Kingstone(KINS) - 2025 Q2 - Quarterly Report

PART I — FINANCIAL INFORMATION This section presents the unaudited condensed consolidated financial statements and management's discussion and analysis Item 1 — Financial Statements This section presents the unaudited condensed consolidated financial statements for Kingstone Companies, Inc. and its subsidiaries, including balance sheets, statements of income and comprehensive income, statements of stockholders' equity, and statements of cash flows, along with detailed notes explaining the accounting policies, significant financial activities, and estimates Condensed Consolidated Balance Sheets This section summarizes the company's financial position at specific dates, showing assets, liabilities, and equity Condensed Consolidated Balance Sheets (June 30, 2025 vs. December 31, 2024): | Category | June 30, 2025 | December 31, 2024 | Change | % Change | | :----------------------------------- | :------------ | :---------------- | :------- | :------- | | Total assets | $393,421,525 | $374,915,843 | $18,505,682 | 4.9% | | Total liabilities | $298,543,633 | $308,207,392 | $(9,663,759) | -3.1% | | Total stockholders' equity | $94,877,892 | $66,708,451 | $28,169,441 | 42.2% | - Total assets increased by 4.9% to $393.4 million, driven by an increase in total investments and cash and cash equivalents[15] - Total liabilities decreased by 3.1% to $298.5 million, primarily due to a significant reduction in debt and deferred ceding commission revenue[16] - Total stockholders' equity saw a substantial increase of 42.2% to $94.9 million, largely due to net income and capital in excess of par[17] Condensed Consolidated Statements of Income and Comprehensive Income This section details the company's financial performance over periods, including revenues, expenses, and net income Condensed Consolidated Statements of Income and Comprehensive Income (Six Months Ended June 30, 2025 vs. 2024): | Metric | 2025 (6 Months) | 2024 (6 Months) | Change | % Change | | :----------------------------------- | :-------------- | :-------------- | :------- | :------- | | Total revenues | $102,793,554 | $72,267,292 | $30,526,262 | 42.2% | | Total expenses | $83,908,510 | $64,742,410 | $19,166,100 | 29.6% | | Net income | $15,134,992 | $5,941,616 | $9,193,376 | 154.7% | | Basic EPS | $1.10 | $0.54 | $0.56 | 103.7% | | Diluted EPS | $1.07 | $0.50 | $0.57 | 114.0% | Condensed Consolidated Statements of Income and Comprehensive Income (Three Months Ended June 30, 2025 vs. 2024): | Metric | 2025 (3 Months) | 2024 (3 Months) | Change | % Change | | :----------------------------------- | :-------------- | :-------------- | :------- | :------- | | Total revenues | $52,294,779 | $36,502,115 | $15,792,664 | 43.3% | | Total expenses | $38,128,076 | $30,781,936 | $7,346,140 | 23.9% | | Net income | $11,252,332 | $4,514,937 | $6,737,395 | 149.2% | | Basic EPS | $0.81 | $0.41 | $0.40 | 97.6% | | Diluted EPS | $0.78 | $0.37 | $0.41 | 110.8% | - Net income for the six months ended June 30, 2025, increased by 154.7% to $15.1 million, driven by higher net premiums earned and a gain on the sale of real estate, alongside reduced interest expense[20] Condensed Consolidated Statements of Stockholders' Equity This section tracks changes in stockholders' equity, including net income, stock-based compensation, and stock issuance Condensed Consolidated Statements of Stockholders' Equity (Six Months Ended June 30, 2025): | Item | Amount | | :----------------------------------- | :------------- | | Balance, January 1, 2025 | $66,708,451 | | Stock-based compensation | $810,867 | | Vesting of restricted stock awards | $0 | | Shares deducted for withholding taxes | $(548,500) | | Exercise of stock options | $57,088 | | Shares deducted from stock options for withholding taxes | $(14,305) | | Issuance of common stock, net of offering costs | $9,484,382 | | Exercise of warrants | $0 | | Net income | $15,134,992 | | Decrease in unrealized losses on available-for-sale securities, net of tax | $3,244,917 | | Balance, June 30, 2025 | $94,877,892 | - Stockholders' equity significantly increased from $66.7 million at January 1, 2025, to $94.9 million at June 30, 2025, primarily due to net income of $15.1 million and net proceeds from common stock issuance of $9.5 million[28] - The company also saw a $3.2 million decrease in unrealized losses on available-for-sale securities, net of tax, contributing to the equity increase[28] Condensed Consolidated Statements of Cash Flows This section reports cash inflows and outflows from operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows (Six Months Ended June 30, 2025 vs. 2024): | Activity | 2025 | 2024 | Change | | :----------------------------------- | :----------- | :----------- | :----------- | | Net cash flows provided by operating activities | $27,131,737 | $13,214,888 | $13,916,849 | | Net cash flows used in investing activities | $(24,512,699) | $(9,612,199) | $(14,900,500) | | Net cash flows provided by (used in) financing activities | $2,425,953 | $(408,694) | $2,834,647 | | Increase in cash and cash equivalents | $5,044,991 | $3,193,995 | $1,850,996 | | Cash and cash equivalents, end of period | $33,714,432 | $12,170,993 | $21,543,439 | - Operating cash flows increased significantly by $13.9 million, primarily due to higher net income and favorable changes in operating assets and liabilities[33][332] - Investing activities used $14.9 million more cash, mainly due to increased purchases of available-for-sale fixed-maturity securities, partially offset by proceeds from real estate sales[33][333] - Financing activities shifted from a net use of cash to a net provision of cash, driven by net proceeds from common stock issuance through the ATM program, despite principal payments on debt[33][334] Notes to Condensed Consolidated Financial Statements (Unaudited) This section provides detailed explanations of accounting policies, significant financial activities, and estimates Note 1 - Nature of Business and Basis of Presentation This note describes the company's operations and the basis for financial statement preparation - Kingstone Companies, Inc. operates primarily through its wholly-owned subsidiary, Kingstone Insurance Company (KICO), a New York-domiciled carrier specializing in personal lines and commercial auto insurance[36] - KICO was the 12th largest writer of homeowners insurance in New York in 2024, with 97.9% and 98.1% of direct written premiums from New York policies for the three and six months ended June 30, 2025, respectively[36] - The unaudited condensed consolidated financial statements are prepared in accordance with U.S. GAAP, with management's opinion that they include all necessary normal recurring adjustments for fair presentation[37] Note 2 – Accounting Policies This note outlines significant accounting policies and estimates, including consolidation and new accounting pronouncements - The condensed consolidated financial statements include Kingstone and its wholly-owned subsidiaries, KICO (and its subsidiaries Properties and 15 Joys Lane) and Cosi, with all significant inter-company transactions eliminated[39] - Management's estimates, particularly for loss and loss adjustment expense (LAE) reserves and reinsurance recoverables, are subject to inherent uncertainties and are reevaluated regularly[40][41] - The company is evaluating the impact of new FASB ASUs 2023-09 (Improvements to Income Tax Disclosures) and 2024-03 (Disaggregation of Income Statement Expenses), effective for annual periods ending December 31, 2025, and after December 15, 2026, respectively[42][43] Note 3 - Investments This note details the company's investment portfolio, including fixed-maturity securities and investment income Fixed-Maturity Securities, Available-for-Sale (June 30, 2025 vs. December 31, 2024): | Category | Amortized Cost (2025) | Fair Value (2025) | Amortized Cost (2024) | Fair Value (2024) | | :----------------------------------- | :-------------------- | :---------------- | :-------------------- | :---------------- | | U.S. Treasury securities | $5,969,707 | $5,969,050 | $0 | $0 | | Political subdivisions | $24,262,830 | $21,417,548 | $24,271,177 | $20,873,097 | | Corporate and other bonds | $108,053,269 | $104,532,730 | $112,507,436 | $106,792,378 | | Residential mortgage & asset-backed | $90,700,775 | $85,760,022 | $65,529,545 | $59,227,963 | | Total | $228,986,581 | $217,679,350 | $202,308,158 | $186,893,438 | Net Investment Income (Six Months Ended June 30, 2025 vs. 2024): | Category | 2025 | 2024 | Change | % Change | | :----------------------------------- | :----------- | :----------- | :------- | :------- | | Fixed-maturity securities | $4,061,683 | $2,339,220 | $1,722,463 | 73.6% | | Equity securities | $246,638 | $322,638 | $(76,000) | -23.6% | | Cash and cash equivalents | $143,808 | $688,191 | $(544,383) | -79.1% | | Net investment income | $4,348,863 | $3,267,456 | $1,081,407 | 33.1% | - The company's total investments increased from $208.6 million at December 31, 2024, to $239.8 million at June 30, 2025, primarily driven by an increase in available-for-sale fixed-maturity securities[15] - Net investment income increased by 33.1% for the six months ended June 30, 2025, largely due to a significant rise in income from fixed-maturity securities[56] - Unrealized losses on available-for-sale fixed-maturity securities decreased from $15.4 million at December 31, 2024, to $11.3 million at June 30, 2025, with no identified credit losses[45][47][62] Note 4 - Fair Value Measurements This note explains the fair value hierarchy used for financial instruments Fair Value Measurements (June 30, 2025 vs. December 31, 2024): | Category | Level 1 (2025) | Level 2 (2025) | Total (2025) | Level 1 (2024) | Level 2 (2024) | Total (2024) | | :----------------------------------- | :------------- | :------------- | :----------- | :------------- | :------------- | :----------- | | Fixed-maturity securities available-for-sale | $110,501,780 | $107,177,570 | $217,679,350 | $106,792,378 | $80,101,060 | $186,893,438 | | Equity securities | $10,027,099 | $0 | $10,027,099 | $10,296,505 | $0 | $10,296,505 | | Total investments, at fair value | $120,528,879 | $107,177,570 | $227,706,449 | $117,088,883 | $80,101,060 | $197,189,943 | - As of June 30, 2025, 59% of the investment portfolio measured at fair value was priced using Level 1 inputs (quoted market prices), indicating high transparency[322] - The hedge fund investment, measured at NAV per share, increased from $4.38 million at December 31, 2024, to $5.08 million at June 30, 2025, and is generally redeemable with 45 days' notice[67] Note 5 - Fair Value of Financial Instruments and Real Estate This note presents fair values for specific financial instruments and real estate Fair Value of Financial Instruments and Real Estate (June 30, 2025 vs. December 31, 2024): | Category | Carrying Value (2025) | Fair Value (2025) | Carrying Value (2024) | Fair Value (2024) | | :----------------------------------- | :-------------------- | :---------------- | :-------------------- | :---------------- | | Fixed-maturity securities, held-to-maturity | $7,045,231 | $5,967,140 | $7,047,342 | $5,959,265 | | Real estate, net | $460,031 | $940,000 | $1,913,390 | $3,540,000 | | Debt - 13.75% Senior Notes due 2026 | $0 | $0 | $5,508,000 | $5,553,785 | - The carrying value of real estate significantly decreased from $1.9 million to $0.46 million, reflecting the sale of the office building and house in March 2025, leaving only vacant land[68] - The 13.75% Senior Notes due 2026 were fully satisfied by June 30, 2025, resulting in a carrying and fair value of $0[68] Note 6 – Property and Casualty Insurance Activity This note details insurance-related financial activities, including premiums, loss reserves, and reinsurance Premiums Earned This section reports direct, ceded, net written, and net earned premiums Premiums Earned (Six Months Ended June 30, 2025 vs. 2024): | Metric | 2025 | 2024 | Change | % Change | | :----------------------------------- | :----------- | :----------- | :------- | :------- | | Direct written premiums | $119,237,405 | $102,819,939 | $16,417,466 | 16.0% | | Ceded written premiums | $(6,017,324) | $(23,299,863) | $17,282,539 | -74.2% | | Net written premiums | $113,220,081 | $79,520,076 | $33,700,005 | 42.4% | | Net premiums earned | $89,738,323 | $59,123,514 | $30,614,809 | 51.8% | - Net premiums earned increased by 51.8% for the six months ended June 30, 2025, primarily due to a reduction in quota share rates and increased direct written premiums from market dynamics[69] Loss and Loss Adjustment Expense Reserves This section reconciles and explains the company's reserves for future claims Loss and Loss Adjustment Expense Reserves Reconciliation (Six Months Ended June 30, 2025 vs. 2024): | Metric | 2025 | 2024 | Change | | :----------------------------------- | :------------ | :------------ | :------- | | Balance at beginning of period | $126,210,428 | $121,817,862 | $4,392,566 | | Net balance at end of period | $101,119,364 | $87,563,241 | $13,556,123 | | Balance at end of period (Gross) | $133,927,454 | $116,577,490 | $17,349,964 | - Prior year incurred loss and LAE development was favorable, with $(812,256) for the six months ended June 30, 2025, and $(996,155) for the same period in 2024[72] - The reserving process relies on actuarial methodologies, judgments on claim severity and frequency, and 'tail' factors, with regular reviews and updates to estimates[73][74][75][76][77][78][79][80][81][82] Reinsurance This section describes the company's reinsurance treaties and their purpose - The company transitioned from a 27% quota share reinsurance treaty (2024/2025 Treaty) to a new 16% quota share treaty (2025/2026 Treaty) for personal lines, effective January 1, 2025[90] - Excess of loss and catastrophe reinsurance treaties were renewed effective July 1, 2025, providing 50% coverage for losses over $750,000 and 100% for losses over $1,000,000 up to $9,000,000[91] - The reinsurance program aims to manage underwriting risk, maintain regulatory capital, and generate ceding commissions, while the company retains its obligations to policyholders[95] Ceding Commission Revenue This section details revenue from reinsurance ceding commissions Ceding Commission Revenue (Six Months Ended June 30, 2025 vs. 2024): | Metric | 2025 | 2024 | Change | % Change | | :----------------------------------- | :----------- | :----------- | :------- | :------- | | Provisional ceding commissions earned | $6,639,909 | $9,117,238 | $(2,477,329) | -27.2% | | Contingent ceding commissions earned | $(599,662) | $11,834 | $(611,496) | na | | Total ceding commission revenue | $6,040,247 | $9,129,072 | $(3,088,825) | -33.8% | - Total ceding commission revenue decreased by 33.8% for the six months ended June 30, 2025, primarily due to lower provisional ceding commissions and negative contingent ceding commissions under the new 2025/2026 Treaty[97] - The 2025/2026 Treaty includes a sliding scale for contingent ceding commissions, where the commission rate increases as the estimated ultimate loss ratio decreases[96] Expected Credit Losses – Uncollectible Reinsurance This section discusses the assessment of credit risk for reinsurance recoverables - The company has not recorded an allowance for uncollectible reinsurance, as no perceived credit risk exists, based on the financial strength ratings of its reinsurers[99] Note 7 – Debt This note provides details on the company's debt obligations, including FHLB and senior notes Federal Home Loan Bank This section describes KICO's borrowing capacity and collateral with FHLBNY - KICO, a member of FHLBNY, can now borrow for terms up to five years (effective April 15, 2025), an improvement from previous overnight-only borrowing restrictions[100] - The maximum allowable advance for KICO as of June 30, 2025, was approximately $15.7 million, with available collateral of $9.84 million[100] Debt This section summarizes debt balances and changes, including senior notes and equipment financing Debt Balances (June 30, 2025 vs. December 31, 2024): | Debt Type | June 30, 2025 | December 31, 2024 | | :----------------------------------- | :------------ | :---------------- | | 13.75% Senior Notes due 2026, net | $0 | $5,508,000 | | Equipment financing | $5,060,708 | $5,663,420 | | Total debt | $5,060,708 | $11,171,420 | - The 13.75% Senior Notes due 2026 were fully satisfied by February 24, 2025, through optional principal prepayments, resulting in a $174,962 loss on extinguishment of debt[108] - Equipment financing debt decreased to $5.06 million at June 30, 2025, from $5.66 million at December 31, 2024, with future contractual payments extending to 2028[101][112] Note 8 – Stockholders' Equity This note details changes in stockholders' equity, including dividends, stock plans, and share issuances Dividends Declared and Paid This section reports on dividend policy - The company suspended regular quarterly dividends on November 11, 2022, with future policy subject to Board discretion[114] Preferred Stock This section states the status of preferred stock - No preferred stock was issued or outstanding as of June 30, 2025, or December 31, 2024[115] 2014 Equity Participation Plan This section describes the status of the terminated 2014 equity plan - The 2014 Equity Participation Plan, which authorized up to 1,900,000 shares, terminated on August 12, 2024, and no further awards can be granted under it[116] 2024 Equity Participation Plan This section details the new 2024 equity plan and awards granted - The 2024 Equity Participation Plan, approved effective August 7, 2024, authorizes a maximum of 1,000,000 shares for various stock awards and terminates on May 10, 2034[117] - As of June 30, 2025, 154,689 shares have been granted under the 2024 Plan[118] Stock Options This section summarizes stock option activity and compensation expense Stock Option Activity (Six Months Ended June 30, 2025): | Metric | Number of Shares | Weighted Average Exercise Price per Share | | :----------------------------------- | :--------------- | :------------------------------------ | | Outstanding at January 1, 2025 | 281,913 | $2.71 | | Exercised | (63,172) | $4.32 | | Expired/Forfeited | (13,749) | $2.25 | | Outstanding at June 30, 2025 | 204,992 | $2.25 | - Stock-based compensation expense for stock options was approximately $44,000 for the six months ended June 30, 2025, compared to $53,000 in 2024[119] - The company received $57,088 from the exercise of 25,422 options during the six months ended June 30, 2025, with remaining exercises being Net Exercises and Share Exchanges[124] Restricted Stock Awards This section details restricted stock activity and compensation expense Restricted Stock Activity (Six Months Ended June 30, 2025): | Metric | Shares | Weighted Average Grant Date Fair Value per Share | | :----------------------------------- | :----- | :--------------------------------------------- | | Balance at January 1, 2025 | 267,586 | $5.24 | | Granted | 95,934 | $15.47 | | Vested | (216,226) | $3.80 | | Forfeited | (10,703) | $9.09 | | Balance at June 30, 2025 | 136,591 | $14.40 | - Stock-based compensation for restricted stock awards was approximately $751,000 for the six months ended June 30, 2025, an increase from $441,000 in 2024[126] Employee Stock Purchase Plan This section describes the ESPP and related compensation - The Employee Stock Purchase Plan (ESPP) was re-initiated with an offering period from January 1, 2025, through December 31, 2025, after no offering from November 2022 through December 2024[128] - Stock-based compensation under the ESPP was approximately $16,000 for the six months ended June 30, 2025, compared to $0 in 2024[128] Warrants This section reports on warrant activity and expiration date extension - The expiration date of warrants to purchase 969,525 shares of Common Stock was extended to June 30, 2026, from December 30, 2025, as part of the 2024 Exchange Agreement[129] - During the six months ended June 30, 2025, holders exercised 394,525 warrants via Net Exercises, resulting in the issuance of 371,634 shares of Common Stock[132] Shelf Registration This section mentions the effective shelf registration statement - The company filed an effective shelf registration statement on Form S-3 on April 22, 2024, for $50,000,000 of equity and debt securities[134] At-the-Market Offering This section details shares sold and proceeds from the ATM program - Under its ATM program, the company sold 612,999 shares of Common Stock for $9,484,382 in net proceeds during the six months ended June 30, 2025[135] - As of June 30, 2025, the company had remaining capacity to sell up to an additional $15,945,937 of Common Stock under the ATM program[135] Note 9 – Income Taxes This note presents information on deferred income tax assets and liabilities Net Deferred Income Tax Asset (June 30, 2025 vs. December 31, 2024): | Category | June 30, 2025 | December 31, 2024 | | :----------------------------------- | :------------ | :---------------- | | Total deferred tax assets | $11,042,514 | $11,864,277 | | Total deferred tax liabilities | $5,934,870 | $6,266,357 | | Net deferred income tax asset | $5,107,644 | $5,597,920 | - The company maintains a full valuation allowance against state net operating loss (NOL) carryovers due to uncertainty regarding future state taxable income, despite federal NOLs being fully utilized[139] - No material unrecognized tax benefits, interest, or penalties related to income taxes were accrued or recognized for the six months ended June 30, 2025 and 2024[142] Note 10 – Earnings Per Common Share This note provides details on basic and diluted EPS calculations Weighted Average Common Shares Outstanding (Six Months Ended June 30, 2025 vs. 2024): | Metric | 2025 | 2024 | | :----------------------------------- | :----------- | :----------- | | Basic | 13,700,308 | 11,009,442 | | Diluted | 14,148,748 | 11,987,976 | - Diluted EPS computation includes the dilutive effect of stock options, warrants, and non-vested restricted stock awards, excluding those with exercise prices above the average market price or anti-dilutive effects[144][145] Note 11 - Commitments and Contingencies This note discloses information on legal proceedings, lease obligations, and employment agreements Litigation This section discusses ongoing legal proceedings - The company is involved in various legal proceedings in the ordinary course of business, with potential liabilities considered in loss and LAE expense estimates[147] Office Lease This section details the new operating lease for office facilities - KICO entered a new operating lease for an office facility in Kingston, NY, effective March 1, 2025, expiring March 31, 2030, with a renewal option and early termination clause[149] - Operating lease right-of-use assets and liabilities were $173,098 as of June 30, 2025, compared to $0 at December 31, 2024[151] Employment Agreements This section summarizes key employment agreement terms - Meryl Golden's employment agreement was amended, effective January 1, 2025, extending her term to December 31, 2026, and increasing her annual base salary to $550,000[155][156] - Ms. Golden is entitled to an annual bonus of 3% of consolidated income from operations before taxes (excluding certain investment items) up to 1.25 times her base salary, and restricted stock grants in 2025 and 2026[156] Note 12 – Employee Benefit Plans This note describes bonus plans and 401(k) plan expenses Bonus Plans This section details accruals for employee and executive bonus plans - The company accrued $980,391 for the employee bonus plan (Cash Payments) for the six months ended June 30, 2025, an increase from $584,140 in 2024[158] - An additional $48,006 stock-based compensation liability was accrued for the Senior Leadership Team (SLT) RSA bonus for the six months ended June 30, 2025, as performance metrics were met[158] - Executive bonus accruals for the six months ended June 30, 2025, were approximately $371,000, up from $116,000 in 2024[159] 401(k) Plan This section reports expenses related to the 401(k) plan - The company incurred $185,000 in expenses for its 401(k) Plan for the six months ended June 30, 2025, an increase from $138,000 in 2024[161] Note 13 - Segment Information This note provides financial information by operating segment - The company operates as a single reportable segment, property and casualty insurance, with performance evaluated based on underwriting results (net combined ratio) and investment income[163] Key Ratios (Six Months Ended June 30, 2025 vs. 2024): | Metric | 2025 | 2024 | Point Change | | :----------------------------------- | :--- | :--- | :----------- | | Net loss ratio | 50.3% | 54.3% | (4.0) | | Net underwriting expense ratio | 32.0% | 31.3% | 0.7 | | Net combined ratio | 82.3% | 85.6% | (3.3) | | Return on equity on net investment income (annualized) | 10.8% | 17.4% | (6.6) | | Operating segment net income | $15,892,159 | $8,542,247 | $7,349,912 | - Operating segment net income increased by $7.3 million for the six months ended June 30, 2025, reflecting improved underwriting results[168] Note 14 - Sale of Real Estate This note details the sale of the company's headquarters building - On March 19, 2025, a subsidiary sold the company's headquarters building and an adjacent property in Kingston, NY, for $3,600,000, resulting in a gain on sale of real estate[171] Note 15 – Subsequent Events This note discloses significant events occurring after the reporting period Reinsurance This section details new reinsurance treaties and catastrophe bond - Effective July 1, 2025, KICO entered new excess of loss and catastrophe reinsurance treaties, including a $125 million catastrophe bond (Series 2025-1 Notes) providing multi-year protection against named storm events[173] Income Taxes This section discusses the impact of new tax legislation - The recently enacted One Big Beautiful Bill Act, which includes significant federal tax law changes, is being evaluated but is not expected to have a material impact on the company's results[174] Dividend Declared This section reports on a recently declared cash dividend - On July 22, 2025, the Board of Directors approved a quarterly cash dividend of $0.05 per share, payable on August 26, 2025[175] Employment Agreement - New Chief Financial Officer This section details the appointment and compensation of the new CFO - Randy Patten was appointed Chief Financial Officer, Vice President, and Treasurer, effective August 25, 2025, with an annual base salary of $400,000 and participation in bonus plans[176][177] - Mr. Patten will receive a $200,000 sign-on bonus and a restricted stock grant valued at $600,000, vesting over three years[178][179] Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. This section provides management's perspective on the company's financial condition and results of operations, highlighting strategic initiatives, market dynamics, and detailed financial performance for the three and six months ended June 30, 2025, compared to the prior year Company Overview and Business Model This section describes the company's core business, revenue sources, and expense structure - Kingstone Companies, Inc. operates through its wholly-owned subsidiary, KICO, a New York-domiciled carrier writing personal lines and commercial auto insurance, with 97.9% of direct written premiums from New York policies for the three months ended June 30, 2025[181] - The company's revenue is primarily derived from earned premiums, ceding commissions from reinsurance, net investment income, and net realized gains/losses on investments[183] - Expenses include policyholder losses and loss adjustment expenses (LAE), policy acquisition costs (commissions, premium taxes), and corporate operating expenses[184][185] Product Lines This section details the company's insurance product offerings - Personal lines, including homeowners, dwelling fire, cooperative/condominium, renters, and personal umbrella policies, constitute the largest line of business[186] - Commercial liability business has been in run-off since July 2019 due to poor performance, with no in-force policies as of June 30, 2025[188] - Other product lines include livery physical damage policies for for-hire vehicles and canine legal liability policies[189] Key GAAP and Non-GAAP Measures This section defines the financial metrics used for performance evaluation - Key GAAP measures include net premiums earned, net loss ratio, and net underwriting expense ratio[190][192][196] - Non-GAAP measures used for performance evaluation include direct written premiums, net written premiums, Core and Non-Core direct written premiums, underlying loss ratio, net loss ratio excluding catastrophes, net loss ratio excluding commercial lines, net underwriting expense ratio excluding catastrophes, net combined ratio, net combined ratio excluding catastrophes, underwriting income, and net income from insurance underwriting business on a standalone basis[190][191][193][194][195][198][199][200][201][202] Critical Accounting Estimates This section explains key estimates and judgments in financial reporting - Critical accounting estimates include loss and loss adjustment expense (LAE) reserves, reinsurance receivables, and deferred income taxes, which involve significant judgment and assumptions about future uncertainties[206][209][210] Loss and Loss Adjustment Expense Reserves (June 30, 2025 vs. December 31, 2024, in thousands): | Category | Gross (2025) | Ceded (2025) | Net (2025) | Gross (2024) | Ceded (2024) | Net (2024) | | :----------------------------------- | :----------- | :----------- | :--------- | :----------- | :----------- | :--------- | | Case loss | $63,541 | $17,746 | $45,795 | $64,087 | $17,721 | $46,366 | | Case LAE | $6,907 | $1,604 | $5,303 | $6,563 | $1,426 | $5,137 | | IBNR loss | $45,436 | $10,993 | $34,443 | $38,681 | $10,661 | $28,020 | | IBNR LAE | $18,043 | $2,465 | $15,578 | $16,879 | $2,514 | $14,365 | | Total | $133,927 | $32,808 | $101,119 | $126,210 | $32,322 | $93,888 | Strategic Initiatives and Market Dynamics This section discusses strategic plans and market influences - Kingstone 2.0, completed in late 2022, focused on strengthening management, reducing expenses through technology, developing a segmented product suite (Kingstone Select), and managing catastrophe exposure[213][214] - Kingstone 3.0 initiatives include aggressively reducing non-Core business (non-Core policy count down 67.6% YoY), adjusting pricing to counter inflation (Core personal lines renewal premiums up 17.6% YoY), tightly managing reinsurance costs, and continuing expense reduction to achieve a 33% net expense ratio[214][215] - Market dynamics include a significant increase in policies in force and direct written premiums due to competitors winding down New York personal lines operations, and a new agreement to offer replacement policies to homeowners in Downstate New York, encompassing approximately $70 million in written premium[216][217] - The 5-Year Growth Plan targets $500 million in direct written premium through organic growth in New York and measured geographic expansion into new states starting in 2026[218][219] Consolidated Results of Operations (Six Months Ended June 30, 2025 Compared to Six Months Ended June 30, 2024) This section analyzes financial performance for the six-month period Key Financial Metrics (Six Months Ended June 30, 2025 vs. 2024): | Metric | 2025 | 2024 | Change | % Change | | :----------------------------------- | :----------- | :----------- | :------- | :------- | | Direct written premiums | $119,237 | $102,820 | $16,417 | 16.0% | | Net premiums earned | $89,738 | $59,124 | $30,614 | 51.8% | | Ceding commission revenue | $6,040 | $9,129 | $(3,089) | -33.8% | | Net investment income | $4,349 | $3,267 | $1,082 | 33.1% | | Net gains on investments | $408 | $493 | $(85) | -17.2% | | Gain on sale of real estate | $1,966 | $0 | $1,966 | na | | Net loss and loss adjustment expenses | $45,102 | $32,098 | $13,004 | 40.5% | | Commission expense | $19,943 | $16,084 | $3,859 | 24.0% | | Other underwriting expenses | $15,133 | $11,781 | $3,352 | 28.5% | | Other operating expenses | $2,189 | $1,579 | $610 | 38.6% | | Interest expense | $305 | $1,984 | $(1,679) | -84.6% | | Income tax expense | $3,750 | $1,583 | $2,167 | 136.9% | | Net income | $15,135 | $5,942 | $9,193 | 154.7% | Key Ratios (Six Months Ended June 30, 2025 vs. 2024): | Metric | 2025 | 2024 | Point Change | | :----------------------------------- | :--- | :--- | :----------- | | Net loss ratio | 50.3% | 54.3% | (4.0) | | Net underwriting expense ratio | 32.0% | 31.3% | 0.7 | | Net combined ratio | 82.3% | 85.6% | (3.3) | - Net income increased by 154.7% to $15.1 million, driven by a 51.8% increase in net premiums earned and a significant reduction in interest expense[264] - The net combined ratio improved by 3.3 percentage points to 82.3%, primarily due to a 4.0 percentage point decrease in the net loss ratio[224] - Direct written premiums increased by 16.0% to $119.2 million, with Core business premiums up 19.5% and non-Core business premiums down 54.1%, aligning with strategic plans[225][228] Consolidated Results of Operations (Three Months Ended June 30, 2025 Compared to Three Months Ended June 30, 2024) This section analyzes financial performance for the three-month period Key Financial Metrics (Three Months Ended June 30, 2025 vs. 2024): | Metric | 2025 | 2024 | Change | % Change | | :----------------------------------- | :----------- | :----------- | :------- | :------- | | Direct written premiums | $61,062 | $53,495 | $7,567 | 14.1% | | Net premiums earned | $46,215 | $30,304 | $15,911 | 52.5% | | Ceding commission revenue | $3,081 | $4,562 | $(1,481) | -32.5% | | Net investment income | $2,300 | $1,765 | $535 | 30.3% | | Net gains (losses) on investments | $546 | $(234) | $780 | na | | Net loss and loss adjustment expenses | $17,927 | $14,238 | $3,689 | 25.9% | | Commission expense | $10,630 | $8,232 | $2,398 | 29.1% | | Other underwriting expenses | $7,727 | $5,901 | $1,826 | 30.9% | | Other operating expenses | $1,153 | $801 | $352 | 43.9% | | Interest expense | $77 | $990 | $(913) | -92.2% | | Income tax expense (benefit) | $2,914 | $1,205 | $1,709 | 141.8% | | Net income (loss) | $11,252 | $4,515 | $6,737 | 149.2% | Key Ratios (Three Months Ended June 30, 2025 vs. 2024): | Metric | 2025 | 2024 | Point Change | | :----------------------------------- | :--- | :--- | :----------- | | Net loss ratio | 38.8% | 47.0% | (8.2) | | Net underwriting expense ratio | 32.7% | 31.2% | 1.5 | | Net combined ratio | 71.5% | 78.2% | (6.7) | - Net income increased by 149.2% to $11.3 million, driven by a 52.5% increase in net premiums earned and a significant reduction in interest expense[304] - The net combined ratio improved by 6.7 percentage points to 71.5%, primarily due to an 8.2 percentage point decrease in the net loss ratio[267] - Direct written premiums increased by 14.1% to $61.1 million, with Core business premiums up 16.6% and non-Core business premiums down 42.5%[268][271] Additional Financial Information This section provides supplementary financial data and reconciliations Net Loss Ratios by Product Type (Six Months Ended June 30, 2025 vs. 2024): | Product Line | 2025 | 2024 | | :----------------------------------- | :--- | :--- | | Personal lines | 47.9% | 49.7% | | Livery physical damage | 38.6% | 43.2% | | Other | -66.1% | -77.9% | | Total without commercial lines in run-off | 50.3% | 53.0% | | Total | 50.3% | 54.3% | Net Income from Insurance Underwriting Business on a Standalone Basis (Six Months Ended June 30, 2025 vs. 2024): | Metric | 2025 | 2024 | | :----------------------------------- | :----------- | :----------- | | Net income from insurance underwriting business on a standalone basis | $16,785,353 | $8,528,272 | | GAAP net income | $15,134,992 | $5,941,616 | - The net loss ratio for personal lines improved from 49.7% in 2024 to 47.9% in 2025 for the six-month period, contributing to the overall improvement[306] - Net income from insurance underwriting business on a standalone basis increased significantly to $16.8 million for the six months ended June 30, 2025, compared to $8.5 million in 2024[308] Investments This section details the investment portfolio composition, yield, and credit quality Fixed-Maturity Securities Available-for-Sale (June 30, 2025 vs. December 31, 2024): | Category | Fair Value (2025) | % of Total (2025) | Fair Value (2024) | % of Total (2024) | | :----------------------------------- | :---------------- | :------------------ | :---------------- | :------------------ | | U.S. Treasury securities | $5,969,050 | 2.7% | $0 | 0.0% | | Political subdivisions | $21,417,548 | 9.8% | $20,873,097 | 11.2% | | Corporate and other bonds | $104,532,730 | 48.0% | $106,792,378 | 57.1% | | Residential mortgage & asset-backed | $85,760,022 | 39.4% | $59,227,963 | 31.7% | | Total | $217,679,350 | 100.0% | $186,893,438 | 100.0% | Credit Quality of Available-for-Sale Fixed-Maturity Securities (June 30, 2025 vs. December 31, 2024): | Rating | Fair Value (2025) | % of Total (2025) | Fair Value (2024) | % of Total (2024) | | :----------------------------------- | :---------------- | :------------------ | :---------------- | :------------------ | | U.S. Treasury securities | $5,969,050 | 2.7% | $0 | 0.0% | | Corporate and municipal bonds (AAA-BBB-) | $123,147,906 | 56.5% | $125,311,825 | 66.9% | | Residential mortgage backed, asset backed, and other collateralized obligations (AAA-A) | $88,562,394 | 40.8% | $61,581,613 | 32.9% | | Total | $217,679,350 | 100.0% | $186,893,438 | 100.0% | - The average yield on fixed-maturity securities increased from 3.68% at December 31, 2024, to 3.93% at June 30, 2025[321] - The weighted average effective maturity of fixed-maturity securities increased from 7.6 years to 10.3 years, and effective duration increased from 3.9 years to 4.3 years[321] Liquidity and Capital Resources This section discusses cash flow, funding sources, and capital management Cash Flows (Six Months Ended June 30, 2025 vs. 2024): | Activity | 2025 | 2024 | | :----------------------------------- | :----------- | :----------- | | Operating activities | $27,131,737 | $13,214,888 | | Investing activities | $(24,512,699) | $(9,612,199) | | Financing activities | $2,425,953 | $(408,694) | | Net increase in cash and cash equivalents | $5,044,991 | $3,193,995 | - KICO's primary cash sources are direct premiums, ceding commissions, loss recovery payments, investment income, and proceeds from investment sales/maturities[326] - The holding company's cash flow primarily comes from dividends from KICO, which are subject to statutory restrictions and an agreement with the NYS Department of Financial Services[327] - The company utilized its ATM program, selling 612,999 shares for $9.48 million in net proceeds during the six months ended June 30, 2025, and fully satisfied its 2024 Notes obligation[330][331] - The company has no off-balance sheet arrangements that are material to its financial condition or results of operations[345] Non-GAAP Financial Measures This section reconciles non-GAAP measures to their most directly comparable GAAP measures Reconciliation of Written Premiums to Net Premiums Earned (Six Months Ended June 30, 2025 vs. 2024): | Metric | 2025 | 2024 | | :----------------------------------- | :----------- | :----------- | | Core written premiums | $116,976,970 | $97,892,699 | | Non-Core written premiums | $2,260,435 | $4,927,240 | | Total direct written premiums | $119,237,405 | $102,819,939 | | Ceded written premiums | $(6,017,324) | $(23,299,863) | | Net written premiums | $113,220,081 | $79,520,076 | | Change in unearned premiums | $(23,481,758) | $(20,396,562) | | Net premiums earned | $89,738,323 | $59,123,514 | Reconciliation of Loss Ratios (Six Months Ended June 30, 2025 vs. 2024): | Metric | 2025 | 2024 | | :----------------------------------- | :--- | :--- | | Underlying Loss Ratio | 50.0% | 52.8% | | Effect of prior year reserve development | (0.9%) | (1.7%) | | Net loss ratio excluding the effect of catastrophes | 49.1% | 51.1% | | Effect of catastrophes | 1.2% | 3.2% | | GAAP net loss ratio | 50.3% | 54.3% | Reconciliation of Net Income (Six Months Ended June 30, 2025 vs. 2024): | Metric | 2025 | 2024 | | :----------------------------------- | :----------- | :----------- | | Net income from insurance underwriting business on a standalone basis | $16,785,353 | $8,528,272 | | Holding company operations | $(1,650,361) | $(2,586,656) | | GAAP net income | $15,134,992 | $5,941,616 | Item 3. Quantitative and Qualitative Disclosures About Market Risk. This item is not applicable to smaller reporting companies, and therefore, no disclosures are provided regarding quantitative and qualitative market risk - The company, as a smaller reporting company, is exempt from providing quantitative and qualitative disclosures about market risk[353] Item 4. Controls and Procedures. This section details the effectiveness of the company's disclosure controls and procedures and internal control over financial reporting, including an an evaluation by management and a discussion of changes and inherent limitations Evaluation of Disclosure Controls and Procedures This section presents management's conclusion on the effectiveness of disclosure controls and procedures - Management, including the CEO and Principal Financial Officer, concluded that the company's disclosure controls and procedures were effective as of June 30, 2025, ensuring timely and accurate reporting[355][356][357] Changes in Internal Control over Financial Reporting This section reports on changes to internal controls over financial reporting - The company previously identified a disclosure control deficiency related to incorrect book value per share calculations as of September 30, 2024, which has since been remediated by implementing a new financial reporting system[358][359] - No other material changes in internal control over financial reporting occurred during the most recently completed fiscal quarter[359] Inherent Limitation on Effectiveness of Controls This section acknowledges the inherent limitations of internal controls - Internal control over financial reporting, by its inherent limitations, may not prevent or detect all misstatements, and its effectiveness can deteriorate due to changing conditions or compliance issues[360][361] PART II — OTHER INFORMATION This section contains other required disclosures Item 1. Legal Proceedings. The company reported no legal proceedings for the period - The company is not currently involved in any material legal proceedings[364] Item 1A. Risk Factors. This section refers to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2024, and confirms no material changes to those risks - There have been no material changes to the risk factors disclosed in Part I, Item 1A of the company's Annual Report on Form 10-K for the year ended December 31, 2024[365] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. This section details the unregistered sales of equity securities during the three months ended June 30, 2025, primarily through cashless exercises of warrants, and confirms no proceeds were received from these issuances Unregistered Sales of Equity Securities (Three Months Ended June 30, 2025): | Date Issued | Common Stock Shares | Consideration | | :----------------------------------- | :------------------ | :------------ | | May 9, 2025 | 245,393 | $259,525 | | June 13, 2025 | 126,241 | $135,000 | | Total | 371,634 | $394,525 | - The company issued 371,634 shares of Common Stock through cashless exercises of warrants during the three months ended June 30, 2025, with no cash proceeds received[367] Item 3. Defaults Upon Senior Securities. The company reported no defaults upon senior securities for the period - There were no defaults upon senior securities during the period[368] Item 4. Mine Safety Disclosures. This item is not applicable to the company - Mine safety disclosures are not applicable to the company's operations[369] Item 5. Other Information. The company reported no other information for the period - No other information was reported under this item[370] Item 6. Exhibits. This section lists the exhibits filed as part of the Quarterly Report on Form 10-Q, including XBRL documents, organizational documents, and certifications - Exhibits include XBRL Instance Document, Taxonomy Extension Schema, Calculation Linkbase, Definition Linkbase, Label Linkbase, and Presentation Linkbase[373][374] - Certifications from the Principal Executive Officer and Principal Financial Officer, as required by the Sarbanes-Oxley Act of 2002, are also included[374] Signatures The report is duly signed on behalf of Kingstone Companies, Inc. by its Chief Executive Officer, Meryl Golden, and Chief Accounting Officer, Victor Brodsky - The report was signed by Meryl Golden, Chief Executive Officer, and Victor Brodsky, Chief Accounting Officer, on August 14, 2025[378]