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

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

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

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

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

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

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

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