Kingstone Companies, Inc

Greetings and welcome to the Kingstone Company's fourth quarter and full year 2025 earnings conference call. As a reminder, this conference is being recorded. I would now like to turn the call over to your host, Stefan Norbom, Kingstone Investor Relations representative. Thank you. You may begin.

Thank you and good morning, everyone. Joining us on the call today will be President and Chief Executive Officer Meryl Golden, Chief Financial Officer Randy Patton, On behalf of the company, I would like to note this conference may contain forward-looking statements which involve known and unknown risks and 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 Risk Factors 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 a reconciliation of these non-GAAP measures to GAAP figures, please see the tables in the latest earnings release available at the company's website at www.kingstonecompanies.com. With that, it's my pleasure to turn the call over to Meryl Holton. Meryl?

Thanks, Stephan. Good morning, everyone, and thanks for joining our call. I am delighted to share the results of our most profitable quarter and year in Kingston's history. I want to thank the amazing Kingston team and our select producers for making it possible. Let me start with the headlines. In the fourth quarter, we delivered net income of $14.8 million, diluted earnings per share of $1.03, diluted operating earnings per share of $1.08, a GAAP net combined ratio of 64.2, and an annualized return on equity of 51%. For the full year, net income more than doubled to 40.8 million, diluted earnings per share increased 95% to $2.88, and our return on equity was 43%. These results exceeded the guidance we provided in November. I am particularly proud that from year end 2023, To year end 2025, we grew direct premiums written 39% while improving our combined ratio by 30 points. These results are structural, not simply weather driven, and they validate the transformation we have executed. What sets Kingston apart and what drove these results is clear. First, our select product, now 57% of policies enforced compared to 45% one year ago, continues to improve risk selection, properly matching rate to risk and driving lower claims frequency. Second, our producer relationships generate strong retention and consistent new business flow. Third, our operating efficiency with a net expense ratio that improved from 41% in 2021 to 30% in 2025 provides durable margin advantage. And last, our conservative financial position With no debt and robust reinsurance means we can grow with confidence. Turning to the quarter, direct premiums written grew 14% to $82.8 million, driven by higher average premiums and strong retention. For the full year, direct premiums written grew 15% to $277.8 million, and our New York personal lines policies and force grew over 7%. The hard market conditions in our downstate New York footprint have not changed materially. Demand from our producers remain strong, supported by policies from the Guard Renewal Rights Agreement, which we began writing in September. New business policy count has increased sequentially from Q2, and in Q4 grew 25% over Q3. In this environment, what separates the winners from the rest is straightforward. highly segmented products to better assess risk, low expenses, claims execution, and deep producer relationships. We have built these advantages and we will not chase volume at the expense of underwriting discipline. Net earned premium growth remains a powerful tailwind. Net premiums earned increased 38% in the fourth quarter and 46% for the full year primarily due to our reduced quota share, which allows us to retain a greater share of premiums and underwriting profits. The decision to reduce our quota share reflects our confidence in the quality of our book and that our underwriting results warrant retaining more premium. As such, we have reduced our quota share even further for 2026, and net earned premium growth will continue to be a tailwind. On underwriting, our fourth quarter net combined ratio of 64.2 reflects exceptional performance across the board. The underlying loss ratio was 34.7, an improvement of over 14 points from the prior year quarter, driven by meaningfully lower claim frequency. The improvement in frequency, particularly for non-weather water, our largest peril, is a trend we have shared throughout the year and we attribute it to the effectiveness of risk selection in our SelectProc. During the quarter, we also recognize the benefit from continuing improvements in our claims operations. We're faster cycle times and providing earlier visibility into ultimate property claims costs. For the full year, our underlying loss ratio improved nearly four points to 44.4 and our catastrophe loss ratio was just 1.2 points. I want to be direct. While we benefited from very low catastrophe activity in 2025, our underlying performance improved materially. Even with a normalized catastrophe load, our full year combined ratio would have been in the low 80s, reflecting the differentiated platform we have built. As we shared in the second quarter, we have set a five-year goal of $500 million in direct premiums written by year-end 2029, approximately doubling the size of the company through continued growth in New York, measured expansion into new markets, and strategic inorganic opportunities. I am pleased to share that our first new market will be California, which we will be entering in the second quarter of 2026. on an excess and surplus lines basis. California is one of the largest homeowners markets, with $15 billion in written premium, almost double the size of New York, and the largest ENS homeowners market in the country, where the supply-demand imbalance for homeowners coverage continues to grow. The ENS approach gives us the flexibility to price wildfire risk using forward-looking models to set prices to achieve our margin requirements, and to apply strict underwriting standards, including rigorous property level risk selection and real-time accumulation management. We will start small, consistent with our disciplined approach, and scale as we gain confidence in our pricing and product. The initial contribution from California will be modest, less than 5% of our 26 premium. with the vast majority of our volume continuing to come from New York. But the opportunity is enormous, and California will become a large contributor to our growth over time. Turning to our outlook for 26, I want to explain important change and how we're reframing our outlook for this year, because we think it will help investors better understand our business. Starting this year, we're introducing the underlying combined ratio which excludes catastrophe losses and prior year reserve development as our primary operating lens. We define it as the underlying loss ratio plus the net expense ratio. This metric isolates the performance we control, including pricing, risk selection, claims management, and operating efficiency from the inherent volatility of catastrophe events. In 2025, our underlying combined ratio was 74.4, an improvement of 5.1 points from 79.5 in 2024. That improvement is structural. It reflects select product penetration, earned rate adequacy, and operating leverage is independent of catastrophic weather events. At the same time, our record combined ratio of 75 benefited from an outlier low catastrophe loss ratio of just 1.2 points. To put that in context, the six-year average CAAT loss ratio from 2019 through 24 is 7.1 points. Both 24 and 25 were well below the average, including two consecutive mild winters. So when you look at our 26 guidance, I want to be very clear about the bridge. The headline year-over-year change in earnings per share and return on equity is driven almost entirely by our assumption of a higher than normal catastrophe load, not by any deterioration in our underlying business. In fact, our underlying combined ratio guidance of 74 to 76 is comparable to 2025. The headline story is straightforward. The controllable business is healthy and growing. The year-over-year change reflects CAT normalization. Here is our updated guidance for fiscal year 2026. Direct premiums written growth of 16 to 20%, an underlying combined ratio excluding catastrophes and prior year reserve development of 74 to 76, a catastrophe loss assumption of 7 to 10 points, which is at or above the six-year historical average and reflects the elevated winter storm activity we experienced in the first quarter of 2026 and a net combined ratio of 81 to 86. Diluted earnings per share of 220 to 290 with a midpoint of 255 reflects an increase at the midpoint relative to our initial outlook and the benefit of a lower quota share session for the 26th treaty year. Our 16% to 20% direct premium growth target keeps us on pace toward our five-year goal of $500 million in direct premiums written by year-end 2029. I want to give investors the tools to model different catastrophe scenarios. On an illustrative basis, and this is not guided, each one point of catastrophe loss ratio has approximately a 13-cent impact. on diluted earnings per share. So if you want to see what our earnings power looks like at fiscal year 2025 CAT levels of 1.2 points, the illustrative answer is approximately $3.53 per diluted share, which represents 23% growth year over year. That is the underlying trajectory of this business. I want to emphasize that weather is unpredictable and our 2026 guidance assumes a higher than average catastrophe year given the winter weather in the first quarter of 2026. As a reminder, our catastrophe reinsurance program limits our maximum first event loss to 5 million pre-tax or approximately 27 cents per share after tax, whether from a hurricane or a winter storm. We will refine our outlook as the year unfolds. Before I hand it to Randy, I want to briefly address the regulatory proposals in New York regarding homeowner insurer profitability. We share the goal of affordability for consumers, and we are monitoring these proposals closely and engaging constructively through industry bodies. We believe any final legislation will need to account for the inherent volatility of catastrophe exposed property insurance and the importance of maintaining carrier capacity and availability for New York homeowners. We will continue to execute with discipline, advance our measured expansion roadmap, and allocate capital prudently to drive sustained profitable growth. I remain highly confident in Kingston's strategic direction and fully committed to creating long-term shareholder value. With that, I'll turn the call over to Randy Patton, our Chief Financial Officer, for a more detailed review of our results. Randy?