A.M. Best Affirms Financial Strength Ratings of Conifer Insurance Company and White Pine Insurance Company

Business Wire, Inc.

OLDWICK, N.J.--(BUSINESS WIRE)-- A.M. Best Co. has affirmed the financial strength rating (FSR) of B++ (Good) and downgraded the issuer credit rating to “bbb” from “bbb+” of Conifer Insurance Company (Conifer). Concurrently, A.M. Best has affirmed the FSR of B+ (Good) and ICR of “bbb-” of its affiliate, White Pine Insurance Company(White Pine) (formerly known as Mid-Continent Insurance Company).The outlook for all ratings is stable. Both companies are wholly owned subsidiaries of Conifer Holdings, Inc. (CHI), a Michigan-based property/casualty insurance holding company. All companies are domiciled in Southfield, MI.

While Conifer maintains strong risk-adjusted capitalization, the downgrading of its ICR reflects the inherent challenges in attracting new profitable business in the midst of a soft market. In 2011, Conifer sourced nearly all of its business from White Pine (via quota share reinsurance), providing Conifer immediate access to a mature legacy business with demonstrated loss experience. Effective January 1, 2012, this treaty was terminated. Alternatively, Conifer will continue to build its business and grow through other relationships.

Conifer was acquired on December 23, 2009, by the former management team of North Pointe Insurance Company. The rating actions are based on A.M. Best’s consideration of the prior successes of Conifer’s management and its intention to focus on specific books of business that fall within management’s areas of historical underwriting expertise, as well as its concern about the considerable amount of execution risk involved in Conifer building a profitable portfolio, particularly in light of today’s prevailing competitive market conditions for specialty commercial business.

Positive actions on the ratings and/or outlook of Conifer could be warranted over time, if it successfully executes its plan to profitably build its book of business while leveraging its underwriting expertise and relationships with the agents and brokers producing the business; thus, maintaining risk-adjusted capitalization that comfortably supports the ratings. Conversely, if the company begins to generate deteriorating underwriting or operating results over the near term as it builds its portfolio, leading to a weakening in its risk-adjusted capitalization, negative rating actions could result.

The rating affirmations for White Pine recognize its adequate capitalization, improved prior year loss reserve development and the expectation of sustained profitability, which would be consistent with its most recent trends. The latter speaks to a number of underwriting initiatives implemented by management in 2009, 2010 and 2011, including multiple rate increases, coverage exclusions and restrictions to specifically address the issues that contributed to White Pine’s unprofitable underwriting history prior to Conifer’s ownership.

As for White Pine, positive rating actions could occur if recent underwriting and operating trends relative to current and prior year underwriting profitability lead to improved performance and organic generation of earnings. Negative rating actions could result from a return to negative claim frequency or severity trends, and if the favorable loss reserve development of recent years was reversed.

The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.

Founded in 1899, A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

A.M. Best Co.
David Blades, CPCU
Senior Financial Analyst
(908) 439-2200, ext. 5422
david.blades@ambest.com
or
Rachelle Morrow
Senior Manager, Public Relations
(908) 439-2200, ext. 5445
rachelle.morrow@ambest.com
or
Joseph Roethel
Assistant Vice President
(908) 439-2200, ext. 5630
joseph.roethel@ambest.com
or
Jim Peavy
Assistant Vice President, Public Relations
(908) 439-2200, ext. 5644
james.peavy@ambest.com