Release Date: August 13, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Kingstone Companies Inc (KINS, Financial) reported its third consecutive quarter of profitability, marking the most profitable quarter in the last seven years.
- The company has successfully returned to profitability by raising premiums and updating replacement costs on policy renewals ahead of competitors.
- Kingstone Companies Inc (KINS) experienced a significant increase in new business, with new business policy count up 5 times and new business premium up 13 times compared to the prior year.
- The company has a scalable platform and is considering expansion into new geographies, additional product offerings, and potential acquisitions.
- Kingstone Companies Inc (KINS) has a strong capital position and is prepared to utilize quota share if needed to support growth.
Negative Points
- The insurance market in New York has been volatile, with several competitors exiting the market, creating uncertainty.
- Kingstone Companies Inc (KINS) faces challenges in maintaining profitability while growing, as rapid growth in the insurance business can be difficult to manage.
- The company's expense ratio is higher than the target due to increased employee bonuses and contingent commissions, which may impact overall profitability.
- Kingstone Companies Inc (KINS) is heavily dependent on favorable weather conditions, and the guidance assumes no major catastrophe events.
- The company has not yet factored the recent market changes into its 2024 and 2025 guidance, creating potential uncertainty in future projections.
Q & A Highlights
Q: Can you give us an idea of what you're talking about in terms of expanding your underwriting appetite into new geographies and new products? Also, how can you ensure that the business you're going to be writing will be profitable given the immense growth opportunity ahead?
A: We have reverted our underwriting appetite back to what it was previously, writing more business in the South and increasing coverage limits up to $2.5 million. We are confident in our pricing and have a Select product that matches rate to risk effectively. Our team is experienced, and we are closely managing and responding to business results to ensure profitability.
Q: How will you manage the capital needed to support this growth? Can you change the quota share percentage midstream?
A: We can adjust the quota share percentage midstream and take on additional quota share partners. Our broker has already reached out to our reinsurance partners, who have expressed interest in supporting our growth via quota share if needed.
Q: Given the new cat reinsurance treaty, what would be the net cost to Kingstone if an event like Sandy hit today?
A: Our reinsurance will attach at $5 million, with some quota share underneath that. A Sandy-like event would be a $4.75 million event for us. We continuously model our P&L to ensure we are comfortable with our reinsurance coverage.
Q: The expense ratio was higher than the target shared in the year-end letter to shareholders. Can you explain why and if you expect it to decline?
A: The higher expense ratio is due to increased employee bonuses and contingent commissions triggered by better-than-expected underwriting results. While some expenses are front-loaded, we do expect the expense ratio to decline somewhat, but it is unlikely to hit the 29% target for the year.
Q: Can you clarify the metrics mentioned in your midyear letter regarding new business policies and premiums?
A: In July, our quotes doubled, new business policies were up 5 times, and new business premiums were up 13 times compared to July of the previous year. This change in the marketplace significantly impacted Kingstone's growth trajectory.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
