KINGSTONE COMPANIES, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
	June 30,			December 31,
	2020			2019
	(unaudited)
Assets
Fixed-maturity securities, held-to-maturity, at amortized cost (fair value of
$8,322,456 at June 30, 2020 and $4,124,767 at December 31, 2019)	$	7,870,374		$	3,825,952
Fixed-maturity securities, available-for-sale, at fair value (amortized cost of
$155,226,267 at June 30, 2020 and $162,202,355 at December 31, 2019)		165,466,488			168,236,181
Equity securities, at fair value (cost of $24,564,076 at June 30, 2020 and
$22,624,668 at December 31, 2019)		22,705,709			24,661,382
Other investments		2,542,320			2,584,913
Total investments		198,584,891			199,308,428
Cash and cash equivalents		20,153,732			32,391,485
Premiums receivable, net		13,339,539			12,706,411
Reinsurance receivables, net		41,242,321			40,750,538
Deferred policy acquisition costs		19,522,342			20,634,378
Intangible asset		500,000			500,000
Property and equipment, net		7,361,798			7,620,636
Deferred income taxes, net		-			311,052
Other assets		8,595,855			6,979,884
Total assets	$	309,300,478		$	321,202,812

Liabilities
Loss and loss adjustment expense reserves	$	76,608,359		$	80,498,611
Unearned premiums		85,006,280			90,383,238
Advance premiums		4,599,781			3,191,512
Reinsurance balances payable		5,467,103			11,714,724
Deferred ceding commission revenue		6,978,574			7,735,398
Accounts payable, accrued expenses and other liabilities		9,869,913			9,986,317
Deferred income taxes, net		1,589,469			-
Long-term debt, net		29,559,521			29,471,431
Total liabilities		219,679,000			232,981,231

Commitments and Contingencies (Note 11)

Stockholders' Equity
Preferred stock, $.01 par value; authorized 2,500,000 shares		-			-
Common stock, $.01 par value; authorized 20,000,000 shares; issued 11,866,254 shares
at June 30, 2020 and 11,824,889 shares at December 31, 2019; outstanding
10,670,145 shares at June 30, 2020 and 10,797,450 shares at December 31, 2019		118,662			118,248
Capital in excess of par		69,951,549			69,133,918
Accumulated other comprehensive income		8,091,923			4,768,870
Retained earnings		14,973,684			16,913,097
		93,135,818			90,934,133
Treasury stock, at cost, 1,196,109 shares at June 30, 2020
and 1,027,439 shares at December 31, 2019		(3,514,340	)		(2,712,552	)
Total stockholders' equity		89,621,478			88,221,581

Total liabilities and stockholders' equity	$	309,300,478		$	321,202,812

K~~INGSTONE COMPANIES, INC. AND SUBSIDIARIES~~

~~Condensed Consolidated Balance Sheets~~

KINGSTONE COMPANIES, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations and Comprehensive Income (Unaudited)
	For the Three Months Ended						For the Six Months Ended
	June 30,						June 30,
	2020			2019			2020			2019

Revenues
Net premiums earned	$	26,636,856		$	31,201,279		$	53,578,306		$	60,797,168
Ceding commission revenue		3,480,214			675,695			7,311,313			1,953,378
Net investment income		1,612,006			1,719,769			3,277,850			3,343,481
Net gains (losses) on investments		2,697,868			678,655			(3,746,550	)		2,714,018
Other income		683,480			329,972			1,313,099			695,873
Total revenues		35,110,424			34,605,370			61,734,018			69,503,918

Expenses
Loss and loss adjustment expenses		12,813,631			17,672,308			29,199,452			46,806,532
Commission expense		7,850,607			7,299,173			15,749,798			14,152,589
Other underwriting expenses		6,325,472			5,416,449			13,087,264			11,552,440
Other operating expenses		1,420,160			1,097,468			2,983,780			2,068,640
Depreciation and amortization		673,160			627,669			1,360,254			1,230,001
Interest expense		456,545			456,545			913,090			913,090
Total expenses		29,539,575			32,569,612			63,293,638			76,723,292

Income (loss) from operations before income taxes		5,570,849			2,035,758			(1,559,620	)		(7,219,374	)
Income tax expense (benefit)		962,659			396,378			(723,607	)		(1,523,564	)
Net income (loss)		4,608,190			1,639,380			(836,013	)		(5,695,810	)

Other comprehensive income, net of tax
Gross change in unrealized gains
on available-for-sale-securities		10,887,611			3,679,475			4,160,122			7,868,191

Reclassification adjustment for gains
included in net income (loss)		148,495			12,364			46,273			34,795
Net change in unrealized gains		11,036,106			3,691,839			4,206,395			7,902,986
Income tax expense related to items
of other comprehensive income		(2,317,582	)		(775,285	)		(883,342	)		(1,659,626	)
Other comprehensive income, net of tax		8,718,524			2,916,554			3,323,053			6,243,360

Comprehensive income	$	13,326,714		$	4,555,934		$	2,487,040		$	547,550

Earnings (loss) per common share:
Basic	$	0.43		$	0.15		$	(0.08	)	$	(0.53	)
Diluted	$	0.43		$	0.15		$	(0.08	)	$	(0.53	)

Weighted average common shares outstanding
Basic		10,733,354			10,771,717			10,770,598			10,764,824
Diluted		10,734,784			10,785,064			10,770,598			10,764,824

Dividends declared and paid per common share	$	0.0400		$	0.1000		$	0.1025		$	0.2000

See accompanying notes to condensed consolidated financial statements.

														Accumulated
											Capital			Other
	Preferred Stock				Common Stock						in Excess			Comprehensive			Retained			Treasury Stock
	Shares		Amount		Shares			Amount			of Par			Income (Loss)			Earnings			Shares		Amount			Total
Balance, January 1, 2019		-	$	-		11,775,148		$	117,751		$	67,763,940		$	(2,884,313	)	$	26,380,816			1,027,439	$	(2,712,552	)	$	88,665,642
Stock-based compensation		-		-		-			-			709,207			-			-			-		-			709,207
Vesting of restricted stock awards		-		-		31,546			314			(314	)		-			-			-		-			-
Shares deducted from restricted stock awards for payment of withholding taxes		-		-		(7,607	)		(75	)		(122,763	)		-			-			-		-			(122,838	)
Exercise of stock options		-		-		3,000			30			23,520			-			-			-		-			23,550
Dividends		-		-		-			-			-			-			(2,153,349	)		-		-			(2,153,349	)
Net loss		-		-		-			-			-			-			(5,695,810	)		-		-			(5,695,810	)
Change in unrealized gains on available-for-sale securities, net of tax		-		-		-			-			-			6,243,360			-			-		-			6,243,360
Balance, June 30, 2019		-	$	-		11,802,087		$	118,020		$	68,373,590		$	3,359,047		$	18,531,657			1,027,439	$	(2,712,552	)	$	87,669,762

														Accumulated
											Capital			Other
	Preferred Stock				Common Stock						in Excess			Comprehensive		Retained			Treasury Stock
	Shares		Amount		Shares			Amount			of Par			Income		Earnings			Shares		Amount			Total
Balance, January 1, 2020		-	$	-		11,824,889		$	118,248		$	69,133,918		$	4,768,870	$	16,913,097			1,027,439	$	(2,712,552	)	$	88,221,581
Stock-based compensation		-		-		-			-			942,387			-		-			-		-			942,387
Vesting of restricted stock awards		-		-		60,896			607			(607	)		-		-			-		-			-
Shares deducted from restricted stock awards for payment of withholding taxes		-		-		(19,531	)		(193	)		(124,149	)		-		-			-		-			(124,342	)
Acquisition of treasury stock		-		-		-			-			-			-		-			168,670		(801,788	)		(801,788	)
Dividends		-		-		-			-			-			-		(1,103,400	)		-		-			(1,103,400	)
Net loss		-		-		-			-			-			-		(836,013	)		-		-			(836,013	)
Change in unrealized gains on available-for-sale securities, net of tax		-		-		-			-			-			3,323,053		-			-		-			3,323,053
Balance, June 30, 2020		-	$	-		11,866,254		$	118,662		$	69,951,549		$	8,091,923	$	14,973,684			1,196,109	$	(3,514,340	)	$	89,621,478

See accompanying notes to condensed consolidated financial statements.

KINGSTONE COMPANIES, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows (Unaudited)
Six months ended June 30,	2020			2019

Cash flows from operating activities:
Net loss	$	(836,013	)	$	(5,695,810	)
Adjustments to reconcile net loss to net cash flows (used in) provided by operating activities:
Net gains on sale of investments		(275,158	)		(931	)
Net unrealized losses (gains) of equity investments		3,979,115			(2,232,438	)
Net unrealized losses (gains) of other investments		42,593			(480,649	)
Depreciation and amortization		1,360,254			1,230,001
Bad debts		46,440			-
Amortization of bond premium, net		302,279			188,778
Amortization of discount and issuance costs on long-term debt		88,090			88,090
Stock-based compensation		942,387			709,207
Deferred income tax expense (benefit)		1,017,179			(1,521,867	)
(Increase) decrease in operating assets:
Premiums receivable, net		(679,568	)		(996,601	)
Reinsurance receivables, net		(491,783	)		(2,276,245	)
Deferred policy acquisition costs		1,112,036			(1,506,072	)
Other assets		(1,609,499	)		(329,335	)
Increase (decrease) in operating liabilities:
Loss and loss adjustment expense reserves		(3,890,252	)		13,478,014
Unearned premiums		(5,376,958	)		6,456,015
Advance premiums		1,408,269			1,360,596
Reinsurance balances payable		(6,247,621	)		873,527
Deferred ceding commission revenue		(756,824	)		413,479
Accounts payable, accrued expenses and other liabilities		(116,404	)		1,042,925
Net cash flows (used in) provided by operating activities		(9,981,438	)		10,800,684

Cash flows from investing activities:
Purchase - fixed-maturity securities held-to-maturity		(4,041,750	)		-
Purchase - fixed-maturity securities available-for-sale		(12,447,259	)		(11,867,613	)
Purchase - equity securities		(8,290,221	)		(4,461,684	)
Sale and redemption - fixed-maturity securities held-to-maturity		-			400,000
Sale or maturity - fixed-maturity securities available-for-sale		19,174,048			6,987,908
Sale - equity securities		6,479,813			503,884
Acquisition of property and equipment		(1,101,416	)		(2,353,140	)
Net cash flows used in investing activities		(226,785	)		(10,790,645	)

Cash flows from financing activities:
Proceeds from exercise of stock options		-			23,550
Withholding taxes paid on vested retricted stock awards		(124,342	)		(122,838	)
Purchase of treasury stock		(801,788	)		-
Dividends paid		(1,103,400	)		(2,153,349	)
Net cash flows used in financing activities		(2,029,530	)		(2,252,637	)

Decrease in cash and cash equivalents	$	(12,237,753	)	$	(2,242,598	)
Cash and cash equivalents, beginning of period		32,391,485			21,138,403
Cash and cash equivalents, end of period	$	20,153,732		$	18,895,805

Supplemental disclosures of cash flow information:
Cash paid for income taxes	$	-		$	-
Cash paid for interest	$	825,000		$	825,000

See accompanying notes to condensed consolidated financial statements.

	June 30, 2020
													Net
	Cost or		Gross		Gross Unrealized Losses						Estimated		Unrealized
	Amortized		Unrealized		Less than 12			More than 12			Fair		Gains/
Category	Cost		Gains		Months			Months			Value		(Losses)

Fixed-Maturity Securities:
U.S. Treasury securities and
obligations of U.S. government
corporations and agencies	$	3,032,168	$	54,542	$	-		$	-		$	3,086,710	$	54,542

Political subdivisions of States,
Territories and Possessions		8,577,207		423,179		-			-			9,000,386		423,179

Corporate and other bonds
Industrial and miscellaneous		121,977,355		10,145,949		(117,056	)		-			132,006,248		10,028,893

Residential mortgage and other
asset backed securities (1)		21,639,537		256,784		(180,701	)		(342,476	)		21,373,144		(266,393	)
Total	$	155,226,267	$	10,880,454	$	(297,757	)	$	(342,476	)	$	165,466,488	$	10,240,221

(1)

KICO has placed certain residential mortgage backed securities as eligible collateral in a designated custodian account related to its membership in the Federal Home Loan Bank of New York ("FHLBNY") (see Note 7). The eligible collateral would be pledged to FHLBNY if KICO draws an advance from the FHLBNY credit line. As of June 30, 2020, the estimated fair value of the eligible investments was approximately $6,993,000. KICO will retain all rights regarding all securities if pledged as collateral. As of June 30, 2020, there was no outstanding balance on the FHLBNY credit line.

Table of Contents

	December 31, 2019

	Cost or		Gross		Gross Unrealized Losses						Estimated		Net
	Amortized		Unrealized		Less than 12			More than 12			Fair		Unrealized
Category	Cost		Gains		Months			Months			Value		Gains

Fixed-Maturity Securities:
U.S. Treasury securities and
obligations of U.S. government
corporations and agencies	$	7,037,856	$	23,244	$	-		$	-		$	7,061,100	$	23,244

Political subdivisions of States,
Territories and Possessions		9,151,293		181,835		(11,316	)		-			9,321,812		170,519

Corporate and other bonds
Industrial and miscellaneous		119,874,573		5,777,624		(16,685	)		(13,473	)		125,622,039		5,747,466

Residential mortgage and other
asset backed securities (1)		26,138,633		437,841		(68,793	)		(276,451	)		26,231,230		92,597
Total	$	162,202,355	$	6,420,544	$	(96,794	)	$	(289,924	)	$	168,236,181	$	6,033,826

(1)

KICO has placed certain residential mortgage backed securities as eligible collateral in a designated custodian account related to its membership in the FHLBNY (see Note 7). The eligible collateral would be pledged to FHLBNY if KICO draws an advance from the FHLBNY credit line. As of December 31, 2019, the estimated fair value of the eligible investments was approximately $7,284,000. KICO will retain all rights regarding all securities if pledged as collateral. As of December 31, 2019, there was no outstanding balance on the FHLBNY credit line.

A summary of the amortized cost and estimated fair value of the Company’s investments in available-for-sale fixed-maturity securities by contractual maturity as of June 30, ~~2019~~2020 and December 31, ~~2018~~2019 is shown below:

	June 30, 2020

	Cost or		Gross		Gross Unrealized Losses					Estimated		Net
	Amortized		Unrealized		Less than 12			More than 12		Fair		Unrealized
Category	Cost		Gains		Months			Months		Value		Gains

Held-to-Maturity Securities:
U.S. Treasury securities	$	729,572	$	162,616	$	-		$	-	$	892,188	$	162,616

Political subdivisions of States,
Territories and Possessions		998,527		59,493		-			-		1,058,020		59,493

Corporate and other bonds
Industrial and miscellaneous		6,142,275		280,297		(50,324	)		-		6,372,248		229,973

Total	$	7,870,374	$	502,406	$	(50,324	)	$	-	$	8,322,456	$	452,082

	December 31, 2019

	Cost or		Gross		Gross Unrealized Losses					Estimated		Net
	Amortized		Unrealized		Less than 12			More than 12		Fair		Unrealized
Category	Cost		Gains		Months			Months		Value		Gains

Held-to-Maturity Securities:
U.S. Treasury securities	$	729,550	$	151,002	$	-		$	-	$	880,552	$	151,002

Political subdivisions of States,
Territories and Possessions		998,619		51,021		-			-		1,049,640		51,021

Corporate and other bonds
Industrial and miscellaneous		2,097,783		97,627		(835	)		-		2,194,575		96,792

Total	$	3,825,952	$	299,650	$	(835	)	$	-	$	4,124,767	$	298,815

Held-to-maturity U.S. Treasury securities are held in trust pursuant to various states’ minimum funds requirements.

	Three months ended						Six months ended
	June 30,						June 30,
	2020			2019			2020			2019
Realized (Losses) Gains

Fixed-maturity securities:
Gross realized gains	$	16,087		$	4,942		$	252,577		$	10,944
Gross realized losses		(164,582	)		(17,306	)		(196,925	)		(45,739	)
		(148,495	)		(12,364	)		55,652			(34,795	)

Equity securities:
Gross realized gains		125,310			90,427			444,671			41,688
Gross realized losses		(11,350	)		(27,638	)		(225,165	)		(5,962	)
		113,960			62,789			219,506			35,726

Net realized (losses) gains		(34,535	)		50,425			275,158			931

Unrealized Gains (Losses)

Equity securities:
Gross gains		2,177,605			440,301			-			2,232,438
Gross losses		-			-			(3,979,115	)		-
		2,177,605			440,301			(3,979,115	)		2,232,438

Other investments:
Gross gains		554,798			187,929			-			480,649
Gross losses		-			-			(42,593	)		-
		554,798			187,929			(42,593	)		480,649

Net unrealized gains (losses)		2,732,403			628,230			(4,021,708	)		2,713,087

Net gains (losses) on investments	$	2,697,868		$	678,655		$	(3,746,550	)	$	2,714,018

Impairment Review

	June 30, 2020
	Less than 12 months							12 months or more							Total
	Estimated					No. of		Estimated					No. of		Estimated
	Fair		Unrealized			Positions		Fair		Unrealized			Positions		Fair		Unrealized
Category	Value		Losses			Held		Value		Losses			Held		Value		Losses

Fixed-Maturity Securities:
U.S. Treasury securities
and obligations of U.S.
government corporations
and agencies	$	-	$	-			-	$	-	$	-			-	$	-	$	-

Political subdivisions of
States, Territories and
Possessions		-		-			-		-		-			-		-		-

Corporate and other
bonds industrial and
miscellaneous		4,839,822		(117,056	)		5		-		-			-		4,839,822		(117,056	)

Residential mortgage and other
asset backed securities		7,060,988		(180,701	)		9		10,639,265		(342,476	)		16		17,700,253		(523,177	)

Total fixed-maturity
securities	$	11,900,810	$	(297,757	)		14	$	10,639,265	$	(342,476	)		16	$	22,540,075	$	(640,233	)

Table of Contents

The Company held available-for-sale securities with unrealized losses representing declines that were considered temporary at December 31, ~~2018~~2019 as follows:

	December 31, 2019
	Less than 12 months							12 months or more							Total
	Estimated					No. of		Estimated					No. of		Estimated
	Fair		Unrealized			Positions		Fair		Unrealized			Positions		Fair		Unrealized
Category	Value		Losses			Held		Value		Losses			Held		Value		Losses

Fixed-Maturity Securities:
U.S. Treasury securities
and obligations of U.S.
government corporations
and agencies	$	-	$	-			-	$	-	$	-			-	$	-	$	-

Political subdivisions of
States, Territories and
Possessions		3,067,428		(11,316	)		3		-		-			-		3,067,428		(11,316	)

Corporate and other
bonds industrial and
miscellaneous		3,730,478		(16,685	)		7		1,300,915		(13,473	)		3		5,031,393		(30,158	)

Residential mortgage and other
asset backed securities		5,862,636		(68,793	)		5		13,534,768		(276,451	)		21		19,397,404		(345,244	)

Total fixed-maturity
securities	$	12,660,542	$	(96,794	)		15	$	14,835,683	$	(289,924	)		24	$	27,496,225	$	(386,718	)

Table of Contents

Note 4 - Fair Value Measurements

Pursuant to ASC 820 “Fair Value Measurement,” an entity is permitted, as a practical expedient, to estimate the fair value of an investment within the scope of ASC 820 using the net asset value (“NAV”) per share of the investment.

	June 30, 2020
	Level 1		Level 2		Level 3		Total

Fixed-maturity securities available-for-sale
U.S. Treasury securities
and obligations of U.S.
government corporations
and agencies	$	3,086,710	$	-	$	-	$	3,086,710

Political subdivisions of
States, Territories and
Possessions		-		9,000,386		-		9,000,386

Corporate and other
bonds industrial and
miscellaneous		129,921,971		2,084,277		-		132,006,248

Residential mortgage backed securities		-		21,373,144		-		21,373,144
Total fixed maturities		133,008,681		32,457,807		-		165,466,488
Equity securities		22,705,709		-		-		22,705,709
Total investments	$	155,714,390	$	32,457,807	$	-	$	188,172,197

	December 31, 2019
	Level 1		Level 2		Level 3		Total

Fixed-maturity securities available-for-sale
U.S. Treasury securities
and obligations of U.S.
government corporations
and agencies	$	7,061,100	$	-	$	-	$	7,061,100

Political subdivisions of
States, Territories and
Possessions		-		9,321,812		-		9,321,812

Corporate and other
bonds industrial and
miscellaneous		123,010,772		2,611,267		-		125,622,039

Residential mortgage backed securities		-		26,231,230		-		26,231,230
Total fixed maturities		130,071,872		38,164,309		-		168,236,181
Equity securities		24,661,382		-		-		24,661,382
Total investments	$	154,733,254	$	38,164,309	$	-	$	192,897,563

Table of Contents

The following table sets forth the Company’s investment in a hedge fund measured at ~~NAV~~Net Asset Value (“NAV”) per share as of June 30, ~~2019~~2020 and December 31, ~~2018.~~2019. The Company measures this investment at fair value on a recurring basis. Fair value using NAV per share is as follows as of the dates indicated:

	Direct			Assumed		Ceded			Net

Six months ended June 30, 2020
Premiums written	$	79,347,406		$	-	$	(28,066,253	)	$	51,281,153
Change in unearned premiums		5,376,958			-		(3,079,805	)		2,297,153
Premiums earned	$	84,724,364		$	-	$	(31,146,058	)	$	53,578,306

Six months ended June 30, 2019
Premiums written	$	82,309,827		$	77	$	(15,327,796	)	$	66,982,108
Change in unearned premiums		(6,456,216	)		202		271,074			(6,184,940	)
Premiums earned	$	75,853,611		$	279	$	(15,056,722	)	$	60,797,168

Three months ended June 30, 2020
Premiums written	$	42,650,477		$	-	$	(14,559,998	)	$	28,090,479
Change in unearned premiums		(527,742	)		-		(925,881	)		(1,453,623	)
Premiums earned	$	42,122,735		$	-	$	(15,485,879	)	$	26,636,856

Three months ended June 30, 2019
Premiums written	$	44,821,279		$	111	$	(8,199,887	)	$	36,621,503
Change in unearned premiums		(5,828,149	)		7		407,918			(5,420,224	)
Premiums earned	$	38,993,130		$	118	$	(7,791,969	)	$	31,201,279

Premium receipts in advance of the policy effective date are recorded as advance premiums. The balance of advance premiums as of June 30,~~, 2019~~ 2020 and December 31, ~~2018~~2019 was ~~$3,468,225~~$4,599,781 and ~~$2,107,629,~~$3,191,512, respectively.

~~(1)~~

~~Reported claims for accident year 2012 includes 3,406 claims from Superstorm Sandy.~~

Table of Contents

All Lines of Business
*(in thousands, except reported claims data)*
																					As of
	Incurred Loss and Allocated Loss Adjustment Expenses, Net of Reinsurance																				June 30, 2020
	For the Years Ended December 31,																		For the six months ended June				Cumulative Number of Reported Claims by Accident
Accident Year	2011		2012		2013		2014		2015		2016		2017		2018		2019		30, 2020		IBNR		Year
	(Unaudited 2011 - 2019)																		(Unaudited)

2011	$	7,603	$	7,678	$	8,618	$	9,440	$	9,198	$	9,066	$	9,144	$	9,171	$	9,127	$	9,128	$	-		1,914
2012				9,539		9,344		10,278		10,382		10,582		10,790		10,791		11,015		10,963		91		4,704	(1)
2013						10,728		9,745		9,424		9,621		10,061		10,089		10,607		10,430		33		1,561
2014								14,193		14,260		14,218		14,564		15,023		16,381		16,509		299		2,137
2015										22,340		21,994		22,148		22,491		23,386		23,031		130		2,555
2016												26,062		24,941		24,789		27,887		27,832		423		2,878
2017														31,605		32,169		35,304		36,026		414		3,384
2018																54,455		56,351		58,289		2,187		4,191
2019																		75,092		72,769		11,498		4,394
2020																				27,492		7,445		1,713
																	Total		$	292,469

(1)	Reported claims for accident year 2012 includes 3,406 claims from Superstorm Sandy.

All Lines of Business
*(in thousands)*
	Cumulative Paid Loss and Allocated Loss Adjustment Expenses, Net of Reinsurance
	For the Years Ended December 31,																		For the six months ended June 30,
Accident Year	2011		2012		2013		2014		2015		2016		2017		2018		2019		2020
	(Unaudited 2011 - 2019)																		(Unaudited)

2011	$	3,740	$	5,117	$	6,228	$	7,170	$	8,139	$	8,540	$	8,702	$	8,727	$	8,789	$	8,993
2012				3,950		5,770		7,127		8,196		9,187		10,236		10,323		10,428		10,443
2013						3,405		5,303		6,633		7,591		8,407		9,056		9,717		10,007
2014								5,710		9,429		10,738		11,770		13,819		14,901		15,169
2015										12,295		16,181		18,266		19,984		21,067		22,058
2016												15,364		19,001		21,106		23,974		24,863
2017														16,704		24,820		28,693		30,172
2018																32,383		44,516		47,698
2019																		40,933		52,940
2020																				13,087
																	Total		$	235,431

Net liability for unpaid loss and allocated loss adjustment expenses for the accident years presented																			$	57,038
All outstanding liabilities before 2011, net of reinsurance																				98
Liabilities for loss and allocated loss adjustment expenses, net of reinsurance																			$	57,136

Reported claim counts are measured on an occurrence or per event basis. A single claim occurrence could result in more than one loss type or claimant; however, the Company counts claims at the occurrence level as a single claim regardless of the number of claimants or claim features involved.

Table of Contents

	Treaty Year
	December 15, 2019			July 1, 2019	July 1, 2018
	to			to	to
Line of Business	December 31, 2020			December 14, 2019	June 30, 2019

Personal Lines:
Homeowners, dwelling fire and
and canine legal liability
Quota share treaty:
Percent ceded		25	%	None		10	%

	Treaty Year
	January 1, 2021		July 1, 2020		December 15, 2019		July 1, 2019		July 1, 2018
	to		to		to		to		to
Line of Business	June 30, 2021		December 31, 2020		June 30, 2020		December 14, 2019		June 30, 2019

Personal Lines:
Homeowners, dwelling fire and
and canine legal liability
Quota share treaty:
Risk retained on intial
$1,000,000 of losses	NA (7)		$	750,000	$	750,000	$	1,000,000	$	900,000
Losses per occurrence subject
to quota share
reinsurance coverage	NA (7)		$	1,000,000	$	1,000,000	None		$	1,000,000
Expiration date			December 31, 2020		December 31, 2020				June 30, 2019
Excess of loss coverage and
facultative facility
coverage (1)	$	8,000,000	$	8,000,000	$	9,000,000	$	9,000,000	$	9,000,000
	in excess of		in excess of		in excess of		in excess of		in excess of
	$	1,000,000	$	1,000,000	$	1,000,000	$	1,000,000	$	1,000,000
Total reinsurance coverage
per occurrence (7)	8,000,000		$	8,250,000	$	9,250,000	$	9,000,000	$	9,100,000
Losses per occurrence subject
to reinsurance coverage	$	8,000,000	$	9,000,000	$	10,000,000	$	10,000,000	$	10,000,000
Expiration date (7)	June 30, 2021		June 30, 2021		June 30, 2020		June 30, 2020		June 30, 2019

Catastrophe Reinsurance:
Initial loss subject to personal
lines quota share treaty	$	NA (7)	$	7,500,000	$	7,500,000	None		$	5,000,000
Risk retained per catastrophe
occurrence (2) (7)	$	10,000,000	$	8,125,000	$	5,625,000	$	7,500,000	$	4,500,000
Catastrophe loss coverage
in excess of
quota share coverage (3) (7)	$	475,000,000	$	475,000,000	$	602,500,000	$	602,500,000	$	445,000,000
Reinstatement premium
protection (4) (5) (6)	Yes		Yes		Yes		Yes		Yes

(1)	For personal lines, includes the addition of an automatic facultative facility allowing KICO to obtain homeowners single risk coverage up to $10,000,000 in total insured value, which covers direct losses from $3,500,000 to $10,000,000.
(2)	Plus losses in excess of catastrophe coverage. Effective July 1, 2020, no reinsurance coverage for the $2,500,000 gap between quota share limit of $7,500,000 and first $10,000,000 layer of catastrophe coverage (see note 7 below).
(3)	Catastrophe coverage is limited on an annual basis to two times the per occurrence amounts. Duration of 168 consecutive hours for a catastrophe occurrence from windstorm, hail, tornado, hurricane and cyclone.
(4)	Effective July 1, 2018, reinstatement premium protection for $210,000,000 of catastrophe coverage in excess of $5,000,000.
(5)	Effective July 1, 2019, -reinstatement premium protection for $292,500,000 of catastrophe coverage in excess of $7,500,000.
(6)	Effective July 1, 2020, reinstatement premium protection for $70,000,000 of catastrophe coverage in excess of $10,000,000.
(7)	Quota share expires December 31, 2020; reinsurance coverage from January 1, 2021 through June 30, ~~2020~~2021 is only for excess of loss and catastrophe reinsurance.

~~Treaty~~	~~Range of Loss~~	~~Risk Retained~~
~~Personal Lines (1)~~	~~Initial $1,000,000~~	~~$1,000,000~~
	~~$1,000,000 - $10,000,000~~	~~None(2)~~
	~~Over $10,000,000~~	~~100%~~

~~Personal Umbrella~~	~~Initial $1,000,000~~	~~$100,000~~25
	~~$1,000,000 - $5,000,000~~	~~None~~
	~~Over $5,000,000~~	~~100%~~Table of Contents

~~Commercial Lines~~	~~Initial $750,000~~	~~$750,000~~
	~~$750,000 - $4,500,000~~	~~None(3)~~
	~~Over $4,500,000~~	~~100%~~

~~Commercial Umbrella~~	~~Initial $1,000,000~~	~~$100,000~~
	~~$1,000,000 - $5,000,000~~	~~None~~
	~~Over $5,000,000~~	~~100%~~

~~Catastrophe (4)~~	~~Initial $7,500,000~~	~~$7,500,000~~
	~~$7,500,000 - $610,000,000~~	~~None~~
	~~Over $610,000,000~~	~~100%~~

	Treaty Year
	July 1, 2020			July 1, 2019			July 1, 2018
	to			to			to
Line of Business	June 30, 2021			June 30, 2020			June 30, 2019

Personal Lines:

Personal Umbrella
Quota share treaty:
Percent ceded - first $1,000,000 of coverage		90	%		90	%		90	%
Percent ceded - excess of $1,000,000 of coverage		95	%		100	%		100	%
Risk retained	$	300,000		$	100,000		$	100,000
Total reinsurance coverage per occurrence	$	4,700,000		$	4,900,000		$	4,900,000
Losses per occurrence subject to quota share reinsurance coverage	$	5,000,000		$	5,000,000		$	5,000,000
Expiration date	June 30, 2021			June 30, 2020			June 30, 2019

Commercial Lines:
General liability commercial policies
Quota share treaty	None			None			None
Risk retained	$	750,000		$	750,000		$	750,000
Excess of loss coverage above risk retained	$	3,750,000		$	3,750,000		$	3,750,000
	in excess of			in excess of			in excess of
	$	750,000		$	750,000		$	750,000
Total reinsurance coverage per occurrence	$	3,750,000		$	3,750,000		$	3,750,000
Losses per occurrence subject to reinsurance coverage	$	4,500,000		$	4,500,000		$	4,500,000

Commercial Umbrella
Quota share treaty:	None			None
Percent ceded - first $1,000,000 of coverage								90	%
Percent ceded - excess of $1,000,000 of coverage								100	%
Risk retained							$	100,000
Total reinsurance coverage per occurrence							$	4,900,000
Losses per occurrence subject to quota share reinsurance coverage							$	5,000,000
Expiration date							June 30, 2019

The Company’s reinsurance program ishas been structured to enable the Company to ~~significantly~~ grow its premium volume while maintaining regulatory capital and other financial ratios generally within or below the expected ranges used for regulatory oversight purposes. The reinsurance program also provides income as a result of ceding commissions earned pursuant to the quota share reinsurance contracts. The Company’s participation in reinsurance arrangements does not relieve the Company of its obligations to policyholders.

~~(1)~~

~~Effective July 1, 2018, we decreased~~

	Six months ended June 30,
($ in thousands)	2020			2019			Change			Percent
Revenues
Direct written premiums	$	79,347		$	82,310		$	(2,963	)		(3.6	) %
Assumed written premiums		-			-			-		n/a		%
		79,347			82,310			(2,963	)		(3.6	)%
Ceded written premiums
Ceded to quota share treaties		15,600			5,963			9,637			161.6	%
Ceded to excess of loss treaties		947			833			114			13.7	%
Ceded to catastrophe treaties		11,519			8,532			2,987			35.0	%
Total ceded written premiums		28,066			15,328			12,738			83.1	%
Net written premiums		51,281			66,982			(15,701	)		(23.4	) %
Change in unearned premiums
Direct and assumed		5,377			(6,456	)		11,833			n/a	%
Ceded to quota share treaties		(3,080	)		271			(3,351	)		n/a	%
Change in net unearned premiums		2,297			(6,185	)		8,482			n/a	%
Premiums earned
Direct and assumed		84,724			75,854			8,870			11.7	%
Ceded to reinsurance treaties		(31,146	)		(15,057	)		(16,089	)		106.9	%
Net premiums earned		53,578			60,797			(7,219	)		(11.9	)%
Ceding commission revenue
Excluding the effect of catastrophes		7,311			1,953			5,358			274.3	%
Effect of catastrophes		-			-			-		n/a		%
Total ceding commission revenue		7,311			1,953			5,358			274.3	%
Net investment income		3,278			3,343			(65	)		(1.9	)%
Net (losses) gains on investments		(3,746	)		2,714			(6,460	)		(238.0	)%
Other income		1,313			696			617			88.6	%
Total revenues		61,734			69,503			(7,769	)		(11.2	)%
Expenses
Loss and loss adjustment expenses
Direct and assumed:
Loss and loss adjustment expenses excluding the effect of catastrophes		37,081			46,164			(9,083	)		(19.7	)%
Losses from catastrophes (1)		2,338			7,264			(4,926	)		(67.8	)%
Total direct and assumed loss and loss adjustment expenses		39,419			53,428			(14,009	)		(26.2	)%
Ceded loss and loss adjustment expenses:
Loss and loss adjustment expenses excluding the effect of catastrop hes		9,592			5,859			3,733			63.7	%
Losses from catastrophes (1)		628			763			(135	)		(17.7	)%
Total ceded loss and loss adjustment expenses		10,220			6,622			3,598			54.3	%
Net loss and loss adjustment expenses:
Loss and loss adjustment expenses excluding the effect of catastrophes		27,489			40,305			(12,816	)		(31.8	)%
Losses from catastrophes (1)		1,710			6,501			(4,791	)		(73.7	)%
Net loss and loss adjustment expenses		29,199			46,806			(17,607	)		(37.6	)%
Commission expense		15,750			14,153			1,597			11.3	%
Other underwriting expenses		13,087			11,552			1,535			13.3	%
Other operating expenses		2,984			2,069			915			44.2	%
Depreciation and amortization		1,360			1,230			130			10.6	%
Interest expense		913			913			-		-		%
Total expenses		63,294			76,723			(13,430	)		(17.5	)%
Loss before taxes		(1,560	)		(7,220	)		5,660			(78.4	) %
Income tax benefit		(724	)		(1,524	)		800			(52.5	)%
Net loss	$	(836	)	$	(5,696	)	$	4,860			(85.3	)%

(1)

The six months ended June 30, 2020 and 2019 include catastrophe losses, which are defined as losses from an event for which a catastrophe bulletin and related serial number has been issued by the Property Claims Services (PCS) unit of the Insurance Services Office (ISO). PCS catastrophe bulletins are issued for events that cause more than $25 million in total insured losses and affect a significant number of policyholders and insurers.

Table of Contents

	Six months ended June 30,
	2020			2019			Percentage Point Change			Percent Change

Key ratios:
Net loss ratio		54.5	%		77.0	%		(22.5	)		(29.2	)%
Net underwriting expense ratio		39.2	%		38.0	%		1.2			3.2	%
Net combined ratio		93.7	%		115.0	%		(21.3	)		(18.5	)%

Direct Written Premiums

Direct written premiums during the ~~quota share ceding rate in our personal lines quota share treaty from 20%~~six months ended June 30, 2020 (“Six Months 2020”) were $79,347,000 compared to ~~10% (the “2018 cut-off”).~~

~~(2)~~

~~The~~$82,310,000 during the six months ended June 30, 2019 (“Six Months 2019”). The decrease of $2,963,000, or 3.6%, was primarily due to an $8,580,000 decrease in premiums from our commercial lines business as result of our decision in July 2019 to no longer underwrite this line of business. Direct written premiums from our personal lines business for Six Months 2020 were $75,958,000, an increase of $7,811,000, or 11.5%, from $68,147,000 in Six Months 2019.

Beginning in 2017 we started writing homeowners policies in New Jersey. Through 2019 we expanded to Rhode Island, Massachusetts and Connecticut. We refer to our New York business as our “Core” business and the business outside of New York as our “Expansion” business. Direct written premiums from our Expansion business were $15,095,000 in Six Months 2020 compared to $9,529,000 in Six Months 2019.

Net Written Premiums and Net Premiums Earned

Through June 30, 2019, our quota share reinsurance treaties were on a July 1 through June 30 fiscal year basis. Effective December 15, 2019, we entered into a quota share reinsurance treaty for our personal lines business covering the period from December 15, 2019 through December 31, 2020 (“2019/2020 Treaty”). Our personal lines quota share reinsurance treaty in effect for Six Months 2019 was covered under a treaty covering a two-year period from July 1, 2017 through June 30, 2019 (“2017/2019 Treaty”). The treaty in effect during Six Months 2019 was covered under the July 1, 2018 ~~includes~~through June 30, 2019 treaty year (“2018/2019 Treaty Year”). The following table describes the quota share reinsurance ceding rates in effect for each treaty year during Six Months 2020 and Six Months 2019 under the 2019/2020 Treaty and the 2017/2019 Treaty, respectively. This table should be referred to in conjunction with the discussions for net written premiums, net premiums earned, ceding commission revenue and net loss and loss adjustment expenses that follow.

	(1)	The 2018/2019 Treaty Year, covered under the 2017/2019 Treaty, expired on a run-off basis effective July 1, 2019 through June 30, 2020 (the “2019 Run-off”).

	(2)	The 2019/2020 Treaty was effective December 15, 2019 with a quota share reinsurance rate of 25%. See “Reinsurance” below for changes to our personal lines quota share treaty effective December 15, 2019, and July 1, 2019 and 2018.

Table of Contents

Net written premiums decreased $15,701,000, or 23.4%, to $51,281,000 in Six Months 2020 from $66,982,000 in Six Months 2019. Net written premiums include direct and assumed premiums, less the amount of written premiums ceded under our reinsurance treaties (quota share, excess of loss, and catastrophe). The decrease in net written premiums in Six Months 2020 was attributable to the inception of the 2019/2020 Treaty on December 15, 2019 and the decrease in commercial lines premiums, which are not subject to a quota share treaty. In Six Months 2020, our premiums ceded under quota share treaties increased by $9,637,000 over the comparable ceded premiums in Six Months 2019. Our personal lines business was subject to the 2017/2019 Treaty under the 2018/2019 Treaty Year through June 30, 2019. Following June 30, 2019, any earned premium and associated claims for policies still in force will continue to be ceded under the 10% quota share rate until such policies expire (run-off) over the next year. The 2019 Run-off period is from July 1, 2019 through June 30, 2020 and there was no return of unearned premiums under this arrangement.

Excess of loss reinsurance treaties

An increase in written premiums will increase the premiums ceded under our excess of loss treaties. In Six Months 2020, our ceded excess of loss reinsurance premiums increased by 114,000 over the comparable ceded premiums for Six Months 2019. The increase was due to an increase in premiums subject to excess of loss reinsurance.

Catastrophe reinsurance treaties

Most of the premiums written under our personal lines policies are also subject to our catastrophe treaties. An increase in our personal lines business gives rise to more property exposure, which increases our exposure to catastrophe risk; therefore, our premiums ceded under catastrophe treaties will increase. This results in an increase in premiums ceded under our catastrophe treaties provided that reinsurance rates are stable or are increasing. In Six Months 2020, our premiums ceded under catastrophe treaties increased by $2,987,000 over the comparable ceded premiums in Six Months 2019. The change was due to an increase in our catastrophe limit purchased, an increase in premiums subject to catastrophe reinsurance due to continued growth of our personal lines business, and an increase in reinsurance rates effective July 1, 2019. Our ceded catastrophe premiums are paid based on the total direct written premiums subject to the catastrophe reinsurance treaty.

Net premiums earned

Net premiums earned decreased $7,219,000, or 11.9%, to $53,578,000 in Six Months 2020 from $60,797,000 in Six Months 2019. The decrease was due to the inception of the 2019/2020 Treaty on December 15, 2019 and the decrease in commercial lines premiums, which are not subject to a quota share treaty.

Table of Contents

Ceding Commission Revenue

The following table summarizes the changes in the components of ceding commission revenue (in thousands) for the periods indicated:

	Six months ended June 30,
($ in thousands)	2020		2019			Change		Percent

Provisional ceding commissions earned	$	7,161	$	2,681		$	4,480		167.1	%

Contingent ceding commissions earned
Contingent ceding commissions earned excluding
the effect of catastrophes		150		(728	)		878		n/a
Effect of catastrophes on ceding commissions earned		-		-			-		n/a
Contingent ceding commissions earned		150		(728	)		878		n/a

Total ceding commission revenue	$	7,311	$	1,953		$	5,358		274.3	%

Ceding commission revenue was $7,311,000 in Six Months 2020 compared to $1,953,000 in Six Months 2019. The increase of $5,358,000, or 274.3%, was due to an increase in both provisional ceding commissions earned and contingent ceding commissions earned. The increase in provisional ceding commissions occurred due to the increase in quota share reinsurance rates effective December 15, 2019 (see below for discussion of provisional ceding commissions earned and contingent ceding commissions earned).

Provisional Ceding Commissions Earned

We receive a provisional ceding commission based on ceded written premiums. The $4,480,000 increase in provisional ceding commissions earned is primarily due to the increase in the quota share ceding rate effective December 15, 2019 to 25%, from the 10% rate in effect in Six Months 2019. There was an increase in ceded premiums in Six Months 2020 available from which to earn ceding commissions compared to Six Months 2019 due to the changes in quota share ceding rates and an increase in personal lines direct written premiums subject to the quota share.

Contingent Ceding Commissions Earned

The 2019/2020 Treaty and 2017/2019 Treaty structure calls for a higher upfront provisional ceding commission and there is not an opportunity to earn additional contingent ceding commissions under these treaties. The amount of contingent ceding commissions we are eligible to receive under our prior years’ quota share treaties is subject to change based on losses incurred related to claims with accident dates before July 1, 2017. Under our prior years’ quota share treaties, we received a contingent ceding commission based on a sliding scale in relation to the losses incurred under our quota share treaties. The lower the ceded loss ratio, the more contingent commission we receive.

Net Investment Income

Net investment income was $3,278,000 in Six Months 2020 compared to $3,343,000 in Six Months 2019, a decrease of $65,000, or 1.9%. The average yield on invested assets was 3.53% as of June 30, 2020 compared to 3.64% as of June 30, 2019. The pre-tax equivalent yield on invested assets was 3.09% and 3.43% as of June 30, 2020 and 2019, respectively.

Table of Contents

Cash and invested assets were $218,739,000 as of June 30, 2020 compared to $212,130,000 as of June 30, 2019. The $6,608,000 increase in cash and invested assets was primarily attributable to an increase in operating cash flows for the periods after June 30, 2019.

Net Gains and Losses on Investments

Net losses on investments were $3,746,000 in Six Months 2020 compared to a net gain of $2,714,000 in Six Months 2019. Unrealized losses on our equity securities and other investments in Six Months 2020 were $4,022,000, compared to unrealized gains of $2,713,000 in Six Months 2019. Realized gains on sales of investments were $275,000 in Six Months 2020 compared to $1000 in Six Months 2019. Unrealized losses in Six Months 2020 were due to the market fluctuations related to the Covid-19 pandemic.

Other Income

Other income was $1,313,000 in Six Months 2020 compared to $696,000 in Six Months 2019. The increase of $617,000, or 88.6%, was primarily due to commission revenue from Cosi.

Net Loss and LAE

Net loss and LAE was $29,199,000 in Six Months 2020 compared to $48,806,000 in Six Months 2019. The net loss ratio was 54.5% in Six Months 2020 compared to 77.0% in Six Months 2019, an improvement of 22.5 percentage points.

Table of Contents

The following graph summarizes the changes in the components of net loss ratio for the periods indicated, along with the comparable components excluding commercial lines business:

(Components may not sum to totals due to rounding)

During Six Months 2020, the loss ratio improved 22.5 points, from 77.0% in Six Months 2019 to 54.5% in Six Months 2020. The loss ratio improved due to several factors, including a reduction in the impact of winter weather catastrophes, reduced impact from prior year loss development, and an improvement in the core loss ratio driven by reductions in claim frequency affecting both personal lines and Auto Physical Damage.

Prior year development has been slightly favorable for the Six Months 2020, with a 0.3 points of favorable impact on the overall loss ratio. The favorable loss development for the Six Months 2020 compares to 10.0 points of unfavorable impact in the Six Months 2019, which was primarily related to adverse loss development from commercial lines business, now in runoff. The impact of prior year development was 10.3 points more favorable in Six Months 2020 compared to the prior year period.

The impact of catastrophe losses was lower in Six Months 2020 when compared to the prior period. In the Six Months 2020 there was a much smaller impact from winter catastrophes events than in 2019. Catastrophe events through Six Months 2020 had a 3.2 point impact on the loss ratio, as compared to a 10.7 impact from catastrophe events in the Six Months 2019, or a decrease in the impact from catastrophe events of 7.5 points compared to the prior period.

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The underlying loss ratio (loss ratio excluding the impact of catastrophes and prior year development) was 51.6% for the Six Months 2020, a decrease of 4.7 points from the 56.3% underlying loss ratio recorded for Six Months 2019. The improvement was primarily due to reduced core claim frequency in personal lines and reduced claim frequency in the Auto Physical Damage line. Excluding commercial lines, the underlying loss ratio improved 3.5 points, from 53.1% for Six Months 2019 to 49.6% for the Six Months 2020.

See table below under “Additional Financial Information” summarizing net loss ratios by line of business.

Commission Expense

Commission expense was $15,750,000 in Six Months 2020 or 18.6% of direct earned premiums. Commission expense was $14,153,000 in Six Months 2019 or 18.7% of direct earned premiums. The increase of $1,597,000 is primarily due to the increase in direct earned premiums for Six Months 2020 as compared to Six Months 2019.

Other Underwriting Expenses

Other underwriting expenses were $13,087,000 in Six Months 2020 compared to $11,552,000 in Six Months 2019. The increase of $1,535,000, or 13.3%, was primarily due to expenses related to growth in personal lines direct written premiums and salaries. Expenses directly related to the increase in personal lines direct written premiums primarily consist of underwriting expenses, software usage fees, and state premium taxes. Expenses indirectly related to the increase in personal lines direct written premiums primarily consist of salaries along with related other employment costs.

Our largest single component of other underwriting expenses is salaries and employment costs, with costs of $5,342,000 in Six Months 2020 compared to $4,899,000 in Six Months 2019. The increase of $443,000, or 9.0%, was less than the 11.5% increase in personal lines direct written premiums. The increase in employment costs was attributable to the hiring of additional highly experienced management, offset by staff reductions.

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Our net underwriting expense ratio in Six Months 2020 was 39.2% compared to 38.0% in Six Months 2019. The following table shows the individual components of our net underwriting expense ratio for the periods indicated:

	Six months ended
	June 30,						Percentage
	2020			2019			Point Change

Other underwriting expenses
Employment costs		10.0	%		8.1	%		1.9
Underwriting fees (inspections/data services)		3.0			2.4			0.6
Other expenses		11.4			8.5			2.9
Total other underwriting expenses		24.4			19.0			5.4

Ceding commission revenue
Provisional		(13.4	)		(4.4	)		(9.0	)
Contingent		(0.3	)		1.2			(1.5	)
Total ceding commission revenue		(13.7	)		(3.2	)		(10.5	)

Other income		(0.9	)		(1.1	)		0.2
Commission expense		29.4			23.3			6.1

Net underwriting expense ratio		39.2	%		38.0	%		1.2

The overall 9.0 percentage point increase in the benefit from provisional ceding commissions was driven entirely by the change in our quota share ceding rates and its impact on provisional ceding commission revenue due to less retention beginning with the inception of the 2019/2020 Treaty on December 15, 2019, resulting in an increase in provisional ceding commissions. The components of our net underwriting expense ratio related to other underwriting expenses, other income and commissions increased in all categories due to less retention beginning with the inception of 2019/2020 Treaty on December 15, 2019, resulting in an overall 1.2 percentage point increase in the net underwriting expense ratio.

Other Operating Expenses

Other operating expenses, related to the expenses of our holding company and Cosi, were $2,983,000 for Six Months 2020 compared to $2,069,000 for Six Months 2019. The increase in Six Months 2020 of $914,000, or 44.2%, as compared to Six Months 2019 was primarily due to increases in equity compensation, commissions incurred by Cosi and professional fees. The increase in equity compensation was due to an annual restricted stock award pursuant to the employment agreement with Barry B. Goldstein, our Chief Executive Officer.

Depreciation and Amortization

Depreciation and amortization was $1,360,000 in Six Months 2020 compared to $1,230,000 in Six Months 2019. The increase of $130,000, or 10.6%, in depreciation and amortization was primarily due to depreciation of our new systems platform for handling business being written in Expansion states, newly purchased assets used to upgrade our systems infrastructure and improvements to the Kingston, New York home office building from which we operate.

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Interest Expense

Interest expense was $913,000 for both Six Months 2020 and Six Months 2019. We incurred interest expense in connection with our $30.0 million issuance of long-term debt in December 2017.

Income Tax Benefit

Income tax benefit in Six Months 2020 was $724,000, which resulted in an effective tax benefit rate of 46.4%. Income tax benefit in Six Months 2019 was $1,524,000, which resulted in an effective tax benefit rate of 21.1%. Loss before taxes was $1,560,000 in Six Months 2020 compared to loss before taxes of $7,220,000 in Six Months 2019. On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law, allowing for a five year carryback of 2019 NOL’s. We will elect on our 2019 federal income tax return to carry back the 2019 NOL of $7,222,000 to tax years 2014 and 2015. The corporate tax rate in 2014 and 2015 was 34%, compared to the corporate tax rate of 21% in 2019.

Net Loss

Net loss was $836,000 in Six Months 2020 compared to net loss of $5,696,000 in Six Months 2019. The decrease in net loss of $4,860,000 was due to the circumstances described above, which caused the decrease in our net loss ratio, increase in ceding commission revenue and other income, partially offset by the decrease in our net premiums earned, and increases in net losses on investments, other underwriting and operating expenses, and depreciation and amortization.

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Three Months Ended June 30, 2020 Compared to Three Months Ended June 30, 2019

The following table summarizes the changes in the results of our operations (in thousands) for the periods indicated:

	Three months ended June 30,
($ in thousands)	2020			2019			Change			Percent
Revenues
Direct written premiums	$	42,650		$	44,821		$	(2,171	)		(4.8	)%
Assumed written premiums		-			-			-		n/a		%
		42,650			44,821			(2,171	)		(4.8	)%
Ceded written premiums
Ceded to quota share treaties		8,502			3,304			5,198			157.3	%
Ceded to excess of loss treaties		452			429			23			5.4	%
Ceded to catastrophe treaties		5,606			4,467			1,139			25.5	%
Total ceded written premiums		14,560			8,200			6,360			77.6	%

Net written premiums		28,090			36,621			(8,531	)		(23.3	)%

Change in unearned premiums
Direct and assumed		(527	)		(5,828	)		5,301			(91.0	)%
Ceded to quota share treaties		(926	)		408			(1,334	)		n/a	%
Change in net unearned premiums		(1,453	)		(5,420	)		3,967			(73.2	)%

Premiums earned
Direct and assumed		42,123			38,993			3,130			8.0	%
Ceded to reinsurance treaties		(15,486	)		(7,792	)		(7,694	)		98.7	%
Net premiums earned		26,637			31,201			(4,564	)		(14.6	)%
Ceding commission revenue
Excluding the effect of catastrophes		3,480			675			2,805			415.6	%
Effect of catastrophes		-			-			-		n/a		%
Total ceding commission revenue		3,480			675			2,805			415.6	%
Net investment income		1,612			1,719			(107	)		(6.2	)%
Net gains on investments		2,698			679			2,019			297.3	%
Other income		683			330			353			107.0	%
Total revenues		35,110			34,604			506			1.5	%
Expenses
Loss and loss adjustment expenses
Direct and assumed:
Loss and loss adjustment expenses excluding the effect of catastrophes		15,109			19,521			(4,412	)		(22.6	)%
Losses from catastrophes (1)		2,057			1,637			420			25.7	%
Total direct and assumed loss and loss adjustment expenses		17,166			21,158			(3,992	)		(18.9	)%

Ceded loss and loss adjustment expenses:
Loss and loss adjustment expenses excluding the effect of catastrophes		3,808			3,287			521			15.9	%
Losses from catastrophes (1)		545			199			346			173.9	%
Total ceded loss and loss adjustment expenses		4,353			3,486			867			24.9	%

Net loss and loss adjustment expenses:
Loss and loss adjustment expenses excluding the effect of catastrophes		11,301			16,234			(4,933	)		(30.4	)%
Losses from catastrophes (1)		1,512			1,438			74			5.1	%
Net loss and loss adjustment expenses		12,813			17,672			(4,859	)		(27.5	)%

Commission expense		7,851			7,300			551			7.5	%
Other underwriting expenses		6,325			5,416			909			16.8	%
Other operating expenses		1,420			1,097			323			29.4	%
Depreciation and amortization		673			628			45			7.2	%
Interest expense		456			456			-		-		%
Total expenses		29,539			32,569			(3,031	)		(9.3	)%

Income before taxes		5,571			2,035			3,536			173.8	%
Income tax expense		963			396			567			143.2	%
Net income	$	4,608		$	1,639		$	2,969			181.1	%

(1) The three months ended June 30, 2020 and 2019 include catastrophe losses, which are defined as losses from an event for which a catastrophe bulletin and related serial number has been issued by the Property Claims Services (PCS) unit of the Insurance Services Office (ISO). PCS catastrophe bulletins are issued for events that cause more than $25 million in total insured losses and affect a significant number of policyholders and insurers.

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	For the Three Months Ended						For the Six Months Ended
	June 30,						June 30,
	2020			2019			2020			2019
Gross premiums written:
Personal lines	$	41,522,768		$	38,047,987		$	75,957,604		$	68,146,956
Livery physical damage		1,106,405			2,878,749			3,420,806			5,608,835
Other(1)		54,876			61,806			129,731			134,877
Total without commercial lines		42,684,049			40,988,542			79,508,141			73,890,668
Commercial lines (in run-off effective July 2019)(2)		(33,572	)		3,832,848			(160,735	)		8,419,236
Total gross premiums written	$	42,650,477		$	44,821,390		$	79,347,406		$	82,309,904

Net premiums written:
Personal lines(3)	$	27,103,665		$	30,340,230		$	48,315,146		$	53,844,093
Livery physical damage		1,106,405			2,878,749			3,420,806			5,608,835
Other(1)		42,579			45,984			101,158			112,279
Total without commercial lines		28,252,649			33,264,963			51,837,110			59,565,207
Commercial lines (in run-off effective July 2019)(2)		(162,170	)		3,346,540			(555,957	)		7,406,901
Total net premiums written	$	28,090,479		$	36,611,503		$	51,281,153		$	66,972,108

Net premiums earned:
Personal lines(3)	$	23,614,240		$	24,828,974		$	46,213,874		$	48,249,848
Livery physical damage		2,182,438			2,620,857			4,789,017			5,138,539
Other(1)		48,999			59,404			99,148			117,421
Total without commercial lines		25,845,677			27,509,235			51,102,039			53,505,808
Commercial lines (in run-off effective July 2019)(2)		791,179			3,692,044			2,476,267			7,291,360
Total net premiums earned	$	26,636,856		$	31,201,279		$	53,578,306		$	60,797,168

Net loss and loss adjustment expenses(4):
Personal lines	$	10,639,057		$	11,874,563		$	23,153,625		$	32,277,107
Livery physical damage		369,120			1,203,457			1,149,690			2,420,760
Other(1)		(72,436	)		176,091			(23,639	)		326,565
Unallocated loss adjustment expenses		1,242,516			651,142			2,012,328			1,345,792
Total without commercial lines		12,178,257			13,905,253			26,292,004			36,370,224
Commercial lines (in run-off effective July 2019)(2)		635,374			3,767,085			2,907,448			10,436,308
Total net loss and loss adjustment expenses	$	12,813,631		$	17,672,338		$	29,199,452		$	46,806,532

Net loss ratio(4):
Personal lines		45.1	%		47.8	%		50.1	%		66.9	%
Livery physical damage		16.9	%		45.9	%		24.0	%		47.1	%
Other(1)		-147.8	%		296.4	%		-23.8	%		278.1	%
Total without commercial lines		47.1	%		50.5	%		51.5	%		68.0	%

Commercial lines (in run-off effective July 2019)(2)		80.3	%		102.0	%		117.4	%		143.1	%
Total		48.1	%		56.6	%		54.5	%		77.0	%

(1)	“Other” includes, among other things, premiums and loss and loss adjustment expenses from our participation in a mandatory state joint underwriting association and loss and loss adjustment expenses from commercial auto.
(2)	In July 2019, we decided that we will no longer underwrite Commercial Liability risks. See discussions above regarding the discontinuation of this line of business.
(3)	See discussion above with regard to “Net Written Premiums and Net Premiums Earned”, as to changes in quota share ceding rates, effective July 1, 2019 and 2018.
(4)	See discussion above with regard to “Net Loss and LAE”, as to catastrophe losses in the six months ended June 30, 2020 and 2019.

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Insurance Underwriting Business on a Standalone Basis

follows:

	Three months ended						Six months ended
	June 30,						June 30,
	2020			2019			2020			2019

Revenues
Net premiums earned	$	26,636,856		$	31,201,279		$	53,578,306		$	60,797,168
Ceding commission revenue		3,480,214			675,695			7,311,313			1,953,378
Net investment income		1,611,837			1,697,492			3,277,230			3,297,424
Net gains (losses) on investments		2,655,541			663,586			(3,653,643	)		2,657,149
Other income		261,145			336,854			506,119			651,592
Total revenues		34,645,593			34,574,906			61,019,325			69,356,711

Expenses
Loss and loss adjustment expenses		12,813,631			17,672,308			29,199,452			46,806,532
Commission expense		7,850,607			7,299,173			15,749,798			14,152,589
Other underwriting expenses		6,325,472			5,416,449			13,087,264			11,552,440
Depreciation and amortization		639,968			603,690			1,293,870			1,182,043
Total expenses		27,629,678			30,991,620			59,330,384			73,693,604

Income (loss) from operations		7,015,915			3,583,286			1,688,941			(4,336,893	)
Income tax expense (benefit)		1,387,003			745,041			179,034			(957,930	)
Net income (loss)	$	5,628,912		$	2,838,245		$	1,509,907		$	(3,378,963	)

Key Measures:
Net loss ratio		48.1	%		56.6	%		54.5	%		77.0	%
Net underwriting expense ratio		39.2	%		37.5	%		39.2	%		38.0	%
Net combined ratio		87.3	%		94.1	%		93.7	%		115.0	%

Reconciliation of net underwriting expense ratio:
Acquisition costs and other
underwriting expenses	$	14,176,079		$	12,715,622		$	28,837,062		$	25,705,029
Less: Ceding commission revenue		(3,480,214	)		(675,695	)		(7,311,313	)		(1,953,378	)
Less: Other income		(261,145	)		(336,854	)		(506,119	)		(651,592	)
Net underwriting expenses	$	10,434,720		$	11,703,073		$	21,019,630		$	23,100,059

Net premiums earned	$	26,636,856		$	31,201,279		$	53,578,306		$	60,797,168

Net Underwriting Expense Ratio		39.2	%		37.5	%		39.2	%		38.0	%

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An analysis of our direct, assumed and ceded earned premiums, loss and loss adjustment expenses, and loss ratios is shown below:

	Direct			Assumed			Ceded			Net

Six months ended June 30, 2020
Written premiums	$	79,347,406		$	-		$	(28,066,253	)	$	51,281,153
Change in unearned premiums		5,376,958			-			(3,079,805	)		2,297,153
Earned premiums	$	84,724,364		$	-		$	(31,146,058	)	$	53,578,306

Loss and loss adjustment expenses exluding
the effect of catastrophes	$	37,080,936		$	-		$	(9,591,600	)	$	27,489,336
Catastrophe loss		2,337,948			-			(627,832	)		1,710,116
Loss and loss adjustment expenses	$	39,418,884		$	-		$	(10,219,432	)	$	29,199,452

Loss ratio excluding the effect of catastrophes		43.8	%		n/a			30.8	%		51.3	%
Catastrophe loss		2.8	%		n/a			2.0	%		3.2	%
Loss ratio		46.6	%		n/a			32.8	%		54.5	%

Six months ended June 30, 2019
Written premiums	$	82,309,827		$	77		$	(15,327,796	)	$	66,982,108
Change in unearned premiums		(6,456,216	)		202			271,074			(6,184,940	)
Earned premiums	$	75,853,611		$	279		$	(15,056,722	)	$	60,797,168

Loss and loss adjustment expenses exluding
the effect of catastrophes	$	46,166,574		$	(2,081	)	$	(5,858,517	)	$	40,305,976
Catastrophe loss		7,263,727			-			(763,171	)		6,500,556
Loss and loss adjustment expenses	$	53,430,301		$	(2,081	)	$	(6,621,688	)	$	46,806,532

Loss ratio excluding the effect of catastrophes		60.9	%		-745.9	%		38.9	%		66.3	%
Catastrophe loss		9.6	%		0.0	%		5.0	%		10.7	%
Loss ratio		70.4	%		-745.9	%		44.0	%		77.0	%

Three months ended June 30, 2020
Written premiums	$	42,650,477		$	-		$	(14,559,998	)	$	28,090,479
Change in unearned premiums		(527,742	)		-			(925,881	)		(1,453,623	)
Earned premiums	$	42,122,735		$	-		$	(15,485,879	)	$	26,636,856

Loss and loss adjustment expenses exluding
the effect of catastrophes	$	15,109,585		$	-		$	(3,807,610	)	$	11,301,975
Catastrophe loss		2,056,580			-			(544,924	)		1,511,656
Loss and loss adjustment expenses	$	17,166,165		$	-		$	(4,352,534	)	$	12,813,631

Loss ratio excluding the effect of catastrophes		35.9	%		n/a			24.6	%		42.4	%
Catastrophe loss		4.9	%		n/a			3.4	%		5.7	%
Loss ratio		40.8	%		n/a			28.1	%		48.1	%

Three months ended June 30, 2019
Written premiums	$	44,821,279		$	111		$	(8,199,887	)	$	36,621,503
Change in unearned premiums		(5,828,149	)		7			407,918			(5,420,224	)
Earned premiums	$	38,993,130		$	118		$	(7,791,969	)	$	31,201,279

Loss and loss adjustment expenses exluding
the effect of catastrophes	$	19,520,797		$	921		$	(3,286,770	)	$	16,234,948
Catastrophe loss		1,636,384			-			(199,024	)		1,437,360
Loss and loss adjustment expenses	$	21,157,181		$	921		$	(3,485,794	)	$	17,672,308

Loss ratio excluding the effect of catastrophes		50.1	%		780.5	%		42.2	%		52.0	%
Catastrophe loss		4.1	%		0.0	%		2.6	%		4.6	%
Loss ratio		54.3	%		780.5	%		44.7	%		56.6	%

(Percent components may not sum to totals due to rounding)

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The key measures for our insurance underwriting business for the periods indicated are as follows:

	Three months ended						Six months ended
	June 30,						June 30,
	2020			2019			2020			2019

Net premiums earned	$	26,636,856		$	31,201,279		$	53,578,306		$	60,797,168
Ceding commission revenue		3,480,214			675,695			7,311,313			1,953,378
Other income		261,145			336,854			506,119			651,592

Loss and loss adjustment expenses (1)		12,813,631			17,672,308			29,199,452			46,806,532

Acquistion costs and other underwriting expenses:
Commission expense		7,850,607			7,299,173			15,749,798			14,152,589
Other underwriting expenses		6,325,472			5,416,449			13,087,264			11,552,440
Total acquistion costs and other
underwriting expenses		14,176,079			12,715,622			28,837,062			25,705,029

Underwriting income (loss)	$	3,388,505		$	1,825,898		$	3,359,224		$	(9,109,423	)

Key Measures:
Net loss ratio excluding the effect of catastrophes		42.4	%		52.0	%		51.3	%		66.3	%
Effect of catastrophe loss on net loss ratio (1)		5.7	%		4.6	%		3.2	%		10.7	%
Net loss ratio		48.1	%		56.6	%		54.5	%		77.0	%

Net underwriting expense ratio excluding the
effect of catastrophes		39.2	%		37.5	%		39.2	%		38.0	%
Effect of catastrophe loss on net underwriting
expense ratio (2)		0.0	%		0.0	%		0.0	%		0.0	%
Net underwriting expense ratio		39.2	%		37.5	%		39.2	%		38.0	%

Net combined ratio excluding the effect
of catastrophes		81.6	%		89.5	%		90.5	%		104.3	%
Effect of catastrophe loss on net combined
ratio (1) (2)		5.7	%		4.6	%		3.2	%		10.7	%
Net combined ratio		87.3	%		94.1	%		93.7	%		115.0	%

Reconciliation of net underwriting expense ratio:
Acquisition costs and other
underwriting expenses	$	14,176,079		$	12,715,622		$	28,837,062		$	25,705,029
Less: Ceding commission revenue (2)		(3,480,214	)		(675,695	)		(7,311,313	)		(1,953,378	)
Less: Other income		(261,145	)		(336,854	)		(506,119	)		(651,592	)
	$	10,434,720		$	11,703,073		$	21,019,630		$	23,100,059

Net earned premium	$	26,636,856		$	31,201,279		$	53,578,306		$	60,797,168

Net Underwriting Expense Ratio		39.2	%		37.5	%		39.2	%		38.0	%

(1)

For the three months ended June 30, ~~2019~~2020 and ~~2018,~~2019, includes the sum of net catastrophe losses and loss adjustment expenses of ~~$1,437,360~~$1,511,656 and ~~$183,547,~~$1,437,360, respectively. For the six months ended June 30, ~~2019~~2020 and ~~2018,~~2019, includes the sum of net catastrophe losses and loss adjustment expenses of $1,710,116 and $6,500,556, ~~and $5,730,397,~~ respectively.

~~(2)~~

For the three months ended June 30, 2018, the effect of catastrophe loss on our net underwriting expense ratio includes the effect of reduced contingent ceding commission revenue by $124,929 and does not include the indirect effects of a $135,674 decrease in other underwriting expenses. For the six months ended June 30, 2018, the effect of catastrophe loss on our net underwriting expense ratio includes the effect of reduced contingent ceding commission revenue by $459,068 and does not include the indirect effects of a $164,931 decrease in other underwriting expenses.

2019:

	June 30, 2020

	Cost or		Gross		Gross Unrealized Losses						Estimated		% of
	Amortized		Unrealized		Less than 12			More than 12			Fair		Estimated
Category	Cost		Gains		Months			Months			Value		Fair Value

U.S. Treasury securities and
obligations of U.S. government
corporations and agencies	$	3,032,168	$	54,542	$	-		$	-		$	3,086,710		1.9	%

Political subdivisions of States,
Territories and Possessions		8,577,207		423,179		-			-			9,000,386		5.4	%

Corporate and other bonds							��
Industrial and miscellaneous		121,977,355		10,145,949		(117,056	)		-			132,006,248		79.8	%

Residential mortgage and other
asset backed securities (1)		21,639,537		256,784		(180,701	)		(342,476	)		21,373,144		12.9	%
Total	$	155,226,267	$	10,880,454	$	(297,757	)	$	(342,476	)	$	165,466,488		100.0	%

(1)

KICO has placed certain residential mortgage backed securities as eligible collateral in a designated custodian account related to its membership in the Federal Home Loan Bank of New York ("FHLBNY"). The eligible collateral would be pledged to FHLBNY if KICO draws an advance from the FHLBNY credit line. As of June 30, 2020, the estimated fair value of the eligible investments was approximately $6,993,000. KICO will retain all rights regarding all securities if pledged as collateral. As of June 30, 2020, there was no outstanding balance on the FHLBNY credit line.

	December 31, 2019

	Cost or		Gross		Gross Unrealized Losses						Estimated		% of
	Amortized		Unrealized		Less than 12			More than 12			Fair		Estimated
Category	Cost		Gains		Months			Months			Value		Fair Value

U.S. Treasury securities and
obligations of U.S. government
corporations and agencies	$	7,037,856	$	23,244	$	-		$	-		$	7,061,100		4.2	%

Political subdivisions of States,
Territories and Possessions		9,151,293		181,835		(11,316	)		-			9,321,812		5.5	%

Corporate and other bonds
Industrial and miscellaneous		119,874,573		5,777,624		(16,685	)		(13,473	)		125,622,039		74.7	%

Residential mortgage and other
asset backed securities (1)		26,138,633		437,841		(68,793	)		(276,451	)		26,231,230		15.6	%
Total	$	162,202,355	$	6,420,544	$	(96,794	)	$	(289,924	)	$	168,236,181		100.0	%

(1)

KICO has placed certain residential mortgage backed securities as eligible collateral in a designated custodian account related to its relationship with the FHLBNY. The eligible collateral would be pledged to FHLBNY if KICO draws an advance from FHLBNY. As of December 31, 2019, the estimated fair value of the eligible investments was $7,284,000. KICO will retain all rights regarding all securities if pledged as collateral. As of December 31, 2019, there was no outstanding balance on the FHLBNY credit line.

Table of Contents

Equity Securities

2019:

	June 30, 2020
			Gross		Gross			Estimated		% of
			Unrealized		Unrealized			Fair		Estimated
Category	Cost		Gains		Losses			Value		Fair Value

Equity Securities:
Preferred stocks	$	9,023,896	$	88,910	$	(464,826	)	$	8,647,980		38.1	%
Common stocks, mutual funds,
and exchange traded funds		15,540,180		533,364		(2,015,815	)		14,057,729		61.9	%
Total	$	24,564,076	$	622,274	$	(2,480,641	)	$	22,705,709		100.0	%

	December 31, 2019
			Gross		Gross			Estimated		% of
			Unrealized		Unrealized			Fair		Estimated
Category	Cost		Gains		Losses			Value		Fair Value

Equity Securities:
Preferred stocks	$	8,374,424	$	339,257	$	(11,794	)	$	8,701,887		35.3	%
Common stocks, mutual funds,
and exchange traded funds		14,250,244		1,982,878		(273,627	)		15,959,495		64.7	%
Total	$	22,624,668	$	2,322,135	$	(285,421	)	$	24,661,382		100.0	%

Other Investments

2019:

	June 30, 2020

	Cost or		Gross		Gross Unrealized Losses					Estimated		% of
	Amortized		Unrealized		Less than 12			More than 12		Fair		Estimated
Category	Cost		Gains		Months			Months		Value		Fair Value

U.S. Treasury securities	$	729,572	$	162,616	$	-		$	-	$	892,188		10.7	%

Political subdivisions of States,
Territories and Possessions		998,527		59,493		-			-		1,058,020		12.7	%

Corporate and other bonds
Industrial and miscellaneous		6,142,275		280,297		(50,324	)		-		6,372,248		76.6	%

Total	$	7,870,374	$	502,406	$	(50,324	)	$	-	$	8,322,456		100.0	%

	December 31, 2019

	Cost or		Gross		Gross Unrealized Losses					Estimated		% of
	Amortized		Unrealized		Less than 12			More than 12		Fair		Estimated
Category	Cost		Gains		Months			Months		Value		Fair Value

U.S. Treasury securities	$	729,550	$	151,002	$	-		$	-	$	880,552		21.3	%

Political subdivisions of States,
Territories and Possessions		998,619		51,021		-			-		1,049,640		25.4	%

Corporate and other bonds
Industrial and miscellaneous		2,097,783		97,627		(835	)		-		2,194,575		53.3	%

Total	$	3,825,952	$	299,650	$	(835	)	$	-	$	4,124,767		100.0	%

Held-to-maturity U.S. Treasury securities are held in trust pursuant to various states’ minimum fund requirements.

	June 30, 2020					December 31, 2019
	Estimated		Percentage of			Estimated		Percentage of
	Fair		Fair			Fair		Fair
	Value		Value			Value		Value

Rating
U.S. Treasury securities	$	3,086,710		1.9	%	$	7,061,100		4.2	%

Corporate and municipal bonds
AAA		1,495,753		0.9	%		1,996,676		1.2	%
AA		6,937,577		4.2	%		8,809,480		5.2	%
A		27,641,146		16.7	%		34,636,236		20.6	%
BBB		100,128,865		60.5	%		89,501,460		53.2	%
BB		1,411,305		0.9	%		-		0.0	%
Total corporate and municipal bonds		137,614,646		83.2	%		134,943,852		80.2	%

Residential mortgage backed securities
AAA		2,895,529		1.7	%		2,976,306		1.8	%
AA		17,433,461		10.5	%		18,440,382		10.9	%
A		2,402,420		1.5	%		2,471,761		1.5	%
CCC		830,309		0.5	%		1,174,273		0.7	%
CC		61,709		0.0	%		86,461		0.1	%
C		17,230		0.0	%		17,813		0.0	%
D		378,628		0.2	%		215,015		0.1	%
Non rated		745,846		0.5	%		849,218		0.5	%
Total residential mortgage backed securities		24,765,132		14.9	%		26,231,229		15.6	%

Total	$	165,466,488		100.0	%	$	168,236,181		100.0	%

Table of Contents

The table below summarizes the average yield by type of fixed-maturity security as of June 30, ~~2019~~2020 and December 31, ~~2018:~~

2019:

	June 30, 2020
	Less than 12 months							12 months or more							Total
	Estimated					No. of		Estimated					No. of		Estimated
	Fair		Unrealized			Positions		Fair		Unrealized			Positions		Fair		Unrealized
Category	Value		Losses			Held		Value		Losses			Held		Value		Losses

Fixed-Maturity Securities:
U.S. Treasury securities
and obligations of U.S.
government corporations
and agencies	$	-	$	-			-	$	-	$	-			-	$	-	$	-

Political subdivisions of
States, Territories and
Possessions		-		-			-		-		-			-		-		-

Corporate and other
bonds industrial and
miscellaneous		4,839,822		(117,056	)		5		-		-			-		4,839,822		(117,056	)

Residential mortgage and other
asset backed securities		7,060,988		(180,701	)		9		10,639,265		(342,476	)		16		17,700,253		(523,177	)

Total fixed-maturity
securities	$	11,900,810	$	(297,757	)		14	$	10,639,265	$	(342,476	)		16	$	22,540,075	$	(640,233	)

Table of Contents

	December 31, 2019
	Less than 12 months							12 months or more							Total
	Estimated					No. of		Estimated					No. of		Estimated
	Fair		Unrealized			Positions		Fair		Unrealized			Positions		Fair		Unrealized
Category	Value		Losses			Held		Value		Losses			Held		Value		Losses

Fixed-Maturity Securities:
U.S. Treasury securities
and obligations of U.S.
government corporations
and agencies	$	-	$	-			-	$	-	$	-			-	$	-	$	-

Political subdivisions of
States, Territories and
Possessions		3,067,428		(11,316	)		3		-		-			-		3,067,428		(11,316	)

Corporate and other
bonds industrial and
miscellaneous		3,730,478		(16,685	)		7		1,300,915		(13,473	)		3		5,031,393		(30,158	)

Residential mortgage and other
asset backed securities		5,862,636		(68,793	)		5		13,534,768		(276,451	)		21		19,397,404		(345,244	)

Total fixed-maturity
securities	$	12,660,542	$	(96,794	)		15	$	14,835,683	$	(289,924	)		24	$	27,496,225	$	(386,718	)

Table of Contents

There were 4930 securities at June 30, ~~2019~~2020 that accounted for the gross unrealized loss of our fixed-maturity securities available-for-sale, none of which were deemed by us to be other than temporarily impaired. There were ~~156~~39 securities at December 31, ~~2018~~2019 that accounted for the gross unrealized loss, none of which were deemed by us to be other than temporarily impaired. Significant factors influencing our determination that unrealized losses were temporary included the magnitude of the unrealized losses in relation to each security’s cost, the nature of the investment and management’s intent not to sell these securities and it being not more likely than not that we will be required to sell these investments before anticipated recovery of fair value to our cost basis.

~~(1)~~

Treaty Year

December 15, 2019

July 1, 2019

July 1, 2018

Line of Business

December 31, 2020

December 14, 2019

June 30, 2019

Personal Lines:

Homeowners, dwelling fire and

and canine legal liability

Quota share treaty:

Percent ceded

None

	Treaty Year
	January 1, 2021		July 1, 2020		December 15, 2019		July 1, 2019		July 1, 2018
	to		to		to		to		to
Line of Business	June 30, 2021		December 31, 2020		June 30, 2020		December 14, 2019		June 30, 2019

Personal Lines:
Homeowners, dwelling fire and
and canine legal liability
Quota share treaty:
Risk retained on intial
$1,000,000 of losses		NA (7)	$	750,000	$	750,000	$	1,000,000	$	900,000
Losses per occurrence subject
to quota share
reinsurance coverage		NA (7)	$	1,000,000	$	1,000,000	None		$	1,000,000
Expiration date			December 31,2020		December 31, 2020				June 30, 2019
Excess of loss coverage and
facultative facility
coverage (1)		8,000,000		8,000,000		9,000,000		9,000,000		9,000,000
	in excess of		in excess of		in excess of		in excess of		in excess of
		1,000,000		1,000,000		1,000,000		1,000,000		1,000,000
Total reinsurance coverage
per occurrence (7)		8,000,000		8,250,000		9,250,000		9,000,000		9,100,000
Losses per occurrence subject
to reinsurance coverage		8,000,000		9,000,000		10,000,000		10,000,000		10,000,000
Expiration date (7)	June 30, 2021		June 30, 2021		June 30, 2020		June 30, 2020		June 30, 2019

Catastrophe Reinsurance:
Initial loss subject to personal
lines quota share treaty		NA (7)		7,500,000		7,500,000	None		$	5,000,000
Risk retained per catastrophe
occurrence (2) (7)		10,000,000		8,125,000		5,625,000	$	7,500,000	$	4,500,000
Catastrophe loss coverage
in excess of
quota share coverage (3) (7)		475,000,000		475,000,000		602,500,000	$	602,500,000	$	445,000,000
Reinstatement premium
protection (4) (5) (6)	Yes		Yes		Yes		Yes		Yes

(1)	For personal lines, includes the addition of an automatic facultative facility allowing KICO to obtain homeowners single risk coverage up to $10,000,000 in total insured value, which covers direct losses from $3,500,000 to $10,000,000.
(2)	Plus losses in excess of catastrophe coverage. Effective July 1, 2020, no reinsurance coverage for the $2,500,000 gap between quota share limit of $7,500,000 and first $10,000,000 layer of catastrophe coverage (see note 7 below).
(3)	Catastrophe coverage is limited on an annual basis to two times the per occurrence amounts. Duration of 168 consecutive hours for a catastrophe occurrence from windstorm, hail, tornado, hurricane and cyclone.
(4)	Effective July 1, 2018, reinstatement premium protection for $210,000,000 of catastrophe coverage in excess of $5,000,000.
(5)	Effective July 1, 2019, reinstatement premium protection for $292,500,000 of catastrophe coverage in excess of $7,500,000.
(6)	Effective July 1, 2020, reinstatement premium protection for $70,000,000 of catastrophe coverage in excess of $10,000,000.
(7)	Quota share expires December 31, 2020; reinsurance coverage from January 1, 2021 through June 30, 2021 is only for excess of loss and catastrophe reinsurance.

Table of Contents

	Treaty Year
	July 1, 2020			July 1, 2019			July 1, 2018
	to			to			to
Line of Business	June 30, 2021			June 30, 2020			June 30, 2019		��

Personal Lines:

Personal Umbrella
Quota share treaty:
Percent ceded - first $1,000,000 of coverage		90	%		90	%		90	%
Percent ceded - excess of $1,000,000 dollars of coverage		95	%		100	%		100	%
Risk retained	$	300,000		$	100,000		$	100,000
Total reinsurance coverage per occurrence	$	4,700,000		$	4,900,000		$	4,900,000
Losses per occurrence subject to quota share reinsurance coverage	$	5,000,000		$	5,000,000		$	5,000,000
Expiration date	June 30, 2021			June 30, 2020			June 30, 2019

Commercial Lines:
General liability commercial policies
Quota share treaty	None			None			None
Risk retained	$	750,000		$	750,000		$	750,000
Excess of loss coverage above risk retained	$	3,750,000		$	3,750,000		$	3,750,000
	in excess of			in excess of			in excess of
	$	750,000		$	750,000		$	750,000
Total reinsurance coverage per occurrence	$	3,750,000		$	3,750,000		$	3,750,000
Losses per occurrence subject to reinsurance coverage	$	4,500,000		$	4,500,000		$	4,500,000

Commercial Umbrella
Quota share treaty:	None			None
Percent ceded - first $1,000,000 of coverage								90	%
Percent ceded - excess of $1,000,000 of coverage								100	%
Risk retained							$	100,000
Total reinsurance coverage per occurrence							$	4,900,000
Losses per occurrence subject to quota share reinsurance coverage							$	5,000,000
Expiration date							June 30, 2019

Our catastrophe reinsurance treaty expired on June 30, 2020. Our growth in personal lines ~~includes~~premiums and the ~~addition of an automatic facultative facility allowing KICO to obtain homeowners single risk coverage up to $10,000,000~~increasing coastal exposure in ~~total insured value, which covers direct losses from $3,500,000 to $10,000,000.~~

Delaware		36-2476480
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value per share	KINS	Nasdaq ~~Global Select~~Capital Market

Large accelerated filer	☐	Accelerated filer	☑ ☒
Non-accelerated filer	☐	Smaller reporting company	☑ ☒
		Emerging growth company	☐

		PAGE

PART I —- FINANCIAL INFORMATION		1 2
Item 1 — -	Financial Statements	1 2
	Condensed Consolidated Balance Sheets at June 30, ~~2019~~2020 (Unaudited) and December 31, ~~2018~~2019	1 2
	Condensed Consolidated Statements of Operations and Comprehensive Income ~~(Loss)~~ for the three months and six months ended June 30, ~~2019~~2020 (Unaudited) and ~~2018~~2019 (Unaudited)	2 3
	Condensed Consolidated Statements of Stockholders’ Equity for the three months and six months ended June 30, ~~2019~~2020 (Unaudited) and ~~2018~~2019 (Unaudited)	3 4-5
	Condensed Consolidated Statements of Cash Flows for the six months ended June 30, ~~2019~~2020 (Unaudited) and ~~2018~~2019 (Unaudited)	6
	Notes to Condensed Consolidated Financial Statements (Unaudited)	7
Item 2 — -	Management’s Discussion and Analysis of Financial Condition and Results of Operations	41 39
Item 3 — -	Quantitative and Qualitative Disclosures About Market Risk	74 75
Item 4 — -	Controls and Procedures	75

PART II —- OTHER INFORMATION		76 77
Item 1 — -	Legal Proceedings	76 77
Item 1A — -	Risk Factors	76 77
Item 2 — -	Unregistered Sales of Equity Securities and Use of Proceeds	76 79
Item 3 — -	Defaults Upon Senior Securities	76 79
Item 4 — -	Mine Safety Disclosures	76 79
Item 5 — -	Other Information	76 79
Item 6 — -	Exhibits	77 80
Signatures

	June 30,	December 31,
	2019	2018
	(unaudited)
Assets
Fixed-maturity securities, held-to-maturity, at amortized cost (fair value of
$4,114,072 at June 30, 2019 and $4,426,416 at December 31, 2018)	$3,824,620	$4,222,855
Fixed-maturity securities, available-for-sale, at fair value (amortized cost of
$160,085,628 at June 30, 2019 and $155,431,261 at December 31, 2018)	164,334,869	151,777,516
Equity securities, at fair value (cost of $22,254,788 at June 30, 2019 and
$18,305,986 at December 31, 2018)	22,738,950	16,572,616
Other investments	2,335,874	1,855,225
Total investments	193,234,313	174,428,212
Cash and cash equivalents	18,895,805	21,138,403
Premiums receivable, net	14,958,200	13,961,599
Reinsurance receivables, net	28,643,360	26,367,115
Deferred policy acquisition costs	19,413,809	17,907,737
Intangible assets, net	500,000	670,000
Property and equipment, net	7,350,068	6,056,929
Deferred income taxes, net	216,474	354,233
Other assets	6,256,815	5,867,850
Total assets	$289,468,844	$266,752,078

Liabilities
Loss and loss adjustment expense reserves	$69,675,120	$56,197,106
Unearned premiums	85,488,146	79,032,131
Advance premiums	3,468,225	2,107,629
Reinsurance balances payable	2,806,903	1,933,376
Deferred ceding commission revenue	3,100,156	2,686,677
Accounts payable, accrued expenses and other liabilities	7,877,191	6,819,231
Income taxes payable	-	15,035
Long-term debt, net	29,383,341	29,295,251
Total liabilities	201,799,082	178,086,436

Commitments and Contingencies (note 11)

Stockholders' Equity
Preferred stock, $.01 par value; authorized 2,500,000 shares	-	-
Common stock, $.01 par value; authorized 20,000,000 shares; issued 11,802,087 shares
at June 30, 2019 and 11,775,148 shares at December 31, 2018; outstanding
10,774,648 shares at June 30, 2019 and 10,747,709 shares at December 31, 2018	118,020	117,751
Capital in excess of par	68,373,590	67,763,940
Accumulated other comprehensive income (loss)	3,359,047	(2,884,313)
Retained earnings	18,531,657	26,380,816
	90,382,314	91,378,194
Treasury stock, at cost, 1,027,439 shares at June 30, 2019
and at December 31, 2018	(2,712,552)	(2,712,552)
Total stockholders' equity	87,669,762	88,665,642

Total liabilities and stockholders' equity	$289,468,844	$266,752,078

~~Delaware~~		~~36-2476480~~ KINGSTONE COMPANIES, INC.
(Exact name of registrant as specified in its charter)

	For the Three Months Ended		For the Six Months Ended
	June 30,		June 30,
	2019	2018	2019	2018

Revenues
Net premiums earned	$31,201,279	$24,104,614	$60,797,168	$46,942,231
Ceding commission revenue	675,695	1,691,168	1,953,378	3,386,326
Net investment income	1,719,769	1,556,866	3,343,481	2,940,855
Net gains (losses) on investments	678,655	(106,733)	2,714,018	(629,860)
Other income	329,972	300,271	695,873	608,504
Total revenues	34,605,370	27,546,186	69,503,918	53,248,056

Expenses
Loss and loss adjustment expenses	17,672,308	11,176,085	46,806,532	28,442,415
Commission expense	7,299,173	6,017,189	14,152,589	11,817,137
Other underwriting expenses	5,416,449	5,075,986	11,552,440	10,107,489
Other operating expenses	1,097,468	843,816	2,068,640	1,090,674
Depreciation and amortization	627,669	424,161	1,230,001	833,592
Interest expense	456,545	451,962	913,090	908,507
Total expenses	32,569,612	23,989,199	76,723,292	53,199,814

Income (loss) before taxes	2,035,758	3,556,987	(7,219,374)	48,242
Income tax expense (benefit)	396,378	799,690	(1,523,564)	8,879
Net income (loss)	1,639,380	2,757,297	(5,695,810)	39,363

Other comprehensive income (loss), net of tax
Gross change in unrealized gains (losses)
on available-for-sale-securities	3,679,475	(1,475,767)	7,868,191	(4,349,246)

Reclassification adjustment for losses
included in net income	12,364	76,126	34,795	319,899
Net change in unrealized gains (losses)	3,691,839	(1,399,641)	7,902,986	(4,029,347)
Income tax benefit (expense) related to items
of other comprehensive income (loss)	(775,285)	293,723	(1,659,626)	845,961
Other comprehensive income (loss), net of tax	2,916,554	(1,105,918)	6,243,360	(3,183,386)

Comprehensive income (loss)	$4,555,934	$1,651,379	$547,550	$(3,144,023)

Earnings (loss) per common share:
Basic	$0.15	$0.26	$(0.53)	$0.00
Diluted	$0.15	$0.25	$(0.53)	$0.00

Weighted average common shares outstanding
Basic	10,771,717	10,664,806	10,764,824	10,667,385
Diluted	10,785,064	10,820,322	10,764,824	10,828,020

Dividends declared and paid per common share	$0.1000	$0.1000	$0.2000	$0.2000

KINGSTONE COMPANIES, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Stockholders' Equity (Unaudited)
Three months ended June 30, ~~2019~~2020 and ~~2018~~ 2019

KINGSTONE COMPANIES, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Stockholders' Equity (Unaudited)
Six months ended June 30, ~~2019~~2020 and ~~2018~~ 2019

Six months ended June 30,	2019	2018

Cash flows from operating activities:
Net (loss) income	$(5,695,810)	$39,363
Adjustments to reconcile net income to net cash flows provided by operating activities:
Net (gains) losses on sale of investments	(931)	320,149
Net unrealized (gains) losses of equity investments	(2,232,438)	430,411
Net unrealized gains of other investments	(480,649)	(120,700)
Depreciation and amortization	1,230,001	833,592
Amortization of bond premium, net	188,778	174,110
Amortization of discount and issuance costs on long-term debt	88,090	80,196
Stock-based compensation	709,207	284,477
Deferred income tax benefit	(1,521,867)	(183,840)
(Increase) decrease in operating assets:
Premiums receivable, net	(996,601)	(1,119,494)
Reinsurance receivables, net	(2,276,245)	626,726
Deferred policy acquisition costs	(1,506,072)	(1,224,520)
Other assets	(329,335)	(1,400,192)
Increase (decrease) in operating liabilities:
Loss and loss adjustment expense reserves	13,478,014	458,234
Unearned premiums	6,456,015	5,492,266
Advance premiums	1,360,596	1,354,136
Reinsurance balances payable	873,527	1,621,658
Deferred ceding commission revenue	413,479	492,722
Accounts payable, accrued expenses and other liabilities	1,042,925	(2,206,196)
Net cash flows provided by operating activities	10,800,684	5,953,098

Cash flows from investing activities:
Purchase - fixed-maturity securities available-for-sale	(11,867,613)	(42,305,529)
Purchase - equity securities	(4,461,684)	(8,221,931)
Sale and redemption - fixed-maturity securities held-to-maturity	400,000	-
Sale or maturity - fixed-maturity securities available-for-sale	6,987,908	15,172,845
Sale - equity securities	503,884	4,746,825
Acquisition of property and equipment	(2,353,140)	(1,347,578)
Net cash flows used in investing activities	(10,790,645)	(31,955,368)

Cash flows from financing activities:
Proceeds from exercise of stock options	23,550	46,883
Withholding taxes paid on net exercise of stock options	-	(341,770)
Withholding taxes paid on vested retricted stock awards	(122,838)	(21,523)
Purchase of treasury stock	-	(540,223)
Dividends paid	(2,153,349)	(2,134,759)
Net cash flows used in financing activities	(2,252,637)	(2,991,392)

Decrease in cash and cash equivalents	$(2,242,598)	$(28,993,662)
Cash and cash equivalents, beginning of period	21,138,403	48,381,633
Cash and cash equivalents, end of period	$18,895,805	$19,387,971

Supplemental disclosures of cash flow information:
Cash paid for income taxes	$388,000	$801,000
Cash paid for interest	$825,000	$875,417

	June 30, 2019
						Net
	Cost or	Gross	Gross Unrealized Losses		Estimated	Unrealized
	Amortized	Unrealized	Less than 12	More than 12	Fair	Gains/
Category	Cost	Gains	Months	Months	Value	(Losses)

Fixed-Maturity Securities:
U.S. Treasury securities and
obligations of U.S. government
corporations and agencies	$8,236,255	$142,388	$-	$(1,557)	$8,377,086	$140,831

Political subdivisions of States,
Territories and Possessions	5,675,418	167,952	-	(309)	5,843,061	167,643

Corporate and other bonds
Industrial and miscellaneous	126,095,235	4,106,946	(14,450)	(84,187)	130,103,544	4,008,309

Residential mortgage and other
asset backed securities (1)	20,078,720	317,871	(8,750)	(376,663)	20,011,178	(67,542)
Total	$160,085,628	$4,735,157	$(23,200)	$(462,716)	$164,334,869	$4,249,241

	December 31, 2018
						Net
	Cost or	Gross	Gross Unrealized Losses		Estimated	Unrealized
	Amortized	Unrealized	Less than 12	More than 12	Fair	Gains/
Category	Cost	Gains	Months	Months	Value	(Losses)

Fixed-Maturity Securities:
U.S. Treasury securities and
obligations of U.S. government
corporations and agencies	$8,222,050	$26,331	$(28,000)	$-	$8,220,381	$(1,669)

Political subdivisions of States,
Territories and Possessions	6,339,540	50,903	(12,327)	(36,508)	6,341,608	2,068

Corporate and other bonds
Industrial and miscellaneous	119,078,698	123,740	(2,775,540)	(676,605)	115,750,293	(3,328,405)

Residential mortgage and other
asset backed securities (1)	21,790,973	236,502	(231,229)	(331,012)	21,465,234	(325,739)
Total	$155,431,261	$437,476	$(3,047,096)	$(1,044,125)	$151,777,516	$(3,653,745)

	Three months ended		Six months ended
	June 30,		June 30,
	2019	2018	2019	2018

Income:
Fixed-maturity securities	$1,474,341	$1,361,506	$3,001,211	$2,511,799
Equity securities	205,509	194,091	412,653	394,588
Cash and cash equivalents	172,680	42,582	213,081	115,841
Total	1,852,530	1,598,179	3,626,945	3,022,228
Expenses:
Investment expenses	132,761	41,313	283,464	81,373
Net investment income	$1,719,769	$1,556,866	$3,343,481	$2,940,855

	June 30, 2019
	Less than 12 months			12 months or more			Total
	Estimated		No. of	Estimated		No. of	Estimated
	Fair	Unrealized	Positions	Fair	Unrealized	Positions	Fair	Unrealized
Category	Value	Losses	Held	Value	Losses	Held	Value	Losses

Fixed-Maturity Securities:
U.S. Treasury securities
and obligations of U.S.
government corporations
and agencies	$-	$-	-	$1,992,340	$(1,557)	1	$1,992,340	$(1,557)

Political subdivisions of
States, Territories and
Possessions	-	-	-	302,880	(309)	1	302,880	(309)

Corporate and other
bonds industrial and
miscellaneous	1,959,040	(14,450)	4	11,608,094	(84,187)	18	13,567,134	(98,637)

Residential mortgage and other
asset backed securities	591,845	(8,750)	1	15,983,171	(376,663)	24	16,575,016	(385,413)

Total fixed-maturity
securities	$2,550,885	$(23,200)	5	$29,886,485	$(462,716)	44	$32,437,370	$(485,916)

	June 30, 2019
	Level 1	Level 2	Level 3	Total

Fixed-maturity securities available-for-sale
U.S. Treasury securities
and obligations of U.S.
government corporations
and agencies	$8,377,086	$-	$-	$8,377,086

Political subdivisions of
States, Territories and
Possessions	-	5,843,061	-	5,843,061

Corporate and other
bonds industrial and
miscellaneous	126,359,225	3,744,319	-	130,103,544

Residential mortgage backed securities	-	20,011,178	-	20,011,178
Total fixed maturities	134,736,311	29,598,558	-	164,334,869
Equity securities	22,738,950	-	-	22,738,950
Total investments	$157,475,261	$29,598,558	$-	$187,073,819



	~~PAGE~~

Category	June 30, 2019	December 31, 2018

Other Investments:
Hedge fund	$2,335,874	$1,855,225
Total	$2,335,874	$1,855,225

	June 30, 2019		December 31, 2018
	Carrying	Estimated	Carrying	Estimated
	Value	Fair Value	Value	Fair Value

Fixed-maturity securities-held-to maturity	$3,824,620	$4,114,072	$4,222,855	$4,426,416
Cash and cash equivalents	$18,895,805	$18,895,805	$21,138,403	$21,138,403
Premiums receivable, net	$14,958,200	$14,958,200	$13,961,599	$13,961,599
Reinsurance receivables, net	$28,643,360	$28,643,360	$26,367,115	$26,367,115
Real estate, net of accumulated depreciation	$2,307,072	$2,705,000	$2,300,827	$2,705,000
Reinsurance balances payable	$2,806,903	$2,806,903	$1,933,376	$1,933,376
Long-term debt, net	$29,383,341	$27,326,918	$29,295,251	$28,521,734

	June 30, 2020				December 31, 2019
	Carrying		Estimated		Carrying		Estimated
	Value		Fair Value		Value		Fair Value

Fixed-maturity securities-held-to maturity	$	7,870,374	$	8,322,456	$	3,825,952	$	4,124,767
Cash and cash equivalents	$	20,153,732	$	20,153,732	$	32,391,485	$	32,391,485
Premiums receivable, net	$	13,339,539	$	13,339,539	$	12,706,411	$	12,706,411
Reinsurance receivables, net	$	41,242,321	$	41,242,321	$	40,750,538	$	40,750,538
Real estate, net of accumulated depreciation	$	2,256,872	$	2,705,000	$	2,292,743	$	2,705,000
Reinsurance balances payable	$	5,467,103	$	5,467,103	$	11,714,724	$	11,714,724

	Direct	Assumed	Ceded	Net

Six months ended June 30, 2019
Premiums written	$82,309,827	$77	$(15,327,796)	$66,982,108
Change in unearned premiums	(6,456,216)	202	271,074	(6,184,940)
Premiums earned	$75,853,611	$279	$(15,056,722)	$60,797,168

Six months ended June 30, 2018
Premiums written	$68,389,960	$824	$(16,725,724)	$51,665,060
Change in unearned premiums	(5,495,329)	3,064	769,436	$(4,722,829)
Premiums earned	$62,894,631	$3,888	$(15,956,288)	$46,942,231

Three months ended June 30, 2019
Premiums written	$44,821,279	$111	$(8,199,887)	$36,621,503
Change in unearned premiums	(5,828,149)	7	407,918	(5,420,224)
Premiums earned	$38,993,130	$118	$(7,791,969)	$31,201,279

Three months ended June 30, 2018
Premiums written	$36,863,677	$488	$(8,899,489)	$27,964,676
Change in unearned premiums	(4,486,460)	1,163	625,235	(3,860,062)
Premiums earned	$32,377,217	$1,651	$(8,274,254)	$24,104,614

	Incurred Loss and Allocated Loss Adjustment Expenses, Net of Reinsurance										As of June 30, 2019
										Six Months Ended		Cumulative Number of Reported Claims by
Accident	For the Years Ended December 31,									June 30,		Accident
Year	2010	2011	2012	2013	2014	2015	2016	2017	2018	2019	IBNR	Year
	(Unaudited 2010 - 2018)									(Unaudited)
2010	$5,598	$5,707	$6,429	$6,623	$6,912	$6,853	$6,838	$6,840	$6,787	$6,787	$-	1,617
2011		7,603	7,678	8,618	9,440	9,198	9,066	9,144	9,171	9,181	37	1,914
2012			9,539	9,344	10,278	10,382	10,582	10,790	10,791	11,030	42	4,704(1)
2013				10,728	9,745	9,424	9,621	10,061	10,089	10,464	67	1,561
2014					14,193	14,260	14,218	14,564	15,023	16,294	176	2,133
2015						22,340	21,994	22,148	22,491	23,133	123	2,555
2016							26,062	24,941	24,789	27,112	68	2,868
2017								31,605	32,169	33,895	895	3,364
2018									54,455	54,067	3,944	4,137
2019										38,622	13,451	1,865
									Total	$230,585

	Cumulative Paid Loss and Allocated Loss Adjustment Expenses, Net of Reinsurance
Accident	For the Years Ended December 31,									Six Months Ended June 30,
Year	2010	2011	2012	2013	2014	2015	2016	2017	2018	2019
	(Unaudited 2010 - 2018)									(Unaudited)

2010	$2,566	$3,947	$4,972	$5,602	$6,323	$6,576	$6,720	$6,772	$6,780	$6,780
2011		3,740	5,117	6,228	7,170	8,139	8,540	8,702	8,727	8,773
2012			3,950	5,770	7,127	8,196	9,187	10,236	10,323	10,420
2013				3,405	5,303	6,633	7,591	8,407	9,056	9,212
2014					5,710	9,429	10,738	11,770	13,819	14,031
2015						12,295	16,181	18,266	19,984	20,326
2016							15,364	19,001	21,106	21,910
2017								16,704	24,820	27,024
2018									32,383	41,894
2019										18,803
									Total	$179,173

Net liability for unpaid loss and allocated loss adjustment expenses for the accident years presented										$51,412
All outstanding liabilities before 2010, net of reinsurance										107
Liabilities for loss and allocated loss adjustment expenses, net of reinsurance										$51,519

	~~As of~~
~~(in thousands)~~	~~June 30, 2019~~
~~Liabilities for loss and loss adjustment expenses, net of reinsurance~~	$~~51,519~~
~~Total reinsurance recoverable on unpaid losses~~	~~16,034~~
~~Unallocated loss adjustment expenses~~	~~2,122~~
~~Total gross liability for loss and LAE reserves~~	$~~69,675~~

	Treaty Year
	July 1, 2019		July 1, 2018		July 1, 2017
	to		to		to
Line of Busines	June 30, 2020		June 30, 2019		June 30, 2018

Personal Lines:
Homeowners, dwelling fire and canine legal liability
Quota share treaty:
Percent ceded		None		10%		20%
Risk retained	$	1,000,000	$	900,000	$	800,000
Losses per occurrence subject to quota share reinsurance coverage		None	$	1,000,000	$	1,000,000
Excess of loss coverage and facultative facility above quota share coverage (1)	$	10,000,000	$	9,000,000	$	9,000,000
				in excess of		in excess of
			$	1,000,000	$	1,000,000
Total reinsurance coverage per occurrence	$	9,000,000	$	9,100,000	$	9,200,000
Losses per occurrence subject to reinsurance coverage	$	10,000,000	$	10,000,000	$	10,000,000
Expiration date		June 30, 2020		June 30, 2019		June 30, 2019

Personal Umbrella
Quota share treaty:
Percent ceded - first $1,000,000 of coverage		90%		90%		90%
Percent ceded - excess of $1,000,000 dollars of coverage		100%		100%		100%
Risk retained	$	100,000	$	100,000	$	100,000
Total reinsurance coverage per occurrence	$	4,900,000	$	4,900,000	$	4,900,000
Losses per occurrence subject to quota share reinsurance coverage	$	5,000,000	$	5,000,000	$	5,000,000
Expiration date		June 30, 2020		June 30, 2019		June 30, 2018

Commercial Lines:
General liability commercial policies
Quota share treaty		None		None		None
Risk retained	$	750,000	$	750,000	$	750,000
Excess of loss coverage above risk retained	$	3,750,000	$	3,750,000	$	3,750,000
		in excess of		in excess of		in excess of
	$	750,000	$	750,000	$	750,000
Total reinsurance coverage per occurrence	$	3,750,000	$	3,750,000	$	3,750,000
Losses per occurrence subject to reinsurance coverage	$	4,500,000	$	4,500,000	$	4,500,000

Commercial Umbrella
Quota share treaty:		None
Percent ceded - first $1,000,000 of coverage				90%		90%
Percent ceded - excess of $1,000,000 of coverage				100%		100%
Risk retained			$	100,000	$	100,000
Total reinsurance coverage per occurrence			$	4,900,000	$	4,900,000
Losses per occurrence subject to quota share reinsurance coverage			$	5,000,000	$	5,000,000
Expiration date				June 30, 2019		June 30, 2018

Catastrophe Reinsurance:
Initial loss subject to personal lines quota share treaty		None	$	5,000,000	$	5,000,000
Risk retained per catastrophe occurrence (2)	$	7,500,000	$	4,500,000	$	4,000,000
Catastrophe loss coverage in excess of quota share coverage (3)	$	602,500,000	$	445,000,000	$	315,000,000
Reinstatement premium protection (4)(5)(6)		Yes		Yes		Yes

	July 1, 2018 - June 30, 2019		July 1, 2017 - June 30, 2018
Treaty	Range of Loss	Risk Retained	Range of Loss	Risk Retained
Personal Lines (1)	Initial $1,000,000	$900,000	Initial $1,000,000	$800,000
	$1,000,000 - $10,000,000	None(2)	$1,000,000 - $10,000,000	None(2)
	Over $10,000,000	100%	Over $10,000,000	100%

Personal Umbrella	Initial $1,000,000	$100,000	Initial $1,000,000	$100,000
	$1,000,000 - $5,000,000	None	$1,000,000 - $5,000,000	None
	Over $5,000,000	100%	Over $5,000,000	100%

Commercial Lines	Initial $750,000	$750,000	Initial $750,000	$750,000
	$750,000 - $4,500,000	None(3)	$750,000 - $4,500,000	None(3)
	Over $4,500,000	100%	Over $4,500,000	100%

Commercial Umbrella	Initial $1,000,000	$100,000	Initial $1,000,000	$100,000
	$1,000,000 - $5,000,000	None	$1,000,000 - $5,000,000	None
	Over $5,000,000	100%	Over $5,000,000	100%

Catastrophe (4)	Initial $5,000,000	$4,500,000	Initial $5,000,000	$4,000,000
	$5,000,000 - $450,000,000	None	$5,000,000 - $320,000,000	None
	Over $450,000,000	100%	Over $320,000,000	100%

Stock Options	Number of Shares	Weighted Average Exercise Price per Share	Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value

Outstanding at January 1, 2019	37,500	$8.36	2.24	$349,950

Granted	-	$-	-	$-
Exercised	(3,000)	$7.85	-	$6,270
Forfeited	(2,500)	$7.85	2.04	$13,588

Outstanding at June 30, 2019	32,000	$8.45	1.76	$13,600

Vested and Exercisable at June 30, 2019	32,000	$8.45	1.76	$13,600

Restricted Stock Awards	Shares	Weighted Average Grant Date Fair Value per Share	Aggregate Fair Value

Balance at January 1, 2019	120,499	$17.66	$2,129,175

Granted	120,586	$15.51	$1,870,487
Vested	(28,168)	$18.23	$(513,446)
Forfeited	(5,962)	$15.18	$(90,510)

Balance at June 30, 2019	206,955	$16.39	$3,395,706

	June 30,			December 31,
Type of NOL	2020			2019			Expiration

Federal only, current year	$	-		$	1,517,866		(A)

State only (B)		1,805,591			1,616,568		December 31, 2040
Valuation allowance		(1,749,746	)		(1,548,187	)
State only, net of valuation allowance		55,845			68,381

Total deferred tax asset from net operating loss carryovers	$	55,845		$	1,586,247

	June 30,	December 31,
Type of NOL	2019	2018	Expiration

Federal only, current year	$1,959,030	$-	None
Amount subject to Annual Limitation, federal only	-	2,100	December 31, 2019
Total federal only	1,959,030	2,100

State only (A)	1,504,514	1,305,365	December 31, 2039
Valuation allowance	(1,434,132)	(1,217,027)
State only, net of valuation allowance	70,382	88,338

Total deferred tax asset from net operating loss carryovers	$2,029,412	$90,438

	Three months ended	Six months ended
Lease cost	June 30, 2019	June 30, 2019
Operating lease	$41,342	$82,684
Short-term leases	-	-
Total lease cost (1)	$41,342	$82,684

Other information on operating lease
Cash payments included in the measurement of lease
liability reported in operating cash flows	$42,827	$84,206
Discount rate	5.50%	5.50%
Remaining lease term in years	5 years	5 years

	Three months ended			Six months ended
Lease cost	June 30, 2020			June 30, 2020
Operating leases	$	61,297		$	122,594
Short-term leases		-			-
Total lease cost (1)	$	61,297		$	122,594

Other information on operating leases
Cash payments included in the measurement of lease
liability reported in operating cash flows	$	62,782		$	127,063
Discount rate		5.50	%		5.50	%
Remaining lease term in years	5 years			5 years

For the Year
Ending
December 31,	Total
Remainder of 2019	$85,655
2020	175,806
2021	181,959
2022	188,328
2023	194,919
Thereafter	49,145
Total undiscounted lease payments	875,812
Less: present value adjustment	116,947
Operating lease liability	$758,865

For the Year
Ending
December 31,	Total
Remainder of 2020	$	128,561
2021		264,571
2022		273,831
2023		283,415
2024		140,739
Thereafter		192,916
Total undiscounted lease payments		1,284,033
Less: present value adjustment		190,041
Operating lease liability	$	1,093,992

	Six months ended June 30,
($ in thousands)	2019	2018	Change	Percent
Revenues
Direct written premiums	$82,310	$68,390	$13,920	20.4%
Assumed written premiums	-	1	(1)	na %
	82,310	68,391	13,919	20.4%
Ceded written premiums
Ceded to quota share treaties (1)	5,963	9,610	$(3,647)	(38.0)%
Ceded to excess of loss treaties	833	596	237	39.8%
Ceded to catastrophe treaties	8,532	6,520	2,012	30.9%
Total ceded written premiums	15,328	16,726	(1,398)	(8.4)%

Net written premiums	66,982	51,665	15,317	29.6%

Change in unearned premiums
Direct and assumed	(6,456)	(5,492)	(964)	17.6%
Ceded to quota share treaties	271	769	(498)	(64.8)%
Change in net unearned premiums	(6,185)	(4,723)	(1,462)	31.0%

Premiums earned
Direct and assumed	75,854	62,898	12,956	20.6%
Ceded to reinsurance treaties	(15,057)	(15,956)	899	(5.6)%
Net premiums earned	60,797	46,942	13,855	29.5%
Ceding commission revenue
Excluding the effect of catastrophes	1,953	3,845	(1,892)	(49.2)%
Effect of catastrophes	-	(459)	459	n/a%
Total ceding commission revenue	1,953	3,386	(1,433)	(42.3)%
Net investment income	3,343	2,941	402	13.7%
Net gains (losses) on investments	2,714	(630)	3,344	(530.8)%
Other income	696	609	87	14.3%
Total revenues	69,503	53,248	16,255	30.5%
Expenses
Loss and loss adjustment expenses
Direct and assumed:
Loss and loss adjustment expenses excluding the effect of catastrophes	46,164	25,898	20,266	78.3%
Losses from catastrophes (2)	7,264	10,561	(3,297)	(31.2)%
Total direct and assumed loss and loss adjustment expenses	53,428	36,459	16,969	46.5%

Ceded loss and loss adjustment expenses:
Loss and loss adjustment expenses excluding the effect of catastrophes	5,859	3,186	2,673	83.9%
Losses from catastrophes (2)	763	4,831	(4,068)	(84.2)%
Total ceded loss and loss adjustment expenses	6,622	8,017	(1,395)	(17.4)%

Net loss and loss adjustment expenses:
Loss and loss adjustment expenses excluding the effect of catastrophes	40,305	22,712	17,593	77.5%
Losses from catastrophes (2)	6,501	5,730	771	13.5%
Net loss and loss adjustment expenses	46,806	28,442	18,364	64.6%

Commission expense	14,153	11,817	2,336	19.8%
Other underwriting expenses	11,552	10,107	1,445	14.3%
Other operating expenses	2,069	1,091	978	89.6%
Depreciation and amortization	1,230	834	396	47.5%
Interest expense	913	909	4	0.4%
Total expenses	76,723	53,200	23,523	44.2%

(Loss) income before taxes	(7,220)	48	(7,268)	(15,141.7)%
Income tax (benefit) expense	(1,524)	9	(1,533)	(17,033.3)%
Net (loss) income	$(5,696)	$39	$(5,735)	(14,705.1)%

	Six months ended
	June 30,		Percentage
	2019	2018	Point Change

Other underwriting expenses
Employment costs	8.1%	9.6%	(1.5)
Underwriting fees (inspections/data services)	2.4	2.5	(0.1)
Other expenses	8.6	9.3	(0.7)
Total other underwriting expenses	19.1	21.4	(2.3)

Ceding commission revenue
Provisional	(4.4)	(9.0)	4.6
Contingent	1.2	1.8	(0.6)
Total ceding commission revenue	(3.2)	(7.2)	4.0

Other income	(1.1)	(1.2)	0.1
Commission expense	23.2	25.2	(2.0)

Net underwriting expense ratio	38.0%	38.2%	(0.2)

	Three months ended June 30,
($ in thousands)	2019	2018	Change	Percent
Revenues
Direct written premiums	$44,821	$36,864	$7,957	21.6%
Assumed written premiums	-	-	-	na%
	44,821	36,864	7,957	21.6%
Ceded written premiums
Ceded to quota share treaties	3,304	5,204	(1,900)	(36.5)%
Ceded to excess of loss treaties	429	307	122	39.7%
Ceded to catastrophe treaties	4,467	3,388	1,079	31.8%
Total ceded written premiums	8,200	8,899	(699)	(7.9)%

Net written premiums	36,621	27,965	8,656	31.0%

Change in unearned premiums
Direct and assumed	(5,828)	(4,485)	(1,343)	29.9%
Ceded to quota share treaties	408	625	(217)	(34.7)%
Change in net unearned premiums	(5,420)	(3,860)	(1,560)	40.4%

Premiums earned
Direct and assumed	38,993	32,379	6,614	20.4%
Ceded to reinsurance treaties	(7,792)	(8,274)	482	(5.8)%
Net premiums earned	31,201	24,105	7,096	29.4%
Ceding commission revenue
Excluding the effect of catastrophes	675	1,816	(1,141)	(62.8)%
Effect of catastrophes	-	(125)	125	na%
Total ceding commission revenue	675	1,691	(1,016)	(60.1)%
Net investment income	1,719	1,557	162	10.4%
Net gains (losses) on investments	679	(107)	786	(734.6)%
Other income	330	300	30	10.0%
Total revenues	34,604	27,546	7,058	25.6%
Expenses
Loss and loss adjustment expenses
Direct and assumed:
Loss and loss adjustment expenses excluding the effect of catastrophes	19,521	13,357	6,164	46.1%
Losses from catastrophes (1)	1,637	224	1,413	630.8%
Total direct and assumed loss and loss adjustment expenses	21,158	13,581	7,577	55.8%

Ceded loss and loss adjustment expenses:
Loss and loss adjustment expenses excluding the effect of catastrophes	3,287	2,365	922	39.0%
Losses from catastrophes (1)	199	40	159	397.5%
Total ceded loss and loss adjustment expenses	3,486	2,405	1,081	44.9%

Net loss and loss adjustment expenses:
Loss and loss adjustment expenses excluding the effect of catastrophes	16,234	10,992	5,242	47.7%
Losses from catastrophes (1)	1,438	184	1,254	681.5%
Net loss and loss adjustment expenses	17,672	11,176	6,496	58.1%

Commission expense	7,300	6,017	1,283	21.3%
Other underwriting expenses	5,416	5,076	340	6.7%
Other operating expenses	1,097	844	253	30.0%
Depreciation and amortization	628	424	204	48.1%
Interest expense	456	452	4	0.9%
Total expenses	32,569	23,989	8,581	35.8%

Income before taxes	2,035	3,557	(1,522)	(42.8)%
Income tax expense	396	800	(404)	(50.5)%
Net income	$1,639	$2,757	$(1,118)	(40.6)%

Six months ended June 30,

("2019/2020 Treaty")

("2018/2019 Treaty Year")

Quota share reinsurance rates

Personal lines