Q2 2026 Kingstone Co Inc Earnings Call

August 7, 2026

Speaker #1: Good morning, and welcome to Kingstone Companies' second quarter 2026 earnings conference call. As a reminder, today's conference is being recorded. I'll now turn the call over to your host, Stefan Norbaum, Kingstone's investor relations representative.

Operator 2: Good morning, welcome to Kingstone Companies' Q2 2026 Earnings Conference Call. As a reminder, today's conference is being recorded. I'll now turn the call over to your host, Stefan Norrbom, Kingstone's investor relations representative. Stefan, you may begin.

Operator: Good morning, welcome to Kingstone Companies' Q2 2026 Earnings Conference Call. As a reminder, today's conference is being recorded. I'll now turn the call over to your host, Stefan Norbom, Kingstone's investor relations representative. Stefan, you may begin.

Speaker #1: Stefan, you may begin.

Speaker #2: Thank you, and good morning, everyone. Joining us today are President and Chief Executive Officer Meryl Golden, and Vice President and Chief Financial Officer Randy Patten.

Stefan Norrbom: Thank you. Good morning, everyone. Joining us today are President and Chief Executive Officer, Meryl Golden, and Vice President and Chief Financial Officer, Randy Patten. 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 differ materially from projected results. Forward-looking statements speak only as of the date on which they are made, and Kingstone undertakes no obligation to update the information discussed. For more information, please refer to the section entitled Risk Factors 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 definitions and reconciliations of these non-GAAP measures to the most directly comparable GAAP measures, please see the tables in our latest earnings release available at kingstonecompanies.com.

Stefan Norbom: Thank you. Good morning, everyone. Joining us today are President and Chief Executive Officer, Meryl Golden, and Vice President and Chief Financial Officer, Randy Patten. 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 differ materially from projected results. Forward-looking statements speak only as of the date on which they are made, and Kingstone undertakes no obligation to update the information discussed. For more information, please refer to the section entitled Risk Factors 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 definitions and reconciliations of these non-GAAP measures to the most directly comparable GAAP measures, please see the tables in our latest earnings release available at kingstonecompanies.com.

Speaker #2: 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 differ materially from projected results.

Speaker #2: Forward-looking statements speak only as of the date, on which they are made, and KINGSTONE undertakes no obligation to update the information discussed. For more information, please refer to the section entitled "Risk Factors" in Part 1, Item 1A of the company's latest Form 10-K.

Speaker #2: Additionally, today's remarks may include references to non-GAAP measures. For definitions and reconciliations of these non-GAAP measures to the most directly comparable GAAP measures, please see the tables in our latest earnings release available at kingstonecompanies.com.

Speaker #2: With that, it is my pleasure to turn the call over to Meryl Golden. Meryl?

Stefan Norrbom: With that, it is my pleasure to turn the call over to Meryl Golden. Meryl?

Stefan Norbom: With that, it is my pleasure to turn the call over to Meryl Golden. Meryl?

Speaker #3: Thanks, Stefan. Good morning, everyone, and thanks for joining our call. Kingstone delivered the most profitable quarter in our history. Net income reached a record $15.5 million, net income per diluted share increased 35% to $1.05, and our GAAP net combined ratio improved 1.3 points to 70.2%.

Meryl Golden: Thanks, Stefan. Good morning, everyone. Thanks for joining our call. Kingstone delivered the most profitable quarter in our history. Net income reached a record $15.5 million, net income per diluted share increased 35% to $1.50, and our GAAP net combined ratio improved 1.3 points to 70.2%. That performance produced an annualized return on equity of 50.8%. Diluted book value per share reached $8.69, up 35% year over year, reflecting the value we are creating for shareholders. The earnings contribution was broad-based, driven by premium growth, underwriting profitability, operating efficiency, and higher investment income. Turning to growth, direct premiums written increased 19% to $72.5 million, led by continued strength in New York Personal lines. Relative to the prior year quarter, new business policy count increased 35%, retention improved by 2 percentage points, and average renewal premium increased 8%.

Speaker #3: That performance produced an annualized return on equity of 50.8%. Diluted book value per share reached $8.69, up 35% year over year, reflecting the value we are creating for shareholders.

Speaker #3: The earnings contribution was broad-based, driven by premium growth, underwriting profitability, operating efficiency, and higher investment income. Turning to growth, direct premiums written increased 19% to 72.5 million, led by continued strengths in New York, personal lines.

Speaker #3: Relative to the prior year quarter, new business policy count increased 35%, retention improved by 2 percentage points, and average renewal premium increased 8%. Net premiums earned grew 31% to $60.5 million, as prior period growth continued to earn in, and our lower quota share cession allowed us to retain more premium.

Meryl Golden: Net premiums earned grew 31% to $60.5 million, as prior period growth continued to earn in. Our lower quota share cession allowed us to retain more premium. While growth was robust this quarter, we are seeing signs of a softening market and an increasingly competitive environment. The pressure so far is most visible in the dwelling fire line. Demand across the broader franchise remains healthy, as our new business and retention results show. Competition has entered and exited this market over time. While Kingstone's broad and longstanding producer relationships have supported our performance throughout market cycles. Select has proven effective at risk selection and matching rate to risk, which matters even more in this environment. We will not chase volume at the expense of underwriting discipline. As competition increases, New York growth will moderate from H1 levels.

Speaker #3: While growth was robust this quarter, we are seeing signs of a softening market and an increasingly competitive environment. The pressure so far is most visible in the dwelling fire line.

Speaker #3: Demand across the broader franchise remains healthy, as our new business and retention results show. Competition has entered and exited this market over time, while KINGSTONE's broad and long-standing producer relationships have supported our performance throughout market cycles.

Speaker #3: Select has proven effective at risk selection and matching rate to risk, which matters even more in this environment. We will not chase value at the expense of underwriting discipline.

Speaker #3: As competition increases, New York growth will moderate from first-half levels. Our 16% to 20% full-year guidance growth outlook already reflects the likelihood of increased competition.

Meryl Golden: Our 16% to 20% full year guidance growth outlook already reflects the likelihood of increased competition. Turning to underwriting, attritional claim frequency remains very low overall, flat for non-weather water losses, our largest peril, and up modestly from the prior year quarter for fire losses. Attritional severity for the non-weather water and fire perils combined increased, consistent with inflation and offset by the increase in average premium. Against an exceptionally strong prior year quarter, the underlying loss ratio was 4.4 points higher. Year-to-date, though, it's up only 0.2 points. The catastrophe loss ratio was negative, as favorable development on Q1 catastrophe losses exceeded Q2 catastrophe losses. We also recognized $1.6 million or 2.7 points of favorable prior year development. The Select product continues to perform well.

Speaker #3: Turning to underwriting, attritional claim frequency remains very low overall, flat for non-weather water losses, our largest peril, and up modestly from the prior year quarter for fire losses.

Speaker #3: Attritional severity for the non-weather water and fire perils combined increased, consistent with inflation and offset by the increase in average premium. Against an exceptionally strong prior year quarter, the underlying loss ratio was 4.4 points higher.

Speaker #3: Year-to-date, though, it's up only 0.2 points. The catastrophe loss ratio was negative, as favorable development on first quarter catastrophe losses exceeded second quarter catastrophe losses, we also recognized 1.6 million or 2.7 points of favorable prior year development.

Speaker #3: The Select product continues to perform well. On an exemption-to-date basis, our Select homeowners claim frequency is more than 34% lower than our legacy product, while Select dwelling fire frequency is 19% lower.

Meryl Golden: On an inception-to-date basis, our Select Homeowners claim frequency is more than 34% lower than our legacy product, while Select Dwelling Fire frequency is 19% lower. Select now represents 62% of our homeowner policies in force and 40% of our dwelling fire policies in force, extending our runway for continued mix improvement. Our expense ratio improved by 2.1 points to 30.6, reflecting continued operating leverage as we scale. Underwriting expense dollars are growing more slowly than net earned premium. The net combined ratio for the quarter was 70.2, down 1.3 points from the prior year quarter. Randy will provide a more detailed review of our financial results. We were pleased with our 1 July catastrophe reinsurance placement. We increased total catastrophe protection by 14% to $500 million, added wildfire protection, and lowered the risk-adjusted cost of our core catastrophe excess of loss coverage by more than 15%.

Speaker #3: Select now represents 62% of our homeowner policies enforced and 40% of our dwelling fire policies enforced, extending our runway for continued mix improvement. Our expense ratio improved by 2.1 points to 30.6, reflecting continued operating leverage as we scale.

Speaker #3: Underwriting expense dollars are growing more slowly than net earned premium. The net combined ratio for the quarter was 70.2, down 1.3 points from the prior year quarter.

Speaker #3: Randy will provide a more detailed review of our financial results. We were pleased with our July 1st catastrophe reinsurance placement. We increased total catastrophe protection by 14% to $500 million, added wildfire protection, and lowered the risk-adjusted cost of our core catastrophe excess of loss coverage by more than 15%.

Speaker #3: We also maintained low first-event retention across all perils, including wildfire. This program is built for quarters unlike this one. It protects the balance sheet against adverse catastrophe scenarios, reduces earnings volatility, and supports continued profitable growth.

Meryl Golden: We also maintained low first event retention across all perils, including wildfire. This program is built for quarters, unlike this one. It protects the balance sheet against adverse catastrophe scenarios, reduces earnings volatility, and supports continued profitable growth. We entered California in the last week of the quarter through only a handful of agencies, so it's too early to draw conclusions from the initial activity. Our California business leader knows the market well and has strong producer relationships, which are helping us understand how conditions are evolving. We expected new carriers and MGAs to enter California on an E&S basis. What has changed is that admitted carriers are also beginning to selectively reopen for new business, and competition is building faster than we anticipated. That's why we started small. We're using that early feedback to refine our approach before adding meaningful volume.

Speaker #3: We entered California in the last week of the quarter through only a handful of agencies, so it's too early to draw conclusions from the initial activity.

Speaker #3: Our California business leader knows the market well and has strong producer relationships, which are helping us understand how conditions are evolving. We expected new carriers and MGAs to enter California on an E&S basis.

Speaker #3: What has changed is that admitted carriers are also beginning to selectively reopen for new business, and competition is building faster than we anticipated. That's why we started small.

Speaker #3: We're using that early feedback to refine our approach before adding meaningful volume. Our E&S structure and platform allow us to remain nimble, adjusting pricing and appetite as market conditions evolve.

Meryl Golden: Our E&S structure and platform allow us to remain nimble, adjusting pricing and appetite as market conditions evolve. We will scale only as the business meets our underwriting and return requirements. We are also on track to enter Connecticut on an admitted basis late in Q3. The Department of Insurance has been moving quickly on our filings, and we are preparing to begin writing business once our approvals are received. New York remains our primary growth and earnings engine. California and Connecticut are measured steps toward a more geographically diversified company, and over time, a less concentrated catastrophe footprint. These initiatives support our goal of reaching $500 million in direct premiums written by year-end 2029. We will pursue that goal at a pace consistent with our return requirements, reinsurance protection, and capital capacity. Turning to our outlook, we are reaffirming all elements of our full year 2026 guidance.

Speaker #3: We will scale only as the business meets our underwriting and return requirements. We are also on track to enter Connecticut on an admitted basis late in the third quarter.

Speaker #3: The Department of Insurance has been moving quickly on our filings, and we are preparing to begin writing business once our approvals are received. New York remains our primary growth and earnings engine.

Speaker #3: California and Connecticut are measured steps toward a more geographically diversified company and, over time, a less concentrated catastrophe footprint. These initiatives support our goal of reaching $500 million in direct premiums written by year-end 2029.

Speaker #3: We will pursue that goal at a pace consistent with our return requirements, reinsurance protection, and capital capacity. Turning to our outlook, we are reaffirming all elements of our full-year 26 guidance.

Speaker #3: We continue to expect direct premiums written growth of 16 to 20 percent, a gap net combined ratio of 81 to 86 percent, and underlying combined ratio of 74 to 76 percent, and a catastrophe loss ratio of 7 to 10 percent.

Meryl Golden: We continue to expect direct premiums written growth of 16% to 20%, a GAAP net combined ratio of 81% to 86%, an underlying combined ratio of 74% to 76%, and a catastrophe loss ratio of 7% to 10%. The catastrophe range reflects the elevated winter storm activity in Q1. We also continue to expect diluted net income per share of $2.20 to $2.90, and return on equity of 24% to 30%. Our modeling assumptions continue to include an effective tax rate of 21% and weighted average diluted shares outstanding of 14.8 million. The operating drivers we control are on track. With the most active months of hurricane season ahead and competitive conditions evolving, we believe maintaining our current ranges is appropriate. We remain confident in our full year outlook. Q2 demonstrates the earning power of the business we have built.

Speaker #3: The catastrophe range reflects the elevated winter storm activity in the first quarter. We also continue to expect diluted net income per share of $2.20 to $2.90 and return on equity of 24 percent to 30 percent.

Speaker #3: Our modeling assumptions continue to include an effective tax rate of 21 percent and weighted average diluted shares outstanding of 14.8 million. The operating drivers we control are on track.

Speaker #3: With the most active months of Hurricane season ahead, and competitive conditions evolving, we believe maintaining our current ranges is appropriate. We remain confident in our full-year outlook.

Speaker #3: The second quarter demonstrates the earning power of the business we have built, our New York franchise is growing, our operating platform is converting that growth into earnings, and our reinsurance and capital positions support disciplined expansion.

Meryl Golden: Our New York franchise is growing, our operating platform is converting that growth into earnings, and our reinsurance and capital position support disciplined expansion. Our H2 priorities are clear. Grow New York while protecting rate adequacy, build California deliberately, launch Connecticut on schedule, and continue translating profitable growth into earning and book value per share. I remain confident in Kingstone's trajectory because the drivers are clear. Disciplined pricing and risk selection, strong producer relationships, expense control, and prudent capital management. I want to thank the entire Kingstone team for their execution and our select producers for their continued partnership. With that, I'll turn the call over to Randy for a more detailed review of our financial results. Randy?

Speaker #3: Our second half priorities are clear. Grow New York while protecting rate adequacy, build California deliberately, launch Connecticut on schedule, and continue translating profitable growth into earnings and book value per share.

Speaker #3: I remain confident in Kingstone’s trajectory because the drivers are clear: disciplined pricing and risk selection, strong producer relationships, expense control, and prudent capital management.

Speaker #3: I want to thank the entire Kingstone team for their execution and our select producers for their continued partnership. With that, I'll turn the call over to Randy for a more detailed review of our financial results.

Speaker #3: Randy?

Speaker #1: Thank you, Marilyn. Good morning again, everyone. From a net income and EPS standpoint, the second quarter was our most profitable quarter in company history, with net income of $15.5 million and EPS of $1.05 per diluted share, compared with $11.3 million or $0.78 per diluted share in the same quarter prior year.

Randy Patten: Thank you, Meryl, and good morning again, everyone. From a net income and EPS standpoint, Q2 was our most profitable quarter in company history, with net income of $15.5 million and EPS of $1.05 per diluted share, compared with $11.3 million, or $0.78 per diluted share in the same quarter prior year. Operating net income increased 41% to $15.3 million, and diluted operating net income per share was $1.04 in Q2 of 2026, compared with $0.75 in the prior year Q. Annualized GAAP return on equity was 50.8% during Q2 of 2026. As a reminder, Q2 is typically our most profitable quarter. Net premiums earned increased 31% to $60.5 million in Q2 of 2026, primarily reflecting continued growth in direct premiums written, along with the reduced quota share cession.

Speaker #1: Operating net income increased 41 percent to $15.3 million, and diluted operating net income per share was $1.04 in the second quarter of 2026, compared with $0.75 in the prior year quarter.

Speaker #1: Annualized gap return on equity was 50.8 percent during the second quarter of 2026. As a reminder, the second quarter is typically our most profitable quarter.

Speaker #1: Net premiums earned increased 31 percent to 60.5 million in the second quarter of 2026, primarily reflecting continued growth in direct premiums written along with the reduced quota share session.

Speaker #1: Our New York quota share session is 5 percent for the 2026 treaty year and decrease of 11 percentage points from 16 percent in the 2025 treaty year.

Randy Patten: Our New York quota share cession is 5% for the 2026 treaty year, a decrease of 11 percentage points from 16% in the 2025 treaty year, allowing us to retain more premium and underwriting profit. Direct premiums written increased 19% to $72.5 million, and policies in force increased 9.9% to 84,570. Net investment income increased 49% to $3.4 million in Q2 of 2026 compared with the same quarter prior year, driven by an increase in invested assets and higher average yields that increased to 4.4%. Total investments were $334.1 million at 30 June, up $24.4 million from year-end. Turning to underwriting, the GAAP net loss ratio was 39.6%, compared with 38.8% in the prior year Q. The catastrophe loss ratio was -0.8%, compared with 0.6% in the prior year Q.

Speaker #1: Allowing us to retain more premium in underwriting profit. Direct premiums written increased 19 percent to 72.5 million and policies enforced increased 9.9 percent to 49 percent to 3.4 million in the second quarter of 2026, compared with the same quarter prior year, driven by an increase in invested assets and higher average yields that increased to 4.4 percent.

Speaker #1: Total investments were $334.1 million at June 30th, up $24.4 million from year-end. Turning to underwriting, the GAP net loss ratio was 39.6 percent, compared with 38.8 percent in the prior year quarter.

Speaker #1: The catastrophe loss ratio was negative 0.8%, compared with 0.6% in the prior year quarter. Favorable development on our first quarter 2026 catastrophe losses exceeded the low catastrophe losses experienced during the second quarter of 2026, producing the negative ratio.

Randy Patten: Favorable development on our Q1 2026 catastrophe losses exceeded the low catastrophe losses experienced during Q2 2026, producing the negative ratio. Separately, we recognized 2.7 points of favorable prior year reserve development related to accident years before 2026. Excluding both cat losses and favorable prior year reserve development, the underlying performance of the book was strong in Q2 2026, with an underlying loss ratio of 43.1%. This compares with 38.7% underlying loss ratio in Q2 2025, a quarter when the underlying performance of book was also exceptionally strong. The net underwriting expense ratio improved 2.1 points to 30.6%, as net premiums earned grew faster than our expense base. Together, the GAAP net combined ratio improved 1.3 points to 70.2%. The underlying combined ratio was 73.7%, compared with 71.4% in the prior year quarter.

Speaker #1: Separately, we recognize 2.7 points of favorable prior year reserve development related to accident years before 2026. Excluding both cat losses and favorable prior year reserve development, the underlying performance of the book was strong in the second quarter of 2026.

Speaker #1: With an underlying loss ratio of 43.1%, this compares with a 38.7% underlying loss ratio in the second quarter of 2025, a quarter when the underlying performance of the book was also exceptionally strong.

Speaker #1: The net underwriting expense ratio improved 2.1 points to 30.6 percent, as net premiums earned grew faster than our expense base. Together, the GAP net combined ratio improved 1.3 points to 70.2 percent.

Speaker #1: The underlying combined ratio was 73.7 percent, compared with 71.4 percent in the prior quarter. The absolute level of profitability remained strong, and the expense ratio improvement demonstrates the scalability of the business.

Randy Patten: The absolute level of profitability remains strong, and the expense ratio improvement demonstrates the scalability of the business. For H1 2026, direct premiums written increased 19% to $142.1 million, and net premiums earned increased 30% to $116.3 million. Despite elevated winter catastrophe activity in Q1 2026, costing about $14 million in losses, we generated net income of $9.7 million, or $0.66 per diluted share, and operating net income of $10.3 million, or $0.70 per diluted share in H1 2026. The H1 2026 GAAP net combined ratio was 90.2%, compared with 82.3% in the prior year period, and included 12 points of catastrophe losses, compared with 1.2 points in H1 last year.

Speaker #1: For the first six months of 2026, direct premiums written increased 19 percent to $142.1 million, and net premiums earned increased 30 percent to $116.3 million.

Speaker #1: Despite elevated winter loss and winter catastrophe activity in the first quarter of 2026, costing about $14 million in losses, we generated net income of $9.7 million, or $0.66 per diluted share, and operating net income of $10.3 million, or $0.70 per diluted share, in the first half of 2026.

Speaker #1: The first half of 2026 gap net combined ratio was 90.2 percent, compared with 82.3 percent in the prior year period, and included 12 points of catastrophe losses, compared with 1.2 points in the first half last year.

Speaker #1: The underlying combined ratio improved 1.3 points to 80.7, and the underwriting expense ratio improved 1.5 points to 30.5 in the first half of 2026, compared with the first half of 2025.

Randy Patten: The underlying combined ratio improved 1.3 points to 80.7, and the underlying expense ratio improved 1.5 points to 30.5 in H1 2026 compared with H1 2025, reflecting the strength and the performance of the underlying book of business. At 30 June, diluted book value per share was $8.69, up 35% from $6.44 a year ago. Diluted book value per share excluding accumulated other comprehensive income was $9.27, up 32% from $7.04 a year ago. With no holding company debt, our capital position continues to be strong, supporting both profitable expansion and measured shareholder returns. During the quarter, we repurchased approximately 19,500 shares at an average price of $14.98 per share under the program our board authorized in May. Following quarter end, our board increased the quarterly dividend by 20% to $0.06 per share, just one year after reinstating it.

Speaker #1: Reflecting the strength in the performance of the underlying book of business. At June 30th, diluted book value per share was $8.69, up 35% from $6.44 a year ago.

Speaker #1: Diluted book value per share, excluding accumulated other comprehensive income, was $9.27, up 32 percent from $7.04 a year ago. With no holding company debt, our capital position continues to be strong, supporting both profitable expansion and measured shareholder returns.

Speaker #1: During the quarter, we purchased approximately 19,500 shares at an average price of $14.98 per share, under the program our borrower authorized in May. Following quarter-end, our borrower increased the quarterly dividend by 20 percent to 6 cents per share, just one year after reinstating it.

Speaker #1: We will continue to allocate capital to support our strategic growth plans while maximizing long-term shareholder value. With that, operator, we are ready for questions.

Randy Patten: We will continue to allocate capital to support our strategic growth plans while maximizing long-term shareholder value. With that, operator, we are ready for questions.

Speaker #2: Thank you. We'll now be conducting a question-and-answer session. To ask a question at this time, you may press star 1 from your telephone keypad.

Operator 2: Thank you. We'll now be conducting a question and answer session. To ask a question at this time, you may press star one from your telephone keypad, and a confirmation tone indicate your line is in the question queue. You may press star two if you'd like to withdraw your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. We'll pause a moment to poll for questions, and once again, that's star one. Thank you. Thank you. Our first question is from the line of Bob Farnam with Brean Capital. Please proceed with your questions.

Operator: Thank you. We'll now be conducting a question and answer session. To ask a question at this time, you may press star one from your telephone keypad, and a confirmation tone indicate your line is in the question queue. You may press star two if you'd like to withdraw your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. We'll pause a moment to poll for questions, and once again, that's star one. Thank you. Thank you. Our first question is from the line of Bob Farnam with Brean Capital. Please proceed with your questions.

Speaker #2: And a confirmation tone indicate your line is in the question queue. You may press star 2 if you'd like to withdraw your question from the queue.

Speaker #2: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. We'll pause a moment to poll for questions once again at star 1.

Speaker #2: Thank you. Thank you. Our first question is from the line of Bob Farnam with Breen Capital. Please proceed with your questions.

Speaker #3: Hi there. Good morning. I've got a couple of of of kind of quick questions in one kind of overlooking question. So and the quick questions your expense ratio improved to 30.6, and you're talking about how it's going to improve as the company scales.

Bob Farnam: Hi there. Good morning. I've got a couple of kind of quick questions and one kind of overlooking question. On the quick questions, your expense ratio improved to 30.6, and you're talking about how it's going to improve as the company scales. Do you have any idea of where that expense ratio could fall to when you get up to kind of full speed over the next few years?

Speaker #3: Do you have any idea of where that expense ratio could fall to when you get up to to kind of full speed over the next few years?

Speaker #1: Sure. So we're thinking we could take about a point out of the expense ratio. So our our interim goal is something like a 29.

Randy Patten: Sure. We're thinking we could take about a point out of the expense ratio. Our interim goal is something like a 29.

Meryl Golden: Sure. We're thinking we could take about a point out of the expense ratio. Our interim goal is something like a 29.

Speaker #3: Okay. Twenty-nine. And when you're looking to write business, you need to have—you know, it has to meet your profitability expectations.

Bob Farnam: Okay, 29. When you're looking to write business, it has to meet your profitability expectations. Can you describe kind of what you're looking for when you are writing business, what your profitability targets are?

Speaker #3: What can you can you describe kind of what you're looking for when you are writing business? What what your profitability targets are?

Speaker #1: Well, we're pricing for an 85 combined, so that's our profitability expectation over time.

Randy Patten: Well, we're pricing for an 85 combined, that's our profitability expectation over time.

Meryl Golden: Well, we're pricing for an 85 combined, that's our profitability expectation over time.

Speaker #3: Okay. 85 and 85 combined is, is—yeah. Okay.

Bob Farnam: Okay. 85 combined.

Randy Patten: Over time.

Meryl Golden: Over time.

Bob Farnam: Yeah. Okay.

Speaker #1: Yeah.

Randy Patten: Yeah.

Meryl Golden: Yeah.

Speaker #3: And I guess the the more encompassing one is more competition. I know you you offered quite a bit on competition. I I kind of wanted to know the differences.

Bob Farnam: I guess the more encompassing one is more competition. I know you offered up quite a bit on competition. I wanted to know the differences. I'm assuming there's a difference between the California competition and the New York competition because California is mostly E&S, New York is admitted. It sounds like admitteds are getting into California as well. Are those admitteds the same admitteds that you face in New York, or are they a different cohort of admitteds trying to get into California at this point?

Speaker #3: I I'm assuming there's a difference between the California competition and the New York competition because you know, California is mostly E&S, New York is admitted, but it sounds like admitteds are getting into California as well.

Speaker #3: Are those admitteds the same admitteds that you face in New York, or are they a different cohort of admitteds trying to get into California at this point?

Speaker #1: Sure. So and you perhaps I it wasn't clear what I was saying. In California, the admitted carriers had stopped writing new business to a large extent over the past couple of years, because of the regulatory environment.

Meryl Golden: Sure. Perhaps it wasn't clear what I was saying. In California, the admitted carriers had stopped writing new business to a large extent over the past couple of years because of the regulatory environment. There has been a surge in volume on the E&S side. Certainly, we expected a lot of new carriers in the E&S space because we had heard about that. What we had not anticipated in California was that the admitted carriers, the largest writers of homeowners in California, to reopen for business. We are starting to see that in the marketplace, so that is something we had not anticipated. The difference is, in New York, the admitted carriers, the top 10 carriers, to a large extent, avoid catastrophe-exposed property. Our competition are the companies that focus on catastrophe-exposed property.

Speaker #1: And so there has been a surge in volume on the E&S side. And certainly, we expected a lot of new carriers in the E&S space because we had heard about that.

Speaker #1: But what we had not anticipated in California was that the admitted carriers, the largest writers of homeowners in California, to reopen for business. And we are starting to see that in the marketplace.

Speaker #1: So that is something we had not anticipated. The difference is in New York, the admitted carriers to a large the top 10 carriers to a large extent avoid catastrophe-exposed property.

Speaker #1: So, our competition—the companies that focus on catastrophe-exposed property—and in New York, there is like one E&S writer, but most of the companies, or actually, maybe two.

Meryl Golden: In New York, there is one E&S writer, actually maybe two, most of the companies are admitted. In California, our competition is both now the admitted and the E&S carriers. Does that answer your question, Bob?

Speaker #1: Most of the companies are admitted. In California, our competition is both now the admitted and the E&S carriers. Does that answer your question, Bob?

Speaker #3: Yeah. So so the admitted carriers in California, you're talking the large large companies like, you know, State Farm and Farmers and and and whatnot.

Bob Farnam: Yeah. The admitted carriers in California, you're talking the large companies like State Farm and Farmers and whatnot. They're not avoiding getting into the catastrophe exposure area. I know that the regulator was basically saying these companies have to write some high-risk policies to be able to write in the state. They're not avoiding the wildfire exposed areas like they are avoiding the coastal areas in New York. Is that what you're saying?

Speaker #3: Aren't they, they're not avoiding getting into the statutory exposure? And I know that the regulator was basically saying, you know, these companies have to write some high-risk policies to be able to write in the state.

Speaker #3: So they're they're not avoiding the wildfire-exposed areas like they are avoiding the coastal areas and the in the in New York. Is that what you're saying?

Meryl Golden: Well, first of all, it's certainly not State Farm that I'm talking about. There is in California something called the Sustainable Insurance Strategy, and companies who file that they will write some more wildfire business. They get access to forward-looking wildfire models and to include reinsurance in their pricing and other things. We're still seeing that admitted carriers have a limited appetite, particularly for business that is exposed to wildfire, but we just had not anticipated that they would start writing business again, because so many of them were very restrictive until recently.

Speaker #3: Is that.

Speaker #1: First of all, I I you know, it's certainly not State Farm. That I'm talking about. But what I'm like, there is in California something called the Sustainable Insurance Plan and companies who file that they will write some more wildfire business than they get access to forward-looking wildfire models and to include reinsurance in their pricing and other things.

Speaker #1: So we're still seeing that admitted carriers have a limited appetite, particularly for business that is exposed to wildfire. But we just had not anticipated that they would start writing business again because so many of them were very restrictive until recently.

Speaker #3: Right. Okay. All right. And you're talking about the growth moderating in New York in the second half of the year. You're talking about increased competition.

Bob Farnam: Right. Okay. All right. You're talking about the growth moderating in New York in the H2 of the year. You're talking about increased competition. Is that new competition or is that kind of the similar thing, you're getting companies that had been there, stopped writing, and now they're slowly but surely dipping their toe back into the water?

Speaker #3: Is that new competition, or is that same kind of the similar thing you're getting companies that had been there stopped writing and now they're slowly but surely dipping their toe back into the water?

Speaker #1: Yeah. I mean, it's it's really both. So look, it's not a surprise. We all knew that the soft market is coming. But what we did see in July we saw it tick down in our new business for dwelling fire.

Meryl Golden: Yeah, it's really both. Look, it's not a surprise. We all knew that the soft market is coming. What we did see in July, we saw a tick down in our new business for dwelling fire, and from talking to agents, they're just talking more now about the softer market. There have been a few new market entrants, and existing competitors have loosened some of their guidelines. There is one company that is priced in a really irrational way, we hope they figure that out sooner rather than later. Listen, I want to reiterate that Kingstone has a unique position in the downstate New York market. We have broad and deep distribution, and those agencies have stuck with us through various market cycles.

Speaker #1: And from talking to agents, they're just talking more now about the softer market. So, there have been a few new market entrants, and existing competitors have loosened some of their guidelines.

Speaker #1: There is one company that is priced in a really irrational way, so we hope they figure that out sooner rather than later. But listen, I I want to reiterate that Kingstone has a unique position in the downstate New York market.

Speaker #1: We have broad and deep distribution, and those agencies have stuck with us through various market cycles. We have our select product that does a great job with risk selection and and matching rate to risk, which is even more important in in a soft market.

Meryl Golden: We have our Select product that does a great job with risk selection and matching rate to risk, which is even more important in a soft market. We have low expenses, I feel very confident we're going to continue to grow, but perhaps modestly slower than we have been. Again, it's just a different part of the cycle, and we'll do our best.

Speaker #1: We have low expenses. So I feel very confident we're going to continue to grow. But perhaps modestly slower than we have been. So you know, again, it's just a different part of the cycle, and we'll you know, do our best.

Speaker #3: All righty. Thanks. Thanks for the color.

Bob Farnam: All right. Thanks for the color.

Speaker #1: Our pleasure.

Meryl Golden: Our pleasure.

Speaker #2: The next question is from the line of Cam Bianchi with Piper Sandler. Please receive their questions.

Operator 2: The next question is from the line of Cam Bianchi with Piper Sandler. Please proceed with your questions.

Operator: The next question is from the line of Cam Bianchi with Piper Sandler. Please proceed with your questions.

Speaker #4: Good morning. This is Cam on for Paul. Considering the expense ratio improvement you saw in the quarter, I'm wondering if the 30% quota share in the New California book create any like near-term expense ratio drag.

Cam Bianchi: Good morning. This is Cam on for Paul. Considering the expense ratio improvement you saw in the quarter, I'm wondering, does the 30% quota share on the new California book create any near-term expense ratio drag if that state ramps that would offset any New York-driven efficiency gains? I know you mentioned about 29% as the target there, but just curious if that California book has any offset in there.

Speaker #4: Is that state ramps that would offset any New York-driven efficiency gains? I know you mentioned about 29% of the target there, but just curious if that California book has any offset in there.

Speaker #1: Yeah. So thanks for your question. So you know, right now, California is such a small piece of the pie. Like, we're you know, even by the end of this year, it's going to be way less than 5% of our total business.

Meryl Golden: Yeah. Thanks for your question. Right now, California is such a small piece of the pie. Even by the end of this year, it's going to be way less than 5% of our total business. The 30% quota share was really intended just for risk aversion. We wanted to make sure that we didn't have a material impact on our profitability. To answer your question, it has zero, really no impact on the expense ratio at all.

Speaker #1: And the 30% quota share was really intended just for risk aversion. We wanted to make sure that we didn't have a material impact on our profitability.

Speaker #1: So to answer your question, it has zero really, like, no impact on the expense ratio at all.

Speaker #4: Got it. Understood. And then I guess just looking forward a little bit, once you know, the California book ramps up a little bit, and maybe just on the road to that, how are you guys prioritizing capital deployment between California and Connecticut expansion?

Cam Bianchi: Got it. Understood. I guess just looking forward a little bit once the California book ramps up a little bit, and maybe just On the road to that, how are you guys prioritizing capital deployment between California and Connecticut expansion, increasing the dividend, and opportunistic repurchases?

Speaker #4: Increasing the dividend and opportunistic repurchases?

Speaker #1: Randy, I'll let you take that.

Meryl Golden: Randy, I'll let you take that.

Speaker #4: Sure. Yeah. So our capital allocation really it remains the same even entering California. You know, our priorities are first to fund that profitable growth and and we've rebuilt surplus here over the last couple of years.

Randy Patten: Sure. Yeah. Our capital allocation really remains the same even entering California. Our priorities are first to fund that profitable growth, and we've rebuilt surplus here over the last couple of years. We're focused on growing that quarterly dividend. In the past quarter, our board did increase our dividend by 20% to $0.06 per share. Third, looking at when the opportunities present themselves, we will repurchase shares. Really in that order.

Speaker #4: And then we're focused on growing that quarterly dividend and, you know, in the past quarter, our board did increase our dividend by 20% to 6 6 cents per share.

Speaker #4: And then third, looking at, you know, when the opportunities present themselves, we will repurchase shares. But but really, in that order. Fantastic. Thank you.

Rachel Smith: Fantastic. Thank you.

Cam Bianchi: Fantastic. Thank you.

Speaker #1: Thank you.

Meryl Golden: Thank you.

Speaker #2: The next question is from the line of Greg Fortunoff, private investor. Please proceed with your question.

Operator 2: The next question is from the line of Greg Fortunoff, private investor. Please just use your questions.

Operator: The next question is from the line of Greg Fortunoff, private investor. Please just use your questions.

Speaker #1: Hi, Greg.

Meryl Golden: Hi, Greg.

Greg Fortunoff: Good morning. Hi, how are you? Great number. It sounds like the market's getting a little soft. When you figured your numbers earlier in the year, were you considering that, or is that something that could affect what you're thinking going forward?

Speaker #3: Good morning. Hi. How are you? Great number. It sounds like the market's getting a little soft, but when you did your number when you figured your numbers earlier in the year, were you considering that, or is that is that something that could affect what you're thinking going forward?

Speaker #1: Yeah. So if you're talking about our guidance on growth in particular, we did anticipate a softer market in the second half of the year.

Meryl Golden: Yeah. If you're talking about our guidance on growth, in particular, we did anticipate-

Greg Fortunoff: Yeah

Meryl Golden: A softer market in the second half of the year. The range is 16% to 20%, and year to date, we're at 19%. We'll have to see how it goes, right now we're comfortable reaffirming our guidance.

Speaker #1: So, you know, the range is 16% to 20%. And year to date, we're at 19%. So we'll have to see how it goes.

Speaker #1: But right now, we're comfortable reaffirming our guidance.

Speaker #3: Okay. Is it wrong to think that, aside from any catastrophes that might hit, this earnings is a new run rate for us, or am I getting too far ahead of myself?

Greg Fortunoff: Okay. Is it wrong to think that, aside from any catastrophes that might hit, that this earnings is a new run rate for us, or am I getting too far ahead of myself?

Meryl Golden: Are you saying for Q2? Our Q2 earnings?

Speaker #1: Are you asking about Q2? Our Q2 run rate?

Speaker #3: Right, I'm just saying—right. So, I know the second quarter is always the best quarter, but that being said, if you go through the third quarter with no major storms and nothing out of the ordinary on the regular claims, should this be the run rate that we're expecting?

Greg Fortunoff: Right. I'm just saying, so Right. Is this-- I know the Q2 is always the best quarter, but that being said, if you go through the Q3 with no major storms and nothing out of the ordinary on the regular claims, should this be the run rate that we're expecting?

Speaker #1: Yeah. So I would say that our underlying combined ratios so if you take out cat loss and the prior favorable prior year development, that is the run rate we're expecting.

Meryl Golden: Yeah. I would say that our underlying combined ratio, so if you take out catastrophe loss and the favorable prior year development, that is the run rate we're expecting. In our guidance, we split it between the underlying, which are all the things that we control, and that's a combined ratio of 74 to 76, and then the catastrophe loss. Yes, I would say that the run rate is consistent with the guidance that we put out in March.

Speaker #1: So you know, and our guidance, we split it between the underlying and which are all the things that we control. And that's a combined ratio of 74 to 76.

Speaker #1: And then the cat loss. So yes, I would say that the run rate is consistent with the guidance that we put out in March.

Speaker #3: Okay. I understand that, except I'll just press you a little bit more to say if you make a dollar five this quarter, and then you make a dollar five next quarter, you're basically at your low end.

Greg Fortunoff: Okay. I understand that, except I'll just press you a little bit more to say, if you make $1.5 this quarter, and then you make $1.5 next quarter, you're basically at your low end, and then it's just the Q4 to see how much you beat it by. Is that-- You're being pretty conservative. Is that fair or no?

Speaker #3: And then it's just the fourth quarter to see how much you beat it by. Is that I mean, so you're you're being pretty conservative.

Speaker #3: Is that fair or not?

Speaker #1: I mean, listen, we want our guidance to be accurate and durable. And while we feel very positive about our outlook, it is just the very beginning of the hurricane season.

Meryl Golden: Listen, we want our guidance to be accurate and durable. While we feel very positive about our outlook, it is just the very beginning of the hurricane season, and Q3 is typically a quarter where we see sizable catastrophe losses. With the change in the competitive environment, I just thought it was most prudent to maintain our guidance until we had better visibility into the rest of the year. I hope you're right, Greg.

Speaker #1: And Q3 is typically a quarter where we see sizable catastrophe losses. So you know, it's just and then with the change in the competitive environment, I I just thought it was most prudent to to maintain our guidance until we had better visibility into the rest of the year.

Speaker #1: So I hope you're right, Greg. I hope we're at the very high end, and we can update guidance next quarter.

Greg Fortunoff: Okay.

Meryl Golden: I hope we're at the very high end, and we can update guidance next quarter.

Speaker #3: All right. Two two more quick questions. So when you talk about the the competition, obviously, it takes time for policies to roll off that people can't just leave mid-policy and write a new policy with someone else.

Greg Fortunoff: All right. Two more quick questions. When you talk about the competition, obviously, it takes time for policies to roll off. People can't just leave mid-policy and write a new policy with someone else. When will we see the effects of what might be some competition?

Speaker #3: So, I mean, when will we see the effects of what might be some competition?

Speaker #1: Yeah. So, typically, in a soft market, we want to retain our renewals. And consumers generally are much more price sensitive with new business than they are with renewal business.

Meryl Golden: Yeah. Typically in a soft market, we want to retain our renewals, and consumers generally are much more price sensitive when on new business than they are on renewal business. I think what we're most likely to see is a decline in new business writings rather than any impact on the renewal rates. Time will tell. It really depends on how aggressive the competition is.

Speaker #1: So I think what we'll see, what we're most likely to see, is a decline in new business writings rather than any impact on the renewal rate.

Speaker #1: But time will tell. Like, it really depends on how aggressive the competition is.

Speaker #3: Okay, so you're expecting more of a moderation in new business versus our current book. Okay, I understand. And this is my last question. In the past, you've told us what our maximum loss would be in the case of, like, a Sandy or some major storm.

Greg Fortunoff: Okay. You're expecting more of a moderation of new business versus our current book. Okay. Understand.

Meryl Golden: Yeah.

Greg Fortunoff: This is my last question. In the past, you've told us what our maximum loss would be in the case of a Sandy or some major storm. Has that changed since we wrote the new reinsurance policy, or is that similar to, I think you had said maybe 5 million-ish or somewhere around that number?

Speaker #3: Has that changed since we wrote the new reinsurance policy? Or is that similar to I think you had said, like, maybe 5 million-ish or somewhere around that number?

Speaker #1: Yeah. So one of the you know, we had this very successful placement this year. And we were able to retain our low first event retention across all perils.

Meryl Golden: Yeah. One of the-- We had this very successful placement this year, we were able to retain our low first event retention across all perils. Our first event retention is 3.5 million for wildfire, 4.75 million for named storm like a Sandy, winter storm and severe convective storm is 6 million. In the past, we've talked about, let's take if a storm like Sandy hit us today with our current footprint, it would cost us roughly 5 million, 4.7 million. Pre-tax, $4 million after tax, and about $0.27 per diluted share. It is certainly just an earnings event for Kingstone, not a capital event. To your question, Greg, nothing has changed. We maintain that same very conservative first event retention to protect our surplus.

Speaker #1: So our first event retention is $3.5 million for wildfire, $4.75 million for a named storm like Sandy, and then for winter storm and severe convective storm, it is $6 million.

Speaker #1: And so, in the past we've talked about, let's say if a storm like Sandy hit us today with our current footprint, it would cost us roughly $5 million—$4.7 million pre-tax, $4 million after-tax, and about $0.27 per diluted share.

Speaker #1: So it is certainly just an earnings event for Kingstone, not a capital event. So to your question, Greg, nothing has changed. We've maintained that same very conservative first event retention to protect our surplus.

Speaker #3: Okay. I guess, to think if you could only lose $0.27 in a major storm, that's pretty—once you sleep on that, I imagine.

Greg Fortunoff: Okay. I guess to think if you could only lose $0.27 in a major storm, lets you sleep at night, I imagine.

Speaker #1: Absolutely. Plus, I'll need to.

Meryl Golden: Absolutely.

Greg Fortunoff: Okay.

Meryl Golden: Our mean, though. Yeah.

Speaker #3: Thank you very much. Keep up the good work. Thank you very much.

Greg Fortunoff: Thank you very much. Keep up the good work.

Meryl Golden: Thanks, Greg.

Greg Fortunoff: Thank you very much.

Speaker #2: The next question is from Gabriel McClure with Private Investor. Please proceed with your question.

Operator 2: The next question is in the line of Gabriel McClure with Private Investor. Please proceed with your questions.

Operator: The next question is in the line of Gabriel McClure with Private Investor. Please proceed with your questions.

Speaker #4: Hi, Gabe.

Meryl Golden: Hi, Gabe.

Speaker #3: Hi. Good morning. And congrats on another record quarter.

Gabriel McClure: Hi. Good morning, congrats on another record quarter.

Speaker #1: Thank you.

Meryl Golden: Thank you.

Speaker #3: So when you were talking about the policies enforce growth, you threw a number out there. I just wanted to make sure I heard you right because on the presser, it's it said that there's a 9.9% growth.

Gabriel McClure: When you were talking about the policies in force growth, you threw a number out there. I just wanted to make sure I heard you right because on the presser, it said that there's a 9.9% growth. Could you repeat that again, please?

Speaker #3: What could you repeat that again, please?

Speaker #1: I don't recall talking about policy enforce growth. I said new business for the quarter was up 35%. Retention was up 2%. And our average premium was up 8%.

Meryl Golden: I don't recall talking about policy in force growth. I said new business for the quarter was up 35%, retention was up 2%, and our average premium was up 8%. We are really delighted that our policy in force growth was up almost 10% quarter over quarter. You're right. What's in the press release is correct.

Speaker #1: But we are really delighted that our policy enforce growth was up almost 10% quarter over quarter. So so you're right. What's in the press release is correct.

Speaker #3: Okay, that's all for me. Thanks.

Gabriel McClure: Okay. That's all for me. Thanks.

Speaker #1: Okay. Our pleasure.

Meryl Golden: Okay. Our pleasure.

Speaker #2: As a reminder, a star-one to ask a question. Thank you. At this time, we'll turn the floor back to Meryl for closing comments.

Operator 2: As a reminder, press star one to ask a question. Thank you. At this time, I'll turn the floor back to Meryl for closing comments.

Operator: As a reminder, press star one to ask a question. Thank you. At this time, I'll turn the floor back to Meryl for closing comments.

Speaker #1: Terrific. Thank you so much for your interest in Kingstone, and thanks for joining us today. Have a wonderful day.

Meryl Golden: Terrific. Thank you so much for your interest in Kingstone. Thanks for joining us today. Have a wonderful day.

Operator 2: This will conclude today's conference. Thank you for your participation. You may now disconnect your lines at this time.

Operator: This will conclude today's conference. Thank you for your participation. You may now disconnect your lines at this time.

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