Kingstone(US:KINS)2021-11-12 16:54Financial Data and Key Metrics Changes - The company reported a net loss of $10.6 million, or $1.01 per diluted share, compared to a net loss of $1.2 million, or $0.12 per diluted share, for the same period last year [20] - Direct written premiums increased by 6.8% to $48.9 million, up from $42.6 million in the prior year period [20] - Net written premium increased by 39% this quarter due to the exit from quota share reinsurance [21] - Net earned premiums increased by 34% [21] - The net underwriting expense ratio increased by half a point to 39.3% [27] Business Line Data and Key Metrics Changes - The company experienced three catastrophe events that added 33.1 points to the net loss ratio [21] - Liability claims in the dwelling fire product remained elevated, while homeowner liability claims returned to a more normal loss pattern [10][25] - The average premium on new business policies increased by almost 16% compared to last year [15] Market Data and Key Metrics Changes - Quote activity increased by over 24% compared to the prior year [15] - New business policies bound by select producers were up 18% in the third quarter [15] Company Strategy and Development Direction - The company is focused on profitability and has exited unprofitable lines, raised rates, and tightened underwriting [12] - Kingstone 2.0 modernization effort aims to build a new advanced product and retire legacy systems, with completion expected by the end of 2022 [16][19] - Rate increases are pending or have been approved in most states, with a commitment to take rate annually to stay ahead of trends [13] Management's Comments on Operating Environment and Future Outlook - Management noted changes in loss patterns attributed to COVID-19, with expectations for a return to normal as people return to work [7][25] - The company anticipates needing to take more rate to accommodate changes in work-from-home patterns and inflation in loss costs [55] - Management expressed confidence in the steps taken to return to profitability despite a disappointing quarter [28][60] Other Important Information - The investment portfolio performed well, with interest and dividend income net of expenses up just over 12% [30] - The company repurchased 88,000 shares at an average price below the quarter-ending book value per share [32] Q&A Session Summary Question: Examples of COVID-driven losses - Management explained that liability claims in the dwelling fire book are primarily related to trips and falls, exacerbated by deferred maintenance due to difficulties in getting contractors [36][37] Question: Impact of inflationary trends - Management acknowledged experiencing overall inflation, with building material prices up 6.8% year-over-year, impacting loss costs and repair expenses [39][40] Question: Accident year non-cat loss ratio - Management indicated that high severity fires added roughly 8 to 9 points to the loss ratio, while dwelling fire liability frequency added around 4 points [46] Question: Rate increases and future guidance - Management confirmed that rate increases have been implemented in all states, generally in the high-single digits, and indicated that more rate is needed across the board [57][59]