Market Overview

Kingstone Announces 2017 Fourth Quarter and Year-End Financial Results

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Dale Thatcher elected as Chief Operating
Officer of Kingstone Companies, Inc. and President of Kingstone
Insurance Company

Company to Host Conference Call on March 15, 2018 at 8:30 a.m. ET

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 and year
ended December 31, 2017.

Financial and Operational Highlights

2017 Fourth Quarter
(All results are compared to prior
year period unless otherwise noted)

  • Net income decreased 6.0% to $1.9 million or $0.18 per diluted share
  • Net operating income1 decreased 7.8% to $1.9 million or
    $0.18 per diluted share
  • Net premiums earned increased 38.8% to $22.5 million
  • Direct written premiums1 increased 19.9%; Personal lines
    grew by 28.4%
  • Net combined ratio of 89.9% compared to 79.6%
  • Return on average common equity (annualized) of 8.2% compared to 14.5%
  • Operating return on average common equity (annualized)1 of
    8.2% compared to 14.9%
  • Book value per share increased to $8.90, up 24.5% over Q4 2016 and up
    0.8% from Q3 2017.

2017 Full Year
(All results are compared to prior year)

  • Net income increased 12.2% to $10.0 million or $0.94 per diluted share
  • Net operating income1 increased 16.1% to $9.9 million or
    $0.94 per diluted share, compared to $8.6 million or $1.10 per diluted
    share
  • Net premiums earned increased 26.0% to $77.4 million
  • Direct written premiums1 increased 17.8%; Personal lines
    grew by 21.1%
  • Net combined ratio of 80.6% compared to 79.2%
  • Return on average common equity of 13.2% compared to 17.5%
  • Operating return on average common equity1 of 13.1%
    compared to 16.8%
  • Book value per common share on December 31, 2017 of $8.90, compared to
    $7.15 at December 31, 2016, an annual increase of 24.5%
  • Dividends of $0.3025 per share were declared and paid

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.

Quarterly Dividend of $0.10 per share
The Company previously
announced that its Board of Directors declared a quarterly dividend of
$0.10 per share payable on March 15, 2018 to stockholders of record at
the close of business on February 28, 2018. This was our 27th
consecutive quarterly dividend.

___________________

Executive Commentary

Kingstone's Chairman and CEO, Barry Goldstein, commented "We ended 2017
a far different and far stronger company from how we began the year. The
last quarter was somewhat messy, and before we get into the details,
allow me to repeat the major 2017 milestones sequentially.

  • In Q1, we successfully completed a $30 million equity offering.
  • In Q2, we achieved our long sought A.M. Best rating of "A- Excellent".
    In addition we joined the Federal Home Loan Bank of New York and saw
    our stock added to the Russell indices.
  • In Q3, our personal lines quota share ceding percentage was reduced
    from 40% to 20%.
  • In Q4, we completed our first ever debt securities offering, selling
    $30 million of investment grade rated five year notes at a coupon rate
    of 5.50%.

I am very pleased to announce that Dale Thatcher, a member of our Board
of Directors since August 2017, has accepted our offer to lead the
insurance company and lend his considerable skills and extensive
experience in helping to guide Kingstone forward."

Mr. Thatcher noted, "I am excited to join with Barry, along with Ben
Walden and Victor Brodsky, as KINS Chief Operating Officer and President
of its insurance subsidiary, Kingstone Insurance Company. As a director
of KINS since August 2017, I have been able to see, first-hand, the
values that guide Kingstone and why it achieves consistently
above-market results. Integrity, transparency and loyalty are the three
key elements. I will call upon all that I've learned in my thirty years
in the business and most recently my sixteen years as Chief Financial
Officer of Selective Insurance Group. (NYSE "SIGI") to help propel
Kingstone to even greater heights."

Management Commentary

Kingstone's EVP and Chief Actuary, Ben Walden, provided details on the
underwriting results for the quarter.

Mr. Walden stated, "Underwriting results for the quarter were dampened
by the impact of large claims and by an early onset of severe cold
weather. Two large claims, one in personal lines and one in commercial
lines, reached the per risk reinsurance retentions during the quarter,
and these had a 5.8 point impact on the loss ratio. An unusual spell of
very cold weather during the last week of December resulted in pipe
freeze claims that affected the quarterly loss ratio by another 2.7
points. Combined, the two large claims and those from late December had
a 2.5 point impact on the full year loss ratio. Fire claim activity this
quarter was more in line with long term averages than was observed in Q4
2016, which had an unusually low impact from such claims. Despite the
impacts noted above, the quarterly combined ratio again came in under
90% and the full year ended with a combined ratio just over 80%.

An accelerating growth trend in personal lines continues as a result of
the A. M. Best upgrade. New business applications in our New York
Homeowners program increased 90% compared to Q4 2016, and the
multi-state expansion programs are having a meaningful impact on the
overall growth rate. Personal lines gross written premiums increased
28.4% compared to Q4 2016, and increased 21.1% in 2017 compared to 2016.
The dramatic growth in personal lines more than offsets a recent decline
in Livery Physical Damage new business caused by heightened competition.
Numerous actions are now underway to retain as much of that historically
profitable business as possible.

The Company's reserve position remains strong, as confirmed by an
independent external actuarial review performed each year. 2017 marked
the third straight year of favorable prior year loss development, and
the external actuarial review supports our confidence in the adequacy of
reserves. We have built a dedicated and highly capable claims team that
is clearly having a positive impact on financial results."

Financial Highlights Table

       
Financial Highlights Three Months Ended Years Ended
December 31, December 31,
($ in thousands except per share data)   2017       2016       % Change       2017         2016       % Change  
Direct written premiums* $ 32,151 $ 26,817 19.9 % $ 121,575 $ 103,192 17.8 %
Net written premiums* $ 24,146 $ 17,079 41.4 % $ 92,869 $ 65,926 40.9 %
Net premiums earned $ 22,513 $ 16,219 38.8 % $ 77,351 $ 61,408 26.0 %
Total ceding commission revenue $ 1,725 $ 2,994 -42.4 % $ 9,933 $ 11,268 -11.8 %
Net investment income $ 1,215 $ 829 46.6 % $ 4,133 $ 3,116 32.6 %
 
U.S. GAAP Net income $ 1,932 $ 2,056 -6.0 % $ 9,986 $ 8,900 12.2 %
U.S. GAAP Diluted EPS $ 0.18 $ 0.26 -30.8 % $ 0.94 $ 1.14 -17.5 %
 
Comprehensive income $ 1,537 $ 448 243.1 % $ 10,831 $ 8,488 27.6 %
Net operating income* $ 1,940 $ 2,105 -7.8 % $ 9,931 $ 8,556 16.1 %
Net operating income diluted EPS* $ 0.18 $ 0.26 -30.8 % $ 0.94 $ 1.10 -14.5 %
 
Return on average equity (annualized) 8.2 % 14.5 % -6.3 pts 13.2 % 17.5 % -4.3 pts
 
Net loss ratio 50.5 % 45.5 % 5 pts 44.2 % 45.3 % -1.1 pts
Net underwriting expense ratio   39.4 %   34.1 % 5.3 pts     36.4 %   33.9 % 2.5 pts
Net combined ratio 89.9 % 79.6 % 10.3 pts 80.6 % 79.2 % 1.4 pts
 
Effect of catastrophes on net combined ratio 0 pts 0 pts 0 pts 0 pts 2.3 pts -2.3 pts
Net combined ratio excluding the effect
of catastrophes* 89.9 % 79.6 % 10.3 pts 80.6 % 76.9 % 3.7 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 Fourth Quarter and Year End Financial
Review

Net Income:

Net income decreased 6.0% to $1.93 million during the three month period
ended December 31, 2017, compared to net income of $2.06 million in the
prior-year period. The decrease in net income can be attributed to an
increase in the net loss ratio, increases in other underwriting expenses
related to premium growth and new state expansion, and a decrease in
ceding commissions as a result of the reduction in our personal lines
quota share reinsurance rate to 20% on July 1, 2017, from the prior rate
of 40%. This was partially offset by an increase in net premiums earned
driven by growth, an increase in net investment income, and benefits
from the reduction in future tax rates on our net deferred tax
liabilities. For the year ended December 31, 2017, net income increased
12.2% to $9.99 million from $8.90 million in the prior year.

Earnings per share ("EPS"):

Kingstone reported EPS of $0.18 per diluted share for the three months
ended December 31, 2017, compared to $0.26 per diluted share for the
three months ended December 31, 2016. For the year ended December 31,
2017, EPS were $0.94 per diluted share compared to $1.14 in the prior
year. EPS for the three month periods ending December 31, 2017 and
December 31, 2016 were based on 10.86 million and 8.01 million weighted
average diluted shares outstanding, respectively. For the years ended
December 31, 2017 and December 31, 2016, EPS was based on 10.58 million
and 7.81 million weighted average diluted shares outstanding,
respectively.

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

Direct written premiums1 for the fourth quarter of 2017 were
$32.2 million, an increase of 19.9%, compared to $26.8 million in the
prior year period. The increase is attributable to a 17.2% increase in
the total number of policies in-force as of December 31, 2017 as
compared to December 31, 2016, driven by growth in personal lines
resulting from the A. M. Best rating upgrade. In 2017, we started
writing Homeowners' policies in New Jersey and Rhode Island which also
contributed to growth in personal lines. For the year ended December 31,
2017, direct written premiums increased 17.8% to $121.6 million,
compared to $103.2 million in the prior year.

Net written premiums1 increased 41.4% to $24.1 million during
the three month period ended December 31, 2017 from $17.1 million in the
prior year period. For the year ended December 31, 2017, net written
premiums increased 40.9% to $92.9 million, compared to $65.9 million in
the prior year. The increase in both the fourth quarter and year end
periods were due to growth and the reduction of our personal lines quota
share reinsurance rate to 20% on July 1, 2017, from the prior rate of
40%. The increase for the year ended December 31, 2017 was also
attributable to the $7.1 million return of ceded unearned premiums
resulting from the reduction of our personal lines quota share
reinsurance rate. Excluding the one-time impact from the return of ceded
unearned premiums, the increase in net written premiums was 30.0% from
the prior year period.

Net premiums earned for the quarter ended December 31, 2017 increased
38.8% to $22.5 million, compared to $16.2 million in the quarter ended
December 31, 2016. For the year ended December 31, 2017, net premiums
earned increased 26.0% to $77.4 million, compared to $61.4 million in
the prior year. The increase in both the fourth quarter and year end
periods were due to growth and the reduction of our personal lines quota
share reinsurance rate to 20% on July 1, 2017, from the prior rate of
40%.

Net Loss Ratio:

For the quarter ended December 31, 2017, the Company's net loss ratio
was 50.5% compared to 45.5% in the prior year period. For the year ended
December 31, 2017, the Company's net loss ratio was 44.2% compared to
45.3% in the prior year. The loss ratio for the quarter ended December
31, 2017 increased due to the impact of two large claims and an early
onset of winter claims related to unusually cold weather in the last
week of December. The calendar year 2017 net loss ratio improved due to
a reduction in the impact of severe winter weather, which had a 2.3
point impact in 2016 but no impact in 2017. The core loss ratio
excluding the impact of severe winter weather and prior year development
increased slightly due to a higher impact from large claims including
fires during 2017 compared to 2016.

Net Underwriting Expense Ratio:

For the quarter ended December 31, 2017, the net underwriting expense
ratio was 39.4% as compared to 34.1% in the prior year period. The
increase of 5.3 percentage points was largely due to a decrease in
ceding commission revenue resulting from the reduction of our personal
lines quota share reinsurance rate to 20% on July 1, 2017, from the
prior rate of 40%. The net underwriting expense ratio, excluding the
impact of ceding commission revenue and commission expense, declined 0.6
points, to 23.3% in the fourth quarter 2017 from 23.9% in the fourth
quarter 2016. For the year ended December 31, 2017, the Company's net
underwriting expense ratio increased to 36.4% from 33.9% in the prior
year. The net underwriting expense ratio, excluding the impact of ceding
commission revenue and commission expense, declined 0.8 points, to 23.4%
for the year ended December 31, 2017 from 24.2% in the prior year.

The change in quota share rates results in a significant decrease in
ceding commission revenue and an increase in net premiums earned. We
refer to our New York and Pennsylvania business as "Core" 1
and the business in newly licensed states as "Expansion". The inception
of our Expansion business in 2017 creates a lag in net premiums earned
related to that business. This lag and the changes to quota share rates
distort net underwriting expense ratio comparisons between periods.
Therefore, we believe that utilizing the ratio of Core other
underwriting expenses 1 to Core direct written premiums 1
offers a more consistent comparison between periods. The Core other
underwriting expense ratio excludes start-up expenses related to
Expansion business. The ratio of Core other underwriting expenses
excluding the impact of state regulatory fees to Core direct written
premiums remained consistent between the three months and year ended
December 31, 2017 and the prior year comparable periods (see table
below).

State regulatory fees primarily consist of fees charged by the New York
State Department of Financial Services ("DFS"). As a New York domiciled
insurance carrier, we are subject to funding the DFS fiscal year budget
based on our pro-rata share of premiums written in New York. We receive
estimated bills which are the basis for our expense incurred for the
first three quarters. The actual true-up for the prior year and revised
estimate for the current year were reflected in the fourth quarter,
resulting in an increase of $487,000 over what was previously estimated
by the DFS. For the quarter ended December 31, 2017, DFS fees increased
by $565,000 as compared to the prior year period.

The table below details the ratio of Core other underwriting expenses to
Core direct written premiums:

             
Three months ended $ or Years ended $ or
December 31, Point December 31, Point
  2017         2016   Change   2017         2016   Change
(000's except percentages)
Core direct written premiums(1) $ 31,286   $ 26,817   $ 4,469   $ 119,756   $ 103,192   $ 16,564  
 
Core other underwriting expenses(1) as a percentage
of Core direct written premiums
Employment costs 6.18 % 6.72 % -0.54 % 6.17 % 6.58 % -0.41 %
IT expenses 1.14 % 1.18 % -0.04 % 1.17 % 1.03 % 0.14 %
Underwriting expenses 1.57 % 1.45 % 0.12 % 1.48 % 1.43 % 0.05 %
State premium taxes 2.24 % 2.27 % -0.03 % 2.20 % 2.17 % 0.03 %
Professional fees 0.51 % 0.18 % 0.33 % 0.43 % 0.40 % 0.03 %
Other expenses   2.25 %   1.86 %   0.39 %   2.00 %   1.77 %   0.23 %
Core other underwriting expenses before
state regulatory fees 13.89 % 13.66 % 0.23 % 13.45 % 13.38 % 0.07 %
State regulatory fees*   1.85 %   0.07 %   1.78 %   0.81 %   0.57 %   0.24 %
Total   15.74 %   13.73 %   2.01 %   14.26 %   13.95 %   0.31 %
 

* See discussion above for impact of state regulatory fees.

(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.

Net Combined Ratio:

Kingstone's net combined ratio was 89.9% for the three month period
ended December 31, 2017, compared to 79.6% for the prior year period.
For the year ended December 31, 2017, the Company's net combined ratio
was 80.6% compared to 79.2% in the prior year.

Other Operating Expenses not included in Net
Combined Ratio:

For the quarter ended December 31, 2017, other operating expenses were
$0.78 million, compared to $0.62 million in the prior period. For the
year ended December 31, 2017, other operating expenses were $3.51
million, compared to $1.91 million in the prior year. The increase in
the quarter ended December 31, 2017 of $0.16 million and year ended
December 31, 2017 of $1.60 million includes $0.24 million and $0.95
million, respectively, of accrued long-term bonus compensation pursuant
to the three year employment agreement effective January 1, 2017 with
our Chief Executive Officer. In 2016 there was no long-term bonus
compensation plan in place. The bonus is a one-time payment computed at
the end of three year period, and the amount accrued in 2017 will only
be paid if the three year computation meets the required terms of
profitability.

Interest Expense:

For each of the quarter ended December 31, 2017 and the year ended
December 31, 2017, interest expense was $0.06 million, compared to none
in 2016. We incurred interest expense in connection with our $30.0
million issuance of long-term debt in December 2017.

Income Taxes:

Income tax expense for the quarter ended December 31, 2017 was $347,000,
which resulted in an effective tax rate of 15.2%, compared to an
effective tax rate of 34.7% in the prior year period. On December 22,
2017, the Tax Cuts and Jobs Act of 2017 (the "Act"), was enacted by the
U.S. federal government. The Act provides for significant changes to
corporate taxation including a decrease in the corporate tax rate to
21%. We have accounted for the 2017 material impacts of the Act by
re-measuring our net deferred tax liabilities at the new 21% enacted tax
rate. The impact of the change in tax rate was a decrease in net
deferred income tax liabilities of $405,000 with a corresponding
increase in deferred income tax benefit, resulting in a reduction of our
effective tax rate by 19.5 percentage points in the quarter ended
December 31, 2017.

Balance Sheet / Investment Portfolio

Kingstone's cash and investment holdings were $187.5 million at December
31, 2017, compared to $107.6 million at December 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 89.7% of total investments at
December 31, 2017 compared to 89.5% at December 31, 2016. The Company's
effective duration on its fixed-income portfolio is 4.9 years.

Net investment income increased 46.6% to $1.2 million for the fourth
quarter of 2017 from $0.8 million in the prior year period. Net
investment income increased 32.6% to $4.1 million for the year ended
December 31, 2017 from $3.1 million in the prior year period. The
increase in both periods was 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 3.70% at December 31, 2017 as compared to 4.26% as of
December 31, 2016.

Accumulated Other Comprehensive Income (AOCI), net
of tax

During the quarter ended December 31, 2017, AOCI decreased by $0.2
million to $1.1 million. For the year ended December 31, 2017, AOCI
increased by $1.0 million to $1.1 million.

Book Value

The Company's book value per share at December 31, 2017 was $8.90, an
increase of 24.5% compared to $7.15 at December 31, 2016.

                   
31-Dec-17 30-Sep-17 30-Jun-17 31-Mar-17 31-Dec-16
Book Value Per Share $ 8.90 $ 8.83 $ 8.50 $ 8.29 $ 7.15
 
% Increase from specified period to 12/31/2017 0.8 % 4.7 % 7.4 % 24.5 %
 

Conference Call Details

Management will discuss the Company's operations and financial results
in a conference call on Thursday, March 15, 2018, at 8:30 a.m. ET.

The dial-in numbers are:

(877) 407-3105 (U.S.)
(201) 493-6794 (International)

Accompanying Webcast

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/q4-2017.
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.

Core direct written premiums -
represents the total premiums charged on policies issued by the Company
during the respective fiscal period from its business located in New
York and Pennsylvania.

Expansion direct written premiums -
represents the total premiums charged on policies issued by the Company
during the respective fiscal period from its business located in newly
licensed states (i.e., outside New York and Pennsylvania).

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.

Core other underwriting expenses
-
represents the total other underwriting expenses incurred by the
Company during the respective fiscal period from its business located in
New York and Pennsylvania.

Expansion other underwriting expenses
-
represents the total other underwriting expenses incurred by the
Company during the respective fiscal period from its business located in
newly licensed states (i.e., outside New York and Pennsylvania).

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

   

For the Three Months Ended
December 31,

For the Year Ended
December 31,

  2017         2016       $ Change   % Change   2017         2016       $ Change     % Change  
(000's except percentages)    
Direct and Net Written Premiums Reconciliation:
 
Direct written premiums $ 32,151 $ 26,817 $ 5,334 19.9 % $ 121,575 $ 103,192 $ 18,383 17.8 %
Assumed written premiums 5 14 (9 ) (64.3 )% 23 29 (6 ) (20.7 )%
Ceded written premiums   (8,010 )   (9,752 )   1,742   (17.9 )%   (28,729 )   (37,295 )   8,566   (23.0 )%
 
Net written premiums 24,146 17,079 7,067 41.4 % 92,869 65,926 26,943 40.9 %
Change in unearned premiums   (1,633 )   (860 )   (773 ) 89.9 %   (15,518 )   (4,518 )   (11,000 ) 243.5 %
 
Net premiums earned $ 22,513   $ 16,219   $ 6,294   38.8 % $ 77,351   $ 61,408   $ 15,943   26.0 %
 

The table below details the Core direct written premiums, Expansion
direct written premiums, and direct written premiums for the periods
indicated:

     

For the Three Months Ended
December 31,

For the Year Ended
December 31,

  2017       2016     $Change     % Change   2017       2016     $Change     % Change  
(000's except percentages)    
Core and Expansion Direct Written Premiums Reconciliation:
 
Core direct written premiums $ 31,286 $ 26,817 $ 4,469 16.7 % $ 119,756 $ 103,192 $ 16,564 16.1 %
Expansion direct written premiums   865   -   865 na%   1,819   -   1,819 na%
Direct written premiums $ 32,151 $ 26,817 $ 5,334 19.9 % $ 121,575 $ 103,192 $ 18,383 17.8 %
 

The table below details the Core other underwriting expenses to Core
direct written premiums ratio for the periods indicated:

       

For the Three Months Ended
December 31,

For the Year Ended
December 31,

  2017         2016       $Change     % Change   2017         2016       $Change     % Change  
(000's except percentages)    
Core and Expansion Other Underwriting Expenses Reconciliation:
 
Core other underwriting expenses $ 4,925 $ 3,681 $ 1,244 33.8 % $ 17,072 $ 14,391 $ 2,681 18.6 %
Expansion other underwriting expenses   303     204     99   48.5 %   1,044     476     568   119.3 %
Other underwriting expenses $ 5,228   $ 3,885   $ 1,343   34.6 % $ 18,116   $ 14,867   $ 3,249   21.9 %
 
Ratio of Core other underwriting expenses to Core direct written
premiums reconciliation:
 
Other underwriting expenses $ 5,228 $ 3,885 $ 1,343 34.6 % $ 18,116 $ 14,867 $ 3,249 21.9 %
Direct written premiums $ 32,151 $ 26,817 $ 5,334 19.9 % $ 121,575 $ 103,192 $ 18,383 17.8 %
 
Ratio of other underwriting expenses to direct written premiums   16.26 %   14.49 %   1.77 % 12.2 %   14.90 %   14.41 %   0.49 % 3.4 %
 
Other underwriting expenses $ 5,228 $ 3,885 $ 1,343 34.6 % $ 18,116 $ 14,867 $ 3,249 21.9 %
Expansion other underwriting expenses   303     204     99   48.5 %   1,044     476     568   119.3 %
Core other underwriting expenses $ 4,925   $ 3,681   $ 1,244   33.8 % $ 17,072   $ 14,391   $ 2,681   18.6 %
 
Direct written premiums $ 32,151 $ 26,817 $ 5,334 19.9 % $ 121,575 $ 103,192 $ 18,383 17.8 %
Expansion direct written premiums   865     -     865   na%   1,819     -     1,819   na%
Core direct written premiums $ 31,286   $ 26,817   $ 4,469   16.7 % $ 119,756   $ 103,192   $ 16,564   16.1 %
 
Ratio of Core other underwriting expenses to Core direct written
premiums
  15.74 %   13.73 %   2.01 % 14.6 %   14.26 %   13.95 %   0.31 % 2.2 %
 

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 Year Ended Year Ended
December 31, 2017 December 31, 2016 December 31, 2017 December 31, 2016
       
Amount  

Diluted
earnings
per
common
share

  Amount  

Diluted
earnings
per
common
share

  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 $ 1,932   $ 0.18 $ 2,056   $ 0.26 $ 9,986   $ 0.94 $ 8,900   $ 1.14  
 
Net realized (gain) loss on investments 12 75 (84 ) (529 )
Less tax (effect) benefit on realized (gain) loss   4     26     (29 )   (185 )
 
Net realized (gain) loss on investments, net of taxes   8   $ -   49   $ -   (55 ) $ -   (344 ) $ (0.04 )
 
Net operating income $ 1,940   $ 0.18 $ 2,105   $ 0.26 $ 9,931   $ 0.94 $ 8,556   $ 1.10  
 
Weighted average diluted shares outstanding   10,858,670     8,012,859     10,581,577     7,807,263  
 
Operating Return on Average Common Equity (Annualized for
Quarterly Periods) Reconciliation:
 
Net income $ 1,932 $ 2,056 $ 9,986 $ 8,900
Average common equity $ 94,198 $ 56,674 $ 75,629 $ 50,979
Return on average common equity (annualized for quarterly periods) 8.2 % 14.5 % 13.2 % 17.5 %
 
Net realized (gain) loss on investments, net of taxes $ 8 $ 49 $ (55 ) $ (344 )
Average common equity $ 94,198 $ 56,674 $ 75,629 $ 50,979
Effect of net realized (gain) loss on investments, net of taxes, on
return on average common equity (annualized for quarterly periods)
0.0 % 0.3 % -0.1 % -0.7 %
 
Net operating income $ 1,940 $ 2,105 $ 9,931 $ 8,556
Average common equity $ 94,198 $ 56,674 $ 75,629 $ 50,979
Operating return on average common equity (annualized for
quarterly periods)
8.2 % 14.9 % 13.1 % 16.8 %
 

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 can cause our results to vary significantly between periods
depending on their frequency 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. 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 For the Year Ended
December 31,     December 31,
2017       2016      

Percentage
Point
Change

2017       2016      

Percentage
Point
Change

Net Combined Ratio Excluding the Effect of Catastrophes
Reconciliation:
 
 
Net combined ratio excluding the effect of catastrophes 89.9 % 79.6 % 10.3 pts 80.6 % 76.9 % 3.7   pts
 
Effect of catastrophe losses
Net loss and loss adjustment expenses 0.0 % 0.0 % - pts 0.0 % 2.3 % (2.3 ) pts
Total effect of catastrophe losses 0.0 % 0.0 % - pts 0.0 % 2.3 % (2.3 ) pts
 
Net combined ratio 89.9 % 79.6 % 10.3 pts 80.6 % 79.2 % 1.4   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, Massachusetts, Rhode Island and Texas.
Kingstone offers property and casualty insurance products to individuals
and small businesses in New York, New Jersey, Rhode Island and
Pennsylvania.

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 For the Year Ended
December 31, December 31,
  2017         2016     2017         2016  
 
Gross premiums written (1):
Personal lines $ 26,662,506 $ 20,759,426 $ 95,993,591 $ 79,256,251
Commercial lines 3,251,388 2,842,746 14,632,300 12,759,351
Livery physical damage 2,177,829 3,162,801 10,727,707 10,955,785
Other(2)   64,341     65,754     244,427     249,130  
Total $ 32,156,064   $ 26,830,727   $ 121,598,025   $ 103,220,517  
 
Net premiums written (1):
Personal lines
Excluding the effect of quota share
adjustments on July 1 $ 19,072,161 $ 11,374,579 $ 61,756,415 $ 43,485,866
Return of premiums previously ceded to
prior quota share treaties (2)   -     -     7,140,088     -  
Personal lines 19,072,161 11,374,579 68,896,503 43,485,866
Commercial lines 2,842,181 2,494,330 13,038,640 11,413,717
Livery physical damage 2,177,829 3,162,801 10,727,707 10,955,785
Other(3)   53,781     47,640     206,026     70,819  
Total $ 24,145,952   $ 17,079,350   $ 92,868,876   $ 65,926,187  
 
Net premiums earned:
Personal lines $ 16,431,251 $ 10,646,722 $ 53,556,294 $ 40,325,585
Commercial lines 3,209,628 2,838,870 12,163,104 11,120,890
Livery physical damage 2,824,803 2,677,074 11,441,168 9,783,792
Other(3)   47,458     56,509     190,457     177,639  
Total $ 22,513,140   $ 16,219,175   $ 77,351,023   $ 61,407,906  
 
Net loss and loss adjustment expenses:
Personal lines $ 7,561,694 $ 3,046,864 $ 20,866,628 $ 16,116,325
Commercial lines 2,074,487 2,136,915 6,368,927 5,408,168
Livery physical damage 1,227,940 1,605,874 4,870,947 4,777,308
Other(3) (47,510 ) 126,465 (14,686 ) (304,404 )
Unallocated loss adjustment expenses   547,685     467,998     2,093,721     1,792,264  
Total $ 11,364,296   $ 7,384,116   $ 34,185,537   $ 27,789,661  
 
Net loss ratio:
Personal lines 46.0 % 28.6 % 39.0 % 40.0 %
Commercial lines 64.6 % 75.3 % 52.4 % 48.6 %
Livery physical damage 43.5 % 60.0 % 42.6 % 48.8 %
Other(3) -100.1 % 223.8 % -7.7 % -171.4 %
Total 50.5 % 45.5 % 44.2 % 45.3 %
 
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. Effective July 1, 2017, we decreased the quota share ceding rate in
our personal lines quota share treaty from 40% to 20%. The Cut-off
of this treaty on July 1, 2017 resulted in a $7,140,000 return of
unearned premiums from our reinsurers that were previously ceded
under the expiring personal lines quota share treaty.
3. "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.
 
 
KINGSTONE COMPANIES, INC. AND SUBSIDIARIES
             
Consolidated Statements of Income and Comprehensive Income
For the Three Months Ended For the Year Ended
December 31,   December 31,
  2017     2016     2017       2016  
(Unaudited) (Unaudited)
Revenues
Net premiums earned $ 22,513,140 $ 16,219,175 $ 77,351,023 $ 61,407,906
Ceding commission revenue 1,725,133 2,993,951 9,933,133 11,268,241
Net investment income 1,215,475 829,384 4,132,586 3,115,583
Net realized gains (losses) on sales of investments (12,602 ) (75,455 ) 84,313 529,448
Other income   342,066       284,450     1,268,255       1,115,486  
Total revenues   25,783,212       20,251,505     92,769,310       77,436,664  
 
Expenses
Loss and loss adjustment expenses 11,364,296 7,384,116 34,185,537 27,789,661
Commission expense 5,691,227 4,927,161 21,182,254 18,327,190
Other underwriting expenses 5,228,126 3,884,862 18,115,614 14,866,646
Other operating expenses 781,428 617,583 3,512,927 1,909,779
Depreciation and amortization 379,538 289,533 1,402,928 1,124,921
Interest expense   60,335       -     60,335       -  
Total expenses   23,504,950       17,103,255     78,459,595       64,018,197  
 
Income from operations before taxes 2,278,262 3,148,250 14,309,715 13,418,467
Income tax expense   346,670       1,092,403     4,323,230       4,518,701  
Net income   1,931,592     2,055,847     9,986,485     8,899,766  
 
Other comprehensive income (loss), net of tax
Gross change in unrealized gains (losses)
on available-for-sale-securities (610,627 ) (2,512,023 ) 1,364,319 (93,718 )
 
Reclassification adjustment for (gains) losses
included in net income   12,602     75,455     (84,313 )   (529,448 )
Net change in unrealized gains (losses) (598,025 ) (2,436,568 ) 1,280,006 (623,166 )
Income tax (expense) benefit related to items
of other comprehensive income (loss)   203,329     828,434     (435,202 )   211,877  
Other comprehensive income (loss), net of tax   (394,696 )   (1,608,134 )   844,804     (411,289 )
 
Comprehensive income $ 1,536,896   $ 447,713   $ 10,831,289   $ 8,488,477  
 
Earnings per common share:
Basic $ 0.18   $ 0.26   $ 0.96   $ 1.15  
Diluted $ 0.18   $ 0.26   $ 0.94   $ 1.14  
 
Weighted average common shares outstanding
Basic   10,628,061     7,914,416     10,388,440     7,736,594  
Diluted   10,858,670     8,012,859     10,581,577     7,807,263  
 
Dividends declared and paid per common share $ 0.0800   $ 0.0625   $ 0.3025   $ 0.2500  
 
 
KINGSTONE COMPANIES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
    December 31,     December 31,
        2017         2016  
 
Assets
Fixed-maturity securities, held-to-maturity, at amortized cost (fair
value of
$5,150,076 at December 31, 2017 and $5,298,119 at December 31, 2016) $ 4,869,808 $ 5,094,902
Fixed-maturity securities, available-for-sale, at fair value
(amortized cost of
$119,122,106 at December 31, 2017 and $80,596,628 at December 31,
2016)
119,988,256 80,428,828
Equity securities, available-for-sale, at fair value (cost of
$13,761,841
at December 31, 2017 and $9,709,385 at December 31, 2016)   14,286,198     9,987,686  
Total investments 139,144,262 95,511,416
Cash and cash equivalents 48,381,633 12,044,520
Investment subscription receivable 2,000,000 -
Premiums receivable, net 13,217,698 11,649,398
Reinsurance receivables, net 28,519,130 32,197,765
Deferred policy acquisition costs 14,847,236 12,239,781
Intangible assets, net 1,010,000 1,350,000
Property and equipment, net 4,772,577 3,011,373
Other assets   2,655,527     1,442,209  
Total assets $ 254,548,063   $ 169,446,462  
 
Liabilities
Loss and loss adjustment expense reserves $ 48,799,622 $ 41,736,719
Unearned premiums 65,647,663 54,994,375
Advance premiums 1,477,693 1,421,560
Reinsurance balances payable 2,563,966 2,146,017
Deferred ceding commission revenue 4,266,412 6,851,841
Accounts payable, accrued expenses and other liabilities 7,487,654 5,448,448
Deferred income taxes 600,342 166,949
Long-term debt, net   29,126,965     -  
Total liabilities   159,970,317     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
11,618,646 shares
at December 31, 2017 and 8,896,335 at December 31, 2016; outstanding
10,631,837 shares at December 31, 2017 and 7,921,866 shares at
December 31, 2016
116,186 88,963
Capital in excess of par 68,380,390 37,950,401
Accumulated other comprehensive income 1,100,647 72,931
Retained earnings   27,152,822     20,563,720  
96,750,045 58,676,015
Treasury stock, at cost, 986,809 shares at December 31, 2017
and 974,469 shares at December 31, 2016   (2,172,299 )   (1,995,462 )
Total stockholders' equity   94,577,746     56,680,553  
 
Total liabilities and stockholders' equity $ 254,548,063   $ 169,446,462  
 

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