10-Q

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, 2025

☐ 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.)

3001 West Big Beaver Road, Suite 319
Troy, Michigan		48084
(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
9.75% Senior Notes due 2028	CNFRZ	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, a 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 13, 2025, was 12,222,881.

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	24
Item 3 — Quantitative and Qualitative Disclosures about Market Risk	33
Item 4 — Controls and Procedures	33
Part II — Other Information
Item 1 — Legal Proceedings	34
Item 1A — Risk Factors	34
Item 2 — Unregistered Sales of Equity Securities and Use of Proceeds	34
Item 3 - Defaults Upon Senior Securities	34
Item 4 - Mine Safety Disclosures	34
Item 5 - Other Information	34
Item 6 — Exhibits	35
Signatures	36

PART 1 - FINANCIAL INFORMATION

ITEM 1 - FINANCIAL STATEMENTS

CONIFER HOLDINGS, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

(dollars in thousands)


	March 31, 2025			December 31, 2024
	(Unaudited)
Assets
Investment securities:
Debt securities, at fair value (amortized cost of $106,636 and $117,827, respectively)	$	96,023		$	105,665
Equity securities, at fair value (cost of $1,838 and $1,836, respectively)		1,411			1,603
Short-term investments, at fair value		42,066			21,151
Total investments		139,500			128,419

Cash and cash equivalents		10,281			27,654
Premiums and agents' balances receivable, net		9,568			9,901
Reinsurance recoverables on unpaid losses		77,872			84,490
Reinsurance recoverables on paid losses		11,666			6,919
Prepaid reinsurance premiums		5,403			6,088
Deferred policy acquisition costs		6,647			6,380
Receivable from contingent considerations		12,465			8,070
Other assets		3,672			3,735
Total assets	$	277,074		$	281,656

Liabilities and Shareholders' Equity
Liabilities:
Unpaid losses and loss adjustment expenses	$	176,362		$	189,285
Unearned premiums		30,645			30,590
Reinsurance premiums payable		2,488			1
Debt		11,996			11,932
Mandatorily redeemable preferred stock		5,651			—
Funds held under reinsurance agreements		20,964			25,829
Accounts payable and other liabilities		3,383			2,494
Total liabilities		251,489			260,131

Commitments and contingencies

Shareholders' equity:
Common stock, no par value (100,000,000 shares authorized; 12,222,881 issued and outstanding, respectively)		100,117			98,178
Accumulated deficit		(62,631	)		(63,153	)
Accumulated other comprehensive income (loss)		(11,901	)		(13,500	)
Total shareholders' equity		25,585			21,525
Total liabilities and shareholders' equity	$	277,074		$	281,656

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

CONIFER HOLDINGS, INC. AND SUBSIDIARIES

Consolidated Statements of Operations (Unaudited)

(dollars in thousands, except per share data)


	Three Months Ended March 31,
	2025			2024
Revenue and Other Income
Premiums
Gross earned premiums	$	16,118			34,232
Ceded earned premiums		(5,803	)		(17,345	)
Net earned premiums		10,315			16,887
Net investment income		1,289			1,546
Net realized investment gains (losses)		3			—
Change in fair value of equity securities		(192	)		43
Other income		65			149
Change in fair value of contingent considerations		4,395			—
Total revenue and other income		15,875			18,625

Expenses
Losses and loss adjustment expenses, net		9,274			10,520
Policy acquisition costs		2,677			3,160
Operating expenses		2,861			2,862
Interest expense		541			877
Total expenses		15,353			17,419

Income (loss) from continuing operations before income taxes		522			1,206
Income tax expense (benefit)		—			(151	)

Net income (loss) from continuing operations	$	522		$	1,357
Net income (loss) from discontinued operations		—			(1,126	)
Net income (loss)		522			231
Series A Preferred Stock dividends		—			157
Net income (loss) allocable to common shareholders	$	522		$	74

Earnings (loss) per common share, basic and diluted
Net income (loss) from continuing operations	$	0.04		$	0.11
Net income (loss) from discontinued operations	$	—		$	(0.10	)
Net income (loss) allocable to common shareholders	$	0.04		$	0.01

Weighted average common shares outstanding, basic and diluted		12,222,881			12,222,881

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

CONIFER HOLDINGS, INC. AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income (Loss) (Unaudited)

(dollars in thousands)


	Three Months Ended March 31,
	2025		2024
Net income (loss)	$	522	$	231

Other comprehensive income (loss), net of tax:
Unrealized investment gains (losses):
Unrealized investment gains (losses) during the period		1,599		(436	)
Income tax (benefit) expense		—		—
Unrealized investment gains (losses), net of tax		1,599		(436	)

Less: reclassification adjustments to:
Net realized investment gains (losses) included in net income (loss)		—		—
Income tax (benefit) expense		—		—
Total reclassifications included in net income (loss), net of tax		—		—

Other comprehensive income (loss)		1,599		(436	)

Total comprehensive income (loss)	$	2,121	$	(205	)

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

CONIFER HOLDINGS, INC. AND SUBSIDIARIES

Consolidated Statements of Changes in Shareholders' Equity (Unaudited)

(dollars in thousands)


	No Par, Preferred Stock				No Par, Common Stock				Accumulated			Accumulated Other Comprehensive			Total Shareholders'
	Shares		Amount		Shares		Amount		Deficit			Income (Loss)			Equity
Balances at December 31, 2024		—		—		12,222,881	$	98,178	$	(63,153	)	$	(13,500	)	$	21,525
Net income (loss)		—		—		—		—		522			—			522
Issuance of warrants		—		—		—		1,924		—			—			1,924
Stock-based compensation expense		—		—		—		15		—			—			15
Other comprehensive income (loss)		—		—		—		—		—			1,599			1,599
Balances at March 31, 2025		—	$	—		12,222,881	$	100,117	$	(62,631	)	$	(11,901	)	$	25,585


Balances at December 31, 2023		1,000	$	6,000		12,222,881	$	98,100	$	(86,683	)	$	(14,528	)	$	2,889
Net income (loss)		—		—		—		—		231			—			231
Stock-based compensation expense		—		—		—		32		—			—			32
Cash dividends paid on Series A Preferred Stock		—		—		—		—		(157	)		—			(157	)
Other comprehensive income (loss)		—		—		—		—		—			(436	)		(436	)
Balances at March 31, 2024		1,000	$	6,000		12,222,881	$	98,132	$	(86,609	)	$	(14,964	)	$	2,559

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

CONIFER HOLDINGS, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows (Unaudited)

(dollars in thousands)


	Three Months Ended March 31,
	2025			2024
Cash Flows From Operating Activities
Net income (loss) from continuing operations	$	522		$	1,357
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization		64			148
Accretion of Series B Preferred Stock		75			—
Amortization of bond premium and discount, net		(108	)		(167	)
Net realized investment (gains) losses		(3	)		—
Change in fair value of equity securities		192			(43	)
Stock-based compensation expenses		15			32
Other		—			(580	)
Change in fair value of contingent considerations		(4,395	)		—
Changes in operating assets and liabilities:
(Increase) decrease in:
Premiums and agents' balances and other receivables		333			5,864
Reinsurance recoverables		1,871			4,544
Prepaid reinsurance premiums		685			8,422
Deferred policy acquisition costs		(267	)		(371	)
Other assets		71			174
Increase (decrease) in:
Unpaid losses and loss adjustment expenses		(12,923	)		1,214
Unearned premiums		55			(9,919	)
Funds held under reinsurance agreements		(4,823	)		(339	)
Reinsurance premiums payable		2,487			2,153
Premiums payable to other insureds		—			(6,264	)
Accounts payable and other liabilities		889			1,187
Net cash provided by (used in) operating activities - discontinued operations		-			763
Net cash provided by (used in) operating activities		(15,260	)		8,175
Cash Flows From Investing Activities
Purchase of investments		(64,055	)		(52,396	)
Proceeds from maturities and redemptions of investments		7,428			1,764
Proceeds from sales of investments		47,014			49,074
Net cash provided by (used in) investing activities		(9,613	)		(1,558	)
Cash Flows From Financing Activities
Issuance of stock warrants		1,924			—
Issuance of Series B Preferred Stock		5,576			—
Dividends paid on Series A Preferred Stock		—			(176	)
Repayment of long-term debt		—			(250	)
Net cash provided by (used in) financing activities		7,500			(426	)
Net increase (decrease) in cash		(17,373	)		6,191
Cash at beginning of period		27,654			11,125
Cash at end of period		10,281			17,316
Less: Cash and cash equivalents of discontinued operations at the end of period		—			1,225
Cash and cash equivalents of continuing operations at the end of period	$	10,281		$	16,091
Supplemental Disclosure of Cash Flow Information:
Interest paid	$	541		$	964
Income taxes paid (refunded), net		(75	)		—

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

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 VSRM, Inc. ("VSRM"). VSRM owned a 50% non-controlling interest in Sycamore Specialty Underwriters, LLC ("SSU" or"Affiliate") until August 30, 2024, when VSRM sold its interest in SSU.

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." Prior to the sale of Conifer Insurance Services ("CIS") the consolidated financial statements also included CIS which is presented under discontinued operations. CIS contained substantially all of the Wholesale Agency segment and was sold on August 30, 2024.

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, 2024, as filed with the SEC.

The results of operations for the three months ended March 31, 2025, are not necessarily indicative of the results expected for the year ended December 31, 2025.

Business

Historically, the Company was engaged in the sale of property and casualty insurance products and organized its principal operations into three types of insurance businesses: commercial lines, personal lines, and agency business. The Company no longer has the agency business following the sales of both CIS and SSU in August 2024. The Company used to underwrite a variety of specialty commercial insurance products, including commercial property, general liability, liquor liability and commercial automobile, of which substantially all of these programs are in run-off. While this business is no longer written by the Company, the historical business contributes significantly to our exposure to loss reserve development.

As of March 31, 2025, the Company is only writing a small amount of commercial business, and continues to write the specialty homeowners business in Texas, Illinois and Indiana. The Company’s corporate headquarters are located in Troy, Michigan.

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.

Recently Adopted Accounting Pronouncements

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740). ASU 2023-09 requires public business entities to disclose additional information with respect to the reconciliation of the effective tax rate to the statutory rate. Additionally, public business entities will need to disaggregate federal, state and foreign taxes paid in their financial statements. ASU 2023-09 is effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2024. The Company adopted this guidance beginning with this Quarterly Report on Form 10-Q and the adoption did not have a significant impact to the Company's required disclosures.

Accounting Guidance Not Yet Adopted

In November 2024, the FASB issued ASU 2024-03, Disaggregation of Income Statement Expenses, which will require disclosure of additional information about specific expense categories in the notes to financial statements for all public business entities. ASU 2024-03 is effective for annual reporting beginning with the fiscal year ending December 31, 2027, and for interim periods thereafter. Early adoption is permitted. The Company is currently evaluating the impact the adoption of this standard will have on its consolidated financial statements.

In January 2021, the FASB issued ASU 2022-06, Reference Rate Reform (Topic 848). 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, 2024. Management has no contracts referencing LIBOR and expects the new guidance to have no material impact on the Company's consolidated financial statements.

Company Liquidity

At March 31, 2025, the Company had $52.3 million in cash, cash equivalents and short-term investments. Our principal sources of funds are insurance premiums, investment income and proceeds from maturities and sales of invested assets. These funds are primarily used to pay claims, commissions, employee compensation, taxes and other operating expenses, and service debt and mandatorily redeemable preferred stock.

We conduct our business operations primarily through our Insurance Company Subsidiaries. Our ability to service debt and mandatorily redeemable preferred stock, and pay administrative expenses is primarily reliant upon our intercompany service fees paid by the Insurance Company Subsidiaries to the holding 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 holding company supports its funding as state insurance laws restrict the ability of our Insurance Company Subsidiaries to declare dividends to the Parent Company. Generally, the limitations are based on the greater of statutory net income for the preceding year or 10% of statutory surplus at the end of the preceding year. There were no dividends paid from our Insurance Company Subsidiaries for the three months ended March 31, 2025 and 2024. We do not anticipate any dividends being paid to us from our insurance subsidiaries in the near term.

Due to significant losses in 2023 and 2024, much of which is attributable to strengthening reserves on the commercial liability lines of business (which are now all in run-off), both Insurance Company Subsidiaries lack sufficient capital to continue to underwrite the volume of business they have historically written. In particular, there was significant additional adverse development in CIC in the fourth quarter of 2024. This resulted in the need for CHI to contribute an additional $16.0 million into CIC in late 2024 and early 2025 in order for CIC to remain above the Regulatory Action Level of the Risk Based Capital (“RBC”). Even with these contributions, CIC fell within the Company Action Level with an RBC ratio of 156% and was required to submit a plan of remediation to its domiciliary regulator.

As an effort to support CIC and WPIC during 2024, the Parent Company received no intercompany service fees from the Insurance Company Subsidiaries and has relied significantly on proceeds from sales of assets and capital raises over the last two years in order to ensure its ability to meet its obligations as they became due.

CIC’s estimated RBC as of March 31, 2025, is approximately 160%. As part of the plan to get CIC’s RBC ratio above 200% in the near term, CIC is not expected to pay CHI any intercompany service fees for the duration of 2025 but is expected to resume such fees in 2026. CIC may also enter into a quota share agreement with its homeowners book of business as a method of increasing the RBC ratio. It also may take additional contributions to CIC to ensure its RBC gets above 200% in the near term.

CIC is also subject to additional regulatory monitoring requirements as a result of the Company not being above the minimum required RBC levels as of December 31, 2024. To fund these additional contributions, CHI utilized proceeds from the CIS Sale and raised $7.5 million from the issuance of the Series B Preferred Stock and common stock purchase warrants. WPIC no longer writes any business and CIC’s writings are significantly constrained by its diminished capital position.

If we do not remediate the regulatory deficiency the insurance regulator could suspend or terminate CIC’s authority to write business. Also, A.M. Best and Kroll downgraded the financial strength ratings of both companies and we terminated the rating relationship. Therefore, neither company is currently rated by a nationally recognized statistical rating organization which can negatively impact their ability to market to policyholders. These circumstances could jeopardize the ability of the Company to generate insurance underwriting revenues.

CHI had $2.5 million of cash as of March 31, 2025. CHI is required to make quarterly interest payments on its public debt of $412,000 and quarterly dividend payments of $253,000 on its mandatorily redeemable preferred stock. CHI is also currently bearing much of the operating costs of the organization because no management fee is being paid by either insurance company during 2025. CHI’s cash obligations are expected to be funded with cash on hand, the expected receipt of a $10.0 million second earnout payment sometime during 2025, the potential sale of available assets and additional short-term financing available from existing investors. Management believes the Company has the ability to meet its obligations as they become due over the next twelve months.

2. Investments

The Company analyzed its investment portfolio in accordance with its credit loss review policy and determined it did not need to record a credit loss for the three months ended March 31, 2025. The Company holds only investment grade securities from high credit quality issuers. The gross unrealized losses of $10.7 million as of March 31, 2025, from the Company's available-for-sale securities are due to market conditions and interest rate changes. Management believes it will not need to sell its available-for-sale securities at significant losses as it has the ability and intention to hold them until maturity or until their values improve.

The cost or amortized cost, gross unrealized gains or losses, and estimated fair value of the investments in securities classified as available for sale at March 31, 2025 and December 31, 2024 were as follows (dollars in thousands):


	March 31, 2025
	Cost or		Gross Unrealized					Estimated
	Amortized Cost		Gains		Losses			Fair Value
Debt Securities:
U.S. Government	$	4,972	$	12	$	(51	)	$	4,933
State and local government		21,372		—		(3,367	)		18,005
Corporate debt		33,521		—		(2,441	)		31,080
Asset-backed securities		18,653		43		(33	)		18,663
Mortgage-backed securities		24,048		—		(4,395	)		19,653
Commercial mortgage-backed securities		1,379		—		(62	)		1,317
Collateralized mortgage obligations		2,691		—		(319	)		2,372
Total debt securities available for sale	$	106,636	$	55	$	(10,668	)	$	96,023


	December 31, 2024
	Cost or		Gross Unrealized					Estimated
	Amortized Cost		Gains		Losses			Fair Value
Debt Securities:
U.S. Government	$	4,573	$	4	$	(75	)	$	4,502
State and local government		21,933		—		(3,810	)		18,123
Corporate debt		33,543		—		(2,903	)		30,640
Asset-backed securities		28,432		84		(83	)		28,433
Mortgage-backed securities		24,605		—		(4,940	)		19,665
Commercial mortgage-backed securities		1,899		1		(69	)		1,831
Collateralized mortgage obligations		2,842		—		(371	)		2,471
Total debt securities available for sale	$	117,827	$	89	$	(12,251	)	$	105,665

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, 2025
	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		1	$	650	$	(5	)		5	$	1,671	$	(46	)		6	$	2,321	$	(51	)
State and local government		3		1,074		(16	)		102		16,931		(3,351	)		105		18,005		(3,367	)
Corporate debt		1		96		(4	)		63		30,984		(2,437	)		64		31,080		(2,441	)
Asset-backed securities		7		3,982		(2	)		2		448		(31	)		9		4,430		(33	)
Mortgage-backed securities		1		5		(1	)		65		19,648		(4,394	)		66		19,653		(4,395	)
Commercial mortgage-backed securities		1		443		(2	)		2		874		(60	)		3		1,317		(62	)
Collateralized mortgage obligations		—		—		—			27		2,372		(319	)		27		2,372		(319	)
Total debt securities available for sale		14	$	6,250	$	(30	)		266	$	72,928	$	(10,638	)		280	$	79,178	$	(10,668	)


	December 31, 2024
	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	$	2,208	$	(13	)		5	$	1,657	$	(62	)		10	$	3,865	$	(75	)
State and local government		3		1,068		(23	)		104		17,055		(3,787	)		107		18,123		(3,810	)
Corporate debt		1		95		(5	)		63		30,545		(2,898	)		64		30,640		(2,903	)
Asset-backed securities		1		298		(1	)		6		5,630		(82	)		7		5,928		(83	)
Mortgage-backed securities		1		5		(1	)		65		19,660		(4,939	)		66		19,665		(4,940	)
Commercial mortgage-backed securities		—		—		—			2		1,066		(69	)		2		1,066		(69	)
Collateralized mortgage obligations		—		—		—			29		2,471		(371	)		29		2,471		(371	)
Total debt securities available for sale		11	$	3,674	$	(43	)		274	$	78,084	$	(12,208	)		285	$	81,758	$	(12,251	)

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


	Three Months Ended March 31,
	2025			2024
Debt securities	$	958		$	1,225
Equity securities		2			11
Cash, cash equivalents and short-term investments		387			371
Total investment income		1,347			1,607
Investment expenses		(58	)		(61	)
Net investment income	$	1,289		$	1,546

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,
	2025			2024
Debt securities:
Gross realized gains	$	5		$	—
Gross realized losses		(2	)		—
Total debt securities		3			—
Equity securities:
Gross realized gains	$	—		$	—
Gross realized losses		—			—
Total equity securities		—			—
Total net realized investment gains (losses)	$	3		$	—

There were $24.5 million and $1.8 million of proceeds from available-for-sale debt securities for the three months ended March 31, 2025 and 2024, respectively.

There were $5,000 and $0 of gross realized gains from the sale of available-for-sale debt securities for the three months ended March 31, 2025 and 2024, respectively. There were $2,000 and $0 of gross realized losses from the sale of available-for-sale debt securities for the three months ended March 31, 2025 and 2024, respectively.

There were no payables from securities purchased as of March 31, 2025 and March 31, 2024, respectively. There were no receivables from securities sold as of March 31, 2025 and March 31, 2024, respectively.

The Company's gross unrealized gains related to its equity investments were $161,000 and $350,000 as of March 31, 2025 and December 31, 2024, respectively. The Company’s gross unrealized losses related to its equity investments were $586,000 and $584,000 as of March 31, 2025 and December 31, 2024, respectively.

Proceeds from sales of short-term investments were $24.7 million and $23.5 million for the three months ended March 31, 2025 and 2024, respectively. Purchases of short-term investments were $62.4 million and $51.5 million for the three months ended March 31, 2025 and 2024, respectively.

The Company also 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 for the three months ended March 31, 2025 and 2024, respectively, related to the Company's other equity investments. These investments are included in Other Assets in the Consolidated Balance Sheets and amounted to $250,000 as of March 31, 2025 and December 31, 2024.

The table below summarizes the amortized cost and fair value of available-for-sale debt securities by contractual maturity at March 31, 2025. 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	$	6,328	$	6,218
Due after one year through five years		28,048		26,773
Due after five years through ten years		15,473		13,380
Due after ten years		10,016		7,647
Securities with contractual maturities		59,865		54,018
Asset-backed securities		18,653		18,663
Mortgage-backed securities		24,048		19,653
Commercial mortgage-backed securities		1,379		1,317
Collateralized mortgage obligations		2,691		2,372
Total debt securities	$	106,636	$	96,023

At March 31, 2025 and December 31, 2024, the Insurance Company Subsidiaries had $8.4 million and $8.3 million on deposit in trust accounts to meet the deposit requirements of various state insurance departments. At March 31, 2025 and December 31, 2024, the Company had $109.2 million and $108.4 million, respectively, held in trust accounts to meet collateral requirements with other third-party insurers, relating to various fronting arrangements. At March 31, 2025, approximately $108.5 million of the trust account balances are for collateral of gross unearned premiums and gross loss reserves of the fronted business on the security guard and installation industries ("Security Program") and the quick service restaurant program. 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. As the unearned premiums run off to zero and loss reserves are paid on these programs, the remaining trust balances will be released and available for general use. It is expected to take approximately seven years for a large majority of the balances to be released with approximately 50% being released in the next few years.

3. Fair Value Measurements

The Company’s financial instruments include assets carried at fair value, as well as debt carried at face value, net of unamortized debt issuance costs, and are disclosed at fair value in this note. All fair values disclosed in this note are determined on a recurring basis other than the debt which is a non-recurring fair value measure. Fair value is defined as the price that would be received for an asset or paid to transfer a liability in the principal 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.

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 and mutual funds 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, classified by the valuation hierarchy as of March 31, 2025 and December 31, 2024 (dollars in thousands):


	March 31, 2025
	Fair Value Measurements
	Total		Level 1		Level 2		Level 3
Assets:
Debt Securities:
U.S. Government	$	4,933	$	—	$	4,933	$	—
State and local government		18,005		—		18,005		—
Corporate debt		31,080		—		31,080		—
Asset-backed securities		18,663		—		18,663		—
Mortgage-backed securities		19,653		—		19,653		—
Commercial mortgage-backed securities		1,317		—		1,317		—
Collateralized mortgage obligations		2,372		—		2,372		—
Total debt securities		96,023		—		96,023		—
Equity Securities		308		88		220		—
Short-term investments		42,066		42,066		—		—
Total marketable investments measured at fair value	$	138,397	$	42,154	$	96,243	$	—

Investments measured at NAV:
Investments in limited partnerships		1,103
Total investments measured at fair value	$	139,500

Contingent considerations from CIS sale		12,465		—		—		12,465
Total assets measured at fair value	$	151,965

Liabilities:
Senior unsecured notes *	$	11,026	$	—	$	11,026	$	—
Mandatorily redeemable preferred stock		5,567						5,567
Total Liabilities (non-recurring fair value measure)	$	16,593	$	—	$	11,026	$	5,567

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


	December 31, 2024
	Fair Value Measurements
	Total		Level 1		Level 2		Level 3
Assets:
Debt Securities:
U.S. Government	$	4,502	$	—	$	4,502	$	—
State and local government		18,123		—		18,123		—
Corporate debt		30,640		—		30,640		—
Asset-backed securities		28,433		—		28,433		—
Mortgage-backed securities		19,665		—		19,665		—
Commercial mortgage-backed securities		1,831		—		1,831		—
Collateralized mortgage obligations		2,471		—		2,471		—
Total debt securities		105,665		—		105,665		—
Equity securities		311		91		220		—
Short-term investments		21,151		21,151		—		—
Total marketable investments measured at fair value	$	127,127	$	21,242	$	105,885	$	—

Investments measured at NAV:
Investments in limited partnerships		1,292
Total investments measured at fair value		128,419

Contingent considerations from CIS sale		8,070		—		—		8,070
Total assets measured at fair value	$	136,489

Liabilities:
Senior unsecured notes *	$	10,799	$	—	$	10,799	$	—
Total Liabilities (non-recurring fair value measure)	$	10,799	$	—	$	10,799	$	—

* 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 30% and 17% of the fair value of the total marketable investments measured at fair value as of March 31, 2025 and December 31, 2024, respectively.

Level 2 investments include debt securities and equity 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 70% and 83% of the fair value of the total marketable investments measured at fair value as of March 31, 2025 and December 31, 2024, respectively.

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.

As of March 31, 2025, the Company had a Level 3 liability for its mandatorily redeemable preferred stock that was issued during the first quarter of 2025. The fair value measurement of the mandatorily redeemable preferred stock was determined using a one-factor Black-Derman-Toy ("BDT") implementation of a binomial interest lattice in which the distribution of future

short-rates is assumed to be log-normal and is fit to the forward yield curve existing as of the valuation date. This model was selected in consideration of the Company's optional redemption rights. Key assumptions in the analysis included the following as of March 31, 2025:


	Mandatorily Redeemable Preferred Stock

Yield Volatility		20.0	%
Risk-free Rate		3.9	%
Selected Credit Spread		30.4	%
Term	1.75 years
Fixed Rate Equivalent		6.9	%

As of March 31, 2025, the Company had an asset for its contingent considerations related to the CIS Sale. The fair value measurement of the contingent considerations asset was determined using Level 3 inputs. At the time of the fair value analysis, the second contingent payment, equaling $10.0 million, was expected to be earned as of March 31, 2025 and paid on June 1, 2025. The third contingent payment, equaling $10.0 million, was not expected to be earned until 2027, if at all. The Company determined the combined fair value of the second and third contingent payments to be $12.5 million, as of March 31, 2025. The fair value was calculated based on the average of 20,000 simulations of a Monte Carlo analysis performed using Geometric Brownian Motion. Key assumptions in the analysis included the following as of March 31, 2025:


	Contingent Consideration

Discount rate		13.2	%
Gross revenue risk adjustment		3.8	%
Gross revenue volatility		17.5	%
Weighted average risk-free rate		3.9	%
Weighted average cost of capital		12.0	%

The Company's policy on recognizing transfers between hierarchies is applied at the end of each reporting period. The tables below show a rollforward of Level 3 assets and liabilities held at fair value during the three months ended March 31, 2025 (dollars in thousands):


	Balance as of January 1, 2025		Additions into Level 3		Subtractions out of Level 3		Change in Fair Value		Balance as of March 31, 2025
Contingent considerations		8,070	$	—	$	—	$	4,395	$	12,465
Total recurring Level 3 assets		8,070	$	—	$	—	$	4,395	$	12,465

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, 2025 and 2024. The activity in deferred policy acquisition costs, net of reinsurance transactions, is as follows (dollars in thousands):


	Three Months Ended March 31,
	2025			2024
Balance at beginning of period	$	6,380		$	6,405

Deferred policy acquisition costs		2,944			3,530
Amortization of policy acquisition costs		(2,677	)		(3,160	)
Net change		267			370

Balance at end of period	$	6,647		$	6,775

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 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.

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,
	2025			2024
Gross reserves - beginning of period	$	189,285		$	174,612
Less: reinsurance recoverables on unpaid losses		(84,490	)		(70,807	)
Net reserves - beginning of period		104,795			103,805
Add: incurred losses and LAE, net of reinsurance:
Current period		9,130			10,981
Prior period		144			(461	)
Total net incurred losses and LAE		9,274			10,520
Deduct: loss and LAE payments, net of reinsurance:
Current period		1,593			2,862
Prior period		13,986			9,444
Total net loss and LAE payments		15,579			12,306
Net reserves - end of period		98,490			102,019
Plus: reinsurance recoverables on unpaid losses		77,872			73,807
Gross reserves - end of period	$	176,362		$	175,826

Net losses and LAE decreased by $1.2 million, or 11.8%, to $9.3 million during the first quarter of 2025, compared to $10.5 million for the same period in 2024. The $1.9 million decrease in current accident year losses during the first quarter of 2025, compared to the same period in 2024, was mostly due to a significant reduction in net earned premiums as commercial lines business is in runoff and we focus on the specialty homeowners business.

The Company’s incurred losses during the first quarter of 2025 included prior-year adverse development of $144,000. Of the $144,000 of adverse development, $764,000 of adverse development occurred in the Company's personal lines, while the Company experienced prior-year favorable development of $620,000 in the Company's commercial lines. The adverse development in the personal lines was related to the Company's Texas Homeowners book of business mostly in accident year 2024.

The Company’s incurred losses during the first quarter of 2024 included prior-year favorable development of $461,000. Of the $461,000 of favorable development experience during the first quarter of 2024, $508,000 of favorable development was experienced in the Company's personal lines of business, mostly related to accident year 2023. The $508,000 of favorable development in the Company's personal lines was offset by $47,000 of adverse development in the Company's commercial lines of business, mostly related to accident year 2022.

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 ceded primarily all specific commercial liability risks in excess of $400,000 in 2025 and 2024. The Company ceded specific commercial property risks in excess of $400,000 in 2025 and 2024. The Company ceded homeowners specific risks in excess of $500,000 and $400,000 in 2025 and 2024, respectively.

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 minimum A.M. Best rating, or where the policies are written in a state where the Company is not licensed or for other strategic reasons.

On November 1, 2022, the Company entered into a loss portfolio transfer (“LPT”) reinsurance agreement. As of March 31, 2025, the Company has recorded losses through the $5.5 million corridor and $15.3 million into the $20.0 million layer. As of December 31, 2024, the Company recorded losses through the $5.5 million corridor and $14.0 million into the $20.0 million layer.

As of March 31, 2025, the Consolidated Balance Sheets included $2.3 million and $9.7 million of reinsurance recoverables on paid and unpaid losses related to the LPT, respectively. As of December 31, 2024, the Consolidated Balance Sheets included $3.4 million and $10.6 million of reinsurance recoverables on paid and unpaid losses related to the LPT, respectively.

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,
	2025			2024
Written premiums:
Direct	$	16,177		$	24,099
Assumed		(4	)		214
Ceded		(5,333	)		(8,922	)
Net written premiums	$	10,840		$	15,391

Earned premiums:
Direct	$	16,187		$	24,808
Assumed		(69	)		9,424
Ceded		(5,803	)		(17,345	)
Net earned premiums	$	10,315		$	16,887

Losses and LAE:
Direct	$	7,080		$	21,982
Assumed		8,671			(3,264	)
Ceded		(6,477	)		(8,198	)
Net Losses and LAE	$	9,274		$	10,520

7. Debt

Prior to August 30, 2024, the Company's debt was comprised of two instruments: $17.9 million of 9.75% public senior unsecured notes (the "New Public Notes") which were issued during the third quarter of 2023, and $9.3 million of privately placed 12.5% Senior Secured Notes, which were issued on September 30, 2023.

On August 30, 2024, the Company paid off all of its $9.3 million of outstanding Senior Secured Notes with the proceeds from the CIS Sale. The Company incurred a $753,000 call premium from the paydown of the Senior Secured Notes. The Company amortized through interest expense $771,000 of debt issuance costs related to the paydown of the Senior Secured Notes.

A summary of the Company's outstanding debt is as follows (dollars in thousands):


	As of March 31, 2025						As of December 31, 2024
	Gross Debt		Unamortized Debt Issuance Costs		Net Debt		Gross Debt		Unamortized Debt Issuance Costs		Net Debt
Senior unsecured notes	$	12,887	$	891	$	11,996	$	12,887	$	955	$	11,932
Total	$	12,887	$	891	$	11,996	$	12,887	$	955	$	11,932

New Public Notes

The Company issued $17.9 million of New Public Notes during the third quarter of 2023. The new notes bear an interest rate of 9.75% per annum, payable quarterly at the end of March, June, September and December and mature on September 30, 2028. The Company may redeem the new notes, in whole or in part, at face value at any time after September 30, 2025.

Debt covenants

The Company was not subject to any restrictive financial debt covenants as of March 31, 2025, as a result of its paydown of the Senior Secured Notes on August 30, 2024.

Scheduled Principal Payments

The remaining scheduled principal payments of the Company's debt as of March 31, 2025 are $7.5 million due on December 31, 2026 and $12.9 million due on September 30, 2028.

8. Mandatorily Redeemable Preferred Stock

Series B Preferred Stock

On February 27, 2025 and March 3, 2025, the Company issued a total of $7.5 million of its newly designated non-convertible mandatorily redeemable Series B Preferred Stock, no par value, through a private placement of 1,000 shares priced at $5,000 per share that matures on December 31, 2026, and issued the Purchaser (as defined below) common stock purchase warrants (the "Warrants") to purchase 4,000,000 shares at an exercise price of $1.50 per share.

Upon approval by the Company’s stockholders, the Warrants entitle the Purchaser to purchase up to 4,000,000 shares of the Company’s common stock at an exercise price of $1.50 per share. The Warrants will expire on January 31, 2027.

The Series B Preferred Stock was sold to Clarkston 91 West LLC (the "Purchaser"), an entity affiliated with Gerald and Jeffrey Hakala, members of the Board of Directors of the Company. The Company used the proceeds for working capital and general corporate purposes. The Series B Preferred Shares may be redeemed at the Company's option at a price equal to the Series B issue price. Each share of the Series B Preferred Stock entitles the Holder to 3,000 votes on each matter properly submitted to the Company's shareholders for their vote, however the aggregate voting power of all outstanding shares of the Series B Preferred Stock shall not exceed 19.99% of the aggregate voting power of all voting securities.

The Series B Preferred Stock required quarterly dividend payments at a rate equal to the prime rate of Waterford Bank, N.A. ("Waterford Bank") plus 600 basis points, or 12.0%, whichever is higher. As of March 31, 2025, this equated to an annualized rate of 13.5%. The Company's recorded $88,000 of interest expense related to the first quarter dividend from the Series B Preferred Stock.

The $7.5 million of Series B Preferred Stock, and the Warrants issued contemporaneously, were both fair valued as of the issuance date. The Warrants were valued at $2.0 million and the Preferred Stock was valued at $5.5 million. The fair value of the Warrants was recorded as additional paid-in capital.

The total liability recorded for the Preferred Stock was $5.5 million. The Preferred Stock liability will be accreted to its maximum redemption value over the term maturing on December 31, 2026, using the effective interest method. The increases in the redemption amount are recorded with corresponding adjustments to the interest expense. The Series B Preferred Stock accreted by $75,000 during the first quarter of 2025.

The value of the Warrants increased book value through additional paid-in capital by $0.16 per share. Over time, as the preferred stock liability increases to $7.5 million face value, the $0.16 per share of book value will decrease through retained earnings.

9. Shareholder’s Equity

Series A Preferred Stock

On August 30, 2024, the Company redeemed all of the $6.0 million of its outstanding Series A Preferred Stock. The Company incurred a redemption premium of $397,000. The redemption premium reduced the Company's net income allocable to common shareholders.

The Series A Preferred Stock was originally issued on December 20, 2023, through a private placement of 1,000 shares priced at $6,000 per share that matured on June 30, 2026. The Series A Preferred Stock was sold to Clarkston 91 West LLC (the "Purchaser"), an entity affiliated with Gerald and Jeffrey Hakala, members of the Board of Directors of the Company. The Series A Preferred Stock shareholders had no voting rights and optional redemption was only in the control of the Company.

As of March 31, 2025 and December 31, 2024, the Company had no issued or outstanding shares of the Series A Preferred Stock, respectively.

Common Stock

As of March 31, 2025 and December 31, 2024, the Company had 12,222,881 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.

10. Earnings Per Share

Basic and diluted earnings (loss) per share are computed by dividing net income allocable to common shareholders by the weighted average number of common shares outstanding during the period. The dividends on the Series A Preferred Stock are

deducted from the net income to arrive at net income allocable to common shareholders. The following table presents the calculation of basic and diluted earnings (loss) per common share, as follows (dollars in thousands, except per share and share amounts):


	Three Months Ended March 31,
	2025		2024
Net income (loss) from continuing operations	$	522	$	1,357
Net income (loss) from discontinued operations		—		(1,126	)
Net income (loss)		522		231
Series A Preferred Stock dividends		—		157
Net income (loss) allocable to common shareholders	$	522	$	74

Earnings (loss) per common share, basic and diluted
Net income (loss) from continuing operations	$	0.04	$	0.11
Net income (loss) from discontinued operations	$	-	$	(0.10	)
Net income (loss) allocable to common shareholders	$	0.04	$	0.01

Weighted average common shares outstanding, basic and diluted		12,222,881		12,222,881

* There were no unvested restricted stock units as of March 31, 2025. The non-vested shares of stock options and recently issued warrants were anti-dilutive as of March 31, 2025. The non-vested shares of the restricted stock units and stock options were anti-dilutive as of March 31, 2024. Therefore, the basic and diluted weighted average common shares are equal for the three months ended March 31, 2025 and 2024.

11. Stock-based Compensation

On March 8, 2022 the Company issued options to purchase 630,000 shares of the Company's common stock to two named executive officers. The right to exercise the options vest over a five-year period on a straight-line basis. The options have a strike price of $4.53 per share and will expire on March 8, 2032. The estimated grant date fair value of these options is $612,000, which is being expensed ratably over the vesting period. A Black Scholes model was used to determine the fair value of the options at the time the options were issued, using the Company’s historical 5-year market price of its stock to determine volatility (equating to 65.04%), an estimated 5-year term to exercise the options, a 5-year risk-free rate of return of 1.8%, and the market price for the Company’s stock of $2.40 per share.

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 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 grant date fair value of these options is $290,000, which is being expensed ratably over the vesting period.

The Company recorded $15,000 and $32,000 of compensation expense for the three months ended March 31, 2025 and 2024, respectively, related to the Company's stock options granted. There were 116,000 options outstanding and unvested as of March 31, 2025, which will generate an estimated future expense of $101,000.

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 financial statements. 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.

Payment of Contingent Considerations

As of March 31, 2025, the Company recorded $12.5 million of contingent consideration receivable to reflect the fair value of potential additional contingent consideration related to the CIS Sale. The timing of such payments are contingent on the performance of CIS and the timing of the receipt of such payments, if at all, are subject to variables outside of our control. We have until June 30, 2027 to earn the remaining two contingent considerations and expect to receive the next $10.0 million payment sometime in 2025.

13. Segment Information

The Company has historically been engaged in the sale of property and casualty insurance products and had organized its business model around three classes of insurance businesses: commercial lines, personal lines, and wholesale agency business. Within these three businesses, the Company offered various insurance products and insurance agency services. Such insurance businesses were engaged in underwriting and marketing insurance coverages, and administered claims processing for such policies. The Company viewed the commercial and personal lines segments as underwriting business (business that takes on insurance underwriting risk). The wholesale agency business provided non-risk bearing revenue through commissions and policy fees. The wholesale agency business increased 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. As a result of the CIS Sale, the Company is no longer operating a wholesale agency business. The Company determined that the wholesale agency segment qualifies for discontinued operations reporting. All periods presented now exclude the wholesale agency segment as well as related eliminations from the segment information provided below.

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 agents and a network of independent agents. All of the Company’s insurance activities are conducted in the U.S. with a concentration of activity in Texas and Nevada. In mid-2024, the Company exited the Oklahoma business. As part of the strategic shift described earlier, the Company has also significantly reduced its writings in commercial lines. For the three months ended March 31, 2025 and 2024, gross written premiums attributable to these two states were 96.1% and 28.0%, respectively, of the Company’s total gross written premiums.

In addition to the reportable segments, the Company maintains a Corporate and Other category to reconcile segment results to the consolidated totals. The Corporate and Other category includes: (i) corporate operating expenses such as salaries and related benefits of the Company’s executive management team, some 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.

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


Three months ended March 31, 2025	Commercial Lines			Personal Lines			Total Underwriting			Corporate			Total

Gross written premiums	$	2,047		$	14,126		$	16,173		$	—		$	16,173

Net written premiums	$	(1,604	)	$	12,444		$	10,840		$	—		$	10,840

Net earned premiums	$	1,331		$	8,984		$	10,315		$	—		$	10,315
Other income		—			23			23			42			65
Segment revenue		1,331			9,007			10,338			42			10,380

Losses and LAE, net		1,505			7,769			9,274			—			9,274
Policy acquisition costs		(47	)		2,724			2,677			—			2,677
Operating expenses		384			2,192			2,576			285			2,861
Segment expenses		1,842			12,685			14,527			285			14,812

Segment gain (loss)	$	(511	)	$	(3,678	)	$	(4,189	)	$	(243	)	$	(4,432	)
Investment income											1,289			1,289
Net realized investment gains (losses)											3			3
Change in fair value of equity securities											(192	)		(192	)
Change in fair value of contingent considerations											4,395			4,395
Interest expense											541			541
Income (loss) from continuing operations before income taxes	$	(511	)	$	(3,678	)	$	(4,189	)	$	4,711		$	522


Three months ended March 31, 2024	Commercial Lines			Personal Lines		Total Underwriting		Corporate			Total

Gross written premiums	$	12,762		$	11,551	$	24,313	$	—		$	24,313

Net written premiums	$	8,287		$	7,104	$	15,391	$	—		$	15,391

Net earned premiums	$	8,797		$	8,090	$	16,887	$	—		$	16,887
Other income		50			28		78		71			149
Segment revenue		8,847			8,118		16,965		71			17,036

Losses and LAE, net		6,766			3,754		10,520		—			10,520
Policy acquisition costs		1,147			2,013		3,160		—			3,160
Operating expenses		1,748			971		2,719		143			2,862
Segment expenses		9,661			6,738		16,399		143			16,542

Segment gain (loss)	$	(814	)	$	1,380	$	566	$	(72	)	$	494
Investment income									1,546			1,546
Change in fair value of equity securities									43			43
Interest expense									877			877
Income (loss) from continuing operations before income taxes	$	(814	)	$	1,380	$	566	$	640		$	1,206

14. Subsequent Events

The Company performed an evaluation of subsequent events through the date the financial statements were issued and determined there were no recognized or unrecognized subsequent events that would require an adjustment or additional disclosure in the condensed consolidated financial statements as of March 31, 2025.

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

For the Periods Ended March 31, 2025 and 2024

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 28, 2025 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 28, 2025 and included herein, 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

Sale and Disposal of Agency Business

On August 30, 2024 the Company completed the sale of all of the issued and outstanding membership interests of Conifer Insurance Services ("CIS") to BSU Leaf Holdings LLC, a Delaware limited liability company, pursuant to the Interest Purchase Agreement, dated as of the Closing Date (the "CIS Agreement"), by and among the Company, Buyer and Buyer's parent (the "CIS Sale"). CIS comprised the Company’s managing general agency “MGA” business. CIS also represented almost all of the Wholesale Agency segment. CIS and the related Wholesale Agency segment are now reported as discontinued operations for all periods presented. The Company sold CIS in order to generate liquidity to pay down debt and provide capital to the Insurance Company Subsidiaries.

The CIS Sale will have a significant negative impact on revenues for the Company going forward. With the previously mentioned strategic shift away from underwriting revenues, the Company was relying on the growth of commission revenue to replace the lost revenue from underwriting. Now that the Wholesale Agency segment has been sold, the Company will need to rely entirely on underwriting revenues. These revenues have reduced significantly in the past year. For example, gross written premiums were $24.3 million in the first quarter of 2024, as compared to only $16.2 million in the first quarter of 2025.

In connection with the CIS Sale, 68 of the Company’s 77 employees were transferred to the Buyer, including Nicholas Petcoff, the Company’s then current Chief Executive Officer, as well as all of the underwriting, claims and IT teams, and a portion of the finance staff and other operating staff. As part of the completion of the CIS Sale, Mr. Petcoff resigned from his role as Chief Executive Officer and as a director on August 30, 2024. Concurrently, Brian Roney, President of the Company, was appointed as the Company’s new Chief Executive Officer. The Company entered into a transition services agreement with the buyer to allow both parties to share resources for a certain period of time, generally less than twelve months, in order to effectuate an orderly separation of the internal systems and operations. The net cost to the Company was $225,000 which expense will be recognized over the period the services are provided.

The initial purchase price of CIS was $45.0 million, subject to purchase price adjustments. In addition, during the three years ending on the third anniversary of the Closing Date, the Company is eligible under the CIS Agreement to receive up to three contingent payments based on performance thresholds of the gross revenue earned by CIS in the applicable quarter, with the aggregate amount of contingent capped at $25.0 million. Consideration paid in cash to the Company was $46.6 million on August 30, 2024, which is comprised of the $45.0 million initial purchase price, plus $1.6 million of cash in CIS in excess of the working capital deficiency (as defined in the CIS Agreement).

The contingent consideration payments, in order of achievability are $5.0 million, $10.0 million and $10.0 million. The contingent consideration included in the gain on sale was calculated based on the fair value of the three contingent payments as of September 30, 2024, in accordance with ASC 820 - Fair Value Measurement. The first contingent payment was earned as of September 30, 2024, and received in December 2024. The second contingent payment, equaling $10.0 million, was expected to be earned as of March 31, 2025 and paid on June 1, 2025, however the buyer has not agreed to the final calculation as of the filing of this 10-Q, which could delay the payment, but most likely no later than the end of 2025. The third contingent payment, equaling $10.0 million, was not expected to be earned until 2027, if at all. The Company determined the combined fair value of the second and third contingent payments to be $12.5 million, as of March 31, 2025. As fair value estimates change over time, subsequent measurement adjustments will be reflected in income or loss in the period of change. See Note 3 ~ Fair Value Measurements for further details.

There was significant judgment in deriving the fair value of the final two $10.0 million contingent payments, including estimating the extent of time it will take to achieve the earnout, the credit quality of the buyer and, most importantly, the risk that the contingent payments may not be achieved at all. There is greater than an insignificant chance that we do not receive one or both of these contingent payments. There are no provisions allowing for a partial payment of the earnout.

Sale of SSU

Prior to August 30, 2024 the Company owned 50% of SSU and the other 50% of SSU was owned by Andrew Petcoff, the son of James Petcoff, the Company’s former Executive Chairman and Co-Chief Executive Officer and beneficial owner of more than 5% of the Company’s common stock. Andrew Petcoff purchased 50% of SSU from the Company on December 31, 2022, for $1,000.

On August 30, 2024, the Company completed the sale of its 50% ownership interest in SSU to an entity owned by Andrew Petcoff. Pursuant to the Membership Interest Purchase Agreement, dated as of August 30, 2024 (the “SSU Agreement”) among Sycamore Financial Group, LLC, Andrew Petcoff and VSRM Insurance Agency, Inc., the aggregate purchase price was $6.5 million with $3.0 million paid in cash to the Company at the time of the closing and the remaining $3.5 million was paid to the Company during the fourth quarter of 2024. A gain of $6.5 million was recognized on the sale of SSU.

As part of the sale, the Company entered into a new program administration agreement with SSU, which requires SSU to provide underwriting and systems support to the homeowners programs that they produce. Separately, the Company entered into a claims administration agreement with CIS, now owned by BSU Leaf Holdings LLC., to handle all homeowners claims going forward.

Other Impacts of Recent Developments

With the completion of the disposal of the agency business, we have just two agency relationships; with CIS and SSU. CIS has control over almost all of our commercial lines premium volume and it is expected that CIS will remove all of the remaining commercial lines business to another insurer as some point in the future. SSU has control of our remaining homeowners book of business and could move that business to another insurer or insurers. We no longer directly “market and sell our insurance products through a network of over 4,400 independent agents that distribute our policies through approximately 950 sales offices” as stated in that filing. Those relationships are now owned by unrelated third parties (CIS and SSU). This greatly amplifies our concentration of risk relative to our marketing and distribution network. Refer to the Company's 2024 Annual Report on Form 10-K, filed on March 28, 2025 for further details on the Company's structure.

Our staff is now only nine people. We are relying heavily upon the CIS and SSU teams to handle underwriting, claims, and information technology services. Much of this is managed either through program administration agreements with CIS and SSU or a claims administration agreement with CIS. The policy management system also conveyed with CIS, which we can continue to use for our existing business, but may not be available for any new programs we may consider. CIS and SSU also handle all billing and collections. We no longer have the capacity to operate a direct bill process.

Redemption of the Series A Preferred Stock and payoff of Senior Secured Debt

On August 30, 2024 with a portion of the proceeds from the sale of CIS, the Company paid off all $9.3 million of its privately placed 12.5% Senior Secured Notes which were outstanding at August 30, 2024 (the "Senior Secured Notes"), and redeemed all of the $6.0 million of its outstanding Series A Preferred Stock. The Company incurred a redemption premium of $397,000 from the Series A Preferred Stock, and recorded the premium as additional dividends paid on the Series A Preferred Stock. See Note 7 ~ Debt and Note 8 ~ Shareholders Equity of the Notes to the Consolidated Financial Statements for further details.

A.M. Best and Kroll

On March 25, 2024, Kroll downgraded the financial strength ratings of CIC and WPIC. Kroll has given CIC an insurance financial strength rating of BB- with a negative outlook. Kroll has given WPIC an insurance financial strength rating of B with

a negative outlook. A BB- and a B rating indicates that the insurer's financial condition is low quality. Concurrently, the Company withdrew its participation in the rating process, and shall be non-rated by Kroll going forward.

On March 14, 2024, A.M. Best downgraded the financial strength ratings of CIC and WPIC to C. A rating of C means A.M. Best considers both companies to have a "weak" ability to meet ongoing financial obligations. Concurrently, the Company withdrew its participation in the rating process, and shall be non-rated by A.M. Best going forward.

Business Overview

We are an insurance holding company that markets and services our product offerings through specialty commercial and specialty personal insurance business lines. Currently, we are authorized to write insurance as an excess and surplus lines carrier in 44 states, including the District of Columbia. We are licensed to write insurance as an admitted carrier in 42 states, including the District of Columbia. As of March 31, 2025, we offer insurance products primarily in Texas, Illinois and Indiana, for homeowners lines and Nevada and Michigan for other lines.

Our revenues are primarily derived from premiums earned from our insurance operations. We also generate other revenues through investment income.

Our expenses consist primarily of losses and loss adjustment expenses, agents’ commissions, and other underwriting and administrative expenses. Historically, we have organized our operations in three insurance businesses: commercial insurance lines, personal lines, and agency business. Together, the commercial and personal lines refer to “underwriting” operations that take insurance risk, and the agency business refers to non-risk insurance business.

Through our commercial insurance lines, we historically offered coverage for both commercial property and commercial liability. We also offered 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. We expect minimal commercial lines business going forward.

Through our personal insurance lines, we offer homeowners insurance and dwelling fire insurance products 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.

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 operations will not be affected by accounting adjustments needed to reflect changes in these estimates and assumptions. During the three months ended March 31, 2025, 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 28, 2025.

Executive Overview

The Company reported $16.2 million of gross written premiums in the first quarter of 2025, representing a 33.5% decrease as compared to the same period in 2024. Our commercial lines gross written premiums decreased by $10.8 million, or 84.0%, to $2.0 million in the first quarter of 2025, compared to $12.8 million for the same period in 2024. Personal lines gross written premiums increased by $2.5 million, or 22.3%, to $14.1 million in the first quarter of 2024, compared to $11.6 million for the same period in 2024.

The Company reported net income from continuing operations of $522,000, or $0.04 per share for the three months ended March 31, 2025, compared to net income from continuing operations of $1.4 million, or $0.11 per share for the same period in 2024.

The Company reported net income allocable to common shareholders of $522,000, or $0.04 per share, for the three months ended March 31, 2025, compared to net income of $74,000, or $0.01 per share, for the same period in 2024.

Adjusted operating income per share is a non-GAAP measure that represents net income allocable to common shareholders excluding net realized investment gains or losses, change in fair value of equity securities and net income from discontinued operations. Adjusted operating loss was $3.7 million, or $0.30 per share for the three months ended March 31, 2025, compared to an adjusted operating income of $1.3 million, or $0.11 per share, for the same period in 2024.

Our underwriting combined ratio was 140.5% and 96.7% for the three months ended March 31, 2025 and 2024, respectively.

Results of Operations for the Three Months Ended March 31, 2025 and 2024

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

Summary of Operating Results


	Three Months Ended March 31,
	2025			2024			$ Change			% Change
Gross written premiums	$	16,173		$	24,313		$	(8,140	)		(33.5	%)

Net written premiums	$	10,840		$	15,391		$	(4,551	)		(29.6	%)

Net earned premiums	$	10,315		$	16,887		$	(6,572	)		(38.9	)%
Other income		65			149			(84	)		(56.4	%)
Losses and loss adjustment expenses, net		9,274			10,520			(1,246	)		(11.8	)%
Policy acquisition costs		2,677			3,160			(483	)		(15.3	)%
Operating expenses		2,861			2,862			(1	)		(0.0	)%
Underwriting gain (loss)		(4,432	)		494			(4,926	)	*
Net investment income		1,289			1,546			(257	)		(16.6	)%
Net realized investment gains (losses)		3			—			3		*
Change in fair value of equity securities		(192	)		43			(235	)	*
Change in fair value of contingent considerations		4,395			—
Interest expense		541			877			(336	)		(38.3	)%
Income (loss) from continuing operations before income taxes		522			1,206			(684	)	*
Income tax expense (benefit)		—			(151	)		151		*
Net income (loss) from continuing operations		522			1,357			(835	)	*
Net income from discontinued operations		—			(1,126	)		1,126		*
Net income (loss)	$	522		$	231		$	291		*

Book value per common share outstanding	$	2.09		$	0.21

Underwriting Ratios:
Loss ratio (1)		89.7	%		62.0	%
Expense ratio (2)		50.8	%		34.7	%
Combined ratio (3)		140.5	%		96.7	%

(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.

Our premiums are presented below for the three months ended March 31, 2025 and 2024 (dollars in thousands):

Summary of Premium Revenue


	Three Months Ended March 31,
	2025			2024		$ Change			% Change
Gross written premiums
Commercial lines	$	2,047		$	12,762	$	(10,715	)		(84.0	)%
Personal lines		14,126			11,551		2,575			22.3	%
Total	$	16,173		$	24,313	$	(8,140	)		(33.5	)%

Net written premiums
Commercial lines	$	(1,604	)	$	8,287	$	(9,891	)		(119.4	)%
Personal lines		12,444			7,104		5,340			75.2	%
Total	$	10,840		$	15,391	$	(4,551	)		(29.6	)%

Net earned premiums
Commercial lines	$	1,331		$	8,797	$	(7,466	)		(84.9	)%
Personal lines		8,984			8,090		894			11.1	%
Total	$	10,315		$	16,887	$	(6,572	)		(38.9	)%

Gross written premiums decreased $8.1 million, or 33.5%, to $16.2 million for the three months ended March 31, 2025, as compared to $24.3 million for the same period in 2024.

Commercial lines gross written premiums decreased $10.8 million, or 84.0%, to $2.0 million in the first quarter of 2025, as compared to $12.8 million for the first quarter of 2024. As of September 1, 2024, we no longer write any hospitality or small business commercial lines business. These lines are in run off, and earned a small amount of premium during the first quarter of 2025. We currently do not expect to write a significant amount of other commercial lines in the near term.

Personal lines gross written premiums increased $2.5 million, or 22.3%, to $14.1 million in the first quarter of 2025, as compared to $11.6 million for the same period in 2024. The increase was due to the organic growth in the low-value dwelling book of business in Texas and in the Midwest which, combined, grew by $5.0 million in the first quarter of 2025, compared to the same period in 2024. This increase was offset by our exit in Oklahoma homeowners business. We plan to continue to write the Midwest and Texas homeowners programs but we do not expect continued growth to be significant.

Net written premiums decreased $4.6 million, or 29.6%, to $10.8 million for the three months ended March 31, 2025, as compared to $15.4 million for the same period in 2024. Net written premiums declined during the quarter as a result of the Company's reduction in commercial lines business.

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, 2025 and 2024 (dollars in thousands):


Three months ended March 31, 2025	Commercial Lines			Personal Lines			Total
Accident year net losses and LAE	$	2,125		$	7,005		$	9,130
Net (favorable) adverse development		(620	)		764			144
Calendar year net losses and LAE	$	1,505		$	7,769		$	9,274

Accident year loss ratio		159.7	%		77.7	%		88.3	%
Net (favorable) adverse development		(46.6	)%		8.6	%		1.4	%
Calendar year loss ratio		113.1	%		86.3	%		89.7	%


Three months ended March 31, 2024	Commercial Lines			Personal Lines			Total
Accident year net losses and LAE	$	6,719		$	4,262		$	10,981
Net (favorable) adverse development		47			(508	)		(461	)
Calendar year net losses and LAE	$	6,766		$	3,754		$	10,520

Accident year loss ratio		76.0	%		52.5	%		64.7	%
Net (favorable) adverse development		0.5	%		(6.3	)%		(2.7	)%
Calendar year loss ratio		76.5	%		46.2	%		62.0	%

Net losses and LAE decreased by $1.2 million, or 11.8%, to $9.3 million during the first quarter of 2025, compared to $10.5 million for the same period in 2024. The decrease was mostly attributable to a $1.9 million decrease in current accident year losses due to a significant reduction in net earned premiums described above. The decrease in current accident year losses was partially offset by a $605,000 increase in adverse development on prior-year loss reserves.

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 Corporate expenses.

The table below provides the expense ratio by major component.


	Three Months Ended March 31,
	2025			2024
Commercial Lines
Policy acquisition costs		(3.5	)%		13.0	%
Operating expenses		28.8	%		19.7	%
Total		25.3	%		32.7	%
Personal Lines
Policy acquisition costs		30.2	%		24.8	%
Operating expenses		24.4	%		12.0	%
Total		54.6	%		36.8	%
Total Underwriting
Policy acquisition costs		25.9	%		18.7	%
Operating expenses		24.9	%		16.0	%
Total		50.8	%		34.7	%

Our expense ratio increased by 16.1% during the first quarter of 2025, compared to the same period in 2024.

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 ceding commissions from reinsurers. The percentage of policy acquisition costs to net earned premiums and other income increased by 7.2% during the first quarter of 2025 to 25.9%, compared to 18.7% during the same period in 2024. The increase was primarily related to the increased commission rates under new producer agreements concurrent with the sale of CIS and SSU. Particularly for SSU, which is producing substantially all go-forward business, SSU took on the responsibility of managing the policy issuance, premium collections and systems of the homeowners book of business. This resulted in increased commission rates of approximately 6.0% to SSU to cover those costs.

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 underwriting income increased by 8.9% during the first quarter of 2025 to 24.9%, compared to 16.0% for the same period in 2024. The increase in the ratio was mostly due to significantly lower net earned premiums, while legacy operational costs related to the run off books of business still exist. Such legacy costs are expected to reduce over the next year.

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, 2025 and 2024 (dollars in thousands):

Segment Gain (Loss)


	Three Months Ended March 31,
	2025			2024			$ Change
Commercial Lines	$	(511	)	$	(814	)	$	303
Personal Lines		(3,678	)		1,380			(5,058	)
Total Underwriting		(4,189	)		566			(4,755	)
Corporate		(243	)		(72	)		(171	)
Total segment gain (loss)	$	(4,432	)	$	494		$	(4,926	)

Liquidity and Capital Resources

Sources and Uses of Funds

CIC is also subject to additional regulatory monitoring requirements as a result of the Company not being above the minimum required RBC levels as of December 31, 2024. To fund these additional contributions, CHI utilized proceeds from the CIS Sale and raised $7.5 million from the issuance of the Series B Preferred Stock. WPIC no longer writes any business and CIC’s writings are significantly constrained by its diminished capital position.

The book value per share reflected in our financial statements, which have been prepared in accordance with GAAP, may not represent the amount that shareholders would receive if the Company were liquidated or sold.

The book value per share is calculated based on the historical cost of our assets, less accumulated depreciation and liabilities. This value does not account for the current market conditions, potential future earnings or expenses, or the fair market value of our assets (exclusive of equity security investments) and liabilities. As a result, the book value per share may differ significantly from the actual proceeds that could be realized in a liquidation or sale.

Several factors contribute to this discrepancy, including the following:

•

Market Conditions: The value of our assets and liabilities can fluctuate based on market conditions, which are not reflected in the historical cost basis used in GAAP.

•

Intangible Assets: Intangible assets could have either greater or lesser value than their recorded amounts in a liquidation or sale.

•

Depreciation and Amortization: The book value includes depreciation and amortization, which reduce the carrying value of assets over time. However, these accounting adjustments may not accurately reflect the current market value of our assets.

•

Contingent Liabilities: Potential liabilities or obligations that are not recorded on the balance sheet under GAAP could impact the net proceeds in a liquidation or sale.

•

Transaction Costs: Costs associated with our future operations and with any sale or liquidation, such as legal fees, taxes and other expenses, are not considered in the book value calculation.

Our outstanding public debt securities are currently trading at a discount to their face amount. In order to reduce future cash interest payments, as well as future amounts due at maturity or upon redemption, we may, from time to time, purchase such debt for cash, in exchange for common stock, or for a combination of cash and common stock, in open market or privately negotiated transactions. We will evaluate any such transactions in light of then-existing market conditions, taking into account our current liquidity and prospects for future access to capital. The amounts involved in such transactions, individually or in the aggregate, may be material.

In February and March of 2025, the Company issued $7.5 million of its newly designated Series B Preferred Stock. The Company intends to use the proceeds for working capital and general corporate purposes. With the recent capital raise, anticipated go-forward revenues, the likelihood that we will receive a $10.0 million earnout during 2025 and the potential for further asset sales, management believes the Company has the ability to meet its obligations as they become due over the next twelve months.

Cash Flows

Operating Activities. Cash used in operating activities for the three months ended March 31, 2025 was $15.3 million, compared to $8.2 million of cash provided by operating activities for the same period in 2024. The $23.5 million increase in cash used in operating activities was primarily driven by an increase of $20.0 million in net losses paid during the first quarter of 2025, compared to the same period in 2024. The Company also experienced a $3.2 million decrease in net premiums collected during the first quarter of 2025, compared to the same period in 2024.

Investing Activities. Cash used in investing activities for the three months ended March 31, 2025 was $9.6 million, compared to cash used in investing activities of $1.6 million for the same period in 2023. The $8.0 million increase in cash used in investing activities was driven by an increase of $11.7 million in purchases of investments during the first quarter of 2025, compared to the same period in 2024. In addition, the Company had $2.1 million less of proceeds from sales of investments

during the first quarter of 2025, compared to the same period in 2024. These amounts were offset by a $5.7 million increase in proceeds for maturities and redemptions of investments during the first quarter of 2025, compared to the same period in 2024.

Financing Activities. Cash provided by financing activities for the three months ended March 31, 2025 was $7.5 million compared to $426,000 of cash used in financing activities for the same period in 2024. The $7.9 million increase in cash provided by financing activities was mostly attributed to the $5.6 million of Series B Preferred Stock issued and the $1.9 million of stock warrants issued from the Series B Preferred Stock during the first quarter of 2025.

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 $35.3 million and $41.1 million at March 31, 2025 and December 31, 2024, respectively.

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 net income from discontinued operations. The most directly comparable financial GAAP measures to adjusted operating income and adjusted operating income per share are net income allocable to common shareholders and net income allocable to common shareholders 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 allocable to common shareholders or net income allocable to common shareholders 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) allocable to common shareholders to adjusted operating income (loss) (dollars in thousands), as well as net income (loss) allocable to common shareholders per share to adjusted operating income (loss) per share:


	Three Months Ended March 31,
	2025			2024
Net income (loss)	$	522		$	231
Less:
Net realized investment gains (losses)		3			—
Change in fair value of equity securities		(192	)		43
Change in fair value of contingent considerations		4,395			—
Net income (loss) from discontinued operations		—			(1,126	)
Impact of income tax expense (benefit) from adjustments *		—			—
Adjusted operating income (loss)	$	(3,684	)	$	1,314

Weighted average common shares diluted		12,222,881			12,222,881
Diluted income (loss) per common share:
Net income (loss)	$	0.04		$	0.02
Less:
Net realized investment gains (losses)		—			—
Change in fair value of equity securities		(0.02	)		0.01
Change in fair value of contingent considerations		0.36			—
Net income (loss) from discontinued operations		—			(0.10	)
Impact of income tax expense (benefit) from adjustments *		—			—
Adjusted operating income (loss) per share	$	(0.30	)	$	0.11

* The Company has recorded a full valuation allowance against its deferred tax assets as of March 31, 2025 and March 31, 2024, respectively. As a result, there were no taxable impacts to adjusted operating income from the adjustments to net income (loss) in the table above after taking into account the use of NOLs and the change in the valuation allowance.

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.

Recent Accounting Pronouncements

Refer to Note 1 ~ Summary of Significant Accounting Policies – Accounting Guidance Not Yet Adopted of the Notes to the Consolidated Financial Statements for detailed information regarding recently issued accounting pronouncements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable for smaller reporting companies.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of 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, 2025. Based on such evaluations, the 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, 2025, 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 reasonably likely to materially affect the Company's internal control over financial reporting.

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, 2025, 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 28, 2025.

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

All such sales were previously disclosed on a Form 8-K.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

ITEM 5. OTHER INFORMATION

During the three months ended March 31, 2025, none of the Company's directors or Section 16 officers adopted or terminated any contract, instruction or written plan for the purchase or sale of Conifer securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) under the Exchange Act or any “non-Rule 10b5-1 trading arrangement” as such term is defined in Item 408(c) of Regulation S-K.

ITEM 6. EXHIBITS


		Incorporated by Reference
Exhibit Number	Exhibit Description	Form	Period Ending	Exhibit / Appendix Number	Filing Date

3.1	Certificate of Designation of Series B Preferred Stock	8-K	N/A	3.1	March 4, 2025

10.1	Purchase Agreement, dated February 27, 2025, by and between Conifer Holdings, Inc. and Clarkston Capital, LLC	8-K	N/A	10.1	March 4, 2025

10.2	Form of Warrant	8-K	N/A	10.2	March 4, 2025

10.3	Additional Purchase Agreement, dated March 3, 2025, by and between Conifer Holdings, Inc. and Clarkston Capital, LLC	8-K	N/A	10.3	March 4, 2025

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	inline XBRL Instance Document

101.SCH	inline XBRL Taxonomy Extension Schema Document

104	Cover Page Interactive Date File (embedded within the Inline XBRL document)

* 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.

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 14, 2025