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EX-32.2 - EX-32.2 - Conifer Holdings, Inc.cnfr-ex322_7.htm
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EX-31.2 - EX-31.2 - Conifer Holdings, Inc.cnfr-ex312_9.htm
EX-31.1 - EX-31.1 - Conifer Holdings, Inc.cnfr-ex311_6.htm

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended March 31, 2021

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from           to          

Commission file number 001-37536

 

Conifer Holdings, Inc.

(Exact name of registrant as specified in its charter)

 

Michigan

 

27-1298795

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

 

 

550 West Merrill Street, Suite 200

 

 

Birmingham, Michigan

 

48009

(Address of principal executive offices)

 

(Zip code)

 

(248) 559-0840

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

Common Stock, no par value

 

CNFR

 

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer 

Accelerated filer 

Non-accelerated filer 

Smaller reporting company 

Emerging growth company 

 

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes No

The number of outstanding shares of the registrant’s common stock, no par value, as of May 11, 2021, was 9,681,728.

 

 

 

 


 

 

CONIFER HOLDINGS, INC. AND SUBSIDIARIES

Form 10-Q

INDEX

 

 

Page No.

Part I — Financial Information

 

Item 1 — Financial Statements

3

Consolidated Balance Sheets (Unaudited)

3

Consolidated Statements of Operations (Unaudited)

4

Consolidated Statements of Comprehensive Income (Loss) (Unaudited)

5

Consolidated Statements of Changes in Shareholders’ Equity (Unaudited)

6

Consolidated Statements of Cash Flows (Unaudited)

7

Notes to Consolidated Financial Statements (Unaudited)

8

Item 2 — Management’s Discussion and Analysis of Financial Condition and Results of Operations

21

Item 3 — Quantitative and Qualitative Disclosures about Market Risk

29

Item 4 — Controls and Procedures

30

Part II — Other Information

 

Item 1 — Legal Proceedings

31

Item 1A — Risk Factors

31

Item 2 — Unregistered Sales of Equity Securities and Use of Proceeds

31

Item 6 — Exhibits

32

Signatures

33

 

 

 

2


 

 

PART 1 - FINANCIAL INFORMATION

ITEM 1 - FINANCIAL STATEMENTS

CONIFER HOLDINGS, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

(dollars in thousands)

 

 

 

March 31,

2021

 

 

December 31,

2020

 

 

 

(Unaudited)

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

Investment securities:

 

 

 

 

 

 

 

 

Debt securities, at fair value (amortized cost of $148,434 and $149,954, respectively)

 

$

147,629

 

 

$

151,999

 

Equity securities, at fair value (cost of $19,217 and $16,912, respectively)

 

 

19,638

 

 

 

17,891

 

Short-term investments, at fair value

 

 

12,710

 

 

 

13,317

 

Total investments

 

 

179,977

 

 

 

183,207

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

4,429

 

 

 

8,193

 

Premiums and agents' balances receivable, net

 

 

19,328

 

 

 

20,162

 

Reinsurance recoverables on unpaid losses

 

 

26,559

 

 

 

24,218

 

Reinsurance recoverables on paid losses

 

 

3,923

 

 

 

2,138

 

Prepaid reinsurance premiums

 

 

3,653

 

 

 

1,316

 

Deferred policy acquisition costs

 

 

12,459

 

 

 

12,243

 

Other assets

 

 

9,359

 

 

 

10,120

 

Total assets

 

$

259,687

 

 

$

261,597

 

 

 

 

 

 

 

 

 

 

Liabilities and Shareholders' Equity

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

Unpaid losses and loss adjustment expenses

 

$

118,676

 

 

$

111,270

 

Unearned premiums

 

 

58,350

 

 

 

56,224

 

Debt

 

 

39,075

 

 

 

40,997

 

Accounts payable and accrued expenses

 

 

6,610

 

 

 

8,693

 

Total liabilities

 

 

222,711

 

 

 

217,184

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shareholders' equity:

 

 

 

 

 

 

 

 

Common stock, no par value (100,000,000 shares authorized; 9,681,728 issued and outstanding, respectively)

 

 

92,552

 

 

 

92,486

 

Accumulated deficit

 

 

(53,621

)

 

 

(48,985

)

Accumulated other comprehensive income (loss)

 

 

(1,955

)

 

 

912

 

Total shareholders' equity

 

 

36,976

 

 

 

44,413

 

Total liabilities and shareholders' equity

 

$

259,687

 

 

$

261,597

 

 

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

3


 

CONIFER HOLDINGS, INC. AND SUBSIDIARIES

Consolidated Statements of Operations (Unaudited)

(dollars in thousands, except per share data)

 

 

 

Three Months Ended

March 31,

 

 

 

2021

 

 

2020

 

Revenue

 

 

 

 

 

 

 

 

Premiums

 

 

 

 

 

 

 

 

Gross earned premiums

 

$

28,247

 

 

 

26,053

 

Ceded earned premiums

 

 

(5,412

)

 

 

(4,036

)

Net earned premiums

 

 

22,835

 

 

 

22,017

 

Net investment income

 

 

532

 

 

 

954

 

Net realized investment gains

 

 

2,924

 

 

 

928

 

Change in fair value of equity securities

 

 

(540

)

 

 

(3,086

)

Other gains

 

 

 

 

 

115

 

Other income

 

 

556

 

 

 

658

 

Total revenue

 

 

26,307

 

 

 

21,586

 

 

 

 

 

 

 

 

 

 

Expenses

 

 

 

 

 

 

 

 

Losses and loss adjustment expenses, net

 

 

19,362

 

 

 

14,269

 

Policy acquisition costs

 

 

6,750

 

 

 

6,303

 

Operating expenses

 

 

4,349

 

 

 

5,045

 

Interest expense

 

 

721

 

 

 

731

 

Total expenses

 

 

31,182

 

 

 

26,348

 

 

 

 

 

 

 

 

 

 

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

 

 

(4,875

)

 

 

(4,762

)

Equity earnings in Affiliate, net of tax

 

 

248

 

 

 

50

 

Income tax expense

 

 

9

 

 

 

13

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

(4,636

)

 

$

(4,725

)

 

 

 

 

 

 

 

 

 

Earnings (loss) per common share, basic and diluted

 

$

(0.48

)

 

$

(0.49

)

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding, basic and diluted

 

 

9,681,728

 

 

 

9,592,774

 

 

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

4


 

CONIFER HOLDINGS, INC. AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income (Loss) (Unaudited)

(dollars in thousands)

 

 

 

Three Months Ended

March 31,

 

 

 

2021

 

 

2020

 

Net income (loss)

 

$

(4,636

)

 

$

(4,725

)

 

 

 

 

 

 

 

 

 

Other comprehensive income (loss), net of tax:

 

 

 

 

 

 

 

 

Unrealized investment gains (losses):

 

 

 

 

 

 

 

 

Unrealized investment gains (losses) during the period

 

 

(1,924

)

 

 

(1,315

)

Income tax (benefit) expense

 

 

 

 

 

 

Unrealized investment gains (losses), net of tax

 

 

(1,924

)

 

 

(1,315

)

 

 

 

 

 

 

 

 

 

Less: reclassification adjustments to:

 

 

 

 

 

 

 

 

Net realized investment gains (losses) included in net income (loss)

 

 

943

 

 

 

384

 

Income tax (benefit) expense

 

 

 

 

 

 

Total reclassifications included in net income (loss), net of tax

 

 

943

 

 

 

384

 

 

 

 

 

 

 

 

 

 

Other comprehensive income (loss)

 

 

(2,867

)

 

 

(1,699

)

 

 

 

 

 

 

 

 

 

Total comprehensive income (loss)

 

$

(7,503

)

 

$

(6,424

)

 

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

5


 

CONIFER HOLDINGS, INC. AND SUBSIDIARIES

Consolidated Statements of Changes in Shareholders' Equity (Unaudited)

(dollars in thousands)

 

 

 

No Par, Common Stock

 

 

Retained

Earnings

 

 

Accumulated

Other

Comprehensive

 

 

Total

Shareholders'

 

 

 

Shares

 

 

Amount

 

 

(Accumulated)

 

 

Income (Loss)

 

 

Equity

 

Balances at December 31, 2020

 

 

9,681,728

 

 

$

92,486

 

 

$

(48,985

)

 

$

912

 

 

$

44,413

 

Net income (loss)

 

 

 

 

 

 

 

 

(4,636

)

 

 

 

 

 

(4,636

)

Stock-based compensation expense

 

 

 

 

 

66

 

 

 

 

 

 

 

 

 

66

 

Other comprehensive income (loss)

 

 

 

 

 

 

 

 

 

 

 

(2,867

)

 

 

(2,867

)

Balances at March 31, 2021

 

 

9,681,728

 

 

$

92,552

 

 

$

(53,621

)

 

$

(1,955

)

 

$

36,976

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at December 31, 2019

 

 

9,592,861

 

 

$

91,816

 

 

$

(49,580

)

 

$

489

 

 

$

42,725

 

Net income (loss)

 

 

 

 

 

 

 

 

(4,725

)

 

 

 

 

 

(4,725

)

Repurchase of common stock

 

 

(700

)

 

 

(2

)

 

 

 

 

 

 

 

 

(2

)

Restricted stock unit expense

 

 

 

 

 

239

 

 

 

 

 

 

 

 

 

239

 

Other comprehensive income (loss)

 

 

 

 

 

 

 

 

 

 

 

(1,699

)

 

 

(1,699

)

Balances at March 31, 2020

 

 

9,592,161

 

 

$

92,053

 

 

$

(54,305

)

 

$

(1,210

)

 

$

36,538

 

 

 

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

6


 

CONIFER HOLDINGS, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows (Unaudited)

(dollars in thousands)

 

 

 

Three Months Ended March 31,

 

 

 

2021

 

 

2020

 

Cash Flows From Operating Activities

 

 

 

 

 

 

 

 

Net income (loss)

 

 

(4,636

)

 

$

(4,725

)

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

109

 

 

 

42

 

Amortization of bond premium and discount, net

 

 

120

 

 

 

127

 

Net realized investment (gains) losses

 

 

(2,924

)

 

 

(928

)

Change in fair value of equity securities

 

 

540

 

 

 

3,086

 

Stock based compensation expenses

 

 

66

 

 

 

239

 

Equity earnings in Affiliate, net of tax

 

 

(248

)

 

 

(50

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

(Increase) decrease in:

 

 

 

 

 

 

 

 

Premiums and agents' balances and other receivables

 

 

827

 

 

 

1,676

 

Reinsurance recoverables

 

 

(6,126

)

 

 

1,966

 

Prepaid reinsurance premiums

 

 

(2,337

)

 

 

253

 

Deferred policy acquisition costs

 

 

(216

)

 

 

398

 

Other assets

 

 

197

 

 

 

(756

)

Increase (decrease) in:

 

 

 

 

 

 

 

 

Unpaid losses and loss adjustment expenses

 

 

9,406

 

 

 

2,411

 

Unearned premiums

 

 

2,126

 

 

 

(969

)

Reinsurance premiums payable

 

 

 

 

 

833

 

Accounts payable and other liabilities

 

 

(397

)

 

 

412

 

Net cash provided by (used in) operating activities

 

 

(3,493

)

 

 

4,015

 

Cash Flows From Investing Activities

 

 

 

 

 

 

 

 

Purchase of investments

 

 

(61,370

)

 

 

(105,045

)

Proceeds from maturities and redemptions of investments

 

 

5,416

 

 

 

6,216

 

Proceeds from sales of investments

 

 

57,703

 

 

 

94,742

 

Purchases of property and equipment

 

 

(20

)

 

 

(46

)

Net cash provided by (used in) investing activities

 

 

1,729

 

 

 

(4,133

)

Cash Flows From Financing Activities

 

 

 

 

 

 

 

 

Repurchase of common stock

 

 

 

 

 

(2

)

Repurchase of senior unsecured notes

 

 

 

 

 

(244

)

Borrowings under debt arrangements

 

 

3,000

 

 

 

1,000

 

Repayment of borrowings under debt arrangements

 

 

(5,000

)

 

 

 

Net cash provided by (used in) financing activities

 

 

(2,000

)

 

 

754

 

Net increase (decrease) in cash

 

 

(3,764

)

 

 

636

 

Cash at beginning of period

 

 

8,193

 

 

 

7,464

 

Cash at end of period

 

$

4,429

 

 

$

8,100

 

Supplemental Disclosure of Cash Flow Information:

 

 

 

 

 

 

 

 

Interest paid

 

$

722

 

 

$

643

 

 

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

 

 

7


 

 

CONIFER HOLDINGS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

 

1. Summary of Significant Accounting Policies

Basis of Presentation and Management Representation

The consolidated financial statements include accounts, after elimination of intercompany accounts and transactions, of Conifer Holdings, Inc. (the “Company” or “Conifer”), its wholly owned subsidiaries, Conifer Insurance Company ("CIC"), White Pine Insurance Company ("WPIC"), Red Cedar Insurance Company ("RCIC"), and Sycamore Insurance Agency, Inc. ("SIA").  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."

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”), which differ from statutory accounting practices prescribed or permitted for insurance companies by regulatory authorities.  The Company has applied the rules and regulations of the United States Securities and Exchange Commission (“SEC”) regarding interim financial reporting and therefore the consolidated financial statements do not include all of the information and notes required by GAAP for annual financial statements.  In the opinion of management, all adjustments, consisting of items of a normal recurring nature, necessary for a fair presentation of the consolidated interim financial statements, have been included.

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, 2020, as filed with the SEC.  

The results of operations for the three months ended March 31, 2021, are not necessarily indicative of the results expected for the year ended December 31, 2021.  In addition, there are risks and uncertainties associated with the novel coronavirus ("COVID-19") and the impact it may have on our business, results of operations and financial condition. The COVID-19 pandemic has negatively impacted the U.S. and global economies, created significant volatility and disruption in the capital markets, dramatically increased unemployment levels and has fueled concerns that it has led to a global recession. Depending on the duration and severity of the pandemic, we foresee the potential for adverse impacts related to, among other things: (i) sales results; (ii) insurance product margin; (iii) net investment income; (iv) invested assets; (v) regulatory capital; (vi) liabilities for insurance products; (vii) access to capital markets; and (viii) the present value of future profits. The full extent to which COVID-19 will impact our business, results of operations and financial condition remains uncertain.

Business

 

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: commercial lines, personal lines, and agency business. The Company underwrites a variety of specialty insurance products, including property, general liability, liquor liability, automobile, and homeowners and dwelling policies. 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, Michigan and Pennsylvania.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  While management believes the amounts included in the consolidated financial statements reflect management's best estimates and assumptions, actual results may differ from these estimates.

Cash, Cash Equivalents, and Short-term Investments

Cash consists of cash deposits in banks, generally in operating accounts.  Cash equivalents consist of money-market funds that are specifically used as overnight investments tied to cash deposit accounts.  Short-term investments, consisting of money-market funds, are classified as investments in the consolidated balance sheets as they relate to the Company’s investment activities.

8


 

Recently Issued Accounting Guidance

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326), which amends the current methodology and timing for recognizing credit losses.  This amendment will replace the current GAAP "incurred loss" methodology for credit losses with a methodology based on expected credit losses.  The new guidance will also require expanded consideration of a broader range of reasonable and increased supportable information for the credit loss estimates.  This ASU is effective for annual and interim reporting periods beginning after December 15, 2022.  Management is currently evaluating the impact of the guidance.  The adoption of this guidance is not expected to have a material impact on the Company's consolidated financial statements.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform: Facilitation of the Effects of Reference Rate Reform on Financial Reporting.  This guidance provides optional expedients and exceptions that are intended to ease the burden of updating contracts to contain a new reference rate due to the discontinuation of the London Inter-Bank Offered Rate (LIBOR).  This guidance is available immediately and may be implemented in any period prior to the guidance expiration on December 31, 2022. Management does not expect the new guidance to have a material impact on the Company’s consolidated financial statements. 

 

2. Investments

The cost or amortized cost, gross unrealized gain or loss, and estimated fair value of the investments in securities classified as available for sale at March 31, 2021 and December 31, 2020, were as follows (dollars in thousands):

 

 

 

March 31, 2021

 

 

 

Cost or

 

 

Gross Unrealized

 

 

Estimated

 

 

 

Amortized Cost

 

 

Gains

 

 

Losses

 

 

Fair Value

 

Debt Securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Government

 

$

22,015

 

 

$

172

 

 

$

(27

)

 

$

22,160

 

State and local government

 

 

31,896

 

 

 

584

 

 

 

(601

)

 

 

31,879

 

Corporate debt

 

 

16,379

 

 

 

172

 

 

 

(410

)

 

 

16,141

 

Asset-backed securities

 

 

31,905

 

 

 

36

 

 

 

(118

)

 

 

31,823

 

Mortgage-backed securities

 

 

36,724

 

 

 

184

 

 

 

(861

)

 

 

36,047

 

Commercial mortgage-backed securities

 

 

1,849

 

 

 

40

 

 

 

(32

)

 

 

1,857

 

Collateralized mortgage obligations

 

 

7,666

 

 

 

91

 

 

 

(35

)

 

 

7,722

 

Total debt securities available for sale

 

$

148,434

 

 

$

1,279

 

 

$

(2,084

)

 

$

147,629

 

 

 

 

December 31, 2020

 

 

 

Cost or

 

 

Gross Unrealized

 

 

Estimated

 

 

 

Amortized Cost

 

 

Gains

 

 

Losses

 

 

Fair Value

 

Debt Securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Government

 

$

30,743

 

 

$

225

 

 

$

(1

)

 

$

30,967

 

State and local government

 

 

32,253

 

 

 

1,040

 

 

 

(28

)

 

 

33,265

 

Corporate debt

 

 

19,015

 

 

 

311

 

 

 

(23

)

 

 

19,303

 

Asset-backed securities

 

 

20,987

 

 

 

49

 

 

 

(73

)

 

 

20,963

 

Mortgage-backed securities

 

 

38,512

 

 

 

345

 

 

 

(3

)

 

 

38,854

 

Commercial mortgage-backed securities

 

 

2,083

 

 

 

65

 

 

 

(22

)

 

 

2,126

 

Collateralized mortgage obligations

 

 

6,361

 

 

 

161

 

 

 

(1

)

 

 

6,521

 

Total debt securities available for sale

 

$

149,954

 

 

$

2,196

 

 

$

(151

)

 

$

151,999

 

 

9


 

 

The following table summarizes the aggregate fair value and gross unrealized losses, by security type, of the available-for-sale securities in unrealized loss positions. 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):

 

 

 

March 31, 2021

 

 

 

Less than 12 months

 

 

Greater than 12 months

 

 

Total

 

 

 

No. of

Issues

 

 

Fair Value of

Investments

with Unrealized

Losses

 

 

Gross

Unrealized

Losses

 

 

No. of

Issues

 

 

Fair Value of

Investments

with Unrealized

Losses

 

 

Gross

Unrealized

Losses

 

 

No. of

Issues

 

 

Fair Value of

Investments

with Unrealized

Losses

 

 

Gross

Unrealized

Losses

 

Debt Securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Government

 

 

5

 

 

$

7,664

 

 

$

(27

)

 

 

 

 

$

 

 

$

 

 

 

5

 

 

$

7,664

 

 

$

(27

)

State and local government

 

 

70

 

 

 

14,758

 

 

 

(601

)

 

 

 

 

 

 

 

 

 

 

 

70

 

 

 

14,758

 

 

 

(601

)

Corporate debt

 

 

13

 

 

 

9,144

 

 

 

(410

)

 

 

 

 

 

 

 

 

 

 

 

13

 

 

 

9,144

 

 

 

(410

)

Asset-backed securities

 

 

14

 

 

 

17,644

 

 

 

(114

)

 

 

7

 

 

 

4,578

 

 

 

(4

)

 

 

21

 

 

 

22,222

 

 

 

(118

)

Mortgage-backed securities

 

 

9

 

 

 

28,941

 

 

 

(861

)

 

 

 

 

 

 

 

 

 

 

 

9

 

 

 

28,941

 

 

 

(861

)

Commercial mortgage-backed securities

 

 

 

 

 

 

 

 

 

 

 

1

 

 

 

888

 

 

 

(32

)

 

 

1

 

 

 

888

 

 

 

(32

)

Collateralized mortgage obligations

 

 

9

 

 

 

3,427

 

 

 

(34

)

 

 

1

 

 

 

81

 

 

 

(1

)

 

 

10

 

 

 

3,508

 

 

 

(35

)

Total debt securities available for sale

 

 

120

 

 

$

81,578

 

 

$

(2,047

)

 

 

9

 

 

$

5,547

 

 

$

(37

)

 

 

129

 

 

$

87,125

 

 

$

(2,084

)

 

 

 

December 31, 2020

 

 

 

Less than 12 months

 

 

Greater than 12 months

 

 

Total

 

 

 

No. of

Issues

 

 

Fair Value of

Investments

with Unrealized

Losses

 

 

Gross

Unrealized

Losses

 

 

No. of

Issues

 

 

Fair Value of

Investments

with Unrealized

Losses

 

 

Gross

Unrealized

Losses

 

 

No. of

Issues

 

 

Fair Value of

Investments

with Unrealized

Losses

 

 

Gross

Unrealized

Losses

 

Debt Securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Government

 

 

2

 

 

$

6,764

 

 

$

(1

)

 

 

 

 

$

 

 

$

 

 

 

2

 

 

$

6,764

 

 

$

(1

)

State and local government

 

 

16

 

 

 

3,905

 

 

 

(28

)

 

 

 

 

 

 

 

 

 

 

 

16

 

 

 

3,905

 

 

 

(28

)

Corporate debt

 

 

2

 

 

 

1,051

 

 

 

(23

)

 

 

 

 

 

 

 

 

 

 

 

2

 

 

 

1,051

 

 

 

(23

)

Asset-backed securities

 

 

7

 

 

 

6,050

 

 

 

(34

)

 

 

11

 

 

 

6,551

 

 

 

(39

)

 

 

18

 

 

 

12,601

 

 

 

(73

)

Mortgage-backed securities

 

 

2

 

 

 

1,652

 

 

 

(3

)

 

 

 

 

 

 

 

 

 

 

 

2

 

 

 

1,652

 

 

 

(3

)

Commercial mortgage-backed securities

 

 

1

 

 

 

899

 

 

 

(22

)

 

 

 

 

 

 

 

 

 

 

 

1

 

 

 

899

 

 

 

(22

)

Collateralized mortgage obligations

 

 

2

 

 

 

195

 

 

 

(1

)

 

 

 

 

 

 

 

 

 

 

 

2

 

 

 

195

 

 

 

(1

)

Total debt securities available for sale

 

 

32

 

 

$

20,516

 

 

$

(112

)

 

 

11

 

 

$

6,551

 

 

$

(39

)

 

 

43

 

 

$

27,067

 

 

$

(151

)

 

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 three months ended March 31, 2021 and 2020.

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

 

 

 

Three Months Ended

March 31,

 

 

 

2021

 

 

2020

 

Debt securities

 

$

600

 

 

$

867

 

Equity securities

 

 

48

 

 

 

55

 

Cash, cash equivalents and short-term investments

 

 

1

 

 

 

119

 

Total investment income

 

 

649

 

 

 

1,041

 

Investment expenses

 

 

(117

)

 

 

(87

)

Net investment income

 

$

532

 

 

$

954

 

 

10


 

 

The following table summarizes the gross realized gains and losses from sales, calls and maturities of available-for-sale debt and equity securities (dollars in thousands):

 

 

 

Three Months Ended

March 31,

 

 

 

2021

 

 

2020

 

Debt securities:

 

 

 

 

 

 

 

 

Gross realized gains

 

$

27

 

 

$

720

 

Gross realized losses

 

 

(6

)

 

 

(4

)

Total debt securities

 

 

21

 

 

 

716

 

Equity securities:

 

 

 

 

 

 

 

 

Gross realized gains

 

 

2,903

 

 

 

344

 

Gross realized losses

 

 

 

 

 

(132

)

Total equity securities

 

 

2,903

 

 

 

212

 

Total net realized investment gains (losses)

 

$

2,924

 

 

$

928

 

 

Proceeds from the sales of available-for-sale debt securities were $14.2 million and $23.2 million for the three months ended March 31, 2021 and 2020, respectively.  The gross realized gains and losses from the sales of available-for-sale debt securities for the three months ended March 31, 2021, were $27,000 and $6,000, respectively.  The gross realized gains and losses from the sales of available-for-sale debt securities for the three months ended March 31, 2020, were $719,000 and $0, respectively.  

As of March 31, 2021 and 2020, there were $0 and $6.5 million of payables from securities purchased, respectively.  There were $3,000 and $7,000 of receivables from securities sold as of March 31, 2021, and 2020, respectively.

The Company carries other equity investments that do not have a readily determinable fair value at cost, less impairment or observable changes in price.  We review these investments for impairment during each reporting period.  There were no impairments or observable changes in price recorded during 2021 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 $1.3 million and $1.2 million as of March 31, 2021 and December 31, 2020, respectively.  

The table below summarizes the amortized cost and fair value of available-for-sale debt securities by contractual maturity at March 31, 2021.  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):

 

 

 

Amortized

Cost

 

 

Estimated

Fair Value

 

Due in one year or less

 

$

9,062

 

 

$

9,175

 

Due after one year through five years

 

 

29,289

 

 

 

29,744

 

Due after five years through ten years

 

 

13,602

 

 

 

13,324

 

Due after ten years

 

 

18,337

 

 

 

17,937

 

Securities with contractual maturities

 

 

70,290

 

 

 

70,180

 

Asset-backed securities

 

 

31,905

 

 

 

31,823

 

Mortgage-backed securities

 

 

36,724

 

 

 

36,047

 

Commercial mortgage-backed securities

 

 

1,849

 

 

 

1,857

 

Collateralized mortgage obligations

 

 

7,666

 

 

 

7,722

 

Total debt securities

 

$

148,434

 

 

$

147,629

 

At March 31, 2021 and December 31, 2020, the Insurance Company Subsidiaries had $8.8 million on deposit in trust accounts to meet the deposit requirements of various state insurance departments.  At March 31, 2021 and December 31, 2020, the Company had $67.2 million and $67.6 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.

 


11


 

 

3. Fair Value Measurements

The Company’s financial instruments include assets and liabilities carried at fair value, as well as assets and liabilities carried at cost or amortized cost but disclosed at fair value in these consolidated financial statements.  Fair value is defined as the price that would be received for an asset or paid to transfer a liability in the principally most advantageous market for the asset or liability in an orderly transaction between market participants.  In determining fair value, the Company applies the market approach, which uses prices and other relevant data based on market transactions involving identical or comparable assets and liabilities.  The inputs to valuation techniques used to measure fair value are prioritized into a three-level hierarchy.  The hierarchy gives the highest priority to quoted prices from sources independent of the reporting entity (“observable inputs”) and the lowest priority to prices determined by the reporting entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (“unobservable inputs”).  The fair value hierarchy is as follows:

Level 1—Valuations that are based on quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2—Valuations that are based on observable inputs (other than Level 1 prices) such as quoted prices for similar assets or liabilities at the measurement date; quoted prices in markets that are not active; or other inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability.  The Level 2 financial instruments also include our line of credit and our Paycheck Protection Program loan.  

Level 3—Unobservable inputs that are supported by little or no market activity.  The unobservable inputs represent the Company’s best assumption of how market participants would price the assets or liabilities.

Net Asset Value (NAV)—The fair values of investment company limited partnership investments are based on the capital account balances reported by the investment funds subject to their management review and adjustment. 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 March 31, 2021 and December 31, 2020 (dollars in thousands):

 

 

 

March 31, 2021

 

 

 

Fair Value Measurements

 

 

 

Total

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Debt Securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Government

 

$

22,160

 

 

$

 

 

$

22,160

 

 

$

 

State and local government

 

 

31,879

 

 

 

 

 

 

31,879

 

 

 

 

Corporate debt

 

 

16,141

 

 

 

 

 

 

16,141

 

 

 

 

Asset-backed securities

 

 

31,823

 

 

 

 

 

 

31,823

 

 

 

 

Mortgage-backed securities

 

 

36,047

 

 

 

 

 

 

36,047

 

 

 

 

Commercial mortgage-backed securities

 

 

1,857

 

 

 

 

 

 

1,857

 

 

 

 

Collateralized mortgage obligations

 

 

7,722

 

 

 

 

 

 

7,722

 

 

 

 

Total debt securities

 

 

147,629

 

 

 

 

 

 

147,629

 

 

 

 

Equity Securities

 

 

19,086

 

 

 

18,803

 

 

 

283

 

 

 

 

Short-term investments

 

 

12,710

 

 

 

12,710

 

 

 

 

 

 

 

Total marketable investments measured at fair value

 

$

179,425

 

 

$

31,513

 

 

$

147,912

 

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investments measured at NAV:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment in limited partnership

 

 

552

 

 

 

 

 

 

 

 

 

 

 

 

 

Total assets measured at fair value

 

$

179,977

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Senior Unsecured Notes *

 

$

24,381

 

 

$

 

 

$

24,381

 

 

$

 

Subordinated Notes *

 

 

11,593

 

 

 

 

 

 

 

 

 

11,593

 

Line of credit *

 

 

3,000

 

 

 

 

 

 

3,000

 

 

 

 

Paycheck Protection Program loan *

 

 

2,745

 

 

 

 

 

 

2,745

 

 

 

 

Total Liabilities measured at fair value

 

$

41,719

 

 

$

 

 

$

30,126

 

 

$

11,593

 

 

*

Carried at face value of debt net of unamortized debt issuance costs on the consolidated balance sheets

12


 

 

 

 

December 31, 2020

 

 

 

Fair Value Measurements

 

 

 

Total

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Debt Securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Government

 

$

30,967

 

 

$

 

 

$

30,967

 

 

$

 

State and local government

 

 

33,265

 

 

 

 

 

 

33,265

 

 

 

 

Corporate debt

 

 

19,303

 

 

 

 

 

 

19,303

 

 

 

 

Asset-backed securities

 

 

20,963

 

 

 

 

 

 

20,963

 

 

 

 

Mortgage-backed securities

 

 

38,854

 

 

 

 

 

 

38,854

 

 

 

 

Commercial mortgage-backed securities

 

 

2,126

 

 

 

 

 

 

2,126

 

 

 

 

Collateralized mortgage obligations

 

 

6,521

 

 

 

 

 

 

6,521

 

 

 

 

Total debt securities

 

 

151,999

 

 

 

 

 

 

151,999

 

 

 

 

Equity securities

 

 

17,336

 

 

 

17,053

 

 

 

283

 

 

 

 

Short-term investments

 

 

13,317

 

 

 

13,317

 

 

 

 

 

 

 

Total marketable investments measured at fair value

 

$

182,652

 

 

$

30,370

 

 

$

152,282

 

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investments measured at NAV:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment in limited partnership

 

 

555

 

 

 

 

 

 

 

 

 

 

 

 

 

Total assets measured at fair value

 

$

183,207

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Senior Unsecured Notes *

 

$

20,675

 

 

$

 

 

$

20,675

 

 

$

 

Subordinated Notes *

 

 

11,616

 

 

 

 

 

 

 

 

 

11,616

 

Line of Credit *

 

 

5,000

 

 

 

 

 

 

5,000

 

 

 

 

Paycheck Protection Program loan *

 

 

2,745

 

 

 

 

 

 

2,745

 

 

 

 

Total Liabilities measured at fair value

 

$

40,036

 

 

$

 

 

$

28,420

 

 

$

11,616

 

 

*

Carried at face value of debt net of unamortized debt issuance costs on the consolidated balance sheets

Level 1 investments consist of equity securities traded in an active exchange market.  The Company uses unadjusted quoted prices for identical instruments to measure fair value.  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 17.5% of the fair value of the total investment portfolio as of March 31, 2021.

Level 2 investments include debt securities, which consist of U.S. government agency securities, state and local municipal bonds (including those held as restricted securities), corporate debt securities, mortgage-backed and asset-backed securities.  The fair value of securities included in the Level 2 category were based on the market values obtained from a third party pricing service that were evaluated using pricing models that vary by asset class and incorporate available trade, bid and other observable market information. 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 82.2% of the fair value of the total investment portfolio as of March 31, 2021.

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.  To validate that these quoted prices are reasonable estimates of fair value, the Company performs various quantitative and qualitative procedures, such as (i) evaluation of the underlying methodologies, (ii) analysis of recent sales activity, (iii) analytical review of our fair values against current market prices and (iv) comparison of the pricing services’ fair value to other pricing services’ fair value for the same investment.  No markets for the investments were determined to be inactive at period-ends.  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 March 31, 2021 and December 31, 2020, Level 3 is entirely comprised of the Company's subordinated debt.  In determining the fair value of the subordinated debt outstanding at March 31, 2021 and December 31, 2020, 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

13


 

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 fed back into the model along with the March 31, 2021 and December 31, 2020 U.S. Treasury rates.  A new lattice was generated and the fair value was computed from the OAS.  There were no changes in assumptions of credit risk from the issuance date.

4. Deferred Policy Acquisition Costs

The Company defers costs incurred which are incremental and directly related to the successful acquisition of new or renewal insurance business, net of corresponding amounts of ceded reinsurance commissions.  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 three months ended March 31, 2021 and 2020.  The activity in deferred policy acquisition costs, net of reinsurance transactions, is as follows (dollars in thousands):

 

 

 

Three Months Ended

March 31,

 

 

 

2021

 

 

2020

 

Balance at beginning of period

 

$

12,243

 

 

$

11,906

 

 

 

 

 

 

 

 

 

 

Deferred policy acquisition costs

 

 

6,966

 

 

 

5,905

 

Amortization of policy acquisition costs

 

 

(6,750

)

 

 

(6,303

)

Net change

 

 

216

 

 

 

(398

)

 

 

 

 

 

 

 

 

 

Balance at end of period

 

$

12,459

 

 

$

11,508

 

 

5. Unpaid Losses and Loss Adjustment Expenses

The Company establishes reserves for unpaid losses and loss adjustment expenses ("LAE") which represent the estimated ultimate cost of all losses incurred that were both reported and unreported (i.e., incurred but not yet reported losses; or “IBNR”) and LAE incurred that remain unpaid at the balance sheet date.  The Company’s reserving process takes into account known facts and interpretations of circumstances and factors including the Company’s experience with similar cases, actual claims paid, historical trends involving claim payment patterns and pending levels of unpaid claims, loss management programs, product mix and contractual terms, changes in law and regulation, judicial decisions, and economic conditions. In the normal course of business, the Company may also supplement its claims processes by utilizing third party adjusters, appraisers, engineers, inspectors, and other professionals and information sources to assess and settle catastrophe and non-catastrophe related claims. The effects of inflation are implicitly considered in the reserving process.

Reserves are estimates of unpaid portions of losses that have occurred, including IBNR losses; therefore, the establishment of appropriate reserves is an inherently uncertain and complex process. The ultimate cost of losses may vary materially from recorded amounts, which are based on management’s best estimates. The highest degree of uncertainty is associated with reserves for losses incurred in the current reporting period as it contains the greatest proportion of losses that have not been reported or settled. The Company regularly updates its reserve estimates as new information becomes available and as events unfold that may affect the resolution of unsettled claims. Changes in reserve estimates, which may be material, are reported in the results of operations in the period such changes are determined to be needed and recorded.

Management believes that the reserve for losses and LAE, net of reinsurance recoverables, is appropriately established in the aggregate and adequate to cover the ultimate net cost of reported and unreported claims arising from losses which had occurred by the date of the consolidated financial statements based on available facts and in accordance with applicable laws and regulations.

14


 

The table below provides the changes in the reserves for losses and LAE, net of reinsurance recoverables, for the periods indicated as follows (dollars in thousands):

 

 

 

Three months ended

March 31,

 

 

 

2021

 

 

2020

 

Gross reserves - beginning of period

 

$

111,270

 

 

$

107,246

 

Less: reinsurance recoverables on unpaid losses

 

 

(24,218

)

 

 

(22,579

)

Net reserves - beginning of period

 

 

87,052

 

 

 

84,667

 

Add: incurred losses and LAE, net of reinsurance:

 

 

 

 

 

 

 

 

Current period

 

 

13,584

 

 

 

10,520

 

Prior period

 

 

5,778

 

 

 

3,749

 

Total net incurred losses and LAE

 

 

19,362

 

 

 

14,269

 

Deduct: loss and LAE payments, net of reinsurance:

 

 

 

 

 

 

 

 

Current period

 

 

3,180

 

 

 

874

 

Prior period

 

 

11,117

 

 

 

10,427

 

Total net loss and LAE payments

 

 

14,297

 

 

 

11,301

 

Net reserves - end of period

 

 

92,117

 

 

 

87,635

 

Plus: reinsurance recoverables on unpaid losses

 

 

26,559

 

 

 

22,022

 

Gross reserves - end of period

 

$

118,676

 

 

$

109,657

 

 

The Company’s incurred losses during the three months ended March 31, 2021 include prior-year adverse reserve development of $5.8 million.  Of the $5.8 million of adverse development, $5.2 million was related to the Company’s commercial lines of business, while $612,000 was related to the Company’s personal lines of business.  Of the $5.2 million of adverse development in the Company’s commercial lines of business, $2.7 million was experienced in the Company’s hospitality lines of business, while $2.5 million was experienced in the Company’s small business lines of business.

The Company’s incurred losses during the three months ended March 31, 2020 included prior-year adverse reserve development of $3.7 million related to the Company’s commercial lines of business.  

6. Reinsurance

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 primarily ceded all specific commercial liability risks in excess of $400,000 in 2021 and 2020.  The Company ceded specific commercial property risks in excess of $200,000 in 2021.  The Company ceded 40% of specific commercial property risks in excess of $400,000, and 60% in excess of $300,000 in 2020.  The Company ceded homeowners specific risks in excess of $300,000 in both 2021 and 2020.  

A "treaty" is a reinsurance agreement in which coverage is provided for a class of risks and does not require policy by policy underwriting of the reinsurer. "Facultative" reinsurance is where a reinsurer negotiates an individual reinsurance agreement for every policy it will reinsure on a policy by policy basis. A loss is covered under a reinsurance contract if the loss occurs within the effective dates of the agreement notwithstanding when the loss is reported.

Reinsurance does not discharge the direct insurer from liability to its policyholders.  Failure of reinsurers to honor their obligations could result in losses to the Company.  The Company evaluates the financial condition of its reinsurers and monitors the concentration of credit risk arising from similar geographic regions, activities, or economic characteristics of the reinsurers to minimize its exposure to significant losses from reinsurer insolvencies.  To date, the Company has not experienced any significant difficulties in collecting reinsurance recoverables.

The Company assumes written premiums under a few fronting arrangements. The fronting arrangements are with unaffiliated insurers who write on behalf of the Company in markets that require a higher A.M. Best rating than the Company’s current rating, where the policies are written in a state where the Company is not licensed or for other strategic reasons.

 

 


15


 

 

The following table presents the effects of reinsurance and assumption transactions on written premiums, earned premiums and losses and LAE (dollars in thousands):

 

 

 

Three Months Ended

March 31,

 

 

 

2021

 

 

2020

 

Written premiums:

 

 

 

 

 

 

 

 

Direct

 

$

23,433

 

 

$

19,629

 

Assumed

 

 

6,940

 

 

 

5,455

 

Ceded

 

 

(5,890

)

 

 

(4,033

)

Net written premiums

 

$

24,483

 

 

$

21,051

 

 

 

 

 

 

 

 

 

 

Earned premiums:

 

 

 

 

 

 

 

 

Direct

 

$

20,990

 

 

$

17,458

 

Assumed

 

 

7,257

 

 

 

8,595

 

Ceded

 

 

(5,412

)

 

 

(4,036

)

Net earned premiums

 

$

22,835

 

 

$

22,017

 

 

 

 

 

 

 

 

 

 

Losses and LAE:

 

 

 

 

 

 

 

 

Direct

 

$

20,750

 

 

$

12,326

 

Assumed

 

 

6,781

 

 

 

5,458

 

Ceded

 

 

(8,169

)

 

 

(3,515

)

Net Losses and LAE

 

$

19,362

 

 

$

14,269

 

 

7. Debt

The Company's debt is comprised of four instruments: $24.4 million of publicly traded senior unsecured notes which were issued in September and October of 2018, a $10.0 million line of credit which commenced in June 2018, $10.5 million of privately placed subordinated notes (the “Subordinated Notes”), and a $2.7 million Paycheck Protection Program loan (the “PPP loan”) issued as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act.  A summary of the Company's outstanding debt is as follows (dollars in thousands):

 

 

 

March 31,

2021

 

 

December 31,

2020

 

Senior unsecured notes

 

$

23,731

 

 

$

23,665

 

Subordinated notes

 

 

9,599

 

 

 

9,587

 

Line of credit

 

 

3,000

 

 

 

5,000

 

Paycheck Protection Program loan *

 

 

2,745

 

 

 

2,745

 

Total

 

$

39,075

 

 

$

40,997

 

*

The PPP loan was embedded into the line of credit facility.  See below.

 

Senior unsecured notes

The Company issued $25.3 million of public senior unsecured notes (the "Notes") in 2018.  The Notes bear an interest rate of 6.75% per annum, payable quarterly at the end of March, June, September and December and mature on September 30, 2023.  The Company may redeem the Notes, in whole or in part, at face value at any time after September 30, 2021.

The Company did not repurchase any of the Notes for the three months ended March 31, 2021.  During the first quarter of 2020, the Company repurchased 9,761 units of the Notes in the public market with a face value of $244,000.  The Notes were repurchased at a discount to face value, which resulted in a $115,000 gain on extinguishment.  This gain is reflected in the Consolidated Statement of Operations as Other gains.  

 


16


 

 

Subordinated notes

The Company also has outstanding $10.5 million of Subordinated Notes maturing on September 30, 2038.  The Subordinated Notes bear an interest rate of 7.5% per annum until September 30, 2023, and 12.5% thereafter, and allow for four quarterly interest payment deferrals.  Interest is payable quarterly at the end of March, June, September and December.  Beginning September 30, 2021, the Company may redeem the Subordinated Notes, in whole or in part, for a call premium of $1.1 million.  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 March 31, 2021, the carrying value of the Notes and Subordinated Notes are offset by $650,000 and $900,000 of debt issuance costs, respectively.  The debt issuance costs will be amortized through interest expense over the life of the loans.

The Subordinated Notes contain various restrictive financial debt covenants that relate to the Company’s minimum tangible net worth, minimum fixed-charge coverage ratios, dividend paying capacity, reinsurance retentions, and risk-based capital ratios.  At March 31, 2021, the Company was in compliance with all of its financial covenants.

 

Line of credit

The Company maintains a $10.0 million line of credit with a national bank (the “Lender”).  The line of credit bears interest at the London Interbank rate ("LIBOR") plus 2.75% per annum, payable monthly.  The agreement includes several financial debt covenants, including a minimum tangible net worth, a minimum fixed-charge coverage ratio, and minimum statutory risk-based capital levels.  As of March 31, 2021, the Company had $5.7 million outstanding on the line of credit (including the PPP loan described below), and was in compliance with all of its financial debt covenants.  On June 19, 2020, the line of credit was renewed with a maturity of June 18, 2021.

 

Paycheck Protection Program loan

On April 24, 2020, the Company received a $2,745,000 loan from the line of credit Lender pursuant to the Paycheck Protection Program of the CARES Act administered by the U.S. Small Business Administration (“SBA”).  The PPP loan was incorporated into the existing line of credit facility and utilizes a portion of the line of credit’s limit.  However, the PPP loan has a different maturity date (April 24, 2022) in accordance with the SBA requirements and bears interest at a rate of 1.0% per annum.  The Company amended its $10.0 million line of credit facility with the Lender to incorporate this loan as a reduction of the available line of credit.  The loan may be prepaid by the Company at any time prior to maturity with no prepayment penalties.  This loan may be subject to forgiveness under the CARES Act provisions.  The Company applied for forgiveness of the loan in 2020, at which point the principal and interest payments were deferred until the SBA remits the loan forgiveness amount  to the Lender.  As of March 31, 2021, the loan remains on the Company’s balance sheet as a liability.  

8. Shareholders’ Equity

On December 5, 2018, the Company's Board of Directors authorized a stock repurchase program, under which the Company may repurchase up to one million shares of the Company's common stock. The Company did not repurchase any shares of stock for the three months ended March 31, 2021 related to the stock repurchase program.  The Company repurchased 700 shares valued at approximately $2,000 related to the stock repurchase program for the three months ended March 31, 2020.

For the three months ended March 31, 2021 and 2020, the Company did not repurchased any shares of stock related to the vesting of the Company’s restricted stock units.    

As of March 31, 2021 and December 31, 2020, the Company had 9,681,728 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.  The holders have no preemptive, conversion or subscription rights.

17


 

9. Accumulated Other Comprehensive Income (Loss)

The following table presents changes in accumulated other comprehensive income (loss) for unrealized gains and losses on available-for-sale securities (dollars in thousands):

 

 

 

Three months ended

March 31,

 

 

 

2021

 

 

2020

 

Balance at beginning of period

 

$

912

 

 

$

489

 

Other comprehensive income (loss) before reclassifications

 

 

(1,924

)

 

 

(1,315

)

Less:  amounts reclassified from accumulated other comprehensive income (loss)

 

 

943

 

 

 

384

 

Net other comprehensive income (loss)

 

 

(2,867

)

 

 

(1,699

)

Balance at end of period

 

$

(1,955

)

 

$

(1,210

)

 

10. Earnings Per Share

Basic and diluted earnings (loss) per share are computed by dividing net income (loss) by the weighted average number of common shares outstanding during the period.  The following table presents the calculation of basic and diluted earnings (loss) per common share, as follows (dollars in thousands, except per share amounts):

 

 

 

Three Months Ended

March 31,

 

 

 

2021

 

 

2020

 

Net income (loss)

 

$

(4,636

)

 

$

(4,725

)

 

 

 

 

 

 

 

 

 

Weighted average common shares, basic and diluted *

 

 

9,681,728

 

 

 

9,592,774

 

 

 

 

 

 

 

 

 

 

Earnings (loss) per common share, basic and diluted

 

$

(0.48

)

 

$

(0.49

)

 

*

The nonvested shares of the restricted stock units and stock options were anti-dilutive as of March 31, 2021 and 2020.  Therefore, the basic and diluted weighted average common shares are equal for the three months ended March 31, 2021 and 2020.

11. Stock-based Compensation

On June 30, 2020, the Company issued options to purchase 280,000 shares of the Company’s common stock, to certain executive officers and other employees.  The right to exercise the options will vest over a five-year period on a straight-line basis. The options have a strike price of $3.81 per share and expire on June 30, 2030.  The estimated value of these options is $290,000, which will be 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 $54,000 and $239,000 of compensation expense related to the RSUs for the three months ended March 31, 2021 and 2020, respectively.  There were 51,941 unvested RSUs as of March 31, 2021, which will generate an estimated future expense of $204,000.

 

The Company recorded $12,000 of compensation expense for the three months ended March 31, 2021 related to the stock options granted on June 30, 2020.  There were 265,000 unvested options as of March 31, 2021, which will generate an estimated future expense of $233,000.

 

 


18


 

 

12. Commitments and Contingencies

 

Legal proceedings

 

The Company and its subsidiaries are subject at times to various claims, lawsuits and proceedings relating principally to alleged errors or omissions in the placement of insurance, claims administration, and other business transactions arising in the ordinary course of business. Where appropriate, the Company vigorously defends such claims, lawsuits and proceedings. Some of these claims, lawsuits and proceedings seek damages, including consequential, exemplary or punitive damages, in amounts that could, if awarded, be significant. Most of the claims, lawsuits and proceedings arising in the ordinary course of business are covered by the insurance policy at issue. We account for such activity through the establishment of unpaid losses and LAE reserves. In accordance with accounting guidance, if it is probable that a liability has been incurred as of the date of the financial statements and the amount of loss is reasonably estimable; then an accrual for the costs to resolve these claims is recorded by the Company in the accompanying consolidated balance sheets. Periodic expenses related to the defense of such claims are included in the accompanying consolidated statements of operations. On the basis of current information, the Company does not believe that there is a reasonable possibility that any material loss exceeding amounts already accrued, if any, will result from any of the claims, lawsuits and proceedings to which the Company is subject to, either individually or in the aggregate.

13. Segment Information

The Company is engaged in the sale of property and casualty insurance products and has organized its business model around three classes of insurance businesses: commercial lines, personal lines, and wholesale agency business.  Within these three businesses, the Company offers various insurance products and insurance agency services. Such insurance businesses are engaged in underwriting and marketing insurance coverages, and administering claims processing for such policies.  The Company views the commercial and personal lines segments as underwriting business (business that takes on insurance underwriting risk).  The wholesale agency business provides non-risk bearing revenue through commissions and policy fees.  The wholesale agency business increases the product options to the Company’s independent retail agents by offering both insurance products from the Insurance Company Subsidiaries as well as products offered by other insurers.  

The Company defines its operating segments as components of the business where separate financial information is available and used by the chief operating decision maker in deciding how to allocate resources to its segments and in assessing its performance. In assessing performance of its operating segments, the Company’s chief operating decision maker, the Chief Executive Officer, reviews a number of financial measures including gross written premiums, net earned premiums, losses and LAE, net of reinsurance recoveries, and other revenue and expenses. The primary measure used for making decisions about resources to be allocated to an operating segment and assessing its performance is segment underwriting gain or loss which is defined as segment revenues, consisting of net earned premiums and other income, less segment expenses, consisting of losses and LAE, policy acquisition costs and operating expenses of the operating segments. Operating expenses primarily include compensation and related benefits for personnel, policy issuance and claims systems, rent and utilities. The Company markets, distributes and sells its insurance products through its own insurance agencies and a network of independent agents. 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 three months ended March 31, 2021 and 2020 gross written premiums attributable to these four states were 53.5% and 52.6%, respectively, of the Company’s total gross written premiums.

The Agency business sells insurance products on behalf of the Company’s commercial and personal lines businesses as well as to third-party insurers.  Certain acquisition costs incurred by the commercial and personal lines businesses are reflected as commission revenue for the Agency business and are eliminated in the Eliminations category.  

In addition to the reportable operating segments, the Company maintains a Corporate category to reconcile segment results to the consolidated totals. The Corporate category includes: (i) corporate operating expenses such as salaries and related benefits of the Company’s executive management team and finance and information technology personnel, and other corporate headquarters expenses, (ii) interest expense on the Company’s debt obligations; (iii) depreciation and amortization on property and equipment, and (iv) all investment income activity. All investment income activity is reported within net investment income, net realized investment gains, and change in fair value of equity securities on the consolidated statements of operations.  The Company’s assets on the consolidated balance sheet are not allocated to the reportable segments.

 


19


 

 

The following tables present information by reportable operating segment (dollars in thousands):

 

Three months ended

March 31, 2021

 

Commercial Lines

 

 

Personal

Lines

 

 

Total

Underwriting

 

 

Wholesale

Agency

 

 

Corporate

 

 

Eliminations

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross written premiums

 

$

27,221

 

 

$

3,152

 

 

$

30,373

 

 

$

 

 

$

 

 

$

 

 

$

30,373

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net written premiums

 

$

21,557

 

 

$

2,926

 

 

$

24,483

 

 

$

 

 

$

 

 

$

 

 

$

24,483

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earned premiums

 

$

20,706

 

 

$

2,129

 

 

$

22,835

 

 

$

 

 

$

 

 

$

 

 

$

22,835

 

Other income

 

 

56

 

 

 

40

 

 

 

96

 

 

 

1,726

 

 

 

43

 

 

 

(1,309

)

 

 

556

 

Segment revenue

 

 

20,762

 

 

 

2,169

 

 

 

22,931

 

 

 

1,726

 

 

 

43

 

 

 

(1,309

)

 

 

23,391

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Losses and LAE, net

 

 

16,955

 

 

 

2,407

 

 

 

19,362

 

 

 

 

 

 

 

 

 

 

 

 

19,362

 

Policy acquisition costs

 

 

6,318

 

 

 

600

 

 

 

6,918

 

 

 

1,127

 

 

 

 

 

 

(1,295

)

 

 

6,750

 

Operating expenses

 

 

2,955

 

 

 

349

 

 

 

3,304

 

 

 

744

 

 

 

301

 

 

 

 

 

 

4,349

 

Segment expenses

 

 

26,228

 

 

 

3,356

 

 

 

29,584

 

 

 

1,871

 

 

 

301

 

 

 

(1,295

)

 

 

30,461

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Segment gain (loss)

 

$

(5,466

)

 

$

(1,187

)

 

$

(6,653

)

 

$

(145

)

 

$

(258

)

 

$

(14

)

 

$

(7,070

)

Investment income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

532

 

 

 

 

 

 

 

532

 

Net realized investment gains

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,924

 

 

 

 

 

 

 

2,924

 

Change in fair value of equity securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(540

)

 

 

 

 

 

 

(540

)

Other gains

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(721

)

 

 

 

 

 

 

(721

)

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

 

$

(5,466

)

 

$

(1,187

)

 

$

(6,653

)

 

$

(145

)

 

$

1,937

 

 

$

(14

)

 

$

(4,875

)

 

Three months ended

March 31, 2020

 

Commercial

Lines

 

 

Personal

Lines

 

 

Total

Underwriting

 

 

Wholesale

Agency

 

 

Corporate

 

 

Eliminations

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross written premiums

 

$

23,444

 

 

$

1,640

 

 

$

25,084

 

 

$

 

 

$

 

 

$

 

 

$

25,084

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net written premiums

 

$

19,687

 

 

$

1,364

 

 

$

21,051

 

 

$

 

 

$

 

 

$

 

 

$

21,051

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earned premiums

 

$

20,431

 

 

$

1,586

 

 

$

22,017

 

 

$

 

 

$

 

 

$

 

 

$

22,017

 

Other income

 

 

74

 

 

 

36

 

 

 

110

 

 

 

1,934

 

 

 

31

 

 

 

(1,417

)

 

 

658

 

Segment revenue

 

 

20,505

 

 

 

1,622

 

 

 

22,127

 

 

 

1,934

 

 

 

31

 

 

 

(1,417

)

 

 

22,675

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Losses and LAE, net

 

 

13,461

 

 

 

808

 

 

 

14,269

 

 

 

 

 

 

 

 

 

 

 

 

14,269

 

Policy acquisition costs

 

 

6,164

 

 

 

489

 

 

 

6,653

 

 

 

1,208

 

 

 

 

 

 

(1,558

)

 

 

6,303

 

Operating expenses

 

 

3,503

 

 

 

275

 

 

 

3,778

 

 

 

905

 

 

 

362

 

 

 

 

 

 

5,045

 

Segment expenses

 

 

23,128

 

 

 

1,572

 

 

 

24,700

 

 

 

2,113

 

 

 

362

 

 

 

(1,558

)

 

 

25,617

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Segment gain (loss)

 

$

(2,623

)

 

$

50

 

 

$

(2,573

)

 

$

(179

)

 

$

(331

)

 

$

141

 

 

$

(2,942

)

Investment income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

954

 

 

 

 

 

 

 

954

 

Net realized investment gains

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

928

 

 

 

 

 

 

 

928

 

Change in fair value of equity securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,086

)

 

 

 

 

 

 

(3,086

)

Other gains

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

115

 

 

 

 

 

 

 

115

 

Interest expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(731

)

 

 

 

 

 

 

(731

)

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

 

$

(2,623

)

 

$

50

 

 

$

(2,573

)

 

$

(179

)

 

$

(2,151

)

 

$

141

 

 

$

(4,762

)

20


 

 

 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

For the Periods Ended March 31, 2021 and 2020

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the Consolidated Financial Statements (Unaudited), related notes and other financial information appearing elsewhere in this Quarterly Report on Form 10-Q and the audited consolidated financial statements and related notes included in our Annual Report on Form 10-K, filed on March 11, 2021 with the U. S. Securities and Exchange Commission.

Forward-Looking Statements

Certain statements contained in this Quarterly Report on Form 10-Q, which are not statements of historical fact, are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, as Section 21E of the Securities Exchange Act of 1934, as amended.  Forward-looking statements give current expectations or forecasts of future events or our future financial or operating performance.  Words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “seek” and similar terms and phrases, or the negative thereof, may be used to identify forward-looking statements.

The forward-looking statements contained in this report are based on management’s good-faith belief and reasonable judgment based on current information.  The forward-looking statements are qualified by important factors, risks and uncertainties, many of which are beyond our control, that could cause our actual results to differ materially from those in the forward-looking statements, including those described in our Form 10-K (“Item 1A Risk Factors”) filed with the SEC on March 11, 2021 and subsequent reports filed with or furnished to the SEC.  Any forward-looking statement made by us in this report speaks only as of the date hereof or as of the date specified herein.  We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by any applicable laws or regulations.

Recent Developments

COVID-19 (the “Pandemic”) is causing significant disruption to public health, the global economy, financial markets, and commercial, social and community activity generally.  Our exposure to the Pandemic is manifold.  The majority of our employees are now working remotely in observance of “shelter-in-place” or “stay-at-home” government orders.  A significant portion of our revenues is generated from the hospitality sector of the U.S. economy which has seen unprecedented contraction, at least in the near term, in an effort to mitigate the effects of the Pandemic.

We have continued to provide customer service, process new and renewal business, handle claims and otherwise manage all operations even though the vast majority of the staff is working remotely.  At this time, however, we are not able to provide additional forward-looking guidance as there is significant uncertainty regarding the ultimate impact of the Pandemic.

Business Overview

We are an insurance holding company that markets and services our product offerings through specialty commercial and specialty personal insurance business lines.  Our growth has been significant since our founding in 2009.  Currently, we are authorized to write insurance as an excess and surplus lines carrier in 45 states, including the District of Columbia.  We are also licensed to write insurance as an admitted carrier in 42 states, including the District of Columbia, and we offer our insurance products in all 50 states.

Our revenues are primarily derived from premiums earned from our insurance operations.  We also generate other revenues through investment income and other income which mainly consists of installment fees and policy issuance fees generally related to the policies we write.

Our expenses consist primarily of losses and loss adjustment expenses, agents’ commissions, and other underwriting and administrative expenses.  We organize our operations into three insurance businesses: commercial insurance lines, personal insurance lines, and wholesale agency business.  Together, the commercial and personal lines refer to "underwriting" operations that take insurance risk, and the wholesale agency business refers to non-risk insurance business.

Through our commercial insurance product lines, we offer coverage for both commercial property and commercial liability.  We also offer coverage for commercial automobiles and workers’ compensation.  Our insurance policies are sold to targeted small and mid-sized businesses on a single or multiple-coverage basis.

21


 

Through our personal insurance product lines, we offer homeowners insurance and dwelling fire insurance policies to individuals in several states.  Our specialty homeowners insurance product line is primarily comprised of low-value dwelling insurance tailored for owners of lower valued homes, which we offer in Illinois, Indiana and Texas.  Due to recent Florida-based industry events, we have been de-emphasizing our Florida homeowners' business and reducing our exposures in that state, as well as other wind-exposed states like Texas and Hawaii.

Through our wholesale agency business segment, we offer commercial and personal lines insurance products for our Insurance Company Subsidiaries as well as third-party insurers.  We have expanded the wholesale agency business to develop more non-risk revenue streams, and provide our agents with more insurance product options.

Critical Accounting Policies and Estimates

In certain circumstances, we are required to make estimates and assumptions that affect amounts reported in our consolidated financial statements and related footnotes.  We evaluate these estimates and assumptions periodically on an on-going basis based on a variety of factors.  There can be no assurance, however, that actual results will not be materially different than our estimates and assumptions, and that reported results of operation will not be affected by accounting adjustments needed to reflect changes in these estimates and assumptions.  During the three months ended March 31, 2021, there were no material changes to our critical accounting policies and estimating methodologies, which are disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in the Company’s Annual Report on Form 10-K filed with the SEC on March 11, 2021.

Executive Overview

We reported $30.4 million of gross written premiums in the first quarter of 2021, representing a 21.1% increase as compared to the same period in 2020.  The increase was the result of growth in both commercial and personal lines business as we continue to penetrate markets where we have been the most successful while still reducing exposure to less profitable lines.

We reported a net loss of $4.6 million, or $0.48 per share, for three months ended March 31, 2021, compared to a net loss of $4.7 million, or $0.49 per share for the same period in 2020.

Adjusted operating loss, a non-GAAP measure, was $7.0 million, or $0.72 per share for the three months ended March 31, 2021, compared to an adjusted operating loss of $2.7 million, or $0.28 per share for the same period in 2020.  

Our underwriting combined ratio was 129.0% for the three months ended March 31, 2021, compared to 111.6% for the same period in 2020.  

Our combined ratio was higher in the first quarter of 2021, compared to the same period in 2020, due to catastrophe losses of $2.0 million, net of reinsurance recoverables, plus $318,000 of reinstatement reinsurance premiums, both related to Winter Storm Uri.  We also had adverse development of $5.8 million during the first quarter of 2021, of which $5.2 million was related to the Company’s commercial lines.  

22


 

Results of Operations For The Three Months Ended March 31, 2021 and 2020

The following table summarizes our operating results for the periods indicated (dollars in thousands):

Summary of Operating Results

 

 

 

Three Months Ended

March 31,

 

 

 

 

 

 

 

 

 

 

 

2021

 

 

2020

 

 

$ Change

 

 

% Change

 

Gross written premiums

 

$

30,373

 

 

$

25,084

 

 

$

5,289

 

 

 

21.1

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net written premiums

 

$

24,483

 

 

$

21,051

 

 

$

3,432

 

 

 

16.3

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earned premiums

 

$

22,835

 

 

$

22,017

 

 

$

818

 

 

 

3.7

%

Other income

 

 

556

 

 

 

658

 

 

 

(102

)

 

 

(15.5

%)

Losses and loss adjustment expenses, net

 

 

19,362

 

 

 

14,269

 

 

 

5,093

 

 

 

35.7

%

Policy acquisition costs

 

 

6,750

 

 

 

6,303

 

 

 

447

 

 

 

7.1

%

Operating expenses

 

 

4,349

 

 

 

5,045

 

 

 

(696

)

 

 

(13.8

)%

Underwriting gain (loss)

 

 

(7,070

)

 

 

(2,942

)

 

 

(4,128

)

 

*

 

Net investment income

 

 

532

 

 

 

954

 

 

 

(422

)

 

 

(44.2

)%

Net realized investment gains

 

 

2,924

 

 

 

928

 

 

 

1,996

 

 

*

 

Change in fair value of equity securities

 

 

(540

)

 

 

(3,086

)

 

 

2,546

 

 

*

 

Other gains

 

 

 

 

 

115

 

 

 

(115

)

 

*

 

Interest expense

 

 

721

 

 

 

731

 

 

 

(10

)

 

 

(1.4

)%

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

 

 

(4,875

)

 

 

(4,762

)

 

 

(113

)

 

*

 

Equity earnings (losses) in Affiliate, net of tax

 

 

248

 

 

 

50

 

 

 

198

 

 

*

 

Income tax expense

 

 

9

 

 

 

13

 

 

 

(4

)

 

*

 

Net income (loss)

 

$

(4,636

)

 

$

(4,725

)

 

$

89

 

 

*

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Book value per common share outstanding

 

$

3.82

 

 

$

3.81

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Underwriting Ratios:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss ratio (1)

 

 

84.4

%

 

 

64.5

%

 

 

 

 

 

 

 

 

Expense ratio (2)

 

 

44.6

%

 

 

47.1

%

 

 

 

 

 

 

 

 

Combined ratio (3)

 

 

129.0

%

 

 

111.6

%

 

 

 

 

 

 

 

 

 

(1)

The loss ratio is the ratio, expressed as a percentage, of net losses and loss adjustment expenses to net earned premiums and other income from underwriting operations.

(2)

The expense ratio is the ratio, expressed as a percentage, of policy acquisition costs and other underwriting expenses to net earned premiums and other income from underwriting operations.

(3)

The combined ratio is the sum of the loss ratio and the expense ratio.  A combined ratio under 100% indicates an underwriting profit.  A combined ratio over 100% indicates an underwriting loss.

*

Percentage change is not meaningful.

Premiums

Premiums are earned ratably over the term of the policy, whereas written premiums are reflected on the effective date of the policy.  Almost all commercial lines and homeowners products have annual policies, under which premiums are earned evenly over one year.  The resulting net earned premiums are impacted by the gross and ceded written premiums, earned ratably over the terms of the policies.

23


 

Our premiums are presented below for the three months ended March 31, 2021 and 2020 (dollars in thousands):

Summary of Premium Revenue

 

 

 

Three Months Ended

March 31,

 

 

 

 

 

 

 

 

 

 

 

2021

 

 

2020

 

 

$ Change

 

 

% Change

 

Gross written premiums

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial lines

 

$

27,221

 

 

$

23,444

 

 

$

3,777

 

 

 

16.1

%

Personal lines

 

 

3,152

 

 

 

1,640

 

 

 

1,512

 

 

 

92.2

%

Total

 

$

30,373

 

 

$

25,084

 

 

$

5,289

 

 

 

21.1

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net written premiums

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial lines

 

$

21,557

 

 

$

19,687

 

 

$

1,870

 

 

 

9.5

%

Personal lines

 

 

2,926

 

 

 

1,364

 

 

 

1,562

 

 

 

114.5

%

Total

 

$

24,483

 

 

$

21,051

 

 

$

3,432

 

 

 

16.3

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earned premiums

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial lines

 

$

20,706

 

 

$

20,431

 

 

$

275

 

 

 

1.3

%

Personal lines

 

 

2,129

 

 

 

1,586

 

 

 

543

 

 

 

34.2

%

Total

 

$

22,835

 

 

$

22,017

 

 

$

818

 

 

 

3.7

%

 

Gross written premiums increased $5.3 million, or 21.1%, to $30.4 million for the three months ended March 31, 2021, as compared to $25.1 million for the same period in 2020.

Commercial lines gross written premiums increased $3.8 million, or 16.1%, to $27.2 million in the first quarter of 2021, as compared to $23.4 million for the first quarter of 2020. The increase was due to $5.1 million of additional gross written premium in the Company’s small business programs during the first quarter of 2021, compared the first quarter of 2020.  This increase was offset by a reduction of $1.3 million of gross written premium in the Company’s hospitality programs during the first quarter of 2021, compared to the first quarter of 2020, as a result on the ongoing impact of the pandemic on restaurants, bars and taverns.  

Personal lines gross written premiums increased $1.5 million, or 92.2%, to $3.1 million in the first quarter of 2021, as compared to $1.6 million for the same period in 2020.  The increased gross written premiums were due to continued growth in the Company’s low-value dwelling book of business.  

Net written premiums increased $3.4 million, or 16.3%, to $24.5 million for the three months ended March 31, 2021, as compared to $21.1 million for the same period in 2020.  Net written premiums did not increase as much as gross written premiums due to a combination of factors that increased our ceded premium rates.  Our blended ratio of ceded earned premiums to gross earned premiums increased from 15.5% to 19.2% in the first quarters of 2020 and 2021, respectively. Winter Storm Uri resulted in $318,000 of reinstatement premiums that increased the ceded rate by 1.0 percentage point in the first quarter.  The remainder of the increase was due to a combination of: 1) a change in the mix of business to more property exposure which has a higher ceding rate; 2) general reinsurance rate increases; and 3) we purchased more reinsurance as of January 1, 2021 to reduce our commercial property specific loss retention to only $200,000, from $340,000.

Other Income

Other income consists primarily of fees charged to policyholders by the Company for services outside of the premium charge, such as installment billings and policy issuance costs.  Commission income is also received by the Company’s insurance agencies for writing policies for third party insurance companies.  Other income for the three months ended March 31, 2021, decreased $102,000, or 15.5%, to $556,000 as compared to $658,000 for the same period in 2020.  The decrease in other income was primarily due to a decrease in revenue in the Agency operations in the first quarter of 2021, compared to the same period in 2020.  


24


 

 

Losses and Loss Adjustment Expenses

The tables below detail our losses and loss adjustment expenses and loss ratios in our underwriting business for the three months ended March 31, 2021 and 2020 (dollars in thousands).

 

Three months ended March 31, 2021

 

Commercial

Lines

 

 

Personal

Lines

 

 

Total

 

Accident year net losses and LAE

 

$

11,789

 

 

$

1,795

 

 

$

13,584

 

Net (favorable) adverse development

 

 

5,166

 

 

 

612

 

 

 

5,778

 

Calendar year net losses and LAE

 

$

16,955

 

 

$

2,407

 

 

$

19,362

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accident year loss ratio

 

 

56.8

%

 

 

82.8

%

 

 

59.2

%

Net (favorable) adverse development

 

 

24.9

%

 

 

28.2

%

 

 

25.2

%

Calendar year loss ratio

 

 

81.7

%

 

 

111.0

%

 

 

84.4

%

 

Three months ended March 31, 2020

 

Commercial

Lines

 

 

Personal

Lines

 

 

Total

 

Accident year net losses and LAE

 

$

9,778

 

 

$

742

 

 

$

10,520

 

Net (favorable) adverse development

 

 

3,683

 

 

 

66

 

 

 

3,749

 

Calendar year net losses and LAE

 

$

13,461

 

 

$

808

 

 

$

14,269

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accident year loss ratio

 

 

47.7

%

 

 

45.8

%

 

 

47.6

%

Net (favorable) adverse development

 

 

17.9

%

 

 

4.0

%

 

 

16.9

%

Calendar year loss ratio

 

 

65.6

%

 

 

49.8

%

 

 

64.5

%

 

Net losses and LAE increased by $5.1 million, or 35.7%, to $19.4 million for the first three months in 2021, compared to $14.3 million for the same period in 2020.  As discussed in the Executive Overview, the Company experienced $2.0 million of catastrophe losses, net of reinsurance recoverables, during the first quarter of 2021 from Winter Storm Uri.  In addition to these losses, the Company experienced $5.8 million of adverse development for the three months ended March 31, 2021.  Of the $5.8 million in adverse development, $5.2 million was related to commercial lines, and $612,000 was related to personal lines.  

The Company's incurred losses for the three months ended March 31, 2020, included adverse prior-year reserve development of $3.7 million from the commercial lines, mostly attributable to hospitality liability in 2018 and 2019 accident years.

Expense Ratio

Our expense ratio is a measure of the efficiency and performance of the commercial and personal lines of business (our risk-bearing underwriting operations).  It is calculated by dividing the sum of policy acquisition costs and other underwriting expenses by the sum of net earned premiums and other income of the underwriting business.  Costs that cannot be readily identifiable as a direct cost of a segment or product line remain in Corporate for segment reporting purposes.  The expense ratio excludes wholesale agency and Corporate expenses.  

25


 

The table below provides the expense ratio by major component.

 

 

 

Three Months Ended

March 31,

 

 

 

2021

 

 

2020

 

Commercial Lines

 

 

 

 

 

 

 

 

Policy acquisition costs

 

 

30.4

%

 

 

30.1

%

Operating expenses

 

 

14.2

%

 

 

17.1

%

Total

 

 

44.6

%

 

 

47.2

%

Personal Lines

 

 

 

 

 

 

 

 

Policy acquisition costs

 

 

27.7

%

 

 

30.2

%

Operating expenses

 

 

16.1

%

 

 

16.9

%

Total

 

 

43.8

%

 

 

47.1

%

Total Underwriting

 

 

 

 

 

 

 

 

Policy acquisition costs

 

 

30.2

%

 

 

30.0

%

Operating expenses

 

 

14.4

%

 

 

17.1

%

Total

 

 

44.6

%

 

 

47.1

%

 

Our expense ratio decreased by 2.5 percentage points in the first quarter of 2021 as compared to the same period of 2020.  We saw the most improvement in the operating expense ratios.

Policy acquisition costs are costs we incur to issue policies, which include commissions, premium taxes, underwriting reports and underwriter compensation costs.  The Company offsets direct commissions with ceded commissions from reinsurers.  For the three months ended March 31, 2021 and 2020, the percentage of policy acquisition costs to net earned premiums and other underwriting income increased to 30.2% compared to 30.0%, respectively.  Acquisition costs as a percent of gross earned premiums were lower by 1.0 percentage point in the first quarter of 2021 as compared to the same period in 2020.  However, the acquisition cost ratio (which is based on net earned premiums) was higher due to higher ceded premium rates discussed above.

Operating expenses consist primarily of employee compensation, information technology and occupancy costs, such as rent and utilities.  Operating expenses as a percent of net earned premiums and other income were 14.4% and 17.1% for the three months ended March 31, 2021 and 2020, respectively.  The operating expense ratio was lower due to our expense reduction efforts, partially offset by higher ceded premium rates discussed above.  

Segment Results

We measure the performance of our consolidated results, in part, based on our underwriting gain or loss.  The following table provides the underwriting gain or loss for the three months ended March 31, 2021 and 2020 (dollars in thousands):

Segment Gain (Loss)

 

 

 

Three Months Ended

March 31,

 

 

 

 

 

 

 

2021

 

 

2020

 

 

$ Change

 

Commercial Lines

 

$

(5,466

)

 

$

(2,623

)

 

$

(2,843

)

Personal Lines

 

 

(1,187

)

 

 

50

 

 

 

(1,237

)

Total Underwriting

 

 

(6,653

)

 

 

(2,573

)

 

 

(4,080

)

Wholesale Agency

 

 

(145

)

 

 

(179

)

 

 

34

 

Corporate

 

 

(258

)

 

 

(331

)

 

 

73

 

Eliminations

 

 

(14

)

 

 

141

 

 

 

(155

)

Total Segment gain (loss)

 

$

(7,070

)

 

$

(2,942

)

 

$

(4,128

)

 


26


 

 

Liquidity and Capital Resources

Sources and Uses of Funds

At March 31, 2021, we had $17.1 million in cash, cash equivalents and short-term investments.  Our principal sources of funds are insurance premiums, investment income, proceeds from maturities and sales of invested assets and installment fees.  These funds are primarily used to pay claims, commissions, employee compensation, taxes and other operating expenses, and service debt.

We believe that our existing cash, cash equivalents, short-term investments and investment securities balances will be adequate to meet our capital and liquidity needs and the needs of our subsidiaries on a short-term and long-term basis.

We conduct our business operations primarily through our Insurance Company Subsidiaries.  Our ability to service debt, and pay administrative expenses is primarily reliant upon our intercompany service fees paid by the Insurance Company Subsidiaries to the Parent Company for management, administrative, and information technology services provided to the Insurance Company Subsidiaries by the Parent Company. Secondarily, the Parent Company may receive dividends from the Insurance Company Subsidiaries; however, this is not the primary means in which the Parent Company supports its funding as state insurance laws restrict the ability of our Insurance Company Subsidiaries to declare dividends to the Parent Company.  There were no dividends paid from our Insurance Company Subsidiaries during the three months ended March 31, 2021 and 2020.

Cash Flows

Operating Activities. Cash used in operating activities for the three months ended March 31, 2021, was $3.5 million, compared to $4.0 million provided by operating activities for the same period in 2020.  The differences in cash used in operating activities was primarily due to a $6.2 million increase in paid claims and $1.7 million of additional acquisition costs paid in 2021.  These increases in cash used in operating activities was partially offset by a $1.1 million increase in premiums collected, net of reinsurance premiums.

Investing Activities.  Cash provided by investing activities for the three months ended March 31, 2021, was $1.7 million, as compared to $4.1 million of cash used in investing activities for the same period in 2020.  The $5.8 million increase in cash provided by investing activities was driven by a reduction in the purchases of investments in the first quarter of 2021, compared to the first quarter of 2020.  There was a significant repositioning of the Company’s portfolio during the first quarter of 2020 from the COVID-19 pandemic, which caused an increase in the purchases of investments.  

Financing Activities.  Cash used in financing activities for the three months ended March 31, 2021, was $2.0 million, compared to $754,000 of cash provided financing activities for the same period in 2020.  The $2.8 million increase in cash used in financing activities was mostly due to the Company paying down a net amount of $2.0 million of its outstanding balance on its line of credit during the first quarter of 2021.

 

Statutory Capital and Surplus

Our Insurance Company Subsidiaries are required to file quarterly and annual financial reports with state insurance regulators.  These financial reports are prepared using statutory accounting practices promulgated by the Insurance Company Subsidiaries’ state of domiciliary, rather than GAAP.  The Insurance Company Subsidiaries’ aggregate statutory capital and surplus (which is a statutory measure of equity) was $58.7 million and $64.1 million at March 31, 2021 and December 31, 2020, respectively.

 


27


 

 

Non-GAAP Financial Measures

Adjusted Operating Income and Adjusted Operating Income Per Share

Adjusted operating income and adjusted operating income per share are non-GAAP measures that represent net income allocable to common shareholders excluding net realized investment gains or losses, changes in fair value of equity securities, and other gains or losses; all net of tax.  The most directly comparable financial GAAP measures to adjusted operating income and adjusted operating income per share are net income and net income per share, respectively.  Adjusted operating income and adjusted operating income per share are intended as supplemental information and are not meant to replace net income or net income per share.  Adjusted operating income and adjusted operating income per share should be read in conjunction with the GAAP financial results.  Our definition of adjusted operating income may be different from that used by other companies.  The following is a reconciliation of net income (loss) to adjusted operating income (loss) (dollars in thousands), as well as net income (loss) per share to adjusted operating income (loss) per share:

 

 

 

Three Months Ended

March 31,

 

 

 

2021

 

 

2020

 

Net income (loss)

 

$

(4,636

)

 

$

(4,725

)

Exclude:

 

 

 

 

 

 

 

 

Net realized investment gains and other gains, net of tax

 

 

2,924

 

 

 

1,043

 

Change in fair value of equity securities, net of tax

 

 

(540

)

 

 

(3,086

)

Adjusted operating income (loss)

 

$

(7,020

)

 

$

(2,682

)

 

 

 

 

 

 

 

 

 

Weighted average common shares diluted

 

 

9,681,728

 

 

 

9,592,774

 

Diluted income (loss) per common share:

 

 

 

 

 

 

 

 

Net income (loss)

 

$

(0.48

)

 

$

(0.49

)

Exclude:

 

 

 

 

 

 

 

 

Net realized investment gains and other gains, net of tax

 

 

0.30

 

 

 

0.11

 

Change in fair value of equity securities, net of tax

 

 

(0.06

)

 

 

(0.32

)

Adjusted operating income (loss) per share

 

$

(0.72

)

 

$

(0.28

)

 

We use adjusted operating income and adjusted operating income per share to assess our performance and to evaluate the results of our overall business.  We believe these measures provide investors with valuable information relating to our ongoing performance that may be obscured by the net effect of realized gains and losses as a result of our market risk sensitive instruments, which primarily relate to debt securities that are available for sale and not held for trading purposes.  The change in fair value of equity securities and realized gains and losses may vary significantly between periods and are generally driven by external economic developments, such as capital market conditions. Accordingly, adjusted operating income excludes the effect of items that tend to be highly variable from period to period and highlights the results from our ongoing business operations and the underlying results of our business.  We believe that it is useful for investors to evaluate adjusted operating income and adjusted operating income per share, along with net income and net income per share, when reviewing and evaluating our performance.

Recently Issued Accounting Pronouncements

Refer to Note 1 ~ Summary of Significant Accounting Policies – Recently Issued Accounting Guidance of the Notes to the Consolidated Financial Statements for detailed information regarding recently issued accounting pronouncements.

 


28


 

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk is the risk of loss arising from adverse changes in market rates and prices such as interest rates, other relevant market rates or price changes. The volatility and liquidity in the markets in which the underlying assets are traded directly influence market risk. The following is a discussion of our primary market risk exposures and how those exposures are currently managed as of March 31, 2021. Our market risk sensitive instruments are primarily related to fixed income securities, which are available-for-sale and not held for trading purposes.

Interest Rate Risk

At March 31, 2021, the fair value of our investment portfolio, excluding cash and cash equivalents, was $180.0 million. Our investment portfolio consists principally of investment-grade, fixed-income securities, all of which are classified as available-for-sale. Accordingly, the primary market risk exposure to our debt securities is interest rate risk. In general, the fair market value of a portfolio of debt securities increases or decreases inversely with changes in market interest rates, while net investment income realized from future investments in debt securities increases or decreases along with interest rates. We attempt to mitigate interest rate risks by investing in securities with varied maturity dates and by managing the duration of our investment portfolio to a defined range of three to four years.  The effective duration of our portfolio as of March 31, 2021 and December 31, 2020 was 3.9 and 3.6 years, respectively.

The table below illustrates the sensitivity of the fair value of our debt investments, classified as debt securities and short-term investments, to selected hypothetical changes in interest rates as of March 31, 2021.  The selected scenarios are not predictions of future events, but rather illustrate the effect that events may have on the fair value of the debt portfolio and shareholders’ equity (dollars in thousands).

 

 

 

 

 

 

 

Estimated

 

 

Hypothetical Percentage

Increase (Decrease) in

 

Hypothetical Change in Interest Rates

 

Estimated

 

 

Change in

 

 

 

 

 

 

Shareholders'

 

As of March 31, 2021

 

Fair Value

 

 

Fair Value

 

 

Fair Value

 

 

Equity

 

200 basis point increase

 

$

148,185

 

 

$

(12,154

)

 

 

(7.58

)%

 

 

(32.87

)%

100 basis point increase

 

 

154,118

 

 

 

(6,221

)

 

 

(3.88

)%

 

 

(16.82

)%

No change

 

 

160,339

 

 

 

 

 

 

 

 

 

 

100 basis point decrease

 

 

164,396

 

 

 

4,057

 

 

 

2.53

%

 

 

10.97

%

200 basis point decrease

 

 

166,256

 

 

 

5,917

 

 

 

3.69

%

 

 

16.00

%

 

Credit Risk

An additional exposure to our debt securities portfolio is credit risk. We manage our credit risk by investing only in investment-grade securities. In addition, we comply with applicable statutory requirements which limit the portion of our total investment portfolio that we can invest in any one security.

We are subject to credit risks with respect to our reinsurers. Although a reinsurer is liable for losses to the extent of the coverage which it assumes, our reinsurance contracts do not discharge our insurance companies from primary liability to each policyholder for the full amount of the applicable policy, and consequently our insurance companies remain obligated to pay claims in accordance with the terms of the policies regardless of whether a reinsurer fulfills or defaults on its obligations under the related reinsurance agreement. To mitigate our credit risk to reinsurance companies, we attempt to select financially strong reinsurers with an A.M. Best rating of “A-” or better and continue to evaluate their financial condition throughout the duration of our agreements.

At March 31, 2021, the net amount due to the Company from reinsurers, including prepaid reinsurance premiums, was $34.1 million.  We believe all amounts recorded as due from reinsurers are recoverable.

Effects of Inflation

We do not believe that inflation has a material effect on our results of operations, except for the effect that inflation may have on interest rates and claims costs. We consider the effects of inflation in pricing and estimating reserves for unpaid losses and LAE. The actual effects of inflation on our results are not known until claims are ultimately settled. In addition to general price inflation, we are exposed to a long-term upward trend in the cost of judicial awards for damages.


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ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

 

The Company’s management, including its Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures, as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act") as of March 31, 2021. Based on such evaluations, the Chief Executive Officer and Chief Financial Officer have concluded the Company’s disclosure controls and procedures are effective in recording, processing, summarizing, and reporting, on a timely basis, information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act, and that information is accumulated and communicated to the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

 

Changes in Internal Control over Financial Reporting

For the three months ended March 31, 2021, there were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) that have materially affected, or are reasonable likely to materially affect the Company's internal control over financial reporting.

30


 

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The information required by this item is included under Note 12 ~ Commitments and Contingencies of the Notes to the Consolidated Financial Statements of the Company’s Form 10-Q for the three months ended March 31, 2021, which is hereby incorporated by reference.

ITEM 1A. RISK FACTORS

 

There were no material changes to the risk factors disclosed in our Annual Report on Form 10-K (“Item 1A Risk Factors”) filed with the SEC on March 11, 2021.  

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.   

31


 

ITEM 6.  EXHIBITS

 

 

 

 

 

Incorporated by Reference

Exhibit

Number

 

Exhibit Description

 

Form

 

Period

Ending

 

Exhibit /

Appendix

Number

 

Filing Date

 

 

 

 

 

 

 

 

 

 

 

31.1

 

Section 302 Certification — CEO

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

31.2

 

Section 302 Certification — CFO

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

32.1*

 

Section 906 Certification — CEO

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

32.2*

 

Section 906 Certification — CFO

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

101.INS

 

XBRL Instance Document

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

101.SCH

 

XBRL Taxonomy Extension Schema Document

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

101.CAL

 

XBRL Taxonomy Extension Calculation Linkbase

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

101.DEF

 

XBRL Taxonomy Extension Definition Linkbase

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

101.LAB

 

XBRL Taxonomy Extension Label Linkbase

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

101.PRE

 

XBRL Taxonomy Extension Presentation Linkbase

 

 

 

 

 

 

 

 

 

*

This certification is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.

32


 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

CONIFER HOLDINGS, INC.

 

 

 

 

By:

/s/ Harold J. Meloche

 

 

Harold J. Meloche

 

 

Chief Financial Officer,

 

 

Principal Financial Officer,

 

 

Principal Accounting Officer

 

Dated: May 11, 2021

33