Conifer Holdings, Inc. has signed a new adverse reserve development reinsurance agreement with global reinsurer Swiss Re, as well as implementing some other strategic initiatives in an effort to boost its financial position.
The agreement with Swiss Re is effective September 28th, 2017, and provides Conifer with up to $17.5 million of reinsurance protection for adverse net loss reserve development for accident years 2005 through 2016.
The new agreement attaches when the net loss surpasses $1.4 million of the $36.6 million carried reserves, as at June 30th, 2017, and extends to $19.5 million up to $57.5 million, explains Conifer. For the agreement, there is a consideration payment of $7.2 million, and there’s also a 35% contingent recovery that depends on the reserve performance.
James Petcoff, Chairman and Chief Executive Officer (CEO) of Conifer, said; “We believe today’s announcement represents an important moment in Conifer’s history, as we have implemented a number of initiatives designed to strengthen our financial position while simultaneously accelerating the Company’s ability to achieve consistently profitable results. After a thorough review, we felt it was prudent to proactively pursue decisive measures to curtail the challenging loss trends we have experienced, particularly in personal lines, and more specifically Florida homeowners in recent quarters.
“These efforts were taken to both strengthen our reserve position from past periods in a manner that reduces volatility in our earnings while also increasing financial flexibility to pursue growth opportunities in the lines where we are performing above our industry peers. Further, we concluded all of these initiatives in the third quarter of 2017, which we believe positions Conifer for success in the coming fourth quarter and into 2018 and beyond.”
As well as the Swiss Re agreement, Conifer has also announced a private placement of $30 million in aggregate principal volume of subordinated notes with Elanus Capital Management, LLC, which have a maturity date of September 29th, 2032.
Conifer has said that it will use the proceeds to repay a $16.4 million outstanding balance in relation to a $30 million senior lender credit facility.
Furthermore, the company has announced $5 million in commitments via the issuance of common equity through a private placement, at a price of $6.25 per share, with the proceeds being used to strengthen its balance sheet as it looks to drive profitability.
Lastly, Conifer has said that it expects to experience pre-tax catastrophe losses of $4.5 million, net of reinsurance, for the third-quarter of 2017, driven by hurricanes Harvey and Irma.
“Our entire management team believes strongly in the future of Conifer, based on our strong performance in core lines coupled with our past experience as a specialty niche writer of insurance. We entered into an agreement that we believe is in the best interest of the Company and its shareholders by decreasing the volatility in our earnings and allowing the pursuit of further growth in our core lines.
“Finally, we felt it was critical that management and our Board (including myself) directly participated in supporting the Company through an investment that stabilizes book value. This investment was made at a price above market, which reflects both our commitment to shareholders and reiterates our belief in the future of Conifer,” said Petcoff.