Q1 2024 Kingstone Companies Inc Earnings Call
Operator: Greetings and welcome to the Kingstone Company's first quarter 2024 earnings conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the call, please press star zero on your telephone keypad. To ask a question, please press star one to join the question queue.
Greetings and welcome to the Kingstone companies' first quarter 2024 earnings conference call. At this time all participants are in a listen only mode. A brief question and answer session will follow the formal presentation.
Speaker Change: If anyone should require operator assistance during the call. Please press star zero on your telephone keypad.
Speaker Change: To ask a question. Please press star one to join the question queue.
Operator: As a reminder, this conference is being recorded. It's now my pleasure to introduce your host, Karen Daly, vice president of the Equity Group and Kingstone Investor Relations representative. Karen, you may now begin.
Speaker Change: As a reminder, this conference is being recorded.
Speaker Change: It's now my pleasure to introduce your host Karen Daily Vice President of the equity group at Kingstone Investor Relations Representative parents, you may now begin.
Karen Daly: Thank you, Melissa. Good morning, everyone.
Melissa: Thank you Melissa good morning, everyone.
Karen Daly: Joining us on the call today will be Chief Executive Officer Meryl Golden and Chief Financial Officer Jennifer Gravelle. On behalf of the company, I'd like to note that this conference call may include forward-looking statements that involve known and unknown risks, uncertainties, and other factors that may cause actual results to be materially different from projected results. Such forward-looking statements speak only as of the date on which they are made, and Kingstone undertakes no obligation to update the information discussed.
Speaker Change: Joining us on the call today will be Chief Executive officer of Meryl Golden and Chief Financial Officer, Jennifer Gabel on.
Karen Daly: For more information, please refer to the section entitled Factors That May Affect Future Results and Financial Condition in Part 1, Item 1A of the company's latest Form 10-K. Additionally, today's remarks may include references to non-GAAP measures. For reconciliation of these non-GAAP measures to GAAP figures, please see the tables in the latest earnings release.
Karen Daily: On behalf of the company I'd like to note that this conference call May include forward looking statements, which involve known and unknown risks uncertainties and other factors that may cause actual results to be materially different from projected results.
Kingstone Companies: Forward looking statements speak only as of the date on which they are made and Kingstone undertakes no obligation to update the information discussed for more information. Please refer to the section entitled risk factors that may affect future results and financial condition in part one item one a.
Kingstone Companies: The company's latest Form 10-K. Additionally, todays remarks may include references to non-GAAP measures for a reconciliation of these non-GAAP measures to GAAP figures. Please see the tables in our latest earnings release.
Karen Daly: With that, it's my pleasure to turn the call over to Meryl Golden. Meryl, you may begin.
Speaker Change: With that it's my pleasure to turn the call over to Meryl Golden Merrill you may begin.
Meryl S. Golden: Thanks, Karen. And good morning, everyone.
Speaker Change: Thanks, Karen and good morning, everyone.
Meryl S. Golden: Our results in the first quarter show that the investments we have made and the turnaround plans we have put in place have worked. This quarter was an incredible start to the year as we achieved double-digit growth in our core business, improved our underwriting results markedly, and generated net income for the second consecutive quarter. We are extremely proud of what we've accomplished and even more optimistic about the future.
Speaker Change: Our results in the first quarter show that the investments we have made and the turnaround plans. We have put in place have worked this quarter was an incredible start to the year as we achieved double digit growth in our core business improved our underwriting results markedly and generated net income.
Speaker Change: For the second consecutive quarter, we are extremely proud of what we've accomplished and even more optimistic about the future.
Meryl S. Golden: I've been thinking about the playbook for everything that we have done to modernize and reposition the company. Previously, we talked about Kingstone 2.0 and Kingstone 3.0 as the strategic initiatives that we executed upon. What I've come to realize is that the foundation of those strategies was based on the underlying principles that I learned from my previous experiences, most notably my tenure at Progressive and Bridgewater. Today, I'm going to discuss our turnaround in the context of those principles, and we'll highlight five of them specifically.
I: I've been thinking about the playbook for everything that we have done to modernize and reposition the company previously we've talked about Kingstone, two O and Kingstone three O F. The strategic initiatives that we executed upon what I've come to realize is that the foundation of those strategy.
Speaker Change: This was based on the underlying principles that I learned from my previous experiences most notably my tenure at progressive and Bridgewater.
Speaker Change: Hey, I'm going to discuss our turnaround in the context of those principles and will highlight five of them specifically prior.
Meryl S. Golden: Prioritizing profit over growth and proactively identifying trends and taking prompt action to address them. The imperative of rate segmentation and properly matching rate to risk
Speaker Change: Prioritizing profit overgrowth.
Speaker Change: Proactively identifying trends and taking prompt action to address them.
Speaker Change: The imperative of rate segmentation and properly matching rates a risk the importance of having low expenses and lastly, the power of transparency.
Meryl S. Golden: The importance of having low expenses and lastly, the power of transparency. It's easy to grow in the insurance business, but it's much harder to grow profitably.
Speaker Change: It's easy to grow in the insurance business, it's much harder to grow profitably living by the key tenants that profit is always more important than growth makes it easier to make difficult decisions clearly our determination to aggressively reduce our noncore business, which at its peak represented.
Meryl S. Golden: Living by the key tenant that profit is always more important than growth makes it easier to make difficult decisions. Clearly, our determination to aggressively reduce our non-core business, which at its peak represented 20% of our premiums, is an example of prioritizing profit, but may be an easier decision given how unprofitable that book has been. As another example, last year we significantly slowed our new business in the face of a projected material increase in our reinsurance costs.
Speaker Change: One 8% of our premium is an example of prioritizing profit, but maybe an easier decision given how unprofitable, but that book has been.
Speaker Change: Another example, last year, we significantly slowed our new business in the face of a projected material increase in our reinsurance cost once the increase was understood which was much less than we expected because of the actions we had taken.
Meryl S. Golden: Once the increase was understood, which was much less than we expected because of the actions we had taken, and we were able to raise our rates to account for the higher cost, we relaxed some of our underwriting restrictions to expand our new business opportunities. More than two years ago, and well ahead of many of our competitors, we recognized that loss trends were on the rise and that inflation, which was driving our loss trends, would also result in many of our customers being underinsured. We acted quickly to raise our premiums and put a plan in place to update replacement costs on every policy renewal.
Speaker Change: And we were able to raise our rates to account for the higher cost we relaxed some of our underwriting restrictions to expand our new business opportunities.
Speaker Change: More than two years ago, and well ahead of many of our competitors, we recognize that loss trends were on the rise and that inflation, which was driving our loss trends would also result in many of our customers being under insured we acted quickly to raise our premiums and put a plan.
Speaker Change: And place to update replacement cost on every policy renewal.
Meryl S. Golden: One of the benefits of being an early mover is that we have successfully returned to profitability while some of our competitors are still restricting their business or have shut down completely. This gives us the ability to take advantage of market conditions. Addressing the Needs of Our Producers, which will Enable Faster Growth. You will see our growth continue to accelerate in the second quarter, and we anticipate that continuing for some time. While being an early mover can pose challenges, the decision is validated when you emerge successfully on the other side.
Speaker Change: One of the benefits of being an early mover is that we have successfully returned to profitability. While some of our competitors are still restricting their business or have shut down completely.
Speaker Change: This gives us the ability to take advantage of market conditions.
Speaker Change: Pressing the needs of our producers, which will enable faster growth you will see our growth continue to accelerate in the second quarter.
Speaker Change: And we anticipate that continuing for some time well being an early mover can pose challenges. The decision is validated when you emerge successfully on the other side.
Meryl S. Golden: We have not talked enough about our select products. Very early in my tenure at Kingstone, I recognized the need to develop a more highly segmented product that better matched rate to risk. We hired an outside actuarial firm to help us develop the product, and we went live with it in early 2022.
Kingstone Companies: We have not talked enough about our select product very early in my tenure at Kingstone I recognize the need to develop a more highly segmented product that better matches rate to risk we hired an outside actuarial firm to help us develop the product and we went live in early 2022.
Meryl S. Golden: The results have exceeded our expectations, as reported frequency in Select, which is mostly new business, is materially lower than frequency in our legacy product, which is mostly renewal business. This bodes extremely well for the future of Kingstone, as Select represents less than 30% of our book today and will represent a larger portion in the quarters to come. We are further enhancing our select product by adding new rating variables and further rate segmentation, which we expect will increase our growth and profitability in the future. The significance of maintaining low expenses cannot be emphasized enough.
Speaker Change: The results have exceeded our expectations as reported frequency and select which is mostly new business is materially lower than frequency in our legacy product, which is mostly renewal business. This bodes extremely well for the future of Kingstone and select represents less than 30.
Kingstone Companies: Percent of our book today and will represent a larger portion in the quarters to come.
Kingstone Companies: We are further enhancing our select product by adding new rating variables and further re segmentation, which we expect will increase our growth and profitability in the future.
Speaker Change: The significance of maintaining low expenses cannot be emphasized enough. We have fundamentally changed the company in so many ways and it's reflected in the substantial reduction of our expenses I've talked repeatedly about the various actions taken to reduce expenses. We have also benefited from the significant.
Meryl S. Golden: We have fundamentally changed the company in so many ways, and it's reflected in the substantial reduction of our expenses. I've talked repeatedly about the various actions taken to reduce expenses. We have also benefited from the significant increase in average premium that we implemented. Having low expenses gives us a sustainable, competitive advantage, ultimately allowing us to expand our margins and to grow faster, as we are now doing. And finally, I believe in the power of transparency. I want our employees to act like owners and to build trust with policyholders, regulators, reinsurers, and investors. We are listening closely and proactively implementing ideas to cultivate an environment of openness.
Speaker Change: An increase in average premium that we implemented.
Speaker Change: Having low expenses gives us a sustainable competitive advantage ultimately, allowing us to expand our margins and to grow faster as we are now doing.
Speaker Change: And finally I believe in the power of transparency I want our employees to act like owners and to build trust with policyholders regulators reinsurers and investors. We are listening closely and proactively implementing ideas to cultivate an environment of open.
Speaker Change: No.
Meryl S. Golden: We are confident in our company and believe transparency into our operations enhances confidence, supports our strategies, and raises the bar on our performance. Kingstone's turnaround is largely the product of executing this playbook. Even more important is that we now have a blueprint in place to make sure that the mistakes of the past are not repeated, and a new culture built to identify and quickly address potential problems.
Speaker Change: We are confident in our company and believe transparency into our operations enhances confidence supports our strategies and raises the bar on our performance.
Kingstone CEO: Kingstone is turnaround is largely the product of executing this playbook, even more important is that we now have a blueprint in place to make sure that the mistakes of the past are not repeated and a new culture built to identify and quickly address potential.
Speaker Change: Problems.
Meryl S. Golden: With that, I want to note a few things about the performance in the quarter. As a Northeast writer, we typically experience an underwriting loss in the first quarter due to winter weather. We were fortunate that this winter was mild, and that was certainly a contributing factor to our loss ratio improvement.
Speaker Change: With that I want to note a few things about the performance in the quarter as a north east right are we typically experience an underwriting loss in the first quarter due to winter weather.
Speaker Change: We were fortunate that this winter was mild and that was certainly a contributing factor to our loss ratio improvement.
Meryl S. Golden: Our profitability was made possible from rates continuing to earn from the large rate increases we took last year. Seasonably Favorable Frequency, Mixed Changes in our book from the growth of Select in New York and the reduction in our non-core business, and a lower number of large losses this quarter. Favorable prior year loss reserve development and lower expenses, among other factors, made this the most profitable first quarter that we have experienced in seven years.
Speaker Change: Our profitability was made possible from rate continuing to earn in from the large rate increases we took last year.
Speaker Change: Seasonably favorable frequency Miss.
Speaker Change: Mix changes in our book from the growth of select in New York and the reduction in our noncore business.
Speaker Change: Lower number of large losses this quarter.
Speaker Change: Favorable prior year loss reserve development and lower expenses. Among other factors. This was the most profitable first quarter that we have experienced in seven years also a quick update on our strategic runoff of noncore business in 2023.
Meryl S. Golden: Also, a quick update on our strategic runoff of non-core business. In 2023, we reduced our non-core business by more than half, including a 16% reduction in the last quarter. Our goal is to eliminate the negative impact the non-core business has on our consolidated earnings, not to get off the book entirely. For 2023, the non-core business reduced our earnings per share by 46 cents. Our current estimate is that the non-core business will reduce our full year 24 earnings per share by nine cents, and the impact should be de minimis in 2024.
Speaker Change: We reduced our noncore business by more than half, including a 16% reduction in the last quarter.
Speaker Change: Our goal is to eliminate the negative impact the noncore business has on our consolidated earnings not to get off the book entirely.
Speaker Change: For 2023 the noncore business reduced our earnings per share by 46 cents.
Speaker Change: Our current estimate is that the noncore business will reduce our full year 24 earnings per share by nine cents and the impacts should be de minimis in 2025.
Meryl S. Golden: As announced in yesterday's release, we raised our 2024 guidance to incorporate the outperformance in the first quarter. For the full year, we now expect to achieve direct written premium growth of our core business in the range of 16 to 20%. And based on approximately 125 million of net premium earned, we expect to achieve a gap combined ratio between 86 and 90, earnings per share between $0.75 and $1.10, and return on equity between 22 and 30 percent.
Speaker Change: As announced in yesterday's release, we raised our 2024 guidance to incorporate the outperformance in the first quarter for the full year. We now expect to achieve direct written premium of our core business.
Speaker Change: Sorry, direct written premium growth of our core business in the range of 16% to 20% and based on approximately 125 million of net premium earned we expect to achieve a GAAP combined ratio between 86 and 90.
Speaker Change: Earnings per share between 75 and $1.10.
Speaker Change: And return on equity between 22 and 30%.
Meryl S. Golden: As a reminder, our guidance assumes no material changes in our business, our results are very weather dependent, and we have assumed no major catastrophe events in this guidance. We have also assumed that the premium rates for catastrophe reinsurance will be level with last year's cost at our January 1st renewal. However, following our recent visit with reinsurers in Bermuda, I am optimistic that we may achieve even more favorable rates. With that, I'll turn the call over to Jen for a more detailed review of our quarterly financial results. Jen?
Speaker Change: As a reminder, our guidance assumes no material changes in our business. Our results are very weather dependent and we assume no major catastrophe events. In this guidance. We have also assumed that the premium rates for catastrophe reinsurance will be level with last year's cost.
Reinsurer: At our January 1st renewal. However, following our recent visit with reinsurers in Bermuda I am optimistic that we may achieve even more favorable rates.
Jim: With that I'll turn the call over to Jim for a more detailed review of our quarterly financial results Jen.
Jennifer Lee Gravelle: Thank you, Meryl, and good morning, everyone. We are thrilled to report the 2024 first quarter results, our second consecutive profitable quarter with a net income of $1.4 million, or $0.13 per share. This is a $6.5 million turnaround from the same period last year. As Meryl indicated earlier, and I will happily reiterate, this quarter was the highest first quarter profitability we have seen in seven years. Core directorate and premiums increased 12.5% to $47 million, while non-core business strategically declined 55.6% from the prior year quarter. On a consolidated basis, direct premiums increased 3.6% primarily due to continued pricing actions.
Jim Smith: Thank you Marilyn and good morning, everyone.
Jim Smith: We are thrilled to report the 'twenty 'twenty four our first quarter results, our second consecutive profitable quarter with a net income of $1 4 million or 13 cents per share.
Jim Smith: This is a $6 $5 million turnaround from the same period last year as marilynn indicated earlier and I will happily reiterate this quarter was the highest first quarter profitability. We have has seen in seven years.
Speaker Change: Core direct written premiums increased 12, 5% to 47 million, while noncore business strategically declined 55, 6% from the prior year quarter.
Speaker Change: On a consolidated basis direct premiums written increased three 6% primarily due to continued pricing actions.
Jennifer Lee Gravelle: With favorable weather, fewer large losses, and relatively mild quarter and catastrophe losses, our quarter-over-quarter performance was exceptional. Our first quarter combined ratio improved 30 points to 93.3% due to both lower losses and expenses. Our underlying loss ratio improved by 16.6 points to 58.8 percent, largely due to lower frequency from the mild winter weather, better risk selection from our select product, as well as lower severity. As you may recall, last year we saw an unusually high number of large losses, which we could not explain. We hired an outside firm to take a close look at these losses and ultimately determined that it was random. Insurance can be a fortuitous business.
Speaker Change: With favorable weather fewer large losses and relatively mild quarter in catastrophe losses, our quarter over quarter performance was exceptional.
Speaker Change: Our first quarter combined ratio improved 30 points to a 93, 3% due to both lower losses and expenses.
Speaker Change: Our underlying loss ratio improved by 16.6 points to 58, 8% largely due to lower frequency from the mild winter weather better risk selection from our select product as well as lower severity.
Speaker Change: As you May recall last year, we saw unusually hot high number of large losses, which we could not explain.
Outside Affirmative: We hired an outside affirmative take a close look at these losses.
Outside Affirmative: When we determined it was random.
Speaker Change: <unk> can be a fortuitous business.
Jennifer Lee Gravelle: The lower number of large losses in the fourth quarter and again in the first quarter confirm that conclusion. Naturally, the reduction of our volatile non-core business also contributed to the profitable performance this quarter. In addition to the much-improved underlying loss ratio, we also experienced an 8-point improvement in catastrophe losses and two points of favorable development from the prior year, primarily from the re-estimation of catastrophe losses. Our net loss ratio improved by 26.6 points overall.
Speaker Change: The lower number of large losses in the fourth quarter and again in the first quarter confirmed that conclusion match.
Speaker Change: Naturally the reduction of our volatile noncore business also contributed to the profitable performance this quarter and.
Speaker Change: In addition to the much improved underlying loss ratio. We also experienced an eight point improvement in catastrophe losses.
Speaker Change: And two points of favorable development from prior year, primarily from the re estimation of catastrophe losses, our net loss ratio improved by 26.6 points overall.
Jennifer Lee Gravelle: Our expense ratio was also down 3.4 points to 31.3 as a result of our ongoing expense reduction efforts and trending towards our 29 percent expense ratio goal for the full year of 2024. For the quarter, net investment income of 1.5 million was relatively consistent with the prior year quarter. There are three key points I'd like to make about our investment portfolio. First, rates increased during the quarter, and credit spreads tightened.
Speaker Change: Our expense ratio was also down three points four points to 31.3 as a result of our ongoing expense reduction efforts and trending towards our 29% expense ratio goal for the full year of 2024.
Speaker Change: For the quarter net investment income mm 1.5 million was relatively consistent with the prior year quarter.
Speaker Change: There are three key points I'd like to make about our investment portfolio.
Speaker Change: First rates increased during the quarter and credit spreads tightened as.
Jennifer Lee Gravelle: As such, the decline in our portfolio value was muted. However, we also reduced our exposure to preferred stocks by roughly 13% to reduce volatility. We intend on further reducing our preferred stock holdings during the second quarter.
Speaker Change: As such the decline in our portfolio value was muted. However, we also reduced our exposure to preferred stocks by roughly 13% to reduce volatility we.
Speaker Change: We intend on further reducing our preferred stock holdings during the second quarter.
Jennifer Lee Gravelle: Secondly, we will see an increasing number of maturities in our bond portfolio over the next 12 to 18 months, which carry a far lower coupon than what is available to us today. And finally, the improved operating results of the company are generating positive cash flow. You'll note that we invested this excess cash in the first quarter, leaving us with less cash and higher fixed maturity securities. This will result in an increase in our future investment income. Relative to our six maturity securities, our effective duration is 3.6 years with an average yield that increased to 3.67%. The weighted average effective maturity is down to 6.9 years.
Speaker Change: Secondly.
Speaker Change: We will see an increasing number of maturities in our bond portfolio over the next 12 to 18 months, which carry a far lower coupon than what is available to us today and.
Speaker Change: And finally, the improved operating results of the company are generating positive cash flow. You'll note that we invented invested this excess cash in the first quarter, leaving us with less cash and higher fixed maturity securities.
Speaker Change: This will result in an increase of our future investment income.
Speaker Change: Relative to our fixed maturity securities our effective duration is three six years with an average yield increased to 3.67%.
Speaker Change: The weighted average effect of maturity is down to $6 nine years our.
Jennifer Lee Gravelle: Our book value excluding AOCI at March 31st was $4.40 per share. We are very pleased with our first quarter results, which produced an annualized return on equity of 16.2%. We expect return on equity to further increase over the balance of the year. Operator? Thank you.
Speaker Change: Our book value, excluding Aoc I at March 31st with $4 40 per share.
Speaker Change: We are very pleased with our first quarter results, which produced an annualized return on equity of 16, 2%. We expect return on equity to further increase over the balance of the year.
Operator: And with that we'll open it up for questions operator.
Operator: Thank you. We'll now be conducting a question and answer session. To ask a question, please press star 1 on your telephone keypad. Please make sure to pick up your handset to allow your signal to come through to our equipment. You may press star 2 to remove your question from the queue. One moment while I pull for questions. Our first question comes from the line of David Edelman with Daytona Street Capital. Please proceed with your question.
Operator: Thank you well now be conducting a question and answer session to ask a question. Please press star one on your telephone keypad. Please make sure to pick up your handset to allow your signal to come through to our equipment.
Operator: You May press star two to remove your question from the queue.
Speaker Change: One moment, while I pull for questions.
Operator: Our first question comes from the line of David Adelman with Daytona Street Capital. Please proceed with your question.
David Edelman: Yes. Thanks a lot. That was a great presentation. It's, it's wonderful. You made my day. My question is, given that, over the last few years, the book value has gone down. I wonder if that is a hint if you have enough net worth to grow at the rate that you want to grow and how the decline in book value over the last, let's say, four or five years, affects your ability to grow and reach the levels you want to.
David Adelman: Yes. Thanks, a lot that was a great presentation as this wonderful you made my day.
David Adelman: My question is given that over the last few years the book value has gone down.
Operator:
Speaker Change: I Wonder if that is if you have enough net worth to grow at the rates that you wanted to want to grow.
Operator: How does the decline.
Speaker Change: In book value over the last let's say four or five years affect your ability to grow and reached the levels you want to.
Meryl S. Golden: Great, thanks for your question. We don't really see our capital as constraining our growth today. And just so you know, we always have the ability to increase our quota share if we need more capital to support our growth. But as I said, we don't at this point see it as an impediment at all to our growth.
Speaker Change: Great. Thanks for your question, we don't really see our capital as constraining our growth today and just so you know we always have the ability to increase our quota share if we need more capital to support our growth, but as I said, we don't at this point see it as an impediment at all.
Speaker Change: Our gross.
Operator: Great, thank you.
Operator: Transcribed by https://otter.ai
Speaker Change: Great. Thank you.
Operator: Thank you. Our next question comes from the line of Gabriel McClure, a private investor. Please proceed with your question.
Speaker Change: Thank you. Our next question comes from the line of Gabriel Macquarie Private Investor. Please proceed with your question.
Gabriel Mcclure: Hey, Meryl and Jennifer, I'd like to congratulate you on the first quarter. I was just blown away when I saw that we were profitable in the first quarter. I know since I've been a shareholder, I don't think we've had a profitable first quarter, so thank you for that. I have one question for Jennifer and then one for you, Meryl.
Merrill: Hey Merrill.
Speaker Change: And Jennifer I'd like to congratulate you on our first quarter Oh I was just blown away when I saw that we were profitable in the first quarter I know since I've been a shareholder.
Jennifer: 19, I don't think we've had a.
Speaker Change: Profitable first quarter. So thank you for that.
Jennifer Lee Gravelle: I have one question for Jennifer and then one for for your Merrell Jenny.
Speaker Change: Jennifer.
Jennifer Lee Gravelle: Jennifer, The net investment income went down from the prior year and just kind of helped me. Transcribed by https://otter.ai, Investable Assets Are Also Winners. Page PAGE of NUMPAGES www.verbalink.com
Jennifer: The net investment income went down from prior year and I'm, just kind of help me.
Albert: Understand why why that happens to be and as Albert the yields are.
Jennifer: It should be increasing actually.
Albert: That's why I said to also win.
Jennifer Lee Gravelle: Sure thing, Gabe. Thanks for the question. Effectively, what happened was we did have some increase in our stock portfolio. So, we did have some unrealized gains that came through in 2023 that we didn't have quite as much of in 2024 because, as you recall, at the end of 2022, all of the investments were in quite a bad state with the economy. So, we did have improvement through 2023, which was greater than that of 2024, but it is still going in the right direction.
Jennifer: Sure thing Gabe.
Gabe: Thanks for the question effectively what happened is we did have some increase in our.
Albert: Stock portfolio. So we did have some unrealized gains that came through in 2020.
Jennifer Lee Gravelle: 2023 that we didn't have quite as much in 'twenty 'twenty four because as you recall at the end of 2022 all of the investments we're in quite a bad state with the economy. So we did have improvement through 2023, which was greater than that of 'twenty 'twenty four but it is still going on the proper in the right direction.
Gabriel Mcclure: Okay, but as far as like the actual net investment income of being like one and a half million versus I think the year prior was 1,540,000 or something, but why would that number come down? It seems like we should be having more income.
Jennifer: Okay, but.
Speaker Change: Far as like the actual net investment income would be in that one and a half million versus I think your prior was 1.540 million or something but why would that number come down it seems like we should be.
Gabriel Mcclure: We should be having more income.
Jennifer Lee Gravelle: Sure. It would appear that our investment income, the interest and dividends on the portfolio went from $1.6 million in 2023 down to $1.5 million in 2024, and that would be what is driving that particular change. It's a very small amount, about $70,000. The total net investment change year over year is about $38,000.
Meryl Golden: Sure and it would appear that our investment income the interest and dividends on the portfolio went from 1.6 million in 2023 down to 1.5, and 'twenty 'twenty four and that would be what was what is driving that particular change it's a very small amount about $70000.
Speaker Change: The total net investment changed year over year, it's like 30 $38000.
Gabriel Mcclure: Right, right. I just wondered why it's going in the down direction when it's supposed to be going up.
Meryl Golden: Right right I, just wondered why why it's going in the down direction when it when it's supposed to be going up.
Jennifer Lee Gravelle: Yeah.
Jennifer Lee Gravelle: Yeah, that is the only thing I can see, Gabe, is that we do have some changes in the interest and dividends on the portfolio. I will look into this further and get you a more detailed response.
Speaker Change: Yeah that is the only thing I can see you gave is that we do have some change in the interest and dividends on the portfolio I will look into this further in and it gets you a more detailed response.
Gabriel Mcclure: Okay, okay great, and then Meryl, my question for you is you already answered one of my questions in your presentation about the percent of our program that's in the SELECT program now. Um, but I'm really curious about that. And I mean, like, I guess, how does it work? Are you guys using AI? And I understand it's a competitive business and this is a public call, but anything you could share would be helpful.
Jennifer Lee Gravelle: Okay, Okay, Great and then Merrill My question for you is are you you already answered one of my questions in your.
Gabriel Mcclure: In your presentation about the percent of our program that's in the select program now.
Merrill: But I'm really curious about the I mean like.
Gabriel Mcclure: I guess, where are you guys using AI and I understand it's a competitive business and this is a public call, but anything you could share would be helpful.
Meryl S. Golden: Sure. So I'd like to tell you that we're using AI, but our rates are highly regulated. And at this point, they need to be explained to regulators, which excludes the opportunity to use AI in our rates.
Meryl: Sure. So I'd like to tell you that we're using AI, but our rates are highly regulated and at this point they need to be explained to regulators, which excludes the opportunity to use AI in our rates, but what we did you know as I said, we went live.
Meryl S. Golden: But what we did, you know, as I said, we went live in 22. So for the year or so before then, we took all of the data for Kingstone for the past 10 or so years. And we built what's called a by peril rating plan, which is a very specific way of pricing for homeowners where each peril, like Meryl Goldstein, Jennifer Gravelle, Kingstone Companies Inc. Meryl Goldstein, Jennifer Gravelle, Kingstone Companies Inc. Sure.
Meryl S. Golden: In 'twenty two so for the year or so before then we took all of the data for Kingstone for the past 10, or so years and we built a what's called a bi peril rating plan, which is a very specific way of pricing for homeowners where each peril.
Meryl S. Golden: Like hurricane or liability the different perils water there each are priced based on the data that is most relevant to predicting loss cost for the apparel. So it's a very it's a common way for homeowners to be priced but we feel.
Meryl Goldstein: That we're very far ahead of our competitors in the coastal space and so what we've seen in our select product as I mentioned is that the the reported frequency is lower than our legacy product and in fact, we're seeing upwards of a 10% reduction in our frequency. So you don't care.
Meryl S. Golden: You would see higher frequency for new business. So the fact that we're seeing lower frequency when the majority of our book is new business is really fantastic. So I hope that answers. Your question Gabe our our intent is to continue to enhance the select product and improve our rate segmentation.
Meryl S. Golden: So that we can grow faster and become even more profitable. So we're very excited about the flat products.
Unknown Speaker: Unknown Speaker Sure. So am I. Thank you. Thank you very much.
Meryl S. Golden: Sure. So Omar. Thank you. Thank you very much my pleasure.
Operator: Thank you. Our next question comes from the line of Bob Farnham with Johnny Montgomery Scott. Please proceed with your question.
Unknown Speaker: Thank you. Our next question comes from the line of Bob Farnam with Janney Montgomery Scott. Please proceed with your question.
Bob Farnham: Hey there, good morning. I actually have a couple questions. One is, let's just go back and touch on that. So the select product, again, are you trying to get out of the legacy business? So in other words, are you trying to get everything to be on the select platform? And if so, how soon do you think you can kind of do that transition?
Operator: Hi, there and good morning, I actually have a.
Bob Farnham: A couple of questions.
Bob Farnham: One is just let's just go back and touch on the select product again are you trying to get out of the legacy business. So in other words, you're trying to get everything to be on the select platform and if so how soon do you think you can kind of do that transition.
Bob Farnham: Yeah.
Meryl S. Golden: So the answer, Bob, is no; we have grandfathered our legacy book, and we will continue to renew those policies and legacy for some time. And the primary reason is that there would be a very massive dislocation between if we were to try to convert those policies, and, frankly, the legacy book is profitable. So we, you know, we really are hoping that our customers will retain their business in that book.
Bob Farnham: So the answer Bob is no we have grandfathered our legacy book and we will continue to renew those policies and legacy for some time and the primary reason is there would be a very massive dislocation between if we were to try to convert those policies and frankly the.
Meryl S. Golden: Legacy book is profitable. So we you know we really are hoping that our customers will retain in that book and we don't see any need to move them at this time.
Bob Farnham: Okay, so you're not trying just to eliminate the legacy book, it's just going to unwind as the policy... [inaudible] Okay, and if I heard you correctly with the non-core book, it sounds like you're not planning on exiting that completely. It's just you're reducing the negative impact of it, but you will still have an encore book going forward indefinitely.
Meryl S. Golden: Okay. So you're not you're not trying just to eliminate legacy book its just going to unwind as the policyholders are.
Bob Farnham: Leave, but if they continue to rise.
Bob Farnham: We renewed that will just keep going on indefinitely.
Speaker Change: Basically what exactly exactly I mean at some point it will probably get small enough that we moved them over but certainly not at this time.
Bob Farnham: Okay.
Bob Farnham: And if I did I hear you correctly with the non core book it sounds like you're not planning on exiting that completely it's just you're you're you're reducing the negative impact of it but you will still have a noncore book going forward indefinitely.
Meryl S. Golden: Exactly. You know, we're subject to regulation in terms of how much of the book we can get off. We did withdraw from the state of New Jersey. As a result, at the end of 2025, we will have no business in New Jersey. But in the other states, we continue to take rates. We have had, you know; we non-renew the maximum that we can. But our goal is just to minimize the drag on our earnings from the non-core business. And so we feel very confident with the rate we've taken and the other actions we've taken that in 2025, it will have very little impact, if any at all, on our results.
Bob Farnham: Exactly you know we're subject to regulation in terms of how much of the book, we can get off of that we did withdraw from the state of New Jersey. So at the end of 2020 five we will have no business in new Jersey, but in the other states. We continue to take rate we have.
Meryl S. Golden: Had you know, we nonrenewed or the maximum that we can but our goal is just to minimize the drag on our earnings from the noncore business and so we feel very confident with the rate we've taken and the other actions we've taken that in 2025. It will have very little impact if any at all on.
Meryl S. Golden: Our results.
Meryl S. Golden: Okay great.
Meryl S. Golden: And last question so.
Bob Farnham: Great. And last question, competition in the space, you know. I know that there are a bunch of Florida, you know, specific, specific coastal writers, but I'm not sure who you face in the New York area. What's the competitive environment like up there?
Meryl S. Golden: Competition in this space.
Speaker Change: I know that there are a bunch of kind of Florida.
Speaker Change: Especially the specific coastal writers, but I'm not sure who you face in.
Bob Farnham: The New York area.
Bob Farnham: How is what's the competitive environment.
Bob Farnham: Yes.
Meryl S. Golden: Sure, so it continues to be a very hard market in downstate New York, the coastal business, and I think that's going to continue for some time. We've talked about in the past that two of our largest competitors historically, one is out of business, and the other has a moratorium on all of their business, and the large multi-line riders have pulled away from the coast for a multitude of reasons. And even in the first quarter, we had another large competitor put a moratorium on all new business.
Speaker Change: Sure. So it is it continues to be a very hard market in downstate, New York coastal business and I think that's going to continue for some time.
Meryl S. Golden: You've talked about in the past that two of our largest competitors. Historically, one is out of business and the other has a moratorium on all of their business and the the large multiline writers have pulled away from the coast for a multitude of reasons and even in the first quarter we had.
Speaker Change: Another large competitor put a moratorium on all new business. So you know where there are definitely companies writing coastal business, but the the brokers would tell you that they have many fewer choices than in the past and because we feel so confident about our pricing we are going to take.
Meryl S. Golden: So, you know, there are definitely companies writing coastal business, but the brokers would tell you that they have many fewer choices than in the past. And because we feel so confident about our pricing, we are going to take advantage of this hard market position, and you will see our growth accelerate in the second quarter. I hope that answered your question, Bob.
Bob Farnham: Advantage of this hard market position and you will see our growth accelerate in the second quarter and beyond so I hope that answered your question Bob.
Bob Farnham: Yeah, no, that's good. Does New York have a market of last resort if policyholders just can't find something reasonably priced for them? There is a fair plan, but it's really...
Bob Farnham: Yeah No. That's good there's new York have a like a market of last resort if policyholders just can't find something reasonably priced for them.
Meryl S. Golden: There is a fair plan, but it's really small, and you know what I've heard. First of all, we compete mostly with MGAs at this point, and there have been some ENS, you know, new ENS markets entering the space, so there there is availability, it's just extremely expensive, so I don't think we're seeing much growth in the fair plan. Great. Thank you for the call, Meryl.
Bob Farnham: There is a fair plan, but it's really small and you know there you know what I've heard first of all we compete mostly with M. G. As at this point and there have been some E&S you know new E&S markets entering the space. So there there is availability, it's just extremely expensive.
Meryl S. Golden: So that's you know I don't think we're seeing much growth in the fair plan.
Meryl S. Golden: Okay, great. Thanks for the color.
Meryl: My pleasure.
Operator: Thank you. There are no further questions at this time. Should you have any follow-up questions, you can contact Karen Daly from the Equity Group, Kingstone's Investor Relations Representative. Her telephone number and email address can be found on the most recent earnings release. I'll now turn the call back to Meryl Golden for closing remarks.
Meryl S. Golden: Thank you there are no further questions. At this time should you have any follow up questions. You can contact Karen daily from the equity group Kingstone Investor Relations representative her telephone number an email address can be found on the most recent earnings release I'll now turn.
Meryl S. Golden: Call back Tomorrow Holden for closing remarks.
Meryl S. Golden: Great, thank you for joining our call today. I want to express my gratitude for your support and your interest, and, especially, I want to thank our entire Kingstone team for their great efforts. Have a wonderful day.
Meryl S. Golden: Great. Thank you for joining our call today I want to express my gratitude for your support and your interest and mostly I want to thank our entire kingstone team for their great efforts have a wonderful day.
Operator: Thank you. This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation.
Meryl S. Golden: Thank you. This concludes today's conference call you may disconnect. Your lines at this time. Thank you for your participation.