What changed in this filing

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Item 1. Financial Statements

2022-11-09 compared with 2022-08-11 · 151 added, 104 removed, 569 unchanged (31% of the section changed)

4 unchanged sentences

(dollars in thousands)

September 30,

Investment securities:

31 unchanged sentences

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

Revenue and Other Income

24 unchanged sentences

Three Months Ended

Six Months Ended June 30,

September 30,

Nine Months Ended September 30,

Net income (loss)

19 unchanged sentences

Income (Loss)

Balances at March 31, 2022

Balances at June 30, 2022

Net income (loss)

Repurchase of common stock

Issuance of common stock private placement

Stock-based compensation expense

Other comprehensive income (loss)

Balances at September 30, 2022

Balances at June 30, 2021

Balances at March 31, 2021

Net income (loss)

2 unchanged sentences

Other comprehensive income (loss)

Balances at June 30, 2021

Balances at September 30, 2021

No Par, Common Stock

5 unchanged sentences

Repurchase of common stock

Issuance of common stock private placement

Stock-based compensation expense

Other comprehensive income (loss)

Balances at June 30, 2022

Balances at September 30, 2022

Balances at December 31, 2020

3 unchanged sentences

Other comprehensive income (loss)

Balances at June 30, 2021

Balances at September 30, 2021

The accompanying notes are an integral part of the Consolidated Financial Statements.

3 unchanged sentences

(dollars in thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

Cash Flows From Operating Activities

8 unchanged sentences

Equity earnings in Affiliate, net of tax

Other gains/losses

Changes in operating assets and liabilities:

16 unchanged sentences

Dividends from Affiliate

Other purchases

Purchases of property and equipment

1 unchanged sentence

Cash Flows From Financing Activities

Proceeds received from common stock subscription agreement

Proceeds from issuance of common stock

Repurchase of common stock

Borrowings under debt arrangements

Borrowings under line of credit

Borrowings under Federal Home Loan Bank of Indianapolis

Repayment of borrowings under debt arrangements

28 unchanged sentences

CIC, WPIC, and RCIC are collectively referred to as the "Insurance Company Subsidiaries." On a stand-alone basis, Conifer Holdings, Inc.

is referred to as the "Parent Company." Sycamore owns a 50 % non-controlling interest in Venture Holdings, Inc.

is referred to as the "Parent Company." Sycamore owns a 50 % non-controlling interest in Venture Agency Holdings, Inc.

(“Venture” or “Affiliate”).

3 unchanged sentences

These consolidated financial statements and the notes thereto should be read in conjunction with the Company's audited consolidated financial statements and related notes included in its Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the SEC.

The results of operations for the six months ended June 30, 2022, are not necessarily indicative of the results expected for the year ended December 31, 2022.

The results of operations for the nine months ended September 30, 2022, are not necessarily indicative of the results expected for the year ended December 31, 2022.

The Company is engaged in the sale of property and casualty insurance products and has organized its principal operations into three types of insurance businesses:

2 unchanged sentences

The Company markets and sells its insurance products through a network of independent agents, including managing general agents, whereby policies are written in all 50 states in the United States of America (“U.S.”).

The Company’s corporate headquarters are located in Birmingham, Michigan with additional office facilities in Florida and Michigan.

The Company’s corporate headquarters are located in Troy, Michigan with additional office facilities in Florida and Michigan.

Use of Estimates

17 unchanged sentences

Management does not expect the new guidance to have a material impact on the Company’s consolidated financial statements.

The cost or amortized cost, gross unrealized gains or losses, and estimated fair value of the investments in securities classified as available for sale at June 30, 2022 and December 31, 2021, were as follows (dollars in thousands):

June 30, 2022

The cost or amortized cost, gross unrealized gains or losses, and estimated fair value of the investments in securities classified as available for sale at September 30, 2022 and December 31, 2021, were as follows (dollars in thousands):

September 30, 2022

Gross Unrealized

21 unchanged sentences

The table segregates the holdings based on the length of time that individual securities have been in a continuous unrealized loss position (dollars in thousands):

June 30, 2022

September 30, 2022

Less than 12 months

31 unchanged sentences

Total debt securities available for sale

The Company analyzed its investment portfolio in accordance with its other-than-temporary impairment ("OTTI") review procedures and determined the Company did not need to record a credit-related OTTI loss in net income, nor recognize a non-credit related OTTI loss in other comprehensive income for the six months ended June 30, 2022 and December 31, 2021.

The Company’s sources of net investment income and losses are as follows (dollars in thousands):

Three Months Ended

Six Months Ended June 30,

September 30,

Nine Months Ended September 30,

Debt securities

6 unchanged sentences

Three Months Ended

Six Months Ended June 30,

September 30,

Nine Months Ended September 30,

Debt securities:

7 unchanged sentences

Total net realized investment gains (losses)

Proceeds from available-for-sale debt securities were $ 27.2 million and $ 20.0 million for the six months ended June 30, 2022 and 2021, respectively.

The gross realized gains and losses from the sale of available-for-sale debt securities for three months and six months ended June 30, 2022, were $ 5,000 and $ 155,000 , respectively.

There were no gross realized gains or losses from the sales of available-for-sale securities for the three months ended June 30, 2021.

The gross realized gains and losses from the sales of available-for-sale debt securities for the six months ended June 30, 2021, were $ 27,000 and $ 6,000 , respectively.

As of June 30, 2022 and 2021, there were $ 0 and $ 249,000 of payables from securities purchased, respectively.

There were $ 6.9 million and $ 11,000 of receivables from securities sold as of June 30, 2022, and 2021, respectively.

The Company’s gross unrealized losses related to its equity investments were $ 443,000 and $ 1.0 million as of June 30, 2022 and December 31, 2021, respectively.

Proceeds from available-for-sale debt securities were $ 29.3 million and $ 25.6 million for the nine months ended September 30, 2022 and 2021, respectively.

There were no gross realized gains or losses from the sale of available-for-sale debt securities for the three months ended September 30, 2022.

The gross realized gains and losses from the sale of available-for-sale debt securities for the nine months ended September 30, 2022, were $ 5,000 and $ 155,000 , respectively.

There were no gross realized gains or losses from the sales of available-for-sale securities for the three months ended September 30, 2021.

The gross realized gains and losses from the sales of available-for-sale debt securities for the nine months ended September 30, 2021, were $ 27,000 and $ 6,000 , respectively.

As of September 30, 2022 and 2021, there were $ 0 and $ 43,000 of payables from securities purchased, respectively.

There were $ 0 and $ 3,000 of receivables from securities sold as of September 30, 2022, and 2021, respectively.

The Company’s gross unrealized losses related to its equity investments were $ 595,000 and $ 1.0 million as of September 30, 2022 and December 31, 2021, respectively.

The Company also carries other equity investments that do not have a readily determinable fair value at cost, less impairment or observable changes in price.

1 unchanged sentence

There were no impairments or observable changes in price recorded during 2022 related to the Company's equity securities without readily determinable fair value.

These investments are included in Other Assets in the Consolidated Balance Sheets and amounted to $ 1.2 million as of June 30, 2022 and December 31, 2021.

The table below summarizes the amortized cost and fair value of available-for-sale debt securities by contractual maturity at June 30, 2022.

These investments are included in Other Assets in the Consolidated Balance Sheets and amounted to $ 1.7 million as of September 30, 2022 and $ 1.2 million as of December 31, 2021.

The table below summarizes the amortized cost and fair value of available-for-sale debt securities by contractual maturity at September 30, 2022.

Actual maturities may differ from contractual maturities because certain borrowers have the right to call or prepay obligations with or without call or prepayment penalties (dollars in thousands):

9 unchanged sentences

Total debt securities

At June 30, 2022 and December 31, 2021, the Insurance Company Subsidiaries had $ 8.6 million and $ 8.5 million, respectively, on deposit in trust accounts to meet the deposit requirements of various state insurance departments.

At June 30, 2022 and December 31, 2021, the Company had $ 81.2 million and $ 76.1 million, respectively, held in trust accounts to meet collateral requirements with other third-party insurers, relating to various fronting arrangements.

At September 30, 2022 and December 31, 2021, the Insurance Company Subsidiaries had $ 7.9 million and $ 8.5 million, respectively, on deposit in trust accounts to meet the deposit requirements of various state insurance departments.

At September 30, 2022 and December 31, 2021, the Company had $ 99.9 million and $ 76.1 million, respectively, held in trust accounts to meet collateral requirements with other third-party insurers, relating to various fronting arrangements.

There are withdrawal and other restrictions on these deposits, including the type of investments that may be held, however, the Company may generally invest in high-grade bonds and short-term investments and earn interest on the funds.

15 unchanged sentences

These capital account balances reflect the fair value of the investment funds.

The following tables present the Company’s assets and liabilities measured at fair value on a recurring basis, classified by the valuation hierarchy as of June 30, 2022 and December 31, 2021 (dollars in thousands):

June 30, 2022

The following tables present the Company’s assets and liabilities measured at fair value on a recurring basis, classified by the valuation hierarchy as of September 30, 2022 and December 31, 2021 (dollars in thousands):

September 30, 2022

Fair Value Measurements

15 unchanged sentences

Subordinated Notes *

FHLB of Indianapolis

Total Liabilities measured at fair value

23 unchanged sentences

Level 1 also includes money market funds and other interest-bearing deposits at banks, which are reported as short-term investments.

The fair value measurements that were based on Level 1 inputs comprise 19.1 % and 17.6 % of the fair value of the total investment portfolio as of June 30, 2022 and December 31, 2021, respectively.

The fair value measurements that were based on Level 1 inputs comprise 21.4 % and 17.6 % of the fair value of the total investment portfolio as of September 30, 2022 and December 31, 2021, respectively.

Level 2 investments include debt securities, which consist of U.S.

2 unchanged sentences

The third-party pricing service monitors market indicators, as well as industry and economic events.

The fair value measurements that were based on Level 2 inputs comprise 80.6 % and 82.1 % of the fair value of the total investment portfolio as of June 30, 2022 and December 31, 2021, respectively.

The fair value measurements that were based on Level 2 inputs comprise 78.4 % and 82.1 % of the fair value of the total investment portfolio as of September 30, 2022 and December 31, 2021, respectively.

The Company obtains pricing for each security from independent pricing services, investment managers or consultants to assist in determining fair value for its Level 2 investments.

2 unchanged sentences

Based on these procedures, the Company did not adjust the prices or quotes provided from independent pricing services, investment managers or consultants.

The Level 2 financial instruments also include the Company's senior debt.

The fair value of the borrowings under the senior revolving credit facility approximates its carrying amount because interest is based on a short-term, variable, market-based rate.

As of June 30, 2022 and December 31, 2021, Level 3 is entirely comprised of the Company's subordinated debt.

In determining the fair value of the subordinated debt outstanding at June 30, 2022 and December 31, 2021, the security attributes (issue date, maturity, coupon, calls, etc.) and market rates on September 24, 2018 (the date of the restated and amended agreement which was repriced at that time) were entered into a valuation model.

A lognormal trinomial interest rate lattice was created within the model to compute the option adjusted spread (“OAS”) which is the amount, in basis points, of interest rate

required to be paid under the debt agreement over the risk-free U.S .

The Level 2 financial instruments also include the Company's senior debt and its loan with the FHLB of Indianapolis.

The fair value of the borrowings under the senior revolving credit facility, and the FHLB of Indianapolis loan, approximates its carrying amount because interest is based on a short-term, variable, market-based rate.

As of September 30, 2022 and December 31, 2021, Level 3 is entirely comprised of the Company's subordinated debt.

In determining the fair value of the subordinated debt outstanding at September 30, 2022 and December 31, 2021, the security attributes (issue date, maturity, coupon, calls, etc.) and market rates on September 24, 2018 (the date of the restated and amended agreement which was repriced at that time) were entered into a valuation model.

A lognormal trinomial interest rate

lattice was created within the model to compute the option adjusted spread (“OAS”) which is the amount, in basis points, of interest rate required to be paid under the debt agreement over the risk-free U.S .

Treasury rates .

The OAS was then used in the model along with the June 30, 2022 and December 31, 2021 U.S .

The OAS was then used in the model along with the September 30, 2022 and December 31, 2021 U.S .

Treasury rates .

1 unchanged sentence

There were no changes in assumptions of credit risk from the issuance date.

The Company did no t have any assets or liabilities that were measured at fair value on a nonrecurring basis at September 30, 2022 or December 31, 2021.

Deferred Policy Acquisition Costs

1 unchanged sentence

Net deferred policy acquisition costs are amortized and charged to expense in proportion to premium earned over the estimated policy term.

The Company anticipates that its deferred policy acquisition costs will be fully recoverable and there were no premium deficiencies for the six months ended June 30, 2022 and 2021.

The Company anticipates that its deferred policy acquisition costs will be fully recoverable and there were no premium deficiencies for the nine months ended September 30, 2022 and 2021.

The activity in deferred policy acquisition costs, net of reinsurance transactions, is as follows (dollars in thousands):

Three Months Ended

Six Months Ended June 30,

September 30,

Nine Months Ended September 30,

Balance at beginning of period

17 unchanged sentences

Three months ended

Six months ended

September 30,

Nine months ended

September 30,

Gross reserves - beginning of period

10 unchanged sentences

Gross reserves - end of period

The Company’s incurred losses during the three and six months ended June 30, 2022 included prior-year adverse reserve development of $ 9.5 million and $ 15.0 million, respectively.

Of the $9.5 million of adverse development, $ 4.3 million was related to 2018 and prior accident years, $ 3.6 million was related to the 2019 accident year, and $ 1.6 million was related to the 2020 accident year, substantially all attributable to the commercial lines of business.

Of the $15.0 million of adverse development for the six months ended June 30, 2022, $ 7.1 million was related to 2018 and prior accident years, $ 4.9 million was related to 2019 accident year, and $ 3.1 million was related to the 2020 accident year, substantially all attributable to the commercial lines of business.

The Company’s incurred losses during the three and six months ended June 30, 2021 included prior-year adverse reserve development of $6.2 million and $ 12.0 million, respectively.

Of the $ 6.2 million of adverse development, $ 1.9 million was related 2017 and prior accident years, $ 2.4 million was related to the 2018 accident year, and $ 1.9 million was related to the 2019 and 2020 accident years.

Substantially all of the development was from the Company’s commercial lines of business.

Of the $12.0 million of adverse development for the six months ended June 30, 2021, $ 11.4 million was related to commercial lines, while $ 636,000 was related to personal lines.

The adverse development was mostly attributable to the 2018 and 2017 and prior accident years.

Net losses and LAE were $ 16.7 million during the third quarter of 2022.

Adverse development contributed $ 3.1 million to the total incurred losses in the third quarter of 2022.

Of the $ 3.1 million of adverse development, $ 2.3 million was related to 2019 and prior accident years and $ 1.8 million was related to the 2021 accident year.

This was offset by $ 958,000 of favorable development experienced in the 2020 accident year.

Of the $ 3.1 million of adverse development, $ 2.7 million was related to the commercial lines of business, while $ 381,000 was related to the personal lines of business.

Net losses and LAE were $ 56.9 million for the nine months ended September 30, 2022.

Adverse development contributed $ 18.2 million to the total incurred losses during the nine months ended September 30, 2022.

Of the $ 18.2 million of adverse development, $ 14.3 million was related to 2019 and prior accident years, $ 2.2 million was related to the 2020 accident year, and $ 1.7 million was related to the 2021 accident year.

Of the $ 18.2 million of adverse development, $ 17.7 million was related to the commercial lines of business, while $ 430,000 came from the personal lines of business.

Net losses and LAE were $ 16.2 million during the third quarter of 2021.

Adverse development contributed $ 3.6 million to the total incurred losses in the third quarter of 2021, of which $ 1.1 million was related to 2017 and prior accident years, $ 1.4 million was related to the 2018 accident year, and $ 1.0 million was related to the 2019.

In the third quarter, $ 3.4 million of the adverse development came from the commercial lines of business, mostly from liability lines, while $ 290,000 was related to the personal lines of business.

Net losses and LAE were $ 53.4 million for the nine months ended September 30, 2021.

The Company experienced $ 2.0 million of catastrophe losses, net of reinsurance recoverables, during the first quarter of 2021 from Winter Storm Uri.

The Company also experienced $ 15.6 million of adverse development for the nine months ended September 30, 2021.

Of the $15.6 million in adverse development, $ 5.0 million was related to 2017 and prior accident years, $ 4.8 million was related to the 2018 accident year, $ 3.4 million was related to the 2019 accident year, and $ 2.4 million was related to the 2020 accident year.

Of the $15.6 million in adverse development, $ 14.7 million was related to commercial lines, mostly from liability lines, while $ 926,000 was related to personal lines.

In the normal course of business, the Company participates in reinsurance agreements in order to limit losses that may arise from catastrophes or other individually severe events.

The Company ceded 40 % of specific commercial liability risks in excess of $ 400,000 , and 60 % in excess of $ 300,000 in 2022.

The Company primarily ceded all specific commercial liability risks in excess of $ 400,000 in 2021.

The Company ceded specific commercial property risks in excess of $ 300,000 in 2022.

The Company ceded specific commercial property risks in excess of $ 200,000 in 2021.

The Company ceded primarily all specific commercial liability risks in excess of $ 340,000 in 2022, and $ 400,000 in 2021.

The Company ceded specific commercial property risks in excess of $ 300,000 in 2022 and ceded specific commercial property risks in excess of $ 200,000 in 2021.

The Company ceded homeowners specific risks in excess of $ 300,000 in both 2022 and 2021.

11 unchanged sentences

Three Months Ended

Six months ended

September 30,

Nine months ended

September 30,

Written premiums:

5 unchanged sentences

Some of the excess of loss treaties that renewed on December 31, 2021 and January 1, 2022, included ceding commissions equal to 40 % of the ceded premiums.

The ceding commission is reflected as a reduction in acquisition costs and amounted to $ 2.1 million and $ 4.3 million for the three and six months ended June 30, 2022.

There were no ceding commissions on the excess of loss treaties during 2021.

As of June 30, 2022, the Company's debt is comprised of three instruments:

$ 24.4 million of publicly traded senior unsecured notes which were issued in 2018, a $ 10.0 million line of credit which commenced in June 2018, and $ 10.5 million of privately placed subordinated notes.

The ceding commission is reflected as a reduction in acquisition costs and amounted to $ 2.1 million and $ 6.4 million for the three and nine months ended September 30, 2022.

There were no ceding commissions reflected in the Consolidated Statements of Operations in 2021, relating to the excess of loss reinsurance treaties during 2021.

As of September 30, 2022, the Company's debt is comprised of four instruments:

$ 24.4 million of publicly traded senior unsecured notes which were issued in 2018, a $ 10.0 million line of credit which commenced in June 2018, $ 10.5 million of privately placed subordinated notes, and a loan of $ 14.5 million from the Federal Home Loan Bank (“FHLB”) of Indianapolis, which commenced in July 2022.

A summary of the Company's outstanding debt is as follows (dollars in thousands):

September 30,

Senior unsecured notes *

Subordinated notes *

FHLB of Indianapolis

*Net of unamortized debt issuance costs

Senior unsecured notes

2 unchanged sentences

The Company may redeem the Notes, in whole or in part, at face value at any time after September 30, 2021.

The Company did no t repurchase any of the Notes for the three and six months ended June 30, 2022 and 2021.

The Company did no t repurchase any of the Notes for the three and nine months ended September 30, 2022 and 2021.

Management plans to issue new public debt that will provide sufficient cash flow to pay off the senior unsecured notes that are coming due within the next twelve months.

Management believes it is probable that it will be able to issue new public debt and repay the senior unsecured notes by September 30, 2023.

Subordinated notes

4 unchanged sentences

The call premium escalates each quarter to ultimately $ 1.75 million on September 30, 2023, then steps up to $ 3.05 million on December 31, 2023, and increases quarterly at a 12.5 % per annum rate thereafter.

As of June 30, 2022, the carrying value of the Notes and Subordinated Notes are offset by $ 325,000 and $ 836,000 of debt issuance costs, respectively.

As of September 30, 2022, the carrying value of the Notes and Subordinated Notes are offset by $ 260,000 and $ 823,000 of debt issuance costs, respectively.

The debt issuance costs will be amortized through interest expense over the life of the loans.

4 unchanged sentences

On August 8, 2022, the holders of the Subordinated Notes waived the June 30, 2022 tangible net worth requirement.

The $ 5.0 million contribution to the Company on August 10, 2022 (see Note 14 ~ Subsequent Events ), increased the net worth sufficiently to bring the Company back into compliance.

Management expects to be in compliance with all debt covenants in future periods.

The $ 5.0 million contribution to the Company on August 10, 2022 (see Note 8 ~ Shareholder’s Equity ), increased the net worth sufficiently to bring the Company back into compliance.

At September 30, 2022, the Company was in compliance with all of its financial covenants.

Line of credit

3 unchanged sentences

The line of credit contains restrictive financial debt covenants that relate to the Company’s minimum tangible net worth, minimum fixed-charge coverage ratios, dividend paying capacity, reinsurance retentions, risk-based capital ratios, and debt-to-total capital.

As of March 31, 2022, the Company was not in compliance with the tangible net worth and the debt-to-total capital financial covenants of the line of credit.

On May 11, 2022, the holders of the line of credit waived the March 31, 2022 tangible net worth and total debt to capital requirements.

As of June 30, 2022, the Company had no balance outstanding on the line of credit but was not in compliance with the tangible net worth and debt-to-total capital debt covenants.

On August 8, 2022, the Company entered into an amendment with the Lender which waived the June 30, 2022 debt covenant requirements, eliminated the financial debt covenant requirements going forward and requires prior bank approval for any future draws on the line of credit.

Management expects to be in compliance with all debt covenants in future periods.

On August 8, 2022, the Company entered into an amendment with the Lender which eliminated the financial debt covenant requirements if there is no outstanding balance going forward, and requires prior bank approval for any future draws on the line of credit.

As of September 30, 2022, the Company had no balance outstanding on the line of credit.

FHLB of Indianapolis loan

On July 7, 2022, the Company borrowed $ 14.5 million from the FHLB of Indianapolis.

The loan is fully collateralized with high-quality federally guaranteed debt securities and cash.

The loan was drawn for short-term cash needs to avoid realizing losses on a statutory accounting basis due to temporary market-timing issues caused by the recent fluctuations in the interest rate markets.

The loan has a daily floating interest rate that was 3.45 % per annum as of September 30, 2022.

The loan matures on January 9, 2023 .

Paycheck Protection Program loan

4 unchanged sentences

Shareholder’s Equity

On May 11, 2022, the Company entered into a subscription agreement to issue $ 5.0 million of equity.

The Company received the $5.0 million of cash in the second quarter of 2022, however, pricing and terms were pending as of June 30, 2022.

The $5.0 million of cash was converted into 2,500,000 shares of common stock, at a price of $ 2.00 per share in August 2022.

See Note 14 ~ Subsequent Events , for further details.

Accordingly, the Company’s total equity is higher by $ 5.0 million as of the date of the filing of this Form 10-Q.

For the three months ended June 30, 2022, and 2021, the Company repurchased 1,493 and 2,307 shares of stock valued at approximately $ 3,000 and $ 7,000 , respectively, related to the vesting of the Company’s restricted stock units.

The Company made no repurchases of stock relating to the vesting of restricted stock units during the first quarters of 2022 and 2021.

On August 10, 2022, the Company issued $ 5.0 million of equity through a private placement for 2,500,000 shares priced at $ 2.00 per share.

The participants in the private placement consisted of members of the Company's Board of Directors.

The Company used the proceeds for growth capital in the Company's specialty core business segments.

For the three months ended September 30, 2022, the Company had no restricted stock units vest, and made no repurchases of stock.

For the three months ended September 30, 2021, the Company repurchase 1,240 shares of stock valued at approximately $ 4,000 , related to the vesting of the Company’s restricted stock units.

For the nine months ended September 30, 2022 and 2021, the Company repurchased 1,493 and 3,547 shares of stock valued at approximately $ 3,000 and $ 11,000 , respectively.

Upon the repurchase of the Company’s shares, the shares remain authorized, but not issued or outstanding.

As of June 30, 2022 and December 31, 2021, the Company had 9,715,324 and 9,707,817 issued and outstanding shares of common stock, respectively.

As of September 30, 2022 and December 31, 2021, the Company had 12,215,324 and 9,707,817 issued and outstanding shares of common stock, respectively.

Holders of common stock are entitled to one vote per share and to receive dividends only when and if declared by the board of directors.

3 unchanged sentences

Three months ended

Six months ended

September 30,

Nine months ended

September 30,

Balance at beginning of period

7 unchanged sentences

Three Months Ended

Six months ended

September 30,

Nine months ended

September 30,

Net income (loss)

1 unchanged sentence

Earnings (loss) per common share, basic and diluted

The non-vested shares of the restricted stock units and stock options were anti-dilutive as of June 30, 2022 and 2021.

Therefore, the basic and diluted weighted average common shares are equal for the three months and six months ended June 30, 2022 and 2021 .

The non-vested shares of the restricted stock units and stock options were anti-dilutive as of September 30, 2022 and 2021.

Therefore, the basic and diluted weighted average common shares are equal for the three months and nine months ended September 30, 2022 and 2021 .

Stock-based Compensation

7 unchanged sentences

The estimated value of these options is $ 290,000 , which is being expensed ratably over the vesting period.

In 2015, 2016, and 2018, the Company issued 390,352 , 111,281 , and 70,000 , respectively, of restricted stock units (“RSUs”) to various employees to be settled in shares of common stock, which were valued at $ 4.1 million, $ 909,000 , and $ 404,000 , respectively, on the dates of grant.

The Company recorded $ 29,000 and $ 108,000 of compensation expense related to the RSUs for the six months ended June 30, 2022 and 2021, respectively.

There were 10,000 unvested RSUs as of June 30, 2022, which will generate an estimated future expense of $ 44,000 .

The Company recorded $ 67,000 and $ 25,000 of compensation expense related to the stock options for the six months ended June 30, 2022 and 2021, respectively.

There were 783,000 unvested options as of June 30, 2022, which will generate an estimated future expense of $ 729,000 .

In 2016 and 2018, the Company issued 111,281 and 70,000 , respectively, of restricted stock units (“RSUs”) to various employees to be settled in shares of common stock, which were valued at $ 909,000 and $ 404,000 , respectively, on the dates of grant.

The Company recorded $ 43,000 and $ 145,000 of compensation expense related to the RSUs for the nine months ended September 30, 2022 and 2021, respectively.

There were 10,000 unvested RSUs as of September 30, 2022, which will generate an estimated future expense of $ 30,000 .

The Company recorded $ 111,000 and $ 39,000 of compensation expense related to the stock options for the nine months ended September 30, 2022 and 2021, respectively.

There were 783,000 unvested options as of September 30, 2022, which will generate an estimated future expense of $ 685,000 .

Commitments and Contingencies

23 unchanged sentences

All of the Company’s insurance activities are conducted in the United States with a concentration of activity in Michigan, Florida, Texas and California.

For the six months ended June 30, 2022 and 2021, gross written premiums attributable to these four states were 57.0 % and 51.7 %, respectively, of the Company’s total gross written premiums.

For the nine months ended September 30, 2022 and 2021, gross written premiums attributable to these four states were 56.2 % and 51.4 %, respectively, of the Company’s total gross written premiums.

The Wholesale Agency business sells insurance products on behalf of the Company’s commercial and personal lines businesses as well as to third-party insurers.

8 unchanged sentences

Three months ended

June 30, 2022

September 30, 2022

Commercial Lines

15 unchanged sentences

Three months ended

June 30, 2021

September 30, 2021

Gross written premiums

8 unchanged sentences

Investment income

Net realized investment gains

Net realized investment gains (losses)

Change in fair value of equity securities

1 unchanged sentence

Income (loss) before equity earnings in Affiliate and income taxes

Six months ended

June 30, 2022

Nine months ended

September 30, 2022

Gross written premiums

8 unchanged sentences

Investment income

Net realized investment gains

Net realized investment gains (losses)

Change in fair value of equity securities

1 unchanged sentence

Income (loss) before equity earnings in Affiliate and income taxes

Six months ended

June 30, 2021

Nine months ended

September 30, 2021

Gross written premiums

8 unchanged sentences

Investment income

Net realized investment gains

Net realized investment gains (losses)

Change in fair value of equity securities

2 unchanged sentences

Subsequent Events

On May 11, 2022, the Company entered into a subscription agreement to issue $ 5.0 million of equity.

While the cash was received by June 30, 2022, pricing and terms were still pending.

On August 10, 2022, the terms were finalized and the Company issued 2,500,000 shares of common stock at $ 2.00 per share.

The additional equity will increase the June 30, 2022 total shareholders’ equity from $ 17.0 million to $ 22.0 million.

One of the Company’s Insurance Company Subsidiaries borrowed $ 14.5 million from the Federal Home Loan Bank of Indiana on July 7, 2022.

It matures on January 9, 2023 , and has a floating interest rate that was initially 1.93 % per annum.

This fully-collateralized loan was drawn for short-term cash needs to avoid realized losses on a statutory accounting basis due to temporary market-timing issues caused by the recent fluctuations in the interest rate markets.

On October 13, 2022, the Company purchased the 50 % ownership interest in Venture that was owned by a third party for $ 9.7 million, resulting in Venture being owned 100 % by the Company.

On October 14, 2022, Venture completed the sale of certain producer business assets with Whitetail Insurance Services, LLC (the “Buyer”), a wholly-owned subsidiary of Acrisure, LLC (“Acrisure”), for a purchase price of $ 38.2 million.

The effective date of the asset purchase agreement is October 1, 2022 .

There is no material relationship between the Company or any director or officer of the Company, or any associate of any director or officer of the Company, and the Buyer, other than with respect to the Company's disposition of assets to the Buyer.

The assets involved in this transaction relate to Venture Agency Holdings, Inc.

insurance brokerage and associated services provided largely to the security sector.

This sale, along with related transactions including the cost of the Company purchasing the other 50 % of Venture, is expected to generate approximately $ 8.0 million of non-operating gains for the Company, net of taxes, in the fourth quarter of 2022.

This sale is not expected to result in discontinued operations related to agency business.

On November 1, 2022, Conifer Holdings, Inc.

(the “Company”), entered into a loss portfolio transfer (“LPT”) reinsurance agreement with Fleming Reinsurance Ltd (“Fleming Re”).

Under the agreement, Fleming Re will cover an aggregate limit of $ 66.3 million of paid losses on $ 40.8 million of stated net reserves as of June 30, 2022, relating to accident years 2019 and prior.

Within the aggregate limit, there is a $ 5.5 million loss corridor in which the Company and WPIC retains losses in excess of $ 40.8 million.

Fleming Re is then responsible to cover paid losses in excess of $ 46.3 million up to $ 66.3 million.

Accordingly, there is $ 20.0 million of adverse development cover for accident years 2019 and prior.

Under the agreement, Fleming Re retains $ 40.8 million for stated net reserves as of June 30, 2022, plus a one-time risk fee of $ 5.4 million.

Recoverables due to the Company under this agreement will be recorded as reinsurance recoverables.

The agreement is between CIC and WPIC and Fleming Re.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements