Kingstone's Reinsurance Program: Why it is a Cornerstone of Growth

Core Insights - Kingstone Companies Inc. (KINS) has significantly increased its catastrophe reinsurance limit by 57%, from $160 million to $440 million for the 2025/2026 period, which is crucial for its business strategy in the storm-exposed Northeast [1][8] - The cost of this expanded protection has only risen by 10%, resulting in catastrophe cover costs being 12% of projected direct premiums, down from 13% in the previous treaty period, positively impacting the bottom line by 11 cents in the second half of 2025 [2][8] - Reinsurance is not merely a risk mitigation tool for KINS but a core driver of its growth strategy, allowing the company to yield about 25% of its personal lines' premiums and improve its combined ratio, which supports its credit profile and capital efficiency [3][4] Reinsurance Strategy - A well-structured reinsurance program, along with sound underwriting and diversification, is essential for KINS to maintain a profitable and resilient portfolio, stabilizing earnings and unlocking growth opportunities despite challenging pricing conditions in the Northeast [4] - KINS' ability to secure favorable reinsurance terms reflects disciplined risk management, positioning the company for improved return on equity performance in the future [4] Competitive Landscape - KINS competes closely with Heritage Insurance Group (HRTG) and Kinsale Capital Group (KNSL), both of which also emphasize strong reinsurance programs and sound underwriting practices to maintain profitability [5][6] - Heritage is well-positioned to pursue higher-margin excess and surplus niches due to reduced volatility and available capital [5] - Kinsale Capital enhances its underwriting capacity through a prudent reinsurance strategy, which supports its ability to deliver consistent returns [6] Financial Performance - KINS shares have gained 0.4% year to date, underperforming the industry average [7] - The company trades at a price-to-book value ratio of 2.59, above the industry average of 1.55, but holds a Value Score of A, indicating strong fundamentals [10] - The Zacks Consensus Estimate for KINS' earnings for 2025 and 2026 has remained stable, with expectations for year-over-year revenue and EPS increases, supported by a Growth Score of A [11][12]