UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark one) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2020 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________to _________ Commission File Number 0-1665 KINGSTONE COMPANIES, INC. (Exact name of registrant as specified in its charter) (State or other jurisdicti ...

Kingstone Companies, Inc. (NASDAQ:KINS) Q2 2020 Results Conference Call August 7, 2020 8:30 AM ET Company Participants Amanda Goldstein - Investor Relations Barry Goldstein - Chief Executive Officer Meryl Golden - Chief Operating Officer Ben Walden - Chief Actuary Conference Call Participants Paul Newsome - Piper Sandler Bob Farnam - Boenning and Scattergood Operator Hello, and welcome to Kingstone Companies Second Quarter 2020 Financial Results Conference Call. At this time, all participants are in a liste ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark one) ☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2020 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________to _________ Commission File Number 0-1665 KINGSTONE COMPANIES, INC. (Exact name of registrant as specified in its charter) (State or other jurisdict ...

Financial Data and Key Metrics Changes - The first quarter underlying loss ratio improved by more than 5 points compared to the previous year, totaling an improvement of over 37 points [10][24] - There was a 9% decline in net earned premiums, attributed to strategic decisions to reduce earnings volatility and exit the commercial liability lines of business [11][15] - The company reported an operating loss of approximately $300,000 for the first quarter, a significant improvement from an operating loss of $8.9 million in the first quarter of 2019 [15] Business Line Data and Key Metrics Changes - The personal lines underlying loss ratio improved by over 5 points compared to the first quarter of 2019, driven by lower claim frequency and higher average premiums due to recent rate increases [27] - The commercial lines business, which was placed into runoff, represented only 6% of total net earned premiums for the quarter, with less than 3,000 policies remaining [28] Market Data and Key Metrics Changes - The company experienced a significant drop in new business due to the pandemic, particularly affecting physical damage products for livery drivers [64] - Despite the slowdown in new business, retention rates remained stable, which is crucial as retention constitutes the majority of premiums [64] Company Strategy and Development Direction - The company is focused on profitability over growth, leading to a planned decline in net earned premiums [11] - Kingstone is undergoing modernization efforts, referred to as Kingstone 2.0, which includes core system replacements for policy management and claims [29][30] - The Board decided to reduce the quarterly dividend from $0.0625 to $0.04 to preserve capital and improve liquidity [18] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's preparedness for the pandemic, crediting prior regulatory measures that facilitated a smooth transition to remote work [8] - The CEO acknowledged the uncertainty brought by the pandemic but remained optimistic about the company's direction and actions taken [16][68] - The company is closely monitoring potential legislative changes regarding business interruption claims but does not currently see a need to reserve for this possibility [21][22] Other Important Information - The company has seen a recovery of more than half of the decline in book value due to market value fluctuations [20] - The 25% personal lines quota share treaty, which began in the fourth quarter of the previous year, is expected to be reassessed towards the end of the third quarter [46] Q&A Session Summary Question: Outlook for the expense ratio - Management indicated that the current expense ratio is appropriate for the short term, driven by the goal of profitability rather than growth [33] Question: Business owners policies and viral exclusions - The company does not have a separate viral exclusion, and coverage is only provided for losses related to property damage [34][36] Question: Share buyback and liquidity - There is no specific dollar amount for share buybacks, as liquidity is managed carefully to avoid rating risks [42][43] Question: Commercial claims status - As of March, there are 227 open commercial lines claims, which represent about 25% of total claims inventory [48] Question: Disconnect in financial performance despite favorable conditions - Management emphasized focusing on the core loss ratio, which improved significantly, rather than just the combined ratio [58] Question: Expectations for new business - New business is expected to slow down, particularly in Q2, but retention rates remain stable, mitigating the impact [64]

Part I [Business](index=5&type=section&id=Item%201.%20Business) Kingstone is a regional property and casualty insurer focused on personal lines in the Northeast, expanding its footprint while exiting commercial liability - The company offers property and casualty insurance through its subsidiary KICO, with **85.0% of its direct written premiums in 2019 originating from New York**, though it is expanding into New Jersey, Rhode Island, Massachusetts, and Connecticut[11](index=11&type=chunk) - In July 2019, the company decided to **exit the commercial liability business** due to poor performance; in-force policies will be non-renewed at the end of their terms[18](index=18&type=chunk)[32](index=32&type=chunk) - Effective December 15, 2019, KICO entered into a **new 25% quota share reinsurance treaty** for its personal lines business[13](index=13&type=chunk) - Effective July 1, 2019, catastrophe reinsurance coverage was **increased from $450 million to $610 million**, covering more than a 1-in-250 year storm event[15](index=15&type=chunk) Gross Written Premiums by Product Line (2019) | Product Line | % of Gross Written Premiums | | :--- | :--- | | Personal Lines | 87.6% | | Livery Physical Damage | 6.2% | | Commercial Liability | 5.9% | | Other | 0.3% | [Business Strategy and Operations](index=7&type=section&id=Business_Strategy_and_Operations) The company pursues profitable growth through disciplined underwriting, strong producer relationships, and technology investment - The company's principal objectives are to grow profitably while managing risk through prudent use of reinsurance, aiming for underwriting income via adequate pricing and expense management[28](index=28&type=chunk) - KICO has achieved an **underwriting profit in nine of the last ten years**, demonstrating a history of profitable operations[34](index=34&type=chunk) - The company distributes its products through a network of **over 600 producers**, who are selected and monitored for performance and profitability[45](index=45&type=chunk) Homeowners & Dwelling Fire Premiums by Distribution Channel (2019) | Distribution Channel | Direct Written Premiums ($ thousands) | Percent of Total | | :--- | :--- | :--- | | Core Independent (NY) | $120,625 | 80.6% | | Expansion Independent (Outside NY) | $24,253 | 16.2% | | Alternative Distribution through Cosi | $4,799 | 3.2% | | **Total** | **$149,677** | **100.0%** | [Loss Reserves and Reinsurance](index=10&type=section&id=Loss_Reserves_and_Reinsurance) The company manages risk through loss reserves and a significant catastrophe reinsurance program providing $610 million in coverage - The company's reinsurance program limits exposure to catastrophe losses and reduces net liability on individual risks; the catastrophe reinsurance provides coverage up to **$610 million for a single event**, with a net retention of **$5.625 million**[39](index=39&type=chunk)[67](index=67&type=chunk)[74](index=74&type=chunk) Reconciliation of Net Loss and LAE (in thousands) | Metric | 2019 | 2018 | | :--- | :--- | :--- | | Net Balance, Beginning of Period | $40,525,859 | $32,050,714 | | Total Incurred | $90,182,324 | $58,295,205 | | - Incurred related to Prior Years | $11,138,023 | $1,152,128 | | Total Paid | $65,937,795 | $49,820,060 | | **Net Balance, End of Period** | **$64,770,387** | **$40,525,859** | [Investments and Ratings](index=15&type=section&id=Investments_and_Ratings) The company maintains a conservatively managed investment portfolio and an A- (Excellent) A.M. Best rating - As of December 31, 2019, **80.2% of the company's corporate and municipal bonds were rated BBB or higher** by S&P or equivalent rating agencies[78](index=78&type=chunk) - KICO's financial strength rating was **upgraded by A.M. Best to A- (Excellent)** in April 2017, which has created significant additional demand from producers[81](index=81&type=chunk) Investment Portfolio Summary (Carrying Value) | Category | Dec 31, 2019 ($) | % of Portfolio | Dec 31, 2018 ($) | % of Portfolio | | :--- | :--- | :--- | :--- | :--- | | Cash and cash equivalents | 32,391,485 | 14.0% | 21,138,403 | 10.8% | | Corporate and other bonds | 125,622,039 | 54.2% | 115,750,293 | 59.2% | | Residential mortgage backed securities | 26,231,230 | 11.3% | 21,465,234 | 11.0% | | Common stocks, mutual funds, ETFs | 15,959,495 | 6.9% | 10,419,660 | 5.3% | | Other | 31,505,664 | 13.6% | 26,792,925 | 13.7% | | **Total** | **$231,699,913** | **100.0%** | **$195,566,615** | **100.0%** | [Risk Factors](index=20&type=section&id=Item%201A.%20Risk%20Factors) The company faces risks from a material weakness in internal controls, catastrophe exposure, and geographic concentration - A **material weakness has been identified in the internal control over financial reporting** concerning the establishment and monitoring of case reserves for losses and loss adjustment expenses as of December 31, 2019[106](index=106&type=chunk) - The company is exposed to significant losses from catastrophes and severe weather events; while it has catastrophe reinsurance up to **$610 million**, it retains **$5.625 million of risk per occurrence**[111](index=111&type=chunk) - A downgrade in the **A- (Excellent) financial strength rating from A.M. Best** could materially harm the company's competitiveness, marketability, and ability to grow[114](index=114&type=chunk) - The business is highly concentrated in New York, with **approximately 85% of revenue derived from the state**, making it vulnerable to local regulatory, economic, and competitive conditions[130](index=130&type=chunk) - The company is a defendant in a **putative class action lawsuit** alleging violations of federal securities laws related to its disclosures about winter catastrophe losses and claim reserves[144](index=144&type=chunk) [Properties](index=29&type=section&id=Item%202.%20Properties) The company owns its principal office in Kingston, NY, and leases additional space in Valley Stream, NY - The company **owns its principal executive office building** in Kingston, New York, free of mortgage[157](index=157&type=chunk)[158](index=158&type=chunk) - The company leases office space at 70 East Sunrise Highway, Valley Stream, New York for both its insurance underwriting and licensed general agency (Cosi) businesses[157](index=157&type=chunk) [Legal Proceedings](index=29&type=section&id=Item%203.%20Legal%20Proceedings) The company is defending a putative class action lawsuit alleging federal securities law violations - A **putative class action lawsuit was filed** against the company and certain officers on June 12, 2019, alleging securities law violations concerning the April 29, 2019 announcement of losses from winter catastrophe events and the adequacy of claim reserves[159](index=159&type=chunk) - The company believes the lawsuit is without merit and **filed a motion to dismiss** on February 18, 2020[160](index=160&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=30&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's stock trades on Nasdaq (KINS), with a history of quarterly dividends subject to regulatory limits - The company's common stock is traded on The Nasdaq Capital Market under the symbol **"KINS"**[163](index=163&type=chunk) - The company has paid a cash dividend each quarter since September 2011; however, **future dividends are not guaranteed** and are subject to Board discretion and regulatory limits on its subsidiary KICO[164](index=164&type=chunk)[165](index=165&type=chunk) - KICO's ability to pay dividends to the parent company is restricted by New York state law; as of December 31, 2019, the **maximum distribution KICO could pay without prior regulatory approval was approximately $2,384,000**[166](index=166&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=31&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) A net loss of $6.0 million in 2019 was driven by a high loss ratio, despite premium growth and investment gains - The 2019 net loss ratio was elevated primarily due to **prior year loss development of $11.1 million** (an 8.7 point impact), of which **$8.1 million was from the discontinued commercial liability claims**[225](index=225&type=chunk) - Direct written premiums from the **"Expansion" business outside of New York grew significantly to $25.6 million** in 2019 from $9.1 million in 2018[204](index=204&type=chunk) Consolidated Financial Highlights (in thousands) | Metric | 2019 | 2018 | % Change | | :--- | :--- | :--- | :--- | | Direct Written Premiums | $171,214 | $146,716 | 16.7% | | Net Premiums Earned | $127,624 | $103,415 | 23.4% | | Net Loss and LAE | $90,183 | $58,296 | 54.7% | | Total Revenues | $145,563 | $113,772 | 27.9% | | **Net (Loss) Income** | **($5,967)** | **$3,092** | **(293.0)%** | Key Underwriting Ratios | Ratio | 2019 | 2018 | Point Change | | :--- | :--- | :--- | :--- | | Net Loss Ratio | 70.7% | 56.4% | +14.3 | | Net Underwriting Expense Ratio | 38.1% | 38.4% | -0.3 | | **Net Combined Ratio** | **108.8%** | **94.8%** | **+14.0** | [Consolidated Results of Operations Analysis](index=34&type=section&id=Consolidated_Results_of_Operations_Analysis) Premium growth was offset by a surging net loss ratio, driven by adverse development in the discontinued commercial lines - **Direct written premiums increased 16.7%** in 2019, driven by a 14.1% increase in policies-in-force[203](index=203&type=chunk) - **Net premiums earned increased 23.4%**, outpacing written premium growth due to retaining more premiums following the expiration of a 10% quota share treaty on July 1, 2019[213](index=213&type=chunk) - The impact of catastrophes on the net loss ratio was **6.0 percentage points in both 2019 and 2018**, significantly above the five-year average of 3.8 points[226](index=226&type=chunk) - The commercial lines business, which is in run-off, recorded a **net loss ratio of 142.4% in 2019**, compared to 59.5% in 2018, validating the decision to exit the business[241](index=241&type=chunk) [Investments Analysis](index=47&type=section&id=Investments_Analysis) The investment portfolio generated increased income and significant gains in 2019, with a high-quality fixed-income focus - **Net investment income increased 11.0% to $6.9 million** in 2019, driven by higher average invested assets[220](index=220&type=chunk) - The company reported **net investment gains of $4.6 million in 2019**, compared to a net loss of $2.5 million in 2018, primarily due to unrealized gains on equity securities[222](index=222&type=chunk) Available-for-Sale Fixed-Maturity Securities by Credit Rating (Fair Value) | Rating | Dec 31, 2019 ($) | % of Total | Dec 31, 2018 ($) | % of Total | | :--- | :--- | :--- | :--- | :--- | | U.S. Treasury | 7,061,100 | 4.2% | 8,220,381 | 5.4% | | AAA | 1,996,676 | 1.2% | 979,123 | 0.6% | | AA | 8,809,480 | 5.2% | 8,350,910 | 5.5% | | A | 34,636,236 | 20.6% | 27,665,961 | 18.2% | | BBB | 89,501,460 | 53.2% | 85,095,907 | 56.1% | | Below BBB / Non-rated | 26,231,229 | 15.6% | 21,465,234 | 14.2% | | **Total Corporate/Municipal** | **$168,236,181** | **100.0%** | **$151,777,516** | **100.0%** | [Liquidity and Capital Resources Analysis](index=53&type=section&id=Liquidity_and_Capital_Resources_Analysis) Liquidity is sourced from operations and investments, with strong operating cash flow and concentrated reinsurance recoverables - In 2019, KICO paid **dividends of $7.0 million** to the parent holding company[260](index=260&type=chunk) Summary of Cash Flows (in thousands) | Cash Flow Source | 2019 | 2018 | | :--- | :--- | :--- | | Operating Activities | $29,859 | $22,295 | | Investing Activities | ($14,974) | ($43,401) | | Financing Activities | ($3,632) | ($6,137) | | **Net Change in Cash** | **$11,253** | **($27,243)** | Top Reinsurance Recoverables (as of Dec 31, 2019) | Reinsurer | Amount ($ thousands) | % of Total | | :--- | :--- | :--- | | Cavello Bay Reinsurance Limited | $6,463 | 30.6% | | Swiss Reinsurance America Corp. | $5,754 | 27.3% | | Hannover Rueck SE | $3,678 | 17.4% | | **Total Top 3** | **$15,895** | **75.3%** | [Controls and Procedures](index=56&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management identified a material weakness in internal controls over financial reporting related to loss reserves - Management concluded that **internal control over financial reporting was not effective** as of December 31, 2019[287](index=287&type=chunk) - A **material weakness was identified** in the operation of controls related to the establishment and ongoing monitoring of case reserves for losses and loss adjustment expenses[289](index=289&type=chunk) - Remediation efforts include **hiring a new Chief Claims Officer**, increasing the skill of claims personnel, reviewing policies, and enhancing internal audit testing[290](index=290&type=chunk)[294](index=294&type=chunk) - The independent registered public accounting firm, Marcum LLP, issued an **adverse attestation report** on the effectiveness of the company's internal control over financial reporting[291](index=291&type=chunk)[297](index=297&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=62&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) The company is led by CEO Barry Goldstein and a majority-independent board with an expert audit committee - **Barry B. Goldstein serves as Chief Executive Officer**, President, and Executive Chairman of the Board[307](index=307&type=chunk)[308](index=308&type=chunk) - **Meryl S. Golden was appointed Chief Operating Officer** on September 25, 2019, bringing over 25 years of insurance industry experience[309](index=309&type=chunk) - The Audit Committee is composed of three independent directors: Messrs. Tupper, Yankus, and McFadden; **Mr. Tupper is designated as the "audit committee financial expert"**[320](index=320&type=chunk)[321](index=321&type=chunk) [Executive Compensation](index=65&type=section&id=Item%2011.%20Executive%20Compensation) Executive compensation includes salary, bonuses, and significant stock incentives, with new agreements for key executives - Effective January 1, 2020, CEO Barry Goldstein's new employment agreement includes a **$500,000 base salary**, a performance bonus, and substantial restricted stock grants, including a January 2020 grant valued at **$1,250,000**[326](index=326&type=chunk)[327](index=327&type=chunk)[328](index=328&type=chunk) - Non-employee directors receive annual compensation including a **$60,000 cash retainer and a $40,000 stock award**[346](index=346&type=chunk) Summary Compensation Table (2019) | Name and Principal Position | Salary ($) | Stock Awards ($) | All Other Comp. ($) | Total ($) | | :--- | :--- | :--- | :--- | :--- | | Barry B. Goldstein (CEO) | 636,500 | - | 37,520 | 674,020 | | Dale A. Thatcher (Former CEO) | 625,000 | 750,000 | 43,200 | 1,418,200 | | Victor J. Brodsky (CFO) | 369,666 | 150,000 | 56,550 | 576,217 | [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=71&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Insiders own 9.1% of common stock, with CEO Barry Goldstein being the largest individual insider shareholder - As of December 31, 2019, there were **327,900 securities remaining available for future issuance** under equity compensation plans approved by security holders[352](index=352&type=chunk) Security Ownership of Major Holders (as of March 9, 2020) | Name of Beneficial Owner | Number of Shares | Percent of Class | | :--- | :--- | :--- | | Barry B. Goldstein (CEO) | 707,158 | 6.5% | | The TCW Group, Inc. | 673,170 | 6.2% | | RenaissanceRe Ventures Ltd. | 595,238 | 5.5% | | All executive officers and directors as a group (9 persons) | 990,904 | 9.1% | [Certain Relationships and Related Transactions, and Director Independence](index=74&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) The company maintains a majority-independent board and discloses transactions with executives and their family members - The Board of Directors has determined that a **majority of its members are independent** under Nasdaq listing standards[353](index=353&type=chunk) - The daughter of CEO Barry Goldstein, Amanda Goldstein, is employed by the company and **earned $155,368 in compensation in 2019**[358](index=358&type=chunk) - The separation agreement with former CEO Dale Thatcher included **severance of $381,111**, a $5,000 bonus, health coverage, and continued vesting of unvested stock awards[357](index=357&type=chunk) [Principal Accountant Fees and Services](index=75&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Marcum LLP's fees for 2019 and 2018 consisted entirely of audit services pre-approved by the Audit Committee Accountant Fees (Marcum LLP) | Fee Category | Fiscal 2019 Fees ($) | Fiscal 2018 Fees ($) | | :--- | :--- | :--- | | Audit Fees | 306,940 | 309,684 | | Tax Fees | - | - | | Audit-Related Fees | - | - | | All Other Fees | - | - | | **Total** | **$306,940** | **$309,684** | Part IV [Exhibits and Financial Statement Schedules](index=76&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists all filed exhibits, including governing documents, debt indentures, and executive agreements - Key exhibits filed include the Second Amended and Restated Employment Agreement with CEO Barry B. Goldstein and the Indenture for the **$30 million 5.50% Senior Unsecured Notes due 2022**[365](index=365&type=chunk) [Financial Statements and Notes](index=80&type=section&id=Financial%20Statements%20and%20Notes) The audited financial statements show asset growth but a net loss in 2019, with detailed notes on key accounts Consolidated Balance Sheet Highlights (in thousands) | Account | Dec 31, 2019 | Dec 31, 2018 | | :--- | :--- | :--- | | Total Investments | $199,308 | $174,428 | | Cash and cash equivalents | $32,391 | $21,138 | | **Total Assets** | **$321,203** | **$266,752** | | Loss and LAE reserves | $80,499 | $56,197 | | Unearned premiums | $90,383 | $79,032 | | Long-term debt, net | $29,471 | $29,295 | | **Total Liabilities** | **$232,981** | **$178,086** | | **Total Stockholders' Equity** | **$88,222** | **$88,666** | Consolidated Statement of Operations Highlights (in thousands) | Account | 2019 | 2018 | | :--- | :--- | :--- | | Net premiums earned | $127,623 | $103,415 | | Total revenues | $145,563 | $113,772 | | Loss and LAE | $90,182 | $58,295 | | Total expenses | $153,346 | $110,765 | | **Net (loss) income** | **($5,966)** | **$3,093** | [Note 11 - Property and Casualty Insurance Activity](index=114&type=section&id=Note_11_Property_and_Casualty_Insurance_Activity) This note reconciles loss reserves, highlighting $11.1 million in adverse prior-year development for 2019 - The unfavorable prior year loss development of **$11.1 million in 2019** was primarily due to increased case reserves for older liability claims, which mainly affected the ultimate loss projections for the commercial lines business[504](index=504&type=chunk) Reconciliation of Net Loss and LAE (in thousands) | Metric | 2019 | 2018 | | :--- | :--- | :--- | | Net Balance, Beginning of Period | $40,525,859 | $32,050,714 | | Incurred related to Current Year | $79,044,301 | $57,143,077 | | Incurred related to Prior Years | $11,138,023 | $1,152,128 | | Total Paid | ($65,937,795) | ($49,820,060) | | **Net Balance, End of Period** | **$64,770,387** | **$40,525,859** | [Note 13 - Statutory Financial Information](index=122&type=section&id=Note_13_Statutory_Financial_Information) Statutory surplus decreased to $93.8 million, and the insurance subsidiary's dividend capacity is restricted - KICO's **statutory surplus as regards policyholders was $93.8 million** as of December 31, 2019, compared to $98.7 million as of December 31, 2018[538](index=538&type=chunk) - KICO paid **dividends of $7.0 million** to its parent, Kingstone Companies, Inc., in 2019, and $3.6 million in 2018[538](index=538&type=chunk) [Note 17 - Commitments and Contingencies](index=127&type=section&id=Note_17_Commitments_and_Contingencies) The company discloses a class action lawsuit, operating lease commitments, and key executive employment agreements - The company is a defendant in a **putative class action lawsuit** related to its disclosures on catastrophe losses and claim reserves; management believes the suit is without merit and has not established an accrual[560](index=560&type=chunk) - The company has future commitments under non-cancellable operating leases for office space, with **total undiscounted lease payments of $1,411,095** as of December 31, 2019[567](index=567&type=chunk) - Details of employment agreements are provided, including the Second Amended and Restated Employment Agreement for CEO Barry Goldstein, which includes significant salary, bonus, and equity compensation components[570](index=570&type=chunk)[571](index=571&type=chunk)[572](index=572&type=chunk)

Financial Performance - The Company's book value per share at December 31, 2019 was $8.17, a decrease of 1.0% compared to $8.25 at December 31, 2018[9] - Net income (loss) was $1.455 million for the three months ended December 31, 2019, compared to a loss of $879,847 for the three months ended December 31, 2018[20] - Net income (loss) was $(5.966) million for the year ended December 31, 2019, compared to a profit of $3.093 million for the year ended December 31, 2018[20] - Net premiums earned increased by 12.7% to $32.606 million for the three months ended December 31, 2019, from $28.939 million for the three months ended December 31, 2018[11] - Net premiums earned increased by 23.4% to $127.623 million for the year ended December 31, 2019, from $103.415 million for the year ended December 31, 2018[11] - Net loss and loss adjustment expenses increased by 12.3% to $18.595 million for the three months ended December 31, 2019, from $16.556 million for the three months ended December 31, 2018[14] - Net loss and loss adjustment expenses increased by 54.7% to $90.182 million for the year ended December 31, 2019, from $58.295 million for the year ended December 31, 2018[14] Premiums - Direct written premiums increased by 8.4% to $42.881 million for the three months ended December 31, 2019, from $39.541 million for the three months ended December 31, 2018[11] - Direct written premiums increased by 16.7% to $171.214 million for the year ended December 31, 2019, from $146.716 million for the year ended December 31, 2018[11] - Core direct written premiums increased by 5.8% to $145.567 million for the year ended December 31, 2019, from $137.636 million for the year ended December 31, 2018[12] - Expansion direct written premiums increased by 182.5% to $25.647 million for the year ended December 31, 2019, from $9.080 million for the year ended December 31, 2018[12] Ratios - The net combined ratio was 96.0% for the three months ended December 31, 2019, compared to 96.4% for the three months ended December 31, 2018[15] - The net combined ratio was 108.8% for the year ended December 31, 2019, compared to 94.8% for the year ended December 31, 2018[15]

Financial Data and Key Metrics Changes - The company reported a fourth quarter profit for 2019, indicating a positive end to the year [6] - There was a prior year loss development of $11 million through three quarters of 2019, primarily related to unfavorable results in commercial liability lines [15][16] - The net carried reserves were reported at $65 million, with internal and appointed actuary estimates being within $250,000 of each other, reflecting strong reserve management [16][17] Business Line Data and Key Metrics Changes - The company exited commercial liability lines, leading to a reduction in premiums as these books run off [8] - Liability claims have been settling well, with about 40% closed by dollar and volume [9] - Rate increases were initiated in the fourth quarter to address rising loss costs, with a 9% increase for New York homeowners effective for new business from November 1, 2019 [13][14] Market Data and Key Metrics Changes - The company is preparing for its largest reinsurance renewal program, with expectations of securing higher limits than many competitors due to its A.M. Best A- rating [14] - The overall personal lines loss ratio increased by about 3 points from 2018 to 2019, prompting significant rate increases to address this trend [36] Company Strategy and Development Direction - The company is focused on profitability and has initiated a modernization effort called Kingstone 2.0, which includes adding experienced leadership and investing in technology [20][21] - The company aims to improve competitiveness and service quality through new product development and enhanced claims handling procedures [21][22] - Short-term expense ratios are expected to increase due to investments in talent and technology, but these are anticipated to lead to long-term growth and improved returns for shareholders [23] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's future, emphasizing the importance of learning from past challenges and making informed decisions moving forward [6][7] - The company acknowledged the need for a rebuilding year in 2020, with a focus on reducing claims volatility and enhancing profitability [40] Other Important Information - The company is undergoing a transformation from legacy systems to modern technology for policy management and claims [21] - The dividend policy is under review, with management considering stock buybacks as a more effective use of capital compared to dividends [35] Q&A Session Summary Question: Impact of reinsurance business on financials for next year - Management discussed the surplus relief from quota share reinsurance, which helps maintain a comfortable risk ratio while accepting a smaller margin [25][26] Question: Financial impact of July reinsurance renewals - Management anticipates a small rate increase in the low-single digits for reinsurance renewals, driven by market conditions [29][30] Question: Dividend policy going forward - The dividend policy is under review, with management considering stock buybacks over dividends due to current market conditions [34][35] Question: Non-weather-related water damage - Management noted an increase in claims related to non-weather water damage, primarily from interior pipe breaks, and is implementing rate changes to address this trend [36] Question: Earnings volatility with changes being made - Management indicated that while growth may slow, the changes are aimed at reducing claims volatility and enhancing profitability over time [40]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark one) ☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2019 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________to _________ Commission File Number 0-1665 KINGSTONE COMPANIES, INC. (Exact name of registrant as specified in its charter) Delaware(State or oth ...

Financial Performance - The Company's book value per share at September 30, 2019 was $8.04, a decrease of 5.9% compared to $8.54 at September 30, 2018[8] - Net loss for the three months ended September 30, 2019 was $(1,725,162) compared to net income of $3,933,730 for the three months ended September 30, 2018[19] - Net loss for the nine months ended September 30, 2019 was $(7,420,972) compared to net income of $3,973,093 for the nine months ended September 30, 2018[19] - Net operating loss for the three months ended September 30, 2019 was $(2,513,000) compared to net operating income of $3,656,000 for the three months ended September 30, 2018[12] - Net operating loss for the nine months ended September 30, 2019 was $(10,353,000) compared to net operating income of $4,193,000 for the nine months ended September 30, 2018[12] Premiums - Direct written premiums for the three months ended September 30, 2019 increased by 18.7% to $46,023,000 from $38,785,000 in 2018[10] - Direct written premiums for the nine months ended September 30, 2019 increased by 19.7% to $128,333,000 from $107,175,000 in 2018[10] - Net premiums earned for the three months ended September 30, 2019 increased by 24.3% to $34,220,000 from $27,534,000 in 2018[10] - Net premiums earned for the nine months ended September 30, 2019 increased by 27.6% to $95,017,000 from $74,476,000 in 2018[10] - Expansion direct written premiums for the three months ended September 30, 2019 increased by 158.2% to $7,371,000 from $2,855,000 in 2018[11] - Expansion direct written premiums for the nine months ended September 30, 2019 increased by 185.5% to $16,900,000 from $5,919,000 in 2018[11]

Financial Data and Key Metrics Changes - The company reported a significant headline loss for Q3 2019, which has caused disappointment among stakeholders [6] - An adverse development of $5 million in prior year reserves was recorded, with $4.4 million attributed to commercial lines [19][20] - The company aims to return to profitability in 2020, focusing on improving metrics employed by A.M. Best [12][13] Business Line Data and Key Metrics Changes - The majority of adverse development recorded in 2019 (80%) came from commercial liability lines, which have been shut down [7][8] - Personal lines business remains stable, with fast-paying property claims that are less affected by volatility [23] Market Data and Key Metrics Changes - The company has increased homeowner's rates effective November 1st and applied for increases in other states [14] - The expected growth rate for personal lines is projected to be in the low-to-mid-teens moving forward [31] Company Strategy and Development Direction - The company is shifting its focus from growth to profitability, reducing growth mandates to improve financial health [13] - A new management team member, Meryl Golden, has joined to bring energy and expertise to the company [15] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the loss of trust among shareholders and is committed to restoring it over time [26] - The company is confident that reserve levels have stabilized and will allow for a focus on profitable personal lines business [23][60] Other Important Information - The company is reviewing reinsurance options for commercial liability reserves, including a full loss portfolio transfer [22] - The average claim size for commercial lines has turned out to be higher than originally anticipated, impacting reserve estimates [20][43] Q&A Session Summary Question: Differences between internal and external reserve estimates - The company is booking to the central estimate based on internal review, confirming alignment with external actuary estimates [29][30] Question: Impact of profitability focus on growth rates - The expected growth rate for personal lines is projected to be in the low-to-mid-teens due to the new profitability focus [31] Question: Likelihood of not purchasing reinsurance - The company is comfortable with current reserves but is still in the market for reinsurance options [36][37] Question: Details on open claims and policy limits - Most open claims have a $1 million policy limit, with average paid claims severity now at about $50,000 [42][43] Question: Impact of commercial lines on future profitability - The company is non-renewing all commercial lines policies, which will be completed by the end of Q3 next year [60]