News Column

Kingstone Companies Announces 2014 Second Quarter Financial Results

August 12, 2014

Raises Quarterly Dividend to $0.05 Per Share

Company to Host Conference Call on August 13, 2014 at 8:30 a.m. ET

KINGSTON, N.Y.--(BUSINESS WIRE)-- Kingstone Companies, Inc. (Nasdaq:KINS) (the “Company” or “Kingstone”), a multi-line regional property and casualty insurance holding company, today announced its financial results for the second quarter and six months ended June 30, 2014.

Financial and Operational Highlights for 2014 Second Quarter

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

  • Net income increased to $1.4 million, or $0.18 per diluted share, from $68,000, or $0.02 per diluted share
  • Direct premiums written1 for the second quarter increased 27.5% to $20.3 million, driven by growth in personal lines, the Company’s largest business segment
  • Net premiums earned increased 37.5% to $6.4 million
  • Net combined ratio improved by 31.1 percentage points to 70.8%
  • Policies in force increased 23.7% to approximately 41,000
  • Annualized return on average common equity of 14.7%
  • Book value per common share on June 30, 2014 was $5.18, compared to $4.91 at December 31, 2013 and $4.09 at June 30, 2013, or an annual increase of 26.7%

    Kingstone Raises Quarterly Dividend

    The Company announced that its board declared a quarterly dividend of $0.05 per share payable on September 15, 2014 to shareholders of record at the close of business on August 29, 2014. This marks the thirteenth consecutive quarter of dividend distributions and an increase over the prior quarter’s dividend of $0.04 per share.

    Reinsurance Treaties

    Subsequent to the end of the quarter, Kingstone entered into various reinsurance agreements with multiple reinsurers for the treaty year beginning July 1, 2014, highlighted by a reduction of its ceding percentage from 75% to 55% in its personal lines business, as previously disclosed. The Company also announced that it had non-renewed its previous quota share treaty on its commercial lines business.

    1 This measure is not based on GAAP and is reconciled under the “Direct Premiums Written, Net Premiums Written and Net earned Premiums” section and defined and reconciled to the most directly comparable GAAP measures in “Definitions Regarding Non-GAAP Measures.”

    Management Commentary

    Kingstone’s Chairman and CEO, Barry Goldstein, stated, “We reported strong growth in the second quarter, highlighted by a 30.4% increase in direct premiums written in our personal lines business. We increased policies-in-force by 23.7%. Personal lines writings, which include homeowners and dwelling fire policies, increased by 30.4% as compared to the same period last year. For the quarter, personal lines represents 70.3% of our total direct written premiums, up from 68.7% in the prior year period. We also reported improved underwriting profitability with a net combined ratio of 70.8%, primarily as a result of favorable weather conditions, significant improvement in the loss ratio from our commercial auto lines and the elimination of the effect that catastrophes had on our contingent ceding commissions.”

    Kingstone’s Chief Financial Officer, Victor Brodsky, added, “We are also seeing strong growth in commercial lines and livery physical damage lines of business, which increased 45.7% in the second quarter of 2014 compared to the same quarter last year.”

    Financial Highlights

           
    Three Months Ended June 30       Six Months Ended June 30
    2014     2013     % Change2014     2013     % Change

    (000's except per share amounts

    and percentages)

    Direct premiums written1 $ 20,251     $ 15,881     27.5 % $ 36,598     $ 28,726     27.4 %
    Net premiums written1 $ 8,501 $ 5,994 41.8 % $ 15,086 $ 10,965 37.6 %
    Net premiums earned $ 6,429 $ 4,676 37.5 % $ 12,356 $ 9,299 32.9 %
    Ceding commissions revenue $ 3,706 $ 2,334 58.8 % $ 7,087 $ 4,628 53.1 %
    Net investment income $ 452 $ 275 64.4 % $ 831 $ 558 48.9 %
    Interest expense $ - $ 18 (100.0 %) $ - $ 39 (100.0 %)
    Net Income $ 1,355 $ 68 1,892.6 % $ 1,682 $ 259 549.4 %
    Net income per diluted share $ 0.18 $ 0.02 800.0 % $ 0.23 $ 0.07 228.6 %
    Comprehensive income (loss) $ 1,840 $ (764 ) $ 2,617 $ (279 )

    Net operating income (loss)2

    $ 1,266 $ (97 ) $ 1,469 $ 25

    Net operating income (loss) per

    diluted common share2

    $ 0.17 $ (0.02 ) $ 0.20 $ 0.01
     


    1 These measures are not based on GAAP and are reconciled under the “Direct and Net Premiums Written” section and defined and reconciled to the most directly comparable GAAP measures in “Definitions Regarding Non-GAAP Measures.”

    2 These measures are not based on GAAP and are defined and reconciled to the most directly comparable GAAP measures in “Definitions Regarding Non-GAAP Measures.”

    2014 Second Quarter and First Half Financial Review

    Net Income:

    Net income increased to $1.4 million during the three month period ended June 30, 2014, compared to a net income of $68,000 in the prior-year period. The increase was largely due to the effect that growth in direct premiums written had on net premiums earned for the period, the elimination of the effects that Superstorm Sandy had on our ceding commission revenue in the prior year period and significant improvements in the net loss ratio. For the six months ended June 30, 2014, net income increased to $1.7 million from $259,000 in the prior year period.

    Earnings per share (‘EPS’):

    Kingstone reported EPS of $0.18 per diluted share for the three months ended June 30, 2014, compared to $0.02 per diluted share for the three months ended June 30, 2013. For the six months ended June 30, 2014, EPS was $0.23 per diluted share, compared to $0.07 in the prior year period. EPS for the three and six month period ended June 30, 2014 were based on 7.4 million diluted weighted average shares outstanding, compared to 3.9 million diluted weighted average shares outstanding for the prior year period. The increase in total shares outstanding was due to the completion of the Company’s public offering in December 2013.

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

    Direct premiums written for the second quarter 2014 were $20.3 million, an increase of 27.5% from $15.9 million in the prior year period. For six months ended June 30, 2014, the Company’s direct premiums written were $36.6 million, compared to $28.7 million in the prior year period.

    Net written premiums totaled $8.5 million during three month period ended June 30, 2014, an increase of 41.8% from $6.0 million in the prior-year period. During the six month period ended June 30, 2014, net written premiums increased to $15.1 million, compared to $11.0 million in the prior year period.

    Net premiums earned for second quarter ended June 30, 2014 was $6.4 million, compared to $4.7 million in second quarter ended June 30, 2013. Net premiums earned totaled $12.4 million during the six months period ended June 30, 2014, compared to $9.3 million in the prior year period.

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

     
            For the Three Months Ended June 30,       For the Six Months Ended June 30,
    2014       2013       % Change       2014       2013       % Change
    (000’s except percentages)

    Direct and Net Premiums

    Written Reconciliation:

     
    Direct premiums written $ 20,251 $ 15,881 27.5 % $ 36,598 $ 28,726 27.4 %
    Assumed written premiums 8 11 (27.3 ) % 16 20 (20.0 ) %
    Ceded written premiums   (11,758 )   (9,898 ) 18.8 %   (21,528 )   (17,781 ) 21.1 %
     
    Net written premiums 8,501 5,994 41.8 % 15,086 10,965 37.6 %
    Change in unearned premiums   (2,072 )   (1,318 ) 57.2 %   (2,730 )   (1,666 ) 63.9 %
     
    Net premiums earned$6,429   $4,676   37.5%$12,356   $9,299   32.9%
     


    Net Combined Ratio:

    Kingstone’s net combined ratio significantly improved for the three month period ended June 30, 2014 to 70.8% compared to 101.9% for the prior year period.

    Net Loss: The net loss ratio during the three month period ended June 30, 2014 was 46.8% compared to 69.3% in the three month period ended June 30, 2013. The decrease of 22.5 percentage points in the second quarter of 2014 was primarily driven by improved results from our commercial auto line of business, which is not subject to a quota share treaty and a reduction in catastrophe related claims.

    Net Underwriting Expense: The net underwriting expense ratio was 24.0% in the three month period ended June 30, 2014, compared to 32.6% in the prior year period. The decrease is from increased ceding commission revenue due the elimination of the effects that Superstorm Sandy had on contingent ceding commission in 2013 and operational efficiencies generated from increased scale as the Company generated more net premiums earned during the current period.

    The table indicates the comparison of the net loss and net underwriting expense ratios:

     
            Three months ended           Six months ended    
    June 30,June 30,
    2014       2013Change2014       2013Change
    Key Measures:
    Net loss ratio 46.8 % 69.3 % -22.5 pts 59.3 % 61.4 % -2.1 pts
    Net underwriting expense ratio 24.0 % 32.6 % -8.6 pts 23.3 % 37.0 % -13.7 pts
    Net combined ratio 70.8 % 101.9 % -31.1 pts 82.6 % 98.4 % -15.8 pts
     


    Operating Results by Product Line

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

     
            For the Three Months Ended           For the Six Months Ended    
    June 30,June 30,
    2014       2013

    %

    Change

    2014       2013

    %

    Change

    Gross premiums written:
    Personal lines $ 14,242,841 $ 10,920,398 30.4 % $ 25,834,138 $ 19,646,555 31.5 %
    Commercial lines 3,550,104 2,760,167 28.6 % 6,346,101 4,781,491 32.7 %
    Commercial auto 1,143,822 1,601,214 -28.6 % 2,135,998 3,040,081 -29.7 %
    Livery physical damage 1,199,525 500,735 139.6 % 2,141,388 1,128,175 89.8 %
    Other(1)   122,864     108,839   12.9 %   156,623     149,702   4.6 %
    Total$20,259,156   $15,891,353   27.5 % $36,614,248   $28,746,004   27.4 %
     
    Net premiums written:
    Personal lines $ 3,624,033 $ 2,394,779 51.3 % $ 6,348,482 $ 4,250,564 49.4 %
    Commercial lines 2,479,187 1,480,729 67.4 % 4,426,011 2,568,525 72.3 %
    Commercial auto 1,103,732 1,536,284 -28.2 % 2,061,132 2,916,805 -29.3 %
    Livery physical damage 1,199,525 500,735 139.6 % 2,141,388 1,128,175 89.8 %
    Other(1)   94,704     81,237   16.6 %   109,431     100,681   8.7 %
    Total$8,501,181   $5,993,764   41.8 % $15,086,444   $10,964,750   37.6 %
     
    Net premiums earned:
    Personal lines $ 2,796,042 $ 1,788,583 56.3 % $ 5,368,257 $ 3,563,666 50.6 %
    Commercial lines 1,753,832 1,070,199 63.9 % 3,334,655 2,141,729 55.7 %
    Commercial auto 1,028,626 1,296,864 -20.7 % 2,135,309 2,617,493 -18.4 %
    Livery physical damage 784,279 460,042 70.5 % 1,422,672 878,265 62.0 %
    Other(1)   66,594     60,594   9.9 %   94,791     98,344   -3.6 %
    Total$6,429,373   $4,676,282   37.5 % $12,355,684   $9,299,497   32.9 %
     
    Net loss and loss adjustment expenses:
    Personal lines $ 1,512,975 $ 1,096,475 38.0 % $ 3,362,355 $ 1,617,879 107.8 %
    Commercial lines 564,708 177,687 217.8 % 1,538,446 429,358 258.3 %
    Commercial auto 260,131 1,593,635 -83.7 % 1,292,402 2,486,144 -48.0 %
    Livery physical damage 310,989 235,246 32.2 % 511,828 516,103 -0.8 %
    Other(1) 112,152 -5,912 na 145,809 330,154 -55.8 %
    Unallocated loss adjustment expenses   246,984     144,666   70.7 %   482,053     331,800   45.3 %
    Total$3,007,939   $3,241,797   -7.2 % $7,332,893   $5,711,438   28.4 %
     
    Net loss ratio:
    Personal lines 54.1 % 61.3 % -11.7 % 62.6 % 45.4 % 37.9 %
    Commercial lines 32.2 % 16.6 % 94.0 % 46.1 % 20.0 % 130.5 %
    Commercial auto 25.3 % 122.9 % -79.4 % 60.5 % 95.0 % -36.3 %
    Livery physical damage 39.7 % 51.1 % -22.3 % 36.0 % 58.8 % -38.8 %
    Other(1) 168.4 % -9.8 % na 153.8 % 335.7 % -54.2 %
    Total

    46.8

    %

    69.3

    % -32.5 % 59.3%61.4% -3.4 %
     


    (1) “Other” includes, among other things, premiums and loss and loss adjustment expenses from our participation in a mandatory state joint underwriting association.

    Balance Sheet / Investment Portfolio

    Kingstone’s cash and investment holdings were $62.4 million at June 30, 2014, compared to $57.6 million at December 31, 2013. The Company’s investment holdings are comprised primarily of high-quality corporate and municipal securities, with fixed income investments representing approximately 83.1% of total investments at June 30, 2014, and 81.9% at December 31, 2013. The Company’s effective duration on its fixed-income portfolio is 6.1 years.

    Net investment income increased 64.4% to $452,000 in the second quarter of 2014 from $275,000 in the prior year period, largely due to an increase in cash and invested assets. This increase resulted primarily from the deployment of the net proceeds of $18,804,000 received from the Company’s December 2013 public offering and increased operating cash flows. Net investment income increased 48.9% to $831,000 during the first half of 2014, compared to $558,000 during the first half of fiscal 2013.

    The tax equivalent investment yield, excluding cash, was 4.86% and 5.56% at June 30, 2014 and 2013, respectively. The reduction was due to the increase in the value of the portfolio, as reported in changes to other comprehensive income.

    Book Value

    The Company’s book value per share at June 30, 2014 was $5.18, an increase of 5.5% compared to $4.91 at December 31, 2013, and up 26.7% from $4.09 at June 30, 2013.

     
            30-Jun-14     31-Mar-14     31-Dec-13     30-Sep-13     30-Jun-13
    Book Value Per Share $5.18$4.98$4.91$4.47$4.09
    % Increase from specified period to June 30, 20144.02%5.50%15.88%26.65%
     


    Outlook for 2014

    Mr. Brodsky continued, “We feel that the second half of 2014 will continue to show direct written premium growth, and the change in our reinsurance structure will have a significant impact on net premiums written and earnings beginning in the third quarter. We were able to leverage a strengthened financial position that allowed Kingstone to retain a much larger share of the premiums we write, while not sacrificing the conservative underwriting standards that we feel provide sustainability in the long-term.”

    Mr. Goldstein continued, “While we impose a maximum net written premium to capital ratio of 1.5, at June 30, 2014 this amount was .88. This leaves us considerable room to grow our premiums and still stay within our comfort zone.”

    Conference Call Details – Wednesday, August 13, 2014

    Management will discuss the Company’s operations and its financial results in a conference call on Wednesday, August 13, 2014, 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/q2-2014. The webcast will be archived and accessible for approximately 30 days.

    Definitions of Non-GAAP Measures

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

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

    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. Management uses net operating income, 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 is provided as supplemental information, is not a substitute for net income and does not reflect the Company’s overall profitability.

     
            Three Months Ended       Three Months Ended       Six Months Ended       Six Months Ended
    June 30, 2014June 30, 2013June 30, 2014June 30, 2013
                           
    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)

    Net Operating Income

    and Diluted Earnings

    per Common Share

    Reconciliation:

     
    Net income $ 1,355 $ 0.18 $ 68   $ 0.02 $ 1,682 $ 0.23 $ 259 $ 0.07
     
    Net realized gain on investments 135 250 323 355
    Less tax effect on realized gains   46   85     110   121

    Net realized gain on

    investments, net of taxes

      89 $ 0.01   165   $ 0.04     213 $ 0.03   234 $ 0.06
     
    Net operating income$1,266$0.17$(97)$(0.02)$1,469$0.20$25$0.01
     

    Weighted average diluted

    shares outstanding

      7,358,280   3,906,432     7,352,609   3,911,650
     


    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 regional 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 and Pennsylvania. 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.

    KINGSTONE COMPANIES, INC. AND SUBSIDIARIES
     
    Condensed Consolidated Statements of Income and Comprehensive Income (Unaudited)
            For the Three Months Ended       For the Six Months Ended
    June 30June 30
    2014       20132014       2013
               
    Revenues
    Net premiums earned $ 6,429,373 $ 4,676,282 $ 12,355,684 $ 9,299,497
    Ceding commission revenue 3,706,049 2,334,431 7,087,332 4,628,142
    Net investment income 451,915 275,031 830,703 558,318
    Net realized gains on sales of investments 134,602 249,893 322,950 355,018
    Other income   250,908           243,825     478,465           457,815  
    Total revenues   10,972,847           7,779,462     21,075,134           15,298,790  
     
    Expenses
    Loss and loss adjustment expenses 3,007,939 3,241,797 7,332,893 5,711,438
    Commission expense 2,903,792 2,079,084 5,486,300 4,194,904
    Other underwriting expenses 2,529,075 1,931,611 4,810,824 4,144,956
    Other operating expenses 338,379 227,833 588,414 471,143
    Depreciation and amortization 209,935 153,985 393,055 306,971
    Interest expense   -           17,890     -           39,105  
    Total expenses   8,989,120           7,652,200     18,611,486           14,868,517  
     
    Income from operations before taxes 1,983,727 127,262 2,463,648 430,273
    Income tax expense   629,225           59,161     782,013           171,164  
    Net income 1,354,502 68,101 1,681,635 259,109
     
    Other comprehensive income (loss), net of tax
    Gross change in unrealized gains (losses)
    on available-for-sale-securities 736,319 (1,260,607 ) 1,416,715 (814,864 )
     
    Income tax (expense) benefit related to items
    of other comprehensive income (loss)   (250,348 )         428,607     (481,683 )         277,054  
    Comprehensive income (loss) $ 1,840,473         $ (763,899 ) $ 2,616,667         $ (278,701 )
     
    Earnings per common share:
    Basic $ 0.19         $ 0.02   $ 0.23         $ 0.07  
    Diluted $ 0.18         $ 0.02   $ 0.23         $ 0.07  
     
    Weighted average common shares outstanding
    Basic   7,287,935           3,827,712     7,277,313           3,834,269  
    Diluted   7,358,280           3,906,432     7,352,609           3,911,650  
     
    Dividends declared and paid per common share $ 0.04         $ 0.04   $ 0.08         $ 0.08  
     
     
    KINGSTONE COMPANIES, INC. AND SUBSIDIARIES
     
    Condensed Consolidated Balance Sheets                
            June 30,     December 31,
              2014     2013
    (unaudited)
    Assets
    Fixed-maturity securities, held-to-maturity, at amortized cost (fair value of
    $4,829,265 at June 30, 2014 and $2,425,261 at December 31, 2013) $ 4,621,872 $ 2,399,482
    Fixed-maturity securities, available-for-sale, at fair value (amortized cost of
    $40,295,663 at June 30, 2014 and $28,079,902 at December 31, 2013) 41,595,511 28,436,022
    Equity securities, available-for-sale, at fair value (cost of $8,823,489
    at June 30, 2014 and $6,690,338 at December 31, 2013)   9,402,811         6,796,673  
    Total investments 55,620,194 37,632,177
    Cash and cash equivalents 6,824,249 19,922,506
    Premiums receivable, net of provision for uncollectible amounts 9,249,702 7,590,074
    Receivables - reinsurance contracts 1,068,551 974,989
    Reinsurance receivables, net of provision for uncollectible amounts 44,423,447 37,560,825
    Deferred policy acquisition costs 7,996,102 6,860,263
    Intangible assets, net 2,471,387 2,709,244
    Property and equipment, net of accumulated depreciation 2,443,790 2,038,755
    Other assets   1,177,383         1,494,989  
    Total assets $ 131,274,805       $ 116,783,822  
     
    Liabilities
    Loss and loss adjustment expense reserves $ 39,704,288 $ 34,503,229
    Unearned premiums 37,202,073 32,335,614
    Advance premiums 1,280,738 776,099
    Reinsurance balances payable 3,881,409 2,566,729
    Deferred ceding commission revenue 7,774,715 6,984,166
    Accounts payable, accrued expenses and other liabilities 2,557,243 3,215,487
    Income taxes payable 185,543 -
    Deferred income taxes   937,359         693,087  
    Total liabilities   93,523,368         81,074,411  
     
    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 8,213,826 shares
    at June 30, 2014 and 8,186,031 shares at December 31, 2013; outstanding 7,290,868
    shares at June 30, 2014 and 7,266,573 shares at December 31, 2013 82,138 81,860
    Capital in excess of par 32,723,291 32,692,568
    Accumulated other comprehensive income 1,240,251 305,219
    Retained earnings   5,286,405         4,187,209  
    39,332,085 37,266,856
    Treasury stock, at cost, 922,958 shares at June 30, 2014 and 919,458 shares
    at December 31, 2013   (1,580,648 )       (1,557,445 )
    Total stockholders' equity   37,751,437         35,709,411  
     
    Total liabilities and stockholders' equity $ 131,274,805       $ 116,783,822  
     





    Kingstone Companies, Inc.

    Barry Goldstein, 845-802-7900

    CEO

    or

    Investor Relations:

    The Equity Group Inc.

    Adam Prior, 212-836-9606

    Senior Vice-President

    aprior@equityny.com

    or

    Forrest Hunt, 212-836-9610

    Associate

    fhunt@equityny.com


    Source: Kingstone Companies, Inc.


  • For more stories on investments and markets, please see HispanicBusiness' Finance Channel



    Source: Business Wire


    Story Tools






    HispanicBusiness.com Facebook Linkedin Twitter RSS Feed Email Alerts & Newsletters