EX-99.2 3 kins_ex992.htm ADDITIONAL EXHIBITS Blueprint
  Exhibit 99.2
 
Additional Financial Information for Q1 2019
 
 
 
Definitions and Non-GAAP Measures
 
Direct written premiums represents the total premiums charged on policies issued by the Company during the respective fiscal period. Net premiums written are direct written premiums less premiums ceded to reinsurers. Net premiums earned are net premiums written that are pro-rata earned during the fiscal period presented. All of the Company’s policies are written for a twelve month period. Management uses direct written premiums and net written premiums, along with other measures, to gauge the Company’s performance and evaluate results.
 
Expansion direct written premiums - represents the total premiums charged on policies issued by the Company during the respective fiscal period from its business located in newly licensed states (i.e., outside New York).
 
Net operating income - is net income exclusive of realized investment gains, net of tax. Net income is the GAAP measure most closely comparable to net operating income.
 
Operating return on average common equity - is net operating income divided by average common equity. Return on average common equity is the GAAP measure most closely comparable to operating return on average common equity.
 
Management uses net operating income and operating return on average common equity, along with other measures, to gauge the Company’s performance and evaluate results, which can be skewed when including realized investment gains, which may vary significantly between periods. Net operating income and operating return on average common equity are provided as supplemental information, are not a substitute for net income or return on average common equity and do not reflect the Company’s overall profitability or return on average common equity.
 
Net loss ratio excluding the effect of catastrophes - is a non-GAAP ratio, which is computed as the difference between GAAP net loss ratio and the effect of catastrophes on the net loss ratio. Net combined ratio excluding the effect of catastrophes - is a non-GAAP ratio, which is computed as the difference between GAAP net combined ratio and the effect of catastrophes on the net combined ratio.
 
We believe that these ratios are useful to investors and they are used by management to reveal the trends in our business that may be obscured by catastrophe losses. Catastrophe losses cause our loss trends to vary significantly between periods as a result of their incidence of occurrence and magnitude, and can have a significant impact on the net loss ratio and net combined ratio. We believe these measures are useful for investors to evaluate these components separately and in the aggregate when reviewing our underwriting performance. We also provide them to facilitate a comparison to our outlook on the net combined ratio excluding the effect of catastrophes. The most directly comparable GAAP measure are the net loss ratio and net combined ratio. The net loss ratio excluding the effect of catastrophes and net combined ratio excluding the effect of catastrophes should not be considered a substitute for the net loss ratio and the net combined ratio and do not reflect the Company’s net loss ratio and net combined ratio.
 
 
 
 
Book Value Per Share
 
The Company’s book value per share at March 31, 2019 was $7.78, a decrease of 5.9% compared to $8.27 at March 31, 2018.
 
 
 
31-Mar-19
 
 
31-Dec-18
 
 
30-Sep-18
 
 
30-Jun-18
 
 
31-Mar-18
 
Book Value Per Share
 $7.78 
 $8.25 
 $8.54 
 $8.32 
 $8.27 
 
    
    
    
    
    
% Increase from specified period to 3/31/19
    
  -5.7%
  -8.9%
  -6.5%
  -5.9%
 
 
The table below details the direct written premiums, net written premiums, and net premiums earned for the periods indicated:
 
 
 
 For the Three Months Ended
 
 
 
 March 31,
 
 
 
2019
 
 
2018
 
 
$ Change
 
 
% Change
 
(000’s except percentages)
 
 
 
 
 
 
 
 
 
 
 
 
Direct and Net Written Premiums Reconciliation:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Direct written premiums
 $37,489 
 $31,526 
 $5,963 
  18.9%
Assumed written premiums
  - 
  - 
  - 
  -%
Ceded written premiums
  (7,128)
  (7,826)
  698 
  (8.9)%
 
    
    
    
    
Net written premiums
  30,361 
  23,700 
  6,661 
  28.1%
Change in unearned premiums
  (765)
  (862)
  97 
  (11.3)%
 
    
    
    
    
Net premiums earned
 $29,596 
 $22,838 
 $6,758 
  29.6%
 
    
    
    
    
   
The table below details the Core direct written premiums, Expansion direct written premiums, and direct written premiums for the periods indicated:
 
 
 
 For the Three Months Ended
 
 
 
 March 31,
 
 
 
2019
 
 
2018
 
 
$ Change
 
 
% Change
 
(000’s except percentages)
 
 
 
 
 
 
 
 
 
 
 
 
Core and Expansion Direct Written Premiums Reconciliation:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Core direct written premiums
 $34,257 
 $30,629 
 $3,628 
  11.8%
Expansion direct written premiums
  3,232 
  897 
  2,335 
  260.3%
Direct written premiums
 $37,489 
 $31,526 
 $5,963 
  18.9%
 
    
    
    
    
  
 
 
 
The following table reconciles net operating income to net income and operating return on average common equity to return on average common equity for the periods indicated:
 
 
 
 Three Months Ended
 
 
 Three Months Ended
 
 
 
March 31, 2019    
 
 
March 31, 2018    
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Amount
 
 Diluted earnings per common share 
 
 Amount
 
 
Diluted earnings per common share
 
(000’s except per common share amounts and percentages)
 
 
 
 
 
 
 
 
 
 
 
 
Net Operating Income (Loss) and Diluted Earnings (Loss) per Common Share Reconciliation:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income (loss)
 $(7,335)
 $(0.68)
 $(2,718)
 $(0.25)
 
    
    
    
    
Net realized loss (gain) on investments
  (2,035)
    
  523 
    
Less tax benefit (expense) on net realized loss (gain)
  (427)
    
  110 
    
 
    
    
    
    
Net realized loss (gain) on investments, net of taxes
  (1,608)
 $(0.15)
  413 
 $0.04 
 
    
    
    
    
Net operating income (loss)
 $(8,943)
 $(0.83)
 $(2,305)
 $(0.22)
 
    
    
    
    
Weighted average diluted shares outstanding
  10,757,843 
    
  10,669,992 
    
 
    
    
    
    
Operating Return on Average Common Equity (Annualized) Reconciliation:
    
    
    
    
 
    
    
    
    
Net income (loss)
 $(7,335)
    
 $(2,718)
    
Average common equity
 $86,220 
    
 $91,369 
    
Return on average common equity (annualized)
  -34.0%
    
  -11.9%
    
 
    
    
    
    
Net realized loss (gain) on investments, net of taxes
 $(1,608)
    
 $413 
    
Average common equity
 $86,220 
    
 $91,369 
    
Effect of net realized loss (gain) on investments, net of taxes, on return on average common equity (annualized)
  -7.5%
    
  1.8%
    
 
    
    
    
    
Net operating income (loss)
 $(8,943)
    
 $(2,305)
    
Average common equity
 $86,220 
    
 $91,369 
    
 
    
    
    
    
Operating return on average common equity (annualized)
  -41.5%
    
  -10.1%
    
 
 
 
 
The following table reconciles the net loss ratio excluding the effects of catastrophes to the net loss ratio for the periods indicated:
 
 
 
 For the Three Months Ended
 
 
 
 March 31,
 
 
 
2019
 
 
2018
 
 
Percentage Point Change
 
Net Loss Ratio Excluding the Effect of Catastrophes Reconciliation:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net loss ratio excluding the effect of catastrophes
  81.3%
  51.3%
  30.0pts
 
    
    
    
Effect of catastrophe losses
  17.1%
  24.3%
  (7.2)pts
 
    
    
    
Net loss ratio
  98.4%
  75.6%
  22.8pts
 
The following table reconciles the net combined ratio excluding the effects of catastrophes to the net combined ratio for the periods indicated:
 
 
 
 For the Three Months Ended
 
 
 
 March 31,
 
 
 
2019
 
 
2018
 
 
Percentage Point Change
 
Net Combined Ratio Excluding the Effect of Catastrophes Reconciliation:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net combined ratio excluding the effect of catastrophes
  119.8%
  88.7%
  31.1pts
 
    
    
    
Effect of catastrophe losses
    
    
    
Net loss and loss adjustment expenses
  17.1%
  24.3%
  (7.2)pts
Net underwriting expense ratio
  0.0%
  1.3%
  (1.3)pts
Total effect of catastrophe losses
  17.1%
  25.6%
  (8.5)pts
 
    
    
    
Net combined ratio
  136.9%
  114.3%
  22.6pts
 
 
 
 
The following table reconciles net operating income and diluted operating earnings per share exclusive of catastrophe financial impact to net operating income and diluted operating earnings per share for the periods indicated:
 
 
 
 For the Three Months Ended
 
 
 
 March 31,
 
 
 
  2019      
 
 
  2018      
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Amount
 
 
Diluted earnings per common share
 
 
 Amount
 
 
Diluted earnings per common share
 
(000’s except per common shares amounts)
 
 
 
 
 
 
 
 
 
 
 
 
Net Operating Income and Diluted Operating Earnings per Share Exclusive of Catastrophe Financial Impact:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net operating income
 $(8,943)
 $(0.83)
 $(2,305)
 $(0.22)
 
    
    
    
    
Catastrophe financial impact
    
    
    
    
Ceding commission revenue
  - 
    
  334 
    
Total expenses
  5,063 
    
  4,872 
    
Income from operations before taxes
  5,063 
    
  5,206 
    
Income tax expense
  1,063 
    
  1,093 
    
Total catastrophe financial impact
  4,000 
 $0.37 
  4,113 
 $0.39 
 
    
    
    
    
Net operating income exclusive of catastrophe financial impact
 $(4,943)
 $(0.46)
 $1,808 
 $0.17 
 
    
    
    
    
Weighted average diluted shares outstanding
  10,757,843 
    
  10,669,992 
    
 
  
 
 
 
The following table summarizes gross and net written premiums, net premiums earned, and loss and loss adjustment expenses by major product type, which were determined based primarily on similar economic characteristics and risks of loss.
 
 
 
 For the three months ended
 
 
 
 March 31,
 
 
 
 2019
 
 
 2018
 
 
 
 
 
 
 
 
 Gross premiums written:
 
 
 
 
 
 
 Personal lines
 $30,098,969 
 $24,825,452 
 Commercial lines
  4,586,388 
  4,286,391 
 Livery physical damage
  2,730,086 
  2,354,070 
 Other(1)
  73,071 
  60,706 
 Total
 $37,488,514 
 $31,526,619 
 
    
    
 Net premiums written:
    
    
 Personal lines(2)
 $23,503,863 
 $17,443,911 
 Commercial lines
  4,060,361 
  3,852,371 
 Livery physical damage
  2,730,086 
  2,356,070 
 Other(1)
  66,295 
  50,032 
 Total
 $30,360,605 
 $23,702,384 
 
    
    
 Net premiums earned:
    
    
 Personal lines(2)
 $23,420,874 
 $17,040,256 
 Commercial lines
  3,599,316 
  3,229,970 
 Livery physical damage
  2,517,682 
  2,520,684 
 Other(1)
  58,017 
  46,707 
 Total
 $29,595,889 
 $22,837,617 
 
    
    
 Net loss and loss adjustment expenses(3):
    
    
 Personal lines
 $20,402,544 
 $12,961,206 
 Commercial lines
  6,669,223 
  2,449,598 
 Livery physical damage
  1,217,303 
  1,164,081 
 Other(1)
  150,504 
  58,674 
 Unallocated loss adjustment expenses
  694,650 
  632,771 
 Total
 $29,134,224 
 $17,266,330 
 
    
    
Net loss ratio(3):
    
    
Personal lines
  87.1%
  76.1%
Commercial lines
  185.3%
  75.8%
Livery physical damage
  48.4%
  46.2%
Other(1)
  259.4%
  125.6%
Total
  98.4%
  75.6%
 
1.
“Other” includes, among other things, premiums and loss and loss adjustment expenses from our participation in a mandatory state joint underwriting association and loss and loss adjustment expenses from commercial auto.
 
 
 
 
KINGSTONE COMPANIES, INC. AND SUBSIDIARIES
 
 
 
 
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (Unaudited)
 
 
Three months ended March 31,
 
2019
 
 
2018
 
 
 
 
 
 
 
 
 Revenues
 
 
 
 
 
 
 Net premiums earned
 $29,595,889 
 $22,837,617 
 Ceding commission revenue
  1,277,683 
  1,695,158 
 Net investment income
  1,623,712 
  1,383,989 
 Net gains (losses) on investments
  2,035,363 
  (523,127)
 Other income
  365,901 
  308,233 
 Total revenues
  34,898,548 
  25,701,870 
 
    
    
 Expenses
    
    
 Loss and loss adjustment expenses
  29,134,224 
  17,266,330 
 Commission expense
  6,853,416 
  5,799,948 
 Other underwriting expenses
  6,135,991 
  5,031,503 
 Other operating expenses
  971,172 
  246,858 
 Depreciation and amortization
  602,332 
  409,431 
 Interest expense
  456,545 
  456,545 
 Total expenses
  44,153,680 
  29,210,615 
 
    
    
 Loss from operations before income taxes
  (9,255,132)
  (3,508,745)
 Income tax benefit
  (1,919,942)
  (790,811)
 Net loss
  (7,335,190)
  (2,717,934)
 
    
    
 Other comprehensive income (loss), net of tax
    
    
 Gross change in unrealized gains (losses)
    
    
 on available-for-sale-securities
  4,188,716 
  (2,873,479)
 
    
    
 Reclassification adjustment for losses
    
    
 included in net income
  22,431 
  243,773 
 Net change in unrealized gains (losses)
  4,211,147 
  (2,629,706)
 Income tax (expense) benefit related to items
    
    
 of other comprehensive income (loss)
  (884,341)
  552,238 
 Other comprehensive income (loss), net of tax
  3,326,806 
  (2,077,468)
 
    
    
 Comprehensive (loss) income
 $(4,008,384)
 $(4,795,402)
 
    
    
Loss per common share:
    
    
Basic
 $(0.68)
 $(0.25)
Diluted
 $(0.68)
 $(0.25)
 
    
    
Weighted average common shares outstanding
    
    
Basic
  10,757,843 
  10,669,992 
Diluted
  10,757,843 
  10,669,992 
 
    
    
Dividends declared and paid per common share
 $0.1000 
 $0.1000 
 
 
 
 
KINGSTONE COMPANIES, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
 
 
 
 
 
 March 31,
 
 
 December 31,
 
 
 
2019
 
 
2018
 
 
 
 (unaudited)
 
 
 
 
 Assets
 
 
 
 
 
 
  Fixed-maturity securities, held-to-maturity, at amortized cost (fair value of
 
 
 
 
 
 
  $4,076,611 at March 31, 2019 and $4,426,416 at December 31, 2018)
 $3,824,620 
 $4,222,855 
  Fixed-maturity securities, available-for-sale, at fair value (amortized cost of
    
    
  $159,919,750 at March 31, 2019 and $155,431,261 at December 31, 2018)
  160,477,152 
  151,777,516 
  Equity securities, at fair value (cost of $19,646,482 at March 31, 2019 and
    
    
  $18,305,986 at December 31, 2018)
  19,663,987 
  16,572,616 
 Other investments
  2,147,945 
  1,855,225 
 Total investments
  186,113,704 
  174,428,212 
 Cash and cash equivalents
  15,764,480 
  21,138,403 
 Premiums receivable, net
  14,211,748 
  13,961,599 
 Reinsurance receivables, net
  26,157,637 
  26,367,115 
 Deferred policy acquisition costs
  18,154,281 
  17,907,737 
 Intangible assets, net
  585,000 
  670,000 
 Property and equipment, net
  6,875,934 
  6,056,929 
 Deferred income taxes
  - 
  354,233 
 Other assets
  9,525,151 
  5,867,850 
 Total assets
 $277,387,935 
 $266,752,078 
 
    
    
 Liabilities
    
    
 Loss and loss adjustment expense reserves
 $69,110,271 
 $56,197,106 
 Unearned premiums
  79,660,003 
  79,032,131 
 Advance premiums
  3,064,413 
  2,107,629 
 Reinsurance balances payable
  1,201,931 
  1,933,376 
 Deferred ceding commission revenue
  2,745,387 
  2,686,677 
 Accounts payable, accrued expenses and other liabilities
  7,450,822 
  6,819,231 
 Income taxes payable
  - 
  15,035 
 Deferred income taxes
  1,040,641 
  - 
 Long-term debt, net
  29,339,296 
  29,295,251 
 Total liabilities
  193,612,764 
  178,086,436 
 
    
    
 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 11,795,788 shares
    
    
  at March 31, 2019 and 11,775,148 at December 31, 2018; outstanding
    
    
  10,768,349 shares at March 31, 2019 and 10,747,709 shares at December 31, 2018
  117,962 
  117,751 
  Capital in excess of par
  67,957,604 
  67,763,940 
  Accumulated other comprehensive income (loss)
  442,493 
  (2,884,313)
  Retained earnings
  17,969,664 
  26,380,816 
 
  86,487,723 
  91,378,194 
  Treasury stock, at cost, 1,027,439 shares at March 31, 2019
    
    
  and at December 31, 2018
  (2,712,552)
  (2,712,552)
 Total stockholders' equity
  83,775,171 
  88,665,642 
 
    
    
 Total liabilities and stockholders' equity
 $277,387,935 
 $266,752,078