A.M. Best reported it has placed under review with negative implications the Financial Strength Rating (FSR) of B++ (Good) and the Long-Term Issuer Credit Rating (Long-Term ICR) of “bbb” of Birmingham, Mich.-based Conifer Insurance Co. (Conifer); the FSR of B+ (Good) and the Long-Term ICR of “bbb-” of Conifer’s affiliate, White Pine Insurance Co. (White Pine); and the Long-Term ICR of “bb” of its parent holding company, Conifer Holdings Inc.
These rating actions reflect the continued adverse loss reserve development reported by Conifer through 2017, the prevailing challenges associated with this continued adverse development, and the earnings and capital strain placed on CHI and its subsidiaries as a result.
The under review status considers a host of strategic initiatives and corrective actions that management plans to execute sometime in the third quarter of 2017. Upon execution, these actions could alleviate many of A.M. Best’s concerns, and place CHI and its subsidiaries on more solid financial footing. If these initiatives fail to get executed, the ratings are likely to be downgraded, hence the negative implications.
After significant improvement in operating profitability in 2015, Conifer had a setback in 2016 due to adverse reserve development primarily in its commercial auto and commercial multi-peril lines. Through the second quarter of 2017, reserves continue to develop adversely despite much needed reserve strengthening in 2016.
Management is optimistic that operating results will improve in the medium term as the company gains economies of scale and grows into its infrastructure, and as management looks to regain its position as a focused niche commercial specialty insurer.
The ratings will remain under review pending the execution of these new initiatives and discussions with management. Timely and satisfactory execution of these initiatives and continuing to meet its financial plan would likely lead to an affirmation of all of the respective current ratings. Inability to execute or material deviations from the plan would likely result in negative rating pressure.
In July, Conifer Holdings agreed to sell the book of its HomeValue business produced through Sycamore Insurance Agency to Texas-based RHP General Agency Inc. As part of this renewal rights transaction, the entire team at Sycamore Waco will become employees of RHP General Agency.
The company reported in its report on second quarter 2017 results that gross written premiums had decreased by 9.2 percent to $27.0 million; net earned premiums increased 13 percent to $24.5 million; and the company’s combined ratio was 110.4 percent, compared to 109.7 percent in the prior year period and 109.1 percent in the first quarter of 2017.
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