Kingstone(US:KINS)2020-03-12 15:26Financial Data and Key Metrics Changes - The company reported a fourth quarter profit for 2019, indicating a positive end to the year [6] - There was a prior year loss development of $11 million through three quarters of 2019, primarily related to unfavorable results in commercial liability lines [15][16] - The net carried reserves were reported at $65 million, with internal and appointed actuary estimates being within $250,000 of each other, reflecting strong reserve management [16][17] Business Line Data and Key Metrics Changes - The company exited commercial liability lines, leading to a reduction in premiums as these books run off [8] - Liability claims have been settling well, with about 40% closed by dollar and volume [9] - Rate increases were initiated in the fourth quarter to address rising loss costs, with a 9% increase for New York homeowners effective for new business from November 1, 2019 [13][14] Market Data and Key Metrics Changes - The company is preparing for its largest reinsurance renewal program, with expectations of securing higher limits than many competitors due to its A.M. Best A- rating [14] - The overall personal lines loss ratio increased by about 3 points from 2018 to 2019, prompting significant rate increases to address this trend [36] Company Strategy and Development Direction - The company is focused on profitability and has initiated a modernization effort called Kingstone 2.0, which includes adding experienced leadership and investing in technology [20][21] - The company aims to improve competitiveness and service quality through new product development and enhanced claims handling procedures [21][22] - Short-term expense ratios are expected to increase due to investments in talent and technology, but these are anticipated to lead to long-term growth and improved returns for shareholders [23] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's future, emphasizing the importance of learning from past challenges and making informed decisions moving forward [6][7] - The company acknowledged the need for a rebuilding year in 2020, with a focus on reducing claims volatility and enhancing profitability [40] Other Important Information - The company is undergoing a transformation from legacy systems to modern technology for policy management and claims [21] - The dividend policy is under review, with management considering stock buybacks as a more effective use of capital compared to dividends [35] Q&A Session Summary Question: Impact of reinsurance business on financials for next year - Management discussed the surplus relief from quota share reinsurance, which helps maintain a comfortable risk ratio while accepting a smaller margin [25][26] Question: Financial impact of July reinsurance renewals - Management anticipates a small rate increase in the low-single digits for reinsurance renewals, driven by market conditions [29][30] Question: Dividend policy going forward - The dividend policy is under review, with management considering stock buybacks over dividends due to current market conditions [34][35] Question: Non-weather-related water damage - Management noted an increase in claims related to non-weather water damage, primarily from interior pipe breaks, and is implementing rate changes to address this trend [36] Question: Earnings volatility with changes being made - Management indicated that while growth may slow, the changes are aimed at reducing claims volatility and enhancing profitability over time [40]