Third Quarter 2017 Financial Results. May 13, First Quarter Conference Call

Transcription

1 Third Quarter 2017 Financial Results May 13, First Quarter Conference Call Speakers Mr. Barry Goldstein, CEO Mr. Ben Walden, EVP & Chief Actuary Mr. Victor Brodsky, CFO Investor Relations Contact Ms. Amanda Goldstein

2 Forward Looking Statements This document contains forward-looking statements and management may make additional forward looking statements in response to your questions. Forward-looking statements include statements regarding the intent, belief or current expectations of the Company and its management about the Company s business, financial condition and results of operations, among other factors. In some cases you can identify these statements by forward-looking words such as may, might, will, will likely result, should, anticipates, expects, intends, plans, seeks, estimates, potential, continue, believes and similar expressions, although some forward-looking statements are expressed differently. These forward-looking statements are based on the Company s current expectations and assumptions that are subject to risks and uncertainties that may cause its actual results, performance, or achievements to differ materially from any expected future results, performance, or achievements expressed or implied by such forward-looking statements. All statements other than statements of historical fact are statements that could be deemed forward-looking statements. These risks and uncertainties include, but are not limited to the level of demand for the Company s coverage and the incidence of catastrophic events related to its coverage; the Company s ability to grow and remain profitable in the competitive insurance industry; its ability to access additional capital; its ability to attract and retain qualified personnel; changes in general economic, business and industry conditions; and legal, regulatory, and tax developments. There is no assurance that the Company s expectations will be realized. If one or more of these risks or uncertainties materialize, or if the Company s underlying assumptions prove incorrect, actual results may vary materially from those expected, estimated, or projected. Such risks and uncertainties also include those set forth under Risk Factors in the Registration Statement. The Company s forward-looking statements speak only as of the time that they are made and do not necessarily reflect the Company s outlook at any other point in time. Except as required by law or regulation, the Company undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events, or for any other reason. Also, the discussions during this conference call will include certain financial measures that were not prepared in accordance with U.S. generally accepted accounting principles (GAAP). Reconciliations of those non-u.s. GAAP financial measures to the most directly comparable U.S. GAAP financial measures can be found in the Company s press release dated November 9, 2017 that is posted on the Company s web site at // kingstonecompanies.com/pressreleases com/pressreleases.asp asp. Any non-u.s. GAAP financial measures presented should not be viewed as substitutes for financial measures required by U.S. GAAP, have no standardized meaning prescribed by U.S. GAAP and may not be comparable to the calculation of similar measures of other companies. Ticker Cash & Investments Total Assets Total Stockholders Equity Book Value Per Common Share Shares Outstanding At September 30, 2017 (NASDAQ: KINS) Stock Price* $15.35 Market Cap* $163,115,271 Shares Outstanding 10,626,402 *As of November 9, 2017 At December 31, 2016 $155.7 million $107.6 million $215.4 million $169.4 million $93.8 million $56.7 million $8.83 $ ,623,407 7,921,866 2

3 Recent Achievements Homeowner rates and forms approved in Rhode Island October 23 rd Tentatively approved to write business in Massachusetts October 23 rd Purchased adjoining property in Kingston for future expansion November 1 st New Kingstone Companies website launched November 2 nd 3

4 Impact of Upgraded A.M. Best Rating to A-(Excellent) Upgrade to A-Excellent on April 12, 2017, Third Quarter was first to fully reflect impact. Significant increase in personal lines new business within a few weeks of the announcement we are seeing much more activity from our existing agents. The dramatic change in conversion ratio (issued / quoted) accelerated in the Third Quarter. We observe this particularly for New York Homeowners where the A-rating sets us apart from Demotech-rated coastal competitors. We expect a positive impact in quoting and conversion in expansion states allowing us to quickly succeed in new coastal markets dominated by Demotechrated carriers. Many of these carriers are presently dealing with catastrophe events in other states. We have still not seen the full impact of growth from new agents and risks requiring an A-rated carrier. We expect additional opportunities to present themselves for higher-end risks as a result of the A- rating. 4

5 Third Quarter 2017 Investor Highlights Third Quarter 2017 Net income increased 17.7% to $4.07 million or $0.38 per diluted share Return on Average Common Equity (annualized) 17.7% Book value per share of $8.83, up 23.3% since Sep 30, 2016 Year to Date Net income increased 17.7% to $8.05 million or $0.77 per diluted share Return on Average Common Equity (annualized) 14.27% Dividends $.08 per share dividend payable on December 15, 2017 to shareholders of record at the close of business on November 30, Kingstone s 26 th consecutive quarterly dividend. 5

6 Underwriting Performance Net Loss and Loss Adjustment Expense For the Quarter Ended September 30, 2017 September 30, 2016 Personal Lines $ 3,553,087 $ 2,383,297 Commercial Lines 1,535,862 1,178,963 Livery Physical Damage 1,417,332 1,236,780 Other(1) 10,226 (145,932) Unallocated loss adjustment expenses 556, ,746 Total $ 7,073,323 $ 5,134,854 Net Loss Ratio For the Quarter Ended September 30, 2017 September 30, 2016 Personal Lines 23.1% 22.9% Commercial Lines 49.1% 41.7% Livery Physical Damage 48.2% 49.7% Other(1) 18.7% 248.7% Total 32.9% 32.8% (1) 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. 6

7 Third Quarter 2017 Premiums by Line of Business Net Premiums Earned Third Quarter 2017 Percentage of Total Livery Physical Damage 14% Personal Lines 72% Commercial Lines 14% For the Quarter Ended September 30, 2017 September 30, 2016 Personal Lines $ 15,395,435 $ 10,388,403 Commercial Lines 3,125,137 2,828,473 Livery Physical Damage 2,939,032 2,487,975 Other(1) 54,804 (58,670) Total $ 21,514,408 $ 15,646,181 (1) 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. 7

8 Third Quarter 2017 Premiums by Line of Business Gross Written Premium Livery Physical Damage 7% Commercial Lines 11% Personal Lines 81% Percentage of Total For the Quarter Ended September 30, 2017 September 30, 2016 Personal Lines $26,729,634 $ 21,357,900 Commercial Lines 3,634,037 3,111,308 Livery Physical Damage 2,422,352 2,640,531 Other(1) 65,778 59,637 Total $ 32,851,801 $ 27,169,376 Livery Physical Damage 8% Commercial Lines 10% Personal Lines 82% Percentage of Total Net Written Premium September 30, 2017 September 30, 2016 Personal Lines 19,373,782 11,893,952 Excluding the effect of quota share adjustments on July 1 (1) 7,140,088 - Personal Lines 26,513,870 11,893,952 Commercial Lines 3,250,326 2,760,623 Livery Physical Damage 2,422,352 2,640,531 Other(2) 74,771 (62,826) Total $ 32,261,319 $ 17,232,280 (1) 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. (2) 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. 8

9 Breakdown of Third Quarter 2017 Net Loss Ratio Core loss ratio excluding winter weather and prior year development decreased 0.1 point. Claim frequency trends are favorable and fire claim activity was in line with expectations. Prior year loss development was favorable by 0.2 points, compared to 0.4 points of favorable development in Q There was no impact from winter weather. Net Loss Ratio Breakdown 40% 35% 30% 25% 20% 15% 10% 5% 0% -5% 33.1% 33.2% -0.2% -0.4% Q Q Core Severe Winter Weather Prior Years 9

10 Investment Portfolio Portfolio at September 30, 2017 Fixed income portfolio: 89.9% Effective duration less than five years Average Credit rating A- September 30, 2017 December 31, 2016 Total Investments $ $95.51 Cash and Equivalents $25.88 $12.05 Cash and Investments at 9/30/17 Preferred Stock Common Equity 4% 4% Total Cash and Investments $ $ Residental MBS 14% Fixed Income - Corporate 53% Bonds Only AverageEffective Maturity 5.53 years 4.97 years Duration 4.84 years 4.38 years Avg Credit Rating A- A- Cash & Cash Equivalents 17% Fixed Income States & Municipal 8% Fixed Income US Treasuries <1% 10

11 Long-Term Value Creation Book Value Per Share $10.00 $9.00 $8.00 $7.00 $6.00 $5.00 $5.35 $5.54 $5.57 $5.73 $6.00 $6.18 $6.32 $6.80 $7.16 $7.15 $8.29 $8.50 $8.83 $ Q3 2014Q4 2015Q1 2015Q2 2015Q3 2015Q4 2016Q1 2016Q2 2016Q3 2016Q4 2017Q1 2017Q2 2017Q3 Rolling Latest Twelve Months Earnings Per Share $1.50 $1.00 $0.74 $0.74 $0.87 $0.93 $0.94 $0.96 $1.00 $1.11 $1.12 $1.20 $1.07 $1.02 $0.50 $0.52 $- 2014Q3 2014Q4 2015Q1 2015Q2 2015Q3 2015Q4 2016Q1 2016Q2 2016Q3 2016Q4 2017Q1 2017Q2 2017Q3 Note: Earnings Per Share growth in 2017 was impacted by the 2,692,500 shares issued in the follow-on offering during Q CAGR Compound Annual Growth Rate 11

12 Multi-State Expansion Plan VT ME Launched in New Jersey in May Homeowners filing in Rhode Island approved in October. Anticipate launch in Rhode Island in Q Licensed to write P&C insurance in NY, NJ, PA, CT, RI, and TX. Preliminary approval in MA. PA NY NH CT RI MA NJ 12

13 2017 Third Quarter Financial Summary Financial Highlights Three Months Ended September 30, Nine Months Ended September 30, ($ in thousands) % Change % Change Direct written premiums (1) $32,840 $27, % $89,424 $76, % Net written premiums (2) $32,261 $17, % $68,723 $48, % Net premiums earned $21,514 $15, % $54,838 $45, % Total ceding commissions revenue $1,718 $2, % $8,208 $8, % Net investment income $1,033 $ % $2,917 $2, % U.S. GAAP Net income $4,074 $3, % $8,055 $6, % U.S. GAAP Diluted EPS $0.38 $ % $0.77 $ % Comprehensive income $4,389 $3, % $9,294 $8, % Net operating income (1) $4,060 $3, % $7,992 $6, % Net operating income Diluted EPS (1) $0.38 $ % $0.76 $ % Return on average equity (annualized) 17.7% 25.1% -7.4 points 14.3% 17.9% -3.6 points Net loss ratio 32.9% 32.8% 0.1 points 41.6% 45.2% -3.6 points Net underwriting expense ratio 36.9% 34.6% 2.3 points 35.2% 33.8% 1.4 points Net combined ratio 69.8% 67.4% 2.4 points 76.8% 79.0% -2.2 points (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 which can be found in the Press Release dated November 9, (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. 13

14 For Additional Information Amanda M. Goldstein CPA, ARe Investor Relations Director 14