Could Michigan-Based Conifer Holdings IPO Outperform?

Birmingham, Michigan based Conifer Holdings CNFR priced its 3.1 million share offering at $10.50 per share the morning of August 13, after downsizing from 4.6 million.

Founded in 2009, Conifer is the holding company for a variety of commercial and specialty insurance products. Sales are directed by 4,500 independent agents operating out of 2,200 sales offices in 44 of the United States.

One way the company intends to grow is by positioning itself in underserved markets, like owner-operator small business. It believes this allows them to add value without competing on price point with larger carriers.

The company’s other growth and operating strategies are based on an understanding of business and regulatory landscapes, flexibility, strong relationships with agents, premium growth in existing markets and geographic expansion with an overarching goal of conservative underwriting practices to limit volatility or risk to the company.

Financials

Currently, the company has $124 million of cash on its balance sheet, compared with $68 million in 2013.

Since 2012, gross written premiums have almost doubled each year. In 2014, it wrote $84 million in premiums and also suffered its largest losses. In 2012, and 2013, the company’s net income was $413 and $280 thousand. In 2014, due to $40 million in losses, the company lost $7.2 million, despite a $40 million increase in written premiums.

According to management, the 29 percent of the 2014 loss was due to personal automobile insurance policies and 77 percent is attributed to Midwest homeowners. As a result, the company is exiting the non-profitable auto insurance business and increased rates by an average of 8 percent for homeowner policies in Indiana and Illinois.

Proceeds from the offering will be roughly $29 million, which will be used to pay down $6.3 million of senior debt, to repurchase outstanding preferred stock, pay any accrued dividends on the stock and to fund its subsidiary growth.

For the foreseeable future, the company does not anticipate paying any dividends.

BMO Capital Markets and Raymond James are leading the offering.