Kingstone Companies, Inc

Hello and welcome to the Kingstone Company second quarter 2020 financial results conference call. At this time, all participants are in listen-only mode. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Amanda Goldstein, Investor Relations. Please go ahead.

Thank you very much, Kevin, and good morning, everyone. Yesterday afternoon, the company issued a press release detailing Kingston's 2020 second quarter results. On this call, Kingston may make forward-looking statements regarding itself and its business. The forward-looking events and circumstances discussed on this call may not occur and could differ materially as a result of known and unknown risk factors and uncertainties affecting Kingston. For more information, please refer to the section entitled Factors that may affect future results and financial condition in Part 1, Item 1A of the Company's Form 10-K for the year ended December 31, 2019, along with a commentary on forward-looking statements at the end of the Company's earning release issued yesterday. In addition, our remarks today include references to non-GAAP measures. For a reconciliation of our non-GAAP measures to the GAAP figures, please see the tables in our earnings release. With that, I'd like to turn the call over to Kingston CEO, Mr. Barry Goldstein. Please go ahead, Mr. Goldstein.

Thanks, Amanda, and good morning, everyone. We are pleased that you can join us on this, our second quarter 2020 conference call. Joining me on the call today are Meryl Golden, our Chief Operating Officer, and Ben Walden, our Chief Actuary. A year ago, I announced that two major changes were being made to improve upon our profitability. First, I announced that we were exiting the very volatile commercial liability business. Our runoff is more than 90% complete, and we expect to have no active policies at the end of this quarter. Second, I announced that homeowner rate increases were needed and that we had started the process. Each action taken would yield positive financial benefits, reduce losses by exiting commercial, and increase premiums from the rate improvements. But I noted it would take time for you to see these changes. We are just now starting to see the anticipated improvements. Soon after these changes were made, I announced that Meryl Golden was joining our company as its Chief Operating Officer. Her job was to push Kingstone forward to become a more durable carrier, one better able to compete and win in today's marketplace. We call this effort Kingstone 2.0, and this is a work in progress. We've made a number of changes already with many, many more to follow. Results for the second quarter were excellent from many dimensions. Operating income, the non-GAAP measure we use to describe our operating earnings, continues to grow. Perhaps the most satisfying metric for the quarter is that we were able to deliver an 87.3% combined ratio. Meryl will be elaborating on these excellent financial results. I also note that this is the third consecutive quarter without any adverse reserve development, and Ben will expand upon that later. Although our A- rating from AMBEST was affirmed on June 10th, a revision to B++ was issued on July 10th. This followed the finalization of our catastrophe reinsurance placement. Our new 2020-2021 program provides for limits well in excess of many of our competitors and more than adequate for Kingston and its policyholders' needs. The new treaty does not get us to the required confidence interval as anticipated by best for a typical A minus rating and only because of that was our rating changed. The COVID impacted reinsurance markets were extremely difficult to navigate. Reinsurers in May and June were just beginning to recognize up to what some say is a $100 billion event. Risk capital was highly constrained compared to prior years, and according to one industry data source, and affirmed just yesterday by Munich Re, property insurers like Kingston were subjected to the largest price spike seen since 2002. Our board met six times in May and June to discuss this matter. As July approached, capacity had tightened and rates soared. In the end, it was a painful but obvious decision. Had we placed the program at July 1st in the same way we did last year, we would likely have retained that A- rating. But at what cost? Seated premiums would have been at least $10 million higher. But by spending that extra $10 million, we would have eliminated all possibility of Kingston delivering an underwriting profit this year It would have pushed our combined ratio next year to over 100%, and would have forced us to raise our premiums yet again, perhaps by as much as another 10%. We made the choice to forego the rating and strengthen our profitability. We've not given up on the A- rating as a goal, but it's just too expensive now, and without the commercial lines business, we really don't need it right now. With that, I'll turn the call over to Meryl to provide more detail on the second quarter's results and our progress towards Kingstone 2.0. Please go ahead, Meryl.