Kingstone Companies, Inc

Greetings and welcome to the Kingstone Company's fourth quarter 2020 financial results conference call and webcast. If anyone should require operator assistance, 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 Director. Please go ahead.

Thank you very much, Kevin, and good morning, everyone. Yesterday evening, the company issued a press release detailing Kingston's 2020 fourth 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, 2020, along with a commentary on forward-looking statements at the end of the company's earnings release issued yesterday. In addition, our remarks today include references to non-GAAP measures. for reconciliation of our non-GAAP measures to the GAAP figures, please see the table in our earnings release. With that, I'd like to turn the call over to Kingstone CEO, Mr. Barry Goldstein. Please go ahead, Mr. Goldstein.

Thanks, Amanda, and good morning, everyone. We're pleased you can join us on this, our year-end 2020 conference call. We're going to mix it up a bit today. I recognize these calls are intended to lend color and perspective to our historical results as well as to our future. Scott, our new CFO, will review the results with you and Meryl will discuss our operations and in particular our Kingston 2.0 initiative which is ongoing and which will propel us forward. For me, I'm going to go in a bit of a different direction. I have many responsibilities at Kingston but none more important than guiding the allocation of capital to preserve and enhance the investment entrusted to us by our shareholders. And ultimately, our share price should reflect how well we've done and how well we are expected to do. But in short, in my opinion, it doesn't. We had a rough patch to get through when I returned to CEO in mid-2019. I made the difficult decision to exit the commercial liability lines that were requiring more and more of our capital, but which were doing poorly. I didn't make many friends by doing this, but this was 100% the correct action to take. Now, as we go forward, all of our surplus can be deployed in support of our personal lines, where the life of the claim is far shorter and the volatility is far less. Unfortunately, even though the lines we exited were never more than 15% of our business, the issues attendant to the exit brought much pain to our shareholders as the stock price suffered greatly. I said then, and I feel the same now, that the share price decline was exaggerated. And by the way, no one felt the pain more than me as the company's largest holder. I hope that the favorable results we are generating will now take over the spotlight. Last year, many important metrics improved. We ended the year with book value at an all-time high. We earned over a dollar a share in operating profits, excluding catastrophe losses. But while our share price has recovered to a certain extent, we're still trading at a discount to book value and well below our intrinsic value. We demonstrated our belief in the future of the company and our belief we have in our improving results by eliminating the quota share treaty. But I believe there is something else that is weighing on our share price. Because Kingston has coastal exposure, we are included in peer groups that are dominated by the five publicly traded Florida carriers. I don't think it makes sense to compare us to the Florida companies, but many have and some continue to do so. Let me give you some third party expert information to consider that proves my point. I refer you to a report from CoreLogic, a well regarded industry data source. Their report ranked each state by the risk of damage from natural hazards. Their rating for New York, where we have about 80% of our business, is number 43 of all 50 states, making the Empire State one of the least risky when it comes to natural hazard exposure. Florida, by contrast, is number one. the single most hazard exposed state in the country. We will have catastrophe events, no doubt about it. Major ones occurred in 2020 with Tropical Storm Isaias and before that eight years prior in 2012 with Superstorm Sandy. But look at any available model and you'll see there'll be many more weather events in Florida and they will be more impactful there. In short, New York is much less risky. But I'm not here to throw shade on Florida or their carriers. After seeing no landfall hurricanes for 10 years or so, over the past few years, a horrible set of weather events have impacted their businesses, just as a reader of the CoreLogic analysis would have expected. The catastrophe reinsurers have been hard hit by this and have responded with far tighter underwriting, stricter terms, and have imposed major price increases. Add to that the fact that over the last few years, the Florida carriers have seen their attritional losses, that is their non-catastrophe losses, spike higher, eroding their financial results even further. But due to factors that don't exist in New York, many of the carriers there have chosen to access the reinsurance marketplace, specifically by placing and then growing their use of quota share reinsurance, leaning on the balance sheets of their reinsurers to help offset the erosion in their capital. But now think about Kingston. We used quota share when it was appropriate, but we no longer need to. After my return, we became hyper-focused on profitability, and we've seen our attritional results improve, putting us on a path to return Kingston to being one of the industry's top performers as we had been for many years. Our balance sheet is strong. We don't need quota share reinsurance. Over the past few weeks, I've received a number of calls from people who are regular listeners to these investor calls. Not all of them are current shareholders, but all wanted to know what was going on with our Florida peers, as they said. I told them the same thing. It's unfortunate that Kingston is included in that thought process. but while recent days have seen at least three of these companies raise new capital or announce their intention to do so, not Kingston. We don't need to add capital. Our current surplus base is used almost exclusively to support personal lines and the expected and enhanced underwriting profit that our business has and will deliver will grow our company. We again show our confidence by initiating our first share buyback plan that will be in place over the next two years. Point being, we've delivered many years of exceptional results. While much of the past two years were difficult, we are again poised for exceptional results going forward. With that, let me turn the call over to Scott to review our financial results. Go ahead, Scott.