Release Date: November 13, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Kingstone Companies Inc (NASDAQ:KINS) reported its fourth consecutive quarter of profitability with a net income of $7 million for Q3 2024.
• Direct written premiums increased by 28.1% in the third quarter, driven by a 39.4% increase in core direct written premiums.
• The company's combined ratio improved significantly by 38.2 points to 72% for the quarter.
• Investment income for the quarter increased by 14% to $1.7 million, reflecting strategic shifts in the investment portfolio.
• Kingstone Companies Inc (NASDAQ:KINS) raised its guidance for 2024, expecting a GAAP combined ratio between 79% and 83% and earnings per share between $1.40 and $1.70.

Negative Points

• The company is focused on paying off debt quickly, which may involve issuing additional stock, potentially leading to shareholder dilution.
• There is an expected increase in catastrophe reinsurance costs for the 2025 treaty year due to exposure growth and a hardening market.
• The expense ratio was higher than the target, primarily due to increased employee bonuses and contingent commissions.
• Kingstone Companies Inc (NASDAQ:KINS) is reducing its non-core business, which decreased by 60% in both written premium and policies in force.
• The company faces uncertainty in the reinsurance market, which could impact future pricing and profitability.

Q & A Highlights

• Warning! GuruFocus has detected 5 Warning Sign with KINS.

Q: Are you still assuming a 6% catastrophe load in the combined ratio guidance, and what is the expected expense ratio target? A: Yes, we are assuming a roughly 6% catastrophe load for next year, as 2024 was exceptionally light for catastrophes. We expect a decrease in our expense ratio to approximately 28% due to a substantial increase in earned premium. (Respondent: Unidentified_1)

Q: How is the business growth going according to plan, and how are quotes and binds performing? A: It's hard to say if growth is going according to plan due to unprecedented circumstances. However, we are proud of maintaining service and underwriting standards. We have a high conversion rate from companies exiting the market, indicating competitive pricing. (Respondent: Unidentified_1)

Q: Can you discuss the impact of the third company withdrawing from the market and the size of the premium opportunity? A: The company, AMG, a Berkshire Hathaway entity, is withdrawing from the homeowners market nationally. They grew rapidly in New York, and we are confident in our pricing to capture this opportunity. (Respondent: Unidentified_1)

Q: What are the primary differences between the Select product and the legacy book? A: The Select product is a by-peril rated product using Kingstone and industry data for pricing, with insurance score used in pricing and underwriting. It shows better frequency results compared to the legacy product. (Respondent: Unidentified_1)

Q: How are you addressing the potential dilution from the share sale to pay down debt? A: We aim to balance quota share, stock issuance, and dividends to pay down debt quickly and maximize earnings. However, we cannot provide an exact number of shares to be sold at this time. (Respondent: Unidentified_1)

For the complete transcript of the earnings call, please refer to the full earnings call transcript.