Kingstone Companies: Still Improving

Kingstone Companies (KINS) reported strong Q1 2025 results, with a 40% YoY revenue increase driven by higher prices and new business, including policies from Adirondack and Mountain Valley withdrawals; EPS more than doubled YoY. Kingstone will also replace AmGUARD (a Berkshire subsidiary) in New York, potentially adding $25-$35 million in premiums over 12 months starting in late Q3. Management forecasts 2025 EPS of $1.95, implying a $24.3 price target, but the company is not planning share buybacks and trades at 2.7x price-to-book, which may give investors pause.

Analysis

Kingstone Companies (KINS) reported a robust first quarter for 2025, with top-line revenue surging 40% year-over-year, primarily driven by increased pricing and new business generation. This new business included policies from the completed withdrawals of Adirondack and Mountain Valley, contributing to a 68% increase in new business count and a 19% rise in renewal average premiums for property lines. Consequently, core policies in force expanded by 10% from the prior year, led by a 19% increase in its largest product, homeowners, and diluted EPS more than doubled on a YoY basis, supported by a mild winter. A significant future growth catalyst is Kingstone's approval as the replacement carrier for AmGUARD, a Berkshire subsidiary withdrawing from New York, which is anticipated to add $25-$35 million in premiums over a 12-month period starting in late Q3 2025. Management has guided for a mid-range 2025 EPS of $1.95, implying a $24.30 price target at a 12.5x multiple. Despite these positive developments and a strongly positive sentiment, the company is not planning share buybacks in the near future, prioritizing capital for growth. The stock trades at a Price-to-Book ratio of 2.7x, which is not considered cheap, though the author suggests its current valuation may be tempered by its microcap status and illiquidity, with potential for multiple re-rating as it grows. The primary identified risk is a market downturn, which could disproportionately impact microcap investments.

Key Decisions for Investors

• Investors should acknowledge Kingstone's strong Q1 2025 performance and the significant growth potential from the AmGUARD replacement carrier agreement, which is expected to accelerate premium growth starting late Q3.
• Carefully consider the valuation, with a Price-to-Book multiple of 2.7x, and management's current stance of forgoing share buybacks to fund growth initiatives, including the AmGUARD transaction.
• Monitor the execution of the AmGUARD business integration and the company's progress towards its 2025 EPS guidance of $1.95, while remaining cognizant of the heightened volatility and illiquidity risks associated with microcap stocks, especially in adverse market conditions.