KINS

Business Context and Reporting Period

Company: Kingstone Companies, Inc. (KINS)
Filing Type: Form 10-Q (Unaudited)
Period Ended: June 30, 2026
Business Overview: Kingstone operates primarily through its subsidiary, Kingstone Insurance Company (KICO), a New York-domiciled carrier writing personal lines (homeowners, dwelling fire) and commercial auto physical damage. The company is executing a 5-Year Growth Plan to reach $500 million in direct written premium by 2029. In June 2026, KICO began writing homeowners coverage in California on a non-admitted basis. A second subsidiary, Kingstone America Insurance Company (KAIC), was licensed in Connecticut in May 2026 and is expected to begin writing business in the second half of 2026.

Key Financial Metrics (Six Months Ended June 30, 2026)

Material Changes vs. Prior Period

• Revenue Growth: Net premiums earned increased 29.6% year-over-year, driven by a reduction in quota share reinsurance ceding rates (from 16% to 5% for most personal lines) and organic growth.
• Profitability Decline: Net income decreased 36.2% to $9.66 million. This was primarily due to a significant increase in catastrophe losses ($14.0 million net impact in 2026 vs. $1.0 million in 2025) and the absence of a $1.97 million gain on the sale of real estate recorded in the prior year.
• Underwriting Performance: The Net Combined Ratio worsened to 90.2% from 82.3%. The Net Loss Ratio increased 9.4 percentage points to 59.7%, largely attributable to winter storm catastrophe events in early 2026. However, the Net Underwriting Expense Ratio improved to 30.5% from 32.0% due to economies of scale.
• Investment Results: Net investment income rose 55.6% due to higher invested assets and yields. However, the company reported a net loss on investments of $0.78 million compared to a gain of $0.41 million in the prior year, driven by unrealized losses on equity securities.
• Debt Reduction: The company fully repaid its 2024 Senior Notes in early 2025. Remaining debt consists of equipment financing totaling $3.80 million.

Guidance, Outlook, and Risks

• Outlook: Management reaffirmed its growth and profitability outlook for fiscal year 2026 on August 6, 2026. The company continues to pursue its 5-Year Growth Plan, with expansion into California and Connecticut underway.
• Reinsurance Changes: Effective July 1, 2026, the company entered into new excess of loss and catastrophe reinsurance treaties. The new quota share treaty for personal lines (excluding California) cedes 5% of premiums, while California business cedes 30%.
• Dividends: The Board declared a quarterly dividend of $0.06 per share, payable August 26, 2026. This is an increase from the $0.05 per share dividend paid in the current quarter.
• Share Repurchase: A new share repurchase program was authorized in May 2026 for up to 1,000,000 shares. As of June 30, 2026, 19,446 shares were repurchased.
• Internal Controls: The company disclosed a material weakness in internal control over financial reporting related to its insurance premium quoting platform and general ledger systems (lack of SOC 1 Type 2 reports). Management believes remediation is underway but noted that disclosure controls were not considered effective as of June 30, 2026.
• Risks: Key risks include exposure to catastrophe events (specifically winter storms and named storms), inflation impacting loss severity, and the uncertainty of loss reserve estimates.

Investor Verification Checklist

• Catastrophe Exposure: Verify the specific impact of the January/February 2026 winter storms on the loss ratio and the adequacy of the new catastrophe reinsurance treaties effective July 2026.
• Internal Control Remediation: Monitor the progress of remediation for the material weakness in internal controls over financial reporting, with a target completion date of December 31, 2026.
• Geographic Expansion: Assess the underwriting results and profitability of the new California operations and the upcoming Connecticut launch.
• Reinsurance Structure: Review the terms of the new 2026/2027 quota share treaty (5% ceding rate) and its impact on future ceding commission revenue compared to the prior 16% treaty.
• Investment Portfolio: Evaluate the unrealized losses on available-for-sale securities ($10.79 million) and the company's intent to hold these securities to maturity.