses which, along with prior years, have fallen below expectations. Projections over the past few years have been marred by higher-than-expected loss costs and material adverse loss reserve development.

This rating action reflects a revision in AM Best’s assessment of Conifer’s ERM capabilities to “marginal” from “appropriate”, particularly as it relates to underwriting and reserving and the issues on executing strategy, meeting corporate objectives, organically growing capital and maximizing returns.

AM Best recognizes the various remedial actions taken by management over the years in terms of rebalancing its book of business, exiting certain territories, pruning underperforming business and refining pricing; however, these actions have not translated into meaningful improvement to date. This, combined with the inability to grow organic surplus, places a strain on Conifer’s risk-adjusted capital. Although the balance sheet strength assessment remains adequate, the group’s level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), could be pressured if adverse loss reserve development continues.

The stable rating outlooks reflect AM Best's expectation that Conifer's business profile, focusing on its expertise in niche lines, should generate improved underwriting and operating results, which are in line with expectations. Further, the outlooks also consider a number of strategic initiatives planned by management in the near term to curtail the impact of future loss reserve development and enhance its capital position.

This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best's Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

Copyright © 2022 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

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Adrienne Stark

Senior Financial Analyst

+1 908 439 2200, ext. 5526

adrienne.stark@ambest.com

Christopher Sharkey

Manager, Public Relations

+1 908 439 2200, ext. 5159

christopher.sharkey@ambest.com

Daniel J. Ryan

Senior Director

+1 908 439 2200, ext. 5325

daniel.ryan@ambest.com

Jim Peavy

Director, Communications

+1 908 439 2200, ext. 5644

james.peavy@ambest.com

Source: AM Best

FAQ

What recent ratings change occurred for Conifer Holdings, CNFR?

AM Best downgraded Conifer Holdings' Long-Term Issuer Credit Rating to bb- from bb.

What is the Financial Strength Rating for Conifer's insurance subsidiaries?

Conifer Insurance Company's Financial Strength Rating was downgraded to B+ from B++.

What factors contributed to the rating downgrades for CNFR?

The downgrades were due to higher-than-expected loss costs and operating losses below expectations.

What is the outlook for Conifer Holdings after the recent ratings downgrade?

The outlook for Conifer Holdings is stable.

How does AM Best assess Conifer's balance sheet strength?

AM Best assesses Conifer's balance sheet strength as adequate.