☒
|
ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
|
|
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2018
|
☐
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
|
FOR
THE TRANSITION PERIOD
FROM
TO
|
Commission
File Number 0-1665
|
Delaware
|
36-2476480
|
(State
or other jurisdiction of incorporation or
organization)
|
(I.R.S.
Employer Identification No.)
|
15 Joys Lane, Kingston, New York
|
12401
|
(Address
of principal executive offices)
|
(Zip
Code)
|
(845) 802-7900
|
(Registrant’s
telephone number, including area code)
|
Title
of each class
|
Name of
each exchange on which registered
|
Common Stock
|
Nasdaq
Global Select Market
|
Large
accelerated filer ☐
|
Accelerated
filer ☒
|
|
|
Non-accelerated
☐
|
Smaller
reporting company ☒
|
|
|
Emerging
growth company ☐
|
|
|
|
Page No.
|
|
1
|
|||
PART I
|
|
|
|
2
|
|||
19
|
|||
28
|
|||
28
|
|||
28
|
|||
28
|
|||
PART II
|
|
|
|
29
|
|||
29
|
|||
30
|
|||
61
|
|||
61
|
|||
61
|
|||
61
|
|||
65
|
|||
PART III
|
|
|
|
66
|
|||
71
|
|||
76
|
|||
78
|
|||
79
|
|||
PART IV
|
|
|
|
80
|
|||
81
|
|||
|
82
|
|
Years
ended
|
|
|
December
31,
|
|
|
2018
|
2017
|
|
|
|
Balance at
beginning of period
|
$48,799,622
|
$41,736,719
|
Less
reinsurance recoverables
|
(16,748,908)
|
(15,776,880)
|
Net balance,
beginning of period
|
32,050,714
|
25,959,839
|
|
|
|
Incurred
related to:
|
|
|
Current
year
|
57,143,077
|
34,246,081
|
Prior
years
|
1,152,128
|
(60,544)
|
Total
incurred
|
58,295,205
|
34,185,537
|
|
|
|
Paid related
to:
|
|
|
Current
year
|
34,025,387
|
18,194,860
|
Prior
years
|
15,794,673
|
9,899,802
|
Total
paid
|
49,820,060
|
28,094,662
|
|
|
|
Net balance
at end of period
|
40,525,859
|
32,050,714
|
Add
reinsurance recoverables
|
15,671,247
|
16,748,908
|
Balance at
end of period
|
$56,197,106
|
$48,799,622
|
(in thousands of
$)
|
2008
|
2009
|
2010
|
2011
|
2012
|
2013
|
2014
|
2015
|
2016
|
2017
|
2018
|
Reserve for loss and loss
adjustment expenses, net of reinsurance
recoverables
|
5,823
|
6,001
|
7,280
|
8,520
|
12,065
|
17,139
|
21,663
|
23,170
|
25,960
|
32,051
|
32,051
|
Net reserve estimated as of One
year later
|
6,119
|
6,235
|
7,483
|
9,261
|
13,886
|
18,903
|
21,200
|
23,107
|
25,899
|
33,203
|
|
Two years later
|
6,609
|
6,393
|
8,289
|
11,022
|
16,875
|
18,332
|
21,501
|
24,413
|
26,970
|
|
|
Three years
later
|
6,729
|
6,486
|
9,170
|
12,968
|
16,624
|
18,687
|
22,576
|
25,509
|
|
|
|
Four years
later
|
6,711
|
7,182
|
10,128
|
12,552
|
16,767
|
19,386
|
23,243
|
|
|
|
|
Five years
later
|
7,261
|
7,766
|
9,925
|
12,440
|
16,985
|
19,449
|
|
|
|
|
|
Six years later
|
7,727
|
7,602
|
9,932
|
12,367
|
16,959
|
|
|
|
|
|
|
Seven years
later
|
7,554
|
7,615
|
9,779
|
12,307
|
|
|
|
|
|
|
|
Eight years
later
|
7,511
|
7,455
|
9,676
|
|
|
|
|
|
|
|
|
Nine years
later
|
7,330
|
7,406
|
|
|
|
|
|
|
|
|
|
Ten years later
|
7,284
|
|
|
|
|
|
|
|
|
|
|
Net cumulative redundancy
(deficiency)
|
(1,461)
|
(1,405)
|
(2,396)
|
(3,787)
|
(4,894)
|
(2,310)
|
(1,580)
|
(2,339)
|
(1,010)
|
(1,152)
|
|
(in thousands of
$)
|
2008
|
2009
|
2010
|
2011
|
2012
|
2013
|
2014
|
2015
|
2016
|
2017
|
2018
|
Cumulative amount of reserve paid,
net of reinsurance recoverable through
|
|
|
|
|
|
|
|
|
|
|
|
One year later
|
2,533
|
2,307
|
3,201
|
3,237
|
4,804
|
6,156
|
8,500
|
8,503
|
9,900
|
15,795
|
|
Two years later
|
3,974
|
3,992
|
4,947
|
5,661
|
8,833
|
10,629
|
12,853
|
14,456
|
17,187
|
|
|
Three years
later
|
5,054
|
4,659
|
6,199
|
8,221
|
11,873
|
13,571
|
16,564
|
19,533
|
|
|
|
Four years
later
|
5,373
|
5,238
|
7,737
|
10,100
|
13,785
|
16,166
|
19,838
|
|
|
|
|
Five years
later
|
5,717
|
5,997
|
8,585
|
10,903
|
15,479
|
17,262
|
|
|
|
|
|
Six years later
|
6,224
|
6,562
|
8,941
|
11,417
|
15,882
|
|
|
|
|
|
|
Seven years
later
|
6,718
|
6,749
|
9,275
|
11,725
|
|
|
|
|
|
|
|
Eight years
later
|
6,853
|
7,022
|
9,559
|
|
|
|
|
|
|
|
|
Nine years
later
|
7,103
|
7,298
|
|
|
|
|
|
|
|
|
|
Ten years later
|
7,190
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net reserve -
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
5,823
|
6,001
|
7,280
|
8,520
|
12,065
|
17,139
|
21,663
|
23,170
|
25,960
|
32,051
|
40,526
|
* Reinsurance
Recoverable
|
9,766
|
10,512
|
10,432
|
9,960
|
18,420
|
17,364
|
18,250
|
16,707
|
15,777
|
16,749
|
15,671
|
* Gross reserves
-
|
|
|
|
|
|
|
|
|
|
|
|
December
31,
|
15,589
|
16,513
|
17,712
|
18,480
|
30,485
|
34,503
|
39,913
|
39,877
|
41,737
|
48,800
|
56,197
|
|
|
|
|
|
|
|
|
|
|
|
|
Net re-estimated
reserve
|
7,284
|
7,406
|
9,676
|
12,307
|
16,959
|
19,449
|
23,243
|
25,509
|
26,970
|
33,203
|
|
Re-estimated reinsurance
recoverable
|
12,503
|
12,506
|
13,154
|
13,797
|
28,355
|
21,048
|
21,231
|
18,810
|
17,285
|
16,852
|
|
Gross re-estimated
reserve
|
19,787
|
19,912
|
22,830
|
26,104
|
45,314
|
40,497
|
44,474
|
44,319
|
44,255
|
50,055
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross cumulative redundancy
(deficiency)
|
(4,198)
|
(3,399)
|
(5,118)
|
(7,624)
|
(14,829)
|
(5,994)
|
(4,561)
|
(4,442)
|
(2,518)
|
(1,255)
|
|
|
December 31,
2018
|
December 31,
2017
|
||
|
Carrying
|
% of
|
Carrying
|
% of
|
Category
|
Value
|
Portfolio
|
Value
|
Portfolio
|
|
|
|
|
|
Cash
and cash equivalents
|
$21,138,403
|
10.8%
|
$48,381,633
|
25.8%
|
|
|
|
|
|
Held
to maturity
|
|
|
|
|
U.S.
Treasury securities and
|
|
|
|
|
obligations
of U.S. government
|
|
|
|
|
corporations
and agencies
|
729,507
|
0.4%
|
729,466
|
0.4%
|
|
|
|
|
|
Political
subdivisions of states,
|
|
|
|
|
territories
and possessions
|
998,803
|
0.5%
|
998,984
|
0.5%
|
|
|
|
|
|
Corporate
and other bonds
|
|
|
|
|
Industrial
and miscellaneous
|
2,494,545
|
1.3%
|
3,141,358
|
1.7%
|
|
|
|
|
|
Available
for sale
|
|
|
|
|
U.S.
Treasury securities and
|
|
|
|
|
obligations
of U.S. government
|
|
|
|
|
corporations
and agencies
|
8,220,381
|
4.2%
|
-
|
0.0%
|
|
|
|
|
|
Political
subdivisions of states,
|
|
|
|
|
territories
and possessions
|
6,341,608
|
3.2%
|
11,315,443
|
6.0%
|
|
|
|
|
|
Corporate
and other bonds
|
|
|
|
|
Industrial
and miscellaneous
|
115,750,293
|
59.2%
|
88,141,465
|
47.0%
|
|
|
|
|
|
Residential
mortgage backed securities
|
21,465,234
|
11.0%
|
20,531,348
|
10.9%
|
|
|
|
|
|
Other
|
|
|
|
|
Preferred
stocks
|
6,152,956
|
3.1%
|
7,000,941
|
3.7%
|
|
|
|
|
|
Common
stocks
|
10,419,660
|
5.3%
|
7,285,257
|
3.9%
|
|
|
|
|
|
Other
investments
|
1,855,225
|
1.0%
|
-
|
0.0%
|
Total
|
$195,566,615
|
100.0%
|
$187,525,895
|
100.0%
|
|
December 31,
2018
|
December 31,
2017
|
||
|
Estimated
|
Percentage
of
|
Estimated
|
Percentage
of
|
|
Fair
Market
|
Fair
Market
|
Fair
Market
|
Fair
Market
|
|
Value
|
Value
|
Value
|
Value
|
|
|
|
||
Rating
|
|
|
|
|
U.S.
Treasury securities
|
$8,220,381
|
5.4%
|
$-
|
0.0%
|
|
|
|
|
|
Corporate
and municipal bonds
|
|
|
|
|
AAA
|
979,123
|
0.6%
|
1,358,143
|
1.1%
|
AA
|
8,350,910
|
5.5%
|
11,319,057
|
9.4%
|
A
|
27,665,961
|
18.2%
|
17,199,631
|
14.3%
|
BBB
|
85,095,907
|
56.1%
|
68,704,768
|
57.3%
|
BB
|
-
|
0.0%
|
875,310
|
0.7%
|
Total
corporate and municipal bonds
|
122,091,901
|
80.4%
|
99,456,909
|
82.8%
|
|
|
|
|
|
Residential
mortgage backed securities
|
|
|
|
|
AAA
|
999,640
|
0.7%
|
2,013,010
|
1.7%
|
AA
|
12,743,906
|
8.5%
|
11,021,144
|
9.2%
|
A
|
4,777,356
|
3.1%
|
3,902,768
|
3.3%
|
CCC
|
1,440,825
|
0.9%
|
1,420,296
|
1.2%
|
CC
|
109,648
|
0.1%
|
120,742
|
0.1%
|
C
|
24,050
|
0.0%
|
28,963
|
0.0%
|
D
|
390,542
|
0.3%
|
1,659,479
|
1.4%
|
Non
rated
|
979,267
|
0.6%
|
364,945
|
0.3%
|
Total
residential mortgage backed securities
|
21,465,234
|
14.2%
|
20,531,347
|
17.2%
|
|
|
|
|
|
Total
|
$151,777,516
|
100.0%
|
$119,988,256
|
100.0%
|
|
|
|
Kingstone
|
|
KICO
|
|
Companies
|
|
|
|
|
A.M. Best Long-Term issuer credit rating (ICR)
|
a- (stable outlook)
|
|
bbb- (stable outlook)
|
A.M. Best Long-Term issue credit rating (IR)
|
|
|
|
$30.0
million, 5.50% senior unsecured notes due Dec. 30,
2022
|
n/a
|
|
bbb- (stable outlook)
|
Kroll Bond Rating Agency insurance financial strength rating
(IFSR)
|
A- (stable outlook)
|
|
n/a
|
Kroll Bond Rating Agency issuer rating
|
n/a
|
|
BBB- (stable outlook)
|
$30.0
million, 5.50% senior unsecured notes due Dec. 30,
2022
|
n/a
|
|
BBB- (stable outlook)
|
|
Years ended December 31,
|
|||
($ in thousands)
|
2018
|
2017
|
Change
|
Percent
|
Revenues
|
|
|
|
|
Direct
written premiums
|
$146,716
|
$121,575
|
$25,141
|
20.7%
|
Assumed
written premiums
|
1
|
23
|
(22)
|
(95.7)%
|
|
146,717
|
121,598
|
25,119
|
20.7%
|
Ceded
written premiums
|
|
|
|
|
Ceded
to quota share treaties in force during the period
|
15,880
|
23,623
|
(7,743)
|
(32.8)%
|
Return
of premiums previously ceded to prior quota share treaties
(1)
|
(4,553)
|
(7,140)
|
2,587
|
(36.2)%
|
Ceded
to quota share treaties
|
11,327
|
16,483
|
(5,156)
|
(31.3)%
|
Ceded
to excess of loss treaties
|
1,386
|
1,209
|
177
|
14.6%
|
Ceded
to catastrophe treaties
|
14,210
|
11,037
|
3,173
|
28.7%
|
Total
ceded written premiums
|
26,923
|
28,729
|
(1,806)
|
(6.3)%
|
|
|
|
|
|
Net
written premiums
|
119,794
|
92,869
|
26,925
|
29.0%
|
|
|
|
|
|
Change
in unearned premiums
|
|
|
|
|
Direct
and assumed
|
(13,384)
|
(10,653)
|
(2,731)
|
25.6%
|
Ceded
to quota share treaties
|
(2,995)
|
(4,865)
|
1,870
|
(38.4)%
|
Change
in net unearned premiums
|
(16,379)
|
(15,518)
|
(861)
|
5.5%
|
|
|
|
|
|
Premiums
earned
|
|
|
|
|
Direct
and assumed
|
133,333
|
110,945
|
22,388
|
20.2%
|
Ceded
to reinsurance treaties
|
(29,918)
|
(33,594)
|
3,676
|
(10.9)%
|
Net
premiums earned
|
103,415
|
77,351
|
26,064
|
33.7%
|
Ceding
commission revenue
|
|
|
|
|
Excluding
the effect of catastrophes
|
5,792
|
9,933
|
(4,141)
|
(41.7)%
|
Effect
of catastrophes
|
(459)
|
-
|
(459)
|
n/a%
|
Total
ceding commission revenue
|
5,333
|
9,933
|
(4,600)
|
(46.3)%
|
Net
investment income
|
6,186
|
4,133
|
2,053
|
49.7%
|
Net
(losses) gains on investments
|
(2,496)
|
84
|
(2,580)
|
(3,071.4)%
|
Other
income
|
1,334
|
1,268
|
66
|
5.2%
|
Total
revenues
|
113,772
|
92,769
|
21,003
|
22.6%
|
Expenses
|
|
|
|
|
Loss
and loss adjustment expenses
|
|
|
|
|
Direct
and assumed:
|
|
|
|
|
Loss
and loss adjustment expenses excluding the effect of
catastrophes
|
61,950
|
48,253
|
13,697
|
28.4%
|
Losses
from catastrophes (2)
|
10,828
|
-
|
10,828
|
n/a%
|
Total
direct and assumed loss and loss adjustment expenses
|
72,778
|
48,253
|
24,525
|
50.8%
|
|
|
|
|
|
Ceded
loss and loss adjustment expenses:
|
|
|
|
|
Loss
and loss adjustment expenses excluding the effect of
catastrophes
|
9,882
|
14,067
|
(4,185)
|
(29.8)%
|
Losses
from catastrophes (2)
|
4,600
|
-
|
4,600
|
n/a%
|
Total
ceded loss and loss adjustment expenses
|
14,482
|
14,067
|
415
|
3.0%
|
|
|
|
|
|
Net
loss and loss adjustment expenses:
|
|
|
|
|
Loss
and loss adjustment expenses excluding the effect of
catastrophes
|
52,068
|
34,186
|
17,882
|
52.3%
|
Losses
from catastrophes (2)
|
6,228
|
-
|
6,228
|
n/a%
|
Net
loss and loss adjustment expenses
|
58,296
|
34,186
|
24,110
|
70.5%
|
|
|
|
|
|
Commission
expense
|
25,342
|
21,182
|
4,160
|
19.6%
|
Other
underwriting expenses
|
20,943
|
18,116
|
2,827
|
15.6%
|
Other
operating expenses
|
2,575
|
3,513
|
(938)
|
(26.7)%
|
Depreciation
and amortization
|
1,787
|
1,403
|
384
|
27.4%
|
Interest
expense
|
1,822
|
60
|
1,762
|
2,936.7%
|
Total
expenses
|
110,765
|
78,460
|
32,305
|
41.2%
|
|
|
|
|
|
Income
from operations before taxes
|
3,007
|
14,309
|
(11,302)
|
(79.0)%
|
Income
tax (benefit) expense
|
(86)
|
4,323
|
(4,409)
|
(102.0)%
|
Net income
|
$3,093
|
$9,986
|
$(6,893)
|
(69.0)%
|
|
Years
ended December 31,
|
|||
|
2018
|
2017
|
Percentage Point
Change
|
Percent
Change
|
|
|
|
|
|
Key ratios:
|
|
|
|
|
Net
loss ratio
|
56.4%
|
44.2%
|
12.2
|
27.6%
|
Net
underwriting expense ratio
|
38.4%
|
36.4%
|
2.0
|
5.5%
|
Net
combined ratio
|
94.8%
|
80.6%
|
14.2
|
17.6%
|
|
Year
ended December 31, 2018
|
Year
ended December 31, 2017
|
||
|
January
1,
to
June
30,
|
July
1,
to
December
31,
|
January
1,
to
June
30,
|
July
1,
to
December 31,
|
|
("2017/2019 Treaty")
|
("2017/2019 Treaty")
|
("2016/2017 Treaty")
|
("2017/2019 Treaty")
|
|
|
|
|
|
Quota share reinsurance rates
|
|
|
|
|
Personal
lines
|
20% (1)
|
10% (1)
|
40%
|
20% (1)
|
|
Years
ended December 31,
|
|||
($ in thousands)
|
2018
|
2017
|
Change
|
Percent
|
|
|
|
|
|
Net
written premiums
|
$119,794
|
$92,869
|
$26,925
|
29.0%
|
Return
of premiums previously ceded to prior quota share
treaties
|
4,553
|
7,140
|
(2,587)
|
(36.2)%
|
Net
written premiums without the effect of the July 1, 2017
Cut-off
|
$115,241
|
$85,729
|
$29,512
|
34.4%
|
|
Year
ended December 31, 2018
|
Year ended December 31,
2017
|
||
|
January
1,
to
June
30,
|
July
1,
to
December
31,
|
January
1,
to
June
30,
|
July
1,
to
December
31,
|
|
("2017/2019 Treaty")
|
("2017/2019 Treaty")
|
("2015/2016 Treaty")
|
("2016/2017 Treaty")
|
|
|
|
|
|
Provisional ceding commission rate on quota share
treaty
|
|
|
|
|
Personal
lines
|
53%
|
53%
|
52%
|
53%
|
|
Years
ended December 31,
|
|||
($
in thousands)
|
2018
|
2017
|
Change
|
Percent
|
|
|
|
|
|
Provisional
ceding commissions earned
|
$6,746
|
$10,677
|
$(3,931)
|
(36.8)%
|
|
|
|
|
|
Contingent
ceding commissions earned
|
|
|
|
|
Contingent
ceding commissions earned excluding
|
|
|
|
|
the
effect of catastrophes
|
(954)
|
(744)
|
(210)
|
28.2%
|
Effect
of catastrophes on ceding commissions earned
|
(459)
|
-
|
(459)
|
n/a
|
Contingent
ceding commissions earned
|
(1,413)
|
(744)
|
(669)
|
89.9%
|
|
|
|
|
|
Total
ceding commission revenue
|
$5,333
|
$9,933
|
$(4,600)
|
(46.3)%
|
|
Years
ended
December
31,
|
$ or
|
|
|
2018
|
2017
|
Point
Change
|
|
|
|
|
Net
premiums earned
|
|
|
|
Core
|
$99,657
|
$77,007
|
$22,650
|
Expansion
|
3,758
|
344
|
3,414
|
Total
|
$103,415
|
$77,351
|
$26,064
|
|
|
|
|
Other
underwriting expenses
|
|
|
|
Core
|
$19,290
|
$17,072
|
$2,218
|
Expansion
|
1,653
|
1,044
|
609
|
Total
|
$20,943
|
$18,116
|
$2,827
|
|
|
|
|
Other
underwriting expenses as a percentage
|
|
|
|
of
net premiums earned
|
|
|
|
Core
|
19.4%
|
22.2%
|
-2.8%
|
Expansion
|
44.0%
|
303.5%
|
-259.5%
|
Total
|
20.3%
|
23.4%
|
-3.1%
|
|
Years
ended
|
|
|
|
December
31,
|
Percentage
|
|
|
2018
|
2017
|
Point
Change
|
|
|
|
|
Ceding
commission revenue - provisional
|
(6.5)%
|
(13.8)%
|
7.3
|
Ceding
commission revenue - contingent
|
1.4
|
1.0
|
0.4
|
Other
income
|
(1.2)
|
(1.6)
|
0.4
|
Acquisition
costs and other underwriting expenses:
|
|
|
|
Commission
expense
|
24.5
|
27.4
|
(2.9)
|
|
18.2
|
13.0
|
5.2
|
Other
underwriting expenses
|
|
|
|
Core
|
|
|
|
Employment
costs
|
8.2
|
9.5
|
(1.3)
|
Other Core Expenses
|
10.4
|
12.6
|
(2.2)
|
Total
Core Expenses
|
18.6
|
22.1
|
(3.5)
|
Expansion
Expenses
|
1.6
|
1.3
|
0.3
|
Total
other underwriting expenses
|
20.2
|
23.4
|
(3.2)
|
|
|
|
|
Net
underwriting expense ratio
|
38.4%
|
36.4%
|
2.0
|
|
Years
ended
|
|
|
December
31,
|
|
|
2018
|
2017
|
|
|
|
Gross
premiums written:
|
|
|
Personal
lines
|
$119,971,418
|
$95,993,591
|
Commercial
lines
|
16,702,409
|
14,632,300
|
Livery
physical damage
|
9,792,456
|
10,727,707
|
Other(1)
|
251,190
|
244,427
|
Total
|
$146,717,473
|
$121,598,025
|
|
|
|
Net
premiums written:
|
|
|
Personal
lines
|
|
|
Excluding
the effect of quota share adjustments on July 1
|
$90,439,690
|
$61,756,415
|
Return
of premiums previously ceded to prior quota share treaties prior
quota share treaties
|
4,553,345
|
7,140,088
|
Personal
lines (2)
|
94,993,035
|
68,896,503
|
Commercial
lines
|
14,779,752
|
13,038,640
|
Livery
physical damage
|
9,792,456
|
10,727,707
|
Other(1)
|
228,551
|
206,026
|
Total
|
$119,793,794
|
$92,868,876
|
|
|
|
Net
premiums earned:
|
|
|
Personal
lines (2)
|
$79,603,364
|
$53,556,294
|
Commercial
lines
|
13,804,284
|
12,163,104
|
Livery
physical damage
|
9,797,939
|
11,441,168
|
Other(1)
|
209,128
|
190,457
|
Total
|
$103,414,715
|
$77,351,023
|
|
|
|
Net
loss and loss adjustment expenses:
|
|
|
Personal
lines
|
$43,287,170
|
$20,866,628
|
Commercial
lines
|
8,220,382
|
6,368,927
|
Livery
physical damage
|
4,211,273
|
4,870,947
|
Other(1)
|
334,015
|
(14,686)
|
Unallocated
loss adjustment expenses
|
2,242,365
|
2,093,721
|
Total
|
$58,295,205
|
$34,185,537
|
|
|
|
Net
loss ratio:
|
|
|
Personal
lines
|
54.4%
|
39.0%
|
Commercial
lines
|
59.5%
|
52.4%
|
Livery
physical damage
|
43.0%
|
42.6%
|
Other(1)
|
159.7%
|
-7.7%
|
Total
|
56.4%
|
44.2%
|
|
Years
ended
|
|
|
December
31,
|
|
|
2018
|
2017
|
|
|
|
Revenues
|
|
|
Net
premiums earned
|
$103,414,715
|
$77,351,023
|
Ceding
commission revenue
|
5,332,630
|
9,933,133
|
Net
investment income
|
6,037,441
|
4,132,586
|
Net
(losses) gains on investments
|
(2,439,026)
|
84,313
|
Other
income
|
1,266,654
|
1,210,897
|
Total
revenues
|
113,612,414
|
92,711,952
|
|
|
|
Expenses
|
|
|
Loss
and loss adjustment expenses
|
58,295,205
|
34,185,537
|
Commission
expense
|
25,342,137
|
21,182,254
|
Other
underwriting expenses
|
20,943,342
|
18,115,614
|
Depreciation
and amortization
|
1,787,150
|
1,402,928
|
Total
expenses
|
106,367,834
|
74,886,333
|
|
|
|
Income
from operations
|
7,244,580
|
17,825,619
|
Income
tax expense
|
1,387,508
|
5,764,191
|
Net
income
|
$5,857,072
|
$12,061,428
|
|
|
|
Key Measures:
|
|
|
Net
loss ratio
|
56.4%
|
44.2%
|
Net
underwriting expense ratio
|
38.4%
|
36.4%
|
Net
combined ratio
|
94.8%
|
80.6%
|
|
|
|
Reconciliation
of net underwriting expense ratio:
|
|
|
Acquisition
costs and other
|
|
|
underwriting
expenses
|
$46,285,479
|
$39,297,868
|
Less:
Ceding commission revenue
|
(5,332,630)
|
(9,933,133)
|
Less:
Other income
|
(1,266,654)
|
(1,210,897)
|
Net
underwriting expenses
|
$39,686,195
|
$28,153,838
|
|
|
|
Net
premiums earned
|
$103,414,715
|
$77,351,023
|
|
|
|
Net
Underwriting Expense Ratio
|
38.4%
|
36.4%
|
|
Direct
|
Assumed
|
Ceded
|
Net
|
|
|
|
|
|
Year ended December 31,
2018
|
|
|
|
|
Written
premiums
|
$146,716,468
|
$1,004
|
$(26,923,679)
|
$119,793,793
|
Change
in unearned premiums
|
(13,388,535)
|
4,067
|
(2,994,610)
|
(16,379,078)
|
Earned
premiums
|
$133,327,933
|
$5,071
|
$(29,918,289)
|
$103,414,715
|
|
|
|
|
|
Loss
and loss adjustment expenses exluding
|
|
|
|
|
the
effect of catastrophes
|
$61,921,559
|
$28,237
|
$(9,882,474)
|
$52,067,322
|
Catastrophe
loss
|
10,828,121
|
-
|
(4,600,238)
|
6,227,883
|
Loss
and loss adjustment expenses
|
$72,749,680
|
$28,237
|
$(14,482,712)
|
$58,295,205
|
|
|
|
|
|
Loss
ratio excluding the effect of catastrophes
|
46.4%
|
556.8%
|
33.0%
|
50.4%
|
Catastrophe
loss
|
8.1%
|
0.0%
|
15.4%
|
6.0%
|
Loss
ratio
|
54.5%
|
556.8%
|
48.4%
|
56.4%
|
|
|
|
|
|
Year ended December 31,
2017
|
|
|
|
|
Written
premiums
|
$121,575,178
|
$22,847
|
$(28,729,149)
|
$92,868,876
|
Change
in unearned premiums
|
(10,662,744)
|
9,456
|
(4,864,565)
|
(15,517,853)
|
Earned
premiums
|
$110,912,434
|
$32,303
|
$(33,593,714)
|
$77,351,023
|
|
|
|
|
|
Loss
and loss adjustment expenses exluding
|
|
|
|
|
the
effect of catastrophes
|
$48,222,147
|
$30,417
|
$(14,067,027)
|
$34,185,537
|
Catastrophe
loss
|
-
|
-
|
-
|
-
|
Loss
and loss adjustment expenses
|
$48,222,147
|
$30,417
|
$(14,067,027)
|
$34,185,537
|
|
|
|
|
|
Loss
ratio excluding the effect of catastrophes
|
43.5%
|
94.2%
|
41.9%
|
44.2%
|
Catastrophe
loss
|
0.0%
|
0.0%
|
0.0%
|
0.0%
|
Loss
ratio
|
43.5%
|
94.2%
|
41.9%
|
44.2%
|
|
Years
ended
|
|
|
December
31,
|
|
|
2018
|
2017
|
|
|
|
Net
premiums earned
|
$103,414,715
|
$77,351,023
|
Ceding
commission revenue
|
5,332,630
|
9,933,133
|
Other
income
|
1,266,654
|
1,210,897
|
|
|
|
Loss
and loss adjustment expenses (1)
|
58,295,205
|
34,185,537
|
|
|
|
Acquisition costs and other underwriting
expenses:
|
|
|
Commission
expense
|
25,342,137
|
21,182,254
|
Other
underwriting expenses
|
20,943,342
|
18,115,614
|
Total
acquisition costs and other
|
|
|
underwriting
expenses
|
46,285,479
|
39,297,868
|
|
|
|
Underwriting
income
|
$5,433,315
|
$15,011,648
|
|
|
|
Key
Measures:
|
|
|
Net
loss ratio excluding the effect of catastrophes
|
50.4%
|
44.2%
|
Effect
of catastrophe loss on net loss ratio (1)
|
6.0%
|
0.0%
|
Net
loss ratio
|
56.4%
|
44.2%
|
|
|
|
Net
underwriting expense ratio excluding the
|
|
|
effect
of catastrophes
|
37.9%
|
36.4%
|
Effect
of catastrophe loss on net underwriting
|
|
|
expense
ratio (2)
|
0.5%
|
0.0%
|
Net
underwriting expense ratio
|
38.4%
|
36.4%
|
|
|
|
Net
combined ratio excluding the effect
|
|
|
of
catastrophes
|
88.3%
|
80.6%
|
Effect
of catastrophe loss on net combined
|
|
|
ratio
(1) (2)
|
6.5%
|
0.0%
|
Net
combined ratio
|
94.8%
|
80.6%
|
|
|
|
Reconciliation
of net underwriting expense ratio:
|
|
|
Acquisition
costs and other
|
|
|
underwriting
expenses
|
$46,285,479
|
$39,297,868
|
Less:
Ceding commission revenue (2)
|
(5,332,630)
|
(9,933,133)
|
Less:
Other income
|
(1,266,654)
|
(1,210,897)
|
|
$39,686,195
|
$28,153,838
|
|
|
|
Net
earned premium
|
$103,414,715
|
$77,351,023
|
|
|
|
Net
Underwriting Expense Ratio
|
38.4%
|
36.4%
|
|
December
31, 2018
|
|||||
|
|
|
|
|
|
|
|
Cost
or
|
Gross
|
Gross
Unrealized Losses
|
Estimated
|
%
of
|
|
|
Amortized
|
Unrealized
|
Less
than 12
|
More
than 12
|
Fair
|
Estimated
|
Category
|
Cost
|
Gains
|
Months
|
Months
|
Value
|
Fair
Value
|
|
|
|
|
|
|
|
U.S.
Treasury securities and
|
|
|
|
|
|
|
obligations
of U.S. government
|
|
|
|
|
|
|
corporations
and agencies
|
$8,222,050
|
$26,331
|
$(28,000)
|
$-
|
$8,220,381
|
5.4%
|
|
|
|
|
|
|
|
Political
subdivisions of States,
|
|
|
|
|
|
|
Territories
and Possessions
|
6,339,540
|
50,903
|
(12,327)
|
(36,508)
|
6,341,608
|
4.2%
|
|
|
|
|
|
|
|
Corporate
and other bonds
|
|
|
|
|
|
|
Industrial
and miscellaneous
|
119,078,698
|
123,740
|
(2,775,540)
|
(676,605)
|
115,750,293
|
76.3%
|
|
|
|
|
|
|
|
Residential
mortgage and other
|
|
|
|
|
|
|
asset
backed securities (1)
|
21,790,973
|
236,502
|
(231,229)
|
(331,012)
|
21,465,234
|
14.1%
|
Total
fixed-maturity securities
|
155,431,261
|
437,476
|
(3,047,096)
|
(1,044,125)
|
151,777,516
|
100.0%
|
|
December
31, 2017
|
|||||
|
|
|
|
|
|
|
|
Cost
or
|
Gross
|
Gross
Unrealized Losses
|
Estimated
|
%
of
|
|
|
Amortized
|
Unrealized
|
Less
than 12
|
More
than 12
|
Fair
|
Estimated
|
Category
|
Cost
|
Gains
|
Months
|
Months
|
Value
|
Fair
Value
|
|
|
|
|
|
|
|
U.S.
Treasury securities and
|
|
|
|
|
|
|
obligations
of U.S. government
|
|
|
|
|
|
|
corporations
and agencies
|
$-
|
$-
|
$-
|
$-
|
$-
|
0.0%
|
|
|
|
|
|
|
|
Political
subdivisions of States,
|
|
|
|
|
|
|
Territories
and Possessions
|
11,096,122
|
250,135
|
(30,814)
|
-
|
11,315,443
|
9.4%
|
|
|
|
|
|
|
|
Corporate
and other bonds
|
|
|
|
|
|
|
Industrial
and miscellaneous
|
87,562,631
|
1,189,207
|
(269,857)
|
(340,516)
|
88,141,465
|
73.5%
|
|
|
|
|
|
|
|
Residential
mortgage and other
|
|
|
|
|
|
|
asset
backed securities (1)
|
20,463,353
|
305,499
|
(48,482)
|
(189,022)
|
20,531,348
|
17.1%
|
Total
fixed-maturity securities
|
119,122,106
|
1,744,841
|
(349,153)
|
(529,538)
|
119,988,256
|
100.0%
|
|
December
31, 2018
|
||||
|
|
|
|
Estimated
|
%
of
|
|
|
Gross
|
Gross
|
Fair
|
Estimated
|
Category
|
Cost
|
Gains
|
Losses
|
Value
|
Fair
Value
|
|
|
|
|
|
|
Equity Securities:
|
|
|
|
|
|
Preferred
stocks
|
$6,694,754
|
$-
|
$(541,798)
|
$6,152,956
|
37.1%
|
Common
stocks and exchange
|
|
|
|
|
|
traded
mutual funds
|
11,611,232
|
99,817
|
(1,291,389)
|
10,419,660
|
62.9%
|
Total
|
$18,305,986
|
$99,817
|
$(1,833,187)
|
$16,572,616
|
100.0%
|
|
December
31, 2017
|
||||
|
|
|
|
Estimated
|
%
of
|
|
|
Gross
|
Gross
|
Fair
|
Estimated
|
Category
|
Cost
|
Gains
|
Losses
|
Value
|
Fair
Value
|
|
|
|
|
|
|
Equity Securities:
|
|
|
|
|
|
Preferred
stocks
|
$7,081,099
|
$60,867
|
$(141,025)
|
$7,000,941
|
49.0%
|
Common
stocks and exchange
|
|
|
|
|
|
traded
mutual funds
|
6,680,742
|
841,250
|
(236,735)
|
7,285,257
|
51.0%
|
Total
|
$13,761,841
|
$902,117
|
$(377,760)
|
$14,286,198
|
100.0%
|
|
December
31, 2018
|
December
31, 2017
|
||||
|
|
Gross
|
Estimated
|
|
Gross
|
Estimated
|
Category
|
Cost
|
(Losses)
|
Fair
Value
|
Cost
|
Gains
|
Fair
Value
|
|
|
|
|
|
|
|
Other Investments:
|
|
|
|
|
|
|
Hedge
fund
|
$1,999,381
|
$(144,156)
|
$1,855,225
|
$-
|
$-
|
$-
|
Total
|
$1,999,381
|
$(144,156)
|
$1,855,225
|
$-
|
$-
|
$-
|
|
December
31, 2018
|
|||||
|
|
|
|
|
|
|
|
Cost
or
|
Gross
|
Gross
Unrealized Losses
|
Estimated
|
%
of
|
|
|
Amortized
|
Unrealized
|
Less
than 12
|
More
than 12
|
Fair
|
Estimated
|
Category
|
Cost
|
Gains
|
Months
|
Months
|
Value
|
Fair
Value
|
|
|
|
|
|
|
|
U.S.
Treasury securities
|
$729,507
|
$147,532
|
$(3,964)
|
$-
|
$873,075
|
19.7%
|
|
|
|
|
|
|
|
Political
subdivisions of States,
|
|
|
|
|
|
|
Territories
and Possessions
|
998,803
|
33,862
|
-
|
-
|
1,032,665
|
23.3%
|
|
|
|
|
|
|
|
Corporate
and other bonds
|
|
|
|
|
|
|
Industrial
and miscellaneous
|
2,494,545
|
38,461
|
(1,425)
|
(10,905)
|
2,520,676
|
57.0%
|
|
|
|
|
|
|
|
Total
|
$4,222,855
|
$219,855
|
$(5,389)
|
$(10,905)
|
$4,426,416
|
100.0%
|
|
December
31, 2017
|
|||||
|
|
|
|
|
|
|
|
Cost
or
|
Gross
|
Gross
Unrealized Losses
|
Estimated
|
%
of
|
|
|
Amortized
|
Unrealized
|
Less
than 12
|
More
than 12
|
Fair
|
Estimated
|
Category
|
Cost
|
Gains
|
Months
|
Months
|
Value
|
Fair
Value
|
|
|
|
|
|
|
|
U.S.
Treasury securities
|
$729,466
|
$147,573
|
$(1,729)
|
$-
|
$875,310
|
17.0%
|
|
|
|
|
|
|
|
Political
subdivisions of States,
|
|
|
|
|
|
|
Territories
and Possessions
|
998,984
|
50,366
|
-
|
-
|
1,049,350
|
20.4%
|
|
|
|
|
|
|
|
Corporate
and other bonds
|
|
|
|
|
|
|
Industrial
and miscellaneous
|
3,141,358
|
90,358
|
-
|
(6,300)
|
3,225,416
|
62.6%
|
|
|
|
|
|
|
|
Total
|
$4,869,808
|
$288,297
|
$(1,729)
|
$(6,300)
|
$5,150,076
|
100.0%
|
|
December
31, 2018
|
December
31, 2017
|
||
|
Amortized
|
Estimated
|
Amortized
|
Estimated
|
Remaining Time to
Maturity
|
Cost
|
Fair
Value
|
Cost
|
Fair
Value
|
|
|
|
|
|
Less
than one year
|
$-
|
$-
|
$-
|
$-
|
One
to five years
|
2,996,685
|
3,036,531
|
2,546,459
|
2,601,898
|
Five
to ten years
|
619,663
|
635,846
|
1,716,884
|
1,794,139
|
More
than 10 years
|
606,507
|
754,039
|
606,465
|
754,039
|
Total
|
$4,222,855
|
$4,426,416
|
$4,869,808
|
$5,150,076
|
|
December
31, 2018
|
December
31, 2017
|
||
|
Estimated
|
Percentage
of
|
Estimated
|
Percentage
of
|
|
Fair
Market
|
Fair
Market
|
Fair
Market
|
Fair
Market
|
|
Value
|
Value
|
Value
|
Value
|
|
|
|
|
|
Rating
|
|
|
|
|
U.S. Treasury securities
|
$8,220,381
|
5.4%
|
$-
|
0.0%
|
|
|
|
|
|
Corporate and municipal bonds
|
|
|
|
|
AAA
|
979,123
|
0.6%
|
1,358,143
|
1.1%
|
AA
|
8,350,910
|
5.5%
|
11,319,057
|
9.4%
|
A
|
27,665,961
|
18.2%
|
17,199,631
|
14.3%
|
BBB
|
85,095,907
|
56.1%
|
68,704,768
|
57.3%
|
BB
|
-
|
0.0%
|
875,310
|
0.7%
|
Total corporate and municipal bonds
|
122,091,901
|
80.4%
|
99,456,909
|
82.8%
|
|
|
|
|
|
Residential mortgage backed securities
|
|
|
|
|
AAA
|
999,640
|
0.7%
|
2,013,010
|
1.7%
|
AA
|
12,743,906
|
8.5%
|
11,021,144
|
9.2%
|
A
|
4,777,356
|
3.1%
|
3,902,768
|
3.3%
|
CCC
|
1,440,825
|
0.9%
|
1,420,296
|
1.2%
|
CC
|
109,648
|
0.1%
|
120,742
|
0.1%
|
C
|
24,050
|
0.0%
|
28,963
|
0.0%
|
D
|
390,542
|
0.3%
|
1,659,479
|
1.4%
|
Non rated
|
979,267
|
0.6%
|
364,945
|
0.3%
|
Total residential
mortgage backed securities
|
21,465,234
|
14.2%
|
20,531,347
|
17.2%
|
|
|
|
|
|
Total
|
$151,777,516
|
100.0%
|
$119,988,256
|
100.0%
|
Category
|
December
31, 2018
|
December
31, 2017
|
U.S.
Treasury securities and obligations
of U.S. government corporations
and agencies
|
2.20%
|
3.32%
|
|
|
|
Political
subdivisions of States, Territories
and Possessions
|
3.62%
|
3.49%
|
|
|
|
Corporate and other bonds Industrial
and miscellaneous
|
4.11%
|
3.98%
|
|
|
|
Residential
mortgage backed securities
|
1.94%
|
1.83%
|
|
|
|
Total
|
3.68%
|
3.58%
|
|
December
31, 2018
|
December
31, 2017
|
Weighted
average effective maturity
|
5.6
|
5.7
|
|
|
|
Weighted
average final maturity
|
6.9
|
7.8
|
|
|
|
Effective
duration
|
4.6
|
4.9
|
|
December
31, 2018
|
|||||||
|
Less
than 12 months
|
12
months or more
|
Total
|
|||||
|
Estimated
|
|
No.
of
|
Estimated
|
|
No.
of
|
Aggregate
|
|
|
Fair
|
Unrealized
|
Positions
|
Fair
|
Unrealized
|
Positions
|
Fair
|
Unrealized
|
Category
|
Value
|
Losses
|
Held
|
Value
|
Losses
|
Held
|
Value
|
Losses
|
|
|
|
|
|
|
|
|
|
Fixed-Maturity Securities:
|
|
|
|
|
|
|
|
|
U.S.
Treasury securities
|
|
|
|
|
|
|
|
|
and
obligations of U.S.
|
|
|
|
|
|
|
|
|
government
corporations
|
|
|
|
|
|
|
|
|
and
agencies
|
$4,948,530
|
$(28,000)
|
3
|
$-
|
$-
|
-
|
$4,948,530
|
$(28,000)
|
|
|
|
|
|
|
|
|
|
Political
subdivisions of
|
|
|
|
|
|
|
|
|
States,
Territories and
|
|
|
|
|
|
|
|
|
Possessions
|
555,375
|
(12,327)
|
1
|
1,436,242
|
(36,508)
|
3
|
1,991,617
|
(48,835)
|
|
|
|
|
|
|
|
|
|
Corporate
and other
|
|
|
|
|
|
|
|
|
bonds
industrial and
|
|
|
|
|
|
|
|
|
miscellaneous
|
81,004,459
|
(2,775,540)
|
97
|
13,424,888
|
(676,605)
|
24
|
94,429,347
|
(3,452,145)
|
|
|
|
|
|
|
|
|
|
Residential
mortgage and other
|
|
|
|
|
|
|
|
|
asset
backed securities
|
7,002,713
|
(231,229)
|
9
|
11,928,425
|
(331,012)
|
19
|
18,931,138
|
(562,241)
|
|
|
|
|
|
|
|
|
|
Total
fixed-maturity
|
|
|
|
|
|
|
|
|
securities
|
$93,511,077
|
$(3,047,096)
|
110
|
$26,789,555
|
$(1,044,125)
|
46
|
$120,300,632
|
$(4,091,221)
|
|
December
31, 2017
|
|||||||
|
Less
than 12 months
|
12
months or more
|
Total
|
|||||
|
Estimated
|
|
No.
of
|
Estimated
|
|
No.
of
|
Aggregate
|
|
|
Fair
|
Unrealized
|
Positions
|
Fair
|
Unrealized
|
Positions
|
Fair
|
Unrealized
|
Category
|
Value
|
Losses
|
Held
|
Value
|
Losses
|
Held
|
Value
|
Losses
|
|
|
|
|
|
|
|
|
|
Fixed-Maturity Securities:
|
|
|
|
|
|
|
|
|
Political
subdivisions of
|
|
|
|
|
|
|
|
|
States,
Territories and
|
|
|
|
|
|
|
|
|
Possessions
|
$1,549,839
|
$(30,814)
|
4
|
$-
|
$-
|
-
|
$1,549,839
|
$(30,814)
|
|
|
|
|
|
|
|
|
|
Corporate
and other
|
|
|
|
|
|
|
|
|
bonds
industrial and
|
|
|
|
|
|
|
|
|
miscellaneous
|
15,036,462
|
(269,857)
|
20
|
9,113,924
|
(340,516)
|
17
|
24,150,386
|
(610,373)
|
|
|
|
|
|
|
|
|
|
Residential
mortgage and other
|
|
|
|
|
|
|
|
|
asset
backed securities
|
6,956,371
|
(48,482)
|
6
|
7,867,572
|
(189,022)
|
15
|
14,823,943
|
(237,504)
|
|
|
|
|
|
|
|
|
|
Total
fixed-maturity
|
|
|
|
|
|
|
|
|
securities
|
$23,542,672
|
$(349,153)
|
30
|
$16,981,496
|
$(529,538)
|
32
|
$40,524,168
|
$(878,691)
|
|
|
|
|
|
|
|
|
|
Equity Securities:
|
|
|
|
|
|
|
|
|
Preferred
stocks
|
$1,605,217
|
$(20,313)
|
5
|
$1,776,675
|
$(120,712)
|
3
|
$3,381,892
|
$(141,025)
|
Common
stocks and
|
|
|
|
|
|
|
|
|
exchange
traded mutual funds
|
1,446,375
|
(222,205)
|
4
|
124,900
|
(14,530)
|
1
|
1,571,275
|
(236,735)
|
|
|
|
|
|
|
|
|
|
Total
equity securities
|
$3,051,592
|
$(242,518)
|
9
|
$1,901,575
|
$(135,242)
|
4
|
$4,953,167
|
$(377,760)
|
|
|
|
|
|
|
|
|
|
Total
|
$26,594,264
|
$(591,671)
|
39
|
$18,883,071
|
$(664,780)
|
36
|
$45,477,335
|
$(1,256,451)
|
Years
Ended December 31,
|
2018
|
2017
|
|
|
|
Cash
flows provided by (used in):
|
|
|
Operating
activities
|
$22,295,366
|
$28,046,140
|
Investing
activities
|
(43,401,314)
|
(47,626,330)
|
Financing
activities
|
(6,137,282)
|
55,917,303
|
Net (decrease) increase in cash and cash equivalents
|
(27,243,230)
|
36,337,113
|
Cash
and cash equivalents, beginning of period
|
48,381,633
|
12,044,520
|
Cash and cash equivalents, end of period
|
$21,138,403
|
$48,381,633
|
|
|
Amount
|
|
|
|
Recoverable
|
|
|
A.M.
|
as
of
|
|
($
in thousands)
|
Best
Rating
|
December
31, 2018
|
%
|
Cavello
Bay Reinsurance Limited
|
A-
|
$6,596
|
32.8%
|
Swiss
Reinsurance America Corporation
|
A+
|
5,750
|
28.6%
|
Hannover
Rueck SE
|
A+
|
3,909
|
19.4%
|
|
|
16,255
|
80.8%
|
Others
|
|
3,870
|
19.2%
|
Total
|
|
$20,125
|
100.0%
|
|
Treaty Year
|
||
|
July 1, 2018
|
July 1, 2017
|
July 1, 2016
|
|
to
|
to
|
to
|
Line of Business
|
June 30, 2019
|
June 30, 2018
|
June 30, 2017
|
|
|
|
|
Personal
Lines:
|
|
|
|
Homeowners,
dwelling fire and canine legal liability
|
|
|
|
Quota
share treaty:
|
|
|
|
Percent
ceded
|
10%
|
20%
|
40%
|
Risk
retained
|
$900,000
|
$800,000
|
$500,000
|
Losses
per occurrence subject to quota share reinsurance
coverage
|
$1,000,000
|
$1,000,000
|
$833,333
|
Excess
of loss coverage and facultative facility above quota share
coverage (1)
|
$9,000,000
|
$9,000,000
|
$3,666,667
|
|
in
excess of
|
in
excess of
|
in
excess of
|
|
$1,000,000
|
$1,000,000
|
$833,333
|
Total
reinsurance coverage per occurrence
|
$9,100,000
|
$9,200,000
|
$4,000,000
|
Losses
per occurrence subject to reinsurance coverage
|
$10,000,000
|
$10,000,000
|
$4,500,000
|
Expiration date
|
June 30,
2019
|
June 30,
2018
|
June 30,
2017
|
Personal
Umbrella
|
|
|
|
Quota
share treaty:
|
|
|
|
Percent
ceded - first $1,000,000 of coverage
|
90%
|
90%
|
90%
|
Percent
ceded - excess of $1,000,000 dollars of coverage
|
100%
|
100%
|
100%
|
Risk
retained
|
$100,000
|
$100,000
|
$100,000
|
Total
reinsurance coverage per occurrence
|
$4,900,000
|
$4,900,000
|
$4,900,000
|
Losses
per occurrence subject to quota share reinsurance
coverage
|
$5,000,000
|
$5,000,000
|
$5,000,000
|
Expiration
date
|
June
30, 2019
|
June
30, 2018
|
June
30, 2017
|
|
|
|
|
Commercial
Lines:
|
|
|
|
General
liability commercial policies
|
|
|
|
Quota
share treaty
|
None
|
None
|
None
|
Risk
retained
|
$750,000
|
$750,000
|
$500,000
|
Excess
of loss coverage above risk retained
|
$3,750,000
|
$3,750,000
|
$4,000,000
|
|
in
excess of
|
in
excess of
|
in
excess of
|
|
$750,000
|
$750,000
|
$500,000
|
Total
reinsurance coverage per occurrence
|
$3,750,000
|
$3,750,000
|
$4,000,000
|
Losses
per occurrence subject to reinsurance coverage
|
$4,500,000
|
$4,500,000
|
$4,500,000
|
|
|
|
|
Commercial
Umbrella
|
|
|
|
Quota
share treaty:
|
|
|
|
Percent
ceded - first $1,000,000 of coverage
|
90%
|
90%
|
90%
|
Percent
ceded - excess of $1,000,000 of coverage
|
100%
|
100%
|
100%
|
Risk
retained
|
$100,000
|
$100,000
|
$100,000
|
Total
reinsurance coverage per occurrence
|
$4,900,000
|
$4,900,000
|
$4,900,000
|
Losses
per occurrence subject to quota share reinsurance
coverage
|
$5,000,000
|
$5,000,000
|
$5,000,000
|
Expiration
date
|
June
30, 2019
|
June
30, 2018
|
June
30, 2017
|
|
|
|
|
Catastrophe
Reinsurance:
|
|
|
|
Initial
loss subject to personal lines quota share treaty
|
$5,000,000
|
$5,000,000
|
$5,000,000
|
Risk
retained per catastrophe occurrence (2)
|
$4,500,000
|
$4,000,000
|
$3,000,000
|
Catastrophe
loss coverage in excess of quota share coverage (3)
(4)
|
$445,000,000
|
$315,000,000
|
$247,000,000
|
Reinstatement
premium protection (5)
|
Yes
|
Yes
|
Yes
|
|
July
1, 2018 - June 30, 2019
|
|
Treaty
|
Extent
of Loss
|
Risk
Retained
|
Personal Lines (1)
|
Initial $1,000,000
$1,000,000 - $10,000,000
Over $10,000,000
|
$900,000
None(2)
100%
|
Personal Umbrella
|
Initial $1,000,000
$1,000,000 - $5,000,000
Over $5,000,000
|
$100,000
None
100%
|
Commercial Lines
|
Initial $750,000
$750,000 - $4,500,000
Over $4,500,000
|
$750,000
None
(3)
100%
|
Commercial Umbrella
|
Initial $1,000,000
$1,000,000 - $5,000,000
Over $5,000,000
|
$100,000
None
100%
|
Catastrophe (4)
|
Initial $5,000,000
$5,000,000 - $450,000,000
Over $450,000,00
|
$4,500,000
None
100%
|
|
July
1, 2017 - June 30, 2018
|
|
July
1, 2016 - June 30, 2017
|
||
Treaty
|
Range
of Loss
|
Risk
Retained
|
|
Range
of Loss
|
Risk
Retained
|
Personal Lines (1)
|
Initial $1,000,000
$1,000,000 - $10,000,000
Over $10,000,000
|
$800,000
None(2)
100%
|
|
Initial $833,333
$833,333 - $4,500,000
Over
$4,500,000
|
$500,000
None(3)
100%
|
Personal Umbrella
|
Initial $1,000,000
$1,000,000 - $5,000,000
Over $5,000,000
|
$100,000
None
100%
|
|
Initial $1,000,000
$1,000,000 - $5,000,000
Over $5,000,000
|
$100,000
None
100%
|
Commercial Lines
|
Initial $750,000
$750,000 - $4,500,000
Over $4,500,000
|
$750,000
None(3)
100%
|
|
Initial $500,000
$500,000 - $4,500,000
Over $4,500,000
|
$500,000
None(3)
100%
|
Commercial Umbrella
|
Initial $1,000,000
$1,000,000 - $5,000,000
Over $5,000,000
|
$100,000
None
100%
|
|
Initial $1,000,000
$1,000,000 - $5,000,000
Over $5,000,000
|
$100,000
None
100%
|
Catastrophe (4)
|
Initial $5,000,000
$5,000,000 - $320,000,000
Over $320,000,000
|
$4,000,000
None
100%
|
|
Initial
$5,000,000
$5,000,000
- $252,000,000
Over
$252,000,000
|
$3,000,000
None
100%
|
Name
|
Age
|
Positions and Offices Held
|
|
|
|
Barry B. Goldstein
|
65
|
Executive Chairman of the Board and Director
|
Dale A. Thatcher
|
57
|
Chief Executive Officer and Director
|
Victor J. Brodsky
|
61
|
Chief Financial Officer and Treasurer
|
Benjamin Walden
|
51
|
Executive Vice President and Chief Actuary, Kingstone Insurance
Company
|
Floyd R. Tupper
|
64
|
Secretary and Director
|
Jay M. Haft
|
83
|
Director
|
William L. Yankus
|
59
|
Director
|
Carla A. D’Andre
|
63
|
Director
|
Timothy P. McFadden
|
56
|
Director
|
Name and Principal Position
|
Year
|
Salary
|
Bonus
|
Stock Awards(1)
|
Option Awards(1)
|
Non-Equity
Incentive Plan
Compensation
|
All Other
Compensation
|
Total
|
Barry B.
Goldstein
|
2018
|
$630,000
|
$-
|
$-
|
$-
|
$21,887(3)
|
$43,784(4)
|
$695,671
|
Chief
Executive Officer
|
2017
|
$630,000
|
$-
|
$-
|
$-
|
$1,670,111(2)
|
$24,152
|
$2,324,263
|
|
|
|
|
|
|
|
|
|
Dale A.
Thatcher
|
2018
|
$398,630
|
$-
|
$750,000
|
$-
|
$59,795(3)
|
$79,157(4)
|
$1,287,582
|
Chief
Operating Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Victor J.
Brodsky
|
2018
|
$350,000
|
$-
|
$140,009
|
$-
|
$17,573(3)
|
$27,759(4)
|
$535,341
|
Chief
Financial Officer
|
2017
|
$320,000
|
$30,000
|
$149,500
|
$-
|
$49,832(3)
|
$24,500
|
$573,832
|
|
Option
Awards
|
Stock
Awards
|
|||||
Name
|
Number
of Securities Underlying
Unexercised Options
Exercisable
|
Number of Securities Underlying Unexercised Options Unexercisable
Option Exercise Price
|
Option
Expiration Date
|
Number of Shares of Stock That Have Not
Vested
|
Market Value of Shares of Stock That Have
Not Vested
|
Equity Incentive Plan Awards: Number of Unearned
Shares That Have Not Vested
|
Equity Incentive Plan Awards: Market or Payout
Value of Unearned Shares That Have Not Vested
|
Dale
A. Thatcher
|
-
|
-
|
|
530(1)
|
$9,376
|
-
|
$-
|
|
|
|
|
2,000(2)
|
$35,380
|
-
|
$-
|
|
|
|
|
35,715(3)
|
$631,798
|
-
|
$-
|
Victor
J. Brodsky
|
-
|
-
|
|
3,889(4)
|
$68,794
|
-
|
$-
|
|
|
|
|
6,983(5)
|
$123,529
|
|
|
|
|
|
|
|
|
|
|
Name
|
Fees
Earned or
Paid in
Cash
|
Stock
Awards(2)
|
Option
Awards
|
Total
|
|
|
|
|
|
Jay
M. Haft
|
$61,000
|
$41,300
|
$-
|
$102,300
|
Floyd
R. Tupper
|
$72,500
|
$41,300
|
$-
|
$113,800
|
William
L. Yankus
|
$67,500
|
$41,300
|
$-
|
$108,800
|
Carla
A. D’Andre
|
$61,000
|
$41,300
|
$-
|
$102,300
|
Timothy
P. McFadden(1)
|
$18,437
|
$12,362
|
$-
|
$30,799
|
Name
|
Unvested Restricted Stock Awards (#)
|
|
|
Jay
M. Haft
|
1,999
|
Floyd
R. Tupper
|
3,999
|
William
L. Yankus
|
3,833
|
Carla
A. D’Andre
|
2,833
|
Timothy
P. McFadden
|
795
|
Name
and Address
of
Beneficial Owner
|
Number
of Shares
Beneficially
Owned
|
Approximate
Percent
of Class
|
|
|
|
Barry
B. Goldstein
15
Joys Lane
Kingston,
New York
|
658,194(1)
|
6.1%
|
|
|
|
Jay
M. Haft
69
Beaver Dam Road
Salisbury,
Connecticut
|
90,424
|
*
|
|
|
|
Floyd
R. Tupper
220 East 57th
Street
New
York, New York
|
58,897(2)
|
*
|
|
|
|
Dale
A. Thatcher
212
Third Street
Milford,
Pennsylvania
|
37,837(3)
|
*
|
|
|
|
Victor
J. Brodsky
15
Joys Lane
Kingston,
New York
|
29,796(4)
|
*
|
|
|
|
Benjamin
Walden
15
Joys Lane
Kingston,
New York
|
15,458(5)
|
*
|
|
|
|
Carla
A. D’Andre
3561
Avocado Avenue
Miami,
Florida
|
11,401
|
*
|
|
|
|
William
L. Yankus
10
Pheasant Hill Road
Farmington,
Connecticut
|
7,501(6)
|
*
|
|
|
|
Timothy
P. McFadden
310 8th
Avenue N.
Saint
Petersburg, Florida
|
2,000
|
*
|
|
|
|
RenaissanceRe
Ventures Ltd.
Renaissance
Other Investments
Holding
II Ltd.
RenaissanceRe
Holdings Ltd.
Renaissance
House
12
Crow Lane
Pembrooke
HM19
Bermuda
|
595,238(7)
|
5.5%
|
|
|
|
All
executive officers
and
directors as a group
(9
persons)
|
911,508(1)(2)(3)(4)(5)(6)
|
8.5%
|
|
|
(1)
|
The
information regarding Mr. Goldstein is based solely on publicly
available information filed with the SEC. Includes 73,168
shares of common stock owned by Mr. Goldstein's wife. Mr. Goldstein
has sole voting and dispositive power over 585,026 shares of common
stock and shared voting and dispositive power over 73,168 shares of
common stock.
|
|
|
(2)
|
Includes
31,460 shares owned by Mr. Tupper’s wife. Mr. Tupper has sole
voting and dispositive power over 27,437 shares of common stock and
shared voting and dispositive power over 31,460 shares of common
stock
|
|
|
(3)
|
Includes
11,905 shares issuable upon the vesting of restricted stock within
60 days.
|
(4)
|
Includes
556 shares issuable upon the vesting of restricted stock within 60
days.
|
|
|
(5)
|
Includes
10,000 shares issuable upon the exercise of options that are
exercisable currently and 334 shares issuable upon the vesting of
restricted stock within 60 days.
|
|
|
(6)
|
Includes
500 shares issuable upon the vesting of restricted stock within 60
days.
|
|
|
(7)
|
The
information regarding RenaissanceRe Ventures Ltd.
(“RenaissanceRe Ventures”), Renaissance Other
Investments Holding II Ltd. (“ROIHL II”) and
RenaissanceRe Holdings Ltd. (“RenaissanceRe Holdings”)
is based solely on a Schedule 13G/A filed by such reporting persons
with the SEC on February 14, 2019 (the “Renaissance
13G/A”). According to the Renaissance 13G/A, RenaissanceRe
Ventures, ROIHL II and RenaissanceRe Holdings each have shared
voting and dispositive power over the 595,238 shares of common
stock.
|
|
Number
of securities to be issued upon exercise of outstanding options,
warrants and rights
|
Weighted
average exercise price of outstanding options, warrants and
rights
|
Number
of securities remaining available for future issuance under equity
compensation plans (excluding securities reflected in column
(a))
|
|
(a)
|
(b)
|
(c)
|
Equity
compensation plans approved by security holders
|
37,500
|
$8.60
|
466,124
|
|
|
|
|
Equity compensation plans not approved by security
holders
|
|
|
|
|
|
|
|
Total
|
37,500
|
$8.36
|
466,124
|
Fee
Category
|
Fiscal 2018
Fees
|
Fiscal 2017
Fees
|
Audit
Fees(1)
|
$309,684
|
$392,214
|
Tax
Fees(2)
|
$-
|
$-
|
Audit-Related
Fees(3)
|
$-
|
$-
|
All Other
Fees(4)
|
$-
|
$-
|
|
$309,684
|
$392,214
|
Exhibit
Number
|
Description of Exhibit
|
|
|
|
|
Restated Certificate of Incorporation, as amended (incorporated by
reference to Exhibit 3(a) to the Company’s Quarterly Report
on Form 10-Q for the period ended March 31, 2014 filed on May 15,
2014).
|
||
|
|
|
By-laws, as amended (incorporated by reference to Exhibit 3.1 to
the Company’s current Report on Form 8-K filed on November 9,
2009).
|
||
|
|
|
Indenture, dated as of December 19, 2017, between Kingstone
Companies, Inc. and Wilmington Trust, National Association
(incorporated by reference to Exhibit 4.1 to the Company’s
Current Report on Form 8-K filed December 20, 2017).
|
||
|
|
|
First Supplemental Indenture, dated as of December 19, 2017,
between Kingstone Companies, Inc. and Wilmington Trust, National
Association (incorporated by reference to Exhibit 4.2 to the
Company’s Current Report on Form 8-K filed December 20,
2017).
|
||
|
|
|
Form of Global Note representing $30,000,000 aggregate principal
amount of 5.50% Senior Unsecured Notes due 2022 (incorporated by
reference to Exhibit 4.3 to the Company’s Current Report on
Form 8-K filed December 20, 2017).
|
||
|
|
|
2005 Equity Participation Plan (incorporated by reference to
Exhibit 10(a) to the Company’s Annual Report on Form 10-K
filed March 25, 2015).
|
||
|
|
|
2014 Equity Participation Plan (incorporated by reference to
Exhibit 10.1 to the Company’s Current Report on Form 8-K
filed August 14, 2014).
|
||
|
|
|
Amended and Restated Employment Agreement, dated as of October 16,
2018, by and between Kingstone Companies, Inc. and Barry B.
Goldstein (incorporated by reference to Exhibit 10.1 to the
Company’s Current Report on Form 8-K filed on October 22,
2018).
|
||
|
|
|
Stock Option Agreement, dated as of August 12, 2014, between
Kingstone Companies, Inc. and Barry B. Goldstein (2005 Equity
Participation Plan) (incorporated by reference to Exhibit 10.3 to
the Company’s Current Report on Form 8-K filed August 14,
2014).
|
||
|
|
|
Stock Option Agreement, dated as of August 12, 2014, between
Kingstone Companies, Inc. and Barry B. Goldstein (2014 Equity
Participation Plan) (incorporated by reference to Exhibit 10.4 to
the Company’s Current Report on Form 8-K filed August 14,
2014).
|
||
|
|
|
Purchase Agreement, dated April 18, 2016, by and between Kingstone
Companies, Inc. and RenaissanceRe Ventures Ltd. (incorporated by
reference to Exhibit 10.1 to the Company’s Current Report on
Form 8-K filed April 19, 2016).
|
||
|
|
|
Underwriting Agreement, dated January 25, 2017, among Kingstone
Companies, Inc., the selling stockholders named therein and Sandler
O’Neill & Partners, L.P., as representative of the
underwriters named therein (incorporated by reference to Exhibit
1.1 to the Company’s Current Report on Form 8-K filed January
27, 2017).
|
||
|
|
|
Underwriting Agreement, dated December 14, 2017, between Kingstone
Companies, Inc. and Sandler O’Neill & Partners, L.P.
(incorporated by reference to Exhibit 1.1 to the Company’s
Current Report on Form 8-K filed December 18, 2017).
|
||
|
|
|
Employment Agreement, dated as of October 16, 2018, by and between
Kingstone Companies, Inc. and Dale A. Thatcher (incorporated by
reference to Exhibit 10.2 to the Company’s Current Report on
Form 8-K filed on October 22, 2018).
|
||
|
|
|
Stock Grant Agreement, dated as of March 14, 2018, between
Kingstone Companies, Inc. and Dale A. Thatcher.
|
||
|
|
|
Employment Agreement, dated March 14, 2018, between Kingstone
Insurance Company and Dale A. Thatcher.
|
||
|
|
|
Deferred Compensation Plan, dated as of June 18, 2018 (incorporated
by reference to Exhibit 10.1 to the Company’s Current Report
on Form 8-K filed on June 20, 2018).
|
||
|
|
|
Subsidiaries (incorporated by reference to Exhibit 21 to the
Company’s Annual Report on Form 10-K filed March 16,
2017).
|
||
|
|
|
Consent of Marcum LLP.
|
||
|
|
|
Rule 13a-14(a)/15d-14(a) Certification of Principal Executive
Officer as Adopted Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
|
||
|
|
|
Rule 13a-14(a)/15d-14(a) Certification of Principal Financial
Officer as Adopted Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
|
||
|
|
|
Certification of Chief Executive Officer and Chief Financial
Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
|
||
|
|
|
101.INS
|
XBRL Instance Document.
|
|
|
|
|
101.SCH
|
101.SCH XBRL Taxonomy Extension Schema.
|
|
|
|
|
101.CAL
|
101.CAL XBRL Taxonomy Extension Calculation Linkbase.
|
|
|
|
|
101.DEF
|
101.DEF XBRL Taxonomy Extension Definition Linkbase.
|
|
|
|
|
101.LAB
|
101.LAB XBRL Taxonomy Extension Label Linkbase.
|
|
|
|
|
101.PRE
|
101.PRE XBRL Taxonomy Extension Presentation Linkbase.
|
|
KINGSTONE
COMPANIES, INC.
|
|
|
|
|
|
|
March 18,
2019
|
By:
|
/s/ Dale A.
Thatcher
|
|
|
|
Dale A.
Thatcher
|
|
|
|
Chief Executive
Officer
|
|
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
/s/ Dale A.
Thatcher
|
|
Chief Executive
Officer, and Director (Principal Executive
Officer)
|
|
March 18,
2019
|
Dale A.
Thatcher
|
|
|
|
|
|
|
|
|
|
/s/ Victor J.
Brodsky
|
|
Chief Financial
Officer and Treasurer (Principal
Financial and Accounting Officer)
|
|
March 18,
2019
|
Victor J.
Brodsky
|
|
|
|
|
|
|
|
|
|
/s/ Barry B.
Goldstein
|
|
Executive Chairman
of the Board
|
|
March 18,
2019
|
Barry B.
Goldstein
|
|
|
|
|
|
|
|
|
|
/s/ Jay M.
Haft
|
|
Director |
|
March 18, 2019 |
Jay M. Haft
|
|
|
|
|
|
|
|
|
|
/s/ Floyd R.
Tupper
|
|
Director |
|
March 18, 2019 |
Floyd R.
Tupper
|
|
|
|
|
|
|
|
|
|
/s/ William L.
Yankus
|
|
Director |
|
March 18, 2019 |
William L.
Yankus
|
|
|
|
|
|
|
|
|
|
/s/ Carla
D’Andre
|
|
Director |
|
March 18, 2019 |
Carla
D’Andre
|
|
|
|
|
|
|
|
|
|
/s/ Timothy P.
McFadden
|
|
Director |
|
March 18, 2019 |
Timothy P.
McFadden
|
|
|
|
|
|
Page
|
Report of Independent Registered Public Accounting
Firm
|
F-2
|
Consolidated Balance Sheets as of December 31, 2018 and
2017
|
F-3
|
Consolidated Statements of Income and Comprehensive Income (Loss)
for the years ended
|
F-4
|
December
31, 2018 and 2017
|
|
Consolidated Statements of Stockholders’ Equity for the years
ended December 31, 2018
|
F-5
|
and
2017
|
|
Consolidated Statements of Cash Flows for the years ended
December 31, 2018 and 2017
|
F-6
|
Notes to Consolidated Financial Statements
|
F-7
|
KINGSTONE COMPANIES, INC. AND SUBSIDIARIES
|
||
Consolidated
Balance Sheets
|
||
|
December
31,
|
December
31,
|
|
2018
|
2017
|
|
|
|
Assets
|
|
|
Fixed-maturity
securities, held-to-maturity, at amortized cost (fair value
of
|
|
|
$4,426,416
at December 31, 2018 and $5,150,076 at December 31,
2017)
|
$4,222,855
|
$4,869,808
|
Fixed-maturity
securities, available-for-sale, at fair value (amortized cost
of
|
|
|
$155,431,261
at December 31, 2018 and $119,122,106 at December 31,
2017)
|
151,777,517
|
119,988,256
|
Equity
securities, at fair value (cost of $18,305,986 at December 31, 2018
and
|
|
|
$13,761,841
at December 31, 2017)
|
16,572,616
|
14,286,198
|
Other
investments
|
1,855,225
|
-
|
Total
investments
|
174,428,213
|
139,144,262
|
Cash
and cash equivalents
|
21,138,403
|
48,381,633
|
Investment
subscription receivable
|
-
|
2,000,000
|
Premiums
receivable, net
|
13,961,599
|
13,217,698
|
Reinsurance
receivables, net
|
26,367,115
|
28,519,130
|
Deferred
policy acquisition costs
|
17,907,737
|
14,847,236
|
Intangible
assets, net
|
670,000
|
1,010,000
|
Property
and equipment, net
|
6,056,929
|
4,772,577
|
Deferred
income tax
|
354,233
|
-
|
Other
assets
|
5,867,850
|
2,655,527
|
Total assets
|
$266,752,079
|
$254,548,063
|
|
|
|
Liabilities
|
|
|
Loss
and loss adjustment expense reserves
|
$56,197,106
|
$48,799,622
|
Unearned
premiums
|
79,032,131
|
65,647,663
|
Advance
premiums
|
2,107,629
|
1,477,693
|
Reinsurance
balances payable
|
1,933,376
|
2,563,966
|
Deferred
ceding commission revenue
|
2,686,677
|
4,266,412
|
Accounts
payable, accrued expenses and other liabilities
|
6,819,231
|
7,487,654
|
Income
taxes payable
|
15,035
|
-
|
Deferred
income tax
|
-
|
600,342
|
Long-term
debt, net
|
29,295,251
|
29,126,965
|
Total liabilities
|
178,086,436
|
159,970,317
|
|
|
|
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
11,775,148 shares
|
|
|
at
December 31, 2018 and 11,618,646 at December 31, 2017;
outstanding
|
|
|
10,747,709
shares at December 31, 2018 and 10,631,837 shares at December 31,
2017
|
117,751
|
116,186
|
Capital
in excess of par
|
67,763,940
|
68,380,390
|
Accumulated
other comprehensive (loss) income
|
(2,884,313)
|
1,100,647
|
Retained
earnings
|
26,380,816
|
27,152,822
|
|
91,378,194
|
96,750,045
|
Treasury
stock, at cost, 1,027,439 shares at December 31, 2018
|
|
|
and
986,809 shares at December 31, 2017
|
(2,712,552)
|
(2,172,299)
|
Total stockholders' equity
|
88,665,642
|
94,577,746
|
|
|
|
Total liabilities and stockholders' equity
|
$266,752,078
|
$254,548,063
|
|
|
|
Consolidated
Statements of Income and Comprehensive Income (Loss)
|
||
Years ended December 31,
|
2018
|
2017
|
|
|
|
Revenues
|
|
|
Net
premiums earned
|
$103,414,715
|
$77,351,023
|
Ceding
commission revenue
|
5,332,630
|
9,933,133
|
Net
investment income
|
6,186,248
|
4,132,586
|
Net
(losses) gains on investments
|
(2,495,857)
|
84,313
|
Other
income
|
1,334,162
|
1,268,255
|
Total
revenues
|
113,771,898
|
92,769,310
|
|
|
|
Expenses
|
|
|
Loss
and loss adjustment expenses
|
58,295,205
|
34,185,537
|
Commission
expense
|
25,342,137
|
21,182,254
|
Other
underwriting expenses
|
20,943,342
|
18,115,614
|
Other
operating expenses
|
2,575,404
|
3,512,927
|
Depreciation
and amortization
|
1,787,150
|
1,402,928
|
Interest
expense
|
1,821,597
|
60,335
|
Total
expenses
|
110,764,835
|
78,459,595
|
|
|
|
Income
from operations before taxes
|
3,007,063
|
14,309,715
|
Income
tax (benefit) expense
|
(86,183)
|
4,323,230
|
Net income
|
3,093,246
|
9,986,485
|
|
|
|
Other comprehensive (loss) income, net of tax
|
|
|
Gross
change in unrealized (losses) gains
|
|
|
on
available-for-sale-securities
|
(4,984,149)
|
1,364,319
|
|
|
|
Reclassification
adjustment for losses (gains)
|
|
|
included
in net income
|
464,254
|
(84,313)
|
Net
change in unrealized (losses) gains
|
(4,519,895)
|
1,280,006
|
Income
tax benefit (expense) related to items
|
|
|
of
other comprehensive (loss) income
|
949,177
|
(435,202)
|
Other comprehensive (loss) income, net of tax
|
(3,570,718)
|
844,804
|
|
|
|
Comprehensive (loss) income
|
$(477,472)
|
$10,831,289
|
|
|
|
Earnings
per common share:
|
|
|
Basic
|
$0.29
|
$0.96
|
Diluted
|
$0.29
|
$0.94
|
|
|
|
Weighted
average common shares outstanding
|
|
|
Basic
|
10,686,813
|
10,388,440
|
Diluted
|
10,716,886
|
10,581,577
|
|
|
|
Dividends
declared and paid per common share
|
$0.4000
|
$0.3025
|
KINGSTONE
COMPANIES, INC. AND SUBSIDIARIES
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
Consolidated
Statements of Stockholders' Equity
|
||||||||||
Years
ended December 31, 2018 and 2017
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
Capital
|
Other
|
|
|
|
|
|
Preferred
Stock
|
Common
Stock
|
in
Excess
|
Comprehensive
|
Retained
|
Treasury
Stock
|
|
|||
|
Shares
|
Amount
|
Shares
|
Amount
|
of
Par
|
Income
(Loss)
|
Earnings
|
Shares
|
Amount
|
Total
|
Balance, January 1,
2017
|
-
|
$-
|
8,896,335
|
$88,963
|
$37,950,401
|
$72,931
|
$20,563,720
|
974,469
|
$(1,995,462)
|
$56,680,553
|
Proceeds from public offering, net
of offering costs of $2,173,000
|
-
|
-
|
2,692,500
|
26,925
|
30,109,774
|
-
|
-
|
-
|
-
|
30,136,699
|
Stock-based
compensation
|
-
|
-
|
-
|
-
|
270,231
|
-
|
-
|
-
|
-
|
270,231
|
Vesting of restricted stock
awards
|
-
|
-
|
12,311
|
123
|
(123)
|
-
|
-
|
-
|
-
|
-
|
Shares deducted from restricted
stock awards for payment of withholding
taxes
|
-
|
-
|
(1,730)
|
(18)
|
(27,627)
|
-
|
-
|
-
|
-
|
(27,645)
|
Exercise of stock
options
|
-
|
-
|
19,230
|
193
|
77,734
|
-
|
-
|
-
|
-
|
77,927
|
Acquisition of treasury
stock
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
12,340
|
(176,837)
|
(176,837)
|
Dividends
|
-
|
-
|
-
|
-
|
-
|
-
|
(3,214,471)
|
-
|
-
|
(3,214,471)
|
Net income
|
-
|
-
|
-
|
-
|
-
|
-
|
9,986,485
|
-
|
-
|
9,986,485
|
Other comprehensive
income
|
-
|
-
|
-
|
-
|
-
|
844,804
|
-
|
-
|
-
|
844,804
|
Reclassify stranded tax effects
from accumulated other comprehensive income to retained
earnings
|
-
|
-
|
-
|
-
|
-
|
182,912
|
(182,912)
|
-
|
-
|
-
|
Balance, December 31, 2017, as
reported
|
-
|
-
|
11,618,646
|
116,186
|
68,380,390
|
1,100,647
|
27,152,822
|
986,809
|
(2,172,299)
|
94,577,746
|
Cumulative effect of adoption of
updated accounting guidance for equity financial
instruments at January 1, 2018
|
-
|
-
|
-
|
-
|
-
|
(414,242)
|
414,242
|
-
|
-
|
-
|
Balance, January 1, 2018, as
adjusted
|
-
|
-
|
11,618,646
|
116,186
|
68,380,390
|
686,405
|
27,567,064
|
986,809
|
(2,172,299)
|
94,577,746
|
Stock-based
compensation
|
-
|
-
|
-
|
-
|
702,650
|
-
|
-
|
-
|
-
|
702,650
|
Shares deducted from exercise of
stock options for payment of withholding
taxes
|
-
|
-
|
(72,063)
|
(719)
|
(1,356,452)
|
-
|
-
|
-
|
-
|
(1,357,171)
|
Vesting of restricted stock
awards
|
-
|
-
|
19,482
|
190
|
(190)
|
-
|
-
|
-
|
-
|
-
|
Shares deducted from restricted
stock awards for payment of withholding
taxes
|
-
|
-
|
(2,877)
|
(29)
|
(50,975)
|
-
|
-
|
-
|
-
|
(51,004)
|
Exercise of stock
options
|
-
|
-
|
211,960
|
2,123
|
88,517
|
-
|
-
|
-
|
-
|
90,640
|
Acquisition of treasury
stock
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
40,630
|
(540,253)
|
(540,253)
|
Dividends
|
-
|
-
|
-
|
-
|
-
|
-
|
(4,279,494)
|
-
|
-
|
(4,279,494)
|
Net income
|
-
|
-
|
-
|
-
|
-
|
-
|
3,093,246
|
-
|
-
|
3,093,246
|
Other comprehensive
loss
|
-
|
-
|
-
|
-
|
-
|
(3,570,718)
|
-
|
-
|
-
|
(3,570,718)
|
Balance, December 31,
2018
|
-
|
$-
|
11,775,148
|
$117,751
|
$67,763,940
|
$(2,884,313)
|
$26,380,816
|
1,027,439
|
$(2,712,552)
|
$88,665,642
|
KINGSTONE
COMPANIES, INC. AND SUBSIDIARIES
|
||
|
|
|
Consolidated
Statements of Cash Flows
|
|
|
Years ended December 31,
|
2018
|
2017
|
|
|
|
Cash flows from operating activities:
|
|
|
Net
income
|
$3,093,246
|
$9,986,485
|
Adjustments
to reconcile net income to net cash flows provided by operating
activities:
|
|
|
Net
losses (gains) on sale of investments
|
93,974
|
(84,313)
|
Unrealized
losses of equity investments
|
2,257,727
|
-
|
Net
unrealized losses of other investments
|
144,156
|
-
|
Depreciation
and amortization
|
1,787,150
|
1,402,928
|
Amortization
of bond premium, net
|
373,014
|
548,846
|
Amortization
of discount and issuance costs on long-term debt
|
168,286
|
5,335
|
Stock-based
compensation
|
702,650
|
270,231
|
Deferred
income tax benefit
|
(5,398)
|
(1,809)
|
(Increase)
decrease in operating assets:
|
|
|
Premiums
receivable, net
|
(743,901)
|
(1,568,300)
|
Reinsurance
receivables, net
|
2,152,015
|
3,678,635
|
Deferred
policy acquisition costs
|
(3,060,501)
|
(2,607,455)
|
Other
assets
|
(3,215,227)
|
(1,228,493)
|
Increase
(decrease) in operating liabilities:
|
|
|
Loss
and loss adjustment expense reserves
|
7,397,484
|
7,062,903
|
Unearned
premiums
|
13,384,468
|
10,653,288
|
Advance
premiums
|
629,936
|
56,133
|
Reinsurance
balances payable
|
(630,590)
|
417,949
|
Deferred
ceding commission revenue
|
(1,579,735)
|
(2,585,429)
|
Accounts
payable, accrued expenses and other liabilities
|
(653,388)
|
2,039,206
|
Net cash flows provided by operating activities
|
22,295,366
|
28,046,140
|
|
|
|
Cash flows from investing activities:
|
|
|
Purchase
- fixed-maturity securities, held-to-maturity
|
-
|
(121,271)
|
Purchase
- fixed-maturity securities, available-for-sale
|
(58,542,741)
|
(50,396,228)
|
Purchase
- equity securities
|
(13,380,542)
|
(7,526,326)
|
Sale
and redemption - fixed-maturity securities,
held-to-maturity
|
624,963
|
247,500
|
Sale
or maturity - fixed-maturity securities,
available-for-sale
|
21,381,668
|
11,132,000
|
Sale
- equity securities
|
9,246,840
|
3,862,127
|
Investment
subscription
|
-
|
(2,000,000)
|
Acquisition
of fixed assets
|
(2,731,502)
|
(2,824,132)
|
Net cash flows used in investing activities
|
(43,401,314)
|
(47,626,330)
|
|
|
|
Cash flows from financing activities:
|
|
|
Net
proceeds from issuance of common stock
|
-
|
30,136,699
|
Net
proceeds from issuance of long-term debt
|
-
|
29,121,630
|
Proceeds
from exercise of stock options
|
90,640
|
77,927
|
Withholding
taxes paid on net exercise of stock options
|
(1,357,171)
|
-
|
Withholding
taxes paid on vested retricted stock awards
|
(51,004)
|
(27,645)
|
Purchase
of treasury stock
|
(540,253)
|
(176,837)
|
Dividends
paid
|
(4,279,494)
|
(3,214,471)
|
Net cash flows (used in) provided by financing
activities
|
(6,137,282)
|
55,917,303
|
|
|
|
(Decrease)
increase in cash and cash equivalents
|
$(27,243,230)
|
$36,337,113
|
Cash
and cash equivalents, beginning of period
|
48,381,633
|
12,044,520
|
Cash and cash equivalents, end of period
|
$21,138,403
|
$48,381,633
|
|
|
|
Supplemental
disclosures of cash flow information:
|
|
|
Cash paid for
income taxes
|
$2,201,000
|
$5,773,000
|
Cash paid for
interest
|
$1,700,417
|
$-
|
|
December
31,
|
December
31,
|
|
2018
|
2017
|
|
|
|
Collateralized
bank repurchase agreement (1)
|
$568,123
|
$10,249,985
|
Money market
funds
|
15,012,559
|
35,874,700
|
Total
|
$15,580,682
|
$46,124,685
|
|
Years
ended December 31,
|
|
|
2018
|
2017
|
Personal
Lines
|
80.7%
|
77.2%
|
Commercial
Lines
|
11.6%
|
12.2%
|
Livery
physical damage
|
n/a
|
10.3%
|
Total
premiums earned subject to concentration
|
92.3%
|
99.7%
|
Premiums
earned not subject to concentration
|
7.7%
|
0.3%
|
Total
premiums earned
|
100.0%
|
100.0%
|
|
December 31, 2018
|
|||||
|
|
|
|
|
|
Net
|
|
Cost or
|
Gross
|
Gross Unrealized Losses
|
Estimated
|
Unrealized
|
|
|
Amortized
|
Unrealized
|
Less than 12
|
More than 12
|
Fair
|
Gains/
|
Category
|
Cost
|
Gains
|
Months
|
Months
|
Value
|
(Losses)
|
|
|
|
|
|
|
|
Fixed-Maturity Securities:
|
|
|
|
|
|
|
U.S.
Treasury securities and
|
|
|
|
|
|
|
obligations of U.S. government
|
|
|
|
|
|
|
corporations
and agencies
|
$8,222,050
|
$26,331
|
$(28,000)
|
$-
|
$8,220,381
|
$(1,669)
|
|
|
|
|
|
|
|
Political subdivisions of States,
|
|
|
|
|
|
|
Territories
and Possessions
|
6,339,540
|
50,903
|
(12,327)
|
(36,508)
|
6,341,608
|
2,068
|
|
|
|
|
|
|
|
Corporate and other bonds
|
|
|
|
|
|
|
Industrial
and miscellaneous
|
119,078,698
|
123,740
|
(2,775,540)
|
(676,605)
|
115,750,293
|
(3,328,405)
|
|
|
|
|
|
|
|
Residential mortgage and other
|
|
|
|
|
|
|
asset
backed securities (1)
|
21,790,973
|
236,502
|
(231,229)
|
(331,012)
|
21,465,234
|
(325,739)
|
Total
|
$155,431,261
|
$437,476
|
$(3,047,096)
|
$(1,044,125)
|
$151,777,516
|
$(3,653,745)
|
|
December 31, 2017
|
|||||
|
|
|
|
|
|
Net
|
|
Cost or
|
Gross
|
Gross
Unrealized Losses
|
Estimated
|
Unrealized
|
|
|
Amortized
|
Unrealized
|
Less than
12
|
More than
12
|
Fair
|
Gains/
|
Category
|
Cost
|
Gains
|
Months
|
Months
|
Value
|
(Losses)
|
|
|
|||||
Fixed-Maturity Securities:
|
|
|
|
|
|
|
Political
subdivisions of States,
|
|
|
|
|
|
|
Territories
and Possessions
|
$11,096,122
|
$250,135
|
$(30,814)
|
$-
|
$11,315,443
|
$219,321
|
|
|
|
|
|
|
|
Corporate
and other bonds
|
|
|
|
|
|
|
Industrial
and miscellaneous
|
87,562,631
|
1,189,207
|
(269,857)
|
(340,516)
|
88,141,465
|
578,834
|
|
|
|
|
|
|
|
Residential
mortgage and other
|
|
|
|
|
|
|
asset
backed securities (1)
|
20,463,353
|
305,499
|
(48,482)
|
(189,022)
|
20,531,348
|
67,995
|
Total
|
$119,122,106
|
$1,744,841
|
$(349,153)
|
$(529,538)
|
$119,988,256
|
$866,150
|
|
December 31, 2018
|
December 31, 2017
|
||
|
Amortized
|
Estimated
|
Amortized
|
Estimated
|
Remaining Time to Maturity
|
Cost
|
Fair Value
|
Cost
|
Fair Value
|
|
|
|
||
Less
than one year
|
$6,742,519
|
$6,738,014
|
$2,585,479
|
$2,595,938
|
One
to five years
|
47,038,838
|
46,640,012
|
31,716,345
|
32,065,197
|
Five
to ten years
|
76,884,505
|
74,290,076
|
62,702,945
|
63,129,543
|
More
than ten years
|
2,974,426
|
2,644,180
|
1,653,984
|
1,666,230
|
Residential
mortgage and other asset backed securities
|
21,790,973
|
21,465,234
|
20,463,353
|
20,531,348
|
Total
|
$155,431,261
|
$151,777,516
|
$119,122,106
|
$119,988,256
|
|
December 31, 2018
|
|||
|
|
Gross
|
Gross
|
Estimated
|
Category
|
Cost
|
Gains
|
Losses
|
Fair Value
|
|
|
|||
Equity Securities:
|
|
|
|
|
Preferred
stocks
|
$6,694,754
|
$-
|
$(541,798)
|
$6,152,956
|
Common
stocks and exchange
|
|
|
|
|
traded
mutual funds
|
11,611,232
|
99,817
|
(1,291,389)
|
10,419,660
|
Total
|
$18,305,986
|
$99,817
|
$(1,833,187)
|
$16,572,616
|
|
December 31, 2017
|
|||
|
|
Gross
|
Gross
|
Estimated
|
Category
|
Cost
|
Gains
|
Losses
|
Fair Value
|
|
|
|||
Equity Securities:
|
|
|
|
|
Preferred
stocks
|
$7,081,099
|
$60,867
|
$(141,025)
|
$7,000,941
|
Common
stocks and exchange
|
|
|
|
|
traded
mutual funds
|
6,680,742
|
841,250
|
(236,735)
|
7,285,257
|
Total
|
$13,761,841
|
$902,117
|
$(377,760)
|
$14,286,198
|
|
December 31, 2018
|
December 31, 2017
|
||||
|
|
Gross
|
Estimated
|
|
Gross
|
Estimated
|
Category
|
Cost
|
Losses
|
Fair Value
|
Cost
|
Gains/(Losses)
|
Fair Value
|
|
|
|
|
|
||
Other Investments:
|
|
|
|
|
|
|
Hedge
fund
|
$1,999,381
|
$(144,156)
|
$1,855,225
|
$-
|
$-
|
$-
|
Total
|
$1,999,381
|
$(144,156)
|
$1,855,225
|
$-
|
$-
|
$-
|
|
December 31, 2018
|
|||||
|
|
|
|
|
|
|
|
Cost or
|
Gross
|
Gross
Unrealized Losses
|
Estimated
|
Net
|
|
|
Amortized
|
Unrealized
|
Less than
12
|
More than
12
|
Fair
|
Unrealized
|
Category
|
Cost
|
Gains
|
Months
|
Months
|
Value
|
Gains/(Losses)
|
|
|
|||||
Held-to-Maturity Securities:
|
|
|
|
|
|
|
U.S.
Treasury securities
|
$729,507
|
$147,532
|
$(3,964)
|
$-
|
$873,075
|
$143,568
|
|
|
|
|
|
|
|
Political
subdivisions of States,
|
|
|
|
|
|
|
Territories
and Possessions
|
998,803
|
33,862
|
-
|
-
|
1,032,665
|
33,862
|
|
|
|
|
|
|
|
Corporate
and other bonds
|
|
|
|
|
|
|
Industrial
and miscellaneous
|
2,494,545
|
38,461
|
(1,425)
|
(10,905)
|
2,520,676
|
26,131
|
|
|
|
|
|
|
|
Total
|
$4,222,855
|
$219,855
|
$(5,389)
|
$(10,905)
|
$4,426,416
|
$203,561
|
|
December 31, 2017
|
|||||
|
|
|
|
|
|
|
|
Cost or
|
Gross
|
Gross
Unrealized Losses
|
Estimated
|
Net
|
|
|
Amortized
|
Unrealized
|
Less than
12
|
More than
12
|
Fair
|
Unrealized
|
Category
|
Cost
|
Gains
|
Months
|
Months
|
Value
|
Gains/(Losses)
|
|
|
|||||
Held-to-Maturity Securities:
|
|
|
|
|
|
|
U.S.
Treasury securities
|
$729,466
|
$147,573
|
$(1,729)
|
$-
|
$875,310
|
$145,844
|
|
|
|
|
|
|
|
Political
subdivisions of States,
|
|
|
|
|
|
|
Territories
and Possessions
|
998,984
|
50,366
|
-
|
-
|
1,049,350
|
50,366
|
|
|
|
|
|
|
|
Corporate
and other bonds
|
|
|
|
|
|
|
Industrial
and miscellaneous
|
3,141,358
|
90,358
|
-
|
(6,300)
|
3,225,416
|
84,058
|
|
|
|
|
|
|
|
Total
|
$4,869,808
|
$288,297
|
$(1,729)
|
$(6,300)
|
$5,150,076
|
$280,268
|
|
December 31, 2018
|
December 31, 2017
|
||
|
Amortized
|
Estimated
|
Amortized
|
Estimated
|
Remaining Time to Maturity
|
Cost
|
Fair Value
|
Cost
|
Fair Value
|
|
|
|
||
Less
than one year
|
$-
|
$-
|
$-
|
$-
|
One
to five years
|
2,996,685
|
3,036,531
|
2,546,459
|
2,601,898
|
Five
to ten years
|
619,663
|
635,846
|
1,716,884
|
1,794,139
|
More
than ten years
|
606,507
|
754,039
|
606,465
|
754,039
|
Total
|
$4,222,855
|
$4,426,416
|
$4,869,808
|
$5,150,076
|
|
Years
ended
|
|
|
December 31,
|
|
|
2018
|
2017
|
|
|
|
Income:
|
|
|
Fixed-maturity
securities
|
$5,316,970
|
$3,664,577
|
Equity
securities
|
820,827
|
564,071
|
Cash
and cash equivalents
|
219,238
|
56,075
|
Total
|
6,357,035
|
4,284,723
|
Expenses:
|
|
|
Investment
expenses
|
170,787
|
152,137
|
Net
investment income
|
$6,186,248
|
$4,132,586
|
|
Years
ended
|
|
|
December
31,
|
|
|
2018
|
2017
|
Realized (Losses) Gains
|
|
|
|
|
|
Fixed-maturity
securities:
|
|
|
Gross
realized gains
|
$117,186
|
$70,478
|
Gross
realized losses (1)
|
(618,699)
|
(309,247)
|
|
(501,513)
|
(238,769)
|
|
|
|
Equity
securities:
|
|
|
Gross
realized gains
|
992,012
|
636,880
|
Gross
realized losses
|
(584,473)
|
(263,798)
|
|
407,539
|
373,082
|
|
|
|
Net realized
(losses) gains
|
(93,974)
|
134,313
|
|
|
|
Other-than-temporary
impairment losses:
|
|
|
Fixed-maturity
securities
|
-
|
(50,000)
|
|
|
|
Unrealized (Losses) Gains
|
|
|
|
||
Equity
Securities:
|
|
|
Gross
gains
|
-
|
-
|
Gross
losses
|
(2,257,727)
|
-
|
|
(2,257,727)
|
-
|
|
|
|
Other
investments:
|
|
|
Gross
gains
|
-
|
-
|
Gross
losses
|
(144,156)
|
-
|
|
(144,156)
|
-
|
|
|
|
Net
unrealized losses
|
(2,401,883)
|
-
|
|
|
|
Net (losses)
gains on investments
|
$(2,495,857)
|
$84,313
|
|
December 31, 2018
|
|||||||
|
Less than 12 months
|
12 months or more
|
Total
|
|||||
|
Estimated
|
|
No. of
|
Estimated
|
|
No. of
|
Estimated
|
|
|
Fair
|
Unrealized
|
Positions
|
Fair
|
Unrealized
|
Positions
|
Fair
|
Unrealized
|
Category
|
Value
|
Losses
|
Held
|
Value
|
Losses
|
Held
|
Value
|
Losses
|
|
|
|||||||
Fixed-Maturity Securities:
|
|
|
|
|
|
|
|
|
U.S. Treasury
securities
|
|
|
|
|
|
|
|
|
and
obligations of U.S.
|
|
|
|
|
|
|
|
|
government
corporations
|
|
|
|
|
|
|
|
|
and
agencies
|
$4,948,530
|
$(28,000)
|
3
|
$-
|
$-
|
-
|
$4,948,530
|
$(28,000)
|
|
|
|
|
|
|
|
|
|
Political
subdivisions of
|
|
|
|
|
|
|
|
|
States,
Territories and
|
|
|
|
|
|
|
|
|
Possessions
|
555,375
|
(12,327)
|
1
|
1,436,242
|
(36,508)
|
3
|
1,991,617
|
(48,835)
|
|
|
|
|
|
|
|
|
|
Corporate
and other
|
|
|
|
|
|
|
|
|
bonds
industrial and
|
|
|
|
|
|
|
|
|
miscellaneous
|
81,004,459
|
(2,775,540)
|
97
|
13,424,888
|
(676,605)
|
24
|
94,429,347
|
(3,452,145)
|
|
|
|
|
|
|
|
|
|
Residential
mortgage and other
|
|
|
|
|
|
|
|
|
asset
backed securities
|
7,002,713
|
(231,229)
|
9
|
11,928,425
|
(331,012)
|
19
|
18,931,138
|
(562,241)
|
|
|
|
|
|
|
|
|
|
Total
fixed-maturity
|
|
|
|
|
|
|
|
|
securities
|
$93,511,077
|
$(3,047,096)
|
110
|
$26,789,555
|
$(1,044,125)
|
46
|
$120,300,632
|
$(4,091,221)
|
|
December 31, 2017
|
|||||||
|
Less than 12 months
|
12 months or more
|
Total
|
|||||
|
Estimated
|
|
No. of
|
Estimated
|
|
No. of
|
Estimated
|
|
|
Fair
|
Unrealized
|
Positions
|
Fair
|
Unrealized
|
Positions
|
Fair
|
Unrealized
|
Category
|
Value
|
Losses
|
Held
|
Value
|
Losses
|
Held
|
Value
|
Losses
|
|
|
|||||||
Fixed-Maturity Securities:
|
|
|
|
|
|
|
|
|
Political
subdivisions of
|
|
|
|
|
|
|
|
|
States,
Territories and
|
|
|
|
|
|
|
|
|
Possessions
|
$1,549,839
|
$(30,814)
|
4
|
$-
|
$-
|
-
|
$1,549,839
|
$(30,814)
|
|
|
|
|
|
|
|
|
|
Corporate
and other
|
|
|
|
|
|
|
|
|
bonds
industrial and
|
|
|
|
|
|
|
|
|
miscellaneous
|
15,036,462
|
(269,857)
|
20
|
9,113,924
|
(340,516)
|
17
|
24,150,386
|
(610,373)
|
|
|
|
|
|
|
|
|
|
Residential
mortgage and other
|
|
|
|
|
|
|
|
|
asset
backed securities
|
6,956,371
|
(48,482)
|
6
|
7,867,572
|
(189,022)
|
15
|
14,823,943
|
(237,504)
|
|
|
|
|
|
|
|
|
|
Total
fixed-maturity
|
|
|
|
|
|
|
|
|
securities
|
$23,542,672
|
$(349,153)
|
30
|
$16,981,496
|
$(529,538)
|
32
|
$40,524,168
|
$(878,691)
|
|
|
|
|
|
|
|
|
|
Equity Securities:
|
|
|
|
|
|
|
|
|
Preferred
stocks
|
$1,605,217
|
$(20,313)
|
5
|
$1,776,675
|
$(120,712)
|
3
|
$3,381,892
|
$(141,025)
|
Common
stocks and
|
|
|
|
|
|
|
|
|
exchange
traded mutual funds
|
1,446,375
|
(222,205)
|
4
|
124,900
|
(14,530)
|
1
|
1,571,275
|
(236,735)
|
|
|
|
|
|
|
|
|
|
Total
equity securities
|
$3,051,592
|
$(242,518)
|
9
|
$1,901,575
|
$(135,242)
|
4
|
$4,953,167
|
$(377,760)
|
|
|
|
|
|
|
|
|
|
Total
|
$26,594,264
|
$(591,671)
|
39
|
$18,883,071
|
$(664,780)
|
36
|
$45,477,335
|
$(1,256,451)
|
|
December 31,
2018
|
|||
|
Level
1
|
Level
2
|
Level
3
|
Total
|
|
|
|||
Fixed-maturity
securities available-for-sale
|
|
|
|
|
U.S. Treasury
securities
|
|
|
|
|
and
obligations of U.S.
|
|
|
|
|
government
corporations
|
|
|
|
|
and
agencies
|
$8,220,381
|
$-
|
$-
|
$8,220,381
|
|
|
|
|
|
Political
subdivisions of
|
|
|
|
|
States,
Territories and
|
|
|
|
|
Possessions
|
-
|
6,341,608
|
-
|
6,341,608
|
|
|
|
|
|
Corporate
and other
|
|
|
|
|
bonds
industrial and
|
|
|
|
|
miscellaneous
|
112,076,270
|
3,674,023
|
-
|
115,750,293
|
|
|
|
|
|
Residential
mortgage backed securities
|
-
|
21,465,234
|
-
|
21,465,234
|
Total fixed
maturities
|
120,296,651
|
31,480,865
|
-
|
151,777,516
|
Equity
securities
|
16,572,616
|
-
|
-
|
16,572,616
|
Total
investments
|
$136,869,267
|
$31,480,865
|
$-
|
$168,350,132
|
|
December 31,
2017
|
|||
|
Level
1
|
Level
2
|
Level
3
|
Total
|
|
|
|||
Fixed-maturity
securities available-for-sale
|
|
|
|
|
Political
subdivisions of
|
|
|
|
|
States,
Territories and
|
|
|
|
|
Possessions
|
$-
|
$11,315,443
|
$-
|
$11,315,443
|
|
|
|
|
|
Corporate
and other
|
|
|
|
|
bonds
industrial and
|
|
|
|
|
miscellaneous
|
83,597,300
|
4,544,165
|
-
|
88,141,465
|
|
|
|
|
|
Residential
mortgage backed securities
|
-
|
20,531,348
|
-
|
20,531,348
|
Total fixed
maturities
|
83,597,300
|
36,390,956
|
-
|
119,988,256
|
Equity
securities
|
14,286,198
|
-
|
-
|
14,286,198
|
Total
investments
|
$97,883,498
|
$36,390,956
|
$-
|
$134,274,454
|
Category
|
December 31, 2018
|
December 31, 2017
|
|
|
|
Other Investments:
|
|
|
Hedge
fund
|
$1,855,225
|
$-
|
Total
|
$1,855,225
|
$-
|
|
December 31,
2018
|
|||
|
Level
1
|
Level
2
|
Level
3
|
Total
|
Long-term
debt
|
|
|||
|
|
|
|
|
Senior Notes
due 2022
|
$-
|
$28,521,734
|
$-
|
$28,521,734
|
|
December 31,
2017
|
|||
|
Level
1
|
Level
2
|
Level
3
|
Total
|
Long-term
debt
|
|
|||
|
|
|
|
|
Senior Notes
due 2022
|
$-
|
$28,943,251
|
$-
|
$28,943,251
|
|
December 31, 2018
|
December 31, 2017
|
||
|
Carrying
|
Estimated
|
Carrying
|
Estimated
|
|
Value
|
Fair Value
|
Value
|
Fair Value
|
|
|
|
|
|
Fixed-maturity
securities-held-to maturity
|
$4,222,855
|
$4,426,416
|
$4,869,808
|
$5,150,076
|
Cash
and cash equivalents
|
$21,138,403
|
$21,138,403
|
$48,381,633
|
$48,381,633
|
Investment
subscription receivable
|
$-
|
$-
|
$2,000,000
|
$2,000,000
|
Premiums
receivable, net
|
$13,961,599
|
$13,961,599
|
$13,217,698
|
$13,217,698
|
Reinsurance
receivables, net
|
$26,367,115
|
$26,367,115
|
$28,519,130
|
$28,519,130
|
Real
estate, net of accumulated depreciation
|
$2,300,827
|
$2,705,000
|
$2,261,829
|
$2,705,000
|
Reinsurance
balances payable
|
$1,933,376
|
$1,933,376
|
$2,563,966
|
$2,563,966
|
Long-term
debt, net
|
$29,295,251
|
$28,521,734
|
$29,126,965
|
$28,943,251
|
|
|
December 31,
2018
|
December 31,
2017
|
||||
|
Useful
|
Gross
|
|
Net
|
Gross
|
|
Net
|
|
Life
|
Carrying
|
Accumulated
|
Carrying
|
Carrying
|
Accumulated
|
Carrying
|
|
(in
yrs)
|
Value
|
Amortization
|
Amount
|
Value
|
Amortization
|
Amount
|
Insurance
license
|
-
|
$500,000
|
$-
|
$500,000
|
$500,000
|
$-
|
$500,000
|
Customer
relationships
|
10
|
3,400,000
|
3,230,000
|
170,000
|
3,400,000
|
2,890,000
|
510,000
|
Other
identifiable
|
|
|
|
|
|
|
|
intangibles
|
7
|
950,000
|
950,000
|
-
|
950,000
|
950,000
|
-
|
Total
|
|
$4,850,000
|
$4,180,000
|
$670,000
|
$4,850,000
|
$3,840,000
|
$1,010,000
|
|
Treaty
Year
|
||
|
July 1,
2018
|
July 1,
2017
|
July 1,
2016
|
|
to
|
to
|
to
|
Line of
Busines
|
June 30,
2019
|
June 30,
2018
|
June 30,
2017
|
|
|
|
|
Personal Lines:
|
|
|
|
Homeowners,
dwelling fire and canine legal liability
|
|
|
|
Quota share
treaty:
|
|
|
|
Percent
ceded
|
10%
|
20%
|
40%
|
Risk
retained
|
$900,000
|
$800,000
|
$500,000
|
Losses per
occurrence subject to quota share reinsurance coverage
|
$1,000,000
|
$1,000,000
|
$833,333
|
Excess of
loss coverage and facultative facility above quota share coverage
(1)
|
$9,000,000
|
$9,000,000
|
$3,666,667
|
|
in excess
of
|
in excess
of
|
in excess
of
|
|
$1,000,000
|
$1,000,000
|
$833,333
|
Total
reinsurance coverage per occurrence
|
$9,100,000
|
$9,200,000
|
$4,000,000
|
Losses per
occurrence subject to reinsurance coverage
|
$10,000,000
|
$10,000,000
|
$4,500,000
|
Expiration
date
|
June 30, 2019 |
June 30,
2019
|
June 30,
2017
|
|
|
|
|
Personal
Umbrella
|
|
|
|
Quota share
treaty:
|
|
|
|
Percent ceded
- first $1,000,000 of coverage
|
90%
|
90%
|
90%
|
Percent ceded
- excess of $1,000,000 dollars of coverage
|
100%
|
100%
|
100%
|
Risk
retained
|
$100,000
|
$100,000
|
$100,000
|
Total
reinsurance coverage per occurrence
|
$4,900,000
|
$4,900,000
|
$4,900,000
|
Losses per
occurrence subject to quota share reinsurance coverage
|
$5,000,000
|
$5,000,000
|
$5,000,000
|
Expiration
date
|
June 30, 2019 |
June 30,
2018
|
June 30,
2017
|
|
|
|
|
Commercial Lines:
|
|
|
|
General
liability commercial policies
|
|
|
|
Quota share
treaty
|
None |
None
|
None
|
Risk
retained
|
$750,000
|
$750,000
|
$500,000
|
Excess of
loss coverage above risk retained
|
$3,750,000
|
$3,750,000
|
$4,000,000
|
|
in excess of |
in excess
of
|
in excess
of
|
|
$750,000
|
$750,000
|
$500,000
|
Total
reinsurance coverage per occurrence
|
$3,750,000
|
$3,750,000
|
$4,000,000
|
Losses per
occurrence subject to reinsurance coverage
|
$4,500,000
|
$4,500,000
|
$4,500,000
|
|
|
|
|
Commercial
Umbrella
|
|
|
|
Quota share
treaty:
|
|
|
|
Percent ceded
- first $1,000,000 of coverage
|
90%
|
90%
|
90%
|
Percent ceded
- excess of $1,000,000 of coverage
|
100%
|
100%
|
100%
|
Risk
retained
|
$100,000
|
$100,000
|
$100,000
|
Total
reinsurance coverage per occurrence
|
$4,900,000
|
$4,900,000
|
$4,900,000
|
Losses per
occurrence subject to quota share reinsurance coverage
|
$5,000,000
|
$5,000,000
|
$5,000,000
|
Expiration
date
|
June 30,
2019
|
June
30, 2018
|
June
30, 2017
|
|
-
|
-
|
-
|
Catastrophe Reinsurance:
|
|
|
|
Initial
loss subject to personal lines quota share treaty
|
$5,000,000
|
$5,000,000
|
$5,000,000
|
Risk retained
per catastrophe occurrence (2)
|
$4,500,000
|
$4,000,000
|
$3,000,000
|
Catastrophe
loss coverage in excess of quota share coverage (3)
(4)
|
$445,000,000
|
$315,000,000
|
$247,000,000
|
Reinstatement
premium protection (5)
|
Yes
|
Yes
|
Yes
|
|
|
July 1, 2018 - June 30, 2019
|
||
Treaty
|
|
Extent of Loss
|
|
Risk Retained
|
Personal
Lines (1)
|
|
Initial
$1,000,000
|
|
$900,000
|
|
|
$1,000,000
- $10,000,000
|
|
None(2)
|
|
|
Over
$10,000,000
|
|
100%
|
|
|
|
|
|
Personal
Umbrella
|
|
Initial
$1,000,000
|
|
$100,000
|
|
|
$1,000,000
- $5,000,000
|
|
None
|
|
|
Over
$5,000,000
|
|
100%
|
|
|
|
|
|
Commercial
Lines
|
|
Initial
$750,000
|
|
$750,000
|
|
|
$750,000
- $4,500,000
|
|
None(3)
|
|
|
Over
$4,500,000
|
|
100%
|
|
|
|
|
|
Commercial
Umbrella
|
|
Initial
$1,000,000
|
|
$100,000
|
|
|
$1,000,000
- $5,000,000
|
|
None
|
|
|
Over
$5,000,000
|
|
100%
|
|
|
|
|
|
Catastrophe
(4)
|
|
Initial
$5,000,000
|
|
$4,500,000
|
|
|
$5,000,000
- $450,000,000
|
|
None
|
|
|
Over
$450,000,000
|
|
100%
|
|
|
July 1, 2017 - June 30, 2018
|
|
July 1, 2016 - June 30, 2017
|
|||||
Treaty
|
|
Range of Loss
|
|
Risk Retained
|
|
Range of Loss
|
|
Risk Retained
|
|
Personal
Lines
|
|
Initial
$1,000,000
|
|
$800,000
|
|
Initial
$833,333
|
|
$500,000
|
|
|
|
$1,000,000
- $10,000,000
|
|
None(2)
|
|
$833,333
- $4,500,000
|
|
None(3)
|
|
|
|
Over
$10,000,000
|
|
100%
|
|
Over
$4,500,000
|
|
100%
|
|
|
|
|
|
|
|
|
|
|
|
Personal
Umbrella
|
|
Initial
$1,000,000
|
|
$100,000
|
|
Initial
$1,000,000
|
|
$100,000
|
|
|
|
$1,000,000
- $5,000,000
|
|
None
|
|
$1,000,000
- $5,000,000
|
|
None
|
|
|
|
Over
$5,000,000
|
|
100%
|
|
Over
$5,000,000
|
|
100%
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
Lines
|
|
Initial
$750,000
|
|
$750,000
|
|
Initial
$500,000
|
|
$500,000
|
|
|
|
$750,000
- $4,500,000
|
|
None(3)
|
|
$500,000
- $4,500,000
|
|
None(3)
|
|
|
|
Over
$4,500,000
|
|
100%
|
|
Over
$4,500,000
|
|
100%
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
Umbrella
|
|
Initial
$1,000,000
|
|
$100,000
|
|
Initial
$1,000,000
|
|
$100,000
|
|
|
|
$1,000,000
- $5,000,000
|
|
None
|
|
$1,000,000
- $5,000,000
|
|
None
|
|
|
|
Over
$5,000,000
|
|
100%
|
|
Over
$5,000,000
|
|
100%
|
|
|
|
|
|
|
|
|
|
|
|
Catastrophe
(4)
|
|
Initial
$5,000,000
|
|
$4,000,000
|
|
Initial
$5,000,000
|
|
$3,000,000
|
|
|
|
$5,000,000
- $320,000,000
|
|
None
|
|
$5,000,000
- $252,000,000
|
|
None
|
|
|
|
Over
$320,000,000
|
|
100%
|
|
Over
$252,000,000
|
|
100%
|
|
|
Unpaid
|
Paid
|
|
|
|
($ in
thousands)
|
Losses
|
Losses
|
Total
|
Security
|
|
December
31, 2018
|
|
|
|
|
|
Cavello Bay
Reinsurance Limited (1)
|
$5,319
|
$1,277
|
$6,596
|
$7,548
|
(2)
|
Swiss
Reinsurance America Corporation
|
4,499
|
1,251
|
5,750
|
-
|
|
Hanover
Rueck SE
|
2,728
|
1,181
|
3,909
|
-
|
|
SCOR
Reinsurance Company
|
528
|
89
|
617
|
-
|
|
Allied
World Assurance Company
|
306
|
373
|
679
|
-
|
|
Others
|
2,291
|
282
|
2,573
|
58
|
(3)
|
Total
|
$15,671
|
$4,453
|
$20,124
|
$7,606
|
|
|
|
|
|
|
|
December
31, 2017
|
|
|
|
|
|
Maiden
Reinsurace Company (1)
|
$8,160
|
$968
|
$9,128
|
$10,583
|
(2)
|
Swiss
Reinsurance America Corporation
|
4,299
|
600
|
4,899
|
-
|
|
Hanover
Rueck SE
|
857
|
420
|
1,277
|
-
|
|
SCOR
Reinsurance Company
|
851
|
209
|
1,060
|
-
|
|
Allied
World Assurance Company
|
1,649
|
188
|
1,837
|
-
|
|
Others
|
932
|
148
|
1,080
|
205
|
(4)
|
Total
|
$16,748
|
$2,533
|
$19,281
|
$10,788
|
|
|
Years
ended
|
|
|
December
31,
|
|
|
2018
|
2017
|
|
|
|
Provisional
ceding commissions earned
|
$6,745,928
|
$10,677,214
|
Contingent
ceding commissions earned
|
(1,413,298)
|
(744,081)
|
|
$5,332,630
|
$9,933,133
|
|
Years
ended
|
|
|
December
31,
|
|
|
|
|
Net deferred
policy acquisition costs, net of ceding
|
|
|
commission
revenue, beginning of year
|
$10,580,824
|
$5,387,940
|
|
|
|
Cost incurred
and deferred:
|
|
|
Commissions
and brokerage
|
27,687,907
|
23,093,880
|
Other
underwriting and policy acquisition costs
|
8,227,992
|
6,669,904
|
Ceding
commission revenue
|
(5,166,193)
|
(8,091,785)
|
Net deferred
policy acquisition costs
|
30,749,706
|
21,671,999
|
Return of
deferred ceding commission revenue
|
|
|
due to
reduction of quota share
|
(2,413,273)
|
(3,648,859)
|
Amortization
|
(23,696,197)
|
(12,830,256)
|
|
4,640,236
|
5,192,884
|
|
|
|
Net deferred
policy acquisition costs, net of ceding
|
|
|
commission
revenue, end of year
|
$15,221,060
|
$10,580,824
|
|
December
31,
|
|
|
2018
|
2017
|
|
|
|
Deferred
policy acquisition costs
|
$17,907,737
|
$14,847,236
|
Deferred
ceding commission revenue
|
(2,686,677)
|
(4,266,412)
|
Balance at
end of period
|
$15,221,060
|
$10,580,824
|
|
December 31,
|
December 31,
|
|
2018
|
2017
|
|
|
|
5.50%
Senior Unsecured Notes
|
$30,000,000
|
$30,000,000
|
Discount
|
(129,796)
|
(162,209)
|
Issuance
costs
|
(574,953)
|
(710,826)
|
Long-term
debt, net
|
$29,295,251
|
$29,126,965
|
|
|
Accumulated
|
|
|
Cost
|
Depreciation
|
Net
|
|
|
|
|
December 31, 2018
|
|
|
|
Building
|
$2,231,967
|
$(554,077)
|
$1,677,890
|
Land
|
622,937
|
-
|
622,937
|
Furniture
office equipment
|
723,217
|
(586,010)
|
137,207
|
Computer
equipment and software
|
7,240,613
|
(3,621,718)
|
3,618,895
|
Total
|
$10,818,734
|
$(4,761,805)
|
$6,056,929
|
|
|
|
|
December 31, 2017
|
|
|
|
Building
|
$2,146,950
|
$(460,819)
|
$1,686,131
|
Land
|
575,698
|
-
|
575,698
|
Furniture
office equipment
|
707,524
|
(493,558)
|
213,966
|
Computer
equipment and software
|
4,657,174
|
(2,360,392)
|
2,296,782
|
Total
|
$8,087,346
|
$(3,314,769)
|
$4,772,577
|
|
Direct
|
Assumed
|
Ceded
|
Net
|
|
|
|
|
|
Year
ended December 31, 2018
|
|
|
|
|
Premiums
written
|
$146,716,468
|
$1,004
|
$(26,923,679)
|
$119,793,793
|
Change in
unearned premiums
|
(13,388,535)
|
4,067
|
(2,994,610)
|
(16,379,078)
|
Premiums
earned
|
$133,327,933
|
$5,071
|
$(29,918,289)
|
$103,414,715
|
|
|
|
|
|
Year
ended December 31, 2017
|
|
|
|
|
Premiums
written
|
$121,575,178
|
$22,847
|
$(28,729,149)
|
$92,868,876
|
Change in
unearned premiums
|
(10,662,744)
|
9,456
|
(4,864,565)
|
(15,517,853)
|
Premiums
earned
|
$110,912,434
|
$32,303
|
$(33,593,714)
|
$77,351,023
|
|
Gross
|
Reinsurance
|
|
Liability
|
Receivables
|
December
31, 2018
|
|
|
Case-basis
reserves
|
$35,812,037
|
$12,283,616
|
Loss
adjustment expenses
|
9,102,862
|
1,433,170
|
IBNR
reserves
|
11,282,207
|
1,954,461
|
Recoverable
on unpaid losses
|
|
15,671,247
|
Recoverable
on paid losses
|
-
|
4,453,298
|
Total loss
and loss adjustment expenses
|
$56,197,106
|
20,124,545
|
Unearned
premiums
|
|
6,242,570
|
Total
reinsurance receivables
|
|
$26,367,115
|
|
|
|
December
31, 2017
|
|
|
Case-basis
reserves
|
$30,499,592
|
$11,987,693
|
Loss
adjustment expenses
|
8,635,199
|
1,990,506
|
IBNR
reserves
|
9,664,831
|
2,770,709
|
Recoverable
on unpaid losses
|
|
16,748,908
|
Recoverable
on paid losses
|
-
|
2,533,042
|
Total loss
and loss adjustment expenses
|
$48,799,622
|
19,281,950
|
Unearned
premiums
|
|
9,237,180
|
Total
reinsurance receivables
|
|
$28,519,130
|
|
Years
ended
|
|
|
December
31,
|
|
|
2018
|
2017
|
|
|
|
Balance at
beginning of period
|
$48,799,622
|
$41,736,719
|
Less
reinsurance recoverables
|
(16,748,908)
|
(15,776,880)
|
Net balance,
beginning of period
|
32,050,714
|
25,959,839
|
|
|
|
Incurred
related to:
|
|
|
Current
year
|
57,143,077
|
34,246,081
|
Prior
years
|
1,152,128
|
(60,544)
|
Total
incurred
|
58,295,205
|
34,185,537
|
|
|
|
Paid related
to:
|
|
|
Current
year
|
34,025,387
|
18,194,860
|
Prior
years
|
15,794,673
|
9,899,802
|
Total
paid
|
49,820,060
|
28,094,662
|
|
|
|
Net balance
at end of period
|
40,525,859
|
32,050,714
|
Add
reinsurance recoverables
|
15,671,247
|
16,748,908
|
Balance at
end of period
|
$56,197,106
|
$48,799,622
|
All Lines of Business
|
|
|
|
|
|
|
|
|
|
|
|
|
||
(in thousands, except reported claims data)
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
As
of
|
|
|
|
Incurred Loss
and Allocated Loss Adjustment Expenses, Net of
Reinsurance
|
|
December 31,
2018
|
|
||||||||||
|
For the Years
Ended December 31,
|
|
|
IBNR
|
Cumulative
Number of Reported Claims by Accident Year
|
|
||||||||
Accident
Year
|
2009
|
2010
|
2011
|
2012
|
2013
|
2014
|
2015
|
2016
|
2017
|
2018
|
|
|
||
|
(Unaudited 2009
- 2017)
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
$4,403
|
$4,254
|
$4,287
|
$4,384
|
$4,511
|
$4,609
|
$4,616
|
$4,667
|
$4,690
|
$
4,672
|
|
$
-
|
1,136
|
|
2010
|
|
5,598
|
5,707
|
6,429
|
6,623
|
6,912
|
6,853
|
6,838
|
6,840
|
6,787
|
|
-
|
1,617
|
|
2011
|
|
|
7,603
|
7,678
|
8,618
|
9,440
|
9,198
|
9,066
|
9,144
|
9,171
|
|
(3)
|
1,914
|
|
2012
|
|
|
|
9,539
|
9,344
|
10,278
|
10,382
|
10,582
|
10,790
|
10,791
|
|
(4)
|
4,702
|
(1)
|
2013
|
|
|
|
|
10,728
|
9,745
|
9,424
|
9,621
|
10,061
|
10,089
|
|
38
|
1,560
|
|
2014
|
|
|
|
|
|
14,193
|
14,260
|
14,218
|
14,564
|
15,023
|
|
238
|
2,131
|
|
2015
|
|
|
|
|
|
|
22,340
|
21,994
|
22,148
|
22,491
|
|
537
|
2,552
|
|
2016
|
|
|
|
|
|
|
|
26,062
|
24,941
|
24,789
|
|
1,096
|
2,862
|
|
2017
|
|
|
|
|
|
|
|
|
31,605
|
32,169
|
|
2,697
|
3,335
|
|
2018
|
|
|
|
|
|
|
|
|
|
54,455
|
|
9,079
|
3,935
|
|
|
|
|
|
|
|
|
|
|
Total
|
$
190,437
|
|
|
|
|
(1)
Reported claims for accident year 2012 includes 3,406 claims from
Superstorm Sandy.
|
|
|
|
|
|
All Lines of Business
|
|
|
|
|
|
|
|
|
||
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative Paid
Loss and Allocated Loss Adjustment Expenses, Net of
Reinsurance
|
|||||||||
|
For the Years
Ended December 31,
|
|
||||||||
Accident
Year
|
2009
|
2010
|
2011
|
2012
|
2013
|
2014
|
2015
|
2016
|
2017
|
2018
|
|
(Unaudited 2009
- 2017)
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
2009
|
$2,298
|
$3,068
|
$3,607
|
$3,920
|
$4,134
|
$4,362
|
$4,424
|
$4,468
|
$4,487
|
$
4,659
|
2010
|
|
2,566
|
3,947
|
4,972
|
5,602
|
6,323
|
6,576
|
6,720
|
6,772
|
6,780
|
2011
|
|
|
3,740
|
5,117
|
6,228
|
7,170
|
8,139
|
8,540
|
8,702
|
8,727
|
2012
|
|
|
|
3,950
|
5,770
|
7,127
|
8,196
|
9,187
|
10,236
|
10,323
|
2013
|
|
|
|
|
3,405
|
5,303
|
6,633
|
7,591
|
8,407
|
9,056
|
2014
|
|
|
|
|
|
5,710
|
9,429
|
10,738
|
11,770
|
13,819
|
2015
|
|
|
|
|
|
|
12,295
|
16,181
|
18,266
|
19,984
|
2016
|
|
|
|
|
|
|
|
15,364
|
19,001
|
21,106
|
2017
|
|
|
|
|
|
|
|
|
16,704
|
24,820
|
2018
|
|
|
|
|
|
|
|
|
|
32,383
|
|
|
|
|
|
|
|
|
|
Total
|
$
151,657
|
|
|
|
|
|
|
|
|
|
|
|
Net
liability for unpaid loss and allocated loss adjustment expenses
for the accident years presented
|
$
38,780
|
|||||||||
All
outstanding liabilities before 2009, net of
reinsurance
|
93
|
|||||||||
Liabilities
for loss and allocted loss adjustment expenses, net of
reinsurance
|
$
38,873
|
|
As of
|
(in thousands)
|
December 31, 2018
|
Liabilities for
loss and loss adjustment expenses, net of reinsurance
|
$38,873
|
Total
reinsurance recoverable on unpaid losses
|
15,671
|
Unallocated
loss adjustment expenses
|
1,653
|
Total
gross liability for loss and LAE reserves
|
$56,197
|
Average Annual Percentage Payout of Incurred Loss and Allocated
Loss Adjustment Expenses by Age, Net of Reinsurance
(unaudited)
|
||||||||||
Years
|
1
|
2
|
3
|
4
|
5
|
6
|
7
|
8
|
9
|
10
|
|
|
|
|
|
|
|
|
|
|
|
All
Lines of Business
|
46.4%
|
18.8%
|
11.4%
|
8.6%
|
9.5%
|
5.8%
|
1.5%
|
0.7%
|
0.3%
|
3.7%
|
Stock Options
|
Number of Shares
|
Weighted Average Exercise Price per Share
|
Weighted Average Remaining Contractual Term
|
Aggregate Intrinsic Value
|
|
|
|
|
|
Outstanding
at January 1, 2018
|
341,150
|
$6.69
|
1.67
|
$4,131,028
|
|
|
|
|
|
Granted
|
-
|
$-
|
-
|
$-
|
Exercised
|
(303,650)
|
$6.48
|
-
|
$3,794,505
|
Forfeited
|
-
|
$-
|
-
|
$-
|
|
|
|
|
|
Outstanding at
December 31, 2018
|
37,500
|
$8.36
|
2.24
|
$349,950
|
|
|
|
|
|
Vested and
Exercisable at December 31, 2018
|
27,500
|
$8.37
|
2.26
|
$256,313
|
Restricted Stock Awards
|
Shares
|
Weighted Average Grant Date Fair Value per Share
|
Aggregate Fair Value
|
|
|
|
|
Balance
at January 1, 2018
|
47,337
|
$14.35
|
$679,180
|
|
|
|
|
Granted
|
92,004
|
$18.67
|
$1,717,958
|
Vested
|
(15,752)
|
$14.07
|
$(221,613)
|
Forfeited
|
(3,090)
|
$15.00
|
$(46,350)
|
|
|
|
|
Balance at December
31, 2018
|
120,499
|
$17.66
|
$2,129,175
|
|
|
●
|
Policy
acquisition costs are charged to operations in the year such costs
are incurred, rather than being deferred and amortized as premiums
are earned over the terms of the policies.
|
|
|
●
|
Ceding
commission revenues are earned when ceded premiums are written
except for ceding commission revenues in excess of anticipated
acquisition costs, which are deferred and amortized as ceded
premiums are earned. GAAP requires that all ceding commission
revenues be earned as the underlying ceded premiums are earned over
the term of the reinsurance agreements.
|
|
|
●
|
Certain
assets including certain receivables, a portion of the net deferred
tax asset, prepaid expenses and furniture and equipment are not
admitted.
|
|
|
●
|
Investments
in fixed-maturity securities are valued at NAIC value for statutory
financial purposes, which is primarily amortized cost. GAAP
requires certain investments in fixed-maturity securities
classified as available-for-sale, to be reported at fair
value.
|
|
|
●
|
Certain
amounts related to ceded reinsurance are reported on a net basis
within the statutory basis financial statements. GAAP requires
these amounts to be shown gross.
|
●
|
For SAP
purposes, changes in deferred income taxes relating to temporary
differences between net income for financial reporting purposes and
taxable income are recognized as a separate component of gains and
losses in surplus rather than included in income tax expense or
benefit as required under GAAP.
|
Years ended December 31,
|
2018
|
2017
|
|
|
|
Current
federal income tax expense
|
$(74,001)
|
$4,317,686
|
Current state
income tax (benefit) expense
|
(6,784)
|
7,353
|
Deferred
federal and state income tax benefit
|
(5,398)
|
(1,809)
|
Income tax
(benefit) expense
|
$(86,183)
|
$4,323,230
|
Years ended December 31,
|
2018
|
2017
|
||
Computed
expected tax expense
|
$631,483
|
21.0%
|
$5,008,400
|
35.0%
|
Change in
enacted tax rates on net deferred tax liabilities
|
-
|
-
|
(405,218)
|
(2.8)
|
State taxes,
net of Federal benefit
|
(377,884)
|
(12.6)
|
(101,858)
|
(0.7)
|
State
valuation allowance
|
390,976
|
13.0
|
124,486
|
0.9
|
Benefit of
lower tax brackets
|
-
|
-
|
(100,000)
|
(0.7)
|
Permanent
differences
|
|
|
|
|
Dividends
received deduction
|
(85,703)
|
(2.9)
|
(138,197)
|
(1.0)
|
Non-taxable
investment income
|
(40,861)
|
(1.4)
|
(85,684)
|
(0.6)
|
Excess
benefit from stock-based compensation
|
(569,459)
|
(18.9)
|
-
|
-
|
Stock-based
compensation
|
(16,960)
|
(0.5)
|
(25,821)
|
(0.2)
|
Other
permanent differences
|
42,496
|
1.4
|
46,962
|
0.3
|
Prior year
tax matters
|
(61,415)
|
(2.0)
|
4,172
|
-
|
Other
|
1,144
|
-
|
(4,012)
|
-
|
Income tax
(benefit) expense, as reported
|
$(86,183)
|
(2.9)%
|
$4,323,230
|
30.2%
|
|
December
31,
|
December
31,
|
|
2018
|
2017
|
|
|
|
Deferred tax
asset:
|
|
|
Net operating
loss carryovers (1)
|
$90,438
|
$103,655
|
Claims
reserve discount
|
343,905
|
300,005
|
Unearned
premium
|
3,145,682
|
2,431,301
|
Deferred
ceding commission revenue
|
564,202
|
895,947
|
Other
|
383,733
|
382,522
|
Total
deferred tax assets
|
4,527,960
|
4,113,430
|
|
|
|
Deferred tax
liability:
|
|
|
Investment in
KICO (2)
|
759,543
|
759,543
|
Deferred
acquisition costs
|
3,760,625
|
3,117,920
|
Intangibles
|
140,700
|
212,100
|
Depreciation
and amortization
|
664,194
|
328,735
|
Net
unrealized (losses) gains of securities -
available-for-sale
|
(1,151,335)
|
295,474
|
Total
deferred tax liabilities
|
4,173,727
|
4,713,772
|
|
|
|
Net deferred
income tax asset (liability)
|
$354,233
|
$(600,342)
|
|
December
31,
|
December
31,
|
|
Type of
NOL
|
2018
|
2017
|
Expiration
|
State only
(A)
|
$1,305,365
|
$824,996
|
December 31,
2038
|
Valuation
allowance
|
(1,217,027)
|
(725,541)
|
|
State only,
net of valuation allowance
|
88,338
|
99,455
|
|
Amount
subject to Annual Limitation, federal only (B)
|
2,100
|
4,200
|
December 31,
2019
|
Total
deferred tax asset from net operating loss carryovers
|
$90,438
|
$103,655
|
|
Change in net
deferred income tax assets
|
$(954,575)
|
Deferred tax
benefit allocated to other comprehensive (loss) income
|
(949,177)
|
Deferred
income tax benefit
|
$(5,398)
|
For the Year
|
|
Ending
|
|
December 31,
|
Total
|
2019
|
$169,861
|
2020
|
175,806
|
2021
|
181,959
|
2022
|
188,328
|
2023
|
194,919
|
Thereafter
|
49,145
|
Total
|
$960,018
|
|
Years
ended
|
|
|
December
31,
|
|
|
2018
|
2017
|
|
|
|
Weighted
average number of shares outstanding
|
10,686,813
|
10,388,440
|
|
|
|
Effect of
dilutive securities, common share equivalents:
|
|
|
Stock
options
|
19,823
|
188,983
|
Restricted
stock awards
|
10,250
|
4,154
|
|
|
|
Weighted
average number of shares outstanding,
|
|
|
used for
computing diluted earnings per share
|
10,716,886
|
10,581,577
|
|
2018
|
||||
|
March
31,
|
June
30,
|
September
30,
|
December
31,
|
Total
|
|
|
|
|
|
|
Net
premiums earned
|
$22,837,617
|
$24,104,614
|
$27,533,907
|
$28,938,577
|
$103,414,715
|
Ceding
commission revenue
|
1,695,158
|
1,691,168
|
1,044,529
|
901,775
|
5,332,630
|
Net
investment income
|
1,383,989
|
1,556,866
|
1,602,371
|
1,643,022
|
6,186,248
|
Net
(losses) gains on investments
|
(523,127)
|
(106,733)
|
352,025
|
(2,218,022)
|
(2,495,857)
|
Total
revenues
|
25,701,870
|
27,546,186
|
30,885,909
|
29,637,933
|
113,771,898
|
Loss
and loss adjustment expenses
|
17,266,330
|
11,176,085
|
13,296,708
|
16,556,082
|
58,295,205
|
Commission
expense and
|
|
|
|
|
|
other
underwriting expenses
|
10,831,451
|
11,093,175
|
11,788,002
|
12,572,851
|
46,285,479
|
Net
income (loss)
|
(2,717,934)
|
2,757,297
|
3,933,730
|
(879,847)
|
3,093,246
|
Basic
earnings (loss) per share
|
$(0.28)
|
$0.26
|
$0.37
|
$(0.08)
|
$0.29
|
Diluted
earnings (loss) per share
|
$(0.28)
|
$0.25
|
$0.36
|
$(0.08)
|
$0.29
|
|
2017
|
||||
|
March
31,
|
June
30,
|
September
30,
|
December
31,
|
Total
|
|
|
|
|
|
|
Net
premiums earned
|
$16,369,748
|
$16,953,727
|
$21,514,408
|
$22,513,140
|
$77,351,023
|
Ceding
commission revenue
|
3,184,452
|
3,305,938
|
1,717,610
|
1,725,133
|
9,933,133
|
Net
investment income
|
857,800
|
1,026,004
|
1,033,307
|
1,215,475
|
4,132,586
|
Net
realized gain (loss) on investments
|
(54,506)
|
130,423
|
20,998
|
(12,602)
|
84,313
|
Total
revenues
|
20,647,194
|
21,724,251
|
24,614,653
|
25,783,212
|
92,769,310
|
Loss
and loss adjustment expenses
|
8,292,996
|
7,454,922
|
7,073,323
|
11,364,296
|
34,185,537
|
Commission
expense and
|
|
|
|
|
|
other
underwriting expenses
|
9,101,395
|
9,301,182
|
9,975,938
|
10,919,353
|
39,297,868
|
Net
income
|
1,470,580
|
2,510,392
|
4,073,921
|
1,931,592
|
9,986,485
|
Basic
earnings per share
|
$0.15
|
$0.24
|
$0.38
|
$0.18
|
$0.96
|
Diluted
earnings per share
|
$0.15
|
$0.23
|
$0.38
|
$0.18
|
$0.94
|
I, Dale
A. Thatcher, certify that:
|
||
|
|
|
1.
|
I have
reviewed this Annual Report on Form 10-K of Kingstone Companies,
Inc.;
|
|
|
|
|
2.
|
Based
on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the
period covered by this report;
|
|
|
|
|
3.
|
Based
on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in
this report;
|
|
|
|
|
4.
|
The
registrant’s other certifying officer and I are responsible
for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and
internal control over financial reporting (as defined in Exchange
Act Rules 13a-15(f) and 15d-15(f)) for the registrant and
have:
|
|
|
|
|
|
(a)
|
Designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in
which this report is being prepared;
|
|
|
|
|
(b)
|
Designed
such internal control over financial reporting, or caused such
internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally
accepted accounting principles;
|
|
|
|
|
(c)
|
Evaluated
the effectiveness of the registrant’s disclosure controls and
procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the
end of the period covered by this report based on such evaluation;
and
|
|
|
|
|
(d)
|
Disclosed
in this report any change in the registrant’s internal
control over financial reporting that occurred during the
registrant’s most recent fiscal quarter (the
registrant’s fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to
materially affect, the registrant’s internal control over
financial reporting; and
|
|
|
|
5.
|
The
registrant’s other certifying officer and I have disclosed,
based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the
audit committee of the registrant’s board of directors (or
persons performing the equivalent functions):
|
|
|
|
|
|
(a)
|
All
significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s
ability to record, process, summarize and report financial
information; and
|
|
|
|
|
(b)
|
Any
fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant’s
internal control over financial reporting.
|
|
KINGSTONE
COMPANIES,
INC.
|
|
|
|
|
March 18,
2019
|
By:
|
/s/ Dale A.
Thatcher
|
|
|
Dale A.
Thatcher
|
|
|
Chief Executive
Officer
|
1.
|
I have
reviewed this Annual Report on Form 10-K of Kingstone Companies,
Inc.;
|
|
|
|
|
2.
|
Based
on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the
period covered by this report;
|
|
|
|
|
3.
|
Based
on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in
this report;
|
|
|
|
|
4.
|
The
registrant’s other certifying officer(s) and I are
responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
registrant and have:
|
|
|
|
|
|
(a)
|
Designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in
which this report is being prepared;
|
|
|
|
|
(b)
|
Designed
such internal control over financial reporting, or caused such
internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally
accepted accounting principles;
|
|
|
|
|
(c)
|
Evaluated
the effectiveness of the registrant’s disclosure controls and
procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the
end of the period covered by this report based on such evaluation;
and
|
|
|
|
|
(d)
|
Disclosed
in this report any change in the registrant’s internal
control over financial reporting that occurred during the
registrant’s most recent fiscal quarter (the
registrant’s fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to
materially affect, the registrant’s internal control over
financial reporting; and
|
|
|
|
5.
|
The
registrant’s other certifying officer(s) and I have
disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant’s auditors and
the audit committee of the registrant’s board of directors
(or persons performing the equivalent functions):
|
|
|
|
|
|
(a)
|
All significant
deficiencies and material weaknesses in the design or operation of
internal control over financial reporting which are reasonably
likely to adversely affect the registrant’s ability to
record, process, summarize and report financial information;
and
|
|
|
|
|
(b)
|
Any fraud, whether
or not material, that involves management or other employees who
have a significant role in the registrant’s internal control
over financial reporting.
|
|
KINGSTONE
COMPANIES,
INC.
|
|
|
|
|
|
|
March 18,
2019
|
By:
|
/s/ Victor
Brodsky
|
|
|
|
Victor
Brodsky
|
|
|
|
Chief Financial
Officer
|
|
|
KINGSTONE
COMPANIES, INC.
|
|
|
|
|
|
|
March 18,
2019
|
By:
|
/s/ Dale A.
Thatcher
|
|
|
|
Dale A.
Thatcher
|
|
|
|
Chief Executive
Officer
|
|
|
KINGSTONE
COMPANIES, INC.
|
|
|
|
|
|
|
March 18,
2019
|
By:
|
/s/ Victor
Brodsky
|
|
|
|
Victor
Brodsky
|
|
|
|
Chief Financial
Officer
|
|
Document and Entity Information - USD ($) |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2018 |
Mar. 12, 2019 |
Jun. 30, 2018 |
|
Document And Entity Information | |||
Entity Registrant Name | KINGSTONE COMPANIES, INC. | ||
Entity Central Index Key | 0000033992 | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2018 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --12-31 | ||
Is Entity a Well-known Seasoned Issuer? | No | ||
Is Entity a Voluntary Filer? | No | ||
Is Entity's Reporting Status Current? | Yes | ||
Entity Filer Category | Accelerated Filer | ||
Entity Emerging Growth Company | false | ||
Entity Small Business | true | ||
Entity Shell Company | false | ||
Entity Public Float | $ 163,449,432 | ||
Entity Common Stock, Shares Outstanding | 10,760,042 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2018 |
Consolidated Balance Sheets (Parenthetical) - USD ($) |
Dec. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
Deferred Acquisition Costs And Deferred Ceding Commission Revenue Details 1 | ||
Fixed-maturity securities, held to maturity, fair value | $ 4,426,416 | $ 5,150,076 |
Fixed-maturity securities, available for sale, amortized cost | 155,431,261 | 119,122,106 |
Equity securities, available-for-sale, cost | $ 18,305,986 | $ 13,761,841 |
Stockholders' Equity | ||
Preferred stock,par value | $ 0.01 | $ 0.01 |
Preferred stock,authorized shares | 2,500,000 | 2,500,000 |
Common stock, par value | $ 0.01 | $ 0.01 |
Common stock, authorized shares | 20,000,000 | 20,000,000 |
Common stock, issued shares | 11,775,148 | 11,618,646 |
Common stock, outstanding shares | 10,747,709 | 10,631,837 |
Treasury stock, Shares | 1,027,439 | 986,809 |
1. Nature of Business |
12 Months Ended |
---|---|
Dec. 31, 2018 | |
Weighted average amortization period of identified intangible assets of finite useful life | |
1. Nature of Business | Kingstone Companies, Inc. (referred to herein as "Kingstone" or the “Company”), through its wholly owned subsidiary, Kingstone Insurance Company (“KICO”), underwrites property and casualty insurance to small businesses and individuals exclusively through independent agents and brokers. KICO is a licensed insurance company in the States of New York, New Jersey, Rhode Island, Massachusetts, Pennsylvania, Connecticut, Maine and New Hampshire. KICO is currently offering its property and casualty insurance products in New York, New Jersey, Rhode Island, Massachusetts and Pennsylvania. Although New Jersey, Rhode Island and Massachusetts are now growing expansion markets for the Company, 93.7% and 98.5% of KICO’s direct written premiums for the years ended December 31, 2018 and 2017, respectively, came from the New York policies.
|
2. Summary of Significant Accounting Policies |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Weighted average amortization period of identified intangible assets of finite useful life | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2. Summary of Significant Accounting Policies | Basis of Presentation
The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).
Principles of Consolidation
The consolidated financial statements consist of Kingstone and its wholly owned subsidiaries: KICO and its wholly owned subsidiaries, CMIC Properties, Inc. (“Properties”) and 15 Joys Lane, LLC (“15 Joys Lane”), which together own the land and building from which KICO operates. All significant inter-company account balances and transactions have been eliminated in consolidation.
Revenue Recognition
Net Premiums Earned
Insurance policies issued by the Company are short-duration contracts. Accordingly, premium revenues, net of premiums ceded to reinsurers, are recognized as earned in proportion to the amount of insurance protection provided, on a pro-rata basis over the terms of the underlying policies. Unearned premiums represent premiums applicable to the unexpired portions of in-force insurance contracts at the end of each year.
Ceding Commission Revenue
Commissions on reinsurance premiums ceded are earned in a manner consistent with the recognition of the costs of the reinsurance, generally on a pro-rata basis over the terms of the policies reinsured. Unearned amounts are recorded as deferred ceding commission revenue. Certain reinsurance agreements contain provisions whereby the ceding commission rates vary based on the loss experience under the agreements. The Company records ceding commission revenue based on its current estimate of subject losses. The Company records adjustments to ceding commission revenue in the period that changes in the estimated losses are determined.
Loss and Loss Adjustment Expenses (“LAE”) Reserves
The liability for loss and LAE represents management’s best estimate of the ultimate cost of all reported and unreported losses that are unpaid as of the balance sheet date. The liability for loss and LAE is estimated on an undiscounted basis, using individual case-basis valuations, statistical analyses and various actuarial reserving methodologies. The projection of future claim payment and reporting is based on an analysis of the Company’s historical experience, supplemented by analyses of industry loss data. Management believes that the reserves for loss and LAE are adequate to cover the ultimate cost of losses and claims to date; however, because of the uncertainty from various sources, including changes in reporting patterns, claims settlement patterns, judicial decisions, legislation, and economic conditions, actual loss experience may not conform to the assumptions used in determining the estimated amounts for such liability at the balance sheet date. Adjustments to these estimates are reflected in expense for the period in which the estimates are changed. Because of the nature of the business historically written, management believes that the Company has limited exposure to environmental claim liabilities.
Reinsurance
In the normal course of business, the Company seeks to reduce the loss that may arise from catastrophes or other events that cause unfavorable underwriting results. This is done by reinsuring certain levels of risk in various areas of exposure with a panel of financially secure reinsurance carriers.
Reinsurance receivables represents management’s best estimate of paid and unpaid loss and LAE recoverable from reinsurers, and ceded losses receivable and unearned ceded premiums under reinsurance agreements. Ceded losses receivable are estimated using techniques and assumptions consistent with those used in estimating the liability for loss and LAE. Management believes that reinsurance receivables as recorded represent its best estimate of such amounts; however, as changes in the estimated ultimate liability for loss and LAE are determined, the estimated ultimate amount receivable from the reinsurers will also change. Accordingly, the ultimate receivable could be significantly in excess of or less than the amount recorded in the consolidated financial statements. Adjustments to these estimates are reflected in the period in which the estimates are changed. Loss and LAE incurred as presented in the consolidated statements of income and comprehensive (loss) income are net of reinsurance recoveries.
Management estimates uncollectible amounts receivable from reinsurers based on an assessment of factors including the creditworthiness of the reinsurers and the adequacy of collateral obtained, where applicable. There was no allowance for uncollectible reinsurance as of December 31, 2018 and 2017. The Company did not expense any uncollectible reinsurance for the years ended December 31, 2018 and 2017. Significant uncertainties are inherent in the assessment of the creditworthiness of reinsurers and estimates of any uncollectible amounts due from reinsurers. Any change in the ability of the Company’s reinsurers to meet their contractual obligations could have a material adverse effect on the consolidated financial statements as well as KICO’s ability to meet its regulatory capital and surplus requirements.
Cash and Cash Equivalents
The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. The Company maintains its cash balances at several financial institutions.
Investments
The Company classifies its fixed-maturity securities as either held-to-maturity or available-for-sale. Effective January 1, 2018, the Company adopted ASU 2016-01, which resulted in changes in the estimated fair value of equity securities and other investments held at December 31, 2018 being reported in net income instead of other comprehensive income (loss). For additional discussion, see Note 2, Accounting Policies. The Company may sell its available-for-sale securities, equity securities, and other investments in response to changes in interest rates, risk/reward characteristics, liquidity needs or other factors. Fixed-maturity securities that the Company has the specific intent and ability to hold until maturity are classified as such and carried at amortized cost.
Available-for-sale securities are reported at their estimated fair values based on quoted market prices from a recognized pricing service, with unrealized gains and losses, net of tax effects, reported as a separate component of accumulated other comprehensive income (loss). Realized gains and losses are determined on the specific identification method and reported in net income in the consolidated statements of income and comprehensive income (loss).
Equity securities are reported at their estimated fair values based on quoted market prices from recognized pricing services, with unrealized gains and losses reported in net income. Other investments are reported at their estimated fair values using the net asset value (“NAV”) per share (or its equivalent) of the instrument with unrealized gains and losses reported in net income. See Note 3, Investments for additional discussion.
Investment income is accrued to the balance sheet dates of the consolidated financial statements and includes amortization of premium and accretion of discount on fixed-maturity securities. Interest is recognized when earned, while dividends are recognized when declared. Due and accrued investment income totaled approximately $1,721,000 and $1,136,000 as of December 31, 2018 and 2017, respectively, and is included in other assets on the accompanying consolidated balance sheets.
Premiums Receivable
Premiums receivable include balances due currently or in the future and are presented net of an allowance for doubtful accounts of approximately $255,000 and $291,000 as of December 31, 2018 and 2017, respectively. The allowance for uncollectible amounts is based on an analysis of amounts receivable giving consideration to historical loss experience and current economic conditions and reflects an amount that, in management’s judgment, is adequate. Uncollectible premiums receivable balances of approximately $252,000 and $138,000 were written off for the years ended December 31, 2018 and 2017, respectively.
Deferred Policy Acquisition Costs
Policy acquisition costs represent the costs of writing business that vary with, and are primarily related to, the successful production of insurance business (principally commissions, premium taxes and certain underwriting salaries). Policy acquisition costs are deferred and recognized as expense as related premiums are earned.
Intangible Assets
The Company has recorded acquired identifiable intangible assets. The cost of a group of assets acquired in a transaction is allocated to the individual assets including identifiable intangible assets based on their fair values. Identifiable intangible assets with a finite useful life are amortized over the period that the asset is expected to contribute directly or indirectly to the future cash flows of the Company. Intangible assets with an indefinite life are not amortized, but are subject to impairment testing if events or changes in circumstances indicate that it is more likely than not the asset is impaired. All identifiable intangible assets are tested for recoverability whenever events or changes in circumstances indicate that a carrying amount may not be recoverable. No impairment losses from intangible assets were recognized for the years ended December 31, 2018 and 2017.
Property and Equipment
Building and building improvements, automobiles, furniture, computer equipment, and computer software are reported at cost less accumulated depreciation. Depreciation is provided using the straight-line method over the estimated useful lives of the assets. The Company estimates the useful life for computer equipment, computer software, automobiles, furniture and other equipment is three years, and building and building improvements is 39 years.
The Company reviews its real estate assets used as its headquarters to evaluate the necessity of recording impairment losses for market changes due to declines in the estimated fair value of the property. In evaluating potential impairment, management considers the current estimated fair value compared to the carrying value of the asset. At December 31, 2018 and 2017, the fair value of the real estate assets is estimated to be in excess of the carrying value.
Income Taxes
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis and for operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The Company files a consolidated tax return with its subsidiaries. At December 31, 2018, the Company had no material unrecognized tax benefits and no adjustments to liabilities or operations were required.
On December 22, 2017, the Tax Cuts and Jobs Act of 2017 was enacted (see Note 15 - Income Taxes).
Assessments
Insurance related assessments are accrued in the period in which they have been incurred. A typical obligating event would be the issuance of an insurance policy or the occurrence of a claim. The Company is subject to a variety of assessments.
Concentration and Credit Risk
Financial instruments that potentially subject the Company to concentration of credit risk are primarily cash and cash equivalents, investments, and premium and reinsurance receivables. Investments are diversified through many industries and geographic regions based upon KICO’s Investment Committee’s guidelines, which employs a variety of investment strategies. The Company believes that no significant concentration of credit risk exists with respect to investments. At times, cash may be uninsured or in deposit accounts that exceed the Federal Deposit Insurance Corporation (“FDIC”) insurance limits. The Company has not experienced any losses in such accounts and management believes the Company is not exposed to any significant credit risk. Cash equivalents are not insured by the FDIC.
As of December 31, 2018 and 2017, the Company’s cash equivalents were as follows:
(1) The Company has a security interest in certain of the bank's holdings of direct obligations of the United States or one or more agencies thereof. The collateral is held in a hold-in-custody arrangement with a third party who maintains physical possession of the collateral on behalf of the bank.
At December 31, 2018, the outstanding premiums receivable balance is generally diversified due to the large number of individual insureds comprising the Company’s customer base. The Company’s customer base is concentrated in the New York City metropolitan area. The Company also has receivables from its reinsurers.
Reinsurance contracts do not relieve the Company of its obligations to policyholders. Failure of reinsurers to honor their obligations could result in losses to the Company. The Company periodically evaluates the financial condition of its reinsurers to minimize its exposure to significant losses from reinsurer insolvencies. See Note 7 for reinsurance recoverables on unpaid and paid losses by reinsurer. Management’s policy is to review all outstanding receivables quarterly as well as the bad debt write-offs experienced in the past and establish an allowance for doubtful accounts, if deemed necessary.
Direct premiums earned from lines of business in excess of 10% of the total subject the Company to concentration risk for the years ended December 31, 2018 and 2017 as follows:
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The actual results could differ from these estimates and assumptions, which include the reserves for losses and loss adjustment expenses, which are subject to estimation errors due to the inherent uncertainty in projecting ultimate claim amounts that will be reported and settled over a period of many years. In addition, estimates and assumptions associated with receivables under reinsurance contracts related to contingent ceding commission revenue require judgments by management. On an on-going basis, management reevaluates its assumptions and the methods for calculating these estimates. Actual results may differ significantly from the estimates and assumptions used in preparing the consolidated financial statements.
Earnings per share
Basic earnings per common share is computed by dividing income available to common stockholders by the weighted-average number of common shares outstanding. Diluted earnings per common share reflect, in periods in which they have a dilutive effect, the impact of common shares issuable upon the exercise of stock options as well as non-vested restricted stock awards. The computation of diluted earnings per share excludes those options with an exercise price in excess of the average market price of the Company’s common shares during the periods presented. Additionally, the computation of diluted earnings per share excludes unvested restricted stock awards as calculated using the treasury stock method.
Advertising Costs
Advertising costs are charged to operations when the advertising is initiated. Advertising costs are included in other underwriting expenses in the accompanying consolidated statements of income and comprehensive income (loss), and were approximately $173,000 and $202,000 for the years ended December 31, 2018 and 2017, respectively.
Stock-based Compensation
Stock-based compensation expense in 2018 and 2017 is the estimated fair value of restricted stock awards and options granted, amortized on a straight-line basis over the requisite service period for the entire portion of the award less an estimate for anticipated forfeitures. The Company uses the “simplified” method to estimate the expected term of the options because the Company’s historical share option exercise experience does not provide a reasonable basis upon which to estimate expected term.
Compensated Absences
Employees of the Company are entitled to paid vacations, sick days, and other time off depending on job classification, length of service and other factors. It is impracticable to estimate the amount of compensation of future absences and, accordingly, no liability has been recorded in the accompanying consolidated financial statements. The Company’s policy is to recognize the cost of compensated absences when paid to employees.
Comprehensive Income (Loss)
Comprehensive income (loss) refers to revenues, expenses, gains and losses that are included in comprehensive income (loss) but are excluded from net income as these amounts are recorded directly as an adjustment to stockholders' equity, primarily from changes in unrealized gains and losses on available-for-sale securities, and related income taxes.
Accounting Changes
In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09 – Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”). The core principle of the new guidance is that an entity should recognize revenue to reflect the transfer of goods and services to customers in an amount equal to the consideration the entity receives or expects to receive. The Company adopted ASU 2014-09 effective January 1, 2018. The standard excludes from its scope the accounting for insurance contracts, financial instruments, and certain other agreements that are governed under other GAAP guidance. Accordingly, the adoption of ASU 2014-09, as amended, did not have a material impact on the Company’s consolidated financial statements. In January 2016, the FASB issued ASU 2016-01 – Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”). Effective January 1, 2018, the Company adopted the provisions of ASU 2016-01. The updated guidance requires equity investments, including limited partnership interests, except those accounted for under the equity method of accounting, that have a readily determinable fair value to be measured at fair value with any changes in fair value recognized in net income. Equity securities that do not have readily determinable fair values may be measured at estimated fair value or cost less impairment, if any, adjusted for subsequent observable price changes, with changes in the carrying value recognized in net income. A qualitative assessment for impairment is required for equity investments without readily determinable fair values. The updated guidance also eliminates the requirement to disclose the method and significant assumptions used to estimate the fair value of financial instruments measured at amortized cost on the balance sheet. The adoption of this guidance resulted in the recognition of approximately $414,000 of net after-tax unrealized gains on equity investments as a cumulative effect adjustment that increased retained earnings as of January 1, 2018 and decreased accumulated other comprehensive income (loss) (“AOCI”) by the same amount. The Company elected to report changes in the fair value of equity investments in net gains (losses) on investments in the consolidated statements of income and comprehensive income (loss). At December 31, 2017, equity investments were classified as available-for-sale on the Company's consolidated balance sheet. However, upon adoption, the updated guidance eliminated the available-for-sale balance sheet classification for equity investments. Furthermore, for the year ended December 31, 2018, net loss on investments of approximately $2,496,000 recorded in the consolidated statements of income and comprehensive income (loss) includes net losses of approximately $2,402,000 from the estimated fair value change of equity securities and other investments. In August 2016, the FASB issued ASU 2016-15 – Statement of Cash Flows (Topic 320): Classification of Certain Cash Receipts and Cash Payments (“ASU 2016-15”). The revised ASU provides accounting guidance for eight specific cash flow issues. The FASB issued the standard to clarify areas where GAAP has been either unclear or lacking in specific guidance. The Company adopted this ASU effective January 1, 2018, and it did not have a material impact on the Company’s consolidated financial statements.
In May 2017, the FASB issued ASU 2017-09, Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting (“ASU 2017-09”). ASU 2017-09 clarifies when to account for a change to the terms or conditions of a share-based payment award as a modification. Under the new guidance, modification accounting is required only if the fair value, the vesting conditions, or the classification of the award (as equity or liability) changes as a result of the change in terms or conditions. The Company adopted this ASU effective January 1, 2018 on a prospective basis and it did not have a material impact on the Company’s consolidated financial statements.
In February 2018, the FASB issued ASU 2018-02 - Income Statement – Reporting Comprehensive Income (Topic 220) – Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (“ASU 2018-02”). The deferred income tax liability for unrealized gains on available-for-sale securities that were re-measured due to the reduction in corporate income tax rates under the Tax Cuts and Jobs Act of 2017 (the “Tax Act”) resulted in a stranded tax effect within AOCI. This is due to the effect of the tax rate change being recorded through continuing operations as required under Accounting Standards Codification 740 (“ASC 740”). The revised ASU allows for the reclassification of the stranded tax effects as a result of the Act from AOCI to retained earnings and requires certain other disclosures. Effective December 31, 2017, the Company chose to early adopt the provisions of ASU 2018-02 and recorded a one-time reclassification of $182,912 from AOCI to retained earnings for the stranded tax effects resulting from the newly enacted corporate tax rate. The amount of the reclassification was the difference between the historical corporate tax rate and the newly enacted 21% corporate tax rate.
Recent Accounting Pronouncements
In February 2016, the FASB issued ASU 2016-02 – Leases (Topic 842) (“ASU 2016-02”). Under this ASU, lessees will recognize a right-of-use-asset and corresponding liability on the balance sheet for all leases, except for leases covering a period of fewer than 12 months. The liability is to be measured as the present value of the future minimum lease payments taking into account renewal options if applicable plus initial incremental direct costs such as commissions. The minimum payments are discounted using the rate implicit in the lease or, if not known, the lessee’s incremental borrowing rate. The lessee’s income statement treatment for leases will vary depending on the nature of what is being leased. A financing type lease is present when, among other matters, the asset is being leased for a substantial portion of its economic life or has an end-of-term title transfer or a bargain purchase option as in today’s practice. The payment of the liability set up for such leases will be apportioned between interest and principal; the right-of use asset will be generally amortized on a straight-line basis. If the lease does not qualify as a financing type lease, it will be accounted for on the income statement as rent on a straight-line basis. The Company will be adopting ASU 2016-02 effective January 1, 2019. Under the new lease guidance, the Company’s assets and liabilities will increase by approximately $960,000 primarily related to an operating lease for office space. The Company does not expect material changes to the consolidated statements of income and comprehensive (loss) income. In June 2016, FASB issued ASU 2016-13 - Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). The revised accounting guidance requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts and requires enhanced disclosures related to the significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an organization’s portfolio. In addition, ASU 2016-13 amends the accounting for credit losses of available-for-sale debt securities and purchased financial assets with credit deterioration. ASU 2016-13 will be effective on January 1, 2020. The Company is currently evaluating the effect the updated guidance will have on its consolidated financial statements. In August 2018, the Securities and Exchange Commission (the “SEC”) adopted the final rule under SEC Release No. 33-10532, “Disclosure Update and Simplification,” amending certain disclosure requirements that were redundant, duplicative, overlapping, outdated or superseded. In addition, the amendments expanded the disclosure requirements on the analysis of stockholders' equity for interim financial statements. Under the amendments, an analysis of changes in each caption of stockholders' equity presented in the balance sheet must be provided in a note or separate statement. The analysis should present a reconciliation of the beginning balance to the ending balance of each period for which a statement of comprehensive income is required to be filed. This final rule is effective on November 5, 2018. The Company is evaluating the impact of this guidance on its consolidated financial statements. The Company anticipates its first presentation of changes in stockholders’ equity will be included in its Form 10-Q for the quarter ending March 31, 2019. The Company has determined that all other recently issued accounting pronouncements will not have a material impact on its consolidated financial position, results of operations and cash flows, or do not apply to its operations.
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3. Investments |
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3. Investments | Available-for-Sale Securities
The amortized cost and estimated fair value of investments in available-for-sale fixed-maturity securities as of December 31, 2018 and December 31, 2017 are summarized as follows:
A summary of the amortized cost and estimated fair value of the Company’s investments in available-for-sale fixed-maturity securities by contractual maturity as of December 31, 2018 and 2017 is shown below:
The actual maturities may differ from contractual maturities because certain borrowers have the right to call or prepay obligations with or without penalties.
Equity Securities
The cost, estimated fair value, and gross gains and losses of investments in equity securities as of December 31, 2018 and 2017 are as follows:
Other Investments
The cost, estimated fair value, and gross losses of the Company’s other investments as of December 31, 2018 and, 2017 are as follows:
Held-to-Maturity Securities
The amortized cost and estimated fair value of investments in held-to-maturity fixed-maturity securities as of December 31, 2018 and 2017 are summarized as follows:
Held-to-maturity U.S. Treasury securities are held in trust pursuant to various states’ minimum fund requirements.
A summary of the amortized cost and the estimated fair value of the Company’s investments in held-to-maturity securities by contractual maturity as of December 31, 2018 and 2017 is shown below:
The actual maturities may differ from contractual maturities because certain borrowers have the right to call or prepay obligations with or without penalties.
Investment Income
Major categories of the Company’s net investment income are summarized as follows:
Proceeds from the sale and redemption of fixed-maturity securities held-to-maturity were $624,963 and $247,500 for the years ended December 31, 2018 and 2017, respectively. Proceeds from the sale and redemption of fixed-maturity securities held-to-maturity for the year ended December 31, 2017 includes one redemption of $200,000 and one sale of $47,500. The sale was to dispose of a bond issued by the Commonwealth of Puerto Rico that was deemed to have a permanent credit impairment by the Company (see Impairment Review Below).
Proceeds from the sale and maturity of fixed-maturity securities available-for-sale were $21,381,668 and $11,132,000 for the years ended December 31, 2018 and 2017, respectively.
Proceeds from the sale of equity securities were $9,246,840 and $3,862,127 for the years ended December 31, 2018 and 2017, respectively.
The Company’s net (losses) gains on investments are summarized as follows:
Impairment Review
The Company regularly reviews its fixed-maturity securities (and reviewed its equity securities portfolios prior to January 1, 2018) to evaluate the necessity of recording impairment losses as charges to operations for other-than-temporary declines in the fair value of investments. In evaluating potential impairment, GAAP specifies (i) if the Company does not have the intent to sell a debt security prior to recovery and (ii) it is more likely than not that it will not have to sell the debt security prior to recovery, the security would not be considered other-than-temporarily impaired unless there is a credit loss. When the Company does not intend to sell the security and it is more likely than not that the Company will not have to sell the security before recovery of its cost basis, it will recognize the credit component of an other-than-temporary impairment (“OTTI”) of a debt security in earnings and the remaining portion in comprehensive (loss) income. The credit loss component recognized in earnings is identified as the amount of principal cash flows not expected to be received over the remaining term of the security based on cash flow projections. For held-to-maturity fixed-maturity securities, the amount of OTTI recorded in comprehensive (loss) income for the noncredit portion of a previous OTTI is amortized prospectively over the remaining life of the security on the basis of timing of future estimated cash flows of the security.
OTTI losses are recorded in the consolidated statements of income and comprehensive income (loss) as net realized losses on investments and result in a permanent reduction of the cost basis of the underlying investment. The determination of OTTI is a subjective process and different judgments and assumptions could affect the timing of loss realization. At December 31, 2018 and December 31, 2017, there were 156 and 62 fixed-maturity securities, respectively, and 13 equity securities at December 31, 2017 that accounted for the gross unrealized loss. In December 2017, the Company disposed of one of its held-to-maturity debt securities that was previously recorded in OTTI, which was a bond issued by the Commonwealth of Puerto Rico. In July 2016, Puerto Rico defaulted on its interest payment to bondholders. Due to the credit deterioration of Puerto Rico, the Company recorded its first credit loss component of OTTI on this investment as of June 30, 2016. As of December 31, 2016, the full amount of the write-down was recognized as a credit component of OTTI in the amount of $69,911. In September 2017, Hurricane Maria significantly affected Puerto Rico. The impact of this event further contributed to the credit deterioration of Puerto Rico and, as a result, the Company recorded an additional credit loss component of OTTI on this investment for the amount of $50,000 during the quarter ended September 30, 2017. The total of the two OTTI write-downs of this investment through December 31, 2017 was $119,911. The Company determined that none of the other unrealized losses were deemed to be OTTI for its portfolio of investments for the years ended December 31, 2018 and 2017. Significant factors influencing the Company’s determination that unrealized losses were temporary included the magnitude of the unrealized losses in relation to each security’s cost, the nature of the investment and management’s intent and ability to retain the investment for a period of time sufficient to allow for an anticipated recovery of fair value to the Company’s cost basis.
The Company held available-for-sale securities with unrealized losses representing declines that were considered temporary at December 31, 2018 and 2017 as follows:
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4. Fair Value Measurements |
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4. Fair Value Measurements |
Fair value is the price that would be received upon sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The valuation technique used by the Company to estimate the fair value of its financial instruments is the market approach, which uses prices and other relevant information generated by market transactions involving identical or comparable assets.
The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used to measure the assets or liabilities fall within different levels of the hierarchy, the classification is based on the lowest level input that is significant to the fair value measurement of the asset or liability. Classification of assets and liabilities within the hierarchy considers the markets in which the assets and liabilities are traded, including during period of market disruption, and the reliability and transparency of the assumptions used to determine fair value. The hierarchy requires the use of observable market data when available. The levels of the hierarchy and those investments included in each are as follows:
Level 1—Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities traded in active markets. Included are those investments traded on an active exchange, such as the NASDAQ Global Select Market, U.S. Treasury securities and obligations of U.S. government agencies, together with corporate debt securities that are generally investment grade.
Level 2—Inputs to the valuation methodology include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability and market-corroborated inputs. Municipal and corporate bonds, and residential mortgage-backed securities, that are traded in less active markets are classified as Level 2. These securities are valued using market price quotations for recently executed transactions.
Level 3—Inputs to the valuation methodology are unobservable for the asset or liability and are significant to the fair value measurement. Material assumptions and factors considered in pricing investment securities and other assets may include appraisals, projected cash flows, market clearing activity or liquidity circumstances in the security or similar securities that may have occurred since the prior pricing period.
The availability of observable inputs varies and is affected by a wide variety of factors. When the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires significantly more judgment. The degree of judgment exercised by management in determining fair value is greatest for investments categorized as Level 3. For investments in this category, the Company considers prices and inputs that are current as of the measurement date. In periods of market dislocation, as characterized by current market conditions, the ability to observe prices and inputs may be reduced for many instruments. This condition could cause a security to be reclassified between levels.
The Company’s investments measured at fair value on a recurring basis are allocated among fair value levels at December 31, 2018 and 2017 as follows:
Pursuant to ASC 820 “Fair Value Measurement,” an entity is permitted, as a practical expedient, to estimate the fair value of an investment within the scope of ASC 820 using the net asset value (“NAV”) per share (or its equivalent) of the investment. The following table sets forth the Company’s investment in a hedge fund investment measured at NAV per share (or its equivalent) as of December 31, 2018 and 2017. The Company measures this investment at fair value on a recurring basis. Fair value using NAV per share is as follows as of the dates indicated:
The investment is generally redeemable with at least 45 days prior written notice. The hedge fund investment is accounted for as a limited partnership by the Company. Revenue is earned based upon the Company’s allocated share of the partnership's changes in unrealized gains and losses to its partners. Such amounts have been recorded in the 2018 consolidated statement of income and comprehensive (loss) income within net (losses) gains on investments.
The estimated fair value and the level of the fair value hierarchy of the Company’s long-term debt as of December 31, 2018 and 2017, which is not measured at fair value is as follows:
The fair value of long-term debt is estimated based on observable market prices when available. When observable market prices were not available, the fair values of debt were based on observable market prices of comparable instruments adjusted for differences between the observed instruments and the instruments being valued or is estimated using discounted cash flow analyses, based on current incremental borrowing rates for similar types of borrowing arrangements.
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5. Fair Value of Financial Instruments |
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5. Fair Value of Financial Instruments |
The Company uses the following methods and assumptions in estimating the fair value of financial instruments and real estate:
Equity securities, available-for-sale fixed income securities, and other investments: Fair value disclosures for these investments are included in “Note 3 - Investments” and “Note 4 – Fair Value Measurements”.
Cash and cash equivalents: The carrying values of cash and cash equivalents approximate their fair values because of the short-term nature of these instruments.
Premiums receivable, reinsurance receivables, and investment subscription receivable: The carrying values reported in the accompanying consolidated balance sheets for these financial instruments approximate their fair values due to the short-term nature of the assets.
Real estate: The estimated fair value of the land and building included in property and equipment, which is used in the Company’s operations, approximates the carrying value. The estimated fair value was based on an appraisal prepared using the sales comparison approach, and accordingly the real estate is a Level 3 asset under the fair value hierarchy.
Reinsurance balances payable: The carrying value reported in the consolidated balance sheets for these financial instruments approximates fair value.
Long-term debt: The estimated fair value of long-term debt is based on observable market interest rates when available. When observable market interest rates were not available, the estimated fair values of debt were based on observable market interest rates of comparable instruments adjusted for differences between the observed instruments and the instruments being valued or is estimated using discounted cash flow analyses, based on current incremental borrowing rates for similar types of borrowing arrangements.
The estimated fair values of the Company’s financial instruments as of December 31, 2018 and 2017 are as follows:
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6. Intangibles |
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6. Intangibles | Intangible assets consist of finite and indefinite life assets. Finite life intangible assets include customer and producer relationships and other identifiable intangibles. The insurance company license is considered an indefinite life intangible asset subject to annual impairment testing. The remaining weighted average amortization period of identified intangible assets of finite useful life is approximately 0.5 years as of December 31, 2018.
The components of intangible assets and their useful lives, accumulated amortization, and net carrying value as of December 31, 2018 and 2017 are summarized as follows:
Intangible asset impairment testing and amortization
The Company performs an analysis annually as of December 31, or sooner if there are indicators that the asset may be impaired, to identify potential impairment of intangible assets with both finite and indefinite lives and measures the amount of any impairment loss that may need to be recognized. Intangible asset impairment testing requires an evaluation of the estimated fair value of each identified intangible asset to its carrying value. An impairment charge would be recorded if the estimated fair value is less than the carrying amount of the intangible asset. No impairments have been identified for the years ended December 31, 2018 and 2017.
The Company recorded amortization expense related to intangibles of $340,000, for each of the years ended December 31, 2018 and 2017. The $170,000 remaining net carrying amount of finite life intangibles will be amortized during the year ending December 31, 2019.
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7. Reinsurance |
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7. Reinsurance | The Company’s quota share reinsurance treaties are on a July 1 through June 30 fiscal year basis; therefore, for year to date fiscal periods after June 30, two separate treaties will be included in such periods.
The Company’s quota share reinsurance treaties in effect for the year ended December 31, 2018 for its personal lines business, which primarily consists of homeowners’ policies, were covered under the July 1, 2017 through June 30, 2018 treaty year and the new treaty year that began on July 1, 2018 (“2017/2019 Treaty”). The Company’s quota share reinsurance treaties in effect for the year ended December 31, 2017 were covered under the 2017/2019 Treaty and July 1, 2016 through June 30, 2017 treaty year (“2016/2017 Treaty”).
In March 2017, the Company bound its personal lines quota share reinsurance treaty effective July 1, 2017. The treaty provided for a reduction in the quota share ceding rate to 20%, from 40% in the 2016/2017 Treaty, and an increase in the provisional ceding commission rate to 53%, from 52% in the 2016/2017 Treaty. The 2017/2019 Treaty covered a two-year period from July 1, 2017 through June 30, 2019. In August 2018, the Company terminated its contract with one of the reinsurers that was a party to the 2017/2019 Treaty. This termination was retroactive to July 1, 2018 and had the effect of reducing the quota share ceding rate to 10% from 20%.
The Company entered into new excess of loss and catastrophe reinsurance treaties effective July 1, 2018. Material terms for reinsurance treaties in effect for the treaty years shown below are as follows:
Effective July 1, 2017, reinstatement premium protection for $145,000,000 of catastrophe coverage in excess of $5,000,000.
Effective July 1, 2018, reinstatement premium protection for $210,000,000 of catastrophe coverage in excess of $5,000,000.
The single maximum risks per occurrence to which the Company is subject under the treaties effective July 1, 2018 are as follows:
The single maximum risks per occurrence to which the Company is subject under the treaty years shown below are as follows:
The Company’s reinsurance program is structured to enable the Company to significantly grow its premium volume while maintaining regulatory capital and other financial ratios generally within or below the expected ranges used for regulatory oversight purposes. The reinsurance program also provides income as a result of ceding commissions earned pursuant to the quota share reinsurance contracts. The Company’s participation in reinsurance arrangements does not relieve the Company of its obligations to policyholders.
Approximate reinsurance recoverables on unpaid and paid losses by reinsurer at December 31, 2018 and 2017 are as follows:
(1) On December 27, 2018, Enstar Group Limited announced that one of its wholly owned subsidiaries, Cavello Bay Reinsurance Limited acquired Maiden Reinsurance North America, Inc. (2) Secured pursuant to collateralized trust agreements. (3) Represents $53,000 secured pursuant to collateralized trust agreement and $5,000 guaranteed by an irrevocable letter of credit. (4) Represents $202,000 secured pursuant to collateralized trust agreement and $3,000 guaranteed by an irrevocable letter of credit.
Assets held in the trusts referred to in footnotes (2), (3), and (4) in the table above are not included in the Company’s invested assets and investment income earned on these assets is credited to the reinsurers respectively. In addition to reinsurance recoverables on unpaid and paid losses, reinsurance receivables in the accompanying consolidated balance sheets as of December 31, 2018 and 2017 include unearned ceded premiums of approximately $6,243,000 and $9,237,000, respectively.
Ceding Commission Revenue
The Company earns ceding commission revenue under its quota share reinsurance agreements based on: (i) a fixed provisional commission rate at which provisional ceding commissions are earned, and (ii) a sliding scale of commission rates and ultimate treaty year loss ratios on the policies reinsured under each of these agreements based upon which contingent ceding commissions are earned. The sliding scale includes minimum and maximum commission rates in relation to specified ultimate loss ratios. The commission rate and contingent ceding commissions earned increases when the estimated ultimate loss ratio decreases and, conversely, the commission rate and contingent ceding commissions earned decreases when the estimated ultimate loss ratio increases.
The Company’s estimated ultimate treaty year loss ratios (the “Loss Ratio(s)”) for treaties in effect for the year ended December 31, 2018 are attributable to contracts for the 2017/2019 Treaty. The Company’s estimated ultimate treaty year Loss Ratios for treaties in effect for the year ended December 31, 2017 are attributable to contracts for the 2017/2019 Treaty and 2016/2017 Treaty.
Treaties in effect for the year ended December 31, 2018
Under the 2017/2019 Treaty, the Company receives an upfront fixed provisional rate that is subject to a sliding scale contingent adjustment based upon the Loss Ratio. Under this arrangement, the Company earns and earned provisional ceding commissions that are subject to later adjustment dependent on changes to the estimated Loss Ratio for the 2017/2019 Treaty. The Company’s Loss Ratios for the period July 1, 2018 through December 31, 2018 attributable to the 2017/2019 Treaty were consistent with the contractual Loss Ratio at which provisional ceding commissions were earned, and therefore no contingent commission adjustment was recorded for the six-month period ended December 31, 2018. The Company’s Loss Ratios for the period July 1, 2017 through June 30, 2018 attributable to the 2017/2019 Treaty were higher than the contractual Loss Ratio at which provisional ceding commissions were earned. Accordingly, for the six months ended June 30, 2018, the Company incurred negative contingent ceding commissions as a result of the estimated Loss Ratio for the 2017/2019 Treaty, which reduced contingent ceding commissions earned.
Treaties in effect for the year ended December 31, 2017
Under the 2017/2019 Treaty and the 2016/2017 Treaty, the Company received, an upfront fixed provisional rate that was subject to a sliding scale contingent adjustment based upon the Loss Ratio. Under this arrangement, the Company earned provisional ceding commissions that were subject to later adjustment dependent on changes to the estimated Loss Ratio for the 2017/2019 Treaty and 2016/2017 Treaty. The Company’s Loss Ratios for the period July 1, 2017 through December 31, 2017 attributable to the 2017/2019 Treaty, and from July 1, 2016 through December 31, 2017 attributable to the 2016/2017 Treaty, were consistent with the contractual Loss Ratio at which the provisional ceding commissions were earned and therefore no additional contingent commission was recorded for the year ended December 31, 2017 with respect to these treaties.
In addition to the treaties that were in effect for the years ended December 31, 2018 and 2017, the Loss Ratios from prior years’ treaties are subject to change as loss reserves from those periods increase or decrease, resulting in an increase or decrease in the commission rate and contingent ceding commissions earned.
Ceding commission revenues earned consists of the following:
Provisional ceding commissions are settled monthly. Balances due from reinsurers for contingent ceding commissions on quota share treaties are settled annually based on the Loss Ratio of each treaty year that ends on June 30. As discussed above, the Loss Ratios from prior years’ treaties are subject to change as incurred losses from those periods develop, resulting in an increase or decrease in the commission rate and contingent ceding commissions earned. As of December 31, 2018 and 2017, net contingent ceding commissions payable to reinsurers under all treaties was approximately $1,581,000 and $1,850,000, respectively, which are recorded in reinsurance balances payable on the accompanying consolidated balance sheets.
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8. Deferred Policy Acquisition Costs and Deferred Ceding Commission Revenue |
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8. Deferred Policy Acquisition Costs and Deferred Ceding Commission Revenue | Deferred policy acquisition costs incurred and policy-related ceding commission revenue are deferred and amortized to income on property and casualty insurance business as follows:
Ending balances for deferred policy acquisition costs and deferred ceding commission revenue as of December 31, 2018 and 2017 follows:
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9. Debt |
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9. Debt | Federal Home Loan Bank
In July 2017, KICO became a member of, and invested in, the Federal Home Loan Bank of New York (“FHLBNY”). The aggregate investment in dividend bearing common stock was $18,400 as of December 31, 2018. FHLBNY members have access to a variety of flexible, low cost funding through FHLBNY’s credit products, enabling members to customize advances, which are to be fully collateralized. Eligible collateral to pledge to FHLBNY includes residential and commercial mortgage backed securities, along with U.S. Treasury and agency securities. See Note 3 – Investments for eligible collateral held in a designated custodian account available for future advances. Advances are limited to 5% of KICO’s net admitted assets as of December 31 of the previous year and are due and payable within one year of borrowing. The maximum allowable advance as of December 31, 2018 was approximately $9,849,000. Advances are limited to the amount of available collateral, which was approximately $5,116,000 as of December 31, 2018. There were no borrowings under this facility during the year ended December 31, 2018.
Long-term Debt
On December 19, 2017, the Company issued $30 million of its 5.50% Senior Unsecured Notes due December 30, 2022 (the “Notes”) in an underwritten public offering. Interest is payable semi-annually in arrears on June 30 and December 30 of each year, which began on June 30, 2018 at the rate of 5.50%. The net proceeds of the issuance were $29,121,630, net of discount of $163,200 and transaction costs of $715,170, for an effective yield of 5.67%. The balance of long-term debt as of December 31, 2018 and 2017 is as follows:
The Notes are unsecured obligations of the Company and are not the obligations of or guaranteed by any of the Company's subsidiaries. The Notes rank senior in right of payment to any of the Company's existing and future indebtedness that is by its terms expressly subordinated or junior in right of payment to the Notes. The Notes rank equally in right of payment to all of the Company's existing and future senior indebtedness, but will be effectively subordinated to any secured indebtedness to the extent of the value of the collateral securing such secured indebtedness. In addition, the Notes will be structurally subordinated to the indebtedness and other obligations of the Company's subsidiaries. The Company may redeem the Notes, at any time in whole or from time to time in part, at the redemption price equal to the greater of: (i) 100% of the principal amount of the Notes to be redeemed; and (ii) the sum of the present values of the remaining scheduled payments of principal and interest on the Notes to be redeemed that would be due if the Notes matured on the applicable redemption date (exclusive of interest accrued to the applicable redemption date) discounted to the redemption date on a semi-annual basis at the Treasury Rate, plus 50 basis points.
On December 20, 2017, the Company used $25,000,000 of the net proceeds from the offering to contribute capital to KICO, to support additional growth. The remainder of the net proceeds are being used for general corporate purposes. A registration statement relating to the debt issued in the offering was filed with the SEC which became effective on November 28, 2017.
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10. Property and Equipment |
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10. Property and Equipment | The components of property and equipment are summarized as follows:
Depreciation expense for the years ended December 31, 2018 and 2017 was $1,447,150 and $1,062,928, respectively.
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11. Property and Casualty Insurance Activity |
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11. Property and Casualty Insurance Activity | Premiums written, ceded and earned are as follows:
Premium receipts in advance of the policy effective date are recorded as advance premiums. The balance of advance premiums as of December 31, 2018 and 2017 was $2,107,629 and $1,477,693, respectively.
The components of the liability for loss and LAE expenses and related reinsurance receivables as of December 31, 2018 and 2017 are as follows:
The following table provides a reconciliation of the beginning and ending balances for unpaid losses and LAE:
Incurred losses and LAE are net of reinsurance recoveries under reinsurance contracts of $14,482,712 and $14,067,027 for the years ended December 31, 2018 and 2017, respectively.
Prior year incurred loss and LAE development results from changes in ultimate loss and LAE estimates by line of business and accident year. Prior year loss and LAE development incurred during the years ended December 31, 2018 and 2017 was unfavorable $1,152,128 and favorable $(60,544) respectively. The Company’s management continually monitors claims activity to assess the appropriateness of carried case and incurred but not reported (“IBNR”) reserves, giving consideration to Company and industry trends.
Loss and LAE reserves
The reserving process for loss and LAE reserves provides for the Company’s best estimate at a particular point in time of the ultimate unpaid cost of all losses and LAE incurred, including settlement and administration of losses, and is based on facts and circumstances then known including losses that have occurred but that have not yet been reported. The process relies on standard actuarial reserving methodologies, judgments relative to estimates of ultimate claims severity and frequency, the length of time before losses will develop to their ultimate level (‘tail’ factors), and the likelihood of changes in the law or other external factors that are beyond the Company’s control. Several actuarial reserving methodologies are used to estimate required loss reserves. The process produces carried reserves set by management based upon the actuaries’ best estimate and is the cumulative combination of the best estimates made by line of business, accident year, and loss and LAE. The amount of loss and LAE reserves for individual reported claims (the “case reserve”) is determined by the claims department and changes over time as new information is gathered. Such information includes a review of coverage applicability, comparative liability on the part of the insured, injury severity, property damage, replacement cost estimates, and any other information considered pertinent to estimating the exposure presented by the claim. The amounts of loss and LAE reserves for unreported claims and development on known claims (IBNR reserves) are determined using historical information aggregated by line of insurance as adjusted to current conditions. Since this process produces loss reserves set by management based upon the actuaries’ best estimate, there is no explicit or implicit provision for uncertainty in the carried loss reserves.
Due to the inherent uncertainty associated with the reserving process, the ultimate liability may differ, perhaps substantially, from the original estimate. Such estimates are regularly reviewed and updated and any resulting adjustments are included in the current period’s results. Reserves are closely monitored and are recomputed periodically using the most recent information on reported claims and a variety of statistical techniques. On at least a quarterly basis, the Company reviews by line of business existing reserves, new claims, changes to existing case reserves and paid losses with respect to the current and prior periods. Several methods are used, varying by line of business and accident year, in order to select the estimated period-end loss reserves. These methods include the following:
Paid Loss Development – historical patterns of paid loss development are used to project future paid loss emergence in order to estimate required reserves.
Incurred Loss Development – historical patterns of incurred loss development, reflecting both paid losses and changes in case reserves, are used to project future incurred loss emergence in order to estimate required reserves.
Paid Bornhuetter-Ferguson (“BF”) – an estimated loss ratio for a particular accident year is determined, and is weighted against the portion of the accident year claims that have been paid, based on historical paid loss development patterns. The estimate of required reserves assumes that the remaining unpaid portion of a particular accident year will pay out at a rate consistent with the estimated loss ratio for that year. This method can be useful for situations where an unusually high or low amount of paid losses exists at the early stages of the claims development process.
Incurred Bornhuetter-Ferguson (“BF”) - an estimated loss ratio for a particular accident year is determined, and is weighted against the portion of the accident year claims that have been reported, based on historical incurred loss development patterns. The estimate of required reserves assumes that the remaining unreported portion of a particular accident year will pay out at a rate consistent with the estimated loss ratio for that year. This method can be useful for situations where an unusually high or low amount of reported losses exists at the early stages of the claims development process.
Incremental Claim-Based Methods – historical patterns of incremental incurred losses and paid LAE during various stages of development are reviewed and assumptions are made regarding average loss and LAE development applied to remaining claims inventory. Such methods more properly reflect changes in the speed of claims closure and the relative adequacy of case reserve levels at various stages of development. These methods also provide a more accurate estimate of IBNR for lines of business with relatively few remaining open claims but for which significant recent settlement activity has occurred.
Management’s best estimate of required reserves is generally based on an average of the methods above, with appropriate weighting of the various methods based on the line of business and accident year being projected. In some cases, additional methods or historical data from industry sources are employed to supplement the projections derived from the methods listed above.
Two key assumptions that materially affect the estimate of loss reserves are the loss ratio estimate for the current accident year used in the BF methods described above, and the loss development factor selections used in the loss development methods described above. The loss ratio estimates used in the BF methods are selected after reviewing historical accident year loss ratios adjusted for rate changes, trend, and mix of business.
The Company is not aware of any claim trends that have emerged or that would cause future adverse development that have not already been considered in existing case reserves and in its current loss development factors.
In New York State, lawsuits for negligence are subject to certain limitations and must be commenced within three years from the date of the accident or are otherwise barred. Accordingly, the Company’s exposure to unreported claims (“pure” IBNR) for accident dates of December 31, 2015 and prior is limited, although there remains the possibility of adverse development on reported claims (“case development” IBNR). In certain rare circumstances states have retroactively revised a statute of limitations. The Company is not aware of any such effort that would have a material impact on the Company’s results.
The following is information about incurred and paid claims development as of December 31, 2018, net of reinsurance, as well as the cumulative reported claims by accident year and total IBNR reserves as of December 31, 2018 included in the net incurred loss and allocated expense amounts. The historical information regarding incurred and paid claims development for the years ended December 31, 2009 to December 31, 2017 is presented as supplementary unaudited information.
Reported claim counts are measured on an occurrence or per event basis. A single claim occurrence could result in more than one loss type or claimant; however, the Company counts claims at the occurrence level as a single claim regardless of the number of claimants or claim features involved.
Reported claim counts are measured on an occurrence or per event basis. A single claim occurrence could result in more than one loss type or claimant; however the Company counts claims at the occurrence level as a single claim regardless of the number of claimants or claim features involved.
The reconciliation of the net incurred and paid claims development tables to the liability for loss and LAE reserves in the consolidated balance sheet is as follows:
The following is supplementary unaudited information about average historical claims duration as of December 31, 2018:
The percentages in the above table do not add up to 100% because the percentages represent averages across all accident years at each development stage.
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12. Stockholders' Equity |
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12. Stockholders' Equity | Public Offering of Common Stock
On January 31, 2017, the Company closed on an underwritten public offering of 2,500,000 shares of its Common Stock. On February 14, 2017, the Company closed on the underwriters’ purchase option for an additional 192,500 shares of its Common Stock. The public offering price for the 2,692,500 shares sold was $12.00 per share. The aggregate net proceeds to the Company were approximately $30,137,000, after deducting underwriting discounts and commissions and other offering expenses in the aggregate amount of approximately $2,173,000.
On March 1, 2017, the Company used $23,000,000 of the net proceeds from the offering to contribute capital to its insurance subsidiary, KICO, to support its ratings upgrade plan and additional growth. The remainder of the net proceeds will be used for general corporate purposes. A shelf registration statement relating to the shares sold in the offering was filed with the SEC and became effective on January 19, 2017.
Dividends Declared
Dividends declared and paid on Common Stock were $4,279,494 and $3,214,471 for the years ended December 31, 2018 and 2017, respectively. The Company’s Board of Directors approved a quarterly dividend on February 14, 2019 of $.10 per share payable in cash on March 15, 2019 to stockholders of record as of February 28, 2019 (see Note 19 - Subsequent Events).
Stock Options
Pursuant to the Company’s 2005 Equity Participation Plan (the “2005 Plan”), which provides for the issuance of incentive stock options, non-statutory stock options and restricted stock, a maximum of 700,000 shares of the Company’s Common Stock are permitted to be issued pursuant to options granted and restricted stock issued. Effective August 12, 2014, the Company adopted the 2014 Equity Participation Plan (the “2014 Plan”) pursuant to which, a maximum of 700,000 shares of Common Stock of the Company are authorized to be issued pursuant to the grant of incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock and stock bonuses. Incentive stock options granted under the 2014 Plan and 2005 Plan expire no later than ten years from the date of grant (except no later than five years for a grant to a 10% stockholder). The Board of Directors or the Compensation Committee determines the expiration date with respect to non-statutory stock options and the vesting provisions for restricted stock granted under the 2014 Plan and 2005 Plan.
The results of operations for the years ended December 31, 2018 and 2017 include stock-based compensation expense totaling approximately $6,000 and $38,000, respectively. Stock-based compensation expense related to stock options is net of estimated forfeitures of approximately 17% for the years ended December 31, 2018 and 2017. Such amounts have been included in the consolidated statements of income and comprehensive income (loss) within other operating expenses.
Stock-based compensation expense in 2018 and 2017 is the estimated fair value of options granted, amortized on a straight-line basis over the requisite service period, for the entire portion of the award less an estimate for anticipated forfeitures. The Company uses the “simplified” method to estimate the expected term of the options because the Company’s historical share option exercise experience does not provide a reasonable basis upon which to estimate expected term. No options were granted during the years ended December 31, 2018 and 2017.
The Black-Scholes Option Valuation Model was developed for use in estimating the fair value of traded options, which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility. Because our stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management's opinion, the existing models do not necessarily provide a reliable single measure of the fair value of our stock options.
A summary of stock option activity under the Company’s 2014 Plan and 2005 Plan for the year ended December 31, 2018 is as follows:
The aggregate intrinsic value of options outstanding and options exercisable at December 31, 2018 is calculated as the difference between the exercise price of the underlying options and the market price of the Company’s Common Stock for the options that had exercise prices that were lower than the $17.69 closing price of the Company’s Common Stock on December 31, 2018. The total intrinsic value of options exercised in the year ended December 31, 2018 was $3,794,505, determined as of the date of exercise.
Participants in the 2005 and 2014 Plans may exercise their outstanding vested options, in whole or in part, by having the Company reduce the number of shares otherwise issuable by a number of shares having a fair market value equal to the exercise price of the option being exercised (“Net Exercise”), or by exchanging a number of shares owned for a period of greater than one year having a fair market value equal to the exercise price of the option being exercised (“Share Exchange”). The Company received cash proceeds of $90,640 from the exercise of options for the purchase of 15,250 shares of common stock during the year ended December 31, 2018. The Company received 7,855 shares from the exercise of options under a Share Exchange for the purchase of 30,000 shares of common stock during the year ended December 31, 2018. The remaining 258,400 options exercised during the year ended December 31, 2018 were Net Exercises, resulting in the issuance of 94,647 shares of common stock. The Company received cash proceeds of $77,927 from the exercise of options for the purchase of 13,750 shares of common stock during the year ended December 31, 2017. The remaining 7,850 options exercised during the year ended December 31, 2017 were Net Exercises.
As of December 31, 2018, the estimated fair value of unamortized compensation cost related to unvested stock option awards was approximately $1,000. Unamortized compensation cost as of December 31, 2018 is expected to be recognized over a remaining weighted-average vesting period of 0.19 years.
As of December 31, 2018, there were 466,124 shares reserved for grants under the 2014 Plan.
Restricted Stock Awards
A summary of the restricted common stock activity under the Company’s 2014 Plan for the year ended December 31, 2018 is as follows:
Fair value was calculated using the closing price of the Company’s Common Stock on the grant date. For the year ended December 31, 2018 and 2017, stock-based compensation for these grants was approximately $697,000 and $232,000, respectively, which is included in other operating expenses on the accompanying consolidated statements of income and comprehensive income (loss). These amounts reflect the Company’s accounting expense and do not correspond to the actual value that will be recognized by the directors, executives and employees.
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13. Statutory Financial Information and Accounting Policies |
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13. Statutory Financial Information and Accounting Policies |
For regulatory purposes, KICO prepares its statutory basis financial statements in accordance with Statements of Statutory Accounting Principles (“statutory basis” or “SAP”) as promulgated by the National Association of Insurance Commissioners (the “NAIC”) and the prescribed or permitted practices of the New York State Department of Financial Services (the “DFS”). The more significant SAP variances from GAAP are as follows:
State insurance laws restrict the ability of KICO to declare dividends. These restrictions are related to surplus and net investment income. Dividends are restricted to the lesser of 10% of surplus or 100% of investment income (on a statutory accounting basis) for the trailing 36 months, net of dividends paid by KICO during such period. State insurance regulators require insurance companies to maintain specified levels of statutory capital and surplus. Generally, dividends may only be paid out of unassigned surplus, and the amount of an insurer’s unassigned surplus following payment of any dividends must be reasonable in relation to the insurer’s outstanding liabilities and adequate to meet its financial needs. For the years ended December 31, 2018 and 2017, KICO paid dividends to Kingstone of $3,600,000 and $2,900,000, respectively. On February 19, 2019, KICO’s Board of Directors approved a cash dividend of $2,000,000 to Kingstone, which was paid on February 20, 2019. For the years ended December 31, 2018 and 2017, KICO recorded statutory basis net income of $3,801,498 and $7,907,743, respectively. At December 31, 2018 and 2017, KICO reported statutory basis surplus as regards policyholders of $98,745,944 and $101,290,282, respectively, as filed with the DFS. |
14. Risk Based Capital |
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14. Risk Based Capital | State insurance departments impose risk-based capital (“RBC”) requirements on insurance enterprises. The RBC Model serves as a benchmark for the regulation of insurance companies by state insurance regulators. RBC provides for targeted surplus levels based on formulas, which specify various weighting factors that are applied to financial balances or various levels of activity based on the perceived degree of risk, and are set forth in the RBC requirements. Such formulas focus on four general types of risk: (a) the risk with respect to the company’s assets (asset or default risk); (b) the risk of default on amounts due from reinsurers, policyholders, or other creditors (credit risk); (c) the risk of underestimating liabilities from business already written or inadequately pricing business to be written in the coming year (underwriting risk); and, (d) the risk associated with items such as excessive premium growth, contingent liabilities, and other items not reflected on the balance sheet (off-balance sheet risk). The amount determined under such formulas is called the authorized control level RBC (“ACL”).
The RBC guidelines define specific capital levels based on a company’s ACL that are determined by the ratio of the company’s total adjusted capital (“TAC”) to its ACL. TAC is equal to statutory capital, plus or minus certain other specified adjustments. The Company’s TAC was above the ACL for each of the last two years and is in compliance with RBC requirements as of December 31, 2018 and 2017. |
15. Income Taxes |
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15. Income Taxes | The Company files a consolidated U.S. federal income tax return that includes all wholly owned subsidiaries. State tax returns are filed on a consolidated or separate return basis depending on applicable laws. The Company records adjustments related to prior years’ taxes during the period when they are identified, generally when the tax returns are filed. The effect of these adjustments on the current and prior periods (during which the differences originated) is evaluated based upon quantitative and qualitative factors and are considered in relation to the financial statements taken as a whole for the respective periods.
The provision for income taxes is comprised of the following:
A reconciliation of the federal statutory rate to the Company’s effective tax rate is as follows:
Deferred tax assets and liabilities are determined using the enacted tax rates applicable to the period the temporary differences are expected to be recovered. Accordingly, the current period income tax provision can be affected by the enactment of new tax rates. The net deferred income taxes on the balance sheets reflect temporary differences between the carrying amounts of the assets and liabilities for financial reporting purposes and income tax purposes, tax effected at various rates depending on whether the temporary differences are subject to federal taxes, state taxes, or both.
On December 22, 2017, the Tax Cuts and Jobs Act (the “Tax Act”) was enacted by the U.S. federal government. The Company has accounted for the material impacts of the Tax Act by re-measuring its deferred tax assets/(liabilities) at the 21% enacted tax rate as of December 31, 2017. As of December 31, 2017, the impact of the change in tax rate was a decrease in net deferred income tax liabilities of $405,218 with a corresponding increase in deferred income tax benefit. Upon completion of the 2017 U.S. income tax return in 2018, the Company did not identify any additional re-measurement adjustments to its recorded deferred tax liabilities and the one-time transition tax.
Deferred income tax liability for unrealized gains on available-for-sale securities that were re-measured due to the Act resulted in a stranded tax effect within AOCI. Due to the effect of the tax rate change being recorded through continuing operations as required under ASC 740. On February 14, 2018, the FASB issued ASU 2018-02, Income Statement – Reporting Comprehensive Income (Topic 220) – Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (“ASU 2018-02”), which allows for the reclassification of the stranded tax effects as a result of the Act from AOCI to retained earnings and requires certain other disclosures. The Company chose to early adopt the provisions of ASU 2018-02 and recorded a one-time reclassification of $182,912 from AOCI to retained earnings as of December 31, 2017 for the stranded tax effects resulting from the newly enacted corporate tax rate. The amount of the reclassification was the difference between the historical corporate tax rate and the newly enacted 21% corporate tax rate (see the accompanying consolidated statement of stockholders’ equity for reclassification of the stranded tax effects).
Significant components of the Company’s deferred tax assets and liabilities are as follows:
(1) The deferred tax assets from net operating loss carryovers are as follows:
(A) Kingstone generates operating losses for state purposes and has prior year NOLs available. The state NOL as of December 31, 2018 and 2017 was approximately $20,083,000 and $12,692,000, respectively. KICO, the Company’s insurance underwriting subsidiary, is not subject to state income taxes. KICO’s state tax obligations are paid through a gross premiums tax, which is included in the consolidated statements of income and comprehensive income within other underwriting expenses. Kingstone has recorded a valuation allowance due to the uncertainty of generating enough state taxable income to utilize 100% of the available state NOLs over their remaining lives, which expire between 2027 and 2038.
(B) The Company has a remaining NOL of $10,000 that is subject to Internal Revenue Code Section 382, which places a limitation on the utilization of the federal net operating loss to approximately $10,000 per year (“Annual Limitation”) as a result of a greater than 50% ownership change of the Company in 1999. The remaining loss subject to the Annual Limitation will expire on December 31, 2019.
(2) Deferred tax liability - investment in KICO
On July 1, 2009, the Company completed the acquisition of 100% of the issued and outstanding common stock of KICO (formerly known as Commercial Mutual Insurance Company (“CMIC”)) pursuant to the conversion of CMIC from an advance premium cooperative insurance company to a stock property and casualty insurance company. Pursuant to the plan of conversion, the Company acquired a 100% equity interest in KICO, in consideration for the exchange of $3,750,000 principal amount of surplus notes of CMIC. In addition, the Company forgave all accrued and unpaid interest on the surplus notes as of the date of conversion. As of the date of acquisition, unpaid accrued interest on the surplus notes along with the accretion of the discount on the original purchase of the surplus notes totaled $2,921,319 (collectively the “Untaxed Interest”). As of the date of acquisition, the deferred tax liability on the Untaxed Interest was $1,169,000. Under GAAP guidance for business combinations, a temporary difference with an indefinite life exists when the parent company has a lower carrying value of its subsidiary for income tax purposes. The deferred tax liability was reduced to $759,543 upon the reduction of federal income tax rates as of December 31, 2017. The Company is required to maintain its deferred tax liability of $759,543 related to this temporary difference until the stock of KICO is sold, or the assets of KICO are sold or KICO and the parent are merged.
The table below reconciles the changes in net deferred income tax assets (liabilities) to the deferred income tax provision for the year ended December 31, 2018:
In assessing the valuation of deferred tax assets, the Company considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. No valuation allowance against deferred tax assets has been established, except for NOL limitations, as the Company believes it is more likely than not the deferred tax assets will be realized based on the historical taxable income of KICO, or by offset to deferred tax liabilities.
The Company had no material unrecognized tax benefit and no adjustments to liabilities or operations were required. There were no material interest or penalties related to income taxes that have been accrued or recognized as of and for the years ended December 31, 2018 and 2017. If any had been recognized these would be reported in income tax expense.
Generally, taxing authorities may examine the Company’s tax returns for the three years from the date of filing. The Company’s tax returns for the years ended December 31, 2014 through December 31, 2017 remain subject to examination. The Company’s federal income tax return for the year ended December 31, 2016 has been examined by the Internal Revenue Service and was accepted as filed. |
16. Employee Benefit Plans |
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Dec. 31, 2018 | |
Weighted average amortization period of identified intangible assets of finite useful life | |
16. Employee Benefit Plans | Employee Profit Sharing Plan
The Company maintained a discretionary employee profit sharing plan (the “Profit Sharing Plan”) available to full-time employees who were employed as of December 31. For the years ended December 31, 2018 and 2017, the Profit Sharing Plan called for a bonus to be paid based on a formula that is tied to the annual GAAP combined ratio (“Combined Ratio”). The maximum the bonus can be is 25% of eligible wages at a Combined Ratio of 70%. The bonus decreased by 1% for each percentage point increase in the Combined Ratio. There is a minimum bonus of 5% at a Combined Ratio of 90% and above. The bonus is allocated 35% to the employees’ 401(k) account and 65% as cash through payroll. The Company incurred approximately $445,000 and $989,000 of expense for the years ended December 31, 2018 and 2017, respectively, related to the Profit Sharing Plan, which is recorded in other operating expenses on the accompanying consolidated statements of income and comprehensive income (loss).
Employee Bonus Plan
In November 2018, the Company’s Board of Directors approved a new discretionary employee bonus plan (“Bonus Plan”) to replace the existing Profit Sharing Plan to be effective as of January 1, 2019. Eligible employees can receive a target bonus rate of between 12% and 30% of base salary depending on their position. The target bonus rate is subject to adjustment depending on annual performance evaluation scores. The Bonus Plan is funded through a point system whereby up to 60 points are funded by a target return on investment (“Target ROE”) sliding scale and up to 40 points are funded by achieving various annual corporate goals as approved in advance by the Company’s Board of Directors. A maximum of 60 points can be achieved with a Target ROE of 14%. The bonus is decreased by six points for each percentage point decease in Target ROE. The minimum of six points can be achieved with Target ROE of 5%.
401 (k) Plan
The Company maintains a salary reduction plan under Section 401(k) of the Internal Revenue Code (the “401(k) Plan”) for its qualified employees. The Company matches 100% of each participant’s contribution up to 4% of the participant’s eligible contribution. The Company, at its discretion, may allocate an amount for additional contributions (“Additional Contributions”) to the 401(k) Plan included in the Profit Sharing Plan as discussed above. The Company incurred approximately $247,000 and $545,000 of expense for the years ended December 31, 2018 and 2017, respectively, related to the 401(k) Plan, which is recorded in other operating expenses on the accompany consolidated statements of income and comprehensive income (loss). For the years ended December 31, 2018 and 2017, Additional Contributions totaled approximately $-0- and $309,000, respectively.
Deferred Compensation Plan
On June 18, 2018, the Company adopted the Kingstone Companies, Inc. Deferred Compensation Plan (the "Deferred Compensation Plan"). The Deferred Compensation Plan is offered to a select group (“Participants”), consisting of management and highly compensated employees as a method of recognizing and retaining such Participants. The Deferred Compensation Plan provides for eligible Participants to elect to defer up to 75% of their base compensation and up to 100% of bonuses and other compensation and to have such deferred amounts deemed to be invested in specified investment options. In addition to the Participant deferrals, the Company may choose to make matching contributions to some or all of the Participants in the Deferred Compensation Plan to the extent the Participant did not receive the maximum matching or non-elective contributions permissible under the Company’s 401(k) Plan due to limitations under the Internal Revenue Code or the 401(k) Plan. Participants may elect to receive payment of their account balances in a single cash payment or in annual installments for a period of up to ten years. The first payroll subject to the Deferred Compensation Plan was in July 2018. The deferred compensation liability as of December 31, 2018 amounted to $298,638 and is recorded in accounts payable, accrued expenses and other liabilities in the consolidated balance sheets. The Company made voluntary contributions of $24,957 for the year ended December 31, 2018, which are recorded in other operating expenses in the consolidated statements of income and comprehensive (loss) income. |
17. Commitments and Contingencies |
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17. Commitments and Contingencies | Litigation
From time to time, the Company may be involved in various legal proceedings in the ordinary course of business. For example, to the extent a claim asserted by a third party in a lawsuit against one of the Company’s insureds covered by a particular policy, the Company may have a duty to defend the insured party against the claim. These claims may relate to bodily injury, property damage or other compensable injuries as set forth in the policy. Such proceedings are considered in estimating the liability for loss and LAE expenses. The Company is currently not subject to any other pending legal proceedings that management believes are likely to have a material adverse effect on the consolidated financial statements.
Office Lease
The Company is a party to a non-cancellable operating lease, dated March 27, 2015, for its office facility for KICO located in Valley Stream, New York. In June 2016, the Company entered into a lease modification agreement. The original lease had a term of seven years and nine months. The lease modification increased the space occupied by KICO and extended the lease term to seven years and nine months to be measured from the additional premises commencement date. The additional premises commencement date was September 19, 2016, and additional rent was payable beginning March 19, 2017. The original lease commencement date was July 1, 2015 and rent commencement began January 1, 2016.
In addition to the base rental costs, occupancy lease agreements generally provide for rent escalations resulting from increased assessments from real estate taxes and other charges. Rent expense under the lease is recognized on a straight-line basis over the lease term. At December 31, 2018, cumulative rent expense exceeded cumulative rent payments by $91,800. This difference is recorded as deferred rent and is included in accounts payable, accrued expenses and other liabilities in the accompanying consolidated balance sheets.
As of December 31, 2018, aggregate future minimum rental commitments under this agreement are as follows:
Rent expense for the years ended December 31, 2018 and 2017 amounted to $165,368, and is included in the consolidated statements of income and comprehensive (loss) income within other underwriting expenses.
Employment Agreements
Barry Goldstein
(1) Agreement in effect for the years ended December 31, 2017 and 2018
On January 20, 2017, the Company and Mr. Goldstein, the Company’s President, Chairman of the Board and Chief Executive Officer through December 31, 2018, entered into a new employment agreement (the “2017 Goldstein Employment Agreement”). The 2017 Goldstein Employment Agreement was effective as of January 1, 2017 and was originally scheduled to expire on December 31, 2019 (see below for Agreement in effect as January 1, 2019).
Pursuant to the 2017 Goldstein Employment Agreement, Mr. Goldstein was entitled to receive an annual base salary of $630,000 and an annual bonus equal to 6% of the Company's consolidated income from operations before taxes, exclusive of net investment income (loss) and net realized gains (losses) on investments. In addition, pursuant to the 2017 Goldstein Employment Agreement, Mr. Goldstein was entitled to a long-term compensation payment ("LTC") of between $945,000 and $2,835,000 in the event the Company's adjusted book value per share as defined, increased by at least an average of 8% per annum as of December 31, 2019 as compared to December 31, 2016 (with the maximum LTC payment being due if the average per annum increase is at least 14%). Accrued LTC compensation expense (credit) of $(247,311) and $945,000 for the years ended December 31, 2018 and 2017 is included in other operating expenses on the accompanying consolidated statements of income and comprehensive (loss) income.
Further, pursuant to the 2017 Goldstein Employment Agreement, in the event that Mr. Goldstein's employment is terminated by the Company without cause or he resigns for good reason each as defined, Mr. Goldstein would be entitled to receive his base salary, the 6% bonus and the LTC payment for the remainder of the term. Mr. Goldstein would be entitled, under certain circumstances, to a payment equal to one and one-half times his then annual salary and the target LTC payment of $1,890,000 in the event of the termination of his employment following a change of control of the Company.
(2) Agreement in effect as of January 1, 2019
On October 16, 2018, the Company entered into an amended and restated employment agreement with Mr. Goldstein effective as of January 1, 2019 and expiring on December 31, 2021 (the “Amended Employment Agreement”). Pursuant to the Amended Employment Agreement, Mr. Goldstein stepped down as Chief Executive Officer on January 1, 2019 and was named Executive Chairman of the Board.
Mr. Goldstein will be entitled to receive an annual base salary of $636,500 for the calendar year 2019 and $500,000 for each of the calendar years 2020 and 2021. In addition, Mr. Goldstein is eligible to receive an annual performance bonus equal to 3% of the Company’s consolidated income from operations before taxes, exclusive of net investment income (loss) and net realized gains (losses) on investments. In addition, Mr. Goldstein will continue to be entitled to a long-term compensation award (“LTC”) (which is a continuation of the previous terms under the 2017 Goldstein Employment Agreement) of between $945,000 and $2,835,000 based on a specified minimum increase in the Company’s adjusted book value per share, as defined, as of December 31, 2019 as compared to December 31, 2016 (with the maximum LTC payment being due if the average per annum increase is at least 14%). Furthermore, in the event that Mr. Goldstein’s employment is terminated by the Company without cause or he resigns for good reason, each as defined, Mr. Goldstein would be entitled to receive separation payments equal to his then applicable base salary, the 3% bonus and the LTC payment for the remainder of the term. Mr. Goldstein would be entitled, under certain circumstances, to a payment equal to three times his then annual salary and the target LTC payment in the event of the termination of his employment following a change of control of the Company. Mr. Goldstein will also be entitled to receive a grant, under the terms of the 2014 Plan, during the first 30 days of January 2020, with respect to a number of shares of restricted stock determined by dividing $436,500 by the fair market value of the Company stock on the date of grant. The January 2020 grant will become vested with respect to 50% of the award on each of December 31, 2020 and December 31, 2021 based on continued provision of services on each vesting date. In addition, Mr. Goldstein will be entitled to receive a grant, under the 2014 Plan, during the first 30 days of 2021, with respect to a number of shares of restricted stock determined by dividing $236,500 by the fair market value of the Company stock on the date of grant. The January 2021 grant will become vested as of December 31, 2021 based on continued provision of services on the vesting date.
Dale A. Thatcher
(1) Agreement in effect for the year ended December 31, 2018
On March 14, 2018, the Company and Dale A. Thatcher, a director of the Company, entered into an employment agreement (the “Thatcher Employment Agreement”) pursuant to which Mr. Thatcher serves as the Company’s Chief Operating Officer. Mr. Thatcher also serves as KICO’s President. The Thatcher Employment Agreement became effective as of March 15, 2018 and expired on December 31, 2018.
Pursuant to the Thatcher Employment Agreement, Mr. Thatcher is entitled to receive a base salary of $500,000 per annum and a minimum bonus equal to 15% of his base salary. Concurrently with the execution of the Thatcher Employment Agreement, the Company granted to Mr. Thatcher 35,715 shares of restricted Common Stock under the 2014 Plan. The shares granted will vest in three equal installments on each of the three anniversaries following the grant date, subject to the terms of the restricted stock grant agreement between the Company and Mr. Thatcher.
(2) Agreement in effect as of January 1, 2019
On October 16, 2018, the Company and Mr. Thatcher entered into an Employment Agreement effective as of January 1, 2019 and expiring on December 31, 2021 (the “2019 Thatcher Employment Agreement”). Pursuant to the 2019 Thatcher Employment Agreement, Mr. Thatcher was promoted to succeed Mr. Goldstein as Chief Executive Officer effective January 1, 2019. Mr. Thatcher will continue to serve as a director and will remain President of KICO.
Mr. Thatcher will be entitled to receive an annual base salary of $500,000 for 2019, $630,000 for 2020 and no increase in 2021. In addition, Mr. Thatcher is eligible to receive an annual performance bonus equal to 3% of the Company’s consolidated income from operations before taxes, exclusive of the net investment income (loss) and net realized gains (losses) on investments. In the event that Mr. Thatcher’s employment is terminated by the Company without cause or he resigns for good reason, each as defined, Mr. Thatcher would be entitled to receive separation payments equal to his then applicable base salary and the 3% bonus for the remainder of the term. Mr. Thatcher will also be entitled to receive a grant, under the terms of the 2014 Equity Plan, with respect to a number of shares of restricted stock in each of 2019, 2020 and 2021 determined by dividing $750,000, $1,250,000 and $1,500,000, respectively, by the fair market value of the Company’s stock on the date of grant. Each grant vests ratably over a three-year period from the date of grant.
Approval Required for Transactions with Subsidiary
On July 1, 2009, Kingstone completed the acquisition of 100% of the issued and outstanding common stock of KICO (formerly known as Commercial Mutual Insurance Company (“CMIC”)) pursuant to the conversion of CMIC from an advance premium cooperative to a stock property and casualty insurance company. Pursuant to the plan of conversion, Kingstone acquired a 100% equity interest in KICO. In connection with the plan of conversion of CMIC, the Company has agreed with the DFS that any intercompany transaction between itself and KICO must be filed with the DFS 30 days prior to implementation.
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18. Earnings Per Common Share |
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18. Earnings Per Common Share | Basic net earnings per common share is computed by dividing income available to common shareholders by the weighted-average number of common shares outstanding. Diluted earnings per common share reflect, in periods in which they have a dilutive effect, the impact of common shares issuable upon exercise of stock options as well as non-vested restricted stock awards. The computation of diluted earnings per common share excludes those options with an exercise price in excess of the average market price of the Company’s common shares during the periods presented.
The computation of diluted earnings per common share excludes outstanding options in periods where the exercise of such options would be anti-dilutive. For the years ended December 31, 2018 and 2017, the inclusion of -0- options, in the computation of diluted earnings per common share would have been anti-dilutive for the periods and, as a result, the weighted average number of common shares used in the calculation of diluted earnings per common share has not been adjusted for the effect of such options.
The reconciliation of the weighted average number of common shares used in the calculation of basic and diluted earnings per common share follows:
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19. Subsequent Events |
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19. Subsequent Events |
The Company has evaluated events that occurred subsequent to December 31, 2018 through March 15, 2019, the date these consolidated financial statements were issued for matters that required disclosure or adjustment in these consolidated financial statements. Dividends Declared and Paid
On February 14, 2019, the Company’s Board of Directors approved a dividend of $.10 per share payable in cash on March 15, 2019 to stockholders of record as of February 28, 2019. |
20. Quarterly Financial Data |
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Quarterly Financial Information Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
20. Quarterly Financial Data | The following is a summary of unaudited quarterly results of operations for the years ended December 31, 2018 and 2017:
Due to changes in number of shares outstanding from quarter to quarter, the total earnings per share of the four quarters may not necessarily equal the earnings per share for the year.
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2. Summary of Significant Accounting Policies (Policies) |
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Summary Of Significant Accounting Policies | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Basis of Presentation | The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). |
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Principles of Consolidation | The consolidated financial statements consist of Kingstone and its wholly owned subsidiaries: KICO and its wholly owned subsidiaries, CMIC Properties, Inc. (“Properties”) and 15 Joys Lane, LLC (“15 Joys Lane”), which together own the land and building from which KICO operates. All significant inter-company account balances and transactions have been eliminated in consolidation. |
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Revenue Recognition | Net Premiums Earned
Insurance policies issued by the Company are short-duration contracts. Accordingly, premium revenues, net of premiums ceded to reinsurers, are recognized as earned in proportion to the amount of insurance protection provided, on a pro-rata basis over the terms of the underlying policies. Unearned premiums represent premiums applicable to the unexpired portions of in-force insurance contracts at the end of each year.
Ceding Commission Revenue
Commissions on reinsurance premiums ceded are earned in a manner consistent with the recognition of the costs of the reinsurance, generally on a pro-rata basis over the terms of the policies reinsured. Unearned amounts are recorded as deferred ceding commission revenue. Certain reinsurance agreements contain provisions whereby the ceding commission rates vary based on the loss experience under the agreements. The Company records ceding commission revenue based on its current estimate of subject losses. The Company records adjustments to ceding commission revenue in the period that changes in the estimated losses are determined.
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Loss and Loss Adjustment Expenses ("LAE") Reserves |
The liability for loss and LAE represents management’s best estimate of the ultimate cost of all reported and unreported losses that are unpaid as of the balance sheet date. The liability for loss and LAE is estimated on an undiscounted basis, using individual case-basis valuations, statistical analyses and various actuarial reserving methodologies. The projection of future claim payment and reporting is based on an analysis of the Company’s historical experience, supplemented by analyses of industry loss data. Management believes that the reserves for loss and LAE are adequate to cover the ultimate cost of losses and claims to date; however, because of the uncertainty from various sources, including changes in reporting patterns, claims settlement patterns, judicial decisions, legislation, and economic conditions, actual loss experience may not conform to the assumptions used in determining the estimated amounts for such liability at the balance sheet date. Adjustments to these estimates are reflected in expense for the period in which the estimates are changed. Because of the nature of the business historically written, management believes that the Company has limited exposure to environmental claim liabilities. |
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Reinsurance |
In the normal course of business, the Company seeks to reduce the loss that may arise from catastrophes or other events that cause unfavorable underwriting results. This is done by reinsuring certain levels of risk in various areas of exposure with a panel of financially secure reinsurance carriers.
Reinsurance receivables represents management’s best estimate of paid and unpaid loss and LAE recoverable from reinsurers, and ceded losses receivable and unearned ceded premiums under reinsurance agreements. Ceded losses receivable are estimated using techniques and assumptions consistent with those used in estimating the liability for loss and LAE. Management believes that reinsurance receivables as recorded represent its best estimate of such amounts; however, as changes in the estimated ultimate liability for loss and LAE are determined, the estimated ultimate amount receivable from the reinsurers will also change. Accordingly, the ultimate receivable could be significantly in excess of or less than the amount recorded in the consolidated financial statements. Adjustments to these estimates are reflected in the period in which the estimates are changed. Loss and LAE incurred as presented in the consolidated statements of income and comprehensive (loss) income are net of reinsurance recoveries.
Management estimates uncollectible amounts receivable from reinsurers based on an assessment of factors including the creditworthiness of the reinsurers and the adequacy of collateral obtained, where applicable. There was no allowance for uncollectible reinsurance as of December 31, 2018 and 2017. The Company did not expense any uncollectible reinsurance for the years ended December 31, 2018 and 2017. Significant uncertainties are inherent in the assessment of the creditworthiness of reinsurers and estimates of any uncollectible amounts due from reinsurers. Any change in the ability of the Company’s reinsurers to meet their contractual obligations could have a material adverse effect on the consolidated financial statements as well as KICO’s ability to meet its regulatory capital and surplus requirements.
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Cash and Cash Equivalents | The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. The Company maintains its cash balances at several financial institutions. |
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Investments |
The Company classifies its fixed-maturity securities as either held-to-maturity or available-for-sale. Effective January 1, 2018, the Company adopted ASU 2016-01, which resulted in changes in the estimated fair value of equity securities and other investments held at December 31, 2018 being reported in net income instead of other comprehensive income (loss). For additional discussion, see Note 2, Accounting Policies. The Company may sell its available-for-sale securities, equity securities, and other investments in response to changes in interest rates, risk/reward characteristics, liquidity needs or other factors. Fixed-maturity securities that the Company has the specific intent and ability to hold until maturity are classified as such and carried at amortized cost.
Available-for-sale securities are reported at their estimated fair values based on quoted market prices from a recognized pricing service, with unrealized gains and losses, net of tax effects, reported as a separate component of accumulated other comprehensive income (loss). Realized gains and losses are determined on the specific identification method and reported in net income in the consolidated statements of income and comprehensive income (loss).
Equity securities are reported at their estimated fair values based on quoted market prices from recognized pricing services, with unrealized gains and losses reported in net income. Other investments are reported at their estimated fair values using the net asset value (“NAV”) per share (or its equivalent) of the instrument with unrealized gains and losses reported in net income. See Note 3, Investments for additional discussion.
Investment income is accrued to the balance sheet dates of the consolidated financial statements and includes amortization of premium and accretion of discount on fixed-maturity securities. Interest is recognized when earned, while dividends are recognized when declared. Due and accrued investment income totaled approximately $1,721,000 and $1,136,000 as of December 31, 2018 and 2017, respectively, and is included in other assets on the accompanying consolidated balance sheets. |
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Premiums Receivable | Premiums receivable include balances due currently or in the future and are presented net of an allowance for doubtful accounts of approximately $255,000 and $291,000 as of December 31, 2018 and 2017, respectively. The allowance for uncollectible amounts is based on an analysis of amounts receivable giving consideration to historical loss experience and current economic conditions and reflects an amount that, in management’s judgment, is adequate. Uncollectible premiums receivable balances of approximately $252,000 and $138,000 were written off for the years ended December 31, 2018 and 2017, respectively. |
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Deferred Policy Acquisition Costs | Policy acquisition costs represent the costs of writing business that vary with, and are primarily related to, the successful production of insurance business (principally commissions, premium taxes and certain underwriting salaries). Policy acquisition costs are deferred and recognized as expense as related premiums are earned. |
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Intangible Assets |
The Company has recorded acquired identifiable intangible assets. The cost of a group of assets acquired in a transaction is allocated to the individual assets including identifiable intangible assets based on their fair values. Identifiable intangible assets with a finite useful life are amortized over the period that the asset is expected to contribute directly or indirectly to the future cash flows of the Company. Intangible assets with an indefinite life are not amortized, but are subject to impairment testing if events or changes in circumstances indicate that it is more likely than not the asset is impaired. All identifiable intangible assets are tested for recoverability whenever events or changes in circumstances indicate that a carrying amount may not be recoverable. No impairment losses from intangible assets were recognized for the years ended December 31, 2018 and 2017. |
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Property and Equipment | Building and building improvements, automobiles, furniture, computer equipment, and computer software are reported at cost less accumulated depreciation. Depreciation is provided using the straight-line method over the estimated useful lives of the assets. The Company estimates the useful life for computer equipment, computer software, automobiles, furniture and other equipment is three years, and building and building improvements is 39 years.
The Company reviews its real estate assets used as its headquarters to evaluate the necessity of recording impairment losses for market changes due to declines in the estimated fair value of the property. In evaluating potential impairment, management considers the current estimated fair value compared to the carrying value of the asset. At December 31, 2018 and 2017, the fair value of the real estate assets is estimated to be in excess of the carrying value. |
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Income Taxes | Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis and for operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The Company files a consolidated tax return with its subsidiaries. At December 31, 2018, the Company had no material unrecognized tax benefits and no adjustments to liabilities or operations were required.
On December 22, 2017, the Tax Cuts and Jobs Act of 2017 was enacted (see Note 15 - Income Taxes). |
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Assessments | Insurance related assessments are accrued in the period in which they have been incurred. A typical obligating event would be the issuance of an insurance policy or the occurrence of a claim. The Company is subject to a variety of assessments. |
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Concentration and Credit Risk | Financial instruments that potentially subject the Company to concentration of credit risk are primarily cash and cash equivalents, investments, and premium and reinsurance receivables. Investments are diversified through many industries and geographic regions based upon KICO’s Investment Committee’s guidelines, which employs a variety of investment strategies. The Company believes that no significant concentration of credit risk exists with respect to investments. At times, cash may be uninsured or in deposit accounts that exceed the Federal Deposit Insurance Corporation (“FDIC”) insurance limits. The Company has not experienced any losses in such accounts and management believes the Company is not exposed to any significant credit risk. Cash equivalents are not insured by the FDIC.
As of December 31, 2018 and 2017, the Company’s cash equivalents were as follows:
(1) The Company has a security interest in certain of the bank's holdings of direct obligations of the United States or one or more agencies thereof. The collateral is held in a hold-in-custody arrangement with a third party who maintains physical possession of the collateral on behalf of the bank.
At December 31, 2018, the outstanding premiums receivable balance is generally diversified due to the large number of individual insureds comprising the Company’s customer base. The Company’s customer base is concentrated in the New York City metropolitan area. The Company also has receivables from its reinsurers.
Reinsurance contracts do not relieve the Company of its obligations to policyholders. Failure of reinsurers to honor their obligations could result in losses to the Company. The Company periodically evaluates the financial condition of its reinsurers to minimize its exposure to significant losses from reinsurer insolvencies. See Note 7 for reinsurance recoverables on unpaid and paid losses by reinsurer. Management’s policy is to review all outstanding receivables quarterly as well as the bad debt write-offs experienced in the past and establish an allowance for doubtful accounts, if deemed necessary.
Direct premiums earned from lines of business in excess of 10% of the total subject the Company to concentration risk for the years ended December 31, 2018 and 2017 as follows:
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Use of Estimates | The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The actual results could differ from these estimates and assumptions, which include the reserves for losses and loss adjustment expenses, which are subject to estimation errors due to the inherent uncertainty in projecting ultimate claim amounts that will be reported and settled over a period of many years. In addition, estimates and assumptions associated with receivables under reinsurance contracts related to contingent ceding commission revenue require judgments by management. On an on-going basis, management reevaluates its assumptions and the methods for calculating these estimates. Actual results may differ significantly from the estimates and assumptions used in preparing the consolidated financial statements. |
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Earnings per share | Basic earnings per common share is computed by dividing income available to common stockholders by the weighted-average number of common shares outstanding. Diluted earnings per common share reflect, in periods in which they have a dilutive effect, the impact of common shares issuable upon the exercise of stock options as well as non-vested restricted stock awards. The computation of diluted earnings per share excludes those options with an exercise price in excess of the average market price of the Company’s common shares during the periods presented. Additionally, the computation of diluted earnings per share excludes unvested restricted stock awards as calculated using the treasury stock method.
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Advertising Costs |
Advertising costs are charged to operations when the advertising is initiated. Advertising costs are included in other underwriting expenses in the accompanying consolidated statements of income and comprehensive income (loss), and were approximately $173,000 and $202,000 for the years ended December 31, 2018 and 2017, respectively. |
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Stock-based Compensation | Stock-based compensation expense in 2018 and 2017 is the estimated fair value of restricted stock awards and options granted, amortized on a straight-line basis over the requisite service period for the entire portion of the award less an estimate for anticipated forfeitures. The Company uses the “simplified” method to estimate the expected term of the options because the Company’s historical share option exercise experience does not provide a reasonable basis upon which to estimate expected term.
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Compensated Absences |
Employees of the Company are entitled to paid vacations, sick days, and other time off depending on job classification, length of service and other factors. It is impracticable to estimate the amount of compensation of future absences and, accordingly, no liability has been recorded in the accompanying consolidated financial statements. The Company’s policy is to recognize the cost of compensated absences when paid to employees. |
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Comprehensive Income (Loss) |
Comprehensive income (loss) refers to revenues, expenses, gains and losses that are included in comprehensive income (loss) but are excluded from net income as these amounts are recorded directly as an adjustment to stockholders' equity, primarily from changes in unrealized gains and losses on available-for-sale securities, and related income taxes. |
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Accounting Changes |
In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09 – Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”). The core principle of the new guidance is that an entity should recognize revenue to reflect the transfer of goods and services to customers in an amount equal to the consideration the entity receives or expects to receive. The Company adopted ASU 2014-09 effective January 1, 2018. The standard excludes from its scope the accounting for insurance contracts, financial instruments, and certain other agreements that are governed under other GAAP guidance. Accordingly, the adoption of ASU 2014-09, as amended, did not have a material impact on the Company’s consolidated financial statements. In January 2016, the FASB issued ASU 2016-01 – Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”). Effective January 1, 2018, the Company adopted the provisions of ASU 2016-01. The updated guidance requires equity investments, including limited partnership interests, except those accounted for under the equity method of accounting, that have a readily determinable fair value to be measured at fair value with any changes in fair value recognized in net income. Equity securities that do not have readily determinable fair values may be measured at estimated fair value or cost less impairment, if any, adjusted for subsequent observable price changes, with changes in the carrying value recognized in net income. A qualitative assessment for impairment is required for equity investments without readily determinable fair values. The updated guidance also eliminates the requirement to disclose the method and significant assumptions used to estimate the fair value of financial instruments measured at amortized cost on the balance sheet. The adoption of this guidance resulted in the recognition of approximately $414,000 of net after-tax unrealized gains on equity investments as a cumulative effect adjustment that increased retained earnings as of January 1, 2018 and decreased accumulated other comprehensive income (loss) (“AOCI”) by the same amount. The Company elected to report changes in the fair value of equity investments in net gains (losses) on investments in the consolidated statements of income and comprehensive income (loss). At December 31, 2017, equity investments were classified as available-for-sale on the Company's consolidated balance sheet. However, upon adoption, the updated guidance eliminated the available-for-sale balance sheet classification for equity investments. Furthermore, for the year ended December 31, 2018, net loss on investments of approximately $2,496,000 recorded in the consolidated statements of income and comprehensive income (loss) includes net losses of approximately $2,402,000 from the estimated fair value change of equity securities and other investments. In August 2016, the FASB issued ASU 2016-15 – Statement of Cash Flows (Topic 320): Classification of Certain Cash Receipts and Cash Payments (“ASU 2016-15”). The revised ASU provides accounting guidance for eight specific cash flow issues. The FASB issued the standard to clarify areas where GAAP has been either unclear or lacking in specific guidance. The Company adopted this ASU effective January 1, 2018, and it did not have a material impact on the Company’s consolidated financial statements. In May 2017, the FASB issued ASU 2017-09, Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting (“ASU 2017-09”). ASU 2017-09 clarifies when to account for a change to the terms or conditions of a share-based payment award as a modification. Under the new guidance, modification accounting is required only if the fair value, the vesting conditions, or the classification of the award (as equity or liability) changes as a result of the change in terms or conditions. The Company adopted this ASU effective January 1, 2018 on a prospective basis and it did not have a material impact on the Company’s consolidated financial statements. In February 2018, the FASB issued ASU 2018-02 - Income Statement – Reporting Comprehensive Income (Topic 220) – Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (“ASU 2018-02”). The deferred income tax liability for unrealized gains on available-for-sale securities that were re-measured due to the reduction in corporate income tax rates under the Tax Cuts and Jobs Act of 2017 (the “Tax Act”) resulted in a stranded tax effect within AOCI. This is due to the effect of the tax rate change being recorded through continuing operations as required under Accounting Standards Codification 740 (“ASC 740”). The revised ASU allows for the reclassification of the stranded tax effects as a result of the Act from AOCI to retained earnings and requires certain other disclosures. Effective December 31, 2017, the Company chose to early adopt the provisions of ASU 2018-02 and recorded a one-time reclassification of $182,912 from AOCI to retained earnings for the stranded tax effects resulting from the newly enacted corporate tax rate. The amount of the reclassification was the difference between the historical corporate tax rate and the newly enacted 21% corporate tax rate. |
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Recent Accounting Pronouncements |
In February 2016, the FASB issued ASU 2016-02 – Leases (Topic 842) (“ASU 2016-02”). Under this ASU, lessees will recognize a right-of-use-asset and corresponding liability on the balance sheet for all leases, except for leases covering a period of fewer than 12 months. The liability is to be measured as the present value of the future minimum lease payments taking into account renewal options if applicable plus initial incremental direct costs such as commissions. The minimum payments are discounted using the rate implicit in the lease or, if not known, the lessee’s incremental borrowing rate. The lessee’s income statement treatment for leases will vary depending on the nature of what is being leased. A financing type lease is present when, among other matters, the asset is being leased for a substantial portion of its economic life or has an end-of-term title transfer or a bargain purchase option as in today’s practice. The payment of the liability set up for such leases will be apportioned between interest and principal; the right-of use asset will be generally amortized on a straight-line basis. If the lease does not qualify as a financing type lease, it will be accounted for on the income statement as rent on a straight-line basis. The Company will be adopting ASU 2016-02 effective January 1, 2019. Under the new lease guidance, the Company’s assets and liabilities will increase by approximately $960,000 primarily related to an operating lease for office space. The Company does not expect material changes to the consolidated statements of income and comprehensive (loss) income. In June 2016, FASB issued ASU 2016-13 - Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). The revised accounting guidance requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts and requires enhanced disclosures related to the significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an organization’s portfolio. In addition, ASU 2016-13 amends the accounting for credit losses of available-for-sale debt securities and purchased financial assets with credit deterioration. ASU 2016-13 will be effective on January 1, 2020. The Company is currently evaluating the effect the updated guidance will have on its consolidated financial statements. In August 2018, the Securities and Exchange Commission (the “SEC”) adopted the final rule under SEC Release No. 33-10532, “Disclosure Update and Simplification,” amending certain disclosure requirements that were redundant, duplicative, overlapping, outdated or superseded. In addition, the amendments expanded the disclosure requirements on the analysis of stockholders' equity for interim financial statements. Under the amendments, an analysis of changes in each caption of stockholders' equity presented in the balance sheet must be provided in a note or separate statement. The analysis should present a reconciliation of the beginning balance to the ending balance of each period for which a statement of comprehensive income is required to be filed. This final rule is effective on November 5, 2018. The Company is evaluating the impact of this guidance on its consolidated financial statements. The Company anticipates its first presentation of changes in stockholders’ equity will be included in its Form 10-Q for the quarter ending March 31, 2019. The Company has determined that all other recently issued accounting pronouncements will not have a material impact on its consolidated financial position, results of operations and cash flows, or do not apply to its operations. |
2. Summary of Significant Accounting Policies (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Accounting Policies And Basis Of Presentation Tables Abstract | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of deposits of cash equivalents |
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Schedule of Concentration Risk |
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3. Investments (Tables) |
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Investments Tables Abstract | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Available for Sale Securities |
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Schedule of Available for Sale Securities by contractual maturity |
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Schedule of Other Investments |
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Schedule of Held to Maturity Securities |
Held-to-maturity U.S. Treasury securities are held in trust |
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Schedule of Held to Maturity Securities by contractual maturity |
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Schedule of Investment Income |
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Schedule of Securities with realized gains and losses on investments |
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Schedule of Securities with Unrealized Losses |
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4. Fair Value Measurements (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurements | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Fair Value Measurements |
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Schedule of Hedge Fund Investments |
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Fair value hierarchy of long-term debt |
|
5. Fair Value of Financial Instruments (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Of Financial Instruments | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Fair Value of Financial Instruments |
|
6. Intangibles (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Intangibles | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of components of intangible assets and their useful lives, accumulated amortization, and net carrying value |
|
7. Reinsurance (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reinsurance Tables Abstract | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Line of Business |
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Single maximum risks under treaties per occurrence |
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Schedule of approximate reinsurance recoverables |
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Schedule of Ceding commissions earned |
|
8. Deferred Policy Acquisition Costs and Deferred Ceding Commission Revenue (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Deferred Policy Acquisition Costs And Deferred Ceding Commission Revenue | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of acquisition costs incurred |
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Schedule of Ending balances for deferred acquisition costs and deferred ceding commission revenue |
|
9. Debt (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Tables Abstract | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Long-term debt |
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10. Property and Equipment (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property And Equipment | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of components of property and equipment |
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11. Property and Casualty Insurance Activity (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property And Casualty Insurance Activity | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Earned Premiums |
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Schedule of Loss and Loss Adjustment Expenses |
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Schedule of Ceding Commission Revenue |
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Incurred Claims and Allocated Claim Adjustment Expenses |
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Cumulative Paid Claims and Allocated Claim Adjustment Expenses |
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Reconciliation of the net incurred and paid claims |
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Supplementary unaudited information about average historical claims duration |
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12. Stockholders' Equity (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stockholders Equity | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Stock Options Activity |
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15. Income Taxes (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Taxes Tables Abstract | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of provision for income taxes from continuing operations |
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Schedule of a reconciliation of the federal statutory rate |
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Schedule of Deferrred Tax Assets and Liabilities |
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Schedule of net operating loss carryovers |
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Schedule of changes in net deferred income tax liability to the deferred income tax provision |
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17. Commitments and Contingencies (Tables) (USD $) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commitments And Contingencies Tables | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of future minimum rental commitments |
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18. Earnings Per Common Share (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings per common share: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reconciliation of the weighted average number of shares of Common Stock used in the calculation of basic and diluted earnings per common share |
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20. Quarterly Financial Data (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Quarterly Financial Data | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Quarterly Financial Data |
|
2. Accounting Policies and Basis of Presentation (Details) - USD ($) |
Dec. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
Accounting Policies And Basis Of Presentation | ||
Collateralized bank repurchase agreement (1) | $ 568,123 | $ 10,249,985 |
Money market fund | 15,012,559 | 35,874,700 |
Total | $ 15,580,682 | $ 46,124,685 |
2. Accounting Policies and Basis of Presentation (Details 1) |
12 Months Ended | |
---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Total premiums earned subject to concentration | 92.30% | 99.70% |
Premiums earned not subject to concentration | 7.70% | 0.30% |
Total premiums earned | 100.00% | 100.00% |
Personal Lines [Member] | ||
Total premiums earned subject to concentration | 80.70% | 77.20% |
Commercial Lines [Member] | ||
Total premiums earned subject to concentration | 11.60% | 12.20% |
Commercial Auto [Member] | ||
Total premiums earned subject to concentration | 0.00% | 10.30% |
2. Accounting Policies and Basis of Presentation (Details Narrative) - USD ($) |
12 Months Ended | |
---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Accounting Policies And Basis Of Presentation Details Narrative Abstract | ||
Allowance for uncollectible reinsurance | $ 0 | $ 0 |
Due and accrued investment income | 1,721,000 | 1,136,000 |
Allowance for doubtful accounts | 255,000 | 291,000 |
Uncollectible premiums receivable balances written off | 252,000 | 138,000 |
Advertising costs | $ 173,000 | $ 202,000 |
3. Investments (Details 1) - USD ($) |
Dec. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
Amortized Cost | $ 155,431,261 | $ 119,122,106 |
Fair Value | 151,777,516 | 119,988,256 |
Less Than One Year | ||
Amortized Cost | 6,742,519 | 2,585,479 |
Fair Value | 6,738,014 | 2,595,938 |
One To Five Years | ||
Amortized Cost | 47,038,838 | 31,716,345 |
Fair Value | 46,640,012 | 32,065,197 |
Five To Ten Years | ||
Amortized Cost | 76,884,505 | 62,702,945 |
Fair Value | 74,290,076 | 63,129,543 |
More Than 10 Years | ||
Amortized Cost | 2,974,426 | 1,653,984 |
Fair Value | 2,644,180 | 1,666,230 |
Residential mortgage backed securities | ||
Amortized Cost | 21,790,973 | 20,463,353 |
Fair Value | $ 21,465,234 | $ 20,531,348 |
3. Investments (Details 3) - USD ($) |
Dec. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
Amortized Cost | $ 4,222,855 | $ 4,869,808 |
Fair Value | 4,426,416 | 5,150,076 |
Less Than One Year | ||
Amortized Cost | 0 | 0 |
Fair Value | 0 | 0 |
One To Five Years | ||
Amortized Cost | 2,996,685 | 2,546,459 |
Fair Value | 3,036,531 | 2,601,898 |
Five To Ten Years | ||
Amortized Cost | 619,663 | 1,716,884 |
Fair Value | 635,846 | 1,794,139 |
More Than 10 Years | ||
Amortized Cost | 606,507 | 606,465 |
Fair Value | $ 754,039 | $ 754,039 |
3. Investments (Details 4) - USD ($) |
12 Months Ended | |
---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Income: | ||
Fixed-maturity securities | $ 5,316,970 | $ 3,664,577 |
Equity securities | 820,827 | 564,071 |
Cash and cash equivalents | 219,238 | 56,075 |
Total | 6,357,035 | 4,284,723 |
Expenses: | ||
Investment expenses | 170,787 | 152,137 |
Net investment income | $ 6,186,248 | $ 4,132,586 |
3. Investments (Details 5) - USD ($) |
3 Months Ended | 12 Months Ended | ||||||||
---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2018 |
Sep. 30, 2018 |
Jun. 30, 2018 |
Mar. 31, 2018 |
Dec. 31, 2017 |
Sep. 30, 2017 |
Jun. 30, 2017 |
Mar. 31, 2017 |
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Fixed-maturity securities: | ||||||||||
Gross realized gains | $ 117,186 | $ 70,478 | ||||||||
Gross realized losses | (618,699) | (309,247) | ||||||||
Total fixed-maturity securities, realized | (501,513) | (238,769) | ||||||||
Gross unrealized gains | 0 | 0 | ||||||||
Gross unrealized losses | (2,257,727) | 0 | ||||||||
Total fixed-maturity securities, unrealized | (2,257,727) | 0 | ||||||||
Equity securities: | ||||||||||
Gross realized gains | 992,012 | 636,880 | ||||||||
Gross realized losses | (584,473) | (263,798) | ||||||||
Total equity securities, realized | 407,539 | 373,082 | ||||||||
Net realized (losses) gains | (93,974) | 134,313 | ||||||||
Gross unrealized gains | 0 | 0 | ||||||||
Gross unrealized losses | (144,156) | 0 | ||||||||
Total equity securities, unrealized | (144,156) | 0 | ||||||||
Net unrealized losses | (2,401,883) | 0 | ||||||||
Net (losses) gains on investments | $ (2,218,022) | $ 352,025 | $ (106,733) | $ (523,127) | $ (12,602) | $ 20,998 | $ 130,423 | $ (54,506) | (2,495,857) | 84,313 |
Other-than-temporary impairment losses: | ||||||||||
Fixed-maturity securities | $ 0 | $ (50,000) |
3. Investments (Details Narrative) - USD ($) |
12 Months Ended | |
---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Investments Details Narrative Abstract | ||
Proceeds from the sale and maturity of fixed-maturity securities, held to maturity | $ 624,963 | $ 247,500 |
Proceeds from the sale and maturity of fixed-maturity securities, available for sale | 21,381,668 | 11,132,000 |
Proceeds from the sale of equity securities | $ 9,246,840 | $ 3,862,127 |
4. Fair Value Measurements (Details 1) - USD ($) |
Dec. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
Fair Value Measurements Details 1Abstract | ||
Hedge fund | $ 1,855,225 | $ 0 |
Total other investments | $ 1,855,225 | $ 0 |
4. Fair Value Measurements (Details 2) - USD ($) |
Dec. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
Senior Notes due 2022 | $ 28,521,734 | $ 28,943,251 |
Fair Value Inputs Level 1 [Member] | ||
Senior Notes due 2022 | 0 | 0 |
Fair Value Inputs Level 2 [Member] | ||
Senior Notes due 2022 | 28,521,734 | 28,943,251 |
Fair Value Inputs Level 3 [Member] | ||
Senior Notes due 2022 | $ 0 | $ 0 |
6. Intangibles (Details) - USD ($) |
12 Months Ended | |
---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Gross Carrying Value | $ 4,850,000 | $ 4,850,000 |
Accumulated Amortization | 4,180,000 | 3,840,000 |
Net Carrying Amount | 670,000 | 1,010,000 |
Insurance license [Member] | ||
Gross Carrying Value | 500,000 | 500,000 |
Accumulated Amortization | 0 | 0 |
Net Carrying Amount | $ 500,000 | $ 500,000 |
Useful Life (in yrs) | 0 years | 0 years |
Customer relationships [Member] | ||
Gross Carrying Value | $ 3,400,000 | $ 3,400,000 |
Accumulated Amortization | 3,230,000 | 2,890,000 |
Net Carrying Amount | $ 170,000 | $ 510,000 |
Useful Life (in yrs) | 10 years | 10 years |
Other identifiable intangibles [Member] | ||
Gross Carrying Value | $ 950,000 | $ 950,000 |
Accumulated Amortization | 950,000 | 950,000 |
Net Carrying Amount | $ 0 | $ 0 |
Useful Life (in yrs) | 7 years | 7 years |
6. Intangibles (Details Narrative) - USD ($) |
12 Months Ended | |
---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Intangibles Details Narrative Abstract | ||
Amortization expense, related to intangibles | $ 340,000 | $ 340,000 |
7. Reinsurance (Details 2) - USD ($) |
Dec. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
Unpaid Losses | $ 15,671 | $ 16,748 |
Paid Losses | 4,453 | 2,533 |
Total | 20,124 | 19,281 |
Security | 7,606 | 10,788 |
Maiden Reinsurance Company [Member] | ||
Unpaid Losses | 5,319 | 8,160 |
Paid Losses | 1,277 | 968 |
Total | 6,596 | 9,128 |
Security | 7,548 | 10,583 |
Swiss Reinsurance America Corporation [Member] | ||
Unpaid Losses | 4,499 | 4,299 |
Paid Losses | 1,251 | 600 |
Total | 5,750 | 4,899 |
Security | 0 | 0 |
Hanover Rueck SE [Member] | ||
Unpaid Losses | 2,728 | 857 |
Paid Losses | 1,181 | 420 |
Total | 3,909 | 1,277 |
Security | 0 | 0 |
SCOR Reinsurance Company [Member] | ||
Unpaid Losses | 528 | 851 |
Paid Losses | 89 | 209 |
Total | 617 | 1,060 |
Security | 0 | 0 |
Allied World Assurance Company [Member] | ||
Unpaid Losses | 306 | 1,649 |
Paid Losses | 373 | 188 |
Total | 679 | 1,837 |
Security | 0 | 0 |
Others [Member] | ||
Unpaid Losses | 2,291 | 932 |
Paid Losses | 282 | 148 |
Total | 2,573 | 1,080 |
Security | $ 58 | $ 205 |
7. Reinsurance (Details 3) - USD ($) |
3 Months Ended | 12 Months Ended | ||||||||
---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2018 |
Sep. 30, 2018 |
Jun. 30, 2018 |
Mar. 31, 2018 |
Dec. 31, 2017 |
Sep. 30, 2017 |
Jun. 30, 2017 |
Mar. 31, 2017 |
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Reinsurance Details 2Abstract | ||||||||||
Provisional ceding commissions earned | $ 6,745,928 | $ 10,677,214 | ||||||||
Contingent ceding commissions earned | (1,413,298) | (744,081) | ||||||||
Ceding commission revenue | $ 901,775 | $ 1,044,529 | $ 1,691,168 | $ 1,695,158 | $ 1,725,133 | $ 1,717,610 | $ 3,305,938 | $ 3,184,452 | $ 5,332,630 | $ 9,933,133 |
7. Reinsurance (Details Narrative) - USD ($) |
Dec. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
Reinsurance Details Narrative Abstract | ||
Reinsurance receivables | $ 6,243,000 | $ 9,237,000 |
Reinsurance balances payable | $ 1,933,376 | $ 2,563,966 |
8. Deferred Policy Acquisition Costs and Deferred Ceding Commission Revenue (Details) - USD ($) |
12 Months Ended | |
---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Deferred Acquisition Costs And Deferred Ceding Commission Revenue Details | ||
Net deferred policy acquisition costs, net of ceding commission revenue, beginning of year | $ 10,580,824 | $ 5,387,940 |
Cost incurred and deferred: | ||
Commission and brokerage | 27,687,907 | 23,093,880 |
Other underwriting and policy acquisition costs | 8,227,992 | 6,669,904 |
Ceding commission revenue | (5,166,193) | (8,091,785) |
Net deferred policy acquisition costs | 30,749,706 | 21,671,999 |
Return of deferred ceding commission revenue due to reduction of quota share | (2,413,273) | (3,648,859) |
Amortization | (23,696,197) | (12,830,256) |
Deferred acquisition costs | 4,640,236 | 5,192,884 |
Net deferred policy acquisition costs, net of ceding commission revenue, end of year | $ 15,221,060 | $ 10,580,824 |
8. Deferred Policy Acquisition Costs and Deferred Ceding Commission Revenue (Details 1) - USD ($) |
Dec. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
Deferred Acquisition Costs And Deferred Ceding Commission Revenue Details 1Abstract | ||
Deferred policy acquisition costs | $ 17,907,737 | $ 14,847,236 |
Deferred ceding commission revenue | (2,686,677) | (4,266,412) |
Balance at end of period | $ 15,221,060 | $ 10,580,824 |
9. Debt (Details) - USD ($) |
Dec. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
Long-term debt, net | $ 29,295,251 | $ 29,126,965 |
Issuance costs | ||
Long-term debt, net | (574,953) | (710,826) |
5.50% Senior Unsecured Notes | ||
Long-term debt, net | 30,000,000 | 30,000,000 |
Discount | ||
Long-term debt, net | $ (129,796) | $ (162,209) |
10. Property and Equipment (Details) - USD ($) |
Dec. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
Cost | $ 10,818,734 | $ 8,107,644 |
Accumulated Depreciation | (4,761,805) | (3,314,769) |
Net | 6,056,929 | 4,772,577 |
Building | ||
Cost | 2,231,967 | 2,146,950 |
Accumulated Depreciation | (554,077) | (460,819) |
Net | 1,677,890 | 1,686,131 |
Land | ||
Cost | 622,937 | 575,698 |
Accumulated Depreciation | 0 | 0 |
Net | 622,937 | 575,698 |
Furniture office equipment | ||
Cost | 723,217 | 707,524 |
Accumulated Depreciation | (586,010) | (493,558) |
Net | 137,207 | 213,966 |
Computer equipment and software | ||
Cost | 7,240,613 | 4,657,174 |
Accumulated Depreciation | (3,621,718) | (2,360,392) |
Net | $ 3,618,895 | $ 2,296,782 |
10. Property and Equipment (Details Narrative) - USD ($) |
12 Months Ended | |
---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Property And Equipment Details Textual Abstract | ||
Depreciation expense | $ 1,447,150 | $ 1,062,928 |
11. Property and Casualty Insurance Activity (Details) - USD ($) |
12 Months Ended | |
---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Premiums Written | ||
Direct | $ 146,716,468 | $ 121,575,178 |
Assumed | 1,004 | 22,847 |
Ceded | (26,923,679) | (28,729,149) |
Net | 119,793,793 | 92,868,876 |
Changes In Unearned Premiums | ||
Direct | (13,388,535) | (10,662,744) |
Assumed | 4,067 | 9,456 |
Ceded | (2,994,610) | (4,864,565) |
Net | (16,379,078) | (15,517,853) |
Premiums Earned | ||
Direct | 133,327,933 | 110,912,434 |
Assumed | 5,071 | 32,303 |
Ceded | (29,918,289) | (33,593,714) |
Net | $ 103,414,715 | $ 77,351,023 |
11. Property and Casualty Insurance Activity (Details 1) - USD ($) |
Dec. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
Unearned premiums | $ 79,032,131 | $ 65,647,663 |
Gross Liability | ||
Case-basis reserves | 35,812,037 | 30,499,592 |
Loss adjustment expenses | 9,102,862 | 8,635,199 |
IBNR reserves | 11,282,207 | 9,664,831 |
Recoverable on paid losses | 0 | 0 |
Total loss and loss adjustment expenses | 56,197,106 | 48,799,622 |
Reinsurance Receivables | ||
Case-basis reserves | 12,283,616 | 11,987,693 |
Loss adjustment expenses | 1,433,170 | 1,990,506 |
IBNR reserves | 1,954,461 | 2,770,709 |
Recoverable on unpaid losses | 15,671,247 | 16,748,908 |
Recoverable on paid losses | 4,453,298 | 2,533,042 |
Total loss and loss adjustment expenses | 20,124,545 | 19,281,950 |
Unearned premiums | 6,242,570 | 9,237,180 |
Total reinsurance receivables | $ 26,367,115 | $ 28,519,130 |
11. Property and Casualty Insurance Activity (Details 2) - USD ($) |
12 Months Ended | |
---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Property And Casualty Insurance Activity Details 2Abstract | ||
Balance at beginning of period | $ 48,799,622 | $ 41,736,719 |
Less reinsurance recoverables | (16,748,908) | (15,776,880) |
Net balance, beginning of period | 32,050,714 | 25,959,839 |
Incurred related to: | ||
Current year | 57,143,077 | 34,246,081 |
Prior years | 1,152,128 | (60,544) |
Total incurred | 58,295,205 | 34,185,537 |
Paid related to: | ||
Current year | 34,025,387 | 18,194,860 |
Prior years | 15,794,673 | 9,899,802 |
Total paid | 49,820,060 | 28,094,662 |
Net balance at end of period | 40,525,859 | 32,050,714 |
Add reinsurance recoverables | 15,671,247 | 16,748,908 |
Balance at end of period | $ 56,197,106 | $ 48,799,622 |
11. Property and Casualty Insurance Activity (Details 4) |
Dec. 31, 2018
USD ($)
|
---|---|
Net liability for unpaid claim and allocated claim adjustment expenses for the accident years presented | $ 38,780 |
All outstanding liabilities before 2007, net of reinsurance | 93 |
Liabilities for claims and claim adjustment expenses, net of reinsurance | 38,873 |
2009 | |
2009 | 2,298 |
2010 | |
2009 | 3,068 |
2010 | 2,566 |
2011 | |
2009 | 3,607 |
2010 | 3,947 |
2011 | 3,740 |
2012 | |
2009 | 3,920 |
2010 | 4,972 |
2011 | 5,117 |
2012 | 3,950 |
2013 | |
2009 | 4,134 |
2010 | 5,602 |
2011 | 6,228 |
2012 | 5,770 |
2013 | 3,405 |
2014 | |
2009 | 4,362 |
2010 | 6,323 |
2011 | 7,170 |
2012 | 7,127 |
2013 | 5,303 |
2014 | 5,710 |
2015 | |
2009 | 4,424 |
2010 | 6,576 |
2011 | 8,139 |
2012 | 8,196 |
2013 | 6,633 |
2014 | 9,429 |
2015 | 12,295 |
2016 | |
2009 | 4,468 |
2010 | 6,720 |
2011 | 8,540 |
2012 | 9,187 |
2013 | 7,591 |
2014 | 10,738 |
2015 | 16,181 |
2016 | 15,364 |
2017 | |
2009 | 4,487 |
2010 | 6,772 |
2011 | 8,702 |
2012 | 10,236 |
2013 | 8,407 |
2014 | 11,770 |
2015 | 18,266 |
2016 | 19,001 |
2017 | 16,704 |
2018 | |
2009 | 4,659 |
2010 | 6,780 |
2011 | 8,727 |
2012 | 10,323 |
2013 | 9,056 |
2014 | 13,819 |
2015 | 19,984 |
2016 | 21,106 |
2017 | 24,820 |
2018 | 32,383 |
Total | $ 151,657 |
11. Property and Casualty Insurance Activity (Details 5) |
Dec. 31, 2018
USD ($)
|
---|---|
Commissions and brokerage | |
Liabilities for claims and claim adjustment expenses, net of reinsurance | $ 38,873 |
Total reinsurance recoverable on unpaid claims | 15,671 |
Unallocated claims adjustment expenses | 1,653 |
Total gross liability for loss and LAE reserves | $ 56,197 |
11. Property and Casualty Insurance Activity (Details 6) |
Dec. 31, 2018 |
---|---|
Commissions and brokerage | |
Year One | 46.40% |
Year Two | 18.80% |
Year Three | 11.40% |
Year Four | 8.60% |
Year Five | 9.50% |
Year Six | 5.80% |
Year Seven | 1.50% |
Year Eight | 0.70% |
Year Nine | 0.30% |
Year Ten | 3.70% |
11. Property and Casualty Insurance Activity (Details Narrative) - USD ($) |
12 Months Ended | |
---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Property And Casualty Insurance Activity Details Narrative Abstract | ||
Advance premiums | $ 2,107,629 | $ 1,477,693 |
Incurred Losses and Loss Adjustment Expenses are net of reinsurance recoveries under reinsurance contracts | $ 14,482,712 | $ 14,067,027 |
12. Stockholders' Equity (Details Narrative) - USD ($) |
12 Months Ended | |
---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Employee Benefit Plans Details Narrative | ||
Dividends Declared | $ 4,279,494 | $ 3,214,471 |
Compensation Expense | $ 6,000 | $ 38,025 |
Stock-based compensation expense related to stock options is net of estimated forfeitures | 17.00% | 17.00% |
Intrisic Value-Options Exercised | $ 3,794,505 | $ 221,012 |
Options Exercised - Cash proceeds | $ 90,640 | $ 77,927 |
Options for the purchase of shares of Common Stock | 15,250 | 13,750 |
Unamortized compensation cost related to unvested stock option awards | $ 1,000 | |
Unamortized compensation cost vesting period | 8 months 5 days | |
Shares reserved under the 2014 Plan | 466,124 |
13. Statutory Financial Information and Accounting Policies (Details Narrative) - USD ($) |
12 Months Ended | |
---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Statutory Financial Information And Accounting Policies Details Narrative | ||
Dividends paid | $ 3,600,000 | $ 2,900,000 |
Statutory basis net income | 3,801,498 | 7,907,743 |
Statutory basis surplus | $ 98,745,944 | $ 101,290,282 |
15. Income Taxes (Details) - USD ($) |
12 Months Ended | |
---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Income Taxes Details | ||
Current federal income tax expense | $ (74,001) | $ 4,317,686 |
Current state income tax expense | (6,784) | 7,353 |
Deferred federal and state income tax expense (benefit) | (5,398) | (1,809) |
Provision for income taxes | $ (86,183) | $ 4,323,230 |
15. Income Taxes (Details 2) - USD ($) |
Dec. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
Deferred tax asset: | ||
Net operating loss carryovers (1) | $ 90,438 | $ 103,655 |
Claims reserve discount | 343,905 | 300,005 |
Unearned premium | 3,145,682 | 2,431,301 |
Deferred ceding commission revenues | 564,202 | 895,947 |
Other | 383,733 | 382,522 |
Total deferred tax assets | 4,527,960 | 4,113,430 |
Deferred tax liability: | ||
Investment in KICO (2) | 759,543 | 759,543 |
Deferred acquisition costs | 3,760,625 | 3,117,920 |
Intangibles | 140,700 | 212,100 |
Depreciation and amortization | 664,194 | 328,735 |
Net unrealized appreciation of securities - available-for-sale | (1,151,335) | 295,474 |
Total deferred tax liabilities | 4,173,727 | 4,713,772 |
Net deferred income tax liability | $ 354,233 | $ (600,342) |
15. Income Taxes (Details 3) - USD ($) |
Dec. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
Intrisic Value-Options Exercised | ||
State only (A) | $ 1,305,365 | $ 824,996 |
Valuation allowance | (1,217,027) | (725,541) |
State only, net of valuation allowance | 88,338 | 99,455 |
Amount subject to Annual Limitation, Federal only (B) | 2,100 | 4,200 |
Total deferred tax asset from net operating loss carryovers | $ 90,438 | $ 103,655 |
15. Income Taxes (Details 4) - USD ($) |
12 Months Ended | |
---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Income Taxes Details 4Abstract | ||
Change in net deferred income tax liabilities | $ (954,575) | |
Deferred tax benefit allocated to other comprehensive (loss) income | (949,177) | |
Deferred income tax provision | $ (5,398) | $ (1,809) |
15. Income Taxes (Details Narrative) - USD ($) |
Dec. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
Income Taxes Details Narrative Abstract | ||
Net operating loss carryover | $ 20,083,000 | $ 12,692,000 |
16. Employee Benefit Plans (Details Narrative) - USD ($) |
12 Months Ended | |
---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Employee Benefit Plans Details Narrative Abstract | ||
Contribution expense | $ 247,000 | $ 545,000 |
17. Commitments and Contingencies (Details) |
Dec. 31, 2018
USD ($)
|
---|---|
Commitments And Contingencies | |
2019 | $ 169,861 |
2020 | 175,806 |
2021 | 181,959 |
2022 | 188,382 |
2023 | 194,919 |
Thereafter | 49,145 |
Total | $ 960,018 |
17. Commitments and Contingencies (Details Narrative) (USD $) - USD ($) |
12 Months Ended | |
---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Commitments And Contingencies Details Narrative | ||
Rent expenses | $ 165,368 | $ 165,368 |
18. Earnings Per Common Share (Details) - USD ($) |
12 Months Ended | |
---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Net Income Per Common Share Details | ||
Weighted average number of shares outstanding | 10,686,813 | 10,388,440 |
Effect of dilutive securities, common share equivalents: Stock options | $ 19,823 | $ 188,983 |
Effect of dilutive securities, common share equivalents: Restricted stock awards | $ 10,250 | $ 4,154 |
Weighted average number of shares outstanding, used for computing diluted earnings per share | 10,716,886 | 10,581,577 |
20. Quarterly Financial Data (Details) - USD ($) |
3 Months Ended | 12 Months Ended | ||||||||
---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2018 |
Sep. 30, 2018 |
Jun. 30, 2018 |
Mar. 31, 2018 |
Dec. 31, 2017 |
Sep. 30, 2017 |
Jun. 30, 2017 |
Mar. 31, 2017 |
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Quarterly Financial Data | ||||||||||
Net premiums earned | $ 28,938,577 | $ 27,533,907 | $ 24,104,614 | $ 22,837,617 | $ 22,513,140 | $ 21,514,408 | $ 16,953,727 | $ 16,369,748 | $ 103,414,715 | $ 77,351,023 |
Ceding commission revenue | 901,775 | 1,044,529 | 1,691,168 | 1,695,158 | 1,725,133 | 1,717,610 | 3,305,938 | 3,184,452 | 5,332,630 | 9,933,133 |
Net investment income | 1,643,022 | 1,602,371 | 1,556,866 | 1,383,989 | 1,215,475 | 1,033,307 | 1,026,004 | 857,800 | 6,186,248 | 4,132,586 |
Net (losses) gains on investments | (2,218,022) | 352,025 | (106,733) | (523,127) | (12,602) | 20,998 | 130,423 | (54,506) | (2,495,857) | 84,313 |
Total revenues | 29,637,933 | 30,885,909 | 27,546,186 | 25,701,870 | 25,783,212 | 24,614,653 | 21,724,251 | 20,647,194 | 113,771,898 | 92,769,310 |
Loss and loss adjustment expenses | 16,556,082 | 13,296,708 | 11,176,085 | 17,266,330 | 11,364,296 | 7,073,323 | 7,454,922 | 8,292,996 | 58,295,205 | 34,185,537 |
Commission expense and other underwriting expenses | 12,572,851 | 11,788,002 | 11,093,175 | 10,831,451 | 10,919,353 | 9,975,938 | 9,301,182 | 9,101,395 | 46,285,479 | 39,297,868 |
Net income | $ (879,847) | $ 3,933,730 | $ 2,757,297 | $ (2,717,934) | $ 1,931,592 | $ 4,073,921 | $ 2,510,392 | $ 1,470,580 | $ 3,093,246 | $ 9,986,485 |
Basic earnings per share | $ (0.08) | $ 0.37 | $ 0.26 | $ (0.28) | $ 0.18 | $ 0.38 | $ 0.24 | $ 0.15 | $ 0.29 | $ 0.96 |
Diluted earnings per share | $ (0.08) | $ 0.36 | $ 0.25 | $ (0.28) | $ 0.18 | $ 0.38 | $ 0.23 | $ 0.15 | $ 0.29 | $ 0.94 |
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