Kingstone(US:KINS)2020-05-08 18:25Financial 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]