Kingstone’s Earnings Call Highlights Growth Amid Challenges

Kingstone ((KINS)) has held its Q1 earnings call. Read on for the main highlights of the call.

The recent earnings call for Kingstone Company conveyed a slightly positive sentiment, highlighting strong performance, strategic growth, and improved financial health. Despite these achievements, concerns were raised about increased fire losses and challenges in rate matching with new transactions. Overall, the sentiment was buoyed by significant growth and strategic advancements, even as the company navigates some challenges.

Sixth Consecutive Quarter of Profitability

Kingstone reported its sixth consecutive quarter of profitability, marking a significant milestone for the company. The earnings call revealed an 18% growth in direct written premiums, alongside a net income of $3.9 million, or $0.27 per diluted share. This consistent profitability underscores Kingstone’s effective strategies and robust financial management.

Growth in Core Business

The core business of Kingstone experienced impressive growth, with a 23% increase in direct written premiums. This growth was driven by a 68% rise in new business count and a 19% higher renewal average premium. These figures reflect the company’s successful efforts in expanding its market presence and enhancing customer retention.

Successful Renewal Rights Transaction

Kingstone executed a renewal rights agreement with AmGUARD, which is expected to provide competitive advantages. This strategic move is projected to contribute between $25 million to $35 million in premiums over the next 12 months, highlighting Kingstone’s proactive approach to securing future revenue streams.

Improved Select Homeowners Program

The Select homeowners program showed significant improvement, with a decrease in cumulative frequency for 13 consecutive quarters. The frequency now stands at 1.6%, compared to 2.3% for the legacy product, indicating enhanced risk management and product performance.

Strong Investment Income

Kingstone reported a 36% increase in net investment income, reaching $2 million. This growth was supported by strong cash generation and strategic investments in fixed-income securities, demonstrating the company’s effective investment strategy.

Healthy Financial Position

The company finalized the sale of its headquarters, resulting in a $1.5 million after-tax gain. Additionally, Kingstone fully paid off its holding company debt, saving over $800,000 in annual interest. These actions have strengthened the company’s financial position, providing a solid foundation for future growth.

Increase in Fire Losses

The earnings call highlighted an increase in the non-catastrophe loss ratio by 0.4 percentage points due to a rise in severity from a few large fire losses. While considered a random uptick, this issue underscores the need for continued vigilance in risk management.

Challenges with Rate Matching

Kingstone is facing challenges in optimally matching rates to risks, particularly with the AmGUARD transaction. Pricing discrepancies may exist, which the company is actively working to address to ensure competitive and accurate pricing strategies.

Dwelling Fire Product Decline

The dwelling fire product has faced declines, prompting Kingstone to implement rate segmentation changes. These adjustments aim to address the decline and improve the product’s performance in the market.

Forward-Looking Guidance

During the earnings call, CEO Meryl Golden provided forward-looking guidance, emphasizing an 18% growth in direct written premiums and a 23% increase in the core business. The company expects to benefit significantly from the renewal rights agreement with AmGUARD, estimating $25 million to $35 million in premiums over the next year. Despite some challenges, Kingstone remains optimistic about continued growth and profitability, reaffirming its calendar year 2025 guidance.

In conclusion, Kingstone’s earnings call reflected a slightly positive sentiment, driven by strong performance and strategic growth initiatives. While challenges such as increased fire losses and rate matching issues were noted, the company’s robust financial health and forward-looking strategies position it well for future success.