Conifer Holdings (CNFR) said late Monday that it has entered into an agreement with Swiss Re, a provider of reinsurance, to cover loss development of up to $17.5 million in excess of stated reserves as of June 30.
The agreement provides up to $17.5 million of reinsurance for adverse net loss reserve development for accident years 2005 through 2016. Conifer retains sole responsibility for all claims activities, which it said is important to the company’s ongoing value proposition to all of its customers.
The agreement attaches when net losses exceed $1.4 million of the $36.6 million carried reserves at June 30, and extends to $19.5 million in coverage up to $57.5 million (inclusive of a 10% co-participation).
The company said the consideration for the agreement is a payment of $7.2 million. It noted that there is a 35% contingent recovery depending on the performance of the reserves over time.
The agreement, which will be reflected in Conifer’s Q3 financial statements as a retroactive reinsurance agreement, will result in a one-time charge to ceded premiums of $7.2 million, or $0.84 per common share.
Additionally, the company said it has completed a $30 million private placement of subordinated notes with an affiliate of Elanus Capital Management, LLC. The subordinated notes have a maturity date of Sept. 29, 2032, bear interest, payable quarterly at a fixed annual rate of 8.0%, and allows for up to four quarterly interest deferrals. The notes include an issuer call option at par from July 1, 2018, through Oct. 31, 2018, and at 105% of par any time after Sept. 29, 2020.
In conjunction with the agreement and the re-financing, the company also announced that it has $5 million in commitments through the issuance of common equity through a private placement at a price of $6.25 per share. The participants in the private placement consisted mainly of members of the company’s management team and insiders, including Chairman and CEO Jim Petcoff.
Finally, Conifer also announced estimated catastrophe pre-tax losses incurred in Q3 of $4.5 million, net of expected reinsurance recoveries. Its Q3 catastrophe losses included claims from two category 4 hurricanes, Hurricane Harvey in Texas and Hurricane Irma in Florida.