Kingstone(US:KINS)2023-03-31 15:07Financial Data and Key Metrics Changes - Direct written premiums increased by 7.7% to $53.9 million, up $3.8 million from $50.1 million in the prior year period [1] - The net loss in LAE ratio was 81.3%, an increase of 19.5 points from the prior year, primarily driven by catastrophe losses [2] - The net underwriting expense ratio decreased by 6.9 points to 32.6%, attributed to various expense reduction initiatives [3] - The company reported a net loss of $3.95 million or $0.37 per diluted share for Q4 2022, compared to net income of $2.2 million or $0.21 per diluted share for the same period last year [25] Business Line Data and Key Metrics Changes - The attritional or non-cat loss ratio was 61.1%, the lowest of any quarter in 2022, indicating potential for underwriting profit if not for catastrophe losses [3] - The company has tightened underwriting and reduced maximum coverage, leading to non-renewals of policies outside new guidelines [6][7] Market Data and Key Metrics Changes - The company anticipates a continued rise in replacement costs due to ongoing inflation, expecting premiums to increase accordingly [27] - The company has seen a 25% increase in average premium since implementing a new practice to update the replacement cost of insured properties [34] Company Strategy and Development Direction - The strategic plan, referred to as Kingstone 3.0, focuses on reducing the non-New York book of business, adjusting pricing to stay ahead of loss trends, managing reinsurance requirements, and continuing expense reduction [35] - The company aims to return to profitability in 2023 and set the stage for double-digit returns on equity in the future [24] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the challenges posed by inflation and rising interest rates, which have impacted the valuation of the investment portfolio [14][32] - The company is optimistic about the future, with a solid foundation and clear plans to capitalize on strengths and deliver long-term value creation for shareholders [42] Other Important Information - The company has made significant efforts to reduce expenses, achieving a 4-point reduction in the net expense ratio for 2022 [40] - Management has adopted a more conservative approach to reserving, with reserves now $2 million above the central point estimates from an independent actuarial firm [65] Q&A Session All Questions and Answers Question: Can you provide more details on the reserve development in the quarter? - The company recorded a $2 million additional reserve related to commercial multi-parallel policies, a line of business exited in 2019, as a precautionary measure [45] Question: What is the impact of the debt refinancing on the model prospectively? - The company reduced its debt from $30 million to just under $20 million, but the interest rate increased to 12%, resulting in a significant increase in interest expense [47] Question: Any early read on the July renewals for this year? - There is an expectation of increased reinsurance costs, but there may be additional capacity in the Northeast for upcoming renewals [61]