AM Best has revised the outlook to stable from negative for the Long-Term Issuer Credit Rating (Long-Term ICR) of “bb” of Conifer Holdings, Inc. (CHI). Concurrently, AM Best has revised the outlooks to stable from negative and affirmed the Financial Strength Rating of B++ (Good) and the Long-Term ICRs of “bbb” 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. All companies are domiciled in Birmingham, MI. Collectively, these companies are referred to as Conifer Insurance Group (the group or Conifer).
The Credit Ratings (ratings) reflect the group’s balance sheet strength, which AM Best categorizes as adequate, as well as its marginal operating performance, neutral business profile and appropriate enterprise risk management.
The Long-Term ICR outlook revision reflects AM Best’s expectation that Conifer’s business profile, focusing on its niche lines expertise, should generate sustainable underwriting and operating results such that minor volatility from any future adverse development will not materially impact capital adequacy in the negative. The group has spent the past two to three years exiting nearly all of its problematic Florida Assumption of Benefits personal lines while also pruning a fair amount of its Quick Service Restaurant business that significantly underperformed management’s optimistic profitability expectations.
Conifer’s balance sheet assessment of adequate includes the strongest levels of risk-based capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), partially offset by uncertain financial flexibility, persistent loss reserve issues, and a weakened financial profile of its parent company, CHI. CHI has historically provided the enterprise adequate financial flexibility, liquidity and access to capital markets; however, future resources may be limited. The group’s operating performance remains marginal, weighed on by adverse development from legacy lines and a similar expense base supported by lower premiums, as the book of business has been rebalanced toward its commercial specialty lines through product and line of business exits, and relationship pruning. Prospective underwriting results may reflect improvement in blended loss ratios and a lower expense ratio as overall net premium growth resumes. This could translate to sustainable operating profitability, organic surplus growth, and the capacity to reciprocate parent support via intercompany cash flows to service debt that the parent raised in support of its insurance operations.
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