10q10k10q10k.net

What changed in KINGSTONE COMPANIES, INC.'s 10-K — 2022 vs 2023

vs

Paragraph-level year-over-year comparison of KINGSTONE COMPANIES, INC.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+367 added−305 removedSource: 10-K (2024-04-01) vs 10-K (2023-03-31)

Top changes in KINGSTONE COMPANIES, INC.'s 2023 10-K

367 paragraphs added · 305 removed · 243 edited across 3 sections

Item 1. Business

Business — how the company describes what it does

137 edited+57 added−27 removed125 unchanged
Biggest change(in thousands of $) 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Reserve for loss and loss adjustment expenses, net of reinsurance recoverables 12,065 17,139 21,663 23,170 25,960 32,051 40,526 64,770 62,647 84,311 90,680 Net reserve estimated as of One year later 13,886 18,903 21,200 23,107 25,899 33,203 51,664 64,811 62,632 87,011 Two years later 16,875 18,332 21,501 24,413 26,970 42,723 55,145 65,113 65,339 Three years later 16,624 18,687 22,576 25,509 33,298 43,780 56,346 67,291 Four years later 16,767 19,386 23,243 28,638 33,342 43,973 58,048 Five years later 16,985 19,449 25,442 28,506 33,120 43,774 Six years later 16,959 20,265 25,353 28,849 32,936 Seven years later 17,198 20,069 25,445 28,734 Eight years later 17,089 20,129 25,324 Nine years later 17,101 19,963 Ten years later 16,974 Net cumulative redundancy (deficiency) (4,909 ) (2,824 ) (3,661 ) (5,564 ) (6,976 ) (11,723 ) (17,522 ) (2,521 ) (2,692 ) (2,700 ) (in thousands of $) 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Cumulative amount of reserve paid, net of reinsurance recoverable through One year later 4,804 6,156 8,500 8,503 9,900 15,795 23,075 27,454 20,137 32,419 Two years later 8,833 10,629 12,853 14,456 17,187 26,168 35,924 35,142 30,262 Three years later 11,873 13,571 16,564 19,533 23,484 32,704 40,264 42,365 Four years later 13,785 16,166 19,838 22,816 27,203 35,510 45,085 Five years later 15,479 17,262 21,976 25,210 28,833 37,846 Six years later 15,882 18,265 23,280 26,298 30,141 Seven years later 16,152 18,954 24,146 26,945 Eight years later 16,516 19,511 24,633 Nine years later 16,667 19,635 Ten years later 16,709 Net reserve - December 31, 12,065 17,139 21,663 23,170 25,960 32,051 40,526 64,770 62,647 84,311 90,680 * Reinsurance Recoverable 18,420 17,364 18,250 16,707 15,777 16,749 15,671 15,728 20,154 10,638 27,660 * Gross reserves - December 31, 30,485 34,503 39,913 39,877 41,737 48,800 56,197 80,499 82,801 94,949 118,340 Net re-estimated reserve 16,974 19,963 25,324 28,734 32,936 43,774 58,048 67,291 65,339 87,011 Re-estimated reinsurance recoverable 28,161 22,215 23,368 21,374 20,694 20,853 19,024 15,447 19,443 10,942 Gross re-estimated reserve 45,135 42,178 48,692 50,108 53,630 64,627 77,072 82,738 84,782 97,953 Gross cumulative redundancy (deficiency) (14,650 ) (7,675 ) (8,779 ) (10,231 ) (11,893 ) (15,827 ) (20,875 ) (2,239 ) (1,981 ) (3,004 ) (Components may not sum to totals due to rounding) 12 Table of Contents Reinsurance We purchase reinsurance to reduce our net liability on individual risks, to protect against possible catastrophes, to remain within a target ratio of net premiums written to policyholders’ surplus, and to expand our underwriting capacity.
Biggest changeA deficiency means that the current estimate is higher than the original estimate. 12 Table of Contents (in thousands of $) 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Reserve for loss and loss adjustment expenses, net of reinsurance recoverables 17,139 21,663 23,170 25,960 32,051 40,526 64,770 62,647 84,311 90,680 88,529 Net reserve estimated as of One year later 18,903 21,200 23,107 25,899 33,203 51,664 64,811 62,632 87,011 90,673 Two years later 18,332 21,501 24,413 26,970 42,723 55,145 65,113 65,339 88,418 Three years later 18,687 22,576 25,509 33,298 43,780 56,346 67,291 67,135 Four years later 19,386 23,243 28,638 33,342 43,973 58,048 68,612 Five years later 19,449 25,442 28,506 33,120 43,774 57,957 Six years later 20,265 25,353 28,849 32,936 43,777 Seven years later 20,069 25,445 28,734 32,617 Eight years later 20,129 25,324 28,499 Nine years later 19,963 25,200 Ten years later 19,853 Net cumulative redundancy (deficiency) (2,714 ) (3,537 ) (5,329 ) (6,657 ) (11,726 ) (17,431 ) (3,842 ) (4,488 ) (4,107 ) 7 (in thousands of $) 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Cumulative amount of reserve paid, net of reinsurance recoverable through One year later 6,156 8,500 8,503 9,900 15,795 23,075 27,454 20,137 32,419 35,854 Two years later 10,629 12,853 14,456 17,187 26,168 35,924 35,142 30,262 47,547 Three years later 13,571 16,564 19,533 23,484 32,704 40,264 42,365 40,702 Four years later 16,166 19,838 22,816 27,203 35,510 45,085 49,581 Five years later 17,262 21,976 25,210 28,833 37,846 48,650 Six years later 18,265 23,280 26,298 30,141 39,596 Seven years later 18,954 24,146 26,945 30,693 Eight years later 19,511 24,633 27,013 Nine years later 19,635 24,654 Ten years later 19,640 Net reserve - December 31, 17,139 21,663 23,170 25,960 32,051 40,526 64,770 62,647 84,311 90,680 88,529 * Reinsurance Recoverable 17,364 18,250 16,707 15,777 16,749 15,671 15,728 20,154 10,638 27,660 33,289 * Gross reserves - December 31, 34,503 39,913 39,877 41,737 48,800 56,197 80,499 82,801 94,949 118,340 121,818 Net re-estimated reserve 19,853 25,200 28,499 32,617 43,777 57,957 68,612 67,135 88,418 90,673 Re-estimated reinsurance recoverable 22,135 23,289 21,143 20,390 20,504 18,535 14,944 19,105 10,524 27,209 Gross re-estimated reserve 41,988 48,489 49,642 53,007 64,281 76,492 83,556 86,240 98,942 117,882 Gross cumulative redundancy (deficiency) (7,485 ) (8,576 ) (9,765 ) (11,270 ) (15,481 ) (20,295 ) (3,057 ) (3,439 ) (3,993 ) 458 (Components may not sum to totals due to rounding) 13 Table of Contents Reinsurance We purchase reinsurance to reduce our net liability on individual risks, to protect against possible catastrophes, to remain within a target ratio of net premiums written to policyholders’ surplus, and to expand our underwriting capacity.
On the date of the Exchange Agreement, the Exchanging Noteholders held 2017 Notes in the aggregate principal amount of $21,545,000 of the $30,000,000 aggregate principal amount of 2017 Notes then outstanding. 21 Table of Contents At the closing of the Exchange Agreement, the Exchanging Noteholders exchanged their respective 2017 Notes for, among other things, new 12.0% Senior Notes due December 30, 2024 in the aggregate principal amount of $19,950,000 (the “2022 Notes”).
On the date of the Exchange Agreement, the Exchanging Noteholders held 2017 Notes in the aggregate principal amount of $21,545,000 of the $30,000,000 aggregate principal amount of 2017 Notes then outstanding. 23 Table of Contents At the closing of the Exchange Agreement, the Exchanging Noteholders exchanged their respective 2017 Notes for, among other things, new 12.0% Senior Notes due December 30, 2024 in the aggregate principal amount of $19,950,000 (the “2022 Notes”).
However, the prior A.M Best ratings downgrade has resulted in a material decrease in the business of our subsidiary, Cosi, a multi-state licensed general agency that had partnered with name-brand carriers which require an A.M. Best “A-” rating from its partners.
However, a prior A.M Best ratings downgrade resulted in a material decrease in the business of our subsidiary, Cosi, a multi-state licensed general agency that had partnered with name-brand carriers which require an A.M. Best “A-” rating from its partners.
The 2021/2023 Treaty and 2023/2024 Treaty are on a “net” of catastrophe reinsurance basis, as opposed to the “gross” arrangement that existed in prior treaties. Under a “net” arrangement, all catastrophe reinsurance coverage is purchased directly by us.
The 2021/2023 Treaty, 2023/2024 Treaty and 2024/2025 Treaty are on a “net” of catastrophe reinsurance basis, as opposed to the “gross” arrangement that existed in prior treaties. Under a “net” arrangement, all catastrophe reinsurance coverage is purchased directly by us.
From July 1, 2020 through June 30, 2022, we had reinstatement premium protection on the first $70,000,000 layer of catastrophe coverage in excess of $10,000,000. Effective July 1, 2022 and through June 30, 2023, we have reinstatement premium protection for $9,800,000 of catastrophe coverage in excess of $10,000,000.
From July 1, 2020 through June 30, 2022, we had reinstatement premium protection on the first $70,000,000 layer of catastrophe coverage in excess of $10,000,000. Effective July 1, 2022 and through June 30, 2023, we had reinstatement premium protection for $9,800,000 of catastrophe coverage in excess of $10,000,000.
At the closing of the Exchange Agreement, the Exchanging Noteholders exchanged their respective 2017 Notes for, among other things, new 12.0% Senior Notes due December 30, 2024 in the aggregate principal amount of $19,950,000 (the “2022 Notes”). · Catastrophe Reinsurance Coverage Effective July 1, 2022, KICO decreased the top limit of its catastrophe reinsurance coverage from $500,000,000 to $345,000,000, which, at the time, equated to more than a 1-in-100 year storm event according to the primary industry catastrophe model that we follow. 4 Table of Contents · A.M.
At the closing of the Exchange Agreement, the Exchanging Noteholders exchanged their respective 2017 Notes for, among other things, new 12.0% Senior Notes due December 30, 2024 in the aggregate principal amount of $19,950,000 (the “2022 Notes”). · Catastrophe Reinsurance Coverage Effective July 1, 2022, KICO decreased the top limit of its catastrophe reinsurance coverage from $500,000,000 to $345,000,000, which, at the time, equated to more than a 1-in-100 year storm event according to the primary industry catastrophe model that we follow. · A.M.
Such deterioration was driven by a sizeable increase in KICO’s net probable maximum loss (PML) as a result of its latest reinsurance renewal and a decline in surplus from weather-related losses and dividend payments by KICO in 2022. The outlook for each of these credit ratings was revised to “negative” from “stable”. Concurrently, A.M.
Such deterioration was driven by a sizeable increase in KICO’s net probable maximum loss (“PML”) as a result of its latest reinsurance renewal and a decline in surplus from weather-related losses and dividend payments by KICO in 2022. The outlook for each of these credit ratings was revised to “negative” from “stable”. Concurrently, A.M.
Approximately 81% of our revenue is currently derived from sources located in the State of New York and, accordingly, is affected by the prevailing regulatory, economic, demographic, competitive and other conditions in the state. Changes in any of these conditions could make it costlier or difficult for us to conduct our business.
Approximately 88% of our revenue is currently derived from sources located in the State of New York and, accordingly, is affected by the prevailing regulatory, economic, demographic, competitive and other conditions in the state. Changes in any of these conditions could make it costlier or difficult for us to conduct our business.
We believe that the excellent service provided to our Select producers, our broad product offerings, our competitive prices and our financial stability provide a strong foundation for profitable growth. Sophisticated Pricing, Underwriting and Risk Management Practices We believe that a significant underwriting advantage exists due to our local market presence and expertise.
We believe that the excellent service provided to our Select producers, our broad product offerings, and our competitive prices provide a strong foundation for profitable growth. Sophisticated Pricing, Underwriting and Risk Management Practices We believe that a significant underwriting advantage exists due to our local market presence and expertise.
The shares issuable pursuant to the registration statements on Form S-8 will be freely tradable in the public market, except for shares held by our affiliates. As of December 31, 2022, there were also outstanding warrants for the purchase of 969,525 shares of our common stock.
The shares issuable pursuant to the registration statements on Form S-8 will be freely tradable in the public market, except for shares held by our affiliates. As of December 31, 2023, there were also outstanding warrants for the purchase of 969,525 shares of our common stock.
The sliding scale provided minimum and maximum ceding commission rates in relation to specified ultimate loss ratios. Under the 2021/2023 Treaty, KICO received a fixed provisional rate with no adjustment for sliding scale contingent commissions. Under the 2023/2024 Treaty, KICO will receive a fixed provisional rate with no adjustment for sliding scale contingent commissions.
The sliding scale provided minimum and maximum ceding commission rates in relation to specified ultimate loss ratios. Under the 2021/2023 Treaty and the 2023/24 Treaty, KICO received a fixed provisional rate with no adjustment for sliding scale contingent commissions. Under the 2024/2025 Treaty, KICO will receive a fixed provisional rate with no adjustment for sliding scale contingent commissions.
We have effective registration statements on Form S-8 under the Securities Act of 1933, as amended (the “Securities Act”), covering an aggregate of 1,400,000 shares of our common stock issuable under our 2014 Equity Participation Plan (the “2014 Plan”).
We have effective registration statements on Form S-8 under the Securities Act of 1933, as amended (the “Securities Act”), covering an aggregate of 1,900,000 shares of our common stock issuable under our 2014 Equity Participation Plan (the “2014 Plan”).
The incidence and severity of weather conditions are largely unpredictable. There is generally an increase in the frequency and severity of claims when severe weather conditions occur. 20 Table of Contents Unanticipated increases in the severity or frequency of claims may adversely affect our operating results and financial condition.
The incidence and severity of weather conditions are largely unpredictable. There is generally an increase in the frequency and severity of claims when severe weather conditions occur. 21 Table of Contents Unanticipated increases in the severity or frequency of claims may adversely affect our operating results and financial condition.
Since we are primarily liable to an insured for the full amount of insurance coverage, our inability to collect a material recovery from a reinsurer could have a material adverse effect on our operating results and financial condition. Applicable insurance laws regarding the change of control of our company may impede potential acquisitions that our stockholders might consider desirable.
Since we are primarily liable to an insured for the full amount of insurance coverage, our inability to collect a material recovery from a reinsurer could have a material adverse effect on our operating results and financial condition. 25 Table of Contents Applicable insurance laws regarding the change of control of our company may impede potential acquisitions that our stockholders might consider desirable.
With respect to any additional catastrophe losses of up to $335,000,000, we are 100% reinsured under our catastrophe reinsurance program. Catastrophe coverage is limited on an annual basis to two times the per occurrence amounts.
With respect to any additional catastrophe losses of up to $315,000,000, we are 100% reinsured under our catastrophe reinsurance program. Catastrophe coverage is limited on an annual basis to two times the per occurrence amounts.
The amount determined under such formulas is called the authorized control level RBC (“ACL”). 17 Table of Contents The RBC guidelines define specific capital levels based on a company’s ACL that are determined by the ratio of the company’s total adjusted capital (“TAC”) to its ACL. TAC is equal to statutory capital, plus or minus certain other specified adjustments.
The amount determined under such formulas is called the authorized control level RBC (“ACL”). The RBC guidelines define specific capital levels based on a company’s ACL that are determined by the ratio of the company’s total adjusted capital (“TAC”) to its ACL. TAC is equal to statutory capital, plus or minus certain other specified adjustments.
Conversely, a decline in interest rates would decrease the net unrealized loss position of our investment portfolio, which would be offset by lower rates of return on funds reinvested. In addition, market volatility can make it difficult to value certain of our securities if trading becomes less frequent.
Conversely, a decline in interest rates would decrease the net unrealized loss position of our investment portfolio, which would be offset by lower rates of return on funds reinvested. 24 Table of Contents In addition, market volatility can make it difficult to value certain of our securities if trading becomes less frequent.
Adverse regulatory developments in New York, which could include fundamental changes to the design or implementation of the insurance regulatory framework, could have a material adverse effect on our results of operations and financial condition. 24 Table of Contents We are highly dependent on a relatively small number of insurance brokers for a large portion of our revenues.
Adverse regulatory developments in New York, which could include fundamental changes to the design or implementation of the insurance regulatory framework, could have a material adverse effect on our results of operations and financial condition. We are highly dependent on a relatively small number of insurance brokers for a large portion of our revenues.
Our ability to control the growth of operating and other expenses while expanding our operations and growing revenue is a key component of our business model and is important to our financial success. 8 Table of Contents In 2022, we completed the implementation of Kingstone 2.0, an effort to modernize the Company.
Our ability to control the growth of operating and other expenses while expanding our operations and growing revenue is a key component of our business model and is important to our financial success. In 2022, we completed the implementation of Kingstone 2.0, an effort to modernize the Company.
We monitor and evaluate the performance of our producers through periodic reviews of volume and profitability. Our senior executives are actively involved in managing our producer relationships. Each producer is assigned to a staff underwriter and the producer can call that underwriter directly on any matter.
We monitor and evaluate the performance of our producers through periodic reviews of volume and profitability. Our senior executives are actively involved in managing our producer relationships. 9 Table of Contents Each producer is assigned to a staff underwriter and the producer can call that underwriter directly on any matter.
Therefore, stockholders have reduced liquidity and may not be able to sell their shares at the volume, prices and times that they desire. There may be future issuances or resales of our common stock which may materially and adversely affect the market price of our common stock.
Therefore, stockholders have reduced liquidity and may not be able to sell their shares at the volume, prices and times that they desire. 30 Table of Contents There may be future issuances or resales of our common stock which may materially and adversely affect the market price of our common stock.
Producers also value our financial stability coupled with competitive rate and commission structures. 6 Table of Contents Our principal objectives are to grow profitably while managing risk through prudent use of reinsurance in order to strengthen our capital base. We generate underwriting income through adequate pricing of insurance policies and by effectively managing our other underwriting and operating expenses.
Producers also value our broad underwriting appetite coupled with competitive rate and commission structures. 6 Table of Contents Our principal objectives are to grow profitably while managing risk through prudent use of reinsurance in order to strengthen our capital base. We generate underwriting income through adequate pricing of insurance policies and by effectively managing our other underwriting and operating expenses.
The new law applies to actions commenced on or after December 31, 2021. In 2022, the New York legislature passed legislation to greatly expand wrongful death actions. This bill sought to expand the categories of claimants and scope of losses for which a wrongful death lawsuit could be brought.
The new law applies to actions commenced on or after December 31, 2021. In 2022, the New York legislature passed legislation to greatly expand wrongful death actions. This bill sought to expand the categories of claimants and scope of losses for which a wrongful death lawsuit could be brought. The bill was vetoed in January 2023.
Dividends may be paid, without the need for DFS approval, from unassigned surplus and are restricted to the lesser of 10% of surplus or 100% of investment income (on a statutory accounting basis) for the trailing 36 months, less dividends by KICO paid during such period.
These restrictions are related to surplus and net investment income. Dividends may be paid, without the need for DFS approval, from unassigned surplus and are restricted to the lesser of 10% of surplus or 100% of investment income (on a statutory accounting basis) for the trailing 36 months, less dividends by KICO paid during such period.
Covered entities would be further required under the amendments to implement asset inventory management, develop and implement a business continuity and disaster recovery plan, and maintain backups protected from unauthorized alterations or destruction.
Covered entities are further required under the amendments to implement asset inventory management, develop and implement a business continuity and disaster recovery plan, and maintain backups protected from unauthorized alterations or destruction.
Anti-takeover provisions in Delaware law and our restated certificate of incorporation and bylaws, as well as regulatory approvals required under state insurance laws, could make it more difficult for a third party to acquire control of us and may prevent stockholders from receiving a premium for their shares of common stock.
We are a holding company incorporated in Delaware. Anti-takeover provisions in Delaware law and our restated certificate of incorporation and bylaws, as well as regulatory approvals required under state insurance laws, could make it more difficult for a third party to acquire control of us and may prevent stockholders from receiving a premium for their shares of common stock.
Such reports and other information filed by us with the SEC are available free of charge at the investor relations section of our website at www.kingstonecompanies.com as soon as reasonably practicable after such reports are electronically filed with, or furnished to, the SEC.
Securities and Exchange Commission (the “SEC”). Such reports and other information filed by us with the SEC are available free of charge at the investor relations section of our website at www.kingstonecompanies.com as soon as reasonably practicable after such reports are electronically filed with, or furnished to, the SEC.
Such laws did not affect KICO’s ability to withdraw from the commercial liability market in New York State in 2019 and the commercial auto market in New York State in 2015. 15 Table of Contents Federal and State Legislative and Regulatory Changes From time to time, various regulatory and legislative changes have been proposed in the insurance industry.
Such laws did not affect KICO’s ability to withdraw from the commercial liability market in New York State in 2019 and the commercial auto market in New York State in 2015. Federal and State Legislative and Regulatory Changes From time to time, various regulatory and legislative changes have been proposed in the insurance industry.
The ratings of Kingstone Insurance Company (“KICO”), our insurance subsidiary, reflect the rating agencies’ opinion as to its financial strength and are not evaluations directed to investors in our securities, nor are they recommendations to buy, sell or hold our securities.
The ratings of Kingstone Insurance Company (“KICO”), our insurance subsidiary, reflect the rating agencies’ opinion as to its financial strength and are not evaluations directed to investors in our securities, nor are they recommendations to buy, sell or hold our securities. In July 2023, A.M.
Departure from the usual values on four or more of the ratios can lead to inquiries from individual state insurance commissioners as to certain aspects of an insurer’s business. As of December 31, 2022, KICO had three ratios outside the usual range. Accounting Principles Statutory accounting principles (“SAP”) are a basis of accounting developed by the NAIC.
Departure from the usual values on four or more of the ratios can lead to inquiries from individual state insurance commissioners as to certain aspects of an insurer’s business. As of December 31, 2023, KICO had one ratio outside the usual range. Accounting Principles Statutory accounting principles (“SAP”) are a basis of accounting developed by the NAIC.
Recent Developments Developments During 2022 · Debt Exchange On December 9, 2022, we entered into a Note and Warrant Exchange Agreement (the “Exchange Agreement”) with several holders (the “Exchanging Noteholders”) of our outstanding 5.50% Senior Notes due 2022 (the “2017 Notes”).
On December 9, 2022, we entered into a Note and Warrant Exchange Agreement (the “Exchange Agreement”) with several holders (the “Exchanging Noteholders”) of our outstanding 5.50% Senior Notes due 2022 (the “2017 Notes”).
Increased market volatility and fluctuations could result in a substantial decline in the market price of our common stock. 27 Table of Contents The trading volume in our common stock has been limited.
Increased market volatility and fluctuations could result in a substantial decline in the market price of our common stock. The trading volume in our common stock has been limited.
Loss and Loss Adjustment Expenses Development The table below shows the net loss development of reserves held as of each calendar year-end from 2012 through 2022. The first section of the table reflects the changes in our loss and LAE reserves after each subsequent calendar year of development.
Loss and Loss Adjustment Expenses Development The table below shows the net loss development of reserves held as of each calendar year-end from 2013 through 2023. The first section of the table reflects the changes in our loss and LAE reserves after each subsequent calendar year of development.
The proposed regulation updates certain cybersecurity event reporting requirements, including notice and explanation of extortion payments, and amends the April 15 annual reporting requirement to include a written acknowledgment of any areas of noncompliance and remediation plans signed by the entity’s highest-ranking executive and CISO. Finally, the proposed regulation updates the factors the Superintendent may consider in assessing violations.
The regulations update certain cybersecurity event reporting requirements, including notice and explanation of extortion payments, and amends the April 15 annual reporting requirement to include a written acknowledgment of any areas of material noncompliance and remediation plans signed by the entity’s highest-ranking executive and the CISO. Finally, the regulations update the factors the Superintendent may consider in assessing violations.
ITEM 1. BUSINESS . (a) Business Development General As used in this Annual Report, references to the “Company,” “we,” “us,” or “our” refer to Kingstone Companies, Inc. (“Kingstone”) and its subsidiaries. We offer property and casualty insurance products to individuals through our wholly owned subsidiary, Kingstone Insurance Company (“KICO”), domiciled in the state of New York.
ITEM 1. BUSINESS . (a) Business Development General As used in this Annual Report, references to the “Company,” “we,” “us,” or “our” refer to Kingstone Companies, Inc. (“Kingstone”) and its subsidiaries. We offer property and casualty insurance products through our wholly-owned subsidiary, Kingstone Insurance Company (“KICO”).
Claims for property coverage generally are reported and settled in a relatively short period of time, whereas those for casualty coverage may take many years to settle. 5 Table of Contents We generate revenues from earned premiums, ceding commissions from quota share reinsurance, net investment income generated from our investment portfolio, and net realized gains and losses on investment securities.
Claims for property coverage generally are reported and settled in a relatively short period of time, whereas those for casualty coverage may take many years to settle. 5 Table of Contents We derive substantially all of our revenue from KICO, including revenues from earned premiums, ceding commissions from quota share reinsurance, net investment income generated from our investment portfolio, and net realized gains and losses on investment securities.
In addition to a new business moratorium in Massachusetts, New Jersey and Rhode Island, we have been actively non-renewing policies subject to regulatory constraints and have materially lowered commission rates to our producers.
In addition to a new business moratorium in our non-Core states of Connecticut, Massachusetts, New Jersey and Rhode Island, we have been actively non-renewing policies subject to regulatory constraints and have materially lowered commission rates to our producers.
We market our insurance products primarily through insurance brokers. A large percentage of our gross premiums written are sourced through a limited number of brokers. For the year ended December 31, 2022, 38 brokers provided a total of 40% of our total gross premiums written.
We market our insurance products primarily through insurance brokers. A large percentage of our gross premiums written are sourced through a limited number of brokers. For the year ended December 31, 2023, 35 brokers provided a total of 40% of our total gross premiums written.
As of December 31, 2022, KICO could not pay any dividends to us without prior regulatory approval due to negative unassigned surplus of approximately $5,069,000. The aggregate maximum amount of dividends permitted by law to be paid by an insurance company does not necessarily define an insurance company’s actual ability to pay dividends.
As of December 31, 2023, KICO could not pay any dividends to us without prior regulatory approval due to negative unassigned surplus of approximately $7,662,000. The aggregate maximum amount of dividends permitted by law to be paid by an insurance company does not necessarily define an insurance company’s actual ability to pay dividends.
See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Principal Revenue and Expense Items” in Item 7 of this Annual Report and Note 2 and Note 11 in the accompanying consolidated financial statements for additional information and details regarding loss and LAE reserves.
See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Principal Revenue and Expense Items” in Item 7 of this Annual Report and Note 2 and Note 11 in the accompanying consolidated financial statements for additional information.
All of our policies are 12 month policies; therefore, a significant period of time can elapse between the receipt of insurance premiums and the payment of claims. During this time, KICO invests the premiums, earning investment income and generating net realized and unrealized gains and losses on associated investments.
All of our policies are 12 month policies; therefore, a significant period of time can elapse between the receipt of insurance premiums and the payment of insurance claims. During this time, KICO invests the premiums, earning investment income and generating net realized and unrealized gains and losses on associated investments. Our holding company earns investment income from its cash holdings.
The severity and duration of these deficits could have an adverse impact on the collectability and valuation of our municipal bond portfolio. Our investment portfolio also includes mortgage-backed securities which could be adversely impacted by declines in real estate valuations and/or financial market disruption.
The severity and duration of these deficits could have an adverse impact on the collectability and valuation of our municipal bond portfolio. Our investment portfolio also includes mortgage-backed securities which could be adversely impacted by declines in real estate valuations and/or financial market disruption. Further disruptions in global financial markets could adversely impact our net investment income in future periods.
The New York State Department of Financial Services (the “DFS”) imposes risk-based capital requirements on insurance companies to ensure that insurance companies maintain appropriate levels of surplus to support their overall business operations and to protect customers against adverse developments, after taking into account default, credit, underwriting and off-balance sheet risks.
The DFS imposes risk-based capital requirements on insurance companies to ensure that insurance companies maintain appropriate levels of surplus to support their overall business operations and to protect customers against adverse developments, after taking into account default, credit, underwriting and off-balance sheet risks.
In addition, our board of directors is authorized to designate and issue preferred stock without further stockholder approval, and we may issue other equity and equity-related securities that are senior to our common stock in the future for a number of reasons, including, without limitation, to support operations and growth, to maintain our capital ratios, and to comply with any future changes in regulatory standards. 28 Table of Contents Our executive officers and directors own a substantial number of shares of our common stock.
In addition, our board of directors is authorized to designate and issue preferred stock without further stockholder approval, and we may issue other equity and equity-related securities that are senior to our common stock in the future for a number of reasons, including, without limitation, to repay our indebtedness, support operations and growth, maintain our capital ratios, and comply with any future changes in regulatory standards.
Since we pay for all of the catastrophe coverage, none of the losses covered under a catastrophic event will be included in the quota share ceded amounts. In 2022, we purchased catastrophe reinsurance to provide coverage of up to $345,000,000 for losses associated with a single event.
Since we pay for all of the catastrophe coverage, none of the losses covered under a catastrophic event will be included in the quota share ceded amounts. 14 Table of Contents In 2023, we purchased catastrophe reinsurance to provide coverage of up to $325,000,000 for losses associated with a single event.
Effective January 1, 2023 through January 1, 2024, losses on personal lines policies are subject to the 2023/2024 Treaty, which will cover 12.5% of catastrophe losses and will result in a net retention by us of $8,750,000 of exposure per catastrophe occurrence.
Effective January 1, 2023 through January 1, 2024, losses on personal lines policies were subject to the 2023/2024 Treaty, which covered 12.5% of catastrophe losses and resulted in a net retention by us of $8,750,000 of exposure per catastrophe occurrence.
For example, states may limit an insurer’s ability to cancel or not renew policies. Furthermore, certain states prohibit an insurer from withdrawing from one or more lines of business written in the state, except pursuant to a plan that is approved by the insurance regulatory authority. The state regulator may reject a plan that may lead to market disruption.
Furthermore, certain states prohibit an insurer from withdrawing from one or more lines of business written in the state, except pursuant to a plan that is approved by the insurance regulatory authority. The state regulator may reject a plan that may lead to market disruption.
The RBC Model serves as a benchmark for the regulation of insurance companies. RBC provides for targeted surplus levels based on formulas, which specify various weighting factors that are applied to financial balances or various levels of activity based on the perceived degree of risk, and are set forth in the RBC requirements.
RBC provides for targeted surplus levels based on formulas, which specify various weighting factors that are applied to financial balances or various levels of activity based on the perceived degree of risk, and are set forth in the RBC requirements.
PCS catastrophe bulletins are issued for events that cause more than $25 million in total insured losses and affect a significant number of policyholders and insurers. Our predominant market, downstate New York, was affected by several events during 2022, none of which were named storms.
PCS catastrophe bulletins are issued for events that cause more than $25 million in total insured losses and affect a significant number of policyholders and insurers. Our predominant market, downstate New York, was affected by several events during 2023, one of which was a named storm, and one was a major freezing event.
Our maximum net retention under the quota share and excess of loss treaties for any one personal lines occurrence for dates of loss on or after December 31, 2020 through December 30, 2021 was $1,000,000. Effective December 31, 2021 through January 1, 2023, our maximum net retention under the 2021/2023 Treaty decreased to $700,000.
Our maximum net retention under the 2021/2023 Treaty and excess of loss treaties for any one personal lines occurrence for dates of loss on or after December 31, 2021 through January 1, 2024 was $700,000. Effective January 1, 2024 through January 1, 2025, our maximum net retention under the 2024/2025 Treaty increased to $730,000.
The re-estimated ultimate reserves two years later for those claims as of December 31, 2012 had grown to $16,875,000. 11 Table of Contents The “cumulative redundancy (deficiency)” represents, as of December 31, 2022, the difference between the latest re-estimated liability and the amounts as originally estimated. A redundancy means that the original estimate was higher than the current estimate.
The re-estimated ultimate reserves two years later for those claims as of December 31, 2013 had grown to $18,332,000. The “cumulative redundancy (deficiency)” represents, as of December 31, 2023, the difference between the latest re-estimated liability and the amounts as originally estimated. A redundancy means that the original estimate was higher than the current estimate.
The FIO is initially charged with monitoring all aspects of the insurance industry (other than health insurance, certain long-term care insurance and crop insurance), gathering data, and conducting a study on methods to modernize and improve the insurance regulatory system in the United States.
It established a Federal Insurance Office (the “FIO”) within the U.S. Department of the Treasury. The FIO is initially charged with monitoring all aspects of the insurance industry (other than health insurance, certain long-term care insurance and crop insurance), gathering data, and conducting a study on methods to modernize and improve the insurance regulatory system in the United States.
Some of these systems rely on third-party vendors, through either a connection to, or an integration with, those third-parties’ systems. In the course of our operations, we acquire the personal confidential information of our customers and employees.
Some of these systems rely on third-party vendors, through either a connection to, or an integration with, those third-parties’ systems. In the course of our operations, we acquire the personal confidential information of our customers and employees. We also store our intellectual property, trade secrets, and other sensitive business and financial information.
Net Cosi revenue is deducted against commission expense and Cosi-related expenses are included in other operating expenses. Cosi-related operating expenses are not included in our stand-alone insurance underwriting business and, accordingly, its expenses are not included in the calculation of our combined ratio as described below.
Cosi-related operating expenses are not included in our stand-alone insurance underwriting business and, accordingly, its expenses are not included in the calculation of our combined ratio as described below.
We believe that many national and regional carriers have chosen to limit their rate of premium growth or to decrease their presence in Northeastern states due to the relatively high coastal population and associated catastrophe risk that exists in the region. Additionally, some of our largest competitors historically have stopped writing business this year.
We believe that many national and regional carriers have chosen to limit their rate of premium growth or to decrease their presence in Northeastern states due to the relatively high coastal population and associated catastrophe risk that exists in the region.
Availability of Information Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to reports filed pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), are filed with the U.S. Securities and Exchange Commission (the “SEC”).
We believe that our relationship with our employees is good. 20 Table of Contents Availability of Information Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to reports filed pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), are filed with the U.S.
Product Lines Our product lines include the following: Personal lines - Our largest line of business is personal lines, consisting of homeowners and dwelling fire multi-peril, cooperative/condominiums, renters, and personal umbrella policies. Personal lines policies accounted for 93.5% of our gross written premiums for the year ended December 31, 2022.
Product Lines Our product lines include the following: Personal lines - Our largest line of business is personal lines, consisting of homeowners, dwelling fire, cooperative/condominium, renters, and personal umbrella policies. Personal lines policies accounted for 92.6% of our gross written premiums for the year ended December 31, 2023.
The insurance industry is highly competitive. Many of our competitors have well-established national reputations, substantially more capital and significantly greater marketing and management resources.
Many of our competitors have well-established national reputations, substantially more capital and significantly greater marketing and management resources.
Because of the competitive nature of the insurance industry, including competition for customers, agents and brokers, there can be no assurance that we will continue to effectively compete with our industry rivals, or that competitive pressures will not have a material adverse effect on our ability to grow our business and to maintain profitable operating results or financial condition.
Because of the competitive nature of the insurance industry, including competition for customers, agents and brokers, there can be no assurance that we will continue to effectively compete with our industry rivals, or that competitive pressures will not have a material adverse effect on our ability to grow our business and to maintain profitable operating results or financial condition. 28 Table of Contents If we lose key personnel or are unable to recruit qualified personnel, our ability to implement our business strategies could be delayed or hindered.
In addition, there is risk that any particular regulator’s or enforcement authority’s interpretation of a legal issue may change over time to our detriment, or that changes in the overall legal and regulatory environment may, even in the absence of any change to a particular regulator’s or enforcement authority’s interpretation of a legal issue changing, cause us to change our views regarding the actions we need to take from a legal risk management perspective, thereby necessitating changes to our practices that may, in some cases, limit our ability to grow and/or to improve the profitability of our business. 23 Table of Contents While the United States federal government does not directly regulate the insurance industry, federal legislation and administrative policies can affect us.
In addition, there is risk that any particular regulator's or enforcement authority's interpretation of a legal issue may change over time to our detriment, or that changes in the overall legal and regulatory environment may, even in the absence of any change to a particular regulator's or enforcement authority's interpretation of a legal issue changing, cause us to change our views regarding the actions we need to take from a legal risk management perspective, thereby necessitating changes to our practices that may, in some cases, limit our ability to grow and/or to improve the profitability of our business.
We currently have catastrophe reinsurance coverage with regard to losses of up to $345,000,000 ($335,000,000 in excess of $10,000,000). Effective January 1, 2023, $10,000,000 of losses in a catastrophe are subject to a quota share reinsurance treaty, which covers 12.5% of catastrophe losses such that we retain $8,750,000 of risk per catastrophe occurrence.
We currently have catastrophe reinsurance coverage with regard to losses of up to $325,000,000 ($315,000,000 in excess of $10,000,000). Effective January 1, 2024, $10,000,000 of losses in a catastrophe are subject to a quota share reinsurance treaty, which covers 5.0% of catastrophe losses such that we retain $9,500,000 of risk per catastrophe occurrence.
Accordingly, we are required to adopt new guidance or interpretations, which may have a material adverse effect on our results of operations and financial condition that is either unexpected or has a greater impact than expected.
Our financial statements are subject to the application of generally accepted accounting principles, which are periodically revised, interpreted and/or expanded. Accordingly, we are required to adopt new guidance or interpretations, which may have a material adverse effect on our results of operations and financial condition that is either unexpected or has a greater impact than expected.
We handle claims fairly while ensuring that coverage provisions and exclusions are properly applied. Our claims and underwriting expertise supports our ability to grow our profitable business. Distribution We generate business through our relationships with over 700 producers.
We have mitigated this risk through appropriate catastrophe reinsurance and application of hurricane deductibles. We handle claims fairly while ensuring that coverage provisions and exclusions are properly applied. Our claims and underwriting expertise supports our ability to grow our profitable business. Distribution We generate business through our relationships with over 700 producers.
As of December 31, 2022, options to purchase 107,201 shares of our common stock, and 366,597 shares subject to unvested restricted stock grants, were outstanding under the 2014 Plan and 351,445 shares were reserved for issuance thereunder.
As of December 31, 2023, options to purchase 107,201 shares of our common stock, and 550,581 shares subject to unvested restricted stock grants, were outstanding under the 2014 Plan and 584,596 shares were reserved for issuance thereunder.
Our maximum net retention for any one personal lines occurrence is further reduced from $700,000 to $500,000. Effective January 1, 2023, the Underlying XOL Treaty was renewed covering the period from January 1, 2023 through January 1, 2024.
From January 1, 2022 through January 1, 2024, under the Underlying XOL Treaty, our maximum net retention for any one personal lines occurrence was further reduced from the retention of $700,000 under the 2021/2023 Treaty and the 2023/2024 Treaty to $500,000.
An example with respect to the net loss and LAE reserves of $12,065,000 as of December 31, 2012 is as follows. By December 31, 2014 (two years later), $8,833,000 had actually been paid in settlement of the claims that relate to liabilities as of December 31, 2012.
An example with respect to the net loss and LAE reserves of $17,139,000 as of December 31, 2013 is as follows. By December 31, 2015 (two years later), $10,629,000 had actually been paid in settlement of the claims that relate to liabilities as of December 31, 2013.
Statutory accounting practices established by the NAIC and adopted in part by New York insurance regulators determine, among other things, the amount of statutory surplus and statutory net income of KICO and thus determine, in part, the amount of funds that are available for KICO to pay dividends to Kingstone Companies, Inc. 18 Table of Contents Legal Structure We were incorporated in 1961 and assumed the name DCAP Group, Inc. in 1999.
Statutory accounting practices established by the NAIC and adopted in part by New York insurance regulators determine, among other things, the amount of statutory surplus and statutory net income of KICO and thus determine, in part, the amount of funds that are available for KICO to pay dividends to Kingstone Companies, Inc.
This document noted “that during the fiscal year ending September 30, 2021, FIO did not take any action regarding the preemption of any state insurance measures that were inconsistent with a covered agreement.” In addition to reviewing the financial status of the property/casualty industry, the Report includes Topical Updates and FIO activities, climate change, mitigation and resilience and Cyber Risks, Ransomware, and Cyber Insurance. 16 Table of Contents On December 20, 2020, the Terrorism Risk Insurance Program Reauthorization Act of 2019 was enacted and is now scheduled to expire on December 31, 2027.
This document noted “that during the fiscal year ending September 30, 2021, FIO did not take any action regarding the preemption of any state insurance measures that were inconsistent with a covered agreement.” In addition to reviewing the financial status of the property/casualty industry, the Report includes Topical Updates and FIO activities, climate change, mitigation and resilience and Cyber Risks, Ransomware, and Cyber Insurance.
Insurance companies incur a significant amount of their total expenses from insured losses, which are commonly referred to as claims. In settling insured losses, various loss adjustment expenses (“LAE”) are incurred such as insurance adjusters’ fees and legal expenses.
Our expenses include the insurance underwriting expenses of KICO and other operating expenses. Insurance companies incur a significant amount of their total expenses from losses incurred by policyholders, which are referred to as claims. In settling these claims, various loss adjustment expenses (“LAE”) are incurred such as insurance adjusters’ fees and legal expenses.
These actions should reduce the size of our portfolio outside New York materially. 9 Table of Contents In 2022, KICO was the 15th largest writer of homeowners insurance in the State of New York, according to data compiled by S&P Capital IQ. Based on the same data, in 2022, we had a 1.6% market share for this business.
In 2023, KICO was the 15th largest writer of homeowners insurance in the State of New York, according to data compiled by S&P Capital IQ. Based on the same data, in 2023, we had a 1.6% market share for this business.
We are actively writing business in New York, New Jersey, Rhode Island, Massachusetts and Connecticut. Additionally, our subsidiary, Cosi, a multi-state licensed general agency, receives commission revenue from KICO for the policies it places with others and pays commissions to these agencies.
KICO is actively writing its property and casualty insurance products in New York. Additionally, our subsidiary, Cosi, a multi-state licensed general agency, receives commission revenue from KICO for the policies it places with others and pays commissions to these agencies.
Best and other agencies to assist them in assessing the financial strength and overall quality of the companies with which they do business and from which they are considering purchasing insurance or in determining the financial strength of the company that provides insurance with respect to the collateral they hold. A.M.
Ratings Many insurance buyers, agents, brokers and secured lenders use the ratings assigned by ratings agencies to assist them in assessing the financial strength and overall quality of the companies with which they do business and from which they are considering purchasing insurance or in determining the financial strength of the company that provides insurance with respect to the collateral they hold.
We rely on our information technology and telecommunication systems, and the failure of these systems could materially and adversely affect our business. Our business is highly dependent upon the successful and uninterrupted functioning of our information technology and telecommunications systems. We rely on these systems to support our operations.
Our business is highly dependent upon the successful and uninterrupted functioning of our information technology and telecommunications systems. We rely on these systems to support our operations. The failure of these systems could interrupt our operations and result in a material adverse effect on our business.
We also store our intellectual property, trade secrets, and other sensitive business and financial information. 26 Table of Contents All of these systems are subject to “cyber attacks” by sophisticated third parties with substantial computing resources and capabilities, and to unauthorized or illegitimate actions by employees, consultants, agents and other persons with legitimate access to our systems.
All of these systems are subject to “cyber attacks” by sophisticated third parties with substantial computing resources and capabilities, and to unauthorized or illegitimate actions by employees, consultants, agents and other persons with legitimate access to our systems.
The failure of these systems could interrupt our operations and result in a material adverse effect on our business. Risks Related to Our Common Stock Our stock price may fluctuate significantly and be highly volatile and this may make it difficult for stockholders to resell shares of our common stock at the volume, prices and times they find attractive.
Risks Related to Our Common Stock Our stock price may fluctuate significantly and be highly volatile and this may make it difficult for stockholders to resell shares of our common stock at the volume, prices and times they find attractive.
We believe our insurance producers value their relationships with us because we provide excellent, consistent personal service coupled with competitive rates and commission levels.
We carefully select the producers that distribute our insurance policies and continuously monitor and evaluate their performance. We believe our insurance producers value their relationships with us because we provide excellent, consistent personal service coupled with competitive rates and commission levels.
Congress and various federal agencies periodically discuss proposals that would provide for a federal charter for insurance companies. We cannot predict whether any such laws will be enacted or the effect that such laws would have on our business.
While the United States federal government does not directly regulate the insurance industry, federal legislation and administrative policies can affect us. Congress and various federal agencies periodically discuss proposals that would provide for a federal charter for insurance companies. We cannot predict whether any such laws will be enacted or the effect that such laws would have on our business.
Upon the expiration of the 2021/2023 Treaty on January 1, 2023, we entered into a new quota share reinsurance treaty for our personal lines business, covering the period from January 1, 2023 through January 1, 2024 (“2023/2024 Treaty”). Excess of loss contracts provide coverage for individual loss occurrences exceeding a certain threshold.
Upon the expiration of the 2021/2023 Treaty on January 1, 2023, we entered into a new 30% quota share reinsurance treaty for our personal lines business, covering the period from January 1, 2023 through January 1, 2024 (“2023/2024 Treaty”).Upon the expiration of the 2023/2024 Treaty on January 1, 2024, we entered into a new 27% quota share reinsurance treaty for our personal lines business, covering the period from January 1, 2024 through January 1, 2025 (“2024/2025 Treaty”).
Our Competitive Strengths Long History of Operations KICO has been in operation in the State of New York for over 135 years. We have consistently sought to grow the amount of profitable business that we write by introducing new products, increasing volume written with our Select producers in existing markets, and developing new producer relationships and markets.
We have consistently sought to grow the amount of profitable business that we write by introducing new products, increasing volume written with our Select producers in existing markets, and developing new producer relationships and markets.
The effects of this catastrophe and other catastrophes during 2021 increased our net loss ratio by 10.3 percentage points in such year. 14 Table of Contents Government Regulation Holding Company Regulation We, as the parent of KICO, are subject to the insurance holding company laws of the state of New York.
The effects of catastrophes during 2022 increased our net loss ratio by 6.7 percentage points. 15 Table of Contents Government Regulation Holding Company Regulation We, as the parent of KICO, are subject to the insurance holding company laws of the state of New York.

… 141 more changes not shown on this page.

Item 2. Properties

Properties — owned and leased real estate

1 edited+1 added−0 removed1 unchanged
Biggest changeOur insurance underwriting business also maintains an executive office located at 70 East Sunrise Highway, Valley Stream, New York 11581, at which we lease 4,985 square feet of space. We own the building at which our insurance underwriting business principally operates, free of mortgage. ITEM 3. LEGAL PROCEEDINGS . None.
Biggest changeUntil March 2024, our insurance underwriting business also maintained an executive office located at 70 East Sunrise Highway, Valley Stream, New York 11581, at which we leased 4,985 square feet of space. In March 2024, the lease expired and was not renewed.
Added
We own the building and the surrounding property at which our insurance underwriting business principally operates, free of mortgage. The property consists of a complex which includes the office building discussed above, a house and vacant land located in Kingston, New York. In late 2023, the property was rezoned to allow for residential development. ITEM 3. LEGAL PROCEEDINGS. None.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

105 edited+66 added−35 removed34 unchanged
Biggest changeSee Note 2 to the consolidated financial statements following Item 16 of this Annual Report. 34 Table of Contents Consolidated Results of Operations The following table summarizes the changes in the results of our operations for the periods indicated: Years ended December 31, ($ in thousands) 2022 2021 Change Percent Revenues Direct written premiums $ 201,255 $ 181,665 $ 19,590 10.8 % Assumed written premiums - - - na % 201,255 181,665 19,590 10.8 % Ceded written premiums Ceded to quota share treaties (1) 47,409 23,510 23,899 101.7 % Ceded to excess of loss treaties 3,880 2,613 1,267 48.5 % Ceded to catastrophe treaties 27,906 26,787 1,119 4.2 % Total ceded written premiums 79,195 52,910 26,285 49.7 % Net written premiums 122,060 128,755 (6,695 ) (5.2 )% Change in unearned premiums Direct and assumed (9,733 ) (7,750 ) (1,983 ) (25.6 )% Ceded to quota share treaties (1) 2,058 22,877 (20,819 ) (91.0 )% Change in net unearned premiums (7,675 ) 15,127 (22,802 ) 150.7 % Premiums earned Direct and assumed 191,522 173,915 17,607 10.1 % Ceded to reinsurance treaties (77,137 ) (30,033 ) (47,104 ) (156.8 )% Net premiums earned 114,385 143,882 (29,497 ) (20.5 )% Ceding commission revenue (1) 19,319 90 19,229 21,365.6 % Net investment income 4,937 6,621 (1,684 ) (25.4 )% Net (losses) gains on investments (9,392 ) 9,787 (19,179 ) na % Other income 910 851 59 6.9 % Total revenues 130,159 161,231 (31,072 ) (19.3 )% Expenses Loss and loss adjustment expenses Direct and assumed: Loss and loss adjustment expenses excluding the effect of catastrophes 114,943 87,308 27,635 31.7 % Losses from catastrophes (2) 13,106 15,632 (2,526 ) (16.2 )% Total direct and assumed loss and loss adjustment expenses 128,048 102,940 25,109 24.4 % Ceded loss and loss adjustment expenses: Loss and loss adjustment expenses excluding the effect of catastrophes 34,185 155 34,030 21,954.8 % Losses from catastrophes (2) 5,474 813 4,661 573.3 % Total ceded loss and loss adjustment expenses 39,658 968 38,691 3,996.9 % Net loss and loss adjustment expenses: Loss and loss adjustment expenses excluding the effect of catastrophes 80,758 87,153 (6,395 ) (7.3 )% Losses from catastrophes (2) 7,632 14,819 (7,187 ) (48.5 )% Net loss and loss adjustment expenses 88,390 101,973 (13,582 ) (13.3 )% Commission expense 34,582 33,114 1,468 4.4 % Other underwriting expenses 26,697 26,254 443 1.7 % Other operating expenses 3,113 4,183 (1,070 ) (25.6 )% Depreciation and amortization 3,300 3,290 10 0.3 % Interest expense 2,019 1,826 193 10.6 % Total expenses 158,102 170,640 (12,538 ) (7.3 )% Loss before taxes (27,942 ) (9,409 ) (18,533 ) (197.0 )% Income tax benefit (5,418 ) (2,031 ) (3,387 ) (166.8 )% Net loss $ (22,525 ) $ (7,378 ) $ (15,147 ) (205.3 )% (Columns in the table above may not sum to totals due to rounding) (1) Effective December 31, 2021, we entered into a 30% personal lines quota share treaty.
Biggest changeWe believe that the above actions taken will continue to have the intended effect and will result in a return to annual profitability. 42 Table of Contents For the Three Months Ended September 30, 2022 December 31, 2022 March 31, 2023 June 30, 2023 September 30, 2023 December 31, 2023 (000’s except percentages and Policies in Force) Policies In Force, as of end of Three Month Period Core 71,705 71,359 72,081 70,132 68,498 67,575 Non-Core 22,007 20,695 18,945 16,224 13,457 10,823 Total policies in force 93,712 92,054 91,026 86,356 81,955 78,398 Direct written premiums Core $ 43,949 $ 43,923 $ 41,427 $ 42,211 $ 46,025 $ 47,027 Non-Core 10,642 9,978 6,170 5,435 5,966 5,911 Total direct written premiums $ 54,592 $ 53,901 $ 47,597 $ 47,647 $ 51,992 $ 52,938 Change from September 30, 2022 Core Policies In Force $ change na $ (346 ) $ 376 $ (1,573 ) $ (3,207 ) $ (4,130 ) % change na -0.5 % 0.5 % -2.2 % -4.5 % -5.8 % Direct written premiums $ change na $ (26 ) $ (2,522 ) $ (1,738 ) $ 2,076 $ 3,078 % change na -0.1 % -5.7 % -4.0 % 4.7 % 7.0 % Non- Core Policies In Force $ change na $ (1,312 ) $ (3,062 ) $ (5,783 ) $ (8,550 ) $ (11,184 ) % change na -6.0 % -13.9 % -26.3 % -38.9 % -50.8 % Direct written premiums $ change na $ (664 ) $ (4,472 ) $ (5,207 ) $ (4,676 ) $ (4,731 ) % change na -6.2 % -42.0 % -48.9 % -43.9 % -44.5 % (Components may not sum due to rounding) 43 Table of Contents Consolidated Results of Operations The following table summarizes the changes in the results of our operations for the periods indicated: Years ended December 31, ($ in thousands) 2023 2022 Change Percent Revenues Direct written premiums $ 200,175 $ 201,255 $ (1,080 ) (0.5 ) % Assumed written premiums - - - na % 200,175 201,255 (1,080 ) (0.5 )% Ceded written premiums Ceded to quota share treaties (1) 51,125 47,409 3,716 7.8 % Ceded to excess of loss treaties 7,122 3,880 3,242 83.6 % Ceded to catastrophe treaties 48,317 42,952 5,365 12.5 % Total ceded written premiums 106,564 94,241 12,323 13.1 % Net written premiums 93,611 107,014 (13,403 ) (12.5 )% Change in unearned premiums Direct and assumed 1,871 (9,733 ) 11,604 na % Ceded to quota share treaties (1) 18,903 17,104 1,799 10.5 % Change in net unearned premiums 20,774 7,371 13,403 181.8 % Premiums earned Direct and assumed 202,046 191,522 10,524 5.5 % Ceded to reinsurance treaties (87,661 ) (77,137 ) (10,524 ) (13.6 )% Net premiums earned 114,384 114,385 (1 ) - % Ceding commission revenue (1) 21,053 19,319 1,734 9.0 % Net investment income 6,009 4,937 1,072 21.7 % Net gains (losses) on investments 2,135 (9,392 ) 11,527 na % Other income 610 910 (300 ) (33.0 )% Total revenues 144,191 130,159 14,032 10.8 % Expenses Loss and loss adjustment expenses Direct and assumed: Loss and loss adjustment expenses excluding the effect of catastrophes 111,997 114,943 (2,946 ) (2.6 )% Losses from catastrophes (2) 11,944 13,106 (1,162 ) (8.9 )% Total direct and assumed loss and loss adjustment expenses 123,940 128,048 (4,108 ) (3.2 )% Ceded loss and loss adjustment expenses: Loss and loss adjustment expenses excluding the effect of catastrophes 37,302 34,185 3,117 9.1 % Losses from catastrophes (2) 3,789 5,474 (1,685 ) (30.8 )% Total ceded loss and loss adjustment expenses 41,091 39,658 1,432 3.6 % Net loss and loss adjustment expenses: Loss and loss adjustment expenses excluding the effect of catastrophes 74,694 80,758 (6,064 ) (7.5 )% Losses from catastrophes (2) 8,155 7,632 523 6.9 % Net loss and loss adjustment expenses 82,849 88,390 (5,541 ) (6.3 )% Commission expense 33,365 34,582 (1,217 ) (3.5 )% Other underwriting expenses 25,910 26,697 (787 ) (2.9 )% Other operating expenses 2,456 3,113 (657 ) (21.1 )% Depreciation and amortization 2,973 3,300 (327 ) (9.9 )% Interest expense 4,003 2,019 1,984 98.3 % Total expenses 151,556 158,102 (6,545 ) (4.1 )% Loss before taxes (7,365 ) (27,942 ) 20,577 73.6 % Income tax benefit (1,197 ) (5,418 ) 4,221 77.9 % Net loss $ (6,168 ) $ (22,525 ) $ 16,356 72.6 % (Columns in the table above may not sum to totals due to rounding) (1) Effective December 31, 2021, we entered into a 30% personal lines quota share treaty.
(2) KICO has placed certain residential mortgage-backed securities as eligible collateral in a designated custodian account related to its membership in the Federal Home Loan Bank of New York (“FHLBNY”) (see Note 9 – Debt - “Federal Home Loan Bank”). The eligible collateral would be pledged to FHLBNY if KICO draws an advance from the FHLBNY credit line.
(2) KICO has placed certain residential mortgage-backed securities as eligible collateral in a designated custodian account related to its membership in the Federal Home Loan Bank of New York ("FHLBNY") (see Note 9 – Debt - “Federal Home Loan Bank”). The eligible collateral would be pledged to FHLBNY if KICO draws an advance from the FHLBNY credit line.
Cosi retains the profit between the commission revenue received and the commission expense paid (“Net Cosi Revenue”). Commission expense is reduced by Net Cosi Revenue and Cosi-related operating expenses are included in other operating expenses.
Cosi retains the profit between the commission revenue received and the commission expense paid (“Net Cosi Revenue”). Commission expense is reduced by Net Cosi Revenue. Cosi-related operating expenses are minimal and are included in other operating expenses.
Without the prior approval of the DFS, dividends may be paid from unassigned surplus and are restricted to the lesser of 10% of surplus or 100% of investment income (on a statutory accounting basis) for the trailing 36 months, less dividends paid by KICO during such period.
Without the prior approval of the DFS, dividends may be paid by insurance carriers from unassigned surplus and are restricted to the lesser of 10% of surplus or 100% of investment income (on a statutory accounting basis) for the trailing 36 months, less dividends paid by KICO during such period.
(2) The years ended December 31, 2022 and 2021 include catastrophe losses, which are defined as losses from an event for which a catastrophe bulletin and related serial number has been issued by the Property Claims Services (PCS) unit of the Insurance Services Office (ISO).
(2) The years ended December 31, 2023 and 2022 include catastrophe losses, which are defined as losses from an event for which a catastrophe bulletin and related serial number has been issued by the Property Claims Services (PCS) unit of the Insurance Services Office (ISO).
Effective January 1, 2023, the Underlying XOL Treaty was renewed covering the period from January 1, 2023 through January 1, 2024.
Effective January 1, 2023, the Underlying XOL Treaty was renewed covering the period from January 1, 2023 through January 1, 2024. Effective January 1, 2024, the Underlying XOL Treaty was renewed covering the period from January 1, 2024 through January 1, 2025.
Inflation in excess of the levels we have assumed could cause loss and loss adjustment expenses to be higher than we anticipated, which would require us to increase reserves and reduce earnings. 57 Table of Contents Fluctuations in rates of inflation also influence interest rates, which in turn impact the market value of our investment portfolio and yields on new investments.
Inflation in excess of the levels we have assumed could cause loss and loss adjustment expenses to be higher than we anticipated, which would require us to increase reserves and reduce earnings. Fluctuations in rates of inflation also influence interest rates, which in turn impact the market value of our investment portfolio and yields on new investments.
Our ability to pay dividends depends, in part, on the ability of KICO to pay dividends to us. KICO, as an insurance subsidiary, is subject to significant regulatory restrictions limiting its ability to declare and pay dividends. These restrictions are related to surplus and net investment income.
Our ability to pay dividends depends, in part, on the ability of KICO to pay dividends to us. KICO, as an insurance subsidiary, is subject to significant regulatory restrictions limiting its ability to declare and pay dividends. In addition, there are restrictions related to surplus and net investment income.
As of December 31, 2022 and 2021, 65% and 62%, respectively, of the investment portfolio recorded at fair value was priced based upon quoted market prices. 51 Table of Contents The table below summarizes the gross unrealized losses of our fixed-maturity securities available-for-sale and equity securities by length of time the security has continuously been in an unrealized loss position as of December 31, 2022 and 2021: December 31, 2022 Less than 12 months 12 months or more Total Estimated No. of Estimated No. of Estimated Fair Unrealized Positions Fair Unrealized Positions Fair Unrealized Category Value Losses Held Value Losses Held Value Losses Fixed-Maturity Securities: U.S.
As of December 31, 2023 and 2022, 65% of the investment portfolio recorded at fair value was priced based upon quoted market prices. 63 Table of Contents The table below summarizes the gross unrealized losses of our fixed-maturity securities available-for-sale and equity securities by length of time the security has continuously been in an unrealized loss position as of December 31, 2023 and 2022: December 31, 2023 Less than 12 months 12 months or more Total Estimated No. of Estimated No. of Estimated Fair Unrealized Positions Fair Unrealized Positions Fair Unrealized Category Value Losses Held Value Losses Held Value Losses Fixed-Maturity Securities: U.S.
Recent Sales of Unregistered Securities None. Issuer Purchases of Equity Securities None. ITEM 6 . RESERVED . 30 Table of Contents ITEM 7 . MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS . Overview We offer property and casualty insurance products to individuals through our wholly owned subsidiary, Kingstone Insurance Company (“KICO”).
Recent Sales of Unregistered Securities None. 35 Table of Contents Issuer Purchases of Equity Securities None. ITEM 6 . RESERVED . ITEM 7 . MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS . Overview We offer property and casualty insurance products through our wholly-owned subsidiary, Kingstone Insurance Company (“KICO”).
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES . Market Information Our common stock is quoted on The Nasdaq Capital Market under the symbol “KINS.” Holders As of March 21, 2023, there were 243 record holders of our common stock.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES . Market Information Our common stock is quoted on The Nasdaq Capital Market under the symbol “KINS.” Holders As of March 21, 2024, there were 229 record holders of our common stock.
Material terms for our reinsurance treaties in effect for the treaty years shown below are as follows: Treaty Period 2023/2024 Treaty 2021/2023 Treaty July 1, January 1, July 1, December 31, July 1, December 31, 2023 2023 2022 2021 2021 2020 to to to to to to January 1, June 30, January 1, June 30, December 30, June 30, Line of Business 2024 2023 2023 2022 2021 2021 Personal Lines : Homeowners, dwelling fire and and canine legal liability Quota share treaty: Percent ceded (9) 30 % 30 % 30 % 30 % None (5) None (5) Risk retained on intial $1,000,000 of losses (5) (7) (8) (9) $ 700,000 $ 700,000 $ 700,000 $ 700,000 $ 1,000,000 $ 1,000,000 Losses per occurrence subject to quota share reinsurance coverage $ 1,000,000 $ 1,000,000 $ 1,000,000 $ 1,000,000 None (5) None (5) Expiration date January 1, 2024 January 1, 2024 January 1, 2023 January 1, 2023 NA (5) NA (5) Excess of loss coverage and facultative facility coverage (1) (7) (8 ) $ 8,400,000 $ 8,400,000 $ 8,400,000 $ 8,000,000 $ 8,000,000 in excess of in excess of in excess of in excess of in excess of $ 600,000 $ 600,000 $ 600,000 $ 1,000,000 $ 1,000,000 Total reinsurance coverage per occurrence (5) (7) (8) $ 500,000 $ 8,500,000 $ 8,500,000 $ 8,500,000 $ 8,000,000 $ 8,000,000 Losses per occurrence subject to reinsurance coverage (5) (8 ) $ 8,000,000 $ 9,000,000 $ 9,000,000 $ 9,000,000 $ 9,000,000 Expiration date (8 ) June 30, 2023 June 30, 2023 June 30, 2022 June 30, 2022 June 30, 2021 Catastrophe Reinsurance : Initial loss subject to personal lines quota share treaty (8) $ 10,000,000 $ 10,000,000 $ 10,000,000 $ 10,000,000 None (5) None (5) Risk retained per catastrophe occurrence (5) (9) (10) (8 ) $ 8,750,000 $ 7,400,000 $ 7,400,000 $ 10,000,000 $ 10,000,000 Catastrophe loss coverage in excess of quota share coverage (2) (5) (8 ) $ 335,000,000 $ 335,000,000 $ 490,000,000 $ 490,000,000 $ 475,000,000 Catastrophe stub coverage for the period from October 18, 2021 through December 31, 2021 (6) NA NA NA NA $ 5,000,000 NA in excess of $ 5,000,000 Reinstatement premium protection (3) (4) (8 ) Yes Yes Yes Yes Yes (1) For personal lines, includes the addition of an automatic facultative facility allowing KICO to obtain homeowners single risk coverage up to $9,000,000 in total insured value, which covers direct losses from $3,500,000 to $9,000,000 through June 30, 2023.
Material terms for our reinsurance treaties in effect for the treaty years shown below are as follows: Treaty Period 2024/2025 Treaty 2023/2024 Treaty 2021/2023 Treaty July 1, January 1, July 1, January 1, July 1, December 31, 2024 2024 2023 2023 2022 2021 to to to to to to January 1, June 30, January 1, June 30, January 1, June 30, Line of Business 2025 2024 2024 2023 2023 2022 Personal Lines: Homeowners, dwelling fire and canine legal liability Quota share treaty: Percent ceded (7) 27 % 27 % 30 % 30 % 30 % 30 % Risk retained on intial $1,000,000 of losses (5) (6) (7) $ 730,000 $ 730,000 $ 700,000 $ 700,000 $ 700,000 $ 700,000 Losses per occurrence subject to quota share reinsurance coverage $ 1,000,000 $ 1,000,000 $ 1,000,000 $ 1,000,000 $ 1,000,000 $ 1,000,000 Expiration date January 1, 2025 January 1, 2025 January 1, 2024 January 1, 2024 January 1, 2023 January 1, 2023 Excess of loss coverage and facultative facility coverage (1) (5) (6) $ 400,000 $ 8,400,000 $ 8,400,000 $ 8,400,000 $ 8,400,000 $ 8,400,000 in excess of in excess of in excess of in excess of in excess of in excess of $ 600,000 $ 600,000 $ 600,000 $ 600,000 $ 600,000 $ 600,000 Total reinsurance coverage per occurrence (5) (6) $ 470,000 $ 8,470,000 $ 8,500,000 $ 8,500,000 $ 8,500,000 $ 8,500,000 Losses per occurrence subject to reinsurance coverage (6) $ 1,000,000 $ 8,000,000 $ 8,000,000 $ 8,000,000 $ 9,000,000 $ 9,000,000 Expiration date (6) June 30, 2024 June 30, 2024 June 30, 2023 June 30, 2023 June 30, 2022 Catastrophe Reinsurance: Initial loss subject to personal lines quota share treaty (6) $ 10,000,000 $ 10,000,000 $ 10,000,000 $ 10,000,000 $ 10,000,000 $ 10,000,000 Risk retained per catastrophe occurrence (7) (8) (6) $ 9,500,000 $ 8,750,000 $ 8,750,000 $ 7,400,000 $ 7,400,000 Catastrophe loss coverage in excess of quota share coverage (2) (6) $ 315,000,000 $ 315,000,000 $ 335,000,000 $ 335,000,000 $ 490,000,000 Reinstatement premium protection (3) (4) (6) Yes Yes Yes Yes Yes (1) For personal lines, includes the addition of an automatic facultative facility allowing KICO to obtain homeowners single risk coverage up to $9,000,000 in total insured value, which covers direct losses from $3,500,000 to $9,000,000 through June 30, 2024.
During this time, KICO invests the premiums, earns investment income and generates net realized and unrealized investment gains and losses on investments. Our holding company earns investment income from its cash holdings and may also generate net realized and unrealized investment gains and losses on future investments. Our expenses include the insurance underwriting expenses of KICO and other operating expenses.
During this time, KICO invests the premiums, earns investment income and generates net realized and unrealized investment gains and losses on investments. Our holding company earns investment income from its cash holdings. Our expenses include the insurance underwriting expenses of KICO and other operating expenses.
Treasury Bills as required collateral for a sale leaseback transaction in a designated custodian account (see Note 9 - Debt - “Equipment Financing”). As of December 31, 2022, the estimated fair value of the eligible collateral was approximately $8,691,000.
Treasury Bills as required collateral for a sale leaseback transaction in a designated custodian account (see Note 9 - Debt - “Equipment Financing”). As of December 31, 2023 and 2022, the estimated fair value of the eligible collateral was approximately $6,999,000 and $8,691,000, respectively.
(10) Plus losses in excess of catastrophe coverage Treaty Year July 1, 2022 July 1, 2021 July 1, 2020 to to to Line of Business June 30, 2023 June 30, 2022 June 30, 2021 Personal Lines : Personal Umbrella Quota share treaty: Percent ceded - first $1,000,000 of coverage 90 % 90 % 90 % Percent ceded - excess of $1,000,000 dollars of coverage 95 % 95 % 95 % Risk retained $ 300,000 $ 300,000 $ 300,000 Total reinsurance coverage per occurrence $ 4,700,000 $ 4,700,000 $ 4,700,000 Losses per occurrence subject to quota share reinsurance coverage $ 5,000,000 $ 5,000,000 $ 5,000,000 Expiration date June 30, 2023 June 30, 2022 June 30, 2021 Commercial Lines (1): General liability commercial policies Quota share treaty None Risk retained $ 750,000 Excess of loss coverage above risk retained $ 3,750,000 in excess of $ 750,000 Total reinsurance coverage per occurrence $ 3,750,000 Losses per occurrence subject to reinsurance coverage $ 4,500,000 Commercial Umbrella Quota share treaty None (1) Coverage on all commercial lines policies expired in September 2020; reinsurance coverage is based on treaties in effect on the date of loss.
(8) Plus losses in excess of catastrophe coverage Treaty Year July 1, 2023 July 1, 2022 July 1, 2021 to to to Line of Business June 30, 2024 June 30, 2023 June 30, 2022 Personal Lines: Personal Umbrella Quota share treaty: Percent ceded - first $1,000,000 of coverage 90 % 90 % 90 % Percent ceded - excess of $1,000,000 dollars of coverage 95 % 95 % 95 % Risk retained $ 300,000 $ 300,000 $ 300,000 Total reinsurance coverage per occurrence $ 4,700,000 $ 4,700,000 $ 4,700,000 Losses per occurrence subject to quota share reinsurance coverage $ 5,000,000 $ 5,000,000 $ 5,000,000 Expiration date June 30, 2024 June 30, 2023 June 30, 2022 Commercial Lines (1) (1) Coverage on all commercial lines policies expired in September 2020; reinsurance coverage is based on treaties in effect on the date of loss.
As of December 31, 2022, the estimated fair value of the eligible investments was approximately $12,228,000. KICO will retain all rights regarding all securities if pledged as collateral.
As of December 31, 2023 and 2022, the estimated fair value of the eligible investments was approximately $11,412,000 and $12,228,000, respectively. KICO will retain all rights regarding all securities if pledged as collateral.
Upon the expiration of the 2021/2023 Treaty on January 1, 2023, we entered into a new quota share reinsurance treaty for our personal lines business, covering the period from January 1, 2023 through January 1, 2024 (“2023/2024 Treaty”). 55 Table of Contents We entered into new excess of loss and catastrophe reinsurance treaties effective July 1, 2022.
Upon the expiration of the 2023/2024 Treaty on January 1, 2024, we entered into a new 27% quota share reinsurance treaty for our personal lines business, covering the period from January 1, 2024 through January 1, 2025 (“2024/2025 Treaty”). 68 Table of Contents We entered into new excess of loss and catastrophe reinsurance treaties effective July 1, 2023.
Operating expenses, including salaries and benefits, generally are impacted by inflation. Year Ended 2022 included elevated economic inflation, which resulted in a significant increase in interest rates, a widening of credit spreads, lower public equity valuations, and significant financial market volatility.
Operating expenses, including salaries and benefits, generally are impacted by inflation. 70 Table of Contents Year Ended 2023 included continuing economic inflation, which resulted in a sustained increase in interest rates, a widening of credit spreads, lower public equity valuations, and significant financial market volatility.
We have also made underwriting changes to emphasize profitability over growth and have culled out the type of risks that do not generate an acceptable level of return. This action has led, and may continue to lead, to a slowdown in premium growth, particularly in new business. 58 Table of Contents ITEM 7A .
We have made underwriting changes to emphasize profitability over growth and have culled out the type of risks that do not generate an acceptable level of return. This action has led, and may continue to lead, to a slowdown in premium growth, particularly in new business. ITEM 7A . QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK .
Available collateral as of December 31, 2022 was approximately $12,228,000. Advances are limited to 85% of the amount of available collateral. There were no borrowings under this facility during the year ended December 31, 2022. 53 Table of Contents On December 15, 2022, we issued $19,950,000 of our 2022 Notes pursuant to the Exchange Agreement.
Advances are limited to 85% of the amount of available collateral. There were no borrowings under this facility during Year Ended 2023. 66 Table of Contents On December 15, 2022, we issued $19,950,000 of our 2022 Notes pursuant to the Exchange Agreement.
Treasury securities $ 1,228,560 $ 28,400 $ (34,077 ) $ - $ 1,222,883 18.5 % Political subdivisions of States, Territories and Possessions 498,638 2,092 - - 500,730 7.6 % Exchange traded debt 304,111 - (29,111 ) - 275,000 4.2 % Corporate and other bonds Industrial and miscellaneous 5,734,831 36,968 (809,746 ) (360,278 ) 4,601,775 69.7 % Total $ 7,766,140 $ 67,460 $ (872,934 ) $ (360,278 ) $ 6,600,388 100.0 % December 31, 2021 Cost or Gross Gross Unrealized Losses Estimated % of Amortized Unrealized Less than 12 More than 12 Fair Estimated Category Cost Gains Months Months Value Fair Value Held-to-Maturity Securities: U.S.
Treasury securities $ 1,228,560 $ 28,400 $ (34,077 ) $ - $ 1,222,883 18.5 % Political subdivisions of States, Territories and Possessions 498,638 2,092 - - 500,730 7.6 % Exchange traded debt 304,111 - (29,111 ) - 275,000 4.2 % Corporate and other bonds Industrial and miscellaneous 5,734,831 36,968 (809,746 ) (360,278 ) 4,601,775 69.7 % Total $ 7,766,140 $ 67,460 $ (872,934 ) $ (360,278 ) $ 6,600,388 100.0 % Held-to-maturity U.S.
Net underwriting expense ratio: The net underwriting expense ratio is a measure of an insurance company’s operational efficiency in administering its business. Expressed as a percentage, this is the ratio of the sum of acquisition costs (the most significant being commissions paid to our producers) and other underwriting expenses less ceding commission revenue less other income to net premiums earned.
Expressed as a percentage, this is the ratio of the sum of acquisition costs (the most significant being commissions paid to our producers) and other underwriting expenses less ceding commission revenue less other income to net premiums earned. Net combined ratio: The net combined ratio is a measure of an insurance company’s overall underwriting profit.
(9) For the 2021/2023 Treaty, 4% of the 30% total of losses ceded under this treaty are excluded from a named catastrophe event. For the 2023/2024 Treaty, 17.5% of the 30% total of losses ceded under this treaty are excluded from a named catastrophe event.
For the 2023/2024 Treaty, 17.5% of the 30% total of losses ceded under this treaty are excluded from a named catastrophe event. For the 2024/2025 Treaty, 22% of the 27% total of losses ceded under this treaty are excluded from a named catastrophe event.
The increase in cash used in operating activities is also attributable to the payment of $13,245,000 to reinsurers in Year Ended 2022 pursuant to the inception of our quota share reinsurance treaty, effective December 31, 2021. In addition, the increase of reinsurance recoverables by $26,173,000 also contributed to the increase in cash used during Year Ended 2022.
The increase in cash used in operating activities is also partially offset by the payment of $13,245,000 to reinsurers in Year Ended 2022 pursuant to the inception of our quota share reinsurance treaty, effective December 31, 2021.
PCS catastrophe bulletins are issued for events that cause more than $25 million in total insured losses and affect a significant number of policyholders and insurers. 35 Table of Contents Years ended December 31, 2022 2021 Percentage Point Change Percent Change Key ratios: Net loss ratio 77.3 % 70.9 % 6.4 9.0 % Net underwriting expense ratio 36.0 % 40.6 % (4.6 ) (11.3 )% Net combined ratio 113.3 % 111.5 % 1.8 1.6 % Direct Written Premiums Direct written premiums during the year ended December 31, 2022 (“Year Ended 2022”) were $201,255,000 compared to $181,665,000 during the year ended December 31, 2021 (“Year Ended 2021”).
PCS catastrophe bulletins are issued for events that cause more than $25 million in total insured losses and affect a significant number of policyholders and insurers. 44 Table of Contents Years Ended December 31, 2023 2022 Percentage Point Difference Percent Change Key ratios: Net loss ratio 72.4 % 77.3 % (4.9 ) (6.3 )% Net underwriting expense ratio 32.9 % 36.0 % (3.1 ) (8.6 )% Net combined ratio 105.3 % 113.3 % (8.0 ) (7.1 )% Direct Written Premiums Direct written premiums during the year ended December 31, 2023 (“Year Ended 2023”) were $200,175,000 compared to $201,255,000 during the year ended December 31, 2022 (“Year Ended 2022”).
See table below under “Additional Financial Information” summarizing net loss ratios by line of business. 39 Table of Contents Commission Expense Commission expense was $34,582,000 in Year Ended 2022 or 18.1% of direct earned premiums. Commission expense was $33,114,000 in Year Ended 2021 or 19.0% of direct earned premiums.
See table below under “Additional Financial Information” summarizing net loss ratios by line of business. 49 Table of Contents Commission Expense Commission expense was $33,365,000 in Year Ended 2023 or 16.5% of direct earned premiums. Commission expense was $34,582,000 in Year Ended 2022 or 18.1% of direct earned premiums.
The $1,939,000 increase in net cash used in financing activities was attributable to a $10,050,000 principal payment on the 2017 Notes and $1,758,000 of bond issue costs, both paid in connection with the Exchange Agreement.
The $4,395,000 decrease in net cash used in financing activities was attributable to a $10,050,000 principal payment on the 2017 Notes in 2022 and $1,758,000 of bond issue costs, both paid in connection with the Exchange Agreement with no similar payments in 2023.
In-force policies as of July 31, 2019 for these lines were non-renewed at the end of their annual terms. As of December 31, 2022 and 2021, there were no commercial liability policies in-force. As of December 31, 2022, these expired policies represent approximately 17.9% of loss and LAE reserves net of reinsurance recoverables. See discussion below under “Additional Financial Information”.
In-force policies as of July 31, 2019 for these lines were non-renewed at the end of their annual terms. As of December 31, 2023 and 2022, there were no commercial liability policies in-force. As of December 31, 2023, these expired policies represent approximately 15.8% of loss and LAE reserves net of reinsurance recoverables.
Treasury securities and obligations of U.S. government corporations and agencies $ 18,918,196 $ (6,928 ) 3 $ - - - $ 18,918,196 $ (6,928 ) Political subdivisions of States, Territories and Possessions 7,970,633 (2,195,273 ) 9 5,170,753 (1,771,494 ) 5 13,141,386 (3,966,767 ) Corporate and other bonds industrial and miscellaneous 56,910,104 (5,796,994 ) 75 15,172,381 (2,458,985 ) 15 72,082,485 (8,255,979 ) Residential mortgage and other asset backed securities 10,145,880 (882,664 ) 22 34,753,178 (7,150,803 ) 26 44,899,058 (8,033,467 ) Total fixed-maturity securities $ 93,944,813 $ (8,881,859 ) 109 $ 55,096,312 $ (11,381,282 ) 46 $ 149,041,125 $ (20,263,141 ) December 31, 2021 Less than 12 months 12 months or more Total Estimated No. of Estimated No. of Estimated Fair Unrealized Positions Fair Unrealized Positions Fair Unrealized Category Value Losses Held Value Losses Held Value Losses Fixed-Maturity Securities: U.S.
Treasury securities and obligations of U.S. government corporations and agencies $ 18,918,196 $ (6,928 ) 3 $ - $ - - $ 18,918,196 $ (6,928 ) Political subdivisions of States, Territories and Possessions 7,970,633 (2,195,273 ) 9 5,170,753 (1,771,494 ) 5 13,141,386 (3,966,767 ) Corporate and other bonds industrial and miscellaneous 56,910,104 (5,796,994 ) 75 15,172,381 (2,458,985 ) 15 72,082,485 (8,255,979 ) Residential mortgage and other asset backed securities 10,145,880 (882,664 ) 22 34,753,178 (7,150,803 ) 26 44,899,058 (8,033,467 ) Total fixed-maturity securities $ 93,944,813 $ (8,881,859 ) 109 $ 55,096,312 $ (11,381,282 ) 46 $ 149,041,125 $ (20,263,141 ) 65 Table of Contents There were 140 securities at December 31, 2023 that accounted for the gross unrealized loss of our fixed-maturity securities available-for-sale, none of which were deemed to be credit losses by us.
There were 48 securities at December 31, 2021 that accounted for the gross unrealized loss of our fixed-maturity securities available-for-sale, none of which were deemed by us to be other than temporarily impaired.
There were 155 securities at December 31, 2022 that accounted for the gross unrealized loss of our fixed-maturity securities available-for-sale, none of which were deemed to be credit losses by us.
The $25,262,000 decrease in cash flows provided by operating activities in Year Ended 2022 as compared to Year Ended 2021 was primarily the result of a decrease in cash arising from net fluctuations in operating assets and liabilities, partially offset by net loss (adjusted for non-cash items) of $4,073,000.
The $10,411,000 increase in cash flows used in operating activities in Year Ended 2023 as compared to Year Ended 2022 was primarily the result of an increase in cash used arising from net fluctuations in operating assets and liabilities, partially offset by a decrease in net loss (adjusted for non-cash items) of $5,029,000.
Net combined ratio: The net combined ratio is a measure of an insurance company’s overall underwriting profit. This is the sum of the net loss and net underwriting expense ratios. If the net combined ratio is at or above 100 percent, an insurance company cannot be profitable without investment income, and may not be profitable if investment income is insufficient.
This is the sum of the net loss and net underwriting expense ratios. If the net combined ratio is at or above 100 percent, an insurance company cannot be profitable without investment income, and may not be profitable if investment income is insufficient. Underwriting income: Underwriting income is net pre-tax income attributable to our insurance underwriting business before investment activity.
For the year ended December 31, 2022, the primary source of cash flow for our holding company was the dividends received from KICO, subject to statutory restrictions. For the year ended December 31, 2022, KICO paid dividends of $5,250,000 to us.
The primary source of cash flow for our holding company are dividends and distributions received from KICO, which are subject to statutory restrictions. For the year ended December 31, 2023, KICO paid a dividend of $1,250,000 to us.
Net (Losses) Gains on Investments Net losses on investments were $(9,392,000) in Year Ended 2022 compared to net gains of $9,787,000 in Year Ended 2021. Unrealized losses on our equity securities and other investments in Year Ended 2022 were $(9,252,000), compared to net unrealized gains of $2,469,000 in Year Ended 2021.
Unrealized gains on our equity securities and other investments in Year Ended 2023 were $2,153,000, compared to unrealized (losses) of $(9,252,000) in Year Ended 2022. Net realized (losses) on sales of investments were $(19,000) in Year Ended 2023 compared to net realized (losses) of $(140,000) in Year Ended 2022.
Treasury securities are held in trust pursuant to various states’ minimum fund requirements. 49 Table of Contents A summary of the amortized cost and estimated fair value of our investments in held-to-maturity securities by contractual maturity as of December 31, 2022 and 2021 is shown below: December 31, 2022 December 31, 2021 Amortized Estimated Amortized Estimated Remaining Time to Maturity Cost Fair Value Cost Fair Value Less than one year $ 708,535 $ 743,575 $ 994,712 $ 1,008,180 One to five years 1,120,507 1,088,522 1,205,829 1,290,465 Five to ten years 1,402,704 1,200,720 1,513,942 1,648,808 More than 10 years 4,534,394 3,567,571 4,551,851 4,805,706 Total $ 7,766,140 $ 6,600,388 $ 8,266,334 $ 8,753,159 Credit Rating of Fixed-Maturity Securities The table below summarizes the credit quality of our available-for-sale fixed-maturity securities as of December 31, 2022 and 2021 as rated by Standard and Poor’s (or, if unavailable from Standard and Poor’s, then Moody’s, Fitch, or Kroll): December 31, 2022 December 31, 2021 Estimated Percentage of Estimated Percentage of Fair Estimated Fair Estimated Value Fair Value Value Fair Value Rating U.S.
Treasury securities are held in trust pursuant to various states’ minimum fund requirements. 60 Table of Contents A summary of the amortized cost and estimated fair value of our investments in held-to-maturity securities by contractual maturity as of December 31, 2023 and 2022 is shown below: December 31, 2023 December 31, 2022 Amortized Estimated Amortized Estimated Remaining Time to Maturity Cost Fair Value Cost Fair Value Less than one year $ - $ - $ 708,535 $ 743,575 One to five years 1,121,288 1,097,101 1,120,507 1,088,522 Five to ten years 1,414,911 1,270,770 1,402,704 1,200,720 More than 10 years 4,516,342 3,738,277 4,534,394 3,567,571 Total $ 7,052,541 $ 6,106,148 $ 7,766,140 $ 6,600,388 61 Table of Contents Credit Rating of Fixed-Maturity Securities The table below summarizes the credit quality of our available-for-sale fixed-maturity securities as of December 31, 2023 and 2022 as rated by Standard and Poor’s (or, if unavailable from Standard and Poor’s, then Moody’s, Fitch, or Kroll): December 31, 2023 December 31, 2022 Estimated Percentage of Estimated Percentage of Fair Estimated Fair Estimated Value Fair Value Value Fair Value Rating U.S.
See “Business – Government Regulation”, “Risk Factors – As a holding company, we are dependent on the results of operations of our subsidiary, KICO; there are restrictions on the payment of dividends by KICO” and “Management’s Discussion and Analysis of Financial Condition and Results of Operation – Liquidity” in Items 1, 1A and 7, respectively, of this Annual Report.
See “Business – Government Regulation”, “Risk Factors – As a holding company, we are dependent on the results of operations of our subsidiary, KICO; there are restrictions on the payment of dividends by KICO; our ability to pay the principal amount of the 2022 Notes on the due date of December 30, 2024 may be limited by these regulatory constraints” and “Management’s Discussion and Analysis of Financial Condition and Results of Operation – Liquidity” in Items 1, 1A and 7, respectively, of this Annual Report.
Other Underwriting Expenses Other underwriting expenses were $26,697,000, or 13.9% of direct earned premiums, in Year Ended 2022 compared to $26,254,000, or 15.1% of direct earned premiums, in Year Ended 2021.
Other Underwriting Expenses Other underwriting expenses were $25,910,000, or 12.8% of direct earned premiums, in Year Ended 2023 compared to $26,697,000, or 13.9% of direct earned premiums, in Year Ended 2022.
The preparation of financial statements in conformity with GAAP requires our management to make estimates and assumptions in certain circumstances that affect amounts reported in our consolidated financial statements and related notes.
Critical Accounting Estimates Our consolidated financial statements include the accounts of Kingstone Companies, Inc. and all majority-owned and controlled subsidiaries. The preparation of financial statements in conformity with GAAP requires our management to make estimates and assumptions in certain circumstances that affect amounts reported in our consolidated financial statements and related notes.
Policy acquisition costs include commissions paid to producers, premium taxes, and other expenses related to the underwriting process, including employees’ compensation and benefits. Other operating expenses include our corporate expenses as a holding company and operating expenses of Cosi. These corporate expenses include legal and auditing fees, executive employment costs, and other costs directly associated with being a public company.
Policy acquisition costs include commissions paid to producers, premium taxes, and other expenses related to the underwriting process, including employees’ compensation and benefits. Other operating expenses include our corporate expenses as a holding company.
The net fluctuations in assets and liabilities are related to operating activities of KICO as affected by growth or declines in its operations, payments on claims and other changes, which are described above. Net cash used investing activities was $5,906,000 in Year Ended 2022 compared to $15,948,000 used in investing activities in Year Ended 2021.
The net fluctuations in assets and liabilities are related to operating activities of KICO as affected by growth or declines in its operations, payments on claims and other changes, which are described above.
The following table shows the individual components of our net underwriting expense ratio for the periods indicated: Years ended December 31, Percentage 2022 2021 Point Change Other underwriting expenses Employment costs 9.4 % 7.1 % 2.3 Underwriting fees (inspections/surveys) 1.7 1.3 0.4 IT expenses 3.9 3.2 0.7 Professional fees 1.3 1.2 0.1 Other expenses 7.0 5.5 1.5 Total other underwriting expenses 23.3 18.3 5.0 Commission expense 30.2 23.0 7.2 Ceding commission revenue Provisional (16.7 ) (0.2 ) (16.5 ) Contingent (0.2 ) 0.1 (0.3 ) Total ceding commission revenue (16.9 ) (0.1 ) (16.8 ) Other income (0.7 ) (0.6 ) (0.1 ) Net underwriting expense ratio 36.0 % 40.6 % (4.6 ) (Components may not sum to totals due to rounding) 40 Table of Contents The overall 16.8 percentage point increase in the benefit from ceding commissions in Year Ended 2022 was driven by the increase in provisional ceding commission revenue due to the inception of the 2021/2023 Treaty on December 31, 2021.
The following table shows the individual components of our net underwriting expense ratio for the periods indicated: Years ended December 31, Percentage 2023 2022 Point Change Other underwriting expenses Employment costs 9.9 % 9.4 % 0.5 Underwriting fees (inspections/surveys) 1.6 1.7 (0.1 ) IT expenses 2.9 3.9 (1.0 ) Professional fees 1.1 1.3 (0.2 ) Other expenses 7.1 7.0 0.1 Total other underwriting expenses 22.6 23.3 (0.7 ) Commission expense 29.2 30.2 (1.0 ) Ceding commission revenue Provisional (17.8 ) (16.7 ) (1.1 ) Contingent (0.6 ) (0.2 ) (0.4 ) Total ceding commission revenue (18.4 ) (16.9 ) (1.5 ) Other income (0.5 ) (0.7 ) 0.2 Net underwriting expense ratio 32.9 % 36.0 % (3.1 ) (Components may not sum to totals due to rounding) 51 Table of Contents Other Operating Expenses Other operating expenses, related to the expenses of our holding company and Cosi, were $2,456,000 for Year Ended 2023 compared to $3,113,000 for Year Ended 2022.
Cash flow and liquidity are categorized into three sources: (1) operating activities; (2) investing activities; and (3) financing activities, which are shown in the following table: Years ended December 31, 2022 2021 Cash flows (used in) provided by: Operating activities $ (915,521 ) $ 24,346,237 Investing activities (5,905,779 ) (15,947,862 ) Financing activities (5,511,070 ) (3,571,519 ) Net (decrease) increase in cash and cash equivalents (12,332,370 ) 4,826,856 Cash and cash equivalents, beginning of period 24,290,598 19,463,742 Cash and cash equivalents, end of period $ 11,958,228 $ 24,290,598 Net cash used in operating activities was $916,000 in Year Ended 2022 as compared to $24,346,000 provided by operating activities in Year Ended 2021.
Cash flow and liquidity are categorized into three sources: (1) operating activities; (2) investing activities; and (3) financing activities, which are shown in the following table: Years ended December 31, 2023 2022 Cash flows (used in) provided by: Operating activities $ (11,326,850 ) $ (915,521 ) Investing activities 9,461,700 (5,905,779 ) Financing activities (1,116,080 ) (5,511,070 ) Net decrease in cash and cash equivalents (2,981,230 ) (12,332,370 ) Cash and cash equivalents, beginning of period 11,958,228 24,290,598 Cash and cash equivalents, end of period $ 8,976,998 $ 11,958,228 Net cash used in operating activities was $11,327,000 in Year Ended 2023 as compared to $916,000 used in operating activities in Year Ended 2022.
For the period July 1, 2021 through June 30, 2022, reinstatement premium protection for $70,000,000 of catastrophe coverage in excess of $10,000,000.
(3) For the period December 31, 2021 through June 30, 2022, reinstatement premium protection for $70,000,000 of catastrophe coverage in excess of $10,000,000. 69 Table of Contents (4) For the period July 1, 2022 through June 30, 2023, reinstatement premium protection for $9,800,000 of catastrophe coverage in excess of $10,000,000.
Net Written Premiums and Net Premiums Earned Effective December 31, 2021, we entered into a quota share reinsurance treaty for our personal lines business covering the period from December 31, 2021 through January 1, 2023 (“2021/2023 Treaty”). There was no quota share reinsurance treaty in effect in Year Ended 2021.
Quota share reinsurance treaties Effective December 31, 2021, we entered into a quota share reinsurance treaty for our personal lines business covering the period from December 31, 2021 through January 1, 2023 (“2021/2023 Treaty”).
Cosi operating expenses primarily include employment costs, occupancy costs and consulting costs. 32 Table of Contents Stock-based compensation: Non-cash equity compensation includes the fair value of stock grants issued to our directors, officers and employees, and amortization of stock options issued to the same.
These expenses include executive employment costs, legal and auditing fees, and other costs directly associated with being a public company. Cosi operating expenses primarily include employment costs, occupancy costs and consulting costs. Stock-based compensation: Non-cash equity compensation includes the fair value of stock grants issued to our directors, officers and employees, and amortization of stock options issued to the same.
Catastrophe reinsurance treaties Most of the premiums written under our personal lines policies are also subject to our catastrophe treaties. An increase in our personal lines business gives rise to more property exposure, which increases our exposure to catastrophe risk; therefore, our premiums ceded under catastrophe treaties will increase.
An increase in our personal lines business gives rise to more property exposure, which increases our exposure to catastrophe risk; therefore, our premiums ceded under catastrophe treaties will increase. An increase in our personal lines business results in an increase in premiums ceded under our catastrophe treaties if reinsurance rates are stable or are increasing.
Additional Financial Information We operate our business as one segment, property and casualty insurance. Within this segment, we offer an array of property and casualty policies to our producers.
Within this segment, we offer an array of property and casualty policies to our producers.
Accordingly, for a one-year policy written on July 1, 2022, we would earn half of the premiums in 2022 and the other half in 2023. 31 Table of Contents Ceding commission revenue: Commissions on reinsurance premiums ceded to quota share treaties are earned in a manner consistent with the recognition of the direct acquisition costs of the underlying insurance policies, generally on a pro-rata basis over the terms of the policies reinsured.
Ceding commission revenue: Commissions on reinsurance premiums ceded to quota share treaties are earned in a manner consistent with the recognition of the direct acquisition costs of the underlying insurance policies, generally on a pro-rata basis over the terms of the policies reinsured.
As of December 31, 2022, KICO had a negative unassigned surplus of $5,069,000 and will not be able pay any distributions to us without prior regulatory approval.
As of December 31, 2023, KICO had a negative unassigned surplus and currently will not be able to pay any distributions to us without prior regulatory approval. In September 2023, KICO received regulatory approval and paid us a $2,700,000 distribution from paid in capital.
The increase of $19,229,000 was due to an increase in both provisional ceding commissions earned and contingent ceding commissions earned.
The increase of $1,734,000 was due to an increase in both provisional ceding commissions earned and contingent ceding commissions earned. See below for a discussion of provisional ceding commissions earned and contingent ceding commissions earned.
(2) Catastrophe coverage is limited on an annual basis to two times the per occurrence amounts. Duration of 168 consecutive hours for a catastrophe occurrence from windstorm, hail, tornado, hurricane and cyclone. (3) For the period July 1, 2020 through June 30, 2021, reinstatement premium protection for $70,000,000 of catastrophe coverage in excess of $10,000,000.
(2) Catastrophe coverage is limited on an annual basis to two times the per occurrence amounts. Duration of 168 consecutive hours for a catastrophe occurrence from windstorm, hail, tornado, hurricane and cyclone.
Effective January 1, 2022, we entered into an underlying excess of loss reinsurance treaty covering the period from January 1, 2022 through January 1, 2023. The treaty provides 50% reinsurance coverage for losses of $400,000 in excess of $600,000. Losses from named storms are excluded from the treaty.
The increase was due to an increase in subject premiums and the heightened cost of coverage obtained. Effective January 1, 2022, we entered into an underlying XOL reinsurance treaty covering the period from January 1, 2022 through January 1, 2023. The treaty provides 50% reinsurance coverage for losses of $400,000 in excess of $600,000.
We are required to make a mandatory redemption of 2022 Notes on December 30, 2023 as discussed in Note 9 – Debt of the consolidated financial statements included in this Annual Report.
The Exchange Agreement provided for a mandatory redemption payment with regard to the 2022 Notes on December 30, 2023 in an amount discussed in Note 9 – Debt of the consolidated financial statements included in this Annual Report.
For the year ended December 31, 2022, 80.6% of KICO’s direct written premiums came from the New York policies. In addition, our subsidiary, Cosi Agency, Inc. (“Cosi”), a multi-state licensed general agency, receives commission revenue from KICO for the policies it places with others and pays commissions to these agencies.
We refer to our New York business as our “Core” business and the business outside of New York as our “non-Core” business. In addition, our subsidiary, Cosi Agency, Inc. (“Cosi”), a multi-state licensed general agency, receives commission revenue from KICO for the policies it places with others and pays commissions to these agencies.
Treasury securities and obligations of U.S. government corporations and agencies (1) $ 23,874,545 $ 1,479 $ (6,928 ) $ - $ 23,869,096 15.4 % Political subdivisions of States, Territories and Possessions 17,108,154 - (2,195,273 ) (1,771,494 ) 13,141,387 8.5 % Corporate and other bonds Industrial and miscellaneous 80,338,464 - (5,796,994 ) (2,458,985 ) 72,082,485 46.6 % Residential mortgage and other asset backed securities (2) 53,597,264 58,398 (882,664 ) (7,150,803 ) 45,622,195 29.5 % Total fixed-maturity securities $ 174,918,427 $ 59,877 $ (8,881,859 ) $ (11,381,282 ) $ 154,715,163 100.0 % December 31, 2021 Cost or Gross Gross Unrealized Losses Estimated % of Amortized Unrealized Less than 12 More than 12 Fair Estimated Category Cost Gains Months Months Value Fair Value Political subdivisions of States, Territories and Possessions $ 17,236,750 $ 246,748 $ (197,984 ) $ - $ 17,285,514 10.9 % Corporate and other bonds Industrial and miscellaneous 80,534,769 2,603,411 (126,926 ) - 83,011,254 52.5 % Residential mortgage and other asset backed securities (2) 58,036,959 355,985 (489,258 ) (120,344 ) 57,783,342 36.6 % Total fixed-maturity securities $ 155,808,478 $ 3,206,144 $ (814,168 ) $ (120,344 ) $ 158,080,110 100.0 % (1) In October 2022, KICO placed certain U.S.
Treasury securities and obligations of U.S. government corporations and agencies (1) $ 23,874,545 $ 1,479 $ (6,928 ) $ - $ 23,869,096 15.4 % Political subdivisions of States, Territories and Possessions 17,108,154 - (2,195,273 ) (1,771,494 ) 13,141,387 8.5 % Corporate and other bonds Industrial and miscellaneous 80,338,464 - (5,796,994 ) (2,458,985 ) 72,082,485 46.6 % Residential mortgage and other asset backed securities (2) 53,597,264 58,398 (882,664 ) (7,150,803 ) 45,622,195 29.5 % Total fixed-maturity securities $ 174,918,427 $ 59,877 $ (8,881,859 ) $ (11,381,282 ) $ 154,715,163 100.0 % (1) In October 2022, KICO placed certain U.S.
Ceding Commission Revenue The following table summarizes the changes in the components of ceding commission revenue (in thousands) for the periods indicated: Years ended December 31, ($ in thousands) 2022 2021 Change Percent Provisional ceding commissions earned $ 19,106 $ 234 $ 18,872 8,065.0 % Contingent ceding commissions earned 214 (144 ) 358 n/a % Total ceding commission revenue $ 19,319 $ 90 $ 19,229 21,365.6 % (Columns in the table above may not sum to totals due to rounding) Ceding commission revenue was $19,319,000 in Year Ended 2022 compared to $90,000 in Year Ended 2021.
Net premiums earned Net premiums earned remained flat at $114,384,000 in Year Ended 2023 compared to $114,385,000 in Year Ended 2022. 46 Table of Contents Ceding Commission Revenue The following table summarizes the changes in the components of ceding commission revenue (in thousands) for the periods indicated: Years ended December 31, ($ in thousands) 2023 2022 Change Percent Provisional ceding commissions earned $ 20,397 $ 19,106 $ 1,291 6.8 % Contingent ceding commissions earned 656 214 442 206.5 % Total ceding commission revenue $ 21,053 $ 19,319 $ 1,734 9.0 % (Columns in the table above may not sum to totals due to rounding) Ceding commission revenue was $21,053,000 in Year Ended 2023 compared to $19,319,000 in Year Ended 2022.
Policy acquisition costs are deferred and recognized as expense as the related premiums are earned. Other underwriting expenses represent general and administrative expenses of our insurance business and are comprised of other costs associated with our insurance activities such as regulatory fees, telecommunication and technology costs, occupancy costs, employment costs, and legal and auditing fees.
Other underwriting expenses represent general and administrative expenses of our insurance business and are comprised of other costs associated with our insurance activities such as regulatory fees, telecommunication and technology costs, occupancy costs, employment costs, and legal and auditing fees. 37 Table of Contents Other operating expenses: Other operating expenses include the corporate expenses of our holding company, Kingstone Companies, Inc., and operating expenses of Cosi.
Treasury securities $ 23,869,096 15.4 % $ - 0.0 % Corporate and municipal bonds AAA 1,824,478 1.2 % 1,321,809 0.8 % AA 9,785,908 6.3 % 11,532,572 7.3 % A 31,099,075 20.2 % 38,272,571 24.2 % BBB+ 16,682,159 10.8 % 17,936,359 11.3 % BBB 19,664,051 12.7 % 25,161,776 15.9 % BBB- 4,516,713 2.9 % 4,193,401 2.7 % Total corporate and municipal bonds 83,572,384 54.1 % 98,418,488 62.2 % Residential mortgage backed, asset backed, and other collateralized obligations AAA 16,497,621 10.7 % 17,350,192 11.0 % AA 23,062,233 14.9 % 34,241,907 21.7 % A 6,722,902 4.3 % 6,306,161 4.0 % BBB 20,067 0.0 % 24,254 0.0 % CCC 457,683 0.3 % 664,628 0.4 % CC 99,600 0.1 % 125,412 0.1 % D 40,474 0.0 % 55,306 0.0 % Non rated 373,103 0.2 % 893,762 0.6 % Total residential mortgage backed, asset backed, and other collateralized obligations 47,273,683 30.5 % 59,661,622 37.8 % Total $ 154,715,163 100.0 % $ 158,080,110 100.0 % 50 Table of Contents The table below details the average yield by type of fixed-maturity security as of December 31, 2022 and 2021: Category December 31, 2022 December 31, 2021 U.S.
Treasury securities $ 20,939,190 14.1 % $ 23,869,096 15.4 % Corporate and municipal bonds AAA 1,836,736 1.2 % 1,824,478 1.2 % AA 9,872,346 6.6 % 9,785,908 6.3 % A 33,228,327 22.4 % 31,099,075 20.2 % BBB+ 15,042,200 10.1 % 16,682,159 10.8 % BBB 21,826,125 14.7 % 19,664,051 12.7 % BBB- - 0.0 % 4,516,713 2.9 % Total corporate and municipal bonds 81,805,734 54.9 % 83,572,384 54.1 % Residential mortgage backed, asset backed, and other collateralized obligations AAA 12,766,471 8.6 % 16,497,621 10.7 % AA 22,102,169 14.8 % 23,062,233 14.9 % A 6,390,752 4.3 % 6,722,902 4.3 % BBB+ 15,168 0.0 % - 0.0 % BBB - 0.0 % 20,067 0.0 % CCC 413,601 0.3 % 457,683 0.3 % CC 91,390 0.1 % 99,600 0.1 % D - 0.0 % 40,474 0.0 % Non rated 4,396,322 3.0 % 373,103 0.2 % Total residential mortgage backed, asset backed, and other collateralized obligations 46,175,873 31.0 % 47,273,683 30.5 % Total $ 148,920,797 100.0 % $ 154,715,163 100.0 % 62 Table of Contents The table below details the average yield by type of fixed-maturity security as of December 31, 2023 and 2022: Category December 31, 2023 December 31, 2022 U.S.
(4) See discussions above with regard to “Net Loss and LAE”, as to catastrophe losses in the years ended December 31, 2022 and 2021. 43 Table of Contents Insurance Underwriting Business on a Standalone Basis Our insurance underwriting business reported on a standalone basis for the years ended December 31, 2022 and 2021 follows: Years ended December 31, 2022 2021 Revenues Net premiums earned $ 114,384,531 $ 143,881,719 Ceding commission revenue 19,319,391 89,681 Net investment income 4,936,778 6,621,392 Net (losses) gains on investments (9,231,170 ) 9,627,948 Other income 815,952 849,155 Total revenues 130,225,482 161,069,895 Expenses Loss and loss adjustment expenses 88,390,042 101,972,596 Commission expense 34,581,617 33,114,103 Other underwriting expenses 26,697,006 26,254,143 Depreciation and amortization 3,252,134 3,150,489 Total expenses 152,920,799 164,491,331 Loss from operations (22,695,317 ) (3,421,436 ) Income tax benefit (4,588,283 ) (877,002 ) Net loss $ (18,107,034 ) $ (2,544,434 ) Key Measures: Net loss ratio 77.3 % 70.9 % Net underwriting expense ratio 36.0 % 40.6 % Net combined ratio 113.3 % 111.5 % Reconciliation of net underwriting expense ratio: Acquisition costs and other underwriting expenses $ 61,278,623 $ 59,368,246 Less: Ceding commission revenue (19,319,391 ) (89,681 ) Less: Other income (815,952 ) (849,155 ) Net underwriting expenses $ 41,143,280 $ 58,429,410 Net premiums earned $ 114,384,531 $ 143,881,719 Net Underwriting Expense Ratio 36.0 % 40.6 % 44 Table of Contents An analysis of our direct, assumed and ceded earned premiums, loss and loss adjustment expenses, and loss ratios is shown below: Direct Assumed Ceded Net Year ended ended December 31, 2022 Written premiums $ 201,254,837 $ - $ (79,195,016 ) $ 122,059,821 Change in unearned premiums (9,733,170 ) - 2,057,880 (7,675,290 ) Earned premiums $ 191,521,667 $ - $ (77,137,136 ) $ 114,384,531 Loss and loss adjustment expenses excluding the effect of catastrophes $ 114,942,807 $ - $ (34,184,616 ) $ 80,758,191 Catastrophe loss 13,105,600 - (5,473,749 ) 7,631,851 Loss and loss adjustment expenses $ 128,048,407 $ - $ (39,658,365 ) $ 88,390,042 Loss ratio excluding the effect of catastrophes 60.0 % 0.0 % 44.3 % 70.6 % Catastrophe loss 6.8 % 0.0 % 7.1 % 6.7 % Loss ratio 66.9 % 0.0 % 51.4 % 77.3 % Year ended ended December 31, 2021 Written premiums $ 181,665,178 $ - $ (52,909,694 ) $ 128,755,484 Change in unearned premiums (7,750,334 ) - 22,876,569 15,126,235 Earned premiums $ 173,914,844 $ - $ (30,033,125 ) $ 143,881,719 Loss and loss adjustment expenses excluding the effect of catastrophes $ 87,308,372 $ - $ (155,322 ) $ 87,153,050 Catastrophe loss 15,632,444 - (812,898 ) 14,819,546 Loss and loss adjustment expenses $ 102,940,816 $ - $ (968,220 ) $ 101,972,596 Loss ratio excluding the effect of catastrophes 50.2 % 0.0 % 0.5 % 60.6 % Catastrophe loss 9.0 % 0.0 % 2.7 % 10.3 % Loss ratio 59.2 % 0.0 % 3.2 % 70.9 % (Percentage components may not sum to totals due to rounding) 45 Table of Contents The key measures for our insurance underwriting business for the years ended December 31, 2022 and 2021 are as follows: Years ended December 31, 2022 2021 Net premiums earned $ 114,384,531 $ 143,881,719 Ceding commission revenue 19,319,391 89,681 Other income 815,952 849,155 Loss and loss adjustment expenses (1) 88,390,042 101,972,596 Acquisition costs and other underwriting expenses: Commission expense 34,581,617 33,114,103 Other underwriting expenses 26,697,006 26,254,143 Total acquisition costs and other underwriting expenses 61,278,623 59,368,246 Underwriting loss $ (15,148,791 ) $ (16,520,287 ) Key Measures: Net loss ratio excluding the effect of catastrophes 70.6 % 60.6 % Effect of catastrophe loss on net loss ratio (1) 6.7 % 10.3 % Net loss ratio 77.3 % 70.9 % Net underwriting expense ratio excluding the effect of catastrophes 36.0 % 40.6 % Effect of catastrophe loss on net underwriting expense ratio 0.0 % 0.0 % Net underwriting expense ratio 36.0 % 40.6 % Net combined ratio excluding the effect of catastrophes 106.6 % 101.2 % Effect of catastrophe loss on net combined ratio (1) 6.7 % 10.3 % Net combined ratio 113.3 % 111.5 % Reconciliation of net underwriting expense ratio: Acquisition costs and other underwriting expenses $ 61,278,623 $ 59,368,246 Less: Ceding commission revenue (19,319,391 ) (89,681 ) Less: Other income (815,952 ) (849,155 ) $ 41,143,280 $ 58,429,410 Net earned premium $ 114,384,531 $ 143,881,719 Net Underwriting Expense Ratio 36.0 % 40.6 % (1) For the years ended December 31, 2022 and 2021, includes the sum of net catastrophe losses and loss adjustment expenses of $7,631,851 and $14,819,546, respectively. 46 Table of Contents Investments Portfolio Summary The following table presents a breakdown of the amortized cost, estimated fair value, and unrealized gains and losses of our investments in fixed-maturity securities classified as available-for-sale as of December 31, 2022 and 2021: Available-for-Sale Securities December 31, 2022 Cost or Gross Gross Unrealized Losses Estimated % of Amortized Unrealized Less than 12 More than 12 Fair Estimated Category Cost Gains Months Months Value Fair Value U.S.
(3) See discussions above with regard to “Net Loss and LAE”, as to catastrophe losses in the years ended December 31, 2023 and 2022. 54 Table of Contents Insurance Underwriting Business on a Standalone Basis Our insurance underwriting business reported on a standalone basis for the years ended December 31, 2023 and 2022 follows: Years ended December 31, 2023 2022 Revenues Net premiums earned $ 114,384,263 $ 114,384,531 Ceding commission revenue 21,053,494 19,319,391 Net investment income 6,008,682 4,936,778 Net gains (losses) on investments 1,978,373 (9,231,170 ) Other income 600,993 815,952 Total revenues 144,025,805 130,225,482 Expenses Loss and loss adjustment expenses 82,849,210 88,390,042 Commission expense 33,364,629 34,581,617 Other underwriting expenses 25,909,962 26,697,006 Depreciation and amortization 2,973,440 3,252,134 Interest expense 434,155 83,732 Total expenses 145,531,396 153,004,531 Loss from operations (1,505,591 ) (22,779,049 ) Income tax benefit (17,681 ) (4,588,283 ) Net loss $ (1,487,910 ) $ (18,190,766 ) Key Measures: Net loss ratio 72.4 % 77.3 % Net underwriting expense ratio 32.9 % 36.0 % Net combined ratio 105.3 % 113.3 % Reconciliation of net underwriting expense ratio: Acquisition costs and other underwriting expenses $ 59,274,591 $ 61,278,623 Less: Ceding commission revenue (21,053,494 ) (19,319,391 ) Less: Other income (600,993 ) (815,952 ) Net underwriting expenses $ 37,620,104 $ 41,143,280 Net premiums earned $ 114,384,263 $ 114,384,531 Net Underwriting Expense Ratio 32.9 % 36.0 % 55 Table of Contents An analysis of our direct, assumed and ceded earned premiums, loss and loss adjustment expenses, and loss ratios is shown below: Direct Assumed Ceded Net Year ended ended December 31, 2023 Written premiums $ 200,174,502 $ - $ (106,563,985 ) $ 93,610,517 Change in unearned premiums 1,871,239 - 18,902,507 20,773,746 Earned premiums $ 202,045,741 $ - $ (87,661,478 ) $ 114,384,263 Loss and loss adjustment expenses excluding the effect of catastrophes $ 111,996,791 $ - $ (37,302,450 ) $ 74,694,341 Catastrophe loss 11,943,624 - (3,788,755 ) 8,154,869 Loss and loss adjustment expenses $ 123,940,415 $ - $ (41,091,205 ) $ 82,849,210 Loss ratio excluding the effect of catastrophes 55.4 % 0.0 % 42.6 % 65.3 % Catastrophe loss 5.9 % 0.0 % 4.3 % 7.1 % Loss ratio 61.3 % 0.0 % 47.0 % 72.4 % Year ended ended December 31, 2022 Written premiums $ 201,254,837 $ - $ (79,195,016 ) $ 122,059,821 Change in unearned premiums (9,733,170 ) - 2,057,880 (7,675,290 ) Earned premiums $ 191,521,667 $ - $ (77,137,136 ) $ 114,384,531 Loss and loss adjustment expenses excluding the effect of catastrophes $ 114,942,807 $ - $ (34,184,616 ) $ 80,758,191 Catastrophe loss 13,105,600 - (5,473,749 ) 7,631,851 Loss and loss adjustment expenses $ 128,048,407 $ - $ (39,658,365 ) $ 88,390,042 Loss ratio excluding the effect of catastrophes 60.0 % 0.0 % 44.3 % 70.6 % Catastrophe loss 6.8 % 0.0 % 7.1 % 6.7 % Loss ratio 66.9 % 0.0 % 51.4 % 77.3 % (Percentage components may not sum to totals due to rounding) 56 Table of Contents The key measures for our insurance underwriting business for the years ended December 31, 2023 and 2022 are as follows: Years ended December 31, 2023 2022 Net premiums earned $ 114,384,263 $ 114,384,531 Ceding commission revenue 21,053,494 19,319,391 Other income 600,993 815,952 Loss and loss adjustment expenses (1) 82,849,210 88,390,042 Acquisition costs and other underwriting expenses: Commission expense 33,364,629 34,581,617 Other underwriting expenses 25,909,962 26,697,006 Total acquisition costs and other underwriting expenses 59,274,591 61,278,623 Underwriting loss $ (6,085,051 ) $ (15,148,791 ) Key Measures: Net loss ratio excluding the effect of catastrophes 65.3 % 70.6 % Effect of catastrophe loss on net loss ratio (1) 7.1 % 6.7 % Net loss ratio 72.4 % 77.3 % Net underwriting expense ratio excluding the effect of catastrophes 32.9 % 36.0 % Effect of catastrophe loss on net underwriting expense ratio 0.0 % 0.0 % Net underwriting expense ratio 32.9 % 36.0 % Net combined ratio excluding the effect of catastrophes 98.2 % 106.6 % Effect of catastrophe loss on net combined ratio (1) 7.1 % 6.8 % Net combined ratio 105.3 % 113.3 % Reconciliation of net underwriting expense ratio: Acquisition costs and other underwriting expenses $ 59,274,591 $ 61,278,623 Less: Ceding commission revenue (21,053,494 ) (19,319,391 ) Less: Other income (600,993 ) (815,952 ) $ 37,620,104 $ 41,143,280 Net earned premium $ 114,384,263 $ 114,384,531 Net Underwriting Expense Ratio 32.9 % 36.0 % (1) For the years ended December 31, 2023 and 2022, includes the sum of net catastrophe losses and loss adjustment expenses of $8,154,869 and $7,631,851, respectively. 57 Table of Contents Investments Portfolio Summary The following table presents a breakdown of the amortized cost, estimated fair value, and unrealized gains and losses of our investments in fixed-maturity securities classified as available-for-sale as of December 31, 2023 and 2022: Available-for-Sale Securities December 31, 2023 Cost or Gross Gross Unrealized Losses Estimated % of Amortized Unrealized Less than More than Fair Estimated Category Cost Gains 12 Months 12 Months Value Fair Value U.S.
Our reconciliation of net income to net cash provided by operations is generally influenced by the collection of premiums in advance of paid losses, the timing of reinsurance, issuing company settlements and loss payments.
See Notes 2 and 9 to our consolidated financial statements included in this Annual Report for a discussion of our plans in this regard. Our reconciliation of net loss to net cash used by operations is generally influenced by the collection of premiums in advance of paid losses, the timing of reinsurance, issuing company settlements and loss payments.
Key Measures We utilize the following key measures in analyzing the results of our insurance underwriting business: 33 Table of Contents Net loss ratio: The net loss ratio is a measure of the underwriting profitability of an insurance company’s business. Expressed as a percentage, this is the ratio of net losses and LAE incurred to net premiums earned.
Expressed as a percentage, this is the ratio of net losses and LAE incurred to net premiums earned. Net underwriting expense ratio: The net underwriting expense ratio is a measure of an insurance company’s operational efficiency in administering its business.
Cosi operating expenses primarily include employment, occupancy and consulting costs. Principal Revenue and Expense Items Net premiums earned: Net premiums earned is the earned portion of our written premiums, less that portion of premium that is ceded to third party reinsurers under reinsurance agreements.
These corporate expenses include legal and auditing fees, executive employment costs, and other costs directly associated with being a public company. 36 Table of Contents Principal Revenue and Expense Items Net premiums earned: Net premiums earned is the earned portion of our written premiums, less that portion of premium that is ceded to third party reinsurers under reinsurance agreements.
The net loss ratio was 77.3% in Year Ended 2022 compared to 70.9% in Year Ended 2021, an increase of 6.4 percentage points. 38 Table of Contents The following graph summarizes the changes in the components of net loss ratio for the periods indicated, along with the comparable components excluding commercial lines business: (Percent components may not sum to totals due to rounding) The loss ratio for Year Ended 2022 was higher than Year Ended 2021 due to two factors.
The following graph summarizes the changes in the components of net loss ratio for the periods indicated, along with the comparable components excluding commercial lines business: 48 Table of Contents (Percent components may not sum to totals due to rounding) For Year Ended 2023, the 4.9 point reduction in the loss ratio compared to Year Ended 2022 was mainly due to a lower underlying loss ratio (loss ratio excluding the impact of catastrophe and prior year development) and reduced impact from prior year development.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK . This item is not applicable to smaller reporting companies.
This item is not applicable to smaller reporting companies.
The higher interest rates and widening of credit spreads reduced the value of our fixed income securities, which lowered our stockholders’ equity materially for Year Ended 2022. The higher economic inflation impacted our loss and loss adjustment expenses as well; should these trends continue in the near-term, it would in all likelihood negatively impact our profitability.
For Year Ended 2023, the continuing economic inflation impacted our loss and loss adjustment expenses as well; should these trends continue in the near-term, it would in all likelihood negatively impact our results of operations.
In Year Ended 2022, we had net investing activity used in our investment portfolio of $1,355,000, compared to $11,449,000 used in Year Ended 2021 resulting in a $10,094,000 decrease in net cash used investing activities. Net cash used in financing activities was $5,511,000 in Year Ended 2022 compared to $3,572,000 used in Year Ended 2021.
Net cash provided by investing activities was $9,462,000 in Year Ended 2023 compared to $5,906,000 used in investing activities in Year Ended 2022 resulting in a $15,368,000 increase in net cash provided by investing activities. In Year Ended 2023, we had net cash provided by our investment portfolio of $11,289,000, compared to $1,355,000 used in Year Ended 2022.
There was no personal lines quota share in effect in Year Ended 2021. Contingent Ceding Commissions Earned The structure of the 2021/2023 Treaty calls for a fixed provisional ceding commission with no opportunity to earn additional contingent ceding commissions.
The increase of $1,291,000 in provisional ceding commissions earned was due to the increase in premiums ceded under these treaties during Year Ended 2023 compared to Year Ended 2022. Contingent Ceding Commissions Earned The structure of the 2023/2024 Treaty and the 2021/2023 Treaty calls for a fixed provisional ceding commission with no opportunity to earn additional contingent ceding commissions.
The decrease in employment costs was due to staff reductions and fluctuations in deferred compensation liability related to changes in the underlying invested portfolio.
The increase in employment costs was due to the hiring of our new Chief Financial Officer in Year Ended 2023 and fluctuations in deferred compensation liability related to changes in the underlying invested portfolio.
(2) In July 2019, we decided that we will no longer underwrite Commercial Liability risks. See discussions above regarding the discontinuation of this line of business. (3) See discussions above with regard to “Net Written Premiums and Net Premiums Earned”, as to change in quota share ceding rate effective December 31, 2021.
(2) In July 2019, we decided that we will no longer underwrite Commercial Liability risks. See discussions above regarding the discontinuation of this line of business.
In Year Ended 2022, our premiums ceded under quota share treaties increased by $23,899,000 in comparison to ceded premiums in Year Ended 2021 (see table above).
In Year Ended 2023, our premiums ceded under quota share treaties increased by $3,716,000 in comparison to ceded premiums in Year Ended 2022 (see table above). The increase in Year Ended 2023 was attributable to the runoff of an 8.5% portion of the 30% 2021/2023 Treaty.
Livery physical damage: We write for-hire vehicle physical damage only policies for livery and car service vehicles and taxicabs. These policies insure only the physical damage portion of insurance for such vehicles, with no liability coverage included. Other: We write canine legal liability policies and have a small participation in mandatory state joint underwriting associations.
See discussion below under “Additional Financial Information”. 38 Table of Contents Livery physical damage: We write for-hire vehicle physical damage only policies for livery and car service vehicles and taxicabs. These policies insure only the physical damage portion of insurance for such vehicles, with no liability coverage included.
Net Investment Income Net investment income was $4,937,000 in Year Ended 2022 compared to $6,621,000 in Year Ended 2021, a decrease of $1,684,000, or 25.4%. The decrease in investment income is partially attributable to a $766,000 reversal of prior years’ estimated accrued interest income stemming from an error in third party investment reporting.
The increase in investment income was attributable to a $766,000 reversal in Year Ended 2022 of prior years’ estimated accrued interest income stemming from an error in third party investment reporting. The increase was also due to higher interest rates earned on cash balances.
Underwriting income: Underwriting income is net pre-tax income attributable to our insurance underwriting business before investment activity. It excludes net investment income, net realized gains from investments, and depreciation and amortization (net premiums earned less expenses included in combined ratio).
It excludes net investment income, net realized gains from investments, and depreciation and amortization (net premiums earned less expenses included in combined ratio). Underwriting income is a measure of an insurance company’s overall operating profitability before items such as investment income, depreciation and amortization, interest expense and income taxes.
Off-Balance Sheet Arrangements We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, or liquidity that are material to investors. Outlook The COVID-19 pandemic caused significant financial market volatility, economic uncertainty, and interruptions to normal business activities.
Off-Balance Sheet Arrangements We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors. Outlook Our net premiums earned may be impacted by a number of factors.
In Year Ended 2022, our ceded excess of loss reinsurance premiums increased by $1,267,000 over the comparable ceded premiums for Year Ended 2021. The increase was due to an increase in subject premiums and additional coverage obtained.
Excess of loss reinsurance treaties An increase in written premiums will increase the premiums ceded under our excess of loss treaties. In Year Ended 2023, our ceded excess of loss (“XOL”) reinsurance premiums increased by $3,242,000 over the comparable ceded premiums for Year Ended 2022.
Income tax benefit in Year Ended 2021 was $2,031,000, which resulted in an effective tax rate of 21.6%. Loss before taxes was $27,942,000 in Year Ended 2022 compared to $9,409,000 in Year Ended 2021.
Income tax benefit in Year Ended 2022 was $5,418,000, which resulted in an effective tax rate of 19.4%. Loss before taxes was $7,365,000 in Year Ended 2023 compared to $27,942,000 in Year Ended 2022. The difference in effective tax rate is due to the effect of permanent differences in Year Ended 2023 compared to Year Ended 2022.
The increase of $19,590,000, or 10.8%, was primarily due an increase in premiums from our personal lines business. Direct written premiums from our personal lines business for Year Ended 2022 were $188,105,000, an increase of $16,385,000, or 9.5%, from $171,720,000 in Year Ended 2021.
The decrease of $1,080,000, or 0.5%, was primarily due to a decrease in premiums from our personal lines business. Direct written premiums from our personal lines business for Year Ended 2023 were $185,426,000, a decrease of $2,679,000, or 1.4%, from $188,105,000 in Year Ended 2022.
Net written premiums decreased $6,695,000, or 5.2%, to $122,060,000 in Year Ended 2022 from $128,755,000 in Year Ended 2021. Net written premiums include direct and assumed premiums, less the amount of written premiums ceded under our reinsurance treaties (quota share, excess of loss, and catastrophe).
Net written premiums include direct premiums, less the amount of written premiums ceded under our reinsurance treaties (quota share, excess of loss, and catastrophe). The decrease in Year Ended 2023 is primarily due to a decrease in direct written premiums and an increase in catastrophe premiums rates.
See below for a discussion of provisional ceding commissions earned and contingent ceding commissions earned. 37 Table of Contents Provisional Ceding Commissions Earned In Year Ended 2022 we earned provisional ceding commissions from personal lines earned premiums ceded under the 2021/2023 Treaty which was effective as of December 31, 2021.
Provisional Ceding Commissions Earned In Year Ended 2023, we earned provisional ceding commissions of $20,397,000 from personal lines earned premiums ceded under the 2023/2024 Treaty, and in Year Ended 2022, we earned provisional ceding commissions of $19,106,000 from personal lines earned premiums ceded under the 2021/2023 Treaty.
The decline of investment income is also attributable to the disposal of income bearing equity securities. The average yield on invested assets was 3.42% as of December 31, 2022 compared to 3.25% as of December 31, 2021. Cash and invested assets were $191,046,000 as of December 31, 2022 compared to $237,885,000 as of December 31, 2021.
The average yield on non-cash invested assets was 3.75% as of December 31, 2023 compared to 3.42% as of December 31, 2022. 47 Table of Contents Cash and invested assets were $183,610,000 as of December 31, 2023 compared to $191,046,000 as of December 31, 2022.

… 126 more changes not shown on this page.

Other KINS 10-K year-over-year comparisons