Kingstone Companies, Inc

Greetings and welcome to the Kingstone Company's second quarter 2024 earnings conference call. At this time, all participants are on a listen-only mode. A question and answer session will follow the phone presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your hosts, Karen Daly, Vice President of the Equity Group, and Kingstone's Investor Relations Representative. Karen, you may begin.

Thank you, Chamali. Good morning, everyone. Joining us on the call today will be Chief Executive Officer Merrill Golden and Chief Financial Officer Jennifer Gravel. On behalf of the company, I would like to note that this conference call may contain forward-looking statements, which involve known and unknown risks, uncertainties, and other factors that may cause actual results to be materially different from projected results. Forward-looking statements speak only as of the date on which they are made, and Kingston undertakes no obligation to update the information discussed. 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 latest Form 10-K. Additionally, today's remarks may include references to non-GAAP measures. For reconciliation of these non-GAAP measures to GAAP figures, please see the tables in the latest earnings release. With that, it's my pleasure to turn the call over to Meryl Golden. Meryl, you may begin.

Thanks, Karen. And good morning, everyone. We are so proud of our second quarter results. This is our third consecutive quarter of profitability and the most profitable quarter for Kingstone in the last seven years. I had said repeatedly that we were doing all of the right things to return the company to profitability over the years. And we are finally seeing the benefits of all of those actions consistently in our financial results. There could not be a better time for Kingston to grow faster than now, as we are priced right, insured to value, have a product that properly matches rate to risk, have the right teams in place across the organization, and have reduced our expenses markedly. And now we are faced with an unbelievable market opportunity that I wrote about in my mid-year letter to shareholders and will expand upon today. Let me remind you that more than two years ago and well ahead of many of our competitors, we recognized that loss trends were on the rise and that inflation, a primary factor driving our loss trends, would also result in many of our customers being underinsured. We acted quickly to raise our premiums. and put a plan in place to update replacement costs on every policy renewal. One of the benefits of being an early mover is that we have successfully returned to profitability while some of our competitors are still restricting their business or have shut down completely, which along with an expansion of our underwriting appetite fueled the growth in our core business this quarter. The coastal insurance market has been volatile for some time in our core state of New York, with a large competitor going insolvent and others shutting down or restricting their business over the last two years. However, market dynamics have changed profoundly in the last few weeks. Competing carriers representing more than $200 million in annual premium made the decision to exit New York State or to exit the personal property market countrywide. We knew that the policies issued by these carriers needed to be moved to alternative carriers and assumed that that would happen over the next year. However, about 10 days ago, we learned that the policies of two of those carriers, over 60,000 policies in our downstate New York footprint, will need to be moved to alternative carriers by the end of this year. For perspective, that number of policies is roughly the size that Kingstone is today. While the growth potential is seemingly limitless, we cannot write it all. Our intent is to maximize our growth only in those segments that meet or exceed our profitability targets. We are in the fortunate position to pick which segments we want to write. because marked capacity is severely constrained. Our objective is profitable growth, not growth for growth's sake. Kingston has learned this lesson before, particularly when we expanded into the non-core states, and we will not make the same mistakes again. As I stated last quarter, it's very easy to grow in the insurance business, but it's much harder to grow profitably. We plan to capitalize on this amazing opportunity by being very intentional and selective on which properties we write and very nimble to change our approach as we learn more and as market conditions evolve. It is such a difficult time for our select producers and we will do everything we can to help them through this unprecedented situation. While the specifics of these market dynamics are new and evolving, Kingstone's entire leadership team is focused on the changes we need to make to successfully seize this incredible opportunity with as minimal disruption as possible to our underwriting and service standards. We are carefully monitoring our capital position and will utilize quota share, if needed, to ensure we have the capital needed to support our growth. Year to date, most of our growth has been from increases in our average premium rather than growth in policy count. Going forward, while we'll still benefit from increases in average premium, most of our growth will come from increasing our policies in force. For visibility, I want to give you an update on some of the metrics that I shared in my mid-year shareholder letter when we had just learned about this market dynamic. At that time, I shared that our new business policy count was up three times the prior year month. Well, we ended the month of July with an overall five times increase rather than the three times that we had shared. And this has increased materially so far in August. I also shared that we were at nine times the prior year month's new business premium levels. We completed the month of July at 13 times higher new business premium, well ahead of the nine times that I had shared and are seeing the same trend so far in August. While it's hard to see beyond the current opportunity that is directly in front of us, we have been thinking a lot about the longer term and how to continue our profitable growth trajectory beyond 2025. We have what we now call our platform, our proven select product, a competitive expense structure, and expert staff in all areas of the company. We have opportunities for enhanced segmentation in our select product to better match rates of risk and will make us more competitive in our core business. We also want to grow the company in other ways. We have been discussing expansion of our platform to other geographies to increase our footprint, additional product offerings, alternative distribution channels, and potential acquisitions, among other strategies. There is a lot more work to do before we finalize our longer-term plans, but I feel confident that we now have a scalable platform to continue to drive profitable growth for many years to come. Before I touch on full year guidance, I wanted to share an update on our debt that will be maturing at year end. I am delighted to share that we have a solution and we are currently in the final stages of execution. Since this is in process, we cannot share any information or answer any questions regarding the debt at this time. However, I can share that this solution will be announced within the next month, and I have confidence that you will be happy with the outcome. Stay tuned. And finally, turning to guidance, I will first cover our updated 24 guidance that we unveiled in yesterday's earnings release, and then share our initial expectations for 2025. With half of the year under our belt, full year 2024 guidance is as follows. direct premium written growth in our core business in the range of 25 to 35%. This increased from just two weeks ago. And based on approximately 125 million of net premiums earned, we expect to achieve a gap combined ratio between 84 and 88, earnings per share between $1 and $1.30, and return on equity between 26 and 34%. We're also happy to share our initial expectations for full year 2025 as follows. Direct premium written growth in our core business in the range of 15 to 25%. And based on approximately 150 million of net premiums earned, we expect to achieve a gap combined ratio between 85 and 89, earnings per share between $1.20 and $1.60, and return on equity between 22% and 30%. The recent change in our market opportunity that I have been discussing has not been factored in our earned premium, combined ratio, earnings per share, or return on equity in the guidance provided for 24 or 25. It's just too early to be able to do that. As soon as we can forecast the impact, I will update the guidance. Otherwise, our guidance assumes no material changes in our business, and as a reminder, our results are very weather dependent, and we have assumed no major catastrophe events in this guidance. We have also assumed that the cost for catastrophe reinsurance for the 25-26 treaty year will increase modestly relative to this year's treaties. Last, note that the second half of 24 and full year 25 does not assume any gains or losses from our investment portfolio. With that, I'll turn the call over to Jen for a more detailed review of our quarterly financial results. Take it away, Jen.