Market Overview

Kingstone Announces 2017 First Quarter Financial Results

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Kingstone Companies, Inc. (NASDAQ:KINS) (the "Company" or
"Kingstone"), a multi-line property and casualty insurance holding
company, today announced its financial results for the quarter ended
March 31, 2017

Financial and Operational Highlights

2017 First Quarter

(All results are compared to prior year period unless otherwise noted)

  • Net income increased 171.9% to $1.5 million or $0.15 per diluted share
  • Net operating income1 increased 208.8% to $1.5 million or
    $0.15 per diluted share
  • Net premiums earned increased 12.6% to $16.4 million
  • Direct written premiums1 increased 13.4%; Personal lines
    grew by 11.6%
  • Net combined ratio of 85.2% compared to 96.9%
  • Return on average common equity (annualized) of 8.1% compared to 4.7%
  • Operating return on average common equity (annualized)1 of
    8.3% compared to 4.3%
  • Book value per share increased to $8.29, up 31.2% over Q1 2016

Quarterly Dividend of $0.08 per share

The Company announced that its Board of Directors declared an increased
quarterly dividend of $0.08 per share payable on June 15, 2017 to
stockholders of record at the close of business on May 31, 2017. This is
our 24th consecutive quarterly dividend.

Annual Meeting of Stockholders

The Company also announced that the 2017 Annual Meeting of Stockholders
will be held on Wednesday, August 9, 2017 at 9:00 A.M. at 15 Joys Lane,
Kingston, New York. Stockholders of record as of the close of business
on June 14, 2017 will be entitled to vote at the Annual Meeting.

Management Commentary

Kingstone's Chairman and CEO, Barry Goldstein, commented "There are
three things I would like to point out. First, we successfully completed
our second follow-on offering in February, delivering the Company an
additional $30 million in capital. Second, following the equity raise,
we negotiated, with the assistance of Aon Benfield, a new two year
Personal Lines Quota Share treaty extending our already twelve year
relationship with our quota share reinsurers, Maiden Re and Swiss Re.
With the contribution of $23,000,000 to our subsidiary, Kingstone
Insurance Company ("KICO"), we were thrilled to be able to reduce the
percentage ceded by half-from 40% to 20%. Third, with those two items in
place, A.M. Best upgraded KICO's Financial Strength Rating to "A-
Excellent." This took place on the 131st anniversary of the
founding of KICO. A collaboration between lawyers, CPAs, bankers,
analysts and many others with so many different skills resulted in our
achieving a status in the marketplace sought by us since the
demutualization of 2009. I thank all of those involved and look forward
to the enhanced and increased opportunities that await us as an A-rated
carrier."

___________________
(1)   This measure is not based on GAAP and is defined and reconciled to
the most directly comparable GAAP measure in "Information Regarding
Non-GAAP Measures" below.
 

Kingstone's EVP and Chief Actuary, Ben Walden, elaborated on
underwriting results for the quarter. "After three straight unusually
harsh winter seasons in New York, we were fortunate to experience
relatively mild weather this first quarter. From a profitability
perspective, the first quarter is typically the most challenging of the
year for Kingstone due to the combined impact of winter weather and
larger fire claims. However, on both these fronts, results were better
than expected this quarter. Excluding the impact of winter weather,
claim frequency continued to improve year over year in personal lines.
The impact of large fires on the personal lines loss ratio was also
greatly reduced in first quarter 2017 relative to the prior year period,
leading to a strong improvement in our core loss ratio. Our net combined
ratio of 85.2% for the quarter is more than ten points better than our
result for the first quarters for each of the last three years and is a
great start to what we hope will be another record year for Kingstone.
As we continue to post excellent underwriting results, our double digit
New York growth rate continues in line with recent quarters. In the
first quarter we also introduced New York's first voluntary flood
endorsement, which can now be attached to qualifying Kingstone
homeowners policies. Starting in the second quarter, we will begin
supplementing our New York growth with business generated from our state
expansion plan, beginning with our newly approved homeowners product in
New Jersey and then moving on to Rhode Island and Connecticut. The
innovative enhancements built into our new product, along with our elite
status as an A.M. Best A- rated carrier, should differentiate us from
others seeking the cheapest way to deliver their products to new
markets. Our newly achieved A.M. Best rating also opens up many
additional avenues for growth which we anticipate capitalizing on in the
coming months."

Mr. Walden noted, "Our core net loss ratio excluding severe winter
weather and prior year loss development improved 7.8 points from 58.5%
to 50.7% in first quarter 2017 as compared to first quarter 2016. The
improvement was driven by a reduction in both claim frequency and
average claims severity in our personal lines business. In addition,
prior year loss development was stable in the first quarter 2017 with no
material change recorded. We continue to be very confident in the
adequacy of our reserves, having taken the required actions over several
years to dramatically improve our claims handling process. The numbers
again speak for themselves, and we are happy to continue to add value
for our shareholders."

Financial Highlights Table

     
Financial Highlights Three Months Ended March 31,
($ in thousands except per share data)

2017

 

2016

 

% Change

Direct written premiums* $ 26,125 $ 23,043 13.4 %
Net written premiums* $ 16,734 $ 14,662 14.1 %
Net premiums earned $ 16,370 $ 14,532 12.6 %
Total ceding commission revenue $ 3,184 $ 2,770 14.9 %
Net investment income $ 858 $ 813 5.5 %
 
U.S. GAAP Net income $ 1,471 $ 541 171.9 %
U.S. GAAP Diluted EPS $ 0.15 $ 0.07 114.3 %
 
Comprehensive income $ 1,853 $ 1,467 26.3 %
Net operating income* $ 1,507 $ 488 208.8 %
Net operating income diluted EPS* $ 0.15 $ 0.07 114.3 %
 
Return on average equity (annualized) 8.1 % 4.7 % 3.4 pts
 
Net loss ratio 50.7 % 65.3 % -14.6 pts
Net underwriting expense ratio   34.5 %   31.6 % 2.9 pts
Net combined ratio 85.2 % 96.9 % -11.7 pts
 
Effect of catastrophes on net combined ratio 0 pts 9.7 pts -9.7 pts
Net combined ratio excluding the effect
of catastrophes* 85.2 % 87.2 % -2.0 pts
 

* These measures are not based on GAAP and are defined and
reconciled to the most directly comparable GAAP measures in
"information Regarding Non-GAAP Measures."

 

2017 First Quarter Financial Review

Net Income:

Net income increased 171.9% to $1.47 million during the three month
period ended March 31, 2017, compared to net income $0.54 million in the
prior-year period. The increase in net income can be attributed
primarily to a 14.6 point decrease in the net loss ratio. There was a
12.6% increase in net premiums earned, which, combined with the decline
in net loss ratio, contributed to the increase in net income.

Earnings per share ("EPS"):

Kingstone reported EPS of $0.15 per diluted share for the three months
ended March 31, 2017, compared to $0.07 per diluted share for the three
months ended March 31, 2016. EPS for the three month periods ended March
31, 2017 and March 31, 2016 was based on 9.85 million and 7.36 million
weighted average diluted shares outstanding, respectively.

Direct Written Premiums1,
Net Written Premiums
1
and Net Premiums Earned:

Direct written premiums1 for the first quarter of 2017 were
$26.1 million, an increase of 13.4% from $23.0 million in the prior year
period. The increase is attributable to a 10.8% increase in the total
number of policies in-force as of March 31, 2017 as compared to March
31, 2016.

(1) These measures are not based on GAAP and are defined and reconciled
to the most directly comparable GAAP measures in "Information Regarding
Non-GAAP Measures" below.

Net written premiums1 increased 14.1% to $16.7 million during
the three month period ended March 31, 2017 from $14.7 million in the
prior year period.

Net premiums earned for the quarter ended March 31, 2017 increased 12.6%
to $16.4 million, compared to $14.5 million in the quarter ended March
31, 2016.

Net Loss Ratio:

For the quarter ended March 31, 2017, the Company's net loss ratio was
50.7% compared to 65.3% in the prior period. The first quarter 2017 net
loss ratio improved due to a reduction in the impact of severe winter
weather and a decline in the core loss ratio excluding the impact of
catastrophes and prior year loss development.

Net Other Underwriting Expense Ratio:

For the quarter ended March 31, 2017, the net underwriting expense ratio
was 34.5% as compared to 31.6% in the prior year period. The increase of
2.9 percentage points was largely due to expenses related to our new
state expansion initiative and a one-time favorable impact in first
quarter 2016 related to a state premium tax rate adjustment, which does
not affect first quarter 2017.

Net Combined Ratio:

Kingstone's net combined ratio was 85.2% for the three month period
ended March 31, 2017, compared to 96.9% for the prior year period.

Balance Sheet / Investment Portfolio

Kingstone's cash and investment holdings were $138.9 million at March
31, 2017 compared to $94.0 million at March 31, 2016. The Company's
investment holdings are comprised primarily of investment grade
corporate, mortgage-backed and municipal securities, with fixed income
investments representing approximately 91.3% of total investments at
March 31, 2017 and 88.7% at March 31, 2016. The Company's effective
duration on its fixed-income portfolio is 4.8 years.

Net investment income increased 5.5% to $858,000 for the first quarter
of 2017 from $813,000 in the prior year period, largely due to an
increase in invested assets. The purchase of higher rated securities has
led to a reduction in the pre-tax equivalent investment yield on
estimated annual income, excluding cash, to 4.03% at March 31, 2017 as
compared to 4.80% as of March 31, 2016.

Accumulated Other Comprehensive Income (AOCI), net
of tax

As of March 31, 2017, AOCI was $0.46 million compared to $1.41 million
at March 31, 2016.

__________________________________________________________________________________________

Book Value

The Company's book value per share at March 31, 2017 was $8.29 an
increase of 31.2% compared to $6.32 at March 31, 2016.

             
31-Mar-17 31-Dec-16 30-Sep-16 30-Jun-16 31-Mar-16
Book Value Per Share $ 8.29 $ 7.15 $ 7.16 $ 6.80 $ 6.32
 
% Increase from specified period to 3/31/2017 15.9 % 15.8 % 21.9 % 31.2 %
 

In January and February 2017, the Company sold a total of 2,692,500
newly issued shares of common stock in a public offering at a price of
$12.00 per share. Kingstone received net proceeds from the public
offering of $30,136,699 after deducting underwriting discounts and
commissions, and other offering expenses.

Conference Call Details

Management will discuss the Company's operations and financial results
in a conference call on Friday, May 12, 2017, at 8:30 a.m. ET.

The dial-in numbers are:
(877) 407-3105 (U.S.)
(201) 493-6794
(International)

Accompanying Slide Presentation and Webcast

The Company will also have an accompanying slide presentation available
in PDF format on the Kingstone Companies website at http://www.kingstonecompanies.com/.
The presentation will be made available 30 minutes prior to the
conference call. In addition, the call will be simultaneously webcast
over the Internet via the Kingstone website or by clicking on the
conference call link: http://kingstonecompanies.equisolvewebcast.com/q1-2017.
The webcast will be archived and accessible for approximately 30 days.

Information Regarding Non-GAAP Measures

Direct written premiums -
represents the total premiums charged on policies issued by the Company
during the respective fiscal period.

Net written premiums -
represents direct written premiums less premiums ceded to reinsurers.

Net premiums earned - is the GAAP
measure most closely comparable to direct written premiums and net
written premiums. Management uses direct written premiums and net
written premiums, along with other measures, to gauge the Company's
performance and evaluate results. Direct written premiums and net
written premiums are provided as supplemental information, are not a
substitute for net premiums earned and do not reflect the Company's net
premiums earned.

The table below details the direct written premiums, net written
premiums, and net premiums earned for the periods indicated:

       
For the Three Months Ended March 31,
2017   2016  

$
Change

 

%
Change

(000's except percentages)
Direct and Net Written Premiums Reconciliation:
 
Direct written premiums $ 26,125 $ 23,043 $ 3,082 13.4 %
Assumed written premiums 4 5 (1 ) (20.0 )%
Ceded written premiums   (9,395 )   (8,386 )   (1,009 ) 12.0 %
 
Net written premiums 16,734 14,662 2,072 14.1 %
Change in unearned premiums   (364 )   (130 )   (234 ) 180.0 %
 
Net premiums earned $ 16,370   $ 14,532   $ 1,838   12.6 %
 

Net operating income - is net income
exclusive of realized investment gains, net of tax. Net income is the
GAAP measure most closely comparable to net operating income.

Operating return on average common equity
- is net operating income divided by average common equity. Return on
average common equity is the GAAP measure most closely comparable to
operating return on average common equity.

Management uses net operating income and operating return on average
common equity, along with other measures, to gauge the Company's
performance and evaluate results, which can be skewed when including
realized investment gains, which may vary significantly between periods.
Net operating income and operating return on average common equity are
provided as supplemental information, are not a substitute for net
income or return on average common equity and do not reflect the
Company's overall profitability or return on average common equity.

The following table reconciles the net operating income to net income
and the operating return on average common equity to return on average
common equity for the periods indicated:

       
Three Months Ended Three Months Ended
March 31, 2017 March 31, 2016
   
Amount

Diluted
earnings
per
common
share

Amount

Diluted
earnings
per
common
share

(000's except, per common share amounts and percentages)
 
Net Operating Income and Diluted Earnings per Common Share
Reconciliation:
 
Net income $ 1,471   $ 0.15 $ 541   $ 0.07
 
Net realized (gain) loss on investments 55 (80 )
Less tax effect on realized gains   19     (27 )
 
Net realized (gain) loss on investments, net of taxes   36   $ -   (53 ) $ -
 
Net operating income $ 1,507   $ 0.15 $ 488   $ 0.07
 
Weighted average diluted shares outstanding   9,848,494     7,360,564  
 

Operating Return on Average Common Equity (Annualized
for
Quarterly Periods) Reconciliation:

 
Net income $ 1,471 $ 541
Average common equity $ 72,389 $ 45,750
Return on average common equity (annualized for quarterly periods) 8.1 % 4.7 %
 
Net realized (gain) loss on investments, net of taxes $ 36 $ (53 )
Average common equity $ 72,389 $ 45,750
 

Effect of net realized (gain) loss on investments, net of taxes, on
return
on average common equity (annualized for quarterly periods)

0.2 % -0.5 %
 
Net operating income $ 1,507 $ 488
Average common equity $ 72,389 $ 45,750
 
Operating return on average common equity (annualized for
quarterly periods)
8.3 % 4.3 %
 

Net combined ratio excluding the effect of
catastrophes
- is a non-GAAP ratio, which is computed as the
difference between GAAP net combined ratio and the effect of
catastrophes on the net combined ratio. We believe that this ratio is
useful to investors and it is used by management to reveal the trends in
our business that may be obscured by catastrophe losses. Catastrophe
losses cause our loss trends to vary significantly between periods as a
result of their incidence of occurrence and magnitude, and can have a
significant impact on the net combined ratio. We believe it is useful
for investors to evaluate this component separately and in the aggregate
when reviewing our underwriting performance. We also provide it to
facilitate a comparison to our outlook on the net combined ratio
excluding the effect of catastrophes. The most directly comparable GAAP
measure is the net combined ratio. The net combined ratio excluding the
effect of catastrophes should not be considered a substitute for the net
combined ratio and does not reflect the Company's net combined ratio.

The following table reconciles the net combined ratio excluding the
effects of catastrophes to the net combined ratio for the periods
indicated:

     
For the Three Months Ended March 31,
2017   2016  

Percentage
Point Change

Net Combined Ratio Excluding the Effect of Catastrophes
Reconciliation:
 
Net combined ratio excluding the effect of catastrophes 85.2 % 87.2 % (2.0

) pts

 
Effect of catastrophe losses
Net loss and loss adjustment expenses 0.0 % 9.7 % (9.7

) pts

Total effect of catastrophe losses 0.0 % 9.7 % (9.7

) pts

 
Net combined ratio 85.2 % 96.9 % (11.7

) pts

 

About Kingstone Companies, Inc.

Kingstone is a property and casualty insurance holding company whose
principal operating subsidiary, Kingstone Insurance Company, is
domiciled in the State of New York. Kingstone is a multi-line property
and casualty insurance company writing business exclusively through
independent retail and wholesale agents and brokers. Kingstone is
licensed to write insurance policies in New York, New Jersey,
Pennsylvania, Connecticut, Texas and Rhode Island. Kingstone offers
property and casualty insurance products to individuals and small
businesses primarily in New York State.

Forward-Looking Statement

Statements in this press release may contain "forward-looking
statements" within the meaning of the Private Securities Litigation
Reform Act of 1995. All statements, other than statements of historical
facts, may be forward-looking statements. These statements are based on
management's current expectations and are subject to uncertainty and
changes in circumstances. These statements involve risks and
uncertainties that could cause actual results to differ materially from
those included in forward-looking statements due to a variety of
factors. More information about these factors can be found in
Kingstone's filings with the Securities and Exchange Commission,
including its latest Annual Report filed with the Securities and
Exchange Commission on Form 10-K. Kingstone undertakes no obligation to
publicly update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise.

The following table summarizes gross and net written premiums1,
net premiums earned, and loss and loss adjustment expenses by major
product type, which were determined based primarily on similar economic
characteristics and risks of loss.

     
For the Three Months Ended
March 31,
2017   2016
 
Gross premiums written:
Personal lines $ 19,461,972 $ 17,441,086
Commercial lines 3,584,054 3,128,138
Livery physical damage 3,026,483 2,431,915

Other(2)

  57,386     47,264  
Total $ 26,129,895   $ 23,048,403  
 
Net premiums written:
Personal lines $ 10,466,368 $ 9,385,438
Commercial lines 3,202,565 2,814,905
Livery physical damage 3,026,483 2,431,915

Other(2)

  38,889     29,617  
Total $ 16,734,305   $ 14,661,875  
 
Net premiums earned:
Personal lines $ 10,690,583 $ 9,463,896
Commercial lines 2,842,580 2,680,725
Livery physical damage 2,792,347 2,255,854

Other(2)

  44,238     131,200  
Total $ 16,369,748   $ 14,531,675  
 
Net loss and loss adjustment expenses:
Personal lines $ 5,352,112 $ 7,548,551
Commercial lines 1,528,796 910,834
Livery physical damage 965,522 988,553

Other(2)

(52,074 ) (380,407 )
Unallocated loss adjustment expenses   498,640     416,324  
Total $ 8,292,996   $ 9,483,855  
 
Net loss ratio:
Personal lines 50.1 % 79.8 %
Commercial lines 53.8 % 34.0 %
Livery physical damage 34.6 % 43.8 %

Other(2)

-117.7 % -289.9 %
Total 50.7 % 65.3 %
 
        1.   These measures are not based on GAAP and are defined and reconciled
to the most directly comparable GAAP measure in "Information
Regarding Non-GAAP Measures" above.
2. "Other" includes, among other things, premiums and loss and loss
adjustment expenses from commercial auto and our participation in a
mandatory state joint underwriting association. Effective October 1,
2014 we decided to no longer accept applications for new commercial
auto coverage. In February 2015, we decided to no longer offer
renewals to our existing commercial auto policies beginning with
those that expired on or after May 1, 2015.
 
       

KINGSTONE COMPANIES, INC. AND SUBSIDIARIES

 
Condensed Consolidated Statements of Income and Comprehensive
Income (Unaudited)
 
Three months ended March 31,       2017   2016
 
Revenues
Net premiums earned $ 16,369,748 $ 14,531,675
Ceding commission revenue 3,184,452 2,770,337
Net investment income 857,800 813,057
Net realized (losses) gains on sales of investments (54,506 ) 80,436
Other income   289,700       249,347  
Total revenues   20,647,194       18,444,852  
 
Expenses
Loss and loss adjustment expenses 8,292,996 9,483,855
Commission expense 4,888,978 4,270,066
Other underwriting expenses 4,212,417 3,346,441
Other operating expenses 755,804 329,239
Depreciation and amortization   318,698       283,828  
Total expenses   18,468,893       17,713,429  
 
Income from operations before taxes 2,178,301 731,423
Income tax expense   707,721       190,391  
Net income   1,470,580     541,032  
 
Other comprehensive income, net of tax
Gross change in unrealized gains on available-for-sale-securities 524,822 1,484,064
 
Reclassification adjustment for losses (gains)
included in net income   54,506     (80,436 )
Net change in unrealized gains 579,328 1,403,628
Income tax expense related to items of other comprehensive income   (196,972 )   (477,234 )
Other comprehensive income, net of tax   382,356     926,394  
 
Comprehensive income $ 1,852,936   $ 1,467,426  
 
Earnings per common share:
Basic $ 0.15   $ 0.07  
Diluted $ 0.15   $ 0.07  
 
Weighted average common shares outstanding
Basic   9,663,751     7,322,385  
Diluted   9,848,494     7,360,564  
 
Dividends declared and paid per common share $ 0.0625   $ 0.0625  
 
       

KINGSTONE COMPANIES, INC. AND SUBSIDIARIES

 
Condensed Consolidated Balance Sheets            
March 31, December 31,
        2017   2016
(unaudited)
Assets
Fixed-maturity securities, held-to-maturity, at amortized cost (fair
value of
$5,159,351 at March 31, 2017 and $5,298,119 at December 31, 2016) $ 4,895,443 $ 5,094,902
Fixed-maturity securities, available-for-sale, at fair value
(amortized cost of
$100,554,236 at March 31, 2017 and $80,596,628 at December 31, 2016) 100,687,355 80,428,828
Equity securities, available-for-sale, at fair value (cost of
$9,545,785
at March 31, 2017 and $9,709,385 at December 31, 2016)   10,102,495       9,987,686  
Total investments 115,685,293 95,511,416
Cash and cash equivalents 23,235,655 12,044,520
Premiums receivable, net 11,728,443 11,649,398
Reinsurance receivables, net 33,502,642 32,197,765
Deferred policy acquisition costs 12,467,976 12,239,781
Intangible assets, net 1,265,000 1,350,000
Property and equipment, net 3,375,436 3,011,373
Other assets   1,430,646       1,442,209  
Total assets $ 202,691,091     $ 169,446,462  
 
Liabilities
Loss and loss adjustment expense reserves $ 44,611,586 $ 41,736,719
Unearned premiums 55,322,298 54,994,375
Advance premiums 1,965,456 1,421,560
Reinsurance balances payable 2,108,447 2,146,017
Deferred ceding commission revenue 6,772,857 6,851,841
Accounts payable, accrued expenses and other liabilities 3,212,865 5,448,448
Income taxes payable 202,751 -
Deferred income taxes   396,425       166,949  
Total liabilities   114,592,685       112,765,909  
 
Commitments and Contingencies
 
Stockholders' Equity
Preferred stock, $.01 par value; authorized 2,500,000 shares - -
Common stock, $.01 par value; authorized 20,000,000 shares; issued
11,596,947 shares
at March 31, 2017 and 8,896,335 at December 31, 2016; outstanding
10,622,478 shares at March 31, 2017 and 7,921,866 shares at December
31, 2016
115,969 88,963
Capital in excess of par 68,152,149 37,950,401
Accumulated other comprehensive income 455,287 72,931
Retained earnings   21,370,463       20,563,720  
90,093,868 58,676,015
Treasury stock, at cost, 974,469 shares at March 31, 2017 and
December 31, 2016
  (1,995,462 )     (1,995,462 )
Total stockholders' equity   88,098,406       56,680,553  
 
Total liabilities and stockholders' equity $ 202,691,091     $ 169,446,462  

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