Q2 2024 Kingstone Companies Inc Earnings Call

Unknown Speaker: .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. ... Robert Farnam, Meryl Golden,.

Unknown Speaker: ......

Chamali: Robert Farnam, Meryl Golden, Greetings and welcome to the Kingstone Kingstone Company second quarter 2024 earnings call. At this time, all participants are to listen on. A question and answer session will follow the call. If anyone should require an operator... During the conference, please press star zero on your telephone. As a reminder, this conference is being held. It is now my pleasure to introduce Karin Daly, the Vice President, Equity, and Kingstone Investor Relations. Karin, you may begin. Thank you, Chamali. Good morning, everyone.

Operator: Greetings and welcome to the Kingstone Company second quarter, 2024, Ernie Scott's call. At this time, all participants on Alyson O'Neill mode. A question and answer session will follow the phone presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded.

Speaker Change: Greetings and welcome to the Kingstone Company's second quarter 2024 earnings conference call.

Speaker Change: At this time, all participants are in a listen-only mode. A question and answer session will follow the phone presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad.

Karin Daly: It is not my pleasure to introduce your host, Karin Daly, the Vice President, the Equity Group, and Kingstone's and Rest Relations representative.

Speaker Change: As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Karin Daly, Vice President, The Equity Group, and Kingstone's Investor Relations Representative. Karin, you may begin.

Karin Daly: Thank you, Chamali.

Karin 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 would like to note that this conference call may contain 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. Forward-looking statements speak only as of the day on which they are made, and Kingstone undertakes no obligation to update the information discussed.

Karin Daly: Good morning, everyone. Joining us on the call today will be Chief Executive Officer, Meryl Golden, and Chief Financial Officer, Jennifer Gravelle.

Karin Daly: Thank you, Chamali. Good morning, everyone. Joining us on the call today will be Chief Executive Officer Meryl Golden and Chief Financial Officer Jennifer Gravelle.

Karin Daly: On behalf of the company, I would like to note that this conference call may contain 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. Forward-looking statements speak only as of the day on which they are made, and Kingstone undertakes no obligation to update the information discussed. 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.

Speaker Change: On behalf of the company, I would like to note that this conference call may contain 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.

Speaker Change: Forward-looking statements speak only as of the date on which they are made, and Kingston undertakes no obligation to update the information discussed.

Speaker Change: 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.

Karin Daly: Additionally, today's remarks may include references to non-GAAP measures. For a reconciliation of these non-GAAP measures to GAAP figures, please see the tables and the latest earnings release.

Speaker Change: 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. With that, it's my pleasure to turn the call over to Meryl Golden. Meryl, you may begin.

Karin Daly: With that, it's my pleasure to turn the call over to Meryl Golden.

Karin 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 a reconciliation of these non-GAAP measures to GAAP figures, please see the tables in the latest earnings release. With that, it's my pleasure to turn the call over to Meryl Golden. Meryl, you may begin. Thanks Karin, and good morning everyone.

Meryl Golden: Meryl, you may begin. Thanks, Karin, and good morning everyone. We are so proud of our second quarter results. This is our third consecutive quarter of profitability and the most profitable quarter for Kingstone in the last seven years. I had said repeatedly that we were doing all of the right things to return the company to profitability over the years, and we are finally seeing the benefits of all of those actions consistently in our financial results. There could not be a better time for Kingstone to grow faster than now. As we are priced right, insured to value, have a product that properly matches rate to risk, have the right teams in place and cross the organization, and have reduced our expenses markedly, we are now faced with an unbelievable market opportunity that I wrote about in my mid-year letter to shareholders, and we'll expand upon today.

Meryl Golden: We are so proud of our second quarter results. This is our third consecutive quarter of profitability and the most profitable quarter for Kingstone in the last seven years. I have said repeatedly that we were doing all of the right things to return the company to profitability over the years, and we are finally seeing the benefits of all of those actions consistently in our financial results. There could not be a better time for Kingstone to grow faster than now as we are priced right, insured to value, have a product that properly matches rate to risk, have the right teams in place across the organization, and have reduced our expenses markedly.

Meryl Golden: Thanks, Karin. And good morning, everyone. We are so proud of our second quarter results. This is our third consecutive quarter of profitability and the most profitable quarter for Kingstone in the last seven years.

Speaker Change: I had said repeatedly that we were doing all of the right things to return the company to profitability over the years, and we are finally seeing the benefits of all of those actions consistently in our financial results.

Speaker Change: There could not be a better time for Kingston to grow faster than now, as we are priced right, insured to value, have a product that properly matches rate to risk.

Meryl Golden: And now we are faced with an unbelievable market opportunity that I wrote about in my mid-year letter to shareholders and will expand upon today. Let me remind you that more than two years ago and well ahead of many of our competitors, we recognized that lost trends around the rise and then inflation, a primary factor driving our lost 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 the replacement cost on every policy renewal.

Speaker Change: have the right teams in place across the organization and have reduced our expenses markedly. And now we are faced with an unbelievable market opportunity that I wrote about in my mid-year letter to shareholders and will expand upon today.

Meryl Golden: Let me remind you that more than two years ago and well ahead of many of our competitors, we recognize that lost trends around the rise, and then inflation, a primary factor driving our lost trends, would also result in many of our customers being under insured. We acted quickly to raise our premiums and put a plan in place to update replacement cost on every policy renewal. 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, which, along with an expansion of our underwriting appetite, fueled the growth in our core business this quarter.

Speaker Change: Let me remind you that more than two years ago and well ahead of many of our competitors

Speaker Change: We recognize that loss, transfer, and the rise.

Speaker Change: and then inflation, a primary factor driving our loss trends.

Speaker Change: would also result in many of our customers being underinsured.

Speaker Change: We acted quickly to raise our premiums and put a plan in place to update replacement costs on every policy renewal.

Meryl 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, which, along with an expansion of our underwriting appetite, fueled the growth in our core business this quarter. The coastal insurance market has been volatile for some time in our core state of New York, with a large competitor going insolvency and others shutting down or restricting their business over the last two years. However, market dynamics have changed profoundly in the last few weeks. Competing carriers representing more than $200 million in annual premium made the decision to exit New York State or to exit the personal property market countrywide.

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 Which along with an expansion of our underwriting appetite fueled the growth in our core business this quarter

Meryl Golden: The coastal insurance market has been volatile for some time in our core state of New York, with a large competitor going insolvent and others shutting down or restricting their business over the last two years. However, market dynamics have changed profoundly in the last few weeks. Competing carriers representing more than 200 million in annual premium made the decision to exit New York State or to exit the personal property market with countrywide. We knew that the policies issued by these carriers needed to be moved to alternative carriers and assumed that that would happen over the next year.

Meryl Golden: We knew that the policies issued by these carriers needed to be moved to alternative carriers and assumed that that would happen over the next year. However, about 10 days ago, we learned that the policies of two of those carriers, more than 60,000 policies in our downstate New York footprint, will need to be moved to alternative carriers by the end of this year. For perspective, that number of policies is roughly the size that Kingstone is today. While the growth potential is seemingly limitless, we cannot write at all.

Speaker Change: The coastal insurance market has been volatile for some time in our core state of New York, with a large competitor going insolvent and others shutting down or restricting their business over the last two years.

Speaker Change: However, market dynamics have changed profoundly in the last few weeks.

Speaker Change: Competing carriers representing more than $200 million in annual premium made the decision to exit New York State or to exit the personal property market countrywide.

Speaker Change: We knew that the policies issued by these carriers needed to be moved to alternative carriers and assumed that that would happen over the next year.

Meryl Golden: However, about 10 days ago, we learned that the policies of two of those carriers, over 60,000 policies in our downstate New York footprint, will need to be moved to alternative carriers by the end of this year. For perspective, that number of policies is roughly the size that Kingstone is today. While the growth potential is seemingly limitless, we cannot write it all. Our intent is to maximize our growth only in those segments that meet or exceed our profitability targets. We are in the fortunate position to pick which segments we want to write because mark capacity is severely constrained.

Speaker Change: However, about 10 days ago, we learned that the policies of two of those carriers, over 60,000 policies in our downstate New York footprint, will need to be moved to alternative carriers by the end of this year.

Speaker Change: For perspective, that number of policies is roughly the size that Kingstone is today.

Speaker Change: While the growth potential is seemingly limitless,

Meryl Golden: Our intent is to maximize our growth only in those segments that meet or exceed our profitability targets. We are in the fortunate position to pick which segments we want to write because marked capacity is severely constrained. Our objective is profitable growth, not growth for growth's sake. Kingstone has learned this lesson before, particularly when we expanded it into the non-core states, and we will not make the same mistakes again. As I stated last quarter, it's very easy to grow in the insurance business, but it's much harder to grow profitably.

Speaker Change: We cannot write it all.

Speaker Change: Our intent is to maximize our growth only in those segments that meet or exceed our profitability targets. We are in the fortunate position to pick which segments we want to write, because marked capacity is severely constrained.

Meryl Golden: Our objective is profitable growth, not growth for growth's sake. Kingstone has learned this lesson before, particularly when we expanded into the nine core states, and we will not make the same mistakes again. As I stated last quarter, it's very easy to grow in the insurance business, but it's much harder to grow profitably. We have planned to capitalize on this amazing opportunity by being very intentional and selective on which properties we write and very nimble to change our approach as we learn more and as market conditions evolve. It is such a difficult time for our select producers, and we will do everything we can to help them through this unprecedented situation.

Speaker Change: Our objective is profitable growth, not growth for growth's sake. Kingstone has learned this lesson before, particularly when we expanded into the non-core states, and we will not make the same mistakes again.

Speaker Change: As I stated last quarter, it's very easy to grow in the insurance business, but it's much harder to grow profitably.

Meryl Golden: We plan to capitalize on this amazing opportunity by being very intentional and selective about which properties we write, and very nimble to change our approach as we learn more and as market conditions evolve. It is such a difficult time for our select producers, and we will do everything we can to help them through this unprecedented situation.

Speaker Change: We plan to capitalize on this amazing opportunity by being very intentional and selective on which properties we write and very nimble to change our approach as we learn more and as market conditions evolve.

Speaker Change: It is such a difficult time for our select producers and we will do everything we can to help them through this unprecedented situation.

Meryl Golden: While the specifics of these market dynamics are new and evolving, Kingstone's entire leadership team is focused on the changes we need to make to successfully seize this incredible opportunity with as minimal disruption as possible to our underwriting and service standards. We are carefully monitoring our capital position and will utilize quota share if needed to ensure we have the capital needed to support our growth. Your state, most of our growth has been from increases in our average premium rather than growth in policy count. Going forward, while we will still benefit from increases in average premium, most of our growth will come from increasing our policies and force.

Meryl Golden: While the specifics of these market dynamics are new and evolving, Kingstone's entire leadership team is focused on the changes we need to make to successfully seize this incredible opportunity with as minimal disruption as possible to our underwriting and service standards. We are carefully monitoring our capital position and will utilize quota share, if needed, to ensure we have the capital needed to support our growth. In your state, most of our growth has been from increases in our average premium, rather than growth and policy counts.

Speaker Change: while the specifics of these market dynamics are new and evolving.

Kingston: Kingston's entire leadership team is focused on the changes we need to make to successfully seize this incredible opportunity with as minimal disruption as possible to our underwriting and service standards.

Kingston: We are carefully monitoring our capital position and will utilize quota share if needed to ensure we have the capital needed to support our growth.

Kingston: Year-to-date, most of our growth has been from increases in our average premium rather than growth in policy count.

Meryl Golden: Going forward, while we'll still benefit from increases in average premium, most of our growth will come from increasing our policies in force. For visibility, I want to give you an update on some of the metrics that I shared in my mid-year shareholder letter when we had just learned about this market dynamic. At that time, I shared that our new business policy count was up three times the prior year month. Well, we ended the month of July with an overall five times increase rather than the three times that we had shared. And this has increased materially so far in August.

Kingston: Going forward, while we'll still benefit from increases in average premium, most of our growth will come from increasing our policies in force.

Meryl Golden: For visibility, I want to give you an update on some of the metrics that I shared in my mid-year shareholder letter when we had just learned about this market dynamic. At that time, I shared that our new business policy count was up three times the prior year month. Well, we ended the month of July with an overall five times increase rather than the three times that we had shared, and this has increased materially so far in August. I also shared that we were at nine times the prior year month's new business premium level. We completed the month of July at 13 times higher, new business premium, well ahead of the nine times that I had shared, and are seeing the same trends so far in August.

Meryl Golden: I also shared that we were at 9 times the prior year's new business premium level. We completed the month of July at 13 times higher new business premium, well ahead of the 9 times that I had shared and are seeing the same trend so far in August. Well, it's hard to see beyond the current opportunity that is directly in front of us.

Kingston: For visibility, I want to give you an update on some of the metrics that I shared in my mid-year shareholder letter when we had just learned about this market dynamic. At that time, I shared that our new business policy count was up three times the prior year month.

Kingston: Well, we ended the month of July with an overall five times increase, rather than the three times that we had shared. And this has increased materially so far in August.

Kingston: I also shared that we were at nine times the prior year month's new business premium level.

Kingston: We completed the month of July at 13 times higher new business premium, well ahead of the nine times that I had shared, and are seeing the same trend so far in August.

Meryl Golden: Well, it's hard to see beyond the current opportunity that is directly in front of us. We have been thinking a lot about the longer term and how to continue our profitable growth trajectory beyond 2025. We have what we now call our platform, our proven select product, a competitive expense structure, and expert staff in all areas of the company. We have opportunities for enhanced segmentation in our select product to better match risk and will make us more competitive in our core business. We also want to grow the company in other ways. We have been discussing expansion of our platform to other geographies, to increase our footprint, additional product offerings, alternative distribution channels, and potential acquisitions, among other strategies.

Kingston: Well, it's hard to see beyond the current opportunity that is directly in front of us. We have been thinking a lot about the longer term and how to continue our profitable growth trajectory beyond 2025.

Meryl Golden: We have been thinking a lot about the longer term and how to continue our profitable growth trajectory beyond 2025. We have what we now call our platform, our proven select product, a competitive expense structure, and expert staff in all areas of the company. We have opportunities for enhanced segmentation in our select products to better match risk to risk, and this will make us more competitive in our core business. We also want to grow the company in other ways. We have been discussing expansion of our platform to other geographies to increase our footprint, additional product offerings, alternative distribution channels, and potential acquisitions, among other strategies.

Kingston: We have what we now call our platform.

Speaker Change: our proven select product, a competitive expense structure, and expert staff in all areas of the company. We have opportunities for enhanced segmentation in our select product to better match risk to risk and will make us more competitive in our core business.

Speaker Change: We also want to grow the company in other ways. We have been discussing expansion of our platform to other geographies to increase our footprint, additional product offerings, alternative distribution channels, and potential acquisitions among other strategies.

Meryl Golden: There is a lot more work to do before we finalize our longer term plans, but I feel confident that we now have a scalable platform to continue to drive profitable growth for many years to come. Before I touch on full your guidance, I wanted to share an update on our debt that will be maturing at your end. I am delighted to share that we have a solution, and we are currently in the final stages of execution. Since this is in process, we cannot share any information or answer any questions regarding the debt at this time.

Speaker Change: There is a lot more work to do before we finalize our longer term plans, but I feel confident that we now have a scalable platform to continue to drive profitable growth for many years to come.

Meryl Golden: There is a lot more work to do before we finalize our longer-term plans, but I feel confident that we now have a scalable platform to continue to drive profitable growth for many years to come. Before I touch on full-year guidance, I wanted to share an update on our debt that will be maturing at year end. I am delighted to share that we have a solution, and we are currently in the final stages of execution. Since this is in process, we cannot share any information or answer any questions regarding the debt at this time.

Speaker Change: Before I touch on full year guidance, I wanted to share an update on our debt that will be maturing at year end. I am delighted to share that we have a solution and we are currently in the final stages of execution.

Speaker Change: Since this is in process, we cannot share any information or answer any questions regarding the debt at this time. However, I can share that this solution will be announced within the next month.

Meryl Golden: However, I can share that this solution will be announced within the next month and I have confidence that you will be happy with the outcome. Stay tuned. And finally, turning to guidance, I will first cover our update 24 guidance that we unveiled in yesterday's earnings release and then share our initial expectations for 2025, with half of the year under our belts. Full Year 2024 guidance is as follows, with direct premium written growth in our core business in the range of 25 to 35 percent. This is an increase from just two weeks ago.

Meryl Golden: However, I can share that this solution will be announced within the next month, and I have confidence that you will be happy with the outcome. Stay tuned.

Speaker Change: And, I have confidence that you will be happy with the outcome.

Meryl Golden: And finally, turning to guidance, I will first cover our update 24 guidance that we unveiled in yesterday's earnings release, and then share our initial expectations for 2025. With half of the year under our belt, full-year 2024 guidance is as follows. Direct premium written growth in our core business in the range of 25 to 35%. This increased from just two weeks ago. And based on approximately 125 million of net premiums earned, we expect to achieve a gap combined ratio between 84 and 88, earnings per share between a dollar and a dollar 30, and return on equity between 26 and 34%.

Speaker Change: Stay tuned.

Speaker Change: And finally, turning to guidance, I will first cover our updated 24 guidance that we unveiled in yesterday's earnings release, and then share our initial expectations for 2025.

Meryl Golden: And based on approximately $125 million of net premiums earned, we expect to achieve a gap combined ratio between 84 and 88, earnings per share between $1 and $1.30, and return on equity between 26 and 34 percent. We're also happy to share our initial expectations for Full Year 2025 as follows. Direct premium written growth in our core business in the range of 15 to 25 percent. And based on approximately $150 million of net premiums earned, we expect to achieve a gap-combined ratio between 85 and 89, earnings per share between $1.20 and $1.60, and return on equity between 22 and 30 percent.

Speaker Change: With half of the year under our belt, full year 2024 guidance is as follows.

Speaker Change: Direct premium written growth in our core business in the range of 25 to 35 percent. This increased from just two weeks ago.

Speaker Change: And based on approximately 125 million of net premiums earned, we expect to achieve a gap combined ratio between eighty-four and eighty-eight.

Speaker Change: Earnings per share between $1.00 and $1.30, and return on equity between 26% and 34%.

Meryl Golden: We are also happy to share our initial expectations for full year 2025 as follows. Direct premium written growth in our core business in the range of 15 to 25%. And based on approximately 150 million of net premiums earned, we expect to achieve a gap combined ratio between 85 and 89. Earnings per share between a dollar 20 and a dollar 60, and return on equity between 22 and 30%. The recent change in our market opportunity that I have been discussing has not been factored in our earned premium combined ratio, earnings per share, or return on equity in the guidance provided for 24 or 25.

Speaker Change: We're also happy to share our initial expectations for full year 2025 as follows.

Speaker Change: Direct premium written growth in our core business in the range of 15 to 25 percent.

Speaker Change: and based on approximately $150 million of net premiums earned, we expect to achieve a gap-combined ratio of between 85 and 89.

Speaker Change: Earnings per share between $1.20 and $1.60 and return on equity between 22% and 30%.

Meryl Golden: The recent change in our market opportunity that I have been discussing has not been factored in our earned premium, combined ratio, earnings per share, or return on equity in the guidance provided for 24 or 25. It's just too early to be able to do that. As soon as we can forecast the impact, I will update the guidance. Otherwise, our guidance assumes no material changes in our business, and, as a reminder, our results are very weather-dependent, and we have assumed no major catastrophe events in this guidance. We have also assumed that the cost of catastrophe re-insurance for the 25-26 treaty year will increase modestly relative to this year's.

Speaker Change: The recent change in our market opportunity that I have been discussing.

Speaker Change: has not been factored in our earned premium, combined ratio, earnings per share, or return on equity in the guidance provided for 24 or 25.

Meryl Golden: It's just too early to be able to do that. As soon as we can forecast the impact, I will update the guidance. Otherwise, our guidance assumes no material changes in our business, and as a reminder, our results are very weather dependent, and we have assumed no major catastrophe event in this guidance. We have also assumed that the cost for catastrophe re-insurance for the 25-26 treaty year will increase modestly relative to this year's treaty. Last, note that the second half of 24 and full year 25 does not assume any gains or losses from our investment portfolio.

Speaker Change: It's just too early to be able to do that. As soon as we can forecast the impact, I will update the guidance.

Speaker Change: Otherwise, our guidance assumes no material changes in our business, and as a reminder, our results are very weather dependent, and we have assumed no major catastrophe event in this guidance.

Speaker Change: We have also assumed that the cost for catastrophe reinsurance for the 25-26 treaty year will increase modestly relative to this year's treaty.

Meryl Golden: Last note that the second half of 24 and full year 25 do not assume any gains or losses from our investment portfolio. With that, I'll turn the call over to Jen for a more detailed review of our quarterly financial results. Take it away, Jen.

Speaker Change: Last, note that the second half of 24 and full year 25 does not assume any gains or losses from our investment portfolio. With that, I'll turn the call over to Jen for a more detailed review of our quarterly financial results. Take it away, Jen.

Jennifer Gravelle: With that, I will turn the call over to Jen for a more detailed review of our quarterly finance results.

Jennifer Gravelle: Take it away, Jen.

Jennifer Gravelle: Thanks, Meryl, and good morning, everyone. As Meryl mentioned, we could not be more pleased with our second quarter and first half year results. This now marks our third consecutive quarter of profitability, with net income of 4.5 million or 41 cents per basic share. For the year-to-date, our net income is up 11.5 million dollars over this period last year. On a consolidated basis, direct premiums increased 12 percent, inclusive of 21 percent increase in core direct written premiums, partially offset by the continued reduction of our non-core business, which decreased by nearly 60 percent compared to the same period last year.

Jennifer Gravelle: Thank you. Thanks, Meryl. And good morning, everyone.

Jen: Thanks Meryl, and good morning everyone. As Meryl mentioned, we could not be more pleased with our second quarter and first half year results.

Jennifer Gravelle: As Meryl mentioned, we could not be more pleased with our second quarter and first half-year results. This now marks our third consecutive quarter of profitability with a net income of 4.5 million, or 41 cents per basic share. For the year-to-date, our net income is up $11.5 million over this period last year. On a consolidated basis, direct premiums increased 12%, inclusive of a 21% increase in core direct written premiums, partially offset by the continued reduction of our non-core business, which decreased by nearly 60% compared to the same period last year.

Jen: This now marks our third consecutive quarter of profitability with net income of $4.5 million or $0.41 per basic share. For the year to date, our net income is up $11.5 million over this period last year.

Speaker Change: On a consolidated basis, direct premiums increased 12%, inclusive of a 21% increase in core direct written premiums, partially offset by the continued reduction of our non-core business.

Jennifer Gravelle: Increasing our core business reflects strong pricing action, with average premium up more than 18 percent in the quarter. Our combined ratio improved by 21 points to a 78.2 percent for the quarter. Our current accident year loss ratio improved by 18 points with a 15-point improvement in non-cat losses and a three-point reduction in catastrophe losses. We also had $430,000 of favorable prior year development, reducing the loss ratio by 1.4 points. Our expense ratio was 31.2 percent, a 1.2-point improvement from the second quarter of 2024; excuse me, 2023. While our expense ratio is higher than the target shared in Meryl's year-end letter to shareholders, the difference is almost entirely due to increased employee bonus and contingent commission to our producers, which are triggered off of our better-than-expected underwriting results.

Jennifer Gravelle: The increase in our core business reflects strong pricing action, with average premium up more than 18% in the quarter. Our combined ratio improved by 21 points to 78.2% for the quarter. Our current accident year loss ratio improved by 18 points, with a 15-point improvement in non-CAT losses and a three-point reduction in catastrophe losses.

Speaker Change: which decreased by nearly 60% compared to the same period last year. The increase in our core business reflects strong pricing action, with average premium up more than 18% in the quarter.

Speaker Change: Our combined ratio improved by 21 points to a 78.2% for the quarter. Our current accident year loss ratio improved by 18 points with a 15 point improvement in non-CAT losses and a 3 point reduction in catastrophe losses.

Jennifer Gravelle: We also had $430,000 of favorable prior year development, reducing the loss ratio by 1.4. Our expense ratio was 31.2%, a 1.2 point improvement from the second quarter of 2024, excuse me, 2023. While our expense ratio is higher than the target shared in Meryl's year-end letter to shareholders, the difference is almost entirely due to increased employee bonuses and contingent commission to our producers, which are triggered off of our better-than-expected under This is a good problem to have.

Speaker Change: We also had $430,000 of favorable prior year development, reducing the loss ratio by 1.4 points.

Speaker Change: Our expense ratio was 31.2%, a 1.2 point improvement from the second quarter of 2023.

Speaker Change: While our expense ratio is higher than the target shared in Meryl's year-end letter to shareholders, the difference is almost entirely due to increased employee bonus and contingent commission to our producers, which are triggered off of our better-than-expected underwriting results. This is a good problem to have.

Jennifer Gravelle: This is a good problem to have. Our non-cat loss ratio improvement was driven by homeowners, our main line of business, with decreases in both frequency and severity for our largest perils of water and fire as compared to the prior year. We attribute this improvement to better risk selection in our select product and the reduction in our non-core business. We also experienced fewer large losses this quarter compared to the prior year and the three-year average for the second quarter. We are now confident that, despite the large losses of the experience in 2023, was random. For the quarter, net investment income increased 22% to $1.8 million compared to $1.5 million in the prior year quarter.

Jennifer Gravelle: Our non-CAT loss ratio improvement was driven by homeowners, our main line of business, with decreases in both frequency and severity for our largest perils of water and fire as compared to the prior year. We attribute this improvement to better risk selection in our select products and the reduction in our non-core business. We also experienced fewer large losses this quarter compared to the prior year in the three-year average for the second quarter. We are now confident that the spike in large losses we experienced in 2023 was random.

Speaker Change: Our non-CAT loss ratio improvement was driven by homeowners, our main line of business with decreases in both frequency and severity for our largest perils of water and fire as compared to the prior year. We attribute this improvement to better risk selection in our select product and the reduction in our non-core business.

Speaker Change: We also experienced fewer large losses this quarter compared to the prior year in the three-year average for the second quarter. We are now confident that the spike in large losses we experienced in 2023 was random.

Jennifer Gravelle: For the quarter, net investment income increased 22% to 1.8 million compared to 1.5 million in the prior year quarter. Excess cash generated from operations, along with maturities from our bond portfolio, and proceeds from the sale of preferred stocks. I've been invested in treasuries to take advantage of their high risk-free rate. We continue to reduce our preferred stock holdings to lessen the volatility in our portfolio, resulting in a $200,000 loss for the quarter.

Speaker Change: For the quarter, net investment income increased 22% to $1.8 million compared to $1.5 million in the prior year quarter.

Jennifer Gravelle: Excess cash generated from operations, along with the charities where I bond portfolio and proceeds from the sale of preferred stock, I've been invested in Treasuries to take advantage of their high risk-free rate. We continue to reduce our preferred stock holdings to lessen the volatility in our portfolio, resulting in a $200,000 dollar loss for the quarter. The average yield on non-cash-invested assets was 3.81% as of June 30th, compared to 3.6% as of June 30th, 2023. The expected duration of 3.5 years in the weighted average effective maturity down to 6.8 years. With the changing of the macroeconomic factors and the anticipated decline in interest rates, we do expect to see a material improvement in the value of our bond portfolio going forward, which we reflected in our balance sheet as an increase to other comprehensive income.

Speaker Change: Excess cash generated from operations, along with maturities from our bond portfolio and proceeds from the sale of preferred stock, have been invested in treasuries to take advantage of their high risk-free rate.

Speaker Change: We continue to reduce our preferred stock holdings to lessen the volatility in our portfolio, resulting in a $200,000 loss for the quarter.

Jennifer Gravelle: The average yield on non-cash invested assets was 3.81% as of June 30th compared to 3.63% as of June 30th, 2023, with the effective duration of 3.5 years and the weighted average effective maturity down to 6.8 years.

Speaker Change: The average yield on non-cash invested assets was 3.81% as of June 30th compared to 3.63% as of June 30th, 2023, with the effective duration of 3.5 years and the weighted average effective maturity down to 6.8 years.

Jennifer Gravelle: With the changing macroeconomic factors and the anticipated decline in interest rates, we do expect to see a material improvement in the value of our bond portfolio going forward, which will be reflected in our balance sheet as an increase to other comprehensive income. For perspective, every half percent reduction in interest rates will increase our portfolio by about $2.7 million. Before I turn it back to the operator for questions, I would like to add that we benefited from a one-time $300,000 gain from a commutation of prior year reinsurance contracts during the quarter.

Speaker Change: With the changing of the macroeconomic factors and the anticipated decline in interest rates, we do expect to see a material improvement in the value of our bond portfolio going forward, which will be reflected in our balance sheet as an increase to other comprehensive income.

Jennifer Gravelle: For perspective, every half percent reduction in interest rates will increase our preferred portfolio by about $2.7 million.

Speaker Change: For perspective, every half percent reduction in interest rates will increase our portfolio by about $2.7 million.

Jennifer Gravelle: Before I turn it back to the operator questions, I would like to add that we've benefited from a one-time $300,000 gain from a commutation of prior year re-insurance treaties during the quarter. Additionally, we had a $500,000 reduction in re-insurance costs from recognizing a no-claims bonus on one of our catastrophe treaties. Overall, we had a great quarter, earnings of 41 cents per share and an annualized return on equity of 47%. As always, we thank you for your support, and with that, we'll open it up for questions.

Speaker Change: Before I turn it back to the operator for questions, I would like to add that we benefited from a one-time $300,000 gain from a commutation of prior year reinsurance treaties during the quarter.

Speaker Change: Additionally, we had a $500,000 reduction in reinsurance costs from recognizing a no-claims bonus on one of our catastrophe treaties.

Speaker Change: Overall, we had a great quarter with earnings of 41 cents per share and an annualized return on equity of 47%. As always, we thank you for your support. And with that, we'll open it up for questions. Operator?

Jennifer Gravelle: Additionally, we had a $500,000 reduction in reinsurance costs from recognizing a no-claims bonus on one of our catastrophe treaties. Overall, we had a great quarter with earnings of $0.41 per share and an annualized return on equity of 47%. As always, we thank you for your support, and with that, we'll open it up for questions. Operator?

Jennifer Gravelle: Operator? Thank you.

Operator: Thank you. We will now be conducting a question and answer session. If you would like to ask, please press star 1.

Operator: We will now be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate a line in the question queue. You may press star two to remove yourself from the queue, to participate in using speaker equipment, and maybe necessary to pick up the handset before pressing the star keys. One moment please, while we pull four questions. Thank you.

Speaker Change: Thank you. We will now be conducting a question and answer session.

Operator: A confirmation tone will indicate a line is, You may press start to remove yourself. You may press start to remove yourself, Meryl Golden, Jonathan Old, Participants using speaker equipment, and it may be necessary to pick up the handset before pressing, and one moment, please, while we pull four questions. Our first question comes from the line: Bob Farnam with Janie Montgomery Scott.

Speaker Change: If you would like to ask a question, please press star one on your telephone keypad.

Speaker Change: A confirmation tone will indicate a line is in the question queue. You may press star to remove yourself from the queue for participants using speaker equipment and may be necessary to pick up the handset before pressing the star keys.

Speaker Change: And one moment, please, while we pull for questions.

Speaker Change: Unknown Executive, Karin Daly, Meryl Golden

Bob Farnham: Our first question comes from the line of Bob Farnham with Janie Montgomery Scott.

Speaker Change: Thank you. Our first question comes from the line of.

Bob Farnam: Please proceed with your, Yeah, hi there. Good morning, everyone. I have I have multiple questions about the market opportunity in front of you. And I guess, I wanted to start with, you mentioned the kind of expansion of your underwriting appetites, and your geographies, and your products. Can you give us an idea of what you're talking about and that? The second part of my question is going to be, you have an immense growth opportunity, haven't you, and I totally understand that growth within being profitable at the same time is very difficult.

Bob Farnham: Please proceed with your question. Yeah, hi there.

Speaker Change: Bob Farnham with Janie Montgomery Scott. Please proceed with your question.

Meryl Golden: Good morning, everyone. I have multiple questions about the market opportunity in front of you, and I guess I wanted to start with, you mentioned the expansion of your underwriting appetites, new geographies, new products. Can you give us an idea of what you're talking about in that sense? The second part of my question is going to be, you have an immense growth opportunity. I totally understand that growth and being profitable at the same time is very difficult. You've had a lot of competitors pull out of this market because they've had issues. How can you give us confidence that the business that you're going to be writing and taking in is going to be good for you?

Bob Farnham: Yeah. Hi there. Good morning, everyone. Good morning, Bob. Hi. I have multiple questions about the market opportunity in front of you, and I guess...

Bob Farnham: I wanted to start with you mentioned kind of the expansion of your underwriting appetite into new geographies and new products. Can you give us an idea of what you're talking about in that sense?

Bob Farnam: So you've had a lot of competitors pull out of this market because they've had issues. So how can you give us confidence that, you know, the business that you're going to be writing and taking in is going to be good for you?

Speaker Change: The second part of my question is going to be, you have an immense growth opportunity ahead of you. And I totally understand that the growth and being profitable at the same time is very difficult.

Speaker Change: You've had a lot of competitors pull out of this market because they've had issues. So how can you give us confidence that, you know, the business that you're going to be writing and taking in is going to be good for you?

Meryl Golden: Okay, well, thanks for your questions, Bob. So first of all, in terms of our underwriting appetite, if you recall, last year, we severely restricted our writings given the speculation about the reinsurance market. And so we made some significant changes to slow our growth and reduce the overall cost of reinsurance. After we finalized our reinsurance purchase for last year, we've been slowly reverting our underwriting appetite back to what it was previously. So, you know, writing more business in Suffolk County, as an example.

Meryl Golden: Okay.

Meryl Golden: Well, thanks for your questions, Bob. So first of all, in terms of our underwriting appetites, if you recall last year, we severely restricted our writings given a conjecture about the reinsurance market, and so we had made some significant changes to slow our growth to reduce the overall cost of reinsurance. After we finalized our reinsurance purchase for last year, we've been slowly reverting our underwriting appetite back to what it was previously. So writing more business in Suffolk County as an example. And then this year, given the confidence we have that we are priced right and listening to producers in the marketplace and what their needs are, we've made some changes.

Speaker Change: Okay, well, thanks for your questions, Bob. So, first of all, in terms of our underwriting appetite, if you recall last year we severely restricted our writings given the

Speaker Change: a conjecture about the reinsurance market, and so we had made some significant changes to slow our growth to reduce the overall cost of reinsurance.

Speaker Change: After we finalized our reinsurance purchase for last year, we've been slowly reverting our underwriting appetite back to

Meryl Golden: And then this year, given the confidence we have that we are priced right and listening to producers in the marketplace and what their needs are, we've made some changes. As an example, we now write a higher, up to two and a half million coverage limit, which was an area where there were few companies willing to write and where we felt very confident in our pricing. So the change in our underwriting appetite is nothing really new. These are all risks that Kingstone has experience with, but we reacted to the opportunity in the market and just opened up segments that the producers needed. Relative to confidence that we're doing the right thing.

Speaker Change: What it was previously. So, you know, writing more business in Suffolk County as an example. And then this year, given the confidence we have that we are priced right and

Speaker Change: and listening to producers in the marketplace and what their needs are, we've made some changes. As an example, we now write a higher, up to two and a half million coverage limit, which was

Meryl Golden: As an example, we now write a higher up to two and a half million coverage limit, which was an area where there were few companies willing to write and where we felt very confident in our pricing. So the change in our underwriting appetite is nothing like really new. This is all risks that Kingston has experienced with, but we've reacted to the opportunity in the market and just opened up segments that the producers needed. Relative to confidence that we're doing the right thing. I mean, we are just such a different company than we were years ago when we made some mistakes and grew too quickly.

Speaker Change: an area where there were few companies willing to write and where we felt very confident in our pricing.

Speaker Change: So the change in our underwriting appetite is nothing like really new. This is all risks that Kingston has experience with, but we reacted to the opportunity in the market and just opened up segments that the producers needed.

Meryl Golden: I mean, Bob, we are just such a different company than we were years ago when we made some mistakes and grew too quickly. And to give you confidence, first, we have our select product that's been on the street since 2022 and is doing a great job matching rate to risk. And as I've mentioned in the past, the frequency we're experiencing in our select product is 10% lower than what we are experiencing in our legacy product.

Speaker Change: Relative to confidence that we're doing the right thing.

Speaker Change: I mean, we are just such a different company.

Speaker Change: them. We were years ago when we made.

Meryl Golden: And to give you confidence, first we have our select product that's been on the street since 2022 and is doing a great job matching rate to risk. And I've mentioned in the past the frequency we're experiencing in our select product is 10% lower than what we are experiencing in our legacy product. And what's profound about that is that Select is mostly new business and Legacy is mostly renewal business. So usually you'd see a higher frequency, and we're seeing a lower frequency, which gives us a lot of confidence that the product is working in terms of risk selection.

Meryl Golden: And what's profound about that is that select is mostly new business, and legacy is mostly renewal business. So usually, you'd see a higher frequency, and we're seeing a lower frequency, which gives us a lot of confidence that the product is working in terms of risk selection.

Speaker Change: Some mistakes and grew too quickly.

Speaker Change: and to give you confidence. First, we have our select product that's been on the street since 2022 and is doing a great job matching rate to risk.

Speaker Change: and I've mentioned in the past, the frequency we're experiencing in our select product is 10% lower what we are experiencing in our legacy product.

Speaker Change: and what's profound about that is that select is mostly new business.

Speaker Change: and legacy is mostly renewal business. So usually you'd see a higher frequency and we're seeing a lower frequency, which gives us a lot of confidence that the product is working in terms of risk selection.

Meryl Golden: We have done a terrific job managing our reinsurance cost, and we on every single quote measure what the loss cost and reinsurance cost is and make sure that we're adequately priced before binding those risks. We have an A-plus team across all areas of the company, and we're really closely managing and responding to the results of the business. And we're just, you know, a very nimble and efficient company now. So I could not be more confident if this is the time for Kingstone to see this market opportunity and grow fast.

Meryl Golden: We have done a terrific job managing our reinsurance costs, and on every single quote, we measure what the loss cost and reinsurance cost is and make sure that we're adequately priced before binding those risks. We have an A-plus team across all areas of the company, and we're really closely managing and responding to the results of the business. And we're just a very nimble and efficient company now. So I could not be more confident that this is the time for Kingstone to seize this market opportunity and grow faster. Yeah, right. I just figured there'd be people a little nervous with the amount of growth that's potentially coming down.

Speaker Change: We have done a terrific job managing our reinsurance costs and on every single quote we measure what the loss cost and reinsurance cost is and make sure that we're adequately priced before binding those risks.

Speaker Change: We have an A-plus team across all areas of the company, and we're really closely managing and responding to the results of the business.

Speaker Change: and we're just a very nimble and efficient company now. So I could not be more confident that this is the time for Kingstone to seize this market opportunity and grow faster.

Bob Farnham: Director. Yeah, right. I just figured there'd be people a little nervous with the amount of growth that's potentially coming down. But it sounds like one; the expansion products are stuff you've already written before, and two. It sounds like the business that you've expanded into thus far has been profitable. So my guess is, you know, with the potential book of business ahead of you, you know, you're either going to be taking only a slice of it, or you're going to have to be raising rates or changing terms and conditions on the policies. That seems to be like what's going to have to happen if you're going to absorb all these policies from your competitors.

Speaker Change: Yeah, right. I just I figured there'd be people a little nervous with the amount of growth that's potentially coming down.

Bob Farnam: But it sounds like one, the expansion products are stuff you've already written before, and two, it sounds like the business that you've expanded into thus far has been profitable. So my guess is, with the potential book of business ahead of you, you're either going to be taking only a slice of it, or you're gonna have to be raising rates or changing terms and conditions on the policies.

Speaker Change: But it sounds like one, the expansion products are stuff you've already written before and two

Speaker Change: it sounds like the business that you've expanded into thus far has been has been profitable. So my guess is, you know, with the potential book of business ahead of you, you know, you're either going to be taking only a slice of it, or you're going to have to be raising rates or changing terms and conditions on the policies.

Bob Farnam: That seems to be like, what's going to have to happen if you're going to be able to absorb all these policies from your competitors? I'm not sure about this, but policies have to come at our rates and our forms, right?

Speaker Change: That seems to be like what's going to have to happen if you're going to be able to absorb all these policies from your competitors.

Meryl Golden: Sure, but so policies have to come on our race in our forms, right? So it's not like we're going to be changing our underwriting there. Okay, so you're right, Bob. We have already made some restrictions. As I said, we're being very selective in terms of which properties we want to write. So we're managing our geographic concentration. We've also stopped accepting risks that have prior losses. We're writing risks that are more financially stable. So we're using the data we have on our book for on profitability by segment to make a decision on what business we want to write.

Meryl Golden: So it's not like we're going to be changing our underwriting there. Okay, yes. So you're right, Bob, we have already made some restrictions. As I said, we're being very selective in terms of which properties we want to write.

Speaker Change: I'm sure about this. So policies have to come on our rates and our forms, right? So it's not like we're going to be changing our underwriting there.

Speaker Change: In the next episode, we'll see you in the next episode.

Speaker Change: Okay. Yes.

Meryl Golden: So we're managing our geographic concentration. We've also stopped accepting risks that have had prior losses. We're writing risks that are more financially stable. So we're using the data we have on our book on profitability by segment to make a decision on what business we want to write with, you know, I know you had the comment about capital support for this growth. Do you just remind me of the ability to change the court by sheer percentage? Is that something you can do kind of midstream or be halfway to the renewal of the polls?

Speaker Change: So you're right, Bob. We have already made some restrictions. As I said, we're being very selective in terms of which properties we want to write.

Speaker Change: So we're managing our geographic concentration. We've also stopped accepting risks that have prior losses. We're writing risks that are more financially stable. So we're using the data we have on our book for on profitability by segment to make a decision on what business we want to write.

Bob Farnham: With, you know, I know you had the comments about the capital support for this growth. Do you just remind me of the ability to change the court of share percentage. Is that something you can do kind of midstream, or do you have to wait to the renewal of policy? Absolutely, we can do it midstream, but we can also take on additional quota share partners. So we, our broker has already reached out to our reinsurance partners, and they have expressed an interest in continuing to support our growth via quota share if needed. So we're in a good place there.

Speaker Change: with, you know, I know you had the comment about the capital support for this growth. Do you just remind me that the ability to change the quota share percentage, is that something you can do kind of midstream or do you have to wait to the renewal of the policy?

Meryl Golden: So, absolutely, we can do it midstream, but we can also take on additional quota share partners. So we, our broker, have already reached out to our reinsurance partners, and they have expressed an interest in continuing to support our growth via quota share if needed. So we're in a good place there.

Speaker Change: So absolutely, we can do it midstream, but we can also take on additional quota share partners. So we, our broker has already reached out to our reinsurance partners.

Speaker Change: and they have expressed an interest in continuing to support our growth via QuotaShare if needed. So we're in a good place there.

Bob Farnham: Great. Okay.

Meryl Golden: Great. Okay. And last question for Jian, you have the new CATS reinsurance treaty, and I'm just trying to get a seal for it, alright, so give us a new treaty. If you have a hypothetical situation where Sandy hit Gay, kind of what would your net cost to Kingstone be after reinsurance? So the company has been really consistent on the attachment and different layering of the reinsurance actually since Sandy came into New York.

Meryl Golden: And last question for Gian. You have the new Cats reinsurance treaty. And I'm just trying to get a seal for all right. So given new treaty, if you have a hypothetical situation where Sandy hit Day. Kind of what would your what would your net net cost to Kingston be after reinsurance? Sure. So the company has been really consistent on the attachment and different layering of the reinsurance actually since Sandy came into New York. So ultimately, Sandy at that point was a loss to our second layer; didn't go all the way through the second layer. It would be the same here.

Jian: Great. Okay. And last question for Jian. You have the new CATS reinsurance treaty.

Speaker Change: and I'm just trying to get a feel for, all right, so given the new treaty, if you have a hypothetical situation where Sandy hit Gay.

Speaker Change: What would your net cost to Kingston be after reinsurance?

Speaker Change: Transcripts provided by Transcription Outsourcing, LLC.

Jian: different layering of the reinsurance actually since Sandy came into into New York, so Ultimately sandy at that point was a loss to our second layer didn't go all the way through the second layer It would be the same here We actually modeled that on a on an annual basis as we are placing our reinsurance Just making sure that we're able to cover those kinds of

Meryl Golden: So ultimately, Sandy at that point was a loss to our second layer but didn't go all the way through the second layer. It would be the same here. We actually model that on an annual basis as we are placing our reinsurance, just making sure that we're able to cover those kinds of storm events.

Meryl Golden: We actually model that on an annual basis as we are placing our reinsurance, just making sure that we're able to cover those kinds of storm events. And you know, as we continue to put new policies on the books, we're continuously modeling our PML to determine if we are comfortable with the amount of reinsurance that we have. It is entirely possible that we might go back out to market and say, hey, we need to buy a little bit more up top just to make ourselves comfortable with the amount of policies that are coming on the books.

Jennifer Gravelle: And as we continue to put new policies on the books, we're continuously modeling our PML to determine if we're comfortable with the amount of reinsurance that we have. It's entirely possible that we might go back out to market and say, hey, we need to buy a little bit more up top just to make ourselves comfortable with the amount of policies that are coming on the books. Okay, and with the retention changes and stuff, so if you've gotten into the resource layer, if it doesn't float to the top.

Jian: Storm events.

Jian: as we continue to put new policies on the books, we're continuously modeling our PML to determine if we're comfortable with the amount of reinsurance that we have. It's entirely possible that we might go back out to market and say, hey, we need to buy a little bit more up top just to make ourselves comfortable with the

Bob Farnham: Okay. And with the retention changes and stuff, so if it's gone into the reinsurance layer. If it doesn't close to the top, you can give us an idea of the range of how much the loss would be on the net basis. On a net basis for us from Sandy, we actually bought down on our reinsurance tower this year. So instead of attaching it $10 million, our reinsurance will catch it $5 million. And we have some quotas here underneath that. So Sandy event for us would be like a $4.75 million event. Great. All right, guys. Thanks.

Jian: with the amount of policies that are coming on the books.

Jian: Okay, and with the retention changes and stuff, so...

Jian: If you've gone into the reinsurance layer, if it doesn't blow through the top,

Bob Farnam: Can you give us an idea of the range of how much the loss would be on a net basis? For us, on a net basis with Sandy, we actually bought down on our reinsurance tower this year. So instead of attaching at $10 million, our reinsurance will attach at $5 million, and we have some quota share underneath that. So a Sandy event for us would be like a $4.75 million event.

Speaker Change: Can you give us an idea of the range of how much the loss would be on a net basis?

Speaker Change: On a net basis for us with Sandy, we actually bought down on our reinsurance tower this year. So instead of attaching it $10 million, our reinsurance will catch it $5 million. And we have some quota share underneath that. So a Sandy event for us would be like a $4.75 million event.

Jennifer Gravelle: All right, guys. Thanks for all the additional color. Thank you. Our next question comes from the line. Jon Old, with long metal investors.

Bob Farnham: Thanks for all the additional color. Thank you.

Speaker Change: Great.

Speaker Change: Alright guys, thanks for all the additional color. Thank you.

John Old: Our next question comes from the line of John Old with Long Metal Investors. Please proceed with your question. Thank you very much. And Marilyn Jen, just as a long term shareholder, just gushing with appreciation. Thanks for all you've done. Thanks. Yeah. Yeah, it's just, it's been fantastic.

Speaker Change: Thank you. Our next question comes from the line of John Old with Long Meadow Investors. Please proceed with your question.

Jon Old: Please proceed with your... Thank you very much. And Meryl and Jen, just as a long-term shareholders.

John Old: Thank you very much. And Meryl and Jen, just as a long term shareholder, just gushing with appreciation. Thanks for all you've done. Thanks, Jen. Yeah, it's just, it's been fantastic. Anyway, just a question on the

Meryl Golden: I'm cursing with appreciation. Thanks for all you've done. Thanks, Jon. Yeah, it's just been fantastic. Anyway, just a question on the Spence Ratio, I noted in the presentation materials, you still hope to get to 29, https://www.kingstone.com roughly 27% for the second half. So I was curious if that Is that sort of becoming the new expense ratio? Or is there a reason that it's seasonalally, you know, higher in the beginning and maybe lower in the end?

John Old: Anyway, just a question on the expense ratio. I noted in the presentation materials that you still hope to get to 29% number for the year, but if I read it correctly. So that if I've done the math, right, that would imply roughly 27% for the second half. So I'm curious if that is that sort of becomes the new expense ratio or is there reason it's seasonally higher in the beginning and maybe lower in the end or the plan I throw the long term. Thank you very much.

Speaker Change: Spence Ratio, I noted in the presentation materials.

Speaker Change: that you still hope to get to a 29% number for the year, I believe if I've read it correctly. So that, if I've done the math right, that would imply roughly 27% for the second half.

Speaker Change: So I was curious if that.

Speaker Change: Is that sort of becomes the new expense ratio, or is it is there a reason that's seasonally, you know, higher in the beginning and maybe lower in the end, or is plan I still the long term target? Thank you very much.

Meryl Golden: So Jen, let me start, and you could jump in. So you know, when I laid out the 25, the 29% goal, I had a certain profitability target in mind, and what we've been experiencing since our profit is so much greater. We have a higher expense for employee bonuses and for contingent commission for our producers. So that's really what's driving our 31 versus the 29 that I had laid out. That being said, our average premium is continuing to increase, and it is true that some expenses are front-loaded. So I do think the expense ratio will decline a bit, but I think it's unlikely we'll hit our 29 targets for the year.

Meryl Golden: Or is plan I still the long-term target? Thank you. So Jen, let me start, and you can jump in. So, you know, when I laid out the 25, the 29% goal, I had a certain profitability target in mind. And what we've been experiencing since our profit is so much greater, we have a higher expense for employee bonuses and for contingent commissions for our producers. So that's really what's driving our 31 versus the 29 that I had laid out.

Speaker Change: So Jen, let me start and you could jump in.

Speaker Change: You know, when I laid out the 25, the 29% goal.

Speaker Change: I had a certain profitability target in mind and what we've been experiencing since our profit is so much greater, we have a higher expense for employee bonuses.

Meryl Golden: That being said, our average premium is continuing to increase, and it is true that some expenses are front-end loaded. So I do think the expense ratio will decline a bit, but I think it's unlikely we'll hit our 29 target for the year.

Speaker Change: and for contingent commission for our producers. So that's really what's driving our 31 versus the 29 that I had laid out.

Speaker Change: That being said, our average premium is continuing to increase, and it is true that some expenses are front-end loaded.

Speaker Change: So, I do think the expense ratio will decline a bit, but I think it's unlikely we'll hit our 29 target for the year.

Jennifer Gravelle: Jen, anything else you want to add?

Jennifer Gravelle: Janet, anything else you want to add? No, that's perfect, Meryl. Okay, well, I'll just say that whatever bonuses you're going out for are well-deserved. Thank you very much. Thank you, Jon. Thank you. And our next question comes from the line of Gabriel McClear, who is a private investor. Please proceed with your, Good morning, Jen. Good morning, Meryl.

John Old: No, that's, that's, that's perfect, Merrill. Okay, well, I'll just say that whatever bonuses you're building out are well-deserved. Thank you very much. Thank you, John.

Speaker Change: Anything else you want to add? No, that's perfect, Meryl.

Gabriel McClear: And our next question comes from the line of a gathering clue, which is a private investor. Please proceed to a quick.

Meryl Golden: Thank you.

Speaker Change: And our next question comes from the line of Gabrielle McClure, who is a private investor. Please proceed to request...

Gabriel McClear: Good morning, Jen. Good morning, Merrill. And yeah, and congratulations on a great quarter again. Thanks. Yeah, I wanted to, Merrill, you touched on this again, but I wanted to go back to that comment you made in your mid-year letter. I'm not sure I understand it. I've kind of gone over it a few times. So, but you say that you're quoting two times a new business policy, three times the new business premium, and you're up nine times, or sorry. Yeah, three times the business policies and nine times on business premium. I don't understand that. I don't know what I'm not getting, but can you kind of help me out with that, Merrill?

Gabriel McClear: And yeah, and congratulations on a great quarter again. Thanks. Thanks. Yeah, um... So I wanted to eat, Meryl, you touched on this again, but I wanted to go back to that comment you made in your mid-year letter. I'm not sure I understand it. I've kind of gone over it a few times.

Gabrielle McClure: Good morning, Jen. Good morning, Meryl. Yeah, and congratulations on a great quarter again.

Meryl Golden: So, um, But you say that you're quoting two times the new business policies, three times the new business premium, and you're up nine times, or sorry, you got three times the business policies, and you're up nine times on business premium. I don't understand that. I don't know what I'm not getting, but can you kind of help me out with that, Meryl? Sure, I actually updated those numbers, too. So what I'm comparing is in July, once the this material change of these competitors exiting the market was announced. What I'm sharing is how much our business was impacted just in the month of July.

Speaker Change: Thanks. Thanks. Yeah.

Gabrielle McClure: Meryl, you touched on this again, but I wanted to go back to that comment you made in your mid-year letter. I'm not sure I understand it. I've kind of gone over it a few times.

Speaker Change: But you say that you're quoting two times the new business policies, three times.

Speaker Change: The New Business Premium, and you're up nine times, or sorry, you got three times the business policies and you're up nine times on business premium. I don't understand that. I don't know what I'm not getting, but can you kind of help me out with that, Meryl?

Meryl Golden: Sure, I actually updated those numbers too. So what I'm comparing is, in July, once the material change of these competitors exiting the market was announced, what I'm sharing is how much our business was impacted just in the month of July. Now, since then, it's increased, but at the time, when I wrote that mid-year shareholder letter, what we were seeing is our quotes doubled versus July of the previous year. And our new business policies were up three times versus July of the previous year. Now it ended up being of five times, not three times. And then the premium from those new business policies was up nine times versus the amount of new business premium we wrote in the month of July was higher than July of 2023 by nine times.

Meryl Golden: Sure, I actually updated those numbers too. So what I'm comparing is, in July, once the, this, you know, material change of these competitors exiting the market was announced.

Meryl Golden: What I'm sharing is how much.

Speaker Change: our business was impacted just in the month of July. Now, since then, it's increased. But at the time, when I wrote that mid-year shareholder letter, what we were seeing is...

Meryl Golden: Now, since then, it's increased. But at the time when I wrote that mid-year shareholder letter, what we were seeing was our quotes doubled versus July of the previous year, and our new business policies were up three times versus July of the previous year. Now it ended up being up five times, not three times. And then the premium from those new business policies was up nine times versus the amount of new business premium we wrote in the month of July was higher than July of 2023 by nine times.

Speaker Change: are quotes doubled versus July of the previous year.

Speaker Change: and our new business policies were up three times versus July of the previous year. Now it ended up being up five times, not three times.

Speaker Change: and then the premium from those new business policies.

Speaker Change: was up nine times versus the amount of new business premium we wrote in the month of July was higher than July of 2023.

Gabriel McClear: So that's what I was trying to explain: is that this change in the marketplace was my new mental in terms of what it meant for Kingstone's growth trajectory. Does that make sense, Gabe? Yeah, I think so. So are you telling me that you took in for business premiums, you took in nine times the amount of cash from the market that you took in the prior July? Well, not cash necessarily because not all policies are paid in full, but in terms of the new business premium that we booked, yes, it was nine times the previous July.

Meryl Golden: So that's what I was trying to explain is that this change in the marketplace was monumental in terms of what it meant for Kingstone's growth trajectory. Does that make sense, Gabe? Yeah, I think so. So are you telling me that for business premiums, you took in nine times the amount of cash? from the market that you did the prior July. Well, not necessarily cash, because not all policies are paid in full. But in terms of the new business premium that we booked, yes, it was nine times the previous July. Okay, okay. I've got it. I appreciate that. That's, that's all my pleasure. Okay.

Speaker Change: by nine times. So that's what I was trying to explain, is that this change in the marketplace was monumental in terms of what it meant for Kingstone's growth trajectory. Does that make sense, Gabe?

Gabe: yeah I think so so are you telling me that you took in for business premiums you took in nine times the amount of cash from from the market that you did the prior July

Gabe: Well, not cash necessarily, because not all policies are paid in full. But in terms of the new business premium that we booked, yes, it was nine times the previous July.

Gabriel McClear: Okay. I got it. I appreciate that.

Gabriel McClear: That's all for me. Okay. Thank you, Gabe. Thank you.

Speaker Change: Okay, okay. I got it. I appreciate that. That's all for me. My pleasure.

Operator: Thank you, Gabe. Thank you. And we have reached an agreement; there are no further questions at this time. Back to Meryl Golden for a Closed Rewind. Thank you. It is an incredibly exciting time for Kingstone, and we could not be more optimistic about the trajectory of our business. Before ending the call, I'd like to share that we'll be presenting and hosting meetings at the Sidoti Conference on August 15th and 16th, and in September, we'll be participating in the JANI Financial Services Conference in Washington, D.C.

Speaker Change: OK.

Gabe: Thank you, Gabe.

Operator: And we have Rick. There are no further questions at this time.

Gabe: Thank you.

Gabe: Thank you.

Meryl Golden: I would like to turn the pool back to Merrill Golden for close rewind. Thank you. It is an incredibly exciting time for Kingstone, and we could not be more optimistic about the trajectory of our business.

Operator: Greetings and welcome to the Kingstone Company Second Quarter, 2024, Ernie Scott's call. At this time, all participants on Alyson O'Neill mode, a question and answer session will follow the phone presentation. If anyone should require operator assistance during conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded.

Speaker Change: And we have reached, there are no further questions at this time. I would like to turn the floor back to Meryl Golden for a closed remark.

Meryl Golden: Thank you. It is an incredibly exciting time for Kingstone and we could not be more optimistic about the trajectory of our business.

Meryl Golden: Before ending the call, I'd like to share that we'll be presenting and hosting meetings at the Sidoti Conference on August 15th and 16th. And in September, we'll be participating in the Janney Financial Services Conference in Washington, DC. If you'd like to join either of those events, please reach out to their respective sales team. And thank you for joining our call today. Thank you. This does conclude today's telecom. We thank you for your participation. You may disconnect your line at this time.

Speaker Change: Before ending the call, I'd like to share that we'll be presenting and hosting meetings

Karin Daly: It is not my pleasure to introduce your host, Karin Daly, the Vice President, the equity group, and Kingstone's and Rest relations representative. Karin, you may begin. Thank you, Chamali.

Speaker Change: at the Sidoti Conference on August 15th and 16th.

Speaker Change: And in September, we'll be participating in the JANI Financial Services Conference in Washington, D.C. If you'd like to join either of those events, please reach out to their respective sales team. And thank you for joining our call today.

Karin Daly: Good morning everyone.

Karin 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 would like to note that this conference call may contain 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. Forward-looking statements speak only as of the day on which they are made, and Kingstone undertakes no obligation to update the information discussed.

Operator: If you'd like to join either of those events, please reach out to their respective sales teams, and thank you for joining our call today. Thank you. This does conclude today's telecast. We thank you for your participation. You may disconnect your line at this time. [inaudible] Robert Farnam, Meryl Golden [inaudible] The Ultimate Parody Site! Robert Farnam, Meryl Golden, Jonathan Old,

Speaker Change: Robert Farnam, Meryl Golden,

Speaker Change: Thank you. This does conclude today's teleconference. We thank you for your participation. You may disconnect your line at this time.

Karin Daly: For more information, please refer to the section entitled Factors That May Effect Future Results and Financial Condition in Part 1, Item 1A, of the company's latest form 10K. Additionally, today's remarks may include references to non-gap measures. For a reconciliation of these non-gap measures, to gap figures, please see the tables and the latest earnings release.

Unknown Speaker: .. The Ultimate Parody Site!... The Ultimate Parody Site! Robert Farnam, Meryl Golden, Byeeeee! Thanks for watching, and don't forget to like, share, and subscribe to our channel.

Meryl Golden: With that, it's my pleasure to turn the call over to Meryl Golden. Meryl, you may begin. Thanks, Karin, and good morning everyone. We are so proud of our second quarter results. This is our third consecutive quarter of profitability and the most profitable quarter for Kingstone in the last seven years. I had said repeatedly that we were doing all of the right things to return the company to profitability over the years, and we are finally seeing the benefits of all of those actions consistently in our financial results.

Operator: Robert Farnam, Meryl Golden, Robert Farnam, Robert Farnam, Meryl Golden, Robert Farnam,

Speaker Change: Daly, Meryl Golden, Unknown Executive, Daly, Meryl Golden, Unknown Executive,

Meryl Golden: There could not be a better time for Kingstone to grow faster than now. As we are priced right, insured to value, have a product that properly matches rate to risk, have the right teams in place and cross the organization, and have reduced our expenses markedly, and now we are faced with an unbelievable market opportunity that I wrote about in my mid-year letter to shareholders, and we'll expand upon today. Let me remind you that more than two years ago and well ahead of many of our competitors, we recognize that lost trends around the rise, and then inflation, a primary factor driving our lost trends, would also result in many of our customers being under insured.

Meryl Golden: We acted quickly to raise our premiums and put a plan in place to update replacement cost on every policy renewal. 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, which along with an expansion of our underwriting appetite, fueled the growth in our core business this quarter. The coastal insurance market has been volatile for some time in our core state of New York with a large competitor going insolvent and other shutting down or restricting their business over the last two years.

Meryl Golden: However, market dynamics have changed profoundly in the last few weeks, competing carriers representing more than 200 million in annual premium made the decision to exit New York State or to exit the personal property market with countrywide. We knew that the policies issued by these carriers needed to be moved to alternative carriers and assumed that that would happen over the next year. However, about 10 days ago, we learned that the policies of two of those carriers, over 60,000 policies in our downstate New York footprint, will need to be moved to alternative carriers by the end of this year.

Meryl Golden: For perspective, that number of policies is roughly the size that Kingstone is today. While the growth potential is seemingly limitless, we cannot write it all. Our intent is to maximize our growth only in those segments that meet or exceed our profitability targets. We are in the fortunate position to pick which segments we want to write because mark capacity severely constraint. Our objective is profitable growth, not growth for growth sake. Kingstone has learned this lesson before, particularly when we expanded into the nine core states, and we will not make the same mistakes again.

Meryl Golden: As I stated last quarter, it's very easy to grow in the insurance business, but it's much harder to grow profitably. We have planned to capitalize on this amazing opportunity by being very intentional and selective on which properties we write and very nimble to change our approach as we learn more and as market conditions evolve. It is such a difficult time for our select producers, and we will do everything we can to help them through this unprecedented situation.

Meryl Golden: While the specifics of these market dynamics are new and evolving, Kingstone's entire leadership team is focused on the changes we need to make to successfully seize this incredible opportunity with as minimal disruption as possible to our underwriting and service standards. We are carefully monitoring our capital position and will utilize quota share if needed to ensure we have the capital needed to support our growth. Your state, most of our growth has been from increases in our average premium rather than growth in policy count. Going forward, while we will still benefit from increases in average premium, most of our growth will come from increasing our policies and force.

Meryl Golden: For visibility, I want to give you an update on some of the metrics that I shared in my mid-year shareholder letter when we had just learned about this market dynamic. At that time, I shared that our new business policy count was up three times the prior year month. Well, we ended the month of July with an overall five times increase rather than the three times that we had shared, and this has increased materially so far in August.

Meryl Golden: I also shared that we were at nine times the prior year month's new business premium level. We completed the month of July at 13 times higher, new business premium, well ahead of the nine times that I had shared, and are seeing the same trends so far in August. Well, it's hard to see beyond the current opportunity that is directly in front of us. We have been thinking a lot about the longer term and how to continue our profitable growth trajectory beyond 2025.

Meryl Golden: We have what we now call our platform, our proven select product, a competitive expense structure, and expert staff in all areas of the company. We have opportunities for enhanced segmentation in our select product to better match risk and will make us more competitive in our core business. We also want to grow the company in other ways. We have been discussing expansion of our platform to other geographies, to increase our footprint, additional product offerings, alternative distribution channels, and potential acquisitions among other strategies.

Meryl Golden: There is a lot more work to do before we finalize our longer term plans, but I feel confident that we now have a scalable platform to continue to drive profitable growth for many years to come.

Meryl Golden: Before I touch on full your guidance, I wanted to share an update on our debt that will be maturing at your end. I am delighted to share that we have a solution and we are currently in the final stages of execution. Since this is in process, we cannot share any information or answer any questions regarding the debt at this time. However, I can share that this solution will be announced within the next month, and I have confidence that you will be happy with the outcome. Stay tuned.

Meryl Golden: And finally, turning to guidance, I will first cover our update 24 guidance that we unveiled in yesterday's earnings release, and then share our initial expectations for 2025. With half of the year under our belt, full year 2024 guidance is as follows. Direct premium written growth in our core business in the range of 25 to 35%. This increased from just two weeks ago. And based on a approximately 125 million of net premiums earned, we expect to achieve a gap combined ratio between 84 and 88s, earnings per share between a dollar and a dollar 30, and return on equity between 26 and 34%.

Meryl Golden: We are also happy to share our initial expectations for full year 2025 as follows. Direct premium written growth in our core business in the range of 15 to 25%. And based on approximately 150 million of net premiums earned, we expect to achieve a gap combined ratio between 85 and 89. Earnings per share between a dollar 20 and a dollar 60 and return on equity between 22 and 30%. The recent change in our market opportunity that I have been discussing has not been factored in our earned premium combined ratio earnings per share or return on equity in the guidance provided for 24 or 25.

Meryl Golden: It's just too early to be able to do that. As soon as we can forecast the impact, I will update the guidance. Otherwise, our guidance assumes no material changes in our business and as a reminder, our results are very weather dependent and we have assumed no major catastrophe event in this guidance. We have also assumed that the cost for catastrophe re-insurance for the 25-26 treaty year will increase modestly relative to this year's treaty. Last, note that the second half of 24 and full year 25 does not assume any gains or losses from our investment portfolio.

Jennifer Gravelle: With that, I will turn the call over to Jen for a more detailed review of our quarterly finance results. Take it away, Jen. Thanks, Meryl, and good morning, everyone. As Meryl mentioned, we could not be more pleased with our second quarter and first half year results. This now marks our third consecutive quarter of profitability with net income of 4.5 million or 41 cents per basic share. For the year-to-date, our net income is up 11.5 million dollars over this period last year.

Jennifer Gravelle: On a consolidated basis, direct premiums increased 12 percent inclusive of 21 percent increase in core direct written premiums, partially offset by the continued reduction of our non-core business, which decreased by nearly 60 percent compared to the same period last year. Increasing our core business reflects strong pricing action with average premium up more than 18 percent in the quarter. Our combined ratio improved by 21 points to a 78.2 percent for the quarter.

Jennifer Gravelle: Our current accident year loss ratio improved by 18 points with a 15-point improvement in non-cat losses and a three-point reduction in catastrophe losses. We also had $430,000 of favorable prior year development reducing the loss ratio by 1.4 points. Our expense ratio was 31.2 percent, a 1.2-point improvement from the second quarter of 2024, excuse me, 2023. While our expense ratio is higher than the target shared in Meryl's year-end letter to shareholders, the difference is almost entirely due to increased employee bonus and contingent commission to our producers, which are triggered off of our better than expected underwriting results.

Jennifer Gravelle: This is a good problem to have. Our non-cat loss ratio improvement was driven by homeowners our main line of business with decreases in both frequency and severity for our largest perils of water and fire as compared to the prior year. We attribute this improvement to better risk selection in our select product and the reduction in our non-core business. We also experienced fewer large losses this quarter compared to the prior year and the three-year average for the second quarter.

Jennifer Gravelle: We are now confident that despite the large losses of the experience in 2023 was random. For the quarter, net investment income increased 22% to $1.8 million compared to $1.5 million in the prior year quarter. Excess cash generated from operations, along with the charities where I bond portfolio and proceeds from the sale of preferred stock, I've been invested in treasuries to take advantage of their high risk-free rate. We continue to reduce our preferred stock holdings to lessen the volatility in our portfolio, resulting in a $200,000 dollar loss for the quarter.

Jennifer Gravelle: The average yield on non-cash-invested assets was 3.81% as of June 30th compared to 3.6% as of June 30th, 2023. The expected duration of 3.5 years in the weighted average effective maturity down to 6.8 years. With the changing of the macroeconomic factors and the anticipated decline in interest rates, we do expect to see a material improvement in the value of our bond portfolio going forward, which we reflected in our balance sheet as an increase to other comprehensive income.

Jennifer Gravelle: For perspective, every half percent reduction in interest rates will increase our preferred portfolio by about $2.7 million. Before I turn it back to the operator questions, I would like to add that we've benefited from a one-time $300,000 gain from a commutation of prior year re-insurance treaties during the quarter. Additionally, we had a $500,000 reduction in re-insurance costs from recognizing a no-claims bonus on one of our catastrophe treaties. Overall, we had a great quarter earnings of 41 cents per share and an annualized return on equity of 47%.

Operator: As always, we thank you for your support, and with that, we'll open it up for questions. Operator? Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate a line in the question queue. You may press star two to remove yourself from the queue, to participate in using speaker equipment, and maybe necessary to pick up the handset before pressing the star keys. One moment please, while we pull four questions. Thank you.

Bob Farnam: Our first question comes from the line of Bob Farnham with Janie Montgomery Scott. Please proceed with your question. Yeah, hi there. Good morning, everyone. I have multiple questions about the market opportunity in front of you, and I guess I wanted to start with, you mentioned the expansion of your underwriting appetites, new geographies, new products. Can you give us an idea of what you're talking about in that sense? The second part of my question is going to be, you have an immense growth opportunity.

Bob Farnam: I totally understand that growth and being profitable at the same time is very difficult. You've had a lot of competitors pull out of this market because they've had issues. How can you give us confidence that the business that you're going to be writing and taking in is going to be good for you? Okay. Well, thanks for your questions, Bob. So first of all, in terms of our underwriting appetites, if you recall last year, we severely restricted our writings given a conjecture about the reinsurance market, and so we had made some significant changes to slow our growth to reduce the overall cost of reinsurance.

Bob Farnam: After we finalized our reinsurance purchase for last year, we've been slowly reverting our underwriting appetite back to what it was previously. So writing more business in Suffolk County as an example. And then this year, given the confidence we have that we are priced right and listening to producers in the marketplace and what their needs are, we've made some changes. As an example, we now write a higher up to two and a half million coverage limit, which was an area where there were few companies willing to write and where we felt very confident in our pricing.

Bob Farnam: So the change in our underwriting appetite is nothing like really new. This is all risks that Kingston has experienced with, but we've reacted to the opportunity in the market and just opened up segments that the producers needed. Relative to confidence that we're doing the right thing. I mean, we are just such a different company than we were years ago when we made some mistakes and grew too quickly. And to give you confidence, first we have our select product that's been on the street since 2022 and is doing a great job matching rate to risk.

Bob Farnam: And I've mentioned in the past the frequency we're experiencing in our select product is 10% lower what we are experiencing in our legacy product. And what's profound about that is that select is mostly new business and legacy is mostly renewal business. So usually you'd see a higher frequency and we're seeing a lower frequency which gives us a lot of confidence that the product is working in terms of risk selection. We have done a terrific job managing our reinsurance cost and we on every single quote we measure what the loss cost and reinsurance cost is and make sure that we're adequately priced before binding those risks.

Bob Farnam: We have an A-plus team across all areas of the company and we're really closely managing and responding to the results of the business. And we're just, you know, a very nimble and efficient company now. So I could not be more confident if this is the time for Kingstone to see this market opportunity and grow fast. Director. Yeah, right. I just I figured there'd be people a little nervous with the amount of growth that's potentially coming down.

Bob Farnam: But it sounds like one, the expansion products are stuff you've already written before and two. It sounds like the business that you've expanded into thus far has been has been profitable. So my guess is, you know, with the potential book of business ahead of you, you know, you're either going to be taking only a slice of it, or you're going to have to be raising rates or changing terms and conditions on the policies.

Bob Farnam: That seems to be like what's going to have to happen if you're going to be absorb all these policies from your competitors. Sure, but so policies have to come on our race in our forms, right? So it's not like we're going to be changing our underwriting there. Okay, so you're right Bob. We have already made some restrictions. As I said, we're being very selective in terms of which properties we want to write.

Bob Farnam: So we're managing our geographic concentration. We've also stopped accepting risks that have prior losses. We're writing risks that are more financially stable. So we're using the data we have on our book for on profitability by segment to make a decision on what business we want to write. With, you know, I know you had the comments about the capital support for this growth. Do you just remind me of the ability to change the court of share percentage.

Bob Farnam: Is that something you can do kind of midstream or do you have to wait to the renewal of policy? Absolutely, we can do it midstream, but we can also take on additional quota share partners. So we, our broker has already reached out to our reinsurance partners and they have expressed an interest in continuing to support our growth via quota share if needed. So we're in a good place there. Great. Okay. And last question for Gian.

Bob Farnam: You have the new cats reinsurance treaty. And I'm just trying to get a seal for all right. So given new treaty, if you have a hypothetical situation where Sandy hit day. Kind of what would your what would your net net cost to Kingston be after reinsurance? Sure. So the company has been really consistent on the attachment and different layering of the reinsurance actually since Sandy came into into New York. So ultimately Sandy at that point was a loss to our second layer didn't go all the way through the second layer.

Bob Farnam: It would be the same here. We actually model that on an annual basis as we are placing our reinsurance, just making sure that we're able to cover those kinds of storm events. And you know, as we continue to put new policies on the books, we're continuously modeling our PML to determine if we if we're comfortable with the amount of reinsurance that we have it entirely possible that we might go back out to market and say, hey, we need to buy a little bit more up top just to make ourselves comfortable with the with the amount of policies that are coming on the books.

Bob Farnam: Okay. And with the retention changes and stuff, so if it's gone into the reinsurance layer. If it doesn't close to the top, you can give us an idea of the range of how much the loss would be on the net basis. On a net basis for us from Sandy, we actually bought down on our reinsurance tower this year. So instead of attaching it $10 million, our reinsurance will catch it $5 million. And we have some quotas here underneath that. So Sandy event for us would be like a $4.75 million event. Great. All right, guys. Thanks. Thanks for all the additional color. Thank you.

John Old: Our next question comes from the line of John Old with long metal investors. Please proceed with your question. Thank you very much. And Marilyn Jen just as a long term sureholder, just gushing with appreciation. Thanks for all you've done. Thanks. Yeah. Yeah, it's just it's been fantastic.

Meryl Golden: Anyway, just a question on the expense ratio. I noted in the presentation materials that you still hope to get to 29% number for the year, but if I read it correctly. So that if I've done the math, right, that would imply roughly 27% for the second half. So I'm curious if that is that sort of becomes the new expense ratio or is there reason it's seasonally higher in the beginning and maybe lower in the end or the plan I throw the long term.

Meryl Golden: Thank you very much. So Jen, let me start and you could jump in. So you know, when I laid out the 25 the 29% goal, I had a certain profitability target in mind and what we've been experiencing since our profit is so much greater. We have a higher expense for employee bonuses and for contingent commission for our producers. So that's really what's driving our 31 versus the 29 that I had laid out that being said our average premium is continuing to increase and it is true that some expenses are front front and loaded.

Meryl Golden: So I do think the expense ratio will decline a bit, but I think it's unlikely we'll hit our 29 targets for the year. Jen, anything else you want to add? No, that's that's that's perfect, Merrill. Okay, well, I'll just say that whatever bonuses you're building out are well deserved. Thank you very much. Thank you, John.

Unknown Attendee: And our next question comes from the line of a gathering clue, which is a private investor. Please proceed to a quick.

Gabe: Good morning, Jen. Good morning, Merrill. And yeah, and congratulations on a great quarter again. Thanks. Yeah, I wanted to, Merrill, you touched on this again, but I wanted to go back to that that comment you made and your mid year letter. I'm not sure I understand it. I've kind of gone over it a few times. So, but you say that you're, you're quoting two times a new business policy three times the new business premium and you're up nine times or sorry.

Gabe: Yeah, three times the business policies and nine times on business premium. I don't understand that. I don't know what I'm not getting, but can you kind of help me out with that, Merrill? Sure, I actually updated those numbers too. So what I'm comparing is in July, once the material change of these competitors exiting the market was announced, what I'm sharing is how much our business was impacted just in the month of July.

Gabe: Now since then, it's increased, but at the time, when I wrote that mid-year shareholder letter, what we were seeing is our quotes doubled versus July of the previous year. And our new business policies were up three times versus July of the previous year. Now it ended up being of five times, not three times. And then the premium from those new business policies was up nine times versus the amount of new business premium we wrote in the month of July was higher than July of 2023 by nine times.

Gabe: So that's what I was trying to explain is that this change in the marketplace was my new mental in terms of what it meant for Kingstone's growth trajectory. Does that make sense Gabe? Yeah, I think so. So are you telling me that you took in for business premiums, you took in nine times the amount of cash from the market that you took in the prior July? Well, not cash necessarily because not all policies are paid in full, but in terms of the new business premium that we booked, yes, it was nine times the previous July. Okay. I got it. I appreciate that.

Gabe: That's all for me. Okay. Thank you, Gabe. Thank you.

Operator: And we have Rick. There are no further questions at this time.

Meryl Golden: I would like to turn the pool back to Merrill Golden for close rewind. Thank you. It is an incredibly exciting time for Kingstone and we could not be more optimistic about the trajectory of our business.

Meryl Golden: Before ending the call, I'd like to share that we'll be presenting and hosting meetings at the Sidoti conference on August 15th and 16th. And in September, we'll be participating in the Janney Financial Services Conference in Washington DC. If you'd like to join either of those events, please reach out to their respective sales team. And thank you for joining our call today. Thank you.

Operator: This does conclude today's telecom. We thank you for your participation. You may disconnect your line at this time. Robert Farnam, Meryl Golden Robert Farnam, Robert Farnam, Meryl Golden, Robert Farnam,