Kingstone Announces 2017 Second Quarter Financial Results and Discusses Impact of Upgraded A.M. Best Rating
Company to Host Conference Call on
Financial and Operational Highlights
2017 Second Quarter
(All results are compared to prior year period unless otherwise noted)
- Net income decreased 11.7% to
$2.5 million or$0.23 per diluted share - Net operating income1 decreased 8.6% to
$2.4 million or$0.22 per diluted share - Net premiums earned increased 12.9% to
$17.0 million - Direct written premiums1 increased 16.4%; Personal lines grew by 17.5%
- Net combined ratio of 77.6% compared to 73.7%
- Return on average common equity (annualized) of 11.3%
- Operating return on average common equity (annualized)1 of 10.9%
- Book value per share increased to
$8.50 , up 25.0% over Q2 2016
Quarterly Dividend of
The Company announced that its Board of Directors declared a quarterly dividend of
Management Commentary
Kingstone’s Chairman and CEO,
Kingstone’s EVP and Chief Actuary,
(1) This measure is not based on GAAP and is defined and reconciled to the most directly comparable GAAP measure in “Information Regarding Non-GAAP Measures” below.
Financial Highlights Table |
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Financial Highlights | Three Months Ended |
Six Months Ended |
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($ in thousands except per share data) |
2017 |
2016 |
% Change |
2017 |
2016 |
% Change |
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Direct written premiums* | $ | 30,458 | $ | 26,161 | 16.4% | $ | 56,584 | $ | 49,204 | 15.0% | |||||||||||
Net written premiums* | $ | 19,727 | $ | 16,953 | 16.4% | $ | 36,462 | $ | 31,615 | 15.3% | |||||||||||
Net premiums earned | $ | 16,954 | $ | 15,011 | 12.9% | $ | 33,323 | $ | 29,543 | 12.8% | |||||||||||
Total ceding commission revenue | $ | 3,306 | $ | 2,569 | 28.7% | $ | 6,490 | $ | 5,339 | 21.6% | |||||||||||
Net investment income | $ | 1,026 | $ | 764 | 34.3% | $ | 1,884 | $ | 1,577 | 19.5% | |||||||||||
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$ | 2,510 | $ | 2,842 | -11.7% | $ | 3,981 | $ | 3,383 | 17.7% | |||||||||||
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$ | 0.23 | $ | 0.36 | -36.1% | $ | 0.39 | $ | 0.44 | -11.4% | |||||||||||
Comprehensive income | $ | 3,052 | $ | 3,232 | -5.6% | $ | 4,905 | $ | 4,699 | 4.4% | |||||||||||
Net operating income* | $ | 2,426 | $ | 2,655 | -8.6% | $ | 3,932 | $ | 3,143 | 25.1% | |||||||||||
Net operating income diluted EPS* | $ | 0.22 | $ | 0.34 | -35.3% | $ | 0.38 | $ | 0.41 | -7.3% | |||||||||||
Return on average equity (annualized) | 11.3% | 22.7% | -11.4 pts | 10.8% | 13.7% | -2.9 pts | |||||||||||||||
Net loss ratio | 44.0% | 38.6% | 5.4 pts | 47.3% | 51.7% | -4.4 pts | |||||||||||||||
Net underwriting expense ratio | 33.6% | 35.1% | -1.5 pts | 34.1% | 33.4% | 0.7 pts | |||||||||||||||
Net combined ratio | 77.6% | 73.7% | 3.9 pts | 81.4% | 85.1% | -3.7 pts | |||||||||||||||
Effect of catastrophes on net combined ratio | 0 pts | 0 pts | 0 pts | 0 pts | 4.8 pts | -4.8 pts | |||||||||||||||
Net combined ratio excluding the effect of catastrophes* |
77.6% | 73.7% | 3.9 pts | 81.4% | 80.3% | 1.1 pts | |||||||||||||||
* These measures are not based on GAAP and are defined and reconciled to the most directly comparable GAAP measures in "information Regarding Non-GAAP Measures." |
2017 Second Quarter Financial Review
Net Income:
Net income declined by 11.7% to
Earnings per share (“EPS”):
Kingstone reported EPS of
Direct Written Premiums1, Net Written Premiums1 and Net Premiums Earned:
Direct written premiums1 for the second quarter of 2017 were
(1) These measures are not based on GAAP and are defined and reconciled to the most directly comparable GAAP measures in “Information Regarding Non-GAAP Measures” below.
Net written premiums1 increased 16.4% to
Net premiums earned for the quarter ended
Net Loss Ratio:
For the quarter ended
Net Other Underwriting Expense Ratio:
For the quarter ended
Net Combined Ratio:
Kingstone’s net combined ratio was 77.6% for the three month period ended
Other Operating Expenses not included in Net Combined Ratio:
For the quarter ended
Balance Sheet / Investment Portfolio
Kingstone’s cash and investment holdings were
Net investment income increased 34.3% to
Accumulated Other Comprehensive Income (AOCI), net of tax
As of
Book Value |
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The Company’s book value per share at |
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Book Value Per Share | $ | 8.50 | $ | 8.29 | $ | 7.15 | $ | 7.16 | $ | 6.80 | |||||
% Increase from specified period to |
2.5% | 18.9% | 18.7% | 25.0% | |||||||||||
Conference Call Details
Management will discuss the Company’s operations and financial results in a conference call on
The dial-in numbers are:
(877) 407-3105 (
(201) 493-6794 (International)
Accompanying Slide Presentation and Webcast
The Company will also have an accompanying slide presentation available in PDF format on the
The webcast will be archived and accessible for approximately 30 days.
Information Regarding Non-GAAP Measures
Direct written premiums - represents the total premiums charged on policies issued by the Company during the respective fiscal period.
Net written premiums - represents direct written premiums less premiums ceded to reinsurers.
Net premiums earned - is the GAAP measure most closely comparable to direct written premiums and net written premiums. Management uses direct written premiums and net written premiums, along with other measures, to gauge the Company’s performance and evaluate results. Direct written premiums and net written premiums are provided as supplemental information, are not a substitute for net premiums earned and do not reflect the Company’s net premiums earned.
The table below details the direct written premiums, net written premiums, and net premiums earned for the periods indicated:
For the Three Months Ended | For the Six Months Ended | |||||||||||||||||||||||||
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2017 | 2016 | $ Change | % Change | 2017 | 2016 | $ Change | % Change | |||||||||||||||||||
(000’s except percentages) | ||||||||||||||||||||||||||
Direct and Net Written Premiums Reconciliation: | ||||||||||||||||||||||||||
Direct written premiums | |
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16.4 | % | |
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15.0 | % | ||||||||||||||||
Assumed written premiums | 2 | 11 | (9 | ) | (81.8 | ) | % | 6 | 16 | (10 | ) | (62.5 | ) | % | ||||||||||||
Ceded written premiums | (10,733 | ) | (9,219 | ) | (1,514 | ) | 16.4 | % | (20,128 | ) | (17,605 | ) | (2,523 | ) | 14.3 | % | ||||||||||
Net written premiums | 19,727 | 16,953 | 2,774 | 16.4 | % | 36,462 | 31,615 | 4,847 | 15.3 | % | ||||||||||||||||
Change in unearned premiums | (2,773 | ) | (1,942 | ) | (831 | ) | 42.8 | % | (3,139 | ) | (2,072 | ) | (1,067 | ) | 51.5 | % | ||||||||||
Net premiums earned | |
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12.9 | % | |
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12.8 | % | ||||||||||||||||
Net operating income - is net income exclusive of realized investment gains, net of tax. Net income is the GAAP measure most closely comparable to net operating income.
Operating return on average common equity - is net operating income divided by average common equity. Return on average common equity is the GAAP measure most closely comparable to operating return on average common equity.
Management uses net operating income and operating return on average common equity, along with other measures, to gauge the Company’s performance and evaluate results, which can be skewed when including realized investment gains, which may vary significantly between periods. Net operating income and operating return on average common equity are provided as supplemental information, are not a substitute for net income or return on average common equity and do not reflect the Company’s overall profitability or return on average common equity.
The following table reconciles the net operating income to net income and the operating return on average common equity to return on average common equity for the periods indicated:
Three Months Ended | Three Months Ended | Six Months Ended | Six Months Ended | |||||||||||||||||||||||||||||
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Diluted | Diluted | Diluted |
Diluted |
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earnings | earnings | earnings |
earnings |
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per | per | per |
per |
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common | common | common |
common |
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Amount | share | Amount | share | Amount | share | Amount |
share |
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(000’s except per common |
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Net Operating Income and Diluted Earnings |
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Net income | $ | 2,510 | $ | 0.23 | $ | 2,842 | $ | 0.36 | $ | 3,981 | $ | 0.39 | $ | 3,383 | $ | 0.44 | ||||||||||||||||
Net realized gain on investments | (130 | ) | (283 | ) | (76 | ) | (364 | ) | ||||||||||||||||||||||||
Less tax effect on realized gains | (46 | ) | (96 | ) | (27 | ) | (124 | ) | ||||||||||||||||||||||||
Net realized gain on investments, net of taxes | (84 | ) | $ | (0.01 | ) | (187 | ) | $ | (0.02 | ) | (49 | ) | $ | (0.01 | ) | (240 | ) | $ | (0.03 | ) | ||||||||||||
Net operating income | $ | 2,426 | $ | 0.22 | $ | 2,655 | $ | 0.34 | $ | 3,932 | $ | 0.38 | $ | 3,143 | $ | 0.41 | ||||||||||||||||
Weighted average diluted shares outstanding | 10,822,577 | 7,853,284 | 10,337,213 | 7,607,231 | ||||||||||||||||||||||||||||
Operating Return on Average Common Equity |
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Net income | $ | 2,510 | $ | 2,842 | $ | 3,981 | $ | 3,383 | ||||||||||||||||||||||||
Average common equity | $ | 89,208 | $ | 50,007 | $ | 73,499 | $ | 49,534 | ||||||||||||||||||||||||
Return on average common equity |
11.3 | % | 22.7 | % | 10.8 | % | 13.7 | % | ||||||||||||||||||||||||
Net realized gain on investments, net of taxes | $ | (84 | ) | $ | (187 | ) | $ | (49 | ) | $ | (240 | ) | ||||||||||||||||||||
Average common equity | $ | 89,208 | $ | 50,007 | $ | 73,499 | $ | 49,534 | ||||||||||||||||||||||||
Effect of net realized gain on investments, net of taxes, |
-0.4 | % | -1.5 | % | -0.1 | % | -1.0 | % | ||||||||||||||||||||||||
Net operating income | $ | 2,426 | $ | 2,655 | $ | 3,932 | $ | 3,143 | ||||||||||||||||||||||||
Average common equity | $ | 89,208 | $ | 50,007 | $ | 73,499 | $ | 49,534 | ||||||||||||||||||||||||
Operating return on average common equity |
10.9 | % | 21.2 | % | 10.7 | % | 12.7 | % | ||||||||||||||||||||||||
Net combined ratio excluding the effect of catastrophes - is a non-GAAP ratio, which is computed as the difference between GAAP net combined ratio and the effect of catastrophes on the net combined ratio. We believe that this ratio is useful to investors and it is used by management to reveal the trends in our business that may be obscured by catastrophe losses. Catastrophe losses cause our loss trends to vary significantly between periods as a result of their incidence of occurrence and magnitude, and can have a significant impact on the net combined ratio. We believe it is useful for investors to evaluate this component separately and in the aggregate when reviewing our underwriting performance. We also provide it to facilitate a comparison to our outlook on the net combined ratio excluding the effect of catastrophes. The most directly comparable GAAP measure is the net combined ratio. The net combined ratio excluding the effect of catastrophes should not be considered a substitute for the net combined ratio and does not reflect the Company’s net combined ratio.
The following table reconciles the net combined ratio excluding the effects of catastrophes to the net combined ratio for the periods indicated:
For the Three Months Ended | For the Six Months Ended | ||||||||||||||||||||||||||
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2017 | 2016 |
Percentage |
2017 | 2016 |
Percentage |
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Net Combined Ratio Excluding the Effect of Catastrophes Reconciliation: | |||||||||||||||||||||||||||
Net combined ratio excluding the effect of catastrophes | 77.6 | % | 73.7 | % | 3.9 | pts | 81.4 | % | 80.3 | % | 1.1 | pts | |||||||||||||||
Effect of catastrophe losses | |||||||||||||||||||||||||||
Net loss and loss adjustment expenses | 0.0 | % | 0.0 | % | - | pts | 0.0 | % | 4.8 | % | (4.8 | ) | pts | ||||||||||||||
Total effect of catastrophe losses | 0.0 | % | 0.0 | % | - | pts | 0.0 | % | 4.8 | % | (4.8 | ) | pts | ||||||||||||||
Net combined ratio | 77.6 | % | 73.7 | % | 3.9 | pts | 81.4 | % | 85.1 | % | (3.7 | ) | pts | ||||||||||||||
About
Kingstone is a property and casualty insurance holding company whose principal operating subsidiary,
Forward-Looking Statement
Statements in this press release may contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts, may be forward-looking statements. These statements are based on management’s current expectations and are subject to uncertainty and changes in circumstances. These statements involve risks and uncertainties that could cause actual results to differ materially from those included in forward-looking statements due to a variety of factors. More information about these factors can be found in Kingstone’s filings with the
The following table summarizes gross and net written premiums1, net premiums earned, and loss and loss adjustment expenses by major product type, which were determined based primarily on similar economic characteristics and risks of loss.
For the Three Months Ended | For the Six Months Ended | |||||||||||||||
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2017 | 2016 | 2017 | 2016 | |||||||||||||
Gross premiums written (1): | ||||||||||||||||
Personal lines | $ | 23,139,479 | $ | 19,697,839 | $ | 42,601,451 | $ | 37,138,925 | ||||||||
Commercial lines | 4,162,821 | 3,677,159 | 7,746,875 | 6,805,297 | ||||||||||||
Livery physical damage | 3,101,043 | 2,720,538 | 6,127,526 | 5,152,453 | ||||||||||||
Other(2) | 56,922 | 76,475 | 114,308 | 123,739 | ||||||||||||
Total | $ | 30,460,265 | $ | 26,172,011 | $ | 56,590,160 | $ | 49,220,414 | ||||||||
Net premiums written (1): | ||||||||||||||||
Personal lines | $ | 12,844,104 | $ | 10,831,897 | $ | 23,310,472 | $ | 20,217,335 | ||||||||
Commercial lines | 3,743,568 | 3,343,859 | 6,946,133 | 6,158,764 | ||||||||||||
Livery physical damage | 3,101,043 | 2,720,538 | 6,127,526 | 5,152,453 | ||||||||||||
Other(2) | 38,585 | 56,388 | 77,474 | 86,005 | ||||||||||||
Total | $ | 19,727,300 | $ | 16,952,682 | $ | 36,461,605 | $ | 31,614,557 | ||||||||
Net premiums earned: | ||||||||||||||||
Personal lines | $ | 11,039,025 | $ | 9,826,564 | $ | 21,729,608 | $ | 19,290,460 | ||||||||
Commercial lines | 2,985,759 | 2,772,822 | 5,828,339 | 5,453,547 | ||||||||||||
Livery physical damage | 2,884,986 | 2,362,889 | 5,677,333 | 4,618,743 | ||||||||||||
Other(2) | 43,957 | 48,600 | 88,195 | 179,800 | ||||||||||||
Total | $ | 16,953,727 | $ | 15,010,875 | $ | 33,323,475 | $ | 29,542,550 | ||||||||
Net loss and loss adjustment expenses: | ||||||||||||||||
Personal lines | $ | 4,399,735 | $ | 3,137,613 | $ | 9,751,847 | $ | 10,686,164 | ||||||||
Commercial lines | 1,229,782 | 1,181,456 | 2,758,578 | 2,092,290 | ||||||||||||
Livery physical damage | 1,260,153 | 946,101 | 2,225,675 | 1,934,654 | ||||||||||||
Other(2) | 74,672 | 95,470 | 22,598 | (284,937 | ) | |||||||||||
Unallocated loss adjustment expenses | 490,580 | 426,196 | 989,220 | 842,520 | ||||||||||||
Total | $ | 7,454,922 | $ | 5,786,836 | $ | 15,747,918 | $ | 15,270,691 | ||||||||
Net loss ratio: | ||||||||||||||||
Personal lines | 39.9 | % | 31.9 | % | 44.9 | % | 55.4 | % | ||||||||
Commercial lines | 41.2 | % | 42.6 | % | 47.3 | % | 38.4 | % | ||||||||
Livery physical damage | 43.7 | % | 40.0 | % | 39.2 | % | 41.9 | % | ||||||||
Other(2) | 169.9 | % | 196.4 | % | 25.6 | % | -158.5 | % | ||||||||
Total | 44.0 | % | 38.6 | % | 47.3 | % | 51.7 | % | ||||||||
1. | These measures are not based on GAAP and are defined and reconciled to the most directly comparable GAAP measure in “Information Regarding Non-GAAP Measures” above. | ||||
2. | “Other” includes, among other things, premiums and loss and loss adjustment expenses from commercial auto and our participation in a mandatory state joint underwriting association. Effective |
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Condensed Consolidated Statements of Income and Comprehensive Income (Unaudited) | ||||||||||||||||
For the Three Months Ended | For the Six Months Ended | |||||||||||||||
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2017 | 2016 | 2017 | 2016 | |||||||||||||
Revenues | ||||||||||||||||
Net premiums earned | $ | 16,953,727 | $ | 15,010,875 | $ | 33,323,475 | $ | 29,542,550 | ||||||||
Ceding commission revenue | 3,305,938 | 2,569,025 | 6,490,390 | 5,339,362 | ||||||||||||
Net investment income | 1,026,004 | 764,070 | 1,883,804 | 1,577,127 | ||||||||||||
Net realized gains on investments | 130,423 | 283,432 | 75,917 | 363,868 | ||||||||||||
Other income | 308,159 | 284,508 | 597,859 | 533,855 | ||||||||||||
Total revenues | 21,724,251 | 18,911,910 | 42,371,445 | 37,356,762 | ||||||||||||
Expenses | ||||||||||||||||
Loss and loss adjustment expenses | 7,454,922 | 5,786,836 | 15,747,918 | 15,270,691 | ||||||||||||
Commission expense | 5,101,566 | 4,526,208 | 9,990,544 | 8,796,274 | ||||||||||||
Other underwriting expenses | 4,199,616 | 3,596,134 | 8,412,033 | 6,942,575 | ||||||||||||
Other operating expenses | 906,690 | 432,696 | 1,662,494 | 761,935 | ||||||||||||
Depreciation and amortization | 326,174 | 289,173 | 644,872 | 573,001 | ||||||||||||
Total expenses | 17,988,968 | 14,631,047 | 36,457,861 | 32,344,476 | ||||||||||||
Income from operations before taxes | 3,735,283 | 4,280,863 | 5,913,584 | 5,012,286 | ||||||||||||
Income tax expense | 1,224,891 | 1,438,602 | 1,932,612 | 1,628,993 | ||||||||||||
Net income | 2,510,392 | 2,842,261 | 3,980,972 | 3,383,293 | ||||||||||||
Other comprehensive income, net of tax | ||||||||||||||||
Gross change in unrealized gains on available-for-sale-securities |
951,047 | 873,850 | 1,475,869 | 2,357,914 | ||||||||||||
Reclassification adjustment for gains included in net income |
(130,423 | ) | (283,432 | ) | (75,917 | ) | (363,868 | ) | ||||||||
Net change in unrealized gains | 820,624 | 590,418 | 1,399,952 | 1,994,046 | ||||||||||||
Income tax expense related to items of other comprehensive income |
(279,012 | ) | (200,742 | ) | (475,984 | ) | (677,976 | ) | ||||||||
Other comprehensive income, net of tax | 541,612 | 389,676 | 923,968 | 1,316,070 | ||||||||||||
Comprehensive income | $ | 3,052,004 | $ | 3,231,937 | $ | 4,904,940 | $ | 4,699,363 | ||||||||
Earnings per common share: | ||||||||||||||||
Basic | $ | 0.24 | $ | 0.36 | $ | 0.39 | $ | 0.45 | ||||||||
Diluted | $ | 0.23 | $ | 0.36 | $ | 0.39 | $ | 0.44 | ||||||||
Weighted average common shares outstanding | ||||||||||||||||
Basic | 10,622,496 | 7,794,347 | 10,145,772 | 7,558,366 | ||||||||||||
Diluted | 10,822,577 | 7,853,284 | 10,337,213 | 7,607,231 | ||||||||||||
Dividends declared and paid per common share | $ | 0.0800 | $ | 0.0625 | $ | 0.1425 | $ | 0.1250 | ||||||||
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Condensed Consolidated Balance Sheets | ||||||||
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2017 | 2016 | |||||||
(unaudited) | ||||||||
Assets | ||||||||
Fixed-maturity securities, held-to-maturity, at amortized cost (fair value of | ||||||||
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$ | 4,895,894 | $ | 5,094,902 | ||||
Fixed-maturity securities, available-for-sale, at fair value (amortized cost of | ||||||||
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112,423,511 | 80,428,828 | ||||||
Equity securities, available-for-sale, at fair value (cost of |
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at |
11,772,818 | 9,987,686 | ||||||
Total investments | 129,092,223 | 95,511,416 | ||||||
Cash and cash equivalents | 14,357,465 | 12,044,520 | ||||||
Premiums receivable, net | 13,126,077 | 11,649,398 | ||||||
Reinsurance receivables, net | 34,543,843 | 32,197,765 | ||||||
Deferred policy acquisition costs | 13,284,665 | 12,239,781 | ||||||
Intangible assets, net | 1,180,000 | 1,350,000 | ||||||
Property and equipment, net | 3,838,351 | 3,011,373 | ||||||
Other assets | 1,268,699 | 1,442,209 | ||||||
Total assets | $ | 210,691,323 | $ | 169,446,462 | ||||
Liabilities | ||||||||
Loss and loss adjustment expense reserves | $ | 44,196,576 | $ | 41,736,719 | ||||
Unearned premiums | 59,034,845 | 54,994,375 | ||||||
Advance premiums | 2,169,979 | 1,421,560 | ||||||
Reinsurance balances payable | 2,803,939 | 2,146,017 | ||||||
Deferred ceding commission revenue | 7,228,966 | 6,851,841 | ||||||
Accounts payable, accrued expenses and other liabilities | 4,598,774 | 5,448,448 | ||||||
Deferred income taxes | 339,840 | 166,949 | ||||||
Total liabilities | 120,372,919 | 112,765,909 | ||||||
Commitments and Contingencies | ||||||||
Stockholders' Equity | ||||||||
Preferred stock, |
- | - | ||||||
Common stock, |
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at |
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10,622,491 shares at |
116,002 | 88,963 | ||||||
Capital in excess of par | 68,218,302 | 37,950,401 | ||||||
Accumulated other comprehensive income | 996,899 | 72,931 | ||||||
Retained earnings | 23,031,059 | 20,563,720 | ||||||
92,362,262 | 58,676,015 | |||||||
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and 974,469 shares at |
(2,043,858 | ) | (1,995,462 | ) | ||||
Total stockholders' equity | 90,318,404 | 56,680,553 | ||||||
Total liabilities and stockholders' equity | $ | 210,691,323 | $ | 169,446,462 | ||||
View source version on businesswire.com: http://www.businesswire.com/news/home/20170810005944/en/
Investor Relations Director
Source:
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