PART I — FINANCIAL INFORMATION [ITEM 1 — FINANCIAL STATEMENTS](index=3&type=section&id=Item%201%20%E2%80%94%20Financial%20Statements) This section presents the unaudited consolidated financial statements of Conifer Holdings, Inc. and its subsidiaries for the quarter ended March 31, 2025, including balance sheets, statements of operations, comprehensive income (loss), changes in shareholders' equity, and cash flows, along with accompanying notes detailing significant accounting policies, investments, fair value measurements, and other financial disclosures [Consolidated Balance Sheets (Unaudited)](index=3&type=section&id=Consolidated%20Balance%20Sheets%20(Unaudited)) Consolidated Balance Sheet Highlights (dollars in thousands) | Metric | March 31, 2025 | December 31, 2024 | Change ($) | Change (%) | | :-------------------------------- | :------------- | :---------------- | :--------- | :--------- | | Total Assets | $277,074 | $281,656 | $(4,582) | (1.6%) | | Total Liabilities | $251,489 | $260,131 | $(8,642) | (3.3%) | | Total Shareholders' Equity | $25,585 | $21,525 | $4,060 | 18.9% | | Unpaid Losses and LAE | $176,362 | $189,285 | $(12,923) | (6.8%) | | Total Investments | $139,500 | $128,419 | $11,081 | 8.6% | | Cash and Cash Equivalents | $10,281 | $27,654 | $(17,373) | (62.8%) | [Consolidated Statements of Operations (Unaudited)](index=4&type=section&id=Consolidated%20Statements%20of%20Operations%20(Unaudited)) Consolidated Statements of Operations Highlights (dollars in thousands, except per share data) | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Change ($) | Change (%) | | :------------------------------------ | :-------------------------------- | :-------------------------------- | :--------- | :--------- | | Net Earned Premiums | $10,315 | $16,887 | $(6,572) | (38.9%) | | Total Revenue and Other Income | $15,875 | $18,625 | $(2,750) | (14.8%) | | Total Expenses | $15,353 | $17,419 | $(2,066) | (11.9%) | | Net Income (Loss) | $522 | $231 | $291 | 126.0% | | Net Income (Loss) Allocable to Common Shareholders | $522 | $74 | $448 | 605.4% | | Basic and Diluted EPS (allocable to common shareholders) | $0.04 | $0.01 | $0.03 | 300.0% | [Consolidated Statements of Comprehensive Income (Loss) (Unaudited)](index=5&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)%20(Unaudited)) Consolidated Statements of Comprehensive Income (Loss) Highlights (dollars in thousands) | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Change ($) | | :------------------------------------ | :-------------------------------- | :-------------------------------- | :--------- | | Net Income (Loss) | $522 | $231 | $291 | | Other Comprehensive Income (Loss) | $1,599 | $(436) | $2,035 | | Total Comprehensive Income (Loss) | $2,121 | $(205) | $2,326 | [Consolidated Statements of Changes in Shareholders' Equity (Unaudited)](index=6&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Shareholders%27%20Equity%20(Unaudited)) Consolidated Statements of Changes in Shareholders' Equity Highlights (dollars in thousands) | Metric | Balance at Dec 31, 2024 | Net Income (Loss) | Issuance of Warrants | Stock-based Comp. | Other Comp. Income | Balance at Mar 31, 2025 | | :-------------------------------- | :---------------------- | :---------------- | :------------------- | :------------------ | :------------------- | :---------------------- | | Total Shareholders' Equity | $21,525 | $522 | $1,924 | $15 | $1,599 | $25,585 | * Total shareholders' equity increased by $4,060 thousand from December 31, 2024, to March 31, 2025, primarily due to net income, issuance of warrants, and other comprehensive income. [Consolidated Statements of Cash Flows (Unaudited)](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows%20(Unaudited)) Consolidated Statements of Cash Flows Highlights (dollars in thousands) | Activity Type | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Change ($) | | :-------------------------------- | :-------------------------------- | :-------------------------------- | :--------- | | Net Cash Provided by (Used in) Operating Activities | $(15,260) | $8,175 | $(23,435) | | Net Cash Provided by (Used in) Investing Activities | $(9,613) | $(1,558) | $(8,055) | | Net Cash Provided by (Used in) Financing Activities | $7,500 | $(426) | $7,926 | | Net Increase (Decrease) in Cash | $(17,373) | $6,191 | $(23,564) | | Cash at End of Period | $10,281 | $17,316 | $(7,035) | [Notes to Consolidated Financial Statements (Unaudited)](index=8&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements%20(Unaudited)) The notes provide detailed explanations of the accounting policies, financial instruments, and operational changes impacting the consolidated financial statements, covering business transformation, insurance subsidiary health, investment portfolio, fair value measurements, and debt/equity structures - The Company's business model has shifted, no longer including the agency business after the sales of Conifer Insurance Services (CIS) and Sycamore Specialty Underwriters, LLC (SSU) in August 2024 The Company now primarily writes a small amount of commercial business and specialty homeowners business in Texas, Illinois, and Indiana[24](index=24&type=chunk)[25](index=25&type=chunk) - The Company adopted ASU 2023-09, Income Taxes (Topic 740), effective for this quarterly report, which did not have a significant impact on disclosures ASU 2024-03, Disaggregation of Income Statement Expenses, is effective for fiscal years beginning after December 15, 2027, and its impact is being evaluated[28](index=28&type=chunk)[29](index=29&type=chunk) - The Company's Insurance Company Subsidiaries (CIC and WPIC) face capital deficiencies due to significant losses in 2023 and 2024, particularly from commercial liability lines in run-off CIC's Risk Based Capital (RBC) ratio was **156%** as of December 31, 2024, and approximately **160%** as of March 31, 2025, falling within the Company Action Level and requiring a remediation plan[33](index=33&type=chunk)[35](index=35&type=chunk) - The Parent Company (CHI) received no intercompany service fees from Insurance Company Subsidiaries in 2024 and expects none in 2025, relying on asset sales and capital raises CHI had **$2.5 million** cash as of March 31, 2025, and expects to meet obligations through cash on hand, a **$10.0 million** earnout payment in 2025, potential asset sales, and short-term financing[34](index=34&type=chunk)[35](index=35&type=chunk)[38](index=38&type=chunk) Investment Securities at Fair Value (dollars in thousands) **Investment Securities at Fair Value (dollars in thousands):** | Security Type | March 31, 2025 | December 31, 2024 | | :-------------------------------- | :------------- | :---------------- | | Debt securities | $96,023 | $105,665 | | Equity securities | $1,411 | $1,603 | | Short-term investments | $42,066 | $21,151 | | **Total Investments** | **$139,500** | **$128,419** | * Gross unrealized losses on available-for-sale debt securities were $10.7 million as of March 31, 2025, primarily due to market conditions and interest rate changes. Net Investment Income (dollars in thousands) **Net Investment Income (dollars in thousands):** | Source | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Debt securities | $958 | $1,225 | | Equity securities | $2 | $11 | | Cash, cash equivalents and short-term investments | $387 | $371 | | **Total investment income** | **$1,347** | **$1,607** | | Investment expenses | $(58) | $(61) | | **Net investment income** | **$1,289** | **$1,546** | - The fair value of contingent considerations from the CIS sale increased from **$8.07 million** at December 31, 2024, to **$12.465 million** at March 31, 2025, reflecting an expected **$10.0 million** payment in 2025 and a third **$10.0 million** payment not expected until 2027, if at all The fair value is determined using Level 3 inputs and Monte Carlo analysis[8](index=8&type=chunk)[59](index=59&type=chunk)[115](index=115&type=chunk) Changes in Unpaid Losses and Loss Adjustment Expenses (Net of Reinsurance, dollars in thousands) **Changes in Unpaid Losses and Loss Adjustment Expenses (Net of Reinsurance, dollars in thousands):** | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Net reserves - beginning of period | $104,795 | $103,805 | | Total net incurred losses and LAE | $9,274 | $10,520 | | Total net loss and LAE payments | $15,579 | $12,306 | | Net reserves - end of period | $98,490 | $102,019 | * Net losses and LAE decreased by $1.2 million (11.8%) in Q1 2025 compared to Q1 2024, primarily due to a $1.9 million decrease in current accident year losses from reduced net earned premiums. - The Company issued **$7.5 million** of non-convertible mandatorily redeemable Series B Preferred Stock in February and March 2025, along with warrants to purchase **4,000,000** common shares at **$1.50** per share The Series B Preferred Stock matures on December 31, 2026, and carries a quarterly dividend rate of **12.0%** or prime rate plus **600 basis points**, whichever is higher (**13.5%** as of March 31, 2025)[83](index=83&type=chunk)[84](index=84&type=chunk)[85](index=85&type=chunk)[86](index=86&type=chunk) - The Company redeemed all **$6.0 million** of its outstanding Series A Preferred Stock on August 30, 2024, incurring a **$397,000** redemption premium[90](index=90&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=29&type=section&id=Item%202%20%E2%80%94%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the Company's financial condition and operational results for the three months ended March 31, 2025, compared to the same period in 2024, highlighting strategic developments, revenue impact, and a detailed analysis of financial metrics and non-GAAP measures [Recent Developments](index=29&type=section&id=Recent%20Developments) - On August 30, 2024, the Company completed the sale of Conifer Insurance Services (CIS), its managing general agency (MGA) business, for an initial purchase price of **$45.0 million** cash plus **$1.6 million** excess working capital, and eligibility for up to **$25.0 million** in contingent payments[111](index=111&type=chunk)[114](index=114&type=chunk) - The CIS sale will significantly negatively impact future revenues, as the Company was relying on commission revenue growth to replace lost underwriting revenue Gross written premiums decreased from **$24.3 million** in Q1 2024 to **$16.2 million** in Q1 2025[112](index=112&type=chunk) - The Company also sold its 50% ownership interest in Sycamore Specialty Underwriters, LLC (SSU) on August 30, 2024, for **$6.5 million**, recognizing a gain of **$6.5 million**[118](index=118&type=chunk) - The Company's staff is reduced to **nine people**, relying heavily on CIS and SSU for underwriting, claims, and IT services through program and claims administration agreements This amplifies concentration risk in marketing and distribution[121](index=121&type=chunk) - On August 30, 2024, the Company paid off **$9.3 million** of Senior Secured Notes and redeemed all **$6.0 million** of Series A Preferred Stock, incurring a **$397,000** redemption premium[122](index=122&type=chunk) - A.M. Best and Kroll downgraded the financial strength ratings of CIC and WPIC to C and BB-/B respectively in March 2024, leading the Company to withdraw from the rating process This non-rated status could negatively impact the ability to market to policyholders[123](index=123&type=chunk)[124](index=124&type=chunk)[125](index=125&type=chunk) [Business Overview](index=31&type=section&id=Business%20Overview) - Conifer Holdings, Inc. is an insurance holding company marketing specialty commercial and personal insurance It is authorized as an excess and surplus lines carrier in **44 states** and licensed as an admitted carrier in **42 states** Operations are primarily in Texas, Illinois, Indiana (homeowners), and Nevada, Michigan (other lines)[126](index=126&type=chunk) - Revenues are primarily from earned premiums and investment income Expenses include losses and loss adjustment expenses, agents' commissions, and underwriting/administrative costs The Company expects minimal commercial lines business going forward, focusing on specialty homeowners[127](index=127&type=chunk)[128](index=128&type=chunk)[129](index=129&type=chunk)[130](index=130&type=chunk) [Executive Overview](index=31&type=section&id=Executive%20Overview) Key Financial Highlights (dollars in thousands, except per share data) **Key Financial Highlights (dollars in thousands, except per share data):** | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Change ($) | Change (%) | | :------------------------------------ | :-------------------------------- | :-------------------------------- | :--------- | :--------- | | Gross Written Premiums | $16,173 | $24,313 | $(8,140) | (33.5%) | | Commercial Lines GWP | $2,047 | $12,762 | $(10,715) | (84.0%) | | Personal Lines GWP | $14,126 | $11,551 | $2,575 | 22.3% | | Net Income from Continuing Operations | $522 | $1,357 | $(835) | (61.5%) | | EPS from Continuing Operations | $0.04 | $0.11 | $(0.07) | (63.6%) | | Net Income Allocable to Common Shareholders | $522 | $74 | $448 | 605.4% | | EPS Allocable to Common Shareholders | $0.04 | $0.01 | $0.03 | 300.0% | | Adjusted Operating Loss | $(3,700) | $1,300 | $(5,000) | * | | Adjusted Operating Loss Per Share | $(0.30) | $0.11 | $(0.41) | * | | Underwriting Combined Ratio | 140.5% | 96.7% | 43.8 pp | * | * *Percentage change is not meaningful for Adjusted Operating Loss/Per Share and Combined Ratio due to sign change or large magnitude.* [Results of Operations for the Three Months Ended March 31, 2025 and 2024](index=32&type=section&id=Results%20of%20Operations%20for%20the%20Three%20Months%20Ended%20March%2031%2C%202025%20and%202024) Summary of Operating Results (dollars in thousands) **Summary of Operating Results (dollars in thousands):** | Metric | March 31, 2025 | March 31, 2024 | $ Change | % Change | | :------------------------------------ | :------------- | :------------- | :--------- | :--------- | | Gross written premiums | $16,173 | $24,313 | $(8,140) | (33.5%) | | Net written premiums | $10,840 | $15,391 | $(4,551) | (29.6%) | | Net earned premiums | $10,315 | $16,887 | $(6,572) | (38.9%) | | Losses and loss adjustment expenses, net | $9,274 | $10,520 | $(1,246) | (11.8%) | | Policy acquisition costs | $2,677 | $3,160 | $(483) | (15.3%) | | Operating expenses | $2,861 | $2,862 | $(1) | (0.0%) | | Underwriting gain (loss) | $(4,432) | $494 | $(4,926) | * | | Net investment income | $1,289 | $1,546 | $(257) | (16.6%) | | Income (loss) from continuing operations before income taxes | $522 | $1,206 | $(684) | * | | Net income (loss) | $522 | $231 | $291 | * | | Book value per common share outstanding | $2.09 | $0.21 | $1.88 | 895.2% | | Loss ratio | 89.7% | 62.0% | 27.7 pp | * | | Expense ratio | 50.8% | 34.7% | 16.1 pp | * | | Combined ratio | 140.5% | 96.7% | 43.8 pp | * | * *Percentage change is not meaningful for underwriting gain (loss), income before taxes, net income, and ratios due to sign change or large magnitude.* Summary of Premium Revenue by Line (dollars in thousands) **Summary of Premium Revenue by Line (dollars in thousands):** | Metric | March 31, 2025 | March 31, 2024 | $ Change | % Change | | :-------------------------------- | :------------- | :------------- | :--------- | :--------- | | **Gross Written Premiums:** | | | | | | Commercial lines | $2,047 | $12,762 | $(10,715) | (84.0%) | | Personal lines | $14,126 | $11,551 | $2,575 | 22.3% | | **Total GWP** | **$16,173** | **$24,313** | **$(8,140)** | **(33.5%)** | | **Net Written Premiums:** | | | | | | Commercial lines | $(1,604) | $8,287 | $(9,891) | (119.4%) | | Personal lines | $12,444 | $7,104 | $5,340 | 75.2% | | **Total NWP** | **$10,840** | **$15,391** | **$(4,551)** | **(29.6%)** | | **Net Earned Premiums:** | | | | | | Commercial lines | $1,331 | $8,797 | $(7,466) | (84.9%) | | Personal lines | $8,984 | $8,090 | $894 | 11.1% | | **Total NEP** | **$10,315** | **$16,887** | **$(6,572)** | **(38.9%)** | - Commercial lines gross written premiums decreased by **84.0%** due to the cessation of hospitality and small business commercial lines as of September 1, 2024, which are now in run-off[142](index=142&type=chunk) - Personal lines gross written premiums increased by **22.3%**, driven by organic growth in the low-value dwelling business in Texas and the Midwest, offset by the exit from Oklahoma homeowners business[143](index=143&type=chunk) Losses and Loss Adjustment Expenses and Loss Ratios (dollars in thousands) **Losses and Loss Adjustment Expenses and Loss Ratios (dollars in thousands):** | Metric | Commercial Lines (2025) | Personal Lines (2025) | Total (2025) | Commercial Lines (2024) | Personal Lines (2024) | Total (2024) | | :-------------------------------- | :---------------------- | :-------------------- | :----------- | :---------------------- | :-------------------- | :----------- | | Accident year net losses and LAE | $2,125 | $7,005 | $9,130 | $6,719 | $4,262 | $10,981 | | Net (favorable) adverse development | $(620) | $764 | $144 | $47 | $(508) | $(461) | | Calendar year net losses and LAE | $1,505 | $7,769 | $9,274 | $6,766 | $3,754 | $10,520 | | Accident year loss ratio | 159.7% | 77.7% | 88.3% | 76.0% | 52.5% | 64.7% | | Net (favorable) adverse development | (46.6%) | 8.6% | 1.4% | 0.5% | (6.3%) | (2.7%) | | Calendar year loss ratio | 113.1% | 86.3% | 89.7% | 76.5% | 46.2% | 62.0% | * Net losses and LAE decreased by $1.2 million (11.8%) in Q1 2025, primarily due to a $1.9 million decrease in current accident year losses, partially offset by a $605,000 increase in adverse development on prior-year loss reserves. Expense Ratio by Line **Expense Ratio by Line:** | Metric | Commercial Lines (2025) | Personal Lines (2025) | Total Underwriting (2025) | Commercial Lines (2024) | Personal Lines (2024) | Total Underwriting (2024) | | :-------------------------------- | :---------------------- | :-------------------- | :------------------------ | :---------------------- | :-------------------- | :------------------------ | | Policy acquisition costs | (3.5%) | 30.2% | 25.9% | 13.0% | 24.8% | 18.7% | | Operating expenses | 28.8% | 24.4% | 24.9% | 19.7% | 12.0% | 16.0% | | **Total Expense Ratio** | **25.3%** | **54.6%** | **50.8%** | **32.7%** | **36.8%** | **34.7%** | * The total underwriting expense ratio increased by 16.1 percentage points to 50.8% in Q1 2025, primarily due to increased commission rates under new producer agreements and significantly lower net earned premiums impacting operating expense ratios. Segment Gain (Loss) (dollars in thousands) **Segment Gain (Loss) (dollars in thousands):** | Segment | March 31, 2025 | March 31, 2024 | $ Change | | :-------------------------------- | :------------- | :------------- | :--------- | | Commercial Lines | $(511) | $(814) | $303 | | Personal Lines | $(3,678) | $1,380 | $(5,058) | | **Total Underwriting** | **$(4,189)** | **$566** | **$(4,755)** | | Corporate | $(243) | $(72) | $(171) | | **Total segment gain (loss)** | **$(4,432)** | **$494** | **$(4,926)** | [Liquidity and Capital Resources](index=36&type=section&id=Liquidity%20and%20Capital%20Resources) - As of March 31, 2025, the Company had **$52.3 million** in cash, cash equivalents, and short-term investments Principal funding sources are insurance premiums, investment income, and proceeds from asset maturities/sales, used for claims, commissions, operating expenses, and debt/preferred stock service[155](index=155&type=chunk) - The Parent Company's ability to service debt and pay administrative expenses relies primarily on intercompany service fees from Insurance Company Subsidiaries, which are restricted by state insurance laws No dividends were paid from subsidiaries in Q1 2025 or Q1 2024, and none are anticipated in the near term[156](index=156&type=chunk) - Due to significant losses in 2023 and 2024, the Insurance Company Subsidiaries lack sufficient capital Conifer Insurance Company (CIC) required **$16.0 million** in contributions in late 2024 and early 2025 to remain above the Regulatory Action Level, but still fell within the Company Action Level with an RBC ratio of **156%** (approx **160%** as of March 31, 2025)[157](index=157&type=chunk)[159](index=159&type=chunk) - CIC is not expected to pay intercompany service fees to CHI for 2025 to help achieve an RBC ratio above **200%** Potential strategies include a quota share agreement for homeowners business and additional capital contributions[159](index=159&type=chunk) - CHI had **$2.5 million** cash as of March 31, 2025, with quarterly obligations of **$412,000** for public debt interest and **$253,000** for preferred stock dividends Management expects to fund obligations with cash, a **$10.0 million** earnout payment in 2025, potential asset sales, and short-term financing[162](index=162&type=chunk) Cash Flow Summary (dollars in thousands) **Cash Flow Summary (dollars in thousands):** | Activity Type | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Change ($) | | :-------------------------------- | :-------------------------------- | :-------------------------------- | :--------- | | Operating Activities | $(15,260) | $8,175 | $(23,435) | | Investing Activities | $(9,613) | $(1,558) | $(8,055) | | Financing Activities | $7,500 | $(426) | $7,926 | * Cash used in operating activities increased by $23.5 million, primarily due to a $20.0 million increase in net losses paid and a $3.2 million decrease in net premiums collected. - The Insurance Company Subsidiaries' aggregate statutory capital and surplus was **$35.3 million** at March 31, 2025, down from **$41.1 million** at December 31, 2024[172](index=172&type=chunk) [Non-GAAP Financial Measures](index=39&type=section&id=Non-GAAP%20Financial%20Measures) - Adjusted operating income and adjusted operating income per share are non-GAAP measures that exclude net realized investment gains/losses, changes in fair value of equity securities, and net income from discontinued operations, providing insight into ongoing performance[173](index=173&type=chunk)[174](index=174&type=chunk) Reconciliation of Net Income to Adjusted Operating Income (dollars in thousands, except per share data) **Reconciliation of Net Income to Adjusted Operating Income (dollars in thousands, except per share data):** | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :------------------------------------ | :-------------------------------- | :-------------------------------- | | Net income (loss) | $522 | $231 | | Less: Net realized investment gains (losses) | $3 | $0 | | Less: Change in fair value of equity securities | $(192) | $43 | | Less: Change in fair value of contingent considerations | $4,395 | $0 | | Less: Net income (loss) from discontinued operations | $0 | $(1,126) | | **Adjusted operating income (loss)** | **$(3,684)** | **$1,314** | | Diluted income (loss) per common share: Net income (loss) | $0.04 | $0.02 | | **Adjusted operating income (loss) per share** | **$(0.30)** | **$0.11** | [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=40&type=section&id=Item%203%20%E2%80%94%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) This item is not applicable for smaller reporting companies, as indicated by the Company - The Company, as a smaller reporting company, is not required to provide quantitative and qualitative disclosures about market risk[176](index=176&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=40&type=section&id=Item%204%20%E2%80%94%20Controls%20and%20Procedures) Management, including the CEO and CFO, evaluated the effectiveness of the Company's disclosure controls and procedures as of March 31, 2025, concluding they are effective, with no material changes in internal control over financial reporting during the quarter - The Company's disclosure controls and procedures were deemed effective as of March 31, 2025, following evaluation by the CEO and CFO[177](index=177&type=chunk) - No material changes in internal control over financial reporting occurred during the three months ended March 31, 2025[178](index=178&type=chunk) PART II — OTHER INFORMATION [ITEM 1. LEGAL PROCEEDINGS](index=41&type=section&id=Item%201%20%E2%80%94%20Legal%20Proceedings) Information regarding legal proceedings is incorporated by reference from Note 12, Commitments and Contingencies, of the Notes to the Consolidated Financial Statements - Legal proceedings information is referenced from Note 12, Commitments and Contingencies, in the financial statements[180](index=180&type=chunk) [ITEM 1A. RISK FACTORS](index=41&type=section&id=Item%201A%20%E2%80%94%20Risk%20Factors) There were no material changes to the risk factors previously disclosed in the Company's Annual Report on Form 10-K filed on March 28, 2025 - No material changes to risk factors were reported compared to the Annual Report on Form 10-K[181](index=181&type=chunk) [ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=41&type=section&id=Item%202%20%E2%80%94%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) All unregistered sales of equity securities were previously disclosed on a Form 8-K - All unregistered sales of equity securities have been previously disclosed on a Form 8-K[182](index=182&type=chunk) [ITEM 3. DEFAULTS UPON SENIOR SECURITIES](index=41&type=section&id=Item%203%20-%20Defaults%20Upon%20Senior%20Securities) The Company reported no defaults upon senior securities during the period - There were no defaults upon senior securities[183](index=183&type=chunk) [ITEM 4. MINE SAFETY DISCLOSURES](index=41&type=section&id=Item%204%20-%20Mine%20Safety%20Disclosures) This item is not applicable to the Company - Mine safety disclosures are not applicable to the Company[184](index=184&type=chunk) [ITEM 5. OTHER INFORMATION](index=41&type=section&id=Item%205%20-%20Other%20Information) No directors or Section 16 officers adopted or terminated any Rule 10b5-1 trading arrangements during the three months ended March 31, 2025 - No directors or Section 16 officers adopted or terminated Rule 10b5-1 trading arrangements in Q1 2025[185](index=185&type=chunk) [ITEM 6. EXHIBITS](index=42&type=section&id=Item%206%20%E2%80%94%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including certificates of designation, purchase agreements, forms of warrants, and certifications Key Exhibits Filed **Key Exhibits Filed:** | Exhibit Number | Exhibit Description | Form | Filing Date | | :------------- | :-------------------------------------------------------------------------------- | :--- | :---------- | | 3.1 | Certificate of Designation of Series B Preferred Stock | 8-K | March 4, 2025 | | 10.1 | Purchase Agreement, dated February 27, 2025, by and between Conifer Holdings, Inc. and Clarkston Capital, LLC | 8-K | March 4, 2025 | | 10.2 | Form of Warrant | 8-K | March 4, 2025 | | 10.3 | Additional Purchase Agreement, dated March 3, 2025, by and between Conifer Holdings, Inc. and Clarkston Capital, LLC | 8-K | March 4, 2025 | | 31.1 | Section 302 Certification — CEO | | | | 31.2 | Section 302 Certification — CFO | | | | 32.1* | Section 906 Certification — CEO | | | | 32.2* | Section 906 Certification — CFO | | | [SIGNATURES](index=43&type=section&id=Signatures) The report is duly signed on behalf of Conifer Holdings, Inc. by Harold J. Meloche, Chief Financial Officer, Principal Financial Officer, and Principal Accounting Officer, dated May 14, 2025 - The report was signed by Harold J. Meloche, Chief Financial Officer, Principal Financial Officer, and Principal Accounting Officer, on May 14, 2025[192](index=192&type=chunk)

Core Insights - Conifer Holdings, Inc. reported mixed financial results for the first quarter of 2025, with a small net income gain despite significant declines in gross and net written premiums [2][5][15]. Financial Performance - Gross written premiums decreased by 33.5% to $16.2 million compared to $24.3 million in the same period last year [5]. - Net written premiums fell by 29.6% to $10.8 million from $15.4 million year-over-year [2]. - Net earned premiums dropped by 38.9% to $10.3 million from $16.9 million in the prior year [2]. - Net investment income was $1.3 million, down 16.6% from $1.5 million in the previous year [13]. - The company reported a net income allocable to common shareholders of $522,000, or $0.04 per share, compared to $74,000, or $0.01 per share, in the prior year [15][26]. Underwriting Performance - The loss ratio increased to 89.7% from 62.0%, while the expense ratio rose to 50.8% from 34.7%, resulting in a combined ratio of 140.5%, up from 96.7% [12][26]. - Personal lines production grew by 22% during the quarter, with gross written premiums in this segment increasing to $14.1 million from $11.6 million [3][11]. - The commercial lines segment saw a dramatic decline, with gross written premiums down 84.0% to $2.0 million [6][7]. Strategic Focus - The company is shifting its focus towards personal lines, particularly low-value dwelling homeowner's insurance in Texas and the Midwest, following the sale of its agency group in 2024 [5][7]. - Personal lines now represent 87.4% of total gross written premiums for the quarter [10]. Investment and Equity - The change in fair value of equity investments resulted in a loss of $192,000, compared to a gain of $43,000 in the prior year [14]. - Book value per common share increased to $2.09 from $0.21 year-over-year [3].

Financial Performance - Net income allocable to common shareholders was $522,000, or $0.04 per share, compared to $231,000, or $0.02 per share in the prior year [14][21]. - Net income from continuing operations for Q1 2025 was $522,000, compared to $1.357 million in Q1 2024, reflecting a decline of 61.5% [23]. - The company reported a net income allocable to common shareholders of $522,000 for Q1 2025, compared to $74,000 in Q1 2024, indicating a significant increase [23]. - Adjusted operating loss was $3.7 million, or $0.30 per share, compared to an adjusted operating income of $1.3 million, or $0.11 per share in Q1 2024 [15][21]. Premiums and Revenue - Gross written premiums decreased by 33.5% to $16.2 million in Q1 2025, down from $24.3 million in the same period last year [5][6]. - Net earned premiums fell by 38.9% to $10.3 million, compared to $16.9 million in Q1 2024 [5]. - Net earned premiums for Q1 2025 were $10.315 million, a decrease of 38.5% compared to $16.887 million in Q1 2024 [23]. - Total revenue and other income for Q1 2025 was $15.875 million, down 14.0% from $18.625 million in Q1 2024 [23]. Loss Ratios and Expenses - The loss ratio for the quarter was 89.7%, significantly higher than 62.0% in the prior year [11]. - The combined ratio for the quarter was 140.5%, compared to 96.7% in the prior year, indicating increased underwriting losses [11]. - Losses and loss adjustment expenses, net, were $9.274 million in Q1 2025, down from $10.520 million in Q1 2024, a decrease of 11.8% [23]. Investment and Assets - Net investment income decreased to $1.3 million from $1.5 million in the prior year [12]. - The company reported a loss of $192,000 from the change in fair value of equity securities, compared to a gain of $43,000 in the prior year [13]. - Total assets decreased to $277.074 million as of March 31, 2025, down from $311.107 million at December 31, 2024, representing a decline of approximately 10.9% [22]. - Cash and cash equivalents slightly decreased to $10.281 million as of March 31, 2025, from $10.663 million at December 31, 2024 [22]. Liabilities and Deficits - Total liabilities decreased to $251.489 million as of March 31, 2025, down from $260.131 million at December 31, 2024, a reduction of approximately 3.0% [22]. - The company’s accumulated deficit improved to $(62.631) million as of March 31, 2025, compared to $(63.153) million at December 31, 2024 [22]. Shareholder Information - Book value per common share increased to $2.09, up from $0.21 in the previous year [5]. - The weighted average common shares outstanding remained constant at 12,222,881 for both Q1 2025 and Q1 2024 [23].

Financial Performance - For the full year 2024, total Gross Written Premium decreased by almost 50% to $72.1 million from $143.8 million in 2023, while Net Earned Premium fell by 27.5% to $60.9 million[2][4][8]. - The Company reported a net income allocable to common shareholders of $23.5 million for the full year 2024, translating to $1.93 per share, while the Q4 2024 net loss was $25.4 million, or $2.08 per share[4][17]. - Adjusted operating loss for Q4 2024 was $25,821 thousand, compared to a loss of $19,411 thousand in Q4 2023, indicating a decline in performance[25]. - Net income (loss) for the year ended December 31, 2024, was $24,347 thousand, compared to a loss of $25,904 thousand in 2023, showing an improvement in profitability[27]. - Total revenue and other income for the year ended December 31, 2024, was $67,271 thousand, a decrease from $90,522 thousand in 2023, representing a decline of about 25.5%[27]. Premiums and Business Segments - Personal Lines business saw a 10.6% increase in Gross Written Premium for Q4 2024, totaling $10.6 million, and a 23.4% increase for the full year 2024, reaching $45.4 million[3][11][12]. - The Commercial Lines business experienced a 79% decline in Gross Written Premium for Q4 2024, contributing only 23% to total gross written premium[10][12]. - The Company anticipates that future premiums will primarily come from Personal Lines, particularly homeowner's insurance in Texas and the Midwest[3][10]. Loss Ratios and Claims - The loss ratio for the combined business in Q4 2024 was 254.6%, significantly higher than 191.1% in Q4 2023, indicating increased claims relative to premiums[13]. - Adjusted operating loss for Q4 2024 was $25.8 million, or $2.11 per share, reflecting ongoing challenges in the commercial lines segment[18]. Investment Income and Assets - Net investment income increased by 5.8% to $5.8 million for the year ending December 31, 2024, compared to $5.4 million in the prior year[15]. - The company reported a net investment income of $5,763 thousand for the year ended December 31, 2024, compared to $5,447 thousand in 2023, reflecting a growth of approximately 5.8%[27]. - Total assets decreased to $281,656 thousand as of December 31, 2024, from $315,606 thousand in 2023, a reduction of approximately 10.7%[26]. Liabilities and Valuation - The company recorded total liabilities of $260,131 thousand as of December 31, 2024, down from $312,717 thousand in 2023, a decrease of about 16.8%[26]. - Unpaid losses and loss adjustment expenses increased to $189,285 thousand in 2024, up from $174,612 thousand in 2023, indicating a rise of about 8.4%[26]. - The company has recorded a full valuation allowance against its deferred tax assets as of December 31, 2024, resulting in no taxable impacts to adjusted operating income from the adjustments to net income[25]. Shareholder Metrics - Book value per share improved to $1.76 as of December 31, 2024, compared to $0.24 in the previous year[4][12]. - The diluted loss per common share for Q4 2024 was $(2.08), compared to $(1.59) in Q4 2023, indicating a worsening in earnings per share[27]. Other Financial Highlights - The Company recorded a $61 million gain from the sale of its insurance agency operations in August 2024, which contributed to the overall financial results[4][17]. - Net earned premiums for Q4 2024 were $12,708 thousand, down from $14,821 thousand in Q4 2023, reflecting a decrease of approximately 14.2%[27].

Core Viewpoint - Conifer Holdings, Inc. experienced a significant transition in 2024, marked by the sale of its insurance agency operations, a substantial reduction in commercial lines business, and a strategic focus on personal lines insurance moving forward [2][3][4]. Financial Highlights - For the full year 2024, total Gross Written Premium decreased by nearly 50% compared to the previous year, while Net Earned Premium fell by 27.5% [2][10]. - The fourth quarter of 2024 saw Gross Written Premium at $13.7 million, down 43.9% from $24.4 million in the same period of 2023 [10]. - Net income allocable to common shareholders for the fourth quarter was a loss of $25.4 million, or $2.08 per share, while for the full year, the company reported a net income of $23.5 million, or $1.93 per share [20][31]. Commercial Lines Business - The commercial lines business experienced a drastic decline, with Gross Written Premium down 79% in Q4 2024 and 75.1% for the full year [13][14]. - The loss ratio for commercial lines surged to 650.8% in Q4 2024, reflecting the company's focus on strengthening reserves [13][17]. Personal Lines Business - Personal lines gross written premiums increased by 10.6% in Q4 2024 and 23.4% for the full year, driven by growth in the homeowner's insurance portfolio in Texas and the Midwest [3][14]. - Personal lines accounted for 77% of total gross written premium in Q4 2024, indicating a strategic shift towards this segment [15]. Investment Performance - Net investment income rose by 5.8% to $5.8 million for the year ending December 31, 2024, compared to $5.4 million in the prior year [18]. - The company reported a loss of $21,000 from changes in the fair value of equity investments during the quarter, contrasting with a gain of $13,000 in the prior year [19]. Underwriting Ratios - The combined ratio for the company was 292.9% in Q4 2024, significantly higher than 231.7% in Q4 2023, indicating underwriting challenges [17]. - The loss ratio for the overall business was 254.6% in Q4 2024, compared to 191.1% in the same quarter of the previous year [17].

Investment Portfolio - As of December 31, 2024, the fair value of the investment portfolio, excluding cash and cash equivalents, was $128.4 million, down from $145.3 million in 2023, indicating a decrease of approximately 11.9%[314] - As of December 31, 2024, a 200 basis point increase in interest rates would decrease the fair value of investments by $6,328,000, representing a 5.0% decline in shareholders' equity[316] - The estimated fair value of investments remains at $126,816,000 with no change in interest rates[316] - A 200 basis point decrease in interest rates would increase the fair value of investments by $7,305,000, leading to a 5.8% increase in shareholders' equity[316] Interest Rate Risk Management - The option adjusted duration of the debt securities portfolio was 2.7 years as of December 31, 2024, compared to 2.9 years in 2023, reflecting a slight reduction in interest rate risk exposure[314] - The primary market risk exposure to the debt portfolio is interest rate risk, with the fair market value of fixed-income securities inversely related to changes in market interest rates[314] - The company manages interest rate risks by investing in securities with varied maturity dates and maintaining the duration of the investment portfolio within a defined range of three to four years[314] Regulatory Environment - The company's insurance subsidiaries are subject to various state regulations designed to protect policyholders, which may impact profitability and operational flexibility[66] - Regulatory requirements include the approval of premium rates and policy forms, as well as maintaining minimum capital and surplus levels[68] - The company is required to participate in insolvency funds or associations, which protect policyholders against insurer insolvency, with minimal assessments reported for 2023 and 2024[75][76] - The National Association of Insurance Commissioners (NAIC) Insurance Regulatory Information System (IRIS) identifies thirteen industry ratios to assist in monitoring the financial condition of insurance companies[78] Employee and Operational Information - As of December 31, 2024, the company had nine full-time employees, with no collective bargaining agreements in place[79] - The company maintains an internet website where it provides access to its financial reports and filings with the SEC[80] Reinsurance and Credit Risk - The net amount due from reinsurers decreased from $112.3 million in 2023 to $97.5 million in 2024[319] - The company primarily invests in investment-grade securities to manage credit risk[317] - The company selects reinsurers with an A.M. Best rating of "A-" or better to mitigate credit risk[318] - The company remains obligated to pay claims regardless of reinsurer performance under reinsurance agreements[318] - The company evaluates the financial condition of reinsurers throughout the duration of agreements to manage credit risk[318] Inflation Impact - Inflation is not believed to have a material effect on operations, except for its impact on interest rates and claims costs[320] - The company considers inflation effects in pricing and estimating reserves for unpaid losses and loss adjustment expenses (LAE)[320]

Financial Performance - Conifer Holdings reported a net income of $53.3 million for Q3 2024, translating to $4.32 per share[2][11]. - Adjusted operating loss for the quarter was $7.4 million, or $0.60 per share[2][12]. - The company anticipates a significant decline in revenue following the sale of its insurance agency operations[3][5]. - Adjusted operating loss for the three months ended September 30, 2024, was $(7,352) thousand compared to $(4,275) thousand for the same period in 2023, indicating a worsening of approximately 72.8%[17]. - The company reported a net income allocable to common shareholders of $52,788 thousand for the three months ended September 30, 2024, compared to a net loss of $(2,706) thousand for the same period in 2023[19]. - Diluted income per common share for the three months ended September 30, 2024, was $4.32, a significant increase from $(0.22) in the prior year[17]. Revenue and Premiums - Gross written premiums decreased by 60.9% year-over-year to $15 million, primarily due to the exit from commercial lines[4][5]. - Net earned premiums fell by 39.1% to $14.6 million compared to the previous year[4]. - Personal lines gross written premiums increased by 10.1% to $11.1 million, representing 73% of total gross written premiums[9]. - Net earned premiums for the three months ended September 30, 2024, were $14,601 thousand, a decrease from $23,979 thousand for the same period in 2023, representing a decline of approximately 39.5%[19]. - Total revenue and other income for the three months ended September 30, 2024, was $16,017 thousand, down from $25,440 thousand in the prior year, reflecting a decrease of about 37.0%[19]. Assets and Liabilities - Total assets as of September 30, 2024, were $299,852 thousand, a decrease from $315,606 thousand as of December 31, 2023, representing a decline of about 5.0%[18]. - Total liabilities decreased to $250,801 thousand as of September 30, 2024, from $312,717 thousand at the end of 2023, reflecting a reduction of approximately 19.8%[18]. - Cash and cash equivalents increased to $32,389 thousand as of September 30, 2024, compared to $10,663 thousand at the end of 2023, indicating a growth of approximately 203.5%[18]. Other Financial Metrics - The loss ratio for the combined business was 143.1%, up from 120.8% in the prior year[10]. - Interest expense for the three months ended September 30, 2024, was $2,275 thousand, up from $855 thousand in the same period last year, representing an increase of about 166.5%[19]. - The company expects commercial lines to represent 10% or less of written premiums going forward[3].

Core Viewpoint - Conifer Holdings, Inc. reported a significant financial shift following the sale of its insurance agency operations, resulting in a net income of $53.3 million for Q3 2024, despite an adjusted operating loss of $7.4 million [2][12]. Financial Highlights - The company achieved a $61 million gain from the sale of its insurance agency operations [2]. - Adjusted operating loss was reported at $7.4 million, equating to a loss of $0.60 per share [2][13]. - Net income for the period was $53.3 million, or $4.32 per share [12][25]. Premiums and Revenue - Gross written premiums decreased by 60.9% to $15.1 million compared to $38.5 million in Q3 2023 [4][6]. - Net earned premiums fell by 39.1% to $14.6 million from $24 million in the prior year [4][24]. - The company anticipates that commercial lines will represent 10% or less of written premiums going forward, focusing instead on personal lines, particularly homeowners insurance in Texas and the Midwest [3][6]. Commercial Lines Business - The commercial lines business saw a drastic decline, with gross written premiums down 85.9% to $4 million in Q3 2024 [7][8]. - The loss ratio for commercial lines increased significantly to 168% compared to 88.8% in the previous year [7][11]. - The company expects continued revenue decline in commercial lines following the sale of its agency operations [6][8]. Personal Lines Business - Personal lines gross written premiums increased by 10.1% to over $11 million, representing 73% of total gross written premiums for the quarter [10][11]. - The combined ratio for personal lines improved to 100.7%, indicating a more favorable underwriting environment compared to 121.7% in Q3 2023 [10][11]. Investment Income - Net investment income remained stable at $1.4 million for both Q3 2024 and Q3 2023 [11][24]. - The company reported a loss of $29,000 from changes in the fair value of equity investments, an improvement from a loss of $87,000 in the prior year [12][24]. Management Commentary - CEO Brian Roney highlighted the successful sale of the insurance agency operations and the strategic focus on personal lines insurance moving forward [2].

Financial Performance - Net earned premiums for the three months ended September 30, 2024, were $14,601,000, down 38.8% from $23,979,000 in the same period of 2023[10] - Total revenue and other income decreased to $16,017,000 for the three months ended September 30, 2024, compared to $25,440,000 for the same period in 2023, a decline of 37.0%[10] - The company reported a net loss from continuing operations of $6,886,000 for the three months ended September 30, 2024, compared to a loss of $4,362,000 in the same period of 2023[10] - The net income (loss) for the nine months ended September 30, 2024, was $(9,044,000), compared to $(7,861,000) for the same period in 2023, indicating a worsening financial performance[20] - The company reported a net loss from continuing operations of $10,895 million for the nine months ended September 30, 2024, compared to a loss of $8,325 million for the same period in 2023[78] - The company reported a segment loss of $(6,294) for the three months ended September 30, 2024, compared to a loss of $(5,020) for the same period in 2023[75] - The total segment loss increased to $7.3 million in Q3 2024 from $5.3 million in Q3 2023[105] Discontinued Operations - Net income from discontinued operations was $60,176,000 for the three months ended September 30, 2024, compared to $1,656,000 in the same period of 2023, indicating a significant increase[10] - The net income from discontinued operations for the nine months ended September 30, 2024, was $58,773 million, compared to $1,417 million in 2023[35] - The company recognized a gain of $54,767 million on the sale of CIS and $6,459 million on the sale of SSU during the three months ended September 30, 2024[34] - The company completed the sale of Conifer Insurance Services on August 30, 2024, for a total consideration of $59.5 million, which includes an initial cash consideration of $46.6 million and contingent payments[30] Assets and Liabilities - Total assets decreased from $315,606,000 on December 31, 2023, to $299,852,000 as of September 30, 2024, representing a decline of approximately 5.0%[7] - Total liabilities decreased from $312,717,000 on December 31, 2023, to $250,801,000 as of September 30, 2024, a reduction of approximately 19.8%[7] - The company’s accumulated deficit improved from $(86,683,000) on December 31, 2023, to $(37,771,000) as of September 30, 2024[7] - Total liabilities as of August 30, 2024, were $39,421 million, compared to $401 million on December 31, 2023[32] - The company’s total liabilities increased to $98,162 million as of September 30, 2024, compared to $97,913 million at December 31, 2022[19] Cash Flow and Investments - The company experienced a significant increase in cash provided by investing activities, totaling $50,528,000 for the nine months ended September 30, 2024, compared to a cash outflow of $(4,040,000) in the same period of 2023[20] - The company reported a significant increase in cash flows from operating activities, with a net cash provided of $6,722 million for the nine months ended September 30, 2024, compared to a net cash used of $5,550 million in the same period of the previous year[20] - The company reported total cash at the end of the period of $32,389 million, a substantial increase from $14,361 million at the beginning of the period[20] - The company reported gross unrealized losses from available-for-sale securities were $10.2 million as of September 30, 2024, due to market conditions and interest rate changes[38] - The company held 282 issues of debt securities with unrealized losses as of September 30, 2024[40] Premiums and Underwriting - Gross written premiums for the three months ended September 30, 2024, totaled $15,086, a decrease from $38,548 in the same period of 2023[75] - The Company exited the Oklahoma business in mid-2024 and significantly reduced writings in commercial lines[75] - For the nine months ended September 30, 2024, gross written premiums totaled $58,370 million, a decrease from $119,436 million for the same period in 2023[78] - The underwriting combined ratio was 143.1% for Q3 2024, up from 120.8% in Q3 2023, indicating an underwriting loss[93] - The company has significantly reduced its writings in commercial lines, with gross written premiums from Texas, Michigan, Oklahoma, and Indiana accounting for 84.2% of total gross written premiums for the nine months ended September 30, 2024[75] Stock and Equity - The company redeemed all of its $6.0 million Series A Preferred Stock on August 30, 2024, incurring a redemption premium of $397,000[69] - The company’s stock-based compensation expense for the nine months ended September 30, 2024, was $62 million, down from $147 million in the same period of 2023[20] - The book value per common share outstanding increased to $4.01 for the nine months ended September 30, 2024, compared to $0.24 for the same period in 2023[108] Risk and Compliance - The company does not believe there is a reasonable possibility of any material loss exceeding amounts already accrued from ongoing legal claims[74] - The company has no contracts referencing LIBOR and does not expect new accounting guidance to have a material impact on its financial statements[27] - The company is currently evaluating the impact of new accounting standards related to income taxes and segment reporting, effective after December 15, 2024[27] Miscellaneous - The company reported that actual results may differ from estimates made in the financial statements, highlighting the inherent uncertainty in financial reporting[24] - The management's discussion and analysis should be read in conjunction with the consolidated financial statements and related notes included in the quarterly report[80] - The company filed its annual report on Form 10-K with the U.S. Securities and Exchange Commission on April 1, 2024[80]

Core Insights - Bishop Street Underwriters has acquired Conifer Insurance Services, marking its entry into commercial lines and expanding its multi-line MGA platform [1][3] - Conifer operates in specialty lines, including small and medium-sized enterprises, hospitality, and auto dealers, presenting growth opportunities for Bishop Street [2] - The acquisition is part of Bishop Street's strategic expansion, aiming to leverage Conifer's infrastructure for geographic expansion and new product development [3][4] Company Overview - Bishop Street Underwriters, a portfolio company of RedBird Capital, focuses on partnering with MGAs and niche underwriting teams to build a differentiated platform [5] - RedBird Capital Partners manages $10 billion in assets and integrates private equity investing with a business-building mandate across financial services, sports, and media [6]