Kingstone Companies, Inc. Q3 FY2025 earnings call

• Strong financial results: Net income of $10.9 million, diluted EPS of $0.74, 72.7% combined ratio, and 43% annualized ROE. Direct written premium grew 14% and net investment income 52%.
• What sets Kingstone apart: Select product matches rate to risk and reduces claim frequency; producer relationships support high retention; efficient operations and low expense structure enhance margins; great team with ownership mentality.
• Market conditions: Hard market in downstate NY remains, new business moderated from last year but increased month-over-month since June; writing policies under renewal rights agreement with GUARD.
• Net earned premium: Grew over 40% for third consecutive quarter due to reduced quota share and surge in prior new business earning in.
• Underwriting: Underlying loss ratio 44.1%, up 4.9 pts due to higher claim severity; catastrophe losses contributed 0.2 pts to loss ratio.
• Investment: Net investment income jumped 52% to $2.5 million, year-to-date up 39% to $6.8 million; fixed income yield 4.03% with effective duration 4.4 years.

Kingstone Companies had a strong third quarter with net income of $10.9 million, diluted earnings per share of $0.74, a GAAP combined ratio of 72.7%, and an annualized return on equity of 43%. Direct written premium grew 14%, and net investment income increased 52%. The Select product is a key segment, representing 54% of policies in force, which helps in matching rate to risk and reducing claim frequency. The Select product contributes significantly to the company's performance with its risk selection and rate matching capabilities.

• 2025 guidance updated: Raising net combined ratio, EPS, and ROE ranges; reaffirming direct-written premium growth 12%-17%; anticipated net earned premiums $187M, GAAP combined ratio 78%-82%, basic EPS $2.30-$2.70, diluted EPS $2.20-$2.60, ROE 35%-39%.
• Fiscal '26 guidance: Baseline assumes normal seasonality and catastrophe, to be refined as year unfolds, with subsequent years' guidance announced in March along with fourth quarter results.

Forward-looking statements involve known and unknown risks and uncertainties that may cause actual results to differ materially from projected results. For more information, refer to Risk Factors in Part 1 Item 1A of the company's latest Form 10-K.

Q: On your New York admitted basis, the Select product now is 54% of the policies in force. Will all accounts eventually move to Select, or some just renew on the legacy product indefinitely?

A: Yes, we are maintaining our legacy book because it's profitable. Any policy written in legacy will stay there. We don't have a plan to convert near term.

Q: All new business, is that put on the Select platform?

A: Yes, all new business has been written in Select since the beginning of 2022.

Q: When getting into new states on excess and surplus lines basis, how will the product differ from Select?

A: Depending on the state, there may be new perils or rating variables. We're developing the product with an outside actuarial firm similar to the one that helped with Select.

Q: Has the new E&S carrier been finally been approved yet?

A: We have filed for a new company in Connecticut, not yet approved; we'll write on E&S basis in certain states as Kingstone Insurance Company.

Q: How has the AmGUARD book performed since starting to write at beginning of September?

A: Early on, right within expectations; writing about $1M a month, similar to Select mix, with some geographic diversification in boroughs.

Q: Competition in downstate New York, how are competitors going into that environment?

A: Compete mostly with MGAs; some competitors broadening underwriting appetite, but our growth remains healthy with month-over-month new business increase since June.

Q: Homeowners market expansion, is the market still that way with more demand than supply?

A: The homeowners market, particularly catastrophe-exposed, is in a crisis as companies aren't making money; we still see opportunity to expand geographically to earn same return as in NY, with no material change in market.