UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark one)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, ~~2022~~2023

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________to _________

Commission File Number 0-1665

KINGSTONE COMPANIES, INC.

(Exact name of registrant as specified in its charter)

Delaware

36-2476480

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification Number)

15 Joys Lane

Kingston, NY 12401

(Address of principal executive offices)

(845) 802-7900

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading

Symbol(s)

Name of each exchange

on which registered

Common Stock, $0.01 par value per share

KINS

Nasdaq Capital Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, ~~and~~ “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of May ~~16, 2022,~~15, 2023, there were ~~10,645,098~~10,760,579 shares of the registrant’s common stock outstanding.

KINGSTONE COMPANIES, INC.

INDEX

						PAGE

PART I — FINANCIAL INFORMATION				4

Item 1 —		Financial Statements		24
		Condensed Consolidated Balance Sheets at March 31, ~~2022~~2023 (Unaudited) and December 31, ~~2021~~2022		24
		Condensed Consolidated Statements of Operations and Comprehensive ~~Loss~~Income (Loss) for the three months ended March 31, ~~2022~~2023 (Unaudited) and ~~2021~~2022 (Unaudited)		35
		Condensed Consolidated Statements of Stockholders’ Equity for the three months ended March 31, ~~2022~~2023 (Unaudited) and ~~2021~~2022 (Unaudited)		46
		Condensed Consolidated Statements of Cash Flows for the three months ended March 31, ~~2022~~2023 (Unaudited) and ~~2021~~2022 (Unaudited)		57
		Notes to Condensed Consolidated Financial Statements (Unaudited)		69
	Item 2 —		Management’s Discussion and Analysis of Financial Condition and Results of Operations		3642
	Item 3 —		Quantitative and Qualitative Disclosures About Market Risk		6369
	Item 4 —		Controls and Procedures		6370

PART II — OTHER INFORMATION				71

Item 1 —		Legal Proceedings		6571
	Item 1A —		Risk Factors		6571
	Item 2 —		Unregistered Sales of Equity Securities and Use of Proceeds		6571
	Item 3 —		Defaults Upon Senior Securities		6571
	Item 4 —		Mine Safety Disclosures		6571
	Item 5 —		Other Information		6571
	Item 6 —		Exhibits		6672
Signatures				73	67

Table Ofof Contents

Forward-Looking Statements

This Quarterly Report contains forward‑looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The events described in forward‑looking statements contained in this Quarterly Report may not occur. Generally, these statements relate to business plans or strategies, projected or anticipated results or other consequences of our plans or strategies, projected or anticipated results from acquisitions to be made by us, or projections involving anticipated revenues, earnings, costs or other aspects of our operating results. The words “may,” “will,” “expect,” “believe,” “anticipate,” “project,” “plan,” “intend,” “estimate,” and “continue,” and their opposites and similar expressions are intended to identify forward‑looking statements. We caution you that these statements are not guarantees of future performance or events and are subject to a number of uncertainties, risks and other influences, many of which are beyond our control, which may influence the accuracy of the statements and the projections upon which the statements are based. Factors which may cause actual results and outcomes to differ materially from those contained in the forward-looking statements include, but are not limited to the risks and uncertainties discussed in Part I, Item 1A (“Risk Factors”) of our Annual Report ~~under “Factors That May Affect Future Results and Financial Condition”~~ on Form 10-K for the year ended December 31, ~~2021,~~2022, Part I, Item 2 of this Quarterly Report and Part II, Item 1A of this Quarterly Report.

Any one or more of these uncertainties, risks and other influences could materially affect our results of operations and whether forward‑looking statements made by us ultimately prove to be accurate. Our actual results, performance and achievements could differ materially from those expressed or implied in these forward‑looking statements. We undertake no obligation to publicly update or revise any forward‑looking statements, whether from new information, future events or otherwise except as required by law.

Table Ofof Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

KINGSTONE COMPANIES, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets

March 31,

December 31,

2022

2021

(unaudited)

Assets

Fixed-maturity securities, held-to-maturity, at amortized cost (fair value of $7,629,300 at March 31, 2022 and $8,753,159 at December 31, 2021)

$ 7,765,138

$ 8,266,334

Fixed-maturity securities, available-for-sale, at fair value (amortized cost of $159,450,317 at March 31, 2022 and $155,808,478 at December 31, 2021)

151,897,496

158,080,110

Equity securities, at fair value (cost of $33,089,632 at March 31, 2022 and $37,470,669 at December 31, 2021)

31,765,409

39,687,002

Other investments

6,625,883

7,561,415

Total investments

198,053,926

213,594,861

Cash and cash equivalents

5,833,886

24,290,598

Premiums receivable, net

11,029,208

12,318,336

Reinsurance receivables, net

49,341,690

40,292,438

Deferred policy acquisition costs

21,656,581

22,238,987

Intangible assets

500,000

500,000

Property and equipment, net

10,086,615

9,291,597

Deferred income taxes, net

4,367,633

192,253

Other assets

7,028,603

8,593,205

Total assets

$ 307,898,142

$ 331,312,275

Liabilities

Loss and loss adjustment expense reserves

$ 98,916,998

$ 94,948,745

Unearned premiums

95,366,879

97,759,607

Advance premiums

5,232,527

2,693,466

Reinsurance balances payable

5,091,070

12,961,568

Deferred ceding commission revenue

9,479,512

9,748,508

Accounts payable, accrued expenses and other liabilities

5,483,126

7,704,396

Debt, net

29,867,836

29,823,791

Total liabilities

249,437,948

255,640,081

Commitments and Contingencies (Note 11)

Stockholders' Equity

Preferred stock, $.01 par value; authorized 2,500,000 shares

0

0

Common stock, $.01 par value; authorized 20,000,000 shares; issued 12,109,307 shares at March 31, 2022 and 11,955,660 shares at December 31, 2021; outstanding 10,637,901 shares at March 31, 2022 and 10,484,254 shares at December 31, 2021

121,093

119,557

Capital in excess of par

72,638,286

72,467,483

Accumulated other comprehensive (loss) income

(5,964,578 )

1,796,739

(Accumulated deficit) retained earnings

(2,767,126 )

6,855,896

64,027,675

81,239,675

Treasury stock, at cost, 1,471,406 shares at March 31, 2022 and December 31, 2021

(5,567,481 )

(5,567,481 )
Total stockholders' equity

58,460,194

75,672,194

Total liabilities and stockholders' equity

$ 307,898,142

$ 331,312,275

KINGSTONE COMPANIES, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
	March 31,			December 31,
	2023			2022
	(unaudited)
Assets
Fixed-maturity securities, held-to-maturity, at amortized cost (fair value of $6,825,609 at March 31, 2023 and $6,600,388 at December 31, 2022)	$	7,765,096		$	7,766,140
Fixed-maturity securities, available-for-sale, at fair value (amortized cost of $172,374,518 at March 31, 2023 and $174,918,427 at December 31, 2022)		154,641,319			154,715,163
Equity securities, at fair value (cost of $18,011,146 at March 31, 2023 and $18,086,700 at December 31, 2022)		14,622,549			13,834,390
Other investments		3,135,449			2,771,652
Total investments		180,164,413			179,087,345
Cash and cash equivalents		10,500,753			11,958,228
Premiums receivable, net		13,339,037			13,880,504
Reinsurance receivables, net		78,018,606			66,465,061
Deferred policy acquisition costs		22,692,044			23,819,453
Intangible assets		500,000			500,000
Property and equipment, net		10,199,878			10,541,935
Deferred income taxes, net		11,061,418			10,331,158
Other assets		3,921,334			3,748,847
Total assets	$	330,397,483		$	320,332,531

Liabilities
Loss and loss adjustment expense reserves	$	124,121,818		$	118,339,513
Unearned premiums		105,159,893			107,492,777
Advance premiums		5,660,391			2,839,028
Reinsurance balances payable		20,110,212			13,061,966
Deferred ceding commission revenue		10,739,429			10,619,569
Accounts payable, accrued expenses and other liabilities		6,147,717			6,651,723
Debt, net		25,176,019			25,158,523
Total liabilities		297,115,479			284,163,099

Commitments and Contingencies (Note 11)

Stockholders' Equity
Preferred stock, $0.01 par value; authorized 2,500,000 shares		-			-
Common stock, $0.01 par value; authorized 20,000,000 shares; issued 12,231,965 shares at March 31, 2023 and 12,171,512 shares at December 31, 2022; outstanding 10,760,559 shares at March 31, 2023 and 10,700,106 shares at December 31, 2022		122,320			121,715
Capital in excess of par		74,734,915			74,519,590
Accumulated other comprehensive loss		(14,007,076	)		(15,958,428	)
Accumulated deficit		(22,000,674	)		(16,945,964	)
		38,849,485			41,736,913
Treasury stock, at cost, 1,471,406 shares at March 31, 2023 and December 31, 2022		(5,567,481	)		(5,567,481	)
Total stockholders' equity		33,282,004			36,169,432

Total liabilities and stockholders' equity	$	330,397,483		$	320,332,531

See accompanying notes to condensed consolidated financial statements.

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KINGSTONE COMPANIES, INC. AND SUBSIDIARIES	KINGSTONE COMPANIES, INC. AND SUBSIDIARIES							KINGSTONE COMPANIES, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited)
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (Unaudited)								Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (Unaudited)
		For the Three Months Ended,							For the Three Months Ended
		March 31,							March 31,
		2022			2021				2023			2022
Revenues
Net premiums earned		$	26,673,380		$	34,589,218			$	28,254,953		$	26,673,380
Ceding commission revenue			4,681,396			(1,065	)			5,445,407			4,681,396
Net investment income			1,359,100			1,783,196				1,541,492			1,359,100
Net (losses) gains on investments			(4,398,405	)		2,960,407
Net gains (losses) on investments										1,224,871			(4,398,405	)
Other income			235,824			171,446				161,040			235,824
Total revenues			28,551,295			39,503,202				36,627,763			28,551,295

Expenses
Loss and loss adjustment expenses			22,941,198			22,560,672				25,039,410			22,941,198
Commission expense			8,351,086			8,223,839				8,539,762			8,351,086
Other underwriting expenses			6,815,949			6,467,042				6,871,619			6,815,949
Other operating expenses			881,955			1,352,306				662,634			881,955
Depreciation and amortization			770,110			822,340				808,130			770,110
Interest expense			456,545			456,545				1,009,891			456,545
Total expenses			40,216,843			39,882,744				42,931,446			40,216,843

Loss from operations before taxes			(11,665,548	)		(379,542	)			(6,303,683	)		(11,665,548	)
Income tax benefit			(2,468,016	)		(68,445	)			(1,248,973	)		(2,468,016	)
Net loss			(9,197,532	)		(311,097	)			(5,054,710	)		(9,197,532	)

Other comprehensive loss, net of tax
Gross change in unrealized losses on available-for-sale-securities			(9,865,777	)		(3,823,279	)
Other comprehensive income (loss), net of tax
Gross change in unrealized gains (losses) on available-for-sale-securities										2,467,426			(9,865,777	)

Reclassification adjustment for losses (gains) included in net loss			41,324			(394,297	)
Net change in unrealized losses			(9,824,453	)		(4,217,576	)
Income tax benefit related to items of other comprehensive loss			2,063,136			885,692
Other comprehensive loss, net of tax			(7,761,317	)		(3,331,884	)
Reclassification adjustment for losses included in net loss										2,639			41,324
Net change in unrealized gains (losses), on available-for-sale-securities										2,470,065			(9,824,453	)
Income tax (expense) benefit related to items of other comprehensive income (loss)										(518,713	)		2,063,136
Other comprehensive income (loss), net of tax										1,951,352			(7,761,317	)

Comprehensive loss		$	(16,958,849	)	$	(3,642,981	)		$	(3,103,358	)	$	(16,958,849	)

Loss per common share:
Basic		$	(0.87	)	$	(0.03	)		$	(0.47	)	$	(0.87	)
Diluted		$	(0.87	)	$	(0.03	)		$	(0.47	)	$	(0.87	)

Weighted average common shares outstanding
Basic			10,630,450			10,676,298				10,756,913			10,630,450
Diluted			10,630,450			10,676,298				10,756,913			10,630,450

Dividends declared and paid per common share		$	0.04		$	0.04			$	-		$	0.04

See accompanying notes to condensed consolidated financial statements.

Table Ofof Contents

KINGSTONE COMPANIES, INC. AND SUBSIDIARIES	KINGSTONE COMPANIES, INC. AND SUBSIDIARIES																												KINGSTONE COMPANIES, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Stockholders' Equity (Unaudited)	Condensed Consolidated Statements of Stockholders' Equity (Unaudited)																												Condensed Consolidated Statements of Stockholders' Equity (Unaudited)
Three months ended March 31, 2022 and 2021

															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, 2021			-	$	0		11,871,307		$	118,713		$	70,769,165		$	9,880,062		$	15,928,345			1,254,492	$	(3,895,883	)	$	92,800,402
Stock-based compensation			-		0		-			0			494,998			0			0			-		0			494,998
Vesting of restricted stock awards			-		0		85,922			859			(859	)		0			0			-		0			0
Shares deducted from restricted stock awards for payment of withholding taxes			-		0		(21,908	)		(219	)		(146,387	)		0			0			-		0			(146,606	)
Acquisition of treasury stock			-		0		-			0			0			0			0			8,035		(65,915	)		(65,915	)
Dividends			-		0		-			0			0			0			(427,217	)		-		0			(427,217	)
Net loss			-		0		-			0			0			0			(311,097	)		-		0			(311,097	)
Change in unrealized losses on available-for-sale securities, net of tax			-		0		-			0			0			(3,331,884	)		0			-		0			(3,331,884	)
Balance, March 31, 2021			-	$	0		11,935,321		$	119,353		$	71,116,917		$	6,548,178		$	15,190,031			1,262,527	$	(3,961,798	)	$	89,012,681

Three months ended March 31, 2023 and 2022																													Three months ended March 31, 2023 and 2022

															Accumulated			Retained																									Accumulated			Retained
												Capital			Other			Earnings																						Capital			Other			Earnings
		Preferred Stock				Common Stock						in Excess			Comprehensive			(Accumulated				Treasury Stock								Preferred Stock				Common Stock						in Excess			Comprehensive			(Accumulated			Treasury Stock
		Shares		Amount		Shares			Amount			of Par			Income (Loss)			Deficit)			Shares		Amount			Total				Shares		Amount		Shares			Amount			of Par			Income (Loss)			Deficit)			Shares		Amount			Total
Balance, January 1, 2022			-	$	0		11,955,660		$	119,557		$	72,467,483		$	1,796,739		$	6,855,896			1,471,406	$	(5,567,481	)	$	75,672,194				-	$	-		11,955,660		$	119,557		$	72,467,483		$	1,796,739		$	6,855,896			1,471,406	$	(5,567,481	)	$	75,672,194
Stock-based compensation			-		0		-			0			530,414			0			0			-		0			530,414				-		-		-			-			530,414			-			-			-		-			530,414
Vesting of restricted stock awards			-		0		222,070			2,221			(2,221	)		0			0			-		0			0				-		-		222,070			2,221			(2,221	)		-			-			-		-			-
Shares deducted from restricted stock awards for payment of withholding taxes			-		0		(68,423	)		(685	)		(357,390	)		0			0			-		0			(358,075	)
Shares deducted from restricted stock
awards for payment of withholding taxes																															-		-		(68,423	)		(685	)		(357,390	)		-			-			-		-			(358,075	)
Dividends			-		0		-			0			0			0			(425,490	)		-		0			(425,490	)			-		-		-			-			-			-			(425,490	)		-		-			(425,490	)
Net loss			-		0		-			0			0			0			(9,197,532	)		-		0			(9,197,532	)			-		-		-			-			-			-			(9,197,532	)		-		-			(9,197,532	)
Change in unrealized losses on available-for-sale securities, net of tax			-		0		-			0			0			(7,761,317	)		0			-		0			(7,761,317	)
Change in unrealized losses on available-
for-sale securities, net of tax																															-		-		-			-			-			(7,761,317	)		-			-		-			(7,761,317	)
Balance, March 31, 2022			-	$	0		12,109,307		$	121,093		$	72,638,286		$	(5,964,578	)	$	(2,767,126	)		1,471,406	$	(5,567,481	)	$	58,460,194				-	$	-		12,109,307		$	121,093		$	72,638,286		$	(5,964,578	)	$	(2,767,126	)		1,471,406	$	(5,567,481	)	$	58,460,194

														Accumulated
											Capital			Other
	Preferred Stock				Common Stock						in Excess			Comprehensive			Accumulated			Treasury Stock
	Shares		Amount		Shares			Amount			of Par			Loss			Deficit			Shares		Amount			Total
Balance, January 1, 2023		-	$	-		12,171,512		$	121,715		$	74,519,590		$	(15,958,428	)	$	(16,945,964	)		1,471,406	$	(5,567,481	)	$	36,169,432
Stock-based compensation		-		-		-			-			216,767			-			-			-		-			216,767
Vesting of restricted stock awards		-		-		60,951			610			(610	)		-			-			-		-			-
Shares deducted from restricted stock
awards for payment of withholding taxes		-		-		(498	)		(5	)		(832	)		-			-			-		-			(837	)
Net loss		-		-		-			-			-			-			(5,054,710	)		-		-			(5,054,710	)
Change in unrealized gains on available-
for-sale securities, net of tax		-		-		-			-			-			1,951,352			-			-		-			1,951,352
Balance, March 31, 2023		-	$	-		12,231,965		$	122,320		$	74,734,915		$	(14,007,076	)	$	(22,000,674	)		1,471,406	$	(5,567,481	)	$	33,282,004

See accompanying notes to condensed consolidated financial statements.

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KINGSTONE COMPANIES, INC. AND SUBSIDIARIES	KINGSTONE COMPANIES, INC. AND SUBSIDIARIES							KINGSTONE COMPANIES, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows (Unaudited)
Three months ended March 31,		2022			2021
Three Months ended March 31,									2023			2022

Cash flows from operating activities:
Net loss		$	(9,197,532	)	$	(311,097	)		$	(5,054,710	)	$	(9,197,532	)
Adjustments to reconcile net loss to net cash flows (used in) provided by operating activities:
Net gains on investments			(77,761	)		(1,127,234	)
Net unrealized losses (gains) on equity investments			3,560,634			(1,003,209	)
Net unrealized losses (gains) on other investments			915,532			(829,964	)
Adjustments to reconcile net loss to net cash flows used in operating activities:
Net losses (gains) on investments										2,639			(77,761	)
Net unrealized (gains) losses on equity investments										(863,713	)		3,560,634
Net unrealized (gains) losses on other investments										(363,797	)		915,532
Depreciation and amortization			770,110			822,340				808,130			770,110
Bad debt expense			38,817			59,876				19,504			38,817
Amortization of bond premium, net			46,777			31,639				(37,795	)		46,777
Amortization of discount and issuance costs on debt			44,045			44,045				296,919			44,045
Stock-based compensation			530,414			494,998				216,767			530,414
Deferred income tax benefit			(2,112,244	)		(132,990	)			(1,248,973	)		(2,112,244	)
Decrease (increase) in operating assets:
Premiums receivable, net			1,250,311			874,142				521,963			1,250,311
Reinsurance receivables, net			(9,049,252	)		8,093,987				(11,553,545	)		(9,049,252	)
Deferred policy acquisition costs			582,406			790,526				1,127,409			582,406
Other assets			1,555,843			(478,564	)			(172,487	)		1,555,843
Increase (decrease) in operating liabilities:
Loss and loss adjustment expense reserves			3,968,253			1,655,831				5,782,305			3,968,253
Unearned premiums			(2,392,728	)		(3,789,477	)			(2,332,884	)		(2,392,728	)
Advance premiums			2,539,061			1,485,491				2,821,363			2,539,061
Reinsurance balances payable			(7,870,498	)		(4,643,237	)			7,048,246			(7,870,498	)
Deferred ceding commission revenue			(268,996	)		(201	)			119,860			(268,996	)
Accounts payable, accrued expenses and other liabilities			(2,221,270	)		(644,102	)			(504,006	)		(2,221,270	)
Net cash flows (used in) provided by operating activities			(17,388,078	)		1,392,800
Net cash flows used in operating activities										(3,366,805	)		(17,388,078	)

Cash flows from investing activities:
Purchase - fixed-maturity securities held-to-maturity			-			(1,827,425	)
Purchase - fixed-maturity securities available-for-sale			(13,890,402	)		(5,424,374	)			(10,974,819	)		(13,890,402	)
Purchase - equity securities			(506,081	)		(5,732,648	)			-			(506,081	)
Purchase - other investments			-			(2,000,000	)
Redemption - fixed-maturity securities held-to-maturity			500,000			-				-			500,000
Sale and maturity - fixed-maturity securities available-for-sale			10,181,658			11,548,405				13,554,928			10,181,658
Sale - equity securities			4,994,884			6,433,262				75,554			4,994,884
Acquisition of property and equipment			(1,565,128	)		(1,034,064	)			(466,073	)		(1,565,128	)
Net cash flows (used in) provided by investing activities			(285,069	)		1,963,156
Net cash flows provided by (used in) investing activities										2,189,590			(285,069	)

Cash flows from financing activities:
Principal payments on equipment financing										(266,160	)		-
Issue costs on 2022 Notes										(13,263	)		-
Withholding taxes paid on vested retricted stock awards			(358,075	)		(146,606	)			(837	)		(358,075	)
Purchase of treasury stock			-			(65,915	)
Dividends paid			(425,490	)		(427,217	)			-			(425,490	)
Net cash flows used in financing activities			(783,565	)		(639,738	)			(280,260	)		(783,565	)

(Decrease) increase in cash and cash equivalents		$	(18,456,712	)	$	2,716,218
Cash and cash equivalents, beginning of period			24,290,598			19,463,742
Cash and cash equivalents, end of period		$	5,833,886		$	22,179,960

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

See accompanying notes to condensed consolidated financial statements.

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KINGSTONE COMPANIES, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows (Unaudited) (Continued)
Three Months ended March 31,	2023			2022

Decrease in cash and cash equivalents	$	(1,457,475	)	$	(18,456,712	)
Cash and cash equivalents, beginning of period		11,958,228			24,290,598
Cash and cash equivalents, end of period	$	10,500,753		$	5,833,886

Supplemental disclosures of cash flow information:
Cash paid for income taxes	$	-		$	-
Cash paid for interest	$	434,155		$	-

Supplemental schedule of non-cash investing and financing activities:
Other comprehensive income (loss), net of tax	$	1,951,352		$	(7,761,317	)

See accompanying notes to condensed consolidated financial statements.

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KINGSTONE COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1 - Nature of Business and Basis of Presentation

Kingstone Companies, Inc. (referred to herein as ~~“Kingstone”~~"Kingstone" or the “Company” or, on a standalone basis for the parent company only, the “Holding Company”), through its ~~wholly owned~~wholly-owned subsidiary, Kingstone Insurance Company (“KICO”), underwrites property and casualty insurance exclusively through retail and wholesale agents and brokers. KICO is a licensed insurance company in the States of New York, New Jersey, Rhode Island, Massachusetts, Pennsylvania, Connecticut, Maine and New Hampshire. KICO is currently offering its property and casualty insurance products in New York, New Jersey, Rhode Island, Massachusetts, and Connecticut. ~~Although New Jersey, Rhode Island, Massachusetts and Connecticut continue to be growing markets for the Company, 80.6% and 81.1% of KICO’s direct written premiums for~~For the three months ended March 31, 2023 and 2022, 87.0% and ~~2021,~~80.6%, respectively, of KICO’s direct written premiums came from the New York policies. Kingstone, through its wholly owned subsidiary, Cosi Agency, Inc. (“Cosi”), a multi-state licensed general agency, ~~accesses alternate forms of distribution outside of~~receives commission revenue from KICO for the ~~independent agent~~policies it places with others and ~~broker network, through which KICO currently distributes its various products.~~pays commissions to these agencies.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). The principles for condensed interim financial information do not require the inclusion of all the information and footnotes required by GAAP for complete financial statements. Therefore, these condensed consolidated financial statements should be read in conjunction with the consolidated financial statements as of and for the year ended December 31, ~~2021~~2022 and notes thereto included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on ~~April 4, 2022.~~March 31, 2023. The accompanying condensed consolidated financial statements have not been audited by an independent registered public accounting firm in accordance with standards of the Public Company Accounting Oversight Board (United States) but, in the opinion of management, such financial statements include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the Company’s financial position and results of operations. The results of operations for the three months ended March 31, ~~2022~~2023 may not be indicative of the results that may be expected for the year ending December 31, ~~2022.~~2023.

Certain prior year balances were reclassified to conform with the current year presentation. The reclassification had no effect on the Company’s previously reported financial condition, results of operations or cash flows.

Note 2 – Accounting Policies

~~Basis of Presentation; Going Concern~~

~~See Note 2 to the Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 for further information.~~

The Company’s $30,000,000 5.5% Senior Unsecured Notes (the “Notes”) are due on December 30, 2022. The Company’s continuation as a going concern is dependent on its ability to obtain financing and/or other funds to satisfy such obligation. Management believes that KICO’s insurance operations would be able to continue in the unlikely event that financing is not obtained.

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In accordance with Accounting Standards Update (“ASU”) 2014-15, Presentation of Financial Statements—Going Concern (Subtopic 205-40) (“ASC 205-40”), the Company has the responsibility to evaluate whether conditions and/or events raise substantial doubt about its ability to meet its future financial obligations as they become due within one year after the date that the financial statements are issued. This evaluation requires management to perform two steps. First, management must evaluate whether there are conditions and events that raise substantial doubt about the entity’s ability to continue as a going concern. Second, if management concludes that substantial doubt is raised, management is required to consider whether it has plans in place to alleviate that doubt. Disclosures in the notes to the consolidated financial statements are required if management concludes that substantial doubt exists and if its plans alleviate the substantial doubt that was raised.

The accompanying condensed consolidated financial statements have been prepared in accordance with GAAP assuming that the Company will continue as a going concern. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result should the Company be unable to continue as a going concern.

~~Management’s Plan Related to Going Concern~~

In order to continue as a going concern, the Company will need to obtain financing and/or other funds to satisfy its debt obligation due on December 30, 2022. Management plans to refinance the Notes with a new issue of investment grade debt securities of similar or longer maturity that would result in net proceeds equal to or greater than the principal amount of the Notes. In connection therewith, the Company has engaged an investment banker to serve as exclusive placement agent for a proposed offering by the Company of its securities (including debt, equity and/or preferred securities). The engagement letter indicates that the offering would be of such size as to generate proceeds to the Company of no less than $30,000,000. The Company also will receive dividends paid to it by KICO, its insurance subsidiary, that could be utilized to repay the Notes. As of March 31, 2022, the maximum distribution that KICO could pay the Company without prior regulatory approval was approximately $1,122,000. Further, the Company plans to use available invested assets and cash to repay the Notes. As of March 31, 2022, invested assets and cash was approximately $3,812,000.

The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plan described above. The Company believes that its plan is probable of being implemented and that such plan would alleviate any adverse conditions.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates and assumptions, ~~(which~~which include the reserves for losses and ~~LAE),~~LAE, which are subject to estimation errors due to the inherent uncertainty in projecting ultimate claim amounts that will be reported and settled over a period of many years. In addition, estimates and assumptions associated with receivables under reinsurance contracts related to contingent ceding commission revenue require judgments by management. On an ongoing basis, management reevaluates its assumptions and the methods for calculating these estimates. Actual results may differ significantly from the estimates used in preparing the condensed consolidated financial statements.

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Principles of Consolidation

The condensed consolidated financial statements include the accounts of Kingstone and its ~~wholly owned~~wholly-owned subsidiaries: (1) KICO and its ~~wholly owned~~wholly-owned subsidiaries, CMIC Properties, Inc. (“Properties”) and 15 Joys Lane, LLC (“15 Joys Lane”), which together own the land and building from which KICO operates, and (2) Cosi. All significant inter-company account balances and transactions have been eliminated in consolidation.

Recent Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board ~~(the “FASB”)~~ issued ~~ASU~~Accounting Standards Update 2016-13 - Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). ~~The revised accounting~~This new guidance ~~requires the measurement of all expected~~applies to reinsurance and insurance receivables and other financing receivables. For available-for-sale fixed maturity securities carried at fair value, estimated credit losses ~~for financial assets held~~will continue to be measured at the ~~reporting date based on historical experience, current conditions, and reasonable and supportable forecasts and requires enhanced disclosures related to~~present value of expected cash flows, however, the ~~significant estimates and judgments used~~other than temporary impairment (“OTTI”) concept has been eliminated. Under the previous guidance, estimated credit impairments resulted in ~~estimating~~a write-down of amortized cost. Under the new guidance, estimated credit losses ~~as well as~~are recognized through an allowance and reversals of the allowance are permitted if the estimate of credit ~~quality and underwriting standards~~losses declines. For available-for-sale fixed maturity securities where the Company has an intent to sell, impairment will continue to result in a write-down of ~~an organization’s portfolio. In addition,~~amortized cost. ASU 2016-13 ~~amends the accounting for credit losses of available-for-sale debt securities and purchased financial assets with credit deterioration. ASU 2016-13 will be~~was effective for the Company on January 1, 2023. The Company ~~is currently evaluating~~determined as of the ~~effect~~date of adoption that the updated guidance ~~will~~did not have an impact on its consolidated financial statements. Below is a summary of the significant accounting policies impacted by the adoption of ASU 2016-13.

The allowance for credit losses is a valuation account that is reported as a reduction of a financial asset’s cost basis and is measured on a pool basis when similar risk characteristics exist. Management estimates the allowance using relevant available information from both internal and external sources. Historical credit loss experience provides the basis for the estimation of expected credit losses and adjustments may be made to reflect current conditions and reasonable and supportable forecasts. Adjustments to historical loss information are made for any additional factors that come to the Company’s attention. This could include significant shifts in counterparty financial strength ratings, aging of past due receivables, amounts sent to collection agencies, or other underlying portfolio changes. Amounts are considered past due when payments have not been received according to contractual terms. The Company also considers current and forecasted economic conditions, using a variety of economic metrics and forecast indices. The sensitivity of expected credit losses relative to changes to these forecasted economic conditions can vary by financial asset class. The Company considers a reasonable and supportable forecast period to be up to 24 months from the balance sheet date. After the forecast period, the Company reverts to historical credit experience. The Company uses collateral arrangements such as letters of credit and amounts held in beneficiary trusts to mitigate credit risk, which are considered in the estimate of net amount expected to be collected.

The Company has made a policy election to present accrued interest balances separately from the amortized cost basis of assets and has elected the practical expedient to exclude the accrued interest from the tabular disclosures for available-for-sale and held-to-maturity securities. The Company has elected not to estimate an allowance for credit losses on accrued interest receivable. The accrual of interest income is discontinued and the asset is placed on nonaccrual status in the quarter that payment becomes delinquent. Interest accrued but not received for assets on nonaccrual status is reversed through investment income. Interest received for assets that are on nonaccrual status is recognized as payment is received. The asset is returned to accrual status when the principal and interest amounts contractually due are brought current and future payments are expected. Interest receivable is presented as a component of other assets on the condensed consolidated balance sheet.

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See Note 3 and Note 6 to the condensed consolidated financial ~~statements.~~statements for additional information regarding credit losses.

The Company has determined that all other recently issued accounting pronouncements will not have a material impact on its consolidated financial position, results of operations and cash flows, or do not apply to its operations.

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Note 3 - Investments

Fixed-Maturity Securities

The amortized cost, estimated fair value, and gross unrealized gains and losses on investments in fixed-maturity securities classified as available-for-sale for which an allowance for credit loss has not been recorded, as of March 31, ~~2022~~2023 and December 31, ~~2021~~2022 are summarized as follows:

March 31, 2022
Cost or
Gross
Gross Unrealized Losses
Estimated
Net
Amortized
Unrealized
Less than 12
More than 12
Fair
Unrealized
Category
Cost
Gains
Months
Months
Value
Losses
Fixed-Maturity Securities:
Political subdivisions of States,
Territories and Possessions
$ 17,227,562 $ 5,692 $ (1,614,463 ) $ - $ 15,618,791 $ (1,608,771 )
Corporate and other bonds
Industrial and miscellaneous
85,566,044 336,272 (3,143,378 ) - 82,758,938 (2,807,106 )
Residential mortgage and other asset backed securities
56,656,711 289,836 (3,119,931 ) (306,849 ) 53,519,767 (3,136,944 )
Total fixed-maturity securities
$ 159,450,317 $ 631,800 $ (7,877,772 ) $ (306,849 ) $ 151,897,496 $ (7,552,821 )
December 31, 2021
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:
Political subdivisions of States,
Territories and Possessions
$ 17,236,750 $ 246,748 $ (197,984 ) $ - $ 17,285,514 $ 48,764
Corporate and other bonds
Industrial and miscellaneous
80,534,769 2,603,411 (126,926 ) - 83,011,254 2,476,485
Residential mortgage and other asset backed securities
58,036,959 355,985 (489,258 ) (120,344 ) 57,783,342 (253,617 )
Total fixed-maturity securities
$ 155,808,478 $ 3,206,144 $ (814,168 ) $ (120,344 ) $ 158,080,110 $ 2,271,632

	March 31, 2023
													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 (1)	$	21,988,099	$	36,038	$	(674	)	$	-		$	22,023,463	$	35,364

Political subdivisions of States, Territories and Possessions		17,098,969		-		(5,153	)		(3,338,913	)		13,754,903		(3,344,066	)

Corporate and other bonds Industrial and miscellaneous		80,264,856		-		(777,717	)		(6,479,111	)		73,008,028		(7,256,828	)

Residential mortgage and other asset backed securities (2)		53,022,594		67,556		(496,219	)		(6,739,006	)		45,854,925		(7,167,669	)
Total fixed-maturity securities	$	172,374,518	$	103,594	$	(1,279,763	)	$	(16,557,030	)	$	154,641,319	$	(17,733,199	)

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	December 31, 2022
	Cost or		Gross		Gross Unrealized Losses						Estimated		Net
	Amortized		Unrealized		Less than 12			More than 12			Fair		Unrealized
Category	Cost		Gains		Months			Months			Value		Losses

Fixed-Maturity Securities:
U.S. Treasury securities and obligations of U.S. government corporations and agencies (1)	$	23,874,545	$	1,479	$	(6,928	)	$	-		$	23,869,096	$	(5,449	)

Political subdivisions of States, Territories and Possessions		17,108,154		-		(2,195,273	)		(1,771,494	)		13,141,387		(3,966,767	)

Corporate and other bonds Industrial and miscellaneous		80,338,464		-		(5,796,994	)		(2,458,985	)		72,082,485		(8,255,979	)

Residential mortgage and other asset backed securities (2)		53,597,264		58,398		(882,664	)		(7,150,803	)		45,622,195		(7,975,069	)
Total fixed-maturity securities	$	174,918,427	$	59,877	$	(8,881,859	)	$	(11,381,282	)	$	154,715,163	$	(20,203,264	)

	(1)	In October 2022, KICO placed certain U.S. Treasury securities to fulfill the required collateral for a sale leaseback transaction in a designated custodian account (see Note 7 – Debt - “Equipment Financing”). As of March 31, 2023 and December 31, 2022, the amount of required collateral was approximately $8,268,000 and $8,691,000, respectively. As of March 31, 2023 and December 31, 2022, the estimated fair value of the eligible collateral was approximately $11,475,000 and $8,691,000, respectively.
	(2)	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 – Debt – “Federal Home Loan Bank”). The eligible collateral would be pledged to FHLBNY if KICO draws an advance from the FHLBNY credit line. As of December 31, 2022, the estimated fair value of the eligible investments was approximately $12,199,000. KICO will retain all rights regarding all securities if pledged as collateral. As of March 31, 2023 and December 31, 2022 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 March 31, ~~2022~~2023 and December 31, ~~2021~~2022 is shown below:

	March 31, 2022				December 31, 2021				March 31, 2023				December 31, 2022
	Amortized		Estimated		Amortized		Estimated		Amortized		Estimated		Amortized		Estimated
Remaining Time to Maturity	Cost		Fair Value		Cost		Fair Value		Cost		Fair Value		Cost		Fair Value

Less than one year	$	496,511	$	503,090	$	1,153,099	$	1,156,636	$	15,731,448	$	15,650,264	$	16,359,100	$	16,307,991
One to five years		46,504,448		46,284,000		43,007,110		44,914,759		55,396,930		53,174,343		18,605,987		14,085,113
Five to ten years		29,499,983		27,743,070		26,808,853		27,332,581		30,202,432		25,759,376		54,559,158		52,230,283
More than 10 years		26,292,664		23,847,569		26,802,457		26,892,792		18,021,114		14,202,411		31,796,918		26,469,581
Residential mortgage and other asset backed securities		56,656,711		53,519,767		58,036,959		57,783,342		53,022,594		45,854,925		53,597,264		45,622,195
Total	$	159,450,317	$	151,897,496	$	155,808,478	$	158,080,110	$	172,374,518	$	154,641,319	$	174,918,427	$	154,715,163

The actual maturities may differ from contractual maturities because certain borrowers have the right to call or prepay obligations with or without penalties.

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Equity Securities

The cost and estimated fair value of, and gross unrealized gains and losses on, investments in equity securities as of March 31, ~~2022~~2023 and December 31, ~~2021~~2022 are as follows:

	March 31, 2022									March 31, 2023
			Gross		Gross			Estimated				Gross		Gross			Estimated
Category	Cost		Gains		Losses			Fair Value		Cost		Gains		Losses			Fair Value

Equity Securities:
Preferred stocks	$	19,944,128	$	333,811	$	(1,793,476	)	$	18,484,463	$	13,583,942	$	-	$	(2,906,623	)	$	10,677,319
Common stocks, mutual funds, and exchange traded funds		13,145,504		837,696		(702,254	)		13,280,946		4,427,204		199,258		(681,232	)		3,945,230
Total	$	33,089,632	$	1,171,507	$	(2,495,730	)	$	31,765,409	$	18,011,146	$	199,258	$	(3,587,855	)	$	14,622,549




	December 31, 2021
			Gross		Gross			Estimated
Category	Cost		Gains		Losses			Fair Value

Equity Securities:
Preferred stocks	$	22,019,509	$	1,007,009	$	(184,617	)	$	22,841,901
Common stocks, mutual funds, and exchange traded funds		15,451,160		1,573,653		(179,712	)		16,845,101
Total	$	37,470,669	$	2,580,662	$	(364,329	)	$	39,687,002

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	December 31, 2022
			Gross		Gross			Estimated
Category	Cost		Gains		Losses			Fair Value

Equity Securities:
Preferred stocks	$	13,583,942	$	-	$	(3,589,313	)	$	9,994,629
Common stocks, mutual funds, and exchange traded funds		4,502,758		158,635		(821,632	)		3,839,761
Total	$	18,086,700	$	158,635	$	(4,410,945	)	$	13,834,390

Other Investments

The cost and estimated fair value of, and gross gains on, the Company’s other investments as of March 31, ~~2022~~2023 and December 31, ~~2021~~2022 are as follows:

	March 31, 2022						December 31, 2021						March 31, 2023						December 31, 2022
			Gross		Estimated				Gross		Estimated				Gross		Estimated				Gross		Estimated
Category	Cost		Gains		Fair Value		Cost		Gains		Fair Value		Cost		Gains		Fair Value		Cost		Gains		Fair Value

Other Investments:
Hedge fund	$	3,999,381	$	2,626,502	$	6,625,883	$	3,999,381	$	3,562,034	$	7,561,415	$	1,987,040	$	1,148,409	$	3,135,449	$	1,987,040	$	784,612	$	2,771,652

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Held-to-Maturity Securities

The cost or amortized cost and estimated fair value of, and unrealized gross gains and losses on, investments in held-to-maturity fixed-maturity securities as of March 31, ~~2022~~2023 and December 31, ~~2021~~2022 are summarized as follows:

	March 31, 2022														March 31, 2023
												Net															Net
	Cost or		Gross		Gross Unrealized Losses					Estimated		Unrealized			Cost or		Gross		Gross Unrealized Losses						Estimated		Unrealized
	Amortized		Unrealized		Less than 12			More than 12		Fair		Gains/			Amortized		Unrealized		Less than 12			More than 12			Fair		Gains/
Category	Cost		Gains		Months			Months		Value		(Losses)			Cost		Gains		Months			Months			Value		(Losses)

Held-to-Maturity Securities:
U.S. Treasury securities	$	729,654	$	202,788	$	(1,177	)	$	-	$	931,265	$	201,611		$	1,228,634	$	47,886	$	(24,108	)	$	-		$	1,252,412	$	23,778

Political subdivisions of States,
Territories and Possessions		498,249		8,421		-			-		506,670		8,421
Political subdivisions of States, Territories and Possessions																498,769		1,661		-			-			500,430		1,661

Exchange traded debt		304,111		-		(21,611	)				282,500		(21,611	)		304,111		-		(56,461	)		-			247,650		(56,461	)

Corporate and other bonds
Industrial and miscellaneous		6,233,124		56,601		(380,860	)		-		5,908,865		(324,259	)
Corporate and other bonds Industrial and miscellaneous																5,733,582		40,048		(57,910	)		(890,603	)		4,825,117		(908,465	)
Total	$	7,765,138	$	267,810	$	(403,648	)	$	-	$	7,629,300	$	(135,838	)	$	7,765,096	$	89,595	$	(138,479	)	$	(890,603	)	$	6,825,609	$	(939,487	)

	December 31, 2021
												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)

Held-to-Maturity Securities:
U.S. Treasury securities	$	729,642	$	209,633	$	-		$	-	$	939,275	$	209,633

Political subdivisions of States,
Territories and Possessions		998,239		22,856		-			-		1,021,095		22,856

Exchange traded debt		304,111		85		(13,921	)				290,275		(13,836	)

Corporate and other bonds
Industrial and miscellaneous		6,234,342		280,951		(12,779	)		-		6,502,514		268,172
Total	$	8,266,334	$	513,525	$	(26,700	)	$	-	$	8,753,159	$	486,825

	December 31, 2022
													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)

Held-to-Maturity Securities:
U.S. Treasury securities	$	1,228,560	$	28,400	$	(34,077	)	$	-		$	1,222,883	$	(5,677	)

Political subdivisions of States, Territories and Possessions		498,638		2,092		-			-			500,730		2,092

Exchange traded debt		304,111		-		(29,111	)		-			275,000		(29,111	)

Corporate and other bonds Industrial and miscellaneous		5,734,831		36,968		(809,746	)		(360,278	)		4,601,775		(1,133,056	)
Total	$	7,766,140	$	67,460	$	(872,934	)	$	(360,278	)	$	6,600,388	$	(1,165,752	)

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

~~Table Of Contents~~

A summary of the amortized cost and estimated fair value of the Company’s investments in held-to-maturity securities by contractual maturity as of March 31, ~~2022~~2023 and December 31, ~~2021~~2022 is shown below:

	March 31, 2022				December 31, 2021				March 31, 2023				December 31, 2022
	Amortized		Estimated		Amortized		Estimated		Amortized		Estimated		Amortized		Estimated
Remaining Time to Maturity	Cost		Fair Value		Cost		Fair Value		Cost		Fair Value		Cost		Fair Value

Less than one year	$	494,595	$	501,795	$	994,712	$	1,008,180	$	708,744	$	747,483	$	708,535	$	743,575
One to five years		1,206,159		1,262,780		1,205,829		1,290,465		1,120,700		1,098,253		1,120,507		1,088,522
Five to ten years		1,516,810		1,494,773		1,513,942		1,648,808		1,405,680		1,215,945		1,402,704		1,200,720
More than 10 years		4,547,574		4,369,952		4,551,851		4,805,706		4,529,972		3,763,928		4,534,394		3,567,571
Total	$	7,765,138	$	7,629,300	$	8,266,334	$	8,753,159	$	7,765,096	$	6,825,609	$	7,766,140	$	6,600,388

The actual maturities may differ from contractual maturities because certain borrowers have the right to call or prepay obligations with or without penalties.

Table of Contents

Investment Income

Major categories of the Company’s net investment income are summarized as follows:

	Three months ended				Three months ended
	March 31,				March 31,
	2022		2021		2023		2022

Income:
Fixed-maturity securities	$	1,140,189	$	1,491,127	$	1,417,709	$	1,140,189
Equity securities		345,168		357,311		176,877		345,168
Cash and cash equivalents		183		924		32,858		183
Total		1,485,540		1,849,362		1,627,444		1,485,540
Expenses:
Investment expenses		126,440		66,166		85,952		126,440
Net investment income	$	1,359,100	$	1,783,196	$	1,541,492	$	1,359,100

Proceeds from the redemption of fixed-maturity securities held-to-maturity were ~~$500,000~~$-0- and ~~$-0-~~$500,000 for the three months ended March 31, ~~2022~~2023 and ~~2021,~~2022, respectively.

Proceeds from the sale or maturity of fixed-maturity securities available-for-sale were ~~$10,181,658~~$13,554,928 and ~~$11,548,405~~$10,181,658 for the three months ended March 31, ~~2022~~2023 and ~~2021,~~2022, respectively.

Proceeds from the sale of equity securities were ~~$4,994,884~~$75,554 and ~~$6,433,262~~$4,994,884 for the three months ended March 31, ~~2022~~2023 and ~~2021,~~2022, respectively.

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The Company’s net gains (losses) ~~gains~~ on investments are summarized as follows:

	Three months ended						Three months ended
	March 31,						March 31,
	2022			2021			2023			2022
Realized Gains (Losses)

Fixed-maturity securities:
Gross realized gains	$	85,100		$	410,311		$	418		$	85,100
Gross realized losses		(126,424	)		(15,986	)		(3,057	)		(126,424	)
		(41,324	)		394,325			(2,639	)		(41,324	)

Equity securities:
Gross realized gains		448,306			933,122			-			448,306
Gross realized losses		(329,221	)		(200,213	)		-			(329,221	)
		119,085			732,909			-			119,085

Net realized gains		77,761			1,127,234
Other Investments:
Gross realized gains								-			-
Gross realized losses								-			-
								-			-
Unrealized (Losses) Gains
Net realized (losses) gains								(2,639	)		77,761

Unrealized Gains (Losses)

Equity Securities:
Gross gains		-			1,003,209			863,713			-
Gross losses		(3,560,634	)		-			-			(3,560,634	)
		(3,560,634	)		1,003,209			863,713			(3,560,634	)

Other Investments:
Gross gains		-			829,964			363,797			-
Gross losses		(915,532	)		-			-			(915,532	)
		(915,532	)		829,964			363,797			(915,532	)

Net unrealized (losses) gains		(4,476,166	)		1,833,173

Net (losses) gains on investments	$	(4,398,405	)	$	2,960,407
Net unrealized gains (losses)								1,227,510			(4,476,166	)
Net gains (losses) on investments							$	1,224,871		$	(4,398,405	)

~~Impairment Review~~Allowance for Credit Loss

~~Impairment of investment~~For available-for-sale fixed maturity securities, ~~results in~~ a ~~charge to operations when a market decline below cost is deemed to be other-than-temporary. The Company regularly reviews its fixed-maturity securities to evaluate~~credit loss exists if the ~~necessity of recording impairment losses for other-than-temporary declines in the estimated fair~~present value of investments. In evaluating potential impairment, GAAP specifies (i) if the Company does not have the intent to sell a debt security prior to recovery and (ii) it is more likely than not that it will not have to sell the debt security prior to recovery, the security would not be considered other-than-temporarily impaired unless there is a credit loss. When the Company does not intend to sell the security and it is more likely than not that the Company will not have to sell the security before recovery of its cost basis, it will recognize the credit component of an other-than-temporary impairment (“OTTI”) of a debt security in earnings and the remaining portion in comprehensive loss. The credit loss component recognized in earnings is identified as the amount of principal cash flows ~~not~~ expected to be ~~received over~~collected is less than the ~~remaining term~~amortized cost basis. The allowance for credit loss related to available-for-sale fixed maturity securities is the difference between present value of cash flows expected to be collected and the ~~security based on cash flow projections. For held-to-maturity fixed-maturity securities,~~amortized cost basis, limited by the amount ~~of OTTI recorded in comprehensive~~that the fair value is less than the amortized cost basis. The Company considers all available evidence when determining whether an investment requires a credit loss ~~for the noncredit portion of a previous OTTI is amortized prospectively over the remaining life of the security based on timing of future estimated cash flows of the security.~~

~~OTTI losses are recorded~~write-down or allowance to be recorded. Changes in the allowance are presented as a component of net gains (losses) on investments on the accompanying condensed consolidated statements of operations and comprehensive loss as net realized losses on investments and result in a permanent reduction of the cost basis of the underlying investment. The determination of OTTI is a subjective process and different judgments and assumptions could affect the timing of loss realization. income (loss).

At March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, there were ~~100~~152 and 48155 fixed-maturity securities, respectively, that accounted for the gross unrealized losses. The Company determined that none of the unrealized losses were deemed to be ~~OTTI~~credit losses for its portfolio of investments for the three months ended March 31, ~~2022~~2023 and ~~2021.~~2022. Significant factors influencing the Company’s determination that unrealized losses were temporary included credit quality considerations, the magnitude of the unrealized losses in relation to each security’s cost, the nature of the investment and interest rate environment factors, and management’s intent and ability to hold the investment for a period of time sufficient to allow for an anticipated recovery of estimated fair value to the Company’s cost basis.

1516

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The Company held available-for-sale securities with unrealized losses representing declines that were considered temporary at March 31, ~~2022~~2023 as follows:

	March 31, 2022																			March 31, 2023
	Less than 12 months							12 months or more							Total					Less than 12 months							12 months or more							Total
	Estimated					No. of		Estimated					No. of		Estimated					Estimated					No. of		Estimated					No. of		Estimated
	Fair		Unrealized			Positions		Fair		Unrealized			Positions		Fair		Unrealized			Fair		Unrealized			Positions		Fair		Unrealized			Positions		Fair		Unrealized
Category	Value		Losses			Held		Value		Losses			Held		Value		Losses			Value		Losses			Held		Value		Losses			Held		Value		Losses

Fixed-Maturity Securities:
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	-	$	-			-	$	-		-			-	$	-	$	-		$	5,542,768	$	(674	)		1	$	-		-			-	$	5,542,768	$	(674	)

Political subdivisions of States, Territories and Possessions		14,959,121		(1,614,463	)		12		-		-			-		14,959,121		(1,614,463	)		549,276		(5,153	)		2		13,205,628		(3,338,913	)		12		13,754,904		(3,344,066	)

Corporate and other bonds industrial and miscellaneous		51,973,548		(3,143,378	)		55		-		-			-		51,973,548		(3,143,378	)		24,592,198		(777,717	)		33		48,415,831		(6,479,111	)		57		73,008,029		(7,256,828	)

Residential mortgage and other asset backed securities		40,310,519		(3,119,931	)		31		2,733,402		(306,849	)		2		43,043,921		(3,426,780	)		8,454,568		(496,219	)		15		36,667,595		(6,739,006	)		32		45,122,163		(7,235,225	)

Total fixed-maturity securities	$	107,243,188	$	(7,877,772	)		98	$	2,733,402	$	(306,849	)		2	$	109,976,590	$	(8,184,621	)	$	39,138,810	$	(1,279,763	)		51	$	98,289,054	$	(16,557,030	)		101	$	137,427,864	$	(17,836,793	)

1617

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The Company held available-for-sale securities with unrealized losses representing declines that were considered temporary at December 31, ~~2021~~2022 as follows:

	December 31, 2021																			December 31, 2022
	Less than 12 months							12 months or more							Total					Less than 12 months							12 months or more							Total
	Estimated					No. of		Estimated					No. of		Estimated					Estimated					No. of		Estimated					No. of		Estimated
	Fair		Unrealized			Positions		Fair		Unrealized			Positions		Fair		Unrealized			Fair		Unrealized			Positions		Fair		Unrealized			Positions		Fair		Unrealized
Category	Value		Losses			Held		Value		Losses			Held		Value		Losses			Value		Losses			Held		Value		Losses			Held		Value		Losses

Fixed-Maturity Securities:

U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	-	$	-			-	$	-		-			-	$	-	$	-		$	18,918,196	$	(6,928	)		3	$	-		-			-	$	18,918,196	$	(6,928	)

Political subdivisions of States, Territories and Possessions		6,768,123		(197,984	)		5		-		-			-		6,768,123		(197,984	)		7,970,633		(2,195,273	)		9		5,170,753		(1,771,494	)		5		13,141,386		(3,966,767	)

Corporate and other bonds industrial and miscellaneous		17,593,707		(126,926	)		15		-		-			-		17,593,707		(126,926	)		56,910,104		(5,796,994	)		75		15,172,381		(2,458,985	)		15		72,082,485		(8,255,979	)

Residential mortgage and other asset backed securities		45,399,451		(489,258	)		26		2,923,182		(120,344	)		2		48,322,633		(609,602	)		10,145,880		(882,664	)		22		34,753,178		(7,150,803	)		26		44,899,058		(8,033,467	)

Total fixed-maturity securities	$	69,761,281	$	(814,168	)		46	$	2,923,182	$	(120,344	)		2	$	72,684,463	$	(934,512	)	$	93,944,813	$	(8,881,859	)		109	$	55,096,312	$	(11,381,282	)		46	$	149,041,125	$	(20,263,141	)

1718

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Note 4 - Fair Value Measurements

The following table presents information about the Company’s investments that are measured at fair value on a recurring basis at March 31, ~~2022~~2023 and December 31, ~~2021~~2022 indicating the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:

	March 31, 2022								March 31, 2023
	Level 1		Level 2		Level 3		Total		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	$	-	$	-	$	-	$	-	$	22,023,463	$	-	$	-	$	22,023,463

Political subdivisions of States, Territories and Possessions		-		15,618,791		-		15,618,791		-		13,754,903		-		13,754,903

Corporate and other bonds industrial and miscellaneous		82,255,848		503,090		-		82,758,938		73,008,028		-		-		73,008,028

Residential mortgage and other asset backed securities		-		53,519,767		-		53,519,767		-		45,854,925		-		45,854,925
Total fixed maturities		82,255,848		69,641,648		-		151,897,496		95,031,491		59,609,828		-		154,641,319
Equity securities		31,765,409		-		-		31,765,409		14,622,549		-		-		14,622,549
Total investments	$	114,021,257	$	69,641,648	$	-	$	183,662,905	$	109,654,040	$	59,609,828	$	-	$	169,263,868

	December 31, 2021
	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	$	-	$	-	$	-	$	-

Political subdivisions of States, Territories and Possessions		-		17,285,514		-		17,285,514

Corporate and other bonds industrial and miscellaneous		82,500,779		510,475		-		83,011,254

Residential mortgage and other asset backed securities		-		57,783,342		-		57,783,342
Total fixed maturities		82,500,779		75,579,331		-		158,080,110
Equity securities		39,687,002		-		-		39,687,002
Total investments	$	122,187,781	$	75,579,331	$	-	$	197,767,112

	December 31, 2022
	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	$	23,869,096	$	-	$	-	$	23,869,096

Political subdivisions of States, Territories and Possessions		-		13,141,387		-		13,141,387

Corporate and other bonds industrial and miscellaneous		71,585,115		497,370		-		72,082,485

Residential mortgage and other asset backed securities		-		45,622,195		-		45,622,195
Total fixed maturities		95,454,211		59,260,952		-		154,715,163
Equity securities		13,834,390		-		-		13,834,390
Total investments	$	109,288,601	$	59,260,952	$	-	$	168,549,553

1819

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The following table sets forth the Company’s investment in a hedge fund measured at Net Asset Value (“NAV”) per share as of March 31, ~~2022~~2023 and December 31, ~~2021.~~2022. 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:

Category	March 31, 2022		December 31, 2021		March 31, 2023		December 31, 2022

Other Investments
Hedge fund	$	6,625,883	$	7,561,415	$	3,135,449	$	2,771,652

The hedge fund investment is generally redeemable with at least 45 days prior written notice. The hedge fund investment is accounted for as a limited partnership by the Company. Income is earned based upon the Company’s allocated share of the partnership’s changes in unrealized gains and losses to its partners. Such amounts have been recorded in the condensed consolidated statements of operations and comprehensive ~~loss~~income (loss) within net gains (losses) ~~gains~~ on investments.

The estimated fair value and the level of the fair value hierarchy of the Company’s long-term debt as of March 31, ~~2022~~2023 and December 31, ~~2021~~2022 not measured at fair value is as follows:

	March 31, 2022								March 31, 2023
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Debt

Senior Notes due 2022	$	0	$	28,819,199	$	0	$	28,819,199

	December 31, 2021
	Level 1		Level 2		Level 3		Total
Debt

Senior Notes due 2022	$	0	$	28,436,019	$	0	$	28,436,019
Senior Notes due 2024									$	-	$	16,361,057	$	-	$	16,361,057

	December 31, 2022
	Level 1		Level 2		Level 3		Total
Debt

Senior Notes due 2024	$	-	$	15,829,096	$	-	$	15,829,096

Note 5 - Fair Value of Financial Instruments and Real Estate

The estimated fair values of the Company’s financial instruments and real estate, including their fair value level as of March 31, ~~2022~~2023 and December 31, ~~2021~~2022 are as follows:

March 31, 2022
December 31, 2021
Carrying Value
Fair Value
Carrying Value
Fair Value
Fixed-maturity securities-held-to maturity
$ 7,765,138 $ 7,629,300 $ 8,266,334 $ 8,753,159
Cash and cash equivalents
$ 5,833,886 $ 5,833,886 $ 24,290,598 $ 24,290,598
Premiums receivable, net
$ 11,029,208 $ 11,029,208 $ 12,318,336 $ 12,318,336
Reinsurance receivables, net
$ 49,341,690 $ 49,341,690 $ 40,292,438 $ 40,292,438
Real estate, net of accumulated depreciation
$ 2,126,029 $ 3,025,000 $ 2,144,464 $ 3,025,000
Reinsurance balances payable
$ 5,091,070 $ 5,091,070 $ 12,961,568 $ 12,961,568

	March 31, 2023				December 31, 2022
	Carrying Value		Fair Value		Carrying Value		Fair Value

Fixed-maturity securities-held-to maturity, Level 1	$	7,765,096	$	6,825,609	$	7,766,140	$	6,600,388
Cash and cash equivalents, Level 1	$	10,500,753	$	10,500,753	$	11,958,228	$	11,958,228
Premiums receivable, net, Level 1	$	13,339,037	$	13,339,037	$	13,880,504	$	13,880,504
Reinsurance receivables, net, Level 3	$	78,018,606	$	78,018,606	$	66,465,061	$	66,465,061
Real estate, net of accumulated depreciation, Level 3	$	2,052,283	$	2,800,000	$	2,050,644	$	2,800,000
Reinsurance balances payable, Level 3	$	20,110,212	$	20,110,212	$	13,061,966	$	13,061,966

1920

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Note 6 – Property and Casualty Insurance Activity

Premiums Earned

Premiums written, ceded and earned are as follows:

	Direct		Assumed		Ceded			Net		Direct		Assumed		Ceded			Net

Three months ended March 31, 2023
Premiums written										$	47,597,446	$	-	$	(23,628,699	)	$	23,968,747
Change in unearned premiums											2,332,884		-		1,953,322			4,286,206
Premiums earned										$	49,930,330	$	-	$	(21,675,377	)	$	28,254,953

Three months ended March 31, 2022
Premiums written	$	42,983,897	$	0	$	(18,065,709	)	$	24,918,188	$	42,983,897	$	-	$	(18,065,709	)	$	24,918,188
Change in unearned premiums		2,392,727		0		(637,535	)		1,755,192		2,392,727		-		(637,535	)		1,755,192
Premiums earned	$	45,376,624	$	0	$	(18,703,244	)	$	26,673,380	$	45,376,624	$	-	$	(18,703,244	)	$	26,673,380

Three months ended March 31, 2021
Premiums written	$	38,129,117	$	0	$	(7,329,507	)	$	30,799,610
Change in unearned premiums		3,789,478		0		130		$	3,789,608
Premiums earned	$	41,918,595	$	0	$	(7,329,377	)	$	34,589,218

Premium receipts in advance of the policy effective date are recorded as advance premiums. The balance of advance premiums as of March 31, ~~2022~~2023 and December 31, ~~2021~~2022 was ~~$5,232,527~~$5,660,391 and ~~$2,693,466,~~$2,839,028, respectively.

Loss and Loss Adjustment Expense Reserves

The following table provides a reconciliation of the beginning and ending balances for unpaid losses and loss adjustment expense (“LAE”) reserves:

	Three months ended						Three months ended
	March 31,						March 31,
	2022			2021			2023			2022

Balance at beginning of period	$	94,948,745		$	82,801,228		$	118,339,513		$	94,948,745
Less reinsurance recoverables		(10,637,679	)		(20,154,251	)		(27,659,500	)		(10,637,679	)
Net balance, beginning of period		84,311,066			62,646,977			90,680,013			84,311,066

Incurred related to:
Current year		22,944,869			22,571,727			25,042,531			22,944,869
Prior years		(3,671	)		(11,055	)		(3,121	)		(3,671	)
Total incurred		22,941,198			22,560,672			25,039,410			22,941,198

Paid related to:
Current year		9,283,972			7,749,998			5,886,288			9,283,972
Prior years		14,918,035			10,059,577			16,116,681			14,918,035
Total paid		24,202,007			17,809,575			22,002,969			24,202,007

Net balance at end of period		83,050,257			67,398,074			93,716,454			83,050,257
Add reinsurance recoverables		15,866,741			17,058,985			30,405,364			15,866,741
Balance at end of period	$	98,916,998		$	84,457,059		$	124,121,818		$	98,916,998

Incurred losses and LAE are net of reinsurance recoveries under reinsurance contracts of ~~$10,404,866~~$12,256,426 and ~~$823,856~~$10,404,866 for the three months ended March 31, ~~2022~~2023 and ~~2021,~~2022, respectively.

Prior year incurred loss and LAE development is based upon estimates by line of business and accident year. Prior year loss and LAE development incurred during the three months ended March 31, 2023 and 2022 ~~and 2021~~ was ~~$3,671~~$3,121 favorable and ~~$11,055~~$3,671 favorable, respectively. Management, on a quarterly basis, performs a review of open liability claims to assess carried case and incurred but not reported (“IBNR”) reserve levels, giving consideration to both Company and industry trends.

2021

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Loss and LAE reserves

The reserving process for loss and LAE reserves provides for the Company’s best estimate at a particular point in time of the ultimate unpaid cost of all losses and LAE incurred, including settlement and administration of losses, and is based on facts and circumstances then known including losses that have occurred but that have not yet been reported. The process relies on standard actuarial reserving methodologies, judgments relative to estimates of ultimate claim severity and frequency, the length of time before losses will develop to their ultimate level (‘tail’ factors), and the likelihood of changes in the law or other external factors that are beyond the Company’s control. Several actuarial reserving methodologies are used to estimate required loss reserves. The process produces carried reserves set by management based upon the actuaries’ best estimate and is the cumulative combination of the best estimates made by line of business, accident year, and loss and LAE. The amount of loss and LAE reserves for individual reported claims (the “case reserve”) is determined by the claims department and changes over time as new information is gathered. Such information is critical to the review of appropriate IBNR reserves and includes a review of coverage applicability, comparative liability on the part of the insured, injury severity, property damage, replacement cost estimates, and any other information considered pertinent to estimating the exposure presented by the claim. The amounts of loss and LAE reserves for unreported claims and development on known claims (IBNR reserves) are determined using historical information aggregated by line of insurance as adjusted to current conditions. Since this process produces loss reserves set by management based upon the actuaries’ best estimate, there is no explicit or implicit provision for uncertainty in the carried loss reserves.

Due to the inherent uncertainty associated with the reserving process, the ultimate liability may differ, perhaps substantially, from the original estimate. Such estimates are regularly reviewed and updated and any resulting adjustments are included in the current period’s results. Reserves are closely monitored and are recomputed periodically using the most recent information on reported claims and a variety of statistical techniques. On at least a quarterly basis, the Company reviews by line of business existing reserves, new claims, changes to existing case reserves, and paid losses with respect to the current and prior periods. Several methods are used, varying by line of business and accident year, in order to select the estimated period-end loss reserves. These methods include the following:

Paid Loss Development – historical patterns of paid loss development are used to project future paid loss emergence in order to estimate required reserves.

Incurred Loss Development – historical patterns of incurred loss development, reflecting both paid losses and changes in case reserves, are used to project future incurred loss emergence in order to estimate required reserves.

Paid Bornhuetter-Ferguson (“BF”) – an estimated loss ratio for a particular accident year is determined, and is weighted against the portion of the accident year claims that have been paid, based on historical paid loss development patterns. The estimate of required reserves assumes that the remaining unpaid portion of a particular accident year will pay out at a rate consistent with the estimated loss ratio for that year. This method can be useful for situations where an unusually high or low amount of paid losses exists at the early stages of the claims development process.

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Incurred Bornhuetter-Ferguson (“BF”) - an estimated loss ratio for a particular accident year is determined, and is weighted against the portion of the accident year claims that have been reported, based on historical incurred loss development patterns. The estimate of required reserves assumes that the remaining unreported portion of a particular accident year will pay out at a rate consistent with the estimated loss ratio for that year. This method can be useful for situations where an unusually high or low amount of reported losses exists at the early stages of the claims development process.

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Incremental Claim-Based Methods – historical patterns of incremental incurred losses and paid LAE during various stages of development are reviewed and assumptions are made regarding average loss and LAE development applied to remaining claims inventory. Such methods more properly reflect changes in the speed of claims closure and the relative adequacy of case reserve levels at various stages of development. These methods may provide a more accurate estimate of IBNR for lines of business with relatively few remaining open claims but for which significant recent settlement activity has occurred.

Frequency / Severity Based Methods – historical measurements of claim frequency and average paid claim size (severity) are reviewed for more mature accident years where a majority of claims have been reported and/or closed. These historical averages are trended forward to more recent periods in order to estimate ultimate losses for newer accident years that are not yet fully developed. These methods are useful for lines of business with slow and/or volatile loss development patterns, such as liability lines where information pertaining to individual cases may not be completely known for many years. The claim frequency and severity information for older periods can then be used as reasonable measures for developing a range of estimates for more recent immature periods.

Management’s best estimate of required reserves is generally based on an average of the methods above, with appropriate weighting of methods based on the line of business and accident year being projected. In some cases, additional methods or historical data from industry sources are employed to supplement the projections derived from the methods listed above.

Three key assumptions that materially affect the estimate of loss reserves are the loss ratio estimate for the current accident year used in the BF methods, the loss development factor selections used in the loss development methods, and the loss severity assumptions used in the frequency / severity method described above. The loss ratio estimates used in the BF methods are selected after reviewing historical accident year loss ratios adjusted for rate changes, trend, and mix of business. The severity assumptions used in the frequency / severity method are determined by reviewing historical average claim severity for older more mature accident periods, trended forward to less mature accident periods.

COVID-19 has introduced additional uncertainty to recent claim trends. The Company reviews the carried reserves levels on a regular basis as additional information becomes available and makes adjustments in the periods in which such adjustments are determined to be necessary. The Company is not aware of any other claim trends that have emerged or that would cause future adverse development that have not already been contemplated in setting current carried reserves levels.

In New York State, lawsuits for negligence are subject to certain limitations and must be commenced within three years from the date of the accident or are otherwise barred. Accordingly, the Company’s exposure to unreported claims (“pure” IBNR) for accident dates of March 31, ~~2019~~2020 and prior is limited, although there remains the possibility of adverse development on reported claims (“case development” IBNR). In certain rare circumstances states have retroactively revised a statute of limitations. The Company is not aware of any such effort that would have a material impact on the Company’s results.

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The following is information about incurred and paid claims development as of March 31, ~~2022,~~2023, net of reinsurance, as well as the cumulative reported claims by accident year and total IBNR reserves as of March 31, ~~2022~~2023 included in the net incurred loss and allocated expense amounts. The historical information regarding incurred and paid claims development for the years ended December 31, ~~2013~~2014 to December 31, ~~2021~~2022 is presented as supplementary unaudited information.

All Lines of Business

(in thousands, except reported claims data)

																					As of
	Incurred Loss and Allocated Loss Adjustment Expenses, Net of Reinsurance																				March 31, 2023
																							Cumulative
																			Three				Number of
																			Months				Reported
																			Ended				Claims by
Accident	For the Years Ended December 31,																		March 31,				Accident
Year	2014		2015		2016		2017		2018		2019		2020		2021		2022		2023		IBNR		Year
	(Unaudited 2014 - 2022)																		(Unaudited)

2014	$	14,193	$	14,260	$	14,218	$	14,564	$	15,023	$	16,381	$	16,428	$	16,434	$	16,486	$	16,486	$	24	2,138
2015				22,340		21,994		22,148		22,491		23,386		23,291		23,528		23,533		23,553		240	2,559
2016						26,062		24,941		24,789		27,887		27,966		27,417		27,352		27,246		183	2,881
2017								31,605		32,169		35,304		36,160		36,532		36,502		36,456		301	3,399
2018										54,455		56,351		58,441		59,404		61,237		61,231		1,247	4,231
2019												75,092		72,368		71,544		71,964		72,295		2,180	4,499
2020														63,083		62,833		63,217		63,266		2,074	5,873
2021																96,425		96,673		96,305		6,733	5,794
2022																		79,835		79,966		11,460	4,606
2023																				23,738		8,184	876
																	Total		$	500,541

All Lines of Business

(in thousands)

	Cumulative Paid Loss and Allocated Loss Adjustment Expenses, Net of Reinsurance
Accident	For the Years Ended December 31,																		Three Months Ended March 31,
Year	2014		2015		2016		2017		2018		2019		2020		2021		2022		2023
	(Unaudited 2014 - 2022)																		(Unaudited)

2014	$	5,710	$	9,429	$	10,738	$	11,770	$	13,819	$	14,901	$	15,491	$	15,770	$	16,120	$	16,127
2015				12,295		16,181		18,266		19,984		21,067		22,104		22,318		22,473		22,487
2016						15,364		19,001		21,106		23,974		25,234		25,750		26,382		26,557
2017								16,704		24,820		28,693		31,393		32,529		33,522		33,911
2018										32,383		44,516		50,553		52,025		54,424		54,906
2019												40,933		54,897		58,055		60,374		60,993
2020														39,045		50,719		53,432		54,379
2021																56,282		77,756		78,247
2022																		45,856		58,175
2023																				5,301
																	Total		$	411,083

Net liability for unpaid loss and allocated loss adjustment expenses for the accident years presented																			$	89,459
All outstanding liabilities before 2014, net of reinsurance																				273
Liabilities for loss and allocated loss adjustment expenses, net of reinsurance																			$	89,731

(Components may not sum to totals due to rounding)

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All Lines of Business
(in thousands, except reported claims data)

Incurred Loss and Allocated Loss Adjustment Expenses, Net of Reinsurance
As of
March 31, 2022
For the Years Ended December 31,
Three
Months
Ended
March 31,

Accident Year
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022

IBNR
Cumulative
Number of
Reported
Claims by
Accident
Year
(Unaudited 2013 - 2021)
(Unaudited)

2013
$ 10,728 $ 9,745 $ 9,424 $ 9,621 $ 10,061 $ 10,089 $ 10,607 $ 10,495 $ 10,529 $ 10,507 $ 22 1,564
2014
14,193 14,260 14,218 14,564 15,023 16,381 16,428 16,434 16,422 128 2,138
2015
22,340 21,994 22,148 22,491 23,386 23,291 23,528 23,540 277 2,558
2016
26,062 24,941 24,789 27,887 27,966 27,417 27,390 152 2,881
2017
31,605 32,169 35,304 36,160 36,532 36,534 292 3,398
2018
54,455 56,351 58,441 59,404 59,787 563 4,225
2019
75,092 72,368 71,544 71,588 5,324 4,479
2020
63,083 62,833 62,342 4,737 5,845
2021
96,425 96,647 12,276 5,713
2022
21,279 6,972 1,090
Total
$ 426,035

All Lines of Business

(in thousands)

Cumulative Paid Loss and Allocated Loss Adjustment Expenses, Net of Reinsurance

For the Years Ended December 31,

Three
Months
Ended
March 31,

Accident Year

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

(Unaudited 2013 - 2021)

(Unaudited)

2013

$ 3,405

$ 5,303

$ 6,633

$ 7,591

$ 8,407

$ 9,056

$ 9,717

$ 10,016

$ 10,392

$ 10,397

2014

5,710

9,429

10,738

11,770

13,819

14,901

15,491

15,770

15,833

2015

12,295

16,181

18,266

19,984

21,067

22,104

22,318

22,414

2016

15,364

19,001

21,106

23,974

25,234

25,750

25,804

2017

16,704

24,820

28,693

31,393

32,529

32,590

2018

32,383

44,516

50,553

52,025

52,250

2019

40,933

54,897

58,055

58,916

2020

39,045

50,719

51,670

2021

56,282

68,352

2022

8,233

Total

$ 346,460

Net liability for unpaid loss and allocated loss adjustment expenses for the accident years presented

$ 79,574

All outstanding liabilities before 2013, net of reinsurance

296

Liabilities for loss and allocated loss adjustment expenses, net of reinsurance

$ 79,870

(Components may not sum to totals due to rounding)

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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.

The reconciliation of the net incurred and paid loss development tables to the loss and LAE reserves in the consolidated balance sheet is as follows:

Reconciliation of the Disclosure of Incurred and Paid Loss Development
to the Liability for Loss and LAE Reserves
As of
(in thousands)
March 31, 2022
Liabilities for allocated loss and loss adjustment expenses, net of reinsurance
$ 79,870
Total reinsurance recoverable on unpaid losses
15,867
Unallocated loss adjustment expenses
3,180
Total gross liability for loss and LAE reserves
$ 98,917
(Components may not sum to totals due to rounding)

Reconciliation of the Disclosure of Incurred and Paid Loss Development

to the Liability for Loss and LAE Reserves

	As of
(in thousands)	March 31, 2023
Liabilities for allocated loss and loss adjustment expenses, net of reinsurance	$	89,731
Total reinsurance recoverable on unpaid losses		30,405
Unallocated loss adjustment expenses		3,985
Total gross liability for loss and LAE reserves	$	124,122

(Components may not sum to totals due to rounding)

Reinsurance

Effective December 31, 2021, the Company entered into a quota share reinsurance treaty for its personal lines business, which primarily consists of homeowners’ and dwelling fire policies, covering the period from December 31, 2021 through January 1, 2023 (“2021/2023 Treaty”). Upon the expiration of the 2021/2023 Treaty on January 1, 2023, the Company entered into a new quota share reinsurance treaty for its personal lines business, covering the period from January 1, 2023 through January 1, 2024 (“2023/2024 Treaty”).

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The Company’s excess of loss and catastrophe reinsurance treaties expired on June 30, 2022 and the Company entered into new excess of loss and catastrophe reinsurance treaties effective July 1, 2021. Effective October 18, 2021, the Company entered into a stub catastrophe reinsurance treaty covering the period from October 18, 2021 through December 31, 2021. The treaty provided reinsurance coverage for catastrophe losses of $5,000,000 in excess of $5,000,000.2022. Effective January 1, 2022, the Company entered into an underlying excess of loss reinsurance treaty (“Underlying XOL Treaty”) covering the period from January 1, 2022 through January 1, 2023. The treaty provides 50% reinsurance coverage for losses of $400,000 in excess of $600,000. Losses from named storms are excluded from the treaty. Effective January 1, 2023, the Underlying XOL Treaty was renewed covering the period from January 1, 2023 through January 1, 2024. Material terms for reinsurance treaties in effect for the treaty years shown below are as follows:

	Treaty Year												Treaty Period
	(2021/2023 Treaty)												2023/2024 Treaty						2021/2023 Treaty
	July 1,			December 31,			July 1,			December 31,			July 1,			January 1,			July 1,			December 31,
	2022			2021			2021			2020			2023			2023			2022			2021
	to			to			to			to			to			to			to			to
	January 1,			June 30,			December 30,			June 30,			January 1,			June 30,			January 1,			June 30,
Line of Business	2023			2022			2021			2021			2024			2023			2023			2022

Personal Lines:
Homeowners, dwelling fire and and canine legal liability
Quota share treaty:
Percent ceded ~~(9)~~(8)		30	%		30	%	None (5		)	None (5		)		30	%		30	%		30	%		30	%

Risk retained on intial $1,000,000 of losses (5) (7) (9)	$	700,000		$	700,000		$	1,000,000		$	1,000,000
Risk retained on intial $1,000,000 of losses (6) (7) (8)													$	700,000		$	700,000		$	700,000		$	700,000
Losses per occurrence subject to quota share reinsurance coverage	$	1,000,000		$	1,000,000		None (5		)	None (5		)	$	1,000,000		$	1,000,000		$	1,000,000		$	1,000,000
Expiration date		January 1, 2023			January 1, 2023		NA (5		)	NA (5		)		January 1, 2024			January 1, 2024			January 1, 2023			January 1, 2023
Excess of loss coverage and facultative facility coverage (1) (7)	$	400,000		$	8,400,000		$	8,000,000		$	8,000,000
Excess of loss coverage and facultative facility coverage (1) (6)														(7	)	$	8,400,000		$	8,400,000		$	8,400,000
		in excess of			in excess of			in excess of			in excess of						in excess of			in excess of			in excess of
	$	600,000		$	600,000		$	1,000,000		$	1,000,000					$	600,000		$	600,000		$	600,000
Total reinsurance coverage per occurrence (5) (7) (8)	$	500,000		$	8,500,000		$	8,000,000		$	8,000,000
Losses per occurrence subject to reinsurance coverage (5) (8)	$	1,000,000		$	9,000,000		$	9,000,000		$	9,000,000
Total reinsurance coverage per occurrence (6) (7)													$	500,000		$	8,500,000		$	8,500,000		$	8,500,000
Losses per occurrence subject to reinsurance coverage														(7	)	$	8,000,000		$	9,000,000		$	9,000,000
Expiration date		(8	)	June 30, 2022			June 30, 2022			June 30, 2021				(7	)		June 30, 2023			June 30, 2023			June 30, 2022

Catastrophe Reinsurance:
Initial loss subject to personal lines quota share treaty		10,000,000			10,000,000			None (5	)		None (5	)
Risk retained per catastrophe occurrence (5) (9) (10)	None (8		)	$	7,400,000		$	10,000,000		$	10,000,000
Catastrophe loss coverage in excess of quota share coverage (2) (5)	None (8		)	$	490,000,000		$	490,000,000		$	475,000,000
Catastrophe stub coverage for the period from October 18, 2021 through December 31, 2021 (6)	NA			NA			$	5,000,000		NA
Initial loss subject to personal lines quota share treaty (7)													$	10,000,000		$	10,000,000		$	10,000,000		$	10,000,000
Risk retained per catastrophe occurrence (8) (9)														(7	)	$	8,750,000		$	7,400,000		$	7,400,000
Catastrophe loss coverage in excess of quota share coverage (2)														(7	)	$	335,000,000		$	335,000,000		$	490,000,000
Catastrophe stub coverage for the period from October 18, 2021 through December 31, 2021 (5)														NA			NA			NA			NA
								in excess of
							$	5,000,000
Reinstatement premium protection (3) (4) (8)	None			Yes			Yes			Yes
Reinstatement premium protection (3) (4)														(7	)		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 $9,000,000 in total insured value, which covers direct losses from $3,500,000 to $9,000,000 through June 30, ~~2022.~~2023.
	(2)	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.

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	(3)	For the period ~~July 1, 2020 through June 30, 2021, reinstatement premium protection for $70,000,000 of catastrophe coverage in excess of $10,000,000.~~
	~~(4)~~	~~For the period July 1,~~December 31, 2021 through June 30, 2022, reinstatement premium protection for $70,000,000 of catastrophe coverage in excess of $10,000,000.
(4)	~~(5)~~	~~The personal lines quota share (homeowners, dwelling fire and canine legal liability) expired on December~~For the period July 1, 2022 through June 30, ~~2020; reinsurance~~2023, reinstatement premium protection for $9,800,000 of catastrophe coverage ~~from December 31, 2020 through December 30, 2021 is only for~~in excess of ~~loss and catastrophe reinsurance.~~$10,000,000.

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~~(6)~~(5)	Excludes freeze and freeze related claims.
	~~(7)~~(6)	For the period January 1, 2022 through January 1, ~~2023,~~2024, underlying excess of loss treaty provides 50% reinsurance coverage for losses of $400,000 in excess of $600,000. Reduces retention to $500,000 from $700,000 under the 2021/2023 Treaty and 2022/2023 Treaty. Excludes losses from named storms.
	~~(8)~~(7)	Excess of loss and facultative facility, and catastrophe ~~reinsurance~~ treaties will expire on June 30, ~~2022;~~2023; reinsurance coverage in effect from July 1, ~~2022~~2023 through January 1, ~~2023~~2024 is only for ~~personal~~Personal lines quota share (homeowners, dwelling fire and canine ~~legal~~ liability) and underlying excess of loss reinsurance.
	~~(9)~~(8)	For the 2021/2023 Treaty, 4% of the 30% total of losses ceded under this treaty are excluded from a named catastrophe event. For the 2023/2024 Treaty, 17.5% of the 30% total of losses ceded under this treaty are excluded from a named catastrophe event.
	~~(10)~~(9)	Plus losses in excess of catastrophe ~~coverage.~~coverage

	Treaty Year						Treaty Year
	July 1, 2021			July 1, 2020			July 1, 2022			July 1, 2021
	to			to			to			to
Line of Business	June 30, 2022			June 30, 2021			June 30, 2023			June 30, 2022

Personal Lines:
Personal Umbrella
Quota share treaty:
Percent ceded - first $1,000,000 of coverage		90	%		90	%		90	%		90	%
Percent ceded - excess of $1,000,000 dollars of coverage		95	%		95	%		95	%		95	%
Risk retained	$	300,000		$	300,000		$	300,000		$	300,000
Total reinsurance coverage per occurrence	$	4,700,000		$	4,700,000		$	4,700,000		$	4,700,000
Losses per occurrence subject to quota share reinsurance coverage	$	5,000,000		$	5,000,000		$	5,000,000		$	5,000,000
Expiration date	June 30, 2022			June 30, 2021				June 30, 2023			June 30, 2022

Commercial Lines (1):
General liability commercial policies
Quota share treaty				None
Risk retained				$	750,000
Excess of loss coverage above risk retained				$	3,750,000
				in excess of
				$	750,000
Total reinsurance coverage per occurrence				$	3,750,000
Losses per occurrence subject to reinsurance coverage				$	4,500,000

Commercial Umbrella
Quota share treaty				None
Commercial Lines (1)

________________

(1)

Coverage on all commercial lines policies expired in September 2020; reinsurance coverage is based on treaties in effect on the date of loss.

The Company’s reinsurance program has been structured to enable the Company to 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.

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Ceding Commission Revenue

The Company earned ceding commission revenue under the 2023/2024 Treaty for the three months ended March 31, 2023, and under the 2021/2023 Treaty for the three months ended March 31, 2022, based on a fixed provisional commission rate at which provisional ceding commissions ~~will be~~are earned. ~~There was no quota share treaty in effect during the three months ended March 31, 2021.~~ The Company earned ceding commission revenue under its expired quota share reinsurance agreements based on: (i) a fixed provisional commission rate at which provisional ceding commissions were earned, and (ii) a continuing sliding scale of commission rates and ultimate treaty year loss ratios on the policies reinsured under each of these agreements based upon which contingent ceding commissions are earned. The sliding scale includes minimum and maximum commission rates in relation to specified ultimate loss ratios. The commission rate and contingent ceding commissions earned ~~increases~~increase when the estimated ultimate loss ratio decreases and, conversely, the commission rate and contingent ceding commissions earned ~~decreases~~decrease when the estimated ultimate loss ratio increases.

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Ceding commission revenue consists of the following:

	Three months ended					Three months ended
	March 31,					March 31,
	2022		2021			2023			2022

Provisional ceding commissions earned	$	4,541,533	$	45,499		$	5,446,808		$	4,541,533
Contingent ceding commissions earned		139,863		(46,564	)		(1,401	)		139,863
	$	4,681,396	$	(1,065	)	$	5,445,407		$	4,681,396

Provisional ceding commissions are settled monthly. Balances due from reinsurers for contingent ceding commissions on quota share treaties are settled periodically based on the Loss Ratio of each treaty year that ends on June 30, for the expired treaties that were subject to contingent commissions. As discussed above, the Loss Ratios from prior years’ treaties are subject to change as incurred losses from those periods develop, resulting in an increase or decrease in the commission rate and contingent ceding commissions earned. As of March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, net contingent ceding commissions payable to reinsurers under all treaties was approximately ~~$2,741,000~~$ $2,669,000 and $2,881,000, respectively, which is recorded in reinsurance balances payable on the accompanying ~~condensed~~ consolidated balance sheets.

Expected Credit Losses – Uncollectible Reinsurance

The Company reviews reinsurance receivables which relate to both amounts already billed on ceded paid losses as well as ceded reserves that will be billed when losses are paid in the future. The Company has not recorded an allowance for uncollectible reinsurance as there is no perceived credit risk. The principal credit quality indicator used in the valuation of the allowance on reinsurance receivables is the financial strength rating of the reinsurer sourced from major rating agencies. Changes in the allowance are presented as a component of other underwriting expenses on the condensed consolidated statements of operations and comprehensive income (loss).

Note 7 – Debt

Federal Home Loan Bank

In July 2017, KICO became a member of, and invested in, the Federal Home Loan Bank of New York (“FHLBNY”). KICO is required to maintain an investment in capital stock of FHLBNY. Based on redemption provisions of FHLBNY, the stock has no quoted market value and is carried at cost. At its discretion, FHLBNY may declare dividends on the stock. Management reviews for impairment based on the ultimate recoverability of the cost basis in the stock. At March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, no impairment has been recognized. FHLBNY members have access to a variety of flexible, ~~low-cost~~low cost funding through FHLBNY’s credit products, enabling members to customize advances, which are to be fully collateralized. Eligible collateral to pledge to FHLBNY includes residential and commercial mortgage-backed securities, along with U.S. Treasury and agency securities. See Note 3 – Investments for eligible collateral held in a designated custodian account available for future advances. Advances are limited to 5% of KICO’s net admitted assets as of the previous quarter and are due and payable within one year of borrowing. KICO is currently able to borrow on an overnight basis. If KICO has collateral, based on KICO’s net admitted assets, the maximum allowable advance as of March 31, 2023 and December 31, 2022 was approximately ~~$13,314,000 .~~$13,059,000 and $13,192,000, respectively. Available collateral as of March 31, 2023 and December 31, 2022 was approximately $12,199,000 and $12,228,000, respectively. Advances are limited to 85% of the amount of available ~~collateral, which as of March 31, 2022 and December 31, 2021 was $-0-.~~collateral. There ~~have been~~were no borrowings under this facility ~~since~~during the ~~KICO became a member of FHLBNY.~~three months ended March 31, 2023 and 2022.

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Debt

Debt as of March 31, 2023 and December 31, 2022 consists of the following:

	March 31,		December 31,
	2023		2022

2022 Notes, net	$	17,536,524	$	17,252,868
Equipment financing		7,639,495		7,905,655
Balance at end of period	$	25,176,019	$	25,158,523

Note and Warrant Exchange

On December ~~19, 2017,~~9, 2022, the Company ~~issued $30 million~~entered into a Note and Warrant Exchange Agreement (the “Exchange Agreement”) with several holders (the “Exchanging Noteholders”) of ~~its~~the Company’s outstanding 5.50% Senior ~~Unsecured~~Notes due 2022 (the “2017 Notes”). On the date of the Exchange Agreement, the Exchanging Noteholders held 2017 Notes in the aggregate principal amount of $21,545,000 of the $30,000,000 aggregate principal amount of the 2017 Notes then outstanding. Pursuant to the Exchange Agreement, on December 15, 2022, the Exchanging Noteholders exchanged their respective 2017 Notes for the following: (i) new 12.0% Senior Notes due December 30, 2024 of the Company in the aggregate approximate principal amount of $19,950,000 (the “2022 Notes”); (ii) cash in the aggregate approximate amount of $1,595,000, together with accrued interest on the 2017 Notes; and (iii) three-year warrants for the purchase of an aggregate of 969,525 shares of Common Stock of the Company, exercisable at an exercise price of $1.00 per share (the “Warrants”). The remaining $8,455,000 principal amount of the 2017 Notes, together with accrued interest thereon, was paid on the maturity date of the 2017 Notes of December 30, 2022.

2022 ~~(the “Notes”) in an underwritten public offering.~~Notes

On December 15, 2022, the Company issued $19,950,000 of its 2022 Notes pursuant to the Exchange Agreement. Interest is payable semi-annually in arrears on June 30 and December 30 of each year, which ~~began~~will begin on June 30, ~~2018~~2023 at the rate of ~~5.50%~~12.0% per annum. ~~The net proceeds~~Warrants were issued with a fair value of ~~the issuance were $29,121,630, net of discount of $163,200~~$993,200 (see Note 8 – Stockholders’ Equity) and transaction costs ~~of $715,170,~~were $1,758,112, for an effective yield of ~~5.67%~~13.92% per annum. The balance of ~~debt~~the 2022 Notes as of March 31, ~~2022~~2023 and December 31, ~~2021~~2022 is as follows:

March 31,
December 31,
2022
2021
5.50% Senior Unsecured Notes
$ 30,000,000 $ 30,000,000
Discount
(24,331 ) (32,442 )
Issuance costs
(107,833 ) (143,767 )
Debt, net
$ 29,867,836 $ 29,823,791

	March 31,			December 31,
	2023			2022

12.0% Senior Unsecured Notes	$	19,950,000		$	19,950,000
Warrants		(898,044	)		(979,684	)
Issuance costs		(1,515,432	)		(1,717,448	)
2022 Notes, net	$	17,536,524		$	17,252,868

The Company is required to make a mandatory redemption of the 2022 Notes on December 30, 2023, in an amount such that the aggregate principal amount of the 2022 Notes to be redeemed plus accrued and unpaid interest thereon shall be equal to the amount by which the maximum Ordinary Dividend Paying Capacity of KICO (as defined below) measured as of December 15, 2023 exceeds the Company’s Holding Company Expenses (as defined below) for the calendar year ended December 31, 2023. “Ordinary Dividend Paying Capacity” means the sum, as measured on December 15, 2023, of (i) the maximum allowable amount of dividends that KICO is permitted to pay without seeking any regulatory approval in accordance with New York insurance regulations based on its statutory annual and quarterly financial statements filed with the National Association of Insurance Commissioners as of and for the thirty-six (36) month period ended September 30, 2023 plus (ii) any dividends paid by KICO to the Company during the period beginning January 1, 2023 and ending September 30, 2023. “Holding Company Expenses” means the sum of (i) cash interest expense paid or to be paid during the calendar year ended December 31, 2023 on the 2022 Notes, intercompany loans and any other indebtedness of the holding company on a stand-alone basis and (ii) other cash operating expenses, including taxes, paid or to be paid by the holding company during the calendar year ended December 31, 2023. The amount of other operating expenses paid in cash in the preceding clause (ii) shall not exceed $2.5 million. Holding Company Expenses will be determined based on the actual Holding Company Expenses for the nine months ending September 30, 2023, and an estimate of Holding Company Expenses for the three months ending December 30, 2023.

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The 2022 Notes are unsecured obligations of the Company and are not the obligations of or guaranteed by any of the Company’s subsidiaries. The 2022 Notes rank senior in right of payment to any of the Company’s existing and future indebtedness that is by its terms expressly subordinated or junior in right of payment to the 2022 Notes. The Notes rank equally in right of payment to all of the Company’s existing and future senior indebtedness, but ~~will be~~are effectively subordinated to any secured indebtedness to the extent of the value of the collateral securing such secured indebtedness. In addition, the 2022 Notes ~~will be~~are structurally subordinated to the indebtedness and other obligations of the Company’s subsidiaries.

The ~~Company may redeem~~2022 Notes are redeemable, at the ~~Notes,~~Company’s option, in whole or in part, at any time or in ~~whole or~~part from time to time, ~~in part,~~upon not less than fifteen (15) nor more than sixty (60) days’ notice, at the following redemption ~~price equal to the greater of: (i) 100%~~prices (expressed as percentages of the principal amount thereof) if redeemed during the respective period set forth below, plus, in each case, accrued and unpaid interest, if any, to the date of redemption (subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date):

Period:	Percentage

December 30, 2022 to December 29, 2023		102.00	%
December 30, 2023 to September 29, 2024		101.00	%
September 30, 2024 to December 29, 2024		100.00	%

As of the ~~Notes~~end of each calendar quarter, commencing with the calendar quarter ending December 31, 2022, the Company is subject to ~~be redeemed; and (ii)~~a leverage maintenance test (“Leverage Maintenance Test”), which requires that the ~~sum~~Total Consolidated Indebtedness (as defined below) of the ~~present values of the remaining scheduled payments of principal and interest on the Notes to~~Company not be redeemed that would be due if the Notes matured on the applicable redemption date (exclusive of interest accrued to the applicable redemption date) discounted to the redemption date on a semi-annual basis at the Treasury Rate, plus 50 basis points (“Make Whole Call”).

Due to the Make Whole Call, management intends to retire the Notes at or close to the scheduled maturity date in December 2022. Management plans to refinance the Notes with a new issue of debt of similar or longer maturity that would result in net proceeds equal to or greater than ~~the principal amount~~30% of the current issue. In connection therewith, the Company has engaged an investment banker to serve as exclusive placement agent for a proposed offering by the Company of its securities (including debt, equity and/or preferred securities)Total Consolidated Capitalization (as defined below). The engagement letter indicates that the offering would be of such size as to generate proceeds to the Company of no less than $30,000,000. The Company also plans to use dividends paid to it by KICO, its insurance subsidiary, to repay the Notes. As of March 31, 2022, the maximum distribution that KICO could pay the Company without prior regulatory approval was approximately $1,122,000. Further, the Company plans to use available invested assets and cash to repay the Notes. As of March 31, 20222023 and December 31, ~~2021, invested assets~~2022, the ratio as defined under the Leverage Maintenance Test was 29.7% and ~~cash was approximately $3,812,000 and $1,108,000,~~26.7%, respectively.

~~The Company used an~~ “Total Consolidated Indebtedness” is the aggregate ~~$28,256,335~~principal amount (or accreted value in the case of any Indebtedness issued with more than de minimis original issue discount) of all outstanding long-term of the ~~net proceeds from~~Company except for the ~~offering~~sale leaseback transaction described below under “Equipment Financing”, any refinancing or any future sale leaseback transaction. “Total Consolidated Capitalization” is the amount equal to ~~contribute capital to KICO in order to support additional growth. The remainder~~the sum of (x) Total Consolidated Indebtedness outstanding as of such date and (y) the total consolidated shareholders’ equity of the ~~net proceeds was used for general corporate purposes. A registration statement relating to~~Company, excluding accumulated other comprehensive (loss) income, as recorded on the ~~debt issued in the offering was filed with the SEC, which became effective on November 28, 2017.~~Company’s condensed consolidated balance sheet.

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Equipment Financing

On October 27, 2022, KICO entered into a sale leaseback transaction, whereby KICO sold $8,096,824 of fixed assets to a bank. Under GAAP, the sale leaseback transaction is recorded as equipment financing (“Financing”). The provisions of the Financing require KICO to pay a monthly payment of principal and interest at the rate of 5.86% per annum totaling $126,877 for a term of 60 months, which commenced on October 27, 2022. The terms of the Financing provide buyout options to KICO at the end of the 60 month term, which are as follows:

	·	At the end of the lease, KICO may purchase the fixed assets for a purchase price of $2,024,206, which is 25% of the original fixed asset cost of $8,096,824; or

	·	KICO may renew the lease for 16 months at the same rental rate, which totals $2,030,036.

A provision of the Financing requires KICO to pledge collateral for the lease obligation. As of March 31, 2023 and December 31, 2022, the amount of required collateral was approximately $8,268,000 and $8,691,000, respectively. As of March 31, 2023 and December 31, 2022, the fair value of KICO’s pledged collateral was approximately $11,475,000 and $8,691,000, respectively, in United States Treasury securities.

Future contractual payment obligations under the Financing as of March 31, 2023 are as follows:

For the Year Ending December 31,	Total
Remainder of 2023	$	822,212
2024		1,153,862
2025		1,223,293
2026		1,296,901
2027		1,119,021
		5,615,289
2027 purchase price		2,024,206
Total	$	7,639,495

Note 8 – Stockholders’ Equity

Dividends Declared and Paid

Dividends declared and paid on Common Stock were ~~$425,490~~$-0- and ~~$427,217~~$425,490 for the three months ended March 31, 2023 and 2022, ~~and 2021,~~ respectively. ~~The Company announced on May 2,~~On November 11, 2022, ~~that its~~the Company’s Board of Directors ~~approved a~~determined to suspend regular quarterly dividends. Future dividend policy will be subject to the discretion of ~~$0.04 per share payable in cash on June 15, 2022 to stockholders~~the Company’s Board of ~~record as of May 31, 2022 (see Note 13 - Subsequent Events).~~Directors.

Stock Options

Effective August 12, 2014, the Company adopted the 2014 Equity Participation Plan (the “2014 Plan”) pursuant to which a maximum of 700,000 shares of Common Stock of the Company were initially authorized to be issued pursuant to the grant of incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock and stock bonuses. Incentive stock options granted under the 2014 Plan expire no later than ten years from the date of grant (except no later than five years for a grant to a 10% stockholder). Non-statutory stock options granted under the 2014 Plan expire no later than ten years from the date of grant. The Board of Directors or the Compensation Committee determines the vesting provisions for stock awards granted under the 2014 Plan, subject to the provisions of the 2014 Plan. On August 5, 2020, the Company’s stockholders approved amendments to the 2014 Plan, including an increase in the maximum number of shares of Common Stock of the Company that are authorized to be issued pursuant to the 2014 Plan to 1,400,000. On May 10, 2023, the Company’s Board of Directors approved an amendment to the 2014 Plan, subject to shareholder approval, to increase the maximum shares of Common Stock of the Company that are authorized to be issued pursuant to the 2014 Plan to 1,900,000.

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The results of operations for the three months ended March 31, ~~2022~~2023 and ~~2021~~2022 include stock-based compensation expense for stock options totaling approximately ~~$6,000~~$-0- and ~~$14,000,~~$6,000, respectively. Stock-based compensation expense related to stock options for the three months ended March 31, 2022 ~~and 2021~~ is net of estimated forfeitures of approximately 18% ~~and 16%, respectively.~~. Such amounts have been included in the condensed consolidated statements of operations and comprehensive ~~loss~~income (loss) within other operating expenses.

No options were granted during the three months ended March 31, 2023 and 2022. The fair value of stock options at the grant date are estimated using the Black-Scholes option-pricing model. The Black-Scholes option - pricing model was developed for use in estimating the fair value of traded options, which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility. Because the Company’s stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management’s opinion, the existing models do not necessarily provide a reliable single measure of the fair value of the Company’s stock options.

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A summary of stock option activity under the Company’s 2014 Plan for the three months ended March 31, ~~2022~~2023 is as follows:

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

Outstanding at January 1, 2022		107,201	$	8.31		2.92	$	0
Outstanding at January 1, 2023										107,201	$	8.31		1.92	$	-

Granted		-	$	0		-	$	-		-	$	-		-	$	-
Exercised		-	$	0		-	$	-		-	$	-		-	$	-
Expired/Forfeited		-	$	0	$	-	$	0		-	$	-		-	$	-

Outstanding at March 31, 2022		107,201	$	8.31		2.68	$	0
Outstanding at March 31, 2023										107,201	$	8.31		1.66	$	-

Vested and Exercisable at March 31, 2022		37,500	$	8.72		2.49	$	0
Vested and Exercisable at March 31, 2023										107,201	$	8.31		1.66	$	-

The aggregate intrinsic value of options outstanding and options exercisable at March 31, ~~2022~~2023 is calculated as the difference between the exercise price of the underlying options and the market price of the Company’s Common Stock for the options that had exercise prices that were lower than the ~~$5.32~~$1.34 closing price of the Company’s Common Stock on March 31, ~~2022.~~2023. No options were exercised, forfeited or expired during the three months ended March 31, ~~2022.~~2023. The total intrinsic value of options when forfeited are determined as of the date of forfeiture. The total intrinsic value of options when expired are determined as of the date of expiration.

Participants in the 2014 Plan may exercise their outstanding vested options, in whole or in part, by having the Company reduce the number of shares otherwise issuable by a number of shares having a fair market value equal to the exercise price of the option being exercised, ~~(“Net Exercise”),~~ or by exchanging a number of shares owned for a period of greater than one year having a fair market value equal to the exercise price of the option being ~~exercised (“Share Exchange”).~~exercised.

As of March 31, ~~2022, the estimated fair value of unamortized compensation cost related to~~2023, there were no unvested ~~stock option awards was approximately $3,000. Unamortized compensation cost as of March 31, 2022 is expected to be recognized over a remaining weighted-average vesting period of 0.50 years.~~options.

As of March 31, ~~2022,~~2023, there were ~~346,666~~204,399 shares reserved for grants under the 2014 Plan.

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Restricted Stock Awards

A summary of the restricted Common Stock activity under the Company’s 2014 Plan for three months ended March 31, ~~2022~~2023 is as follows:

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

Balance at January 1, 2022		628,531		$	7.01	$	6,074,595
Balance at January 1, 2023										366,597		$	6.97	$	2,555,181

Granted		98,456		$	5.53	$	544,503			272,682		$	1.37	$	373,499
Vested		(245,604	)	$	7.14	$	(1,752,745	)		(60,951	)	$	6.51	$	(396,868	)
Forfeited		-		$	-	$	-			(600	)	$	1.52	$	(912	)

Balance at March 31, 2022		481,383		$	6.97	$	4,866,352
Balance at March 31, 2023										577,728		$	3.77	$	2,178,035

Fair value was calculated using the closing price of the Company’s Common Stock on the grant date. For the three months ended March 31, ~~2022~~2023 and ~~2021,~~2022, stock-based compensation for these grants was approximately ~~$518,000~~$217,000 and ~~$481,000,~~$518,000, respectively, which is included in other operating expenses on the accompanying condensed consolidated statements of operations and comprehensive ~~loss.~~income (loss). These amounts reflect the Company’s accounting expense and do not correspond to the actual value that will be recognized by the directors, executives and employees.

Employee Stock Purchase Plan

On June 19, 2021, the Company’s Board of Directors adopted the Kingstone Companies, Inc. Employee Stock Purchase Plan (the “ESPP”), subject to stockholder approval. Such approval was obtained on August 10, 2021. The purpose of the ESPP is to provide eligible employees of the Company with an opportunity to use payroll deductions to purchase shares of Common Stock of the Company. The maximum number of shares of Common Stock that may be purchased under the ESPP is 750,000, subject to adjustment as provided for in the ESPP. The ESPP was effective August 10, 2021 and expires on August 10, 2031. A maximum of 5,000 shares of Common Stock may be purchased by an employee during any offering period.

The ~~ESPP currently provides for an~~initial offering period under the ESPP was from November 1, 2021 through October 31, 2022 (“2021/2022 Offering”). There is currently no offering pursuant to the ESPP subsequent to October 31, 2022. For the three months ended March 31, 2022, ~~and 2021,~~ stock-based compensation under the 2021/2022 Offering was approximately $6,000, ~~and $-0-, respectively,~~ which is included in other operating expenses on the accompanying condensed consolidated statements of operations and comprehensive ~~loss.~~income (loss).

At the end of the 2021/2022 Offering period, 33,222 shares of Common Stock were issued at $1.82 per share to participating employees for a total purchase of $60,464.

Warrants

In connection with the Exchange Agreement (see Note 7 – Debt – “Note and Warrant Exchange”), as additional consideration, on December 15, 2022, the Company issued warrants to the Exchanging Noteholders to purchase 969,525 shares of Common Stock. The fair value of the warrants, using the Black-Scholes valuation formula, was $993,200, which has been capitalized as a deferred financing cost of the 2022 Notes. The fair value of the warrants is being amortized over the life of the warrants, which is 36.5 months.

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The warrants are exercisable through December 30, 2025 at an exercise price of $1.00 per share. Holders of the warrants may exercise their outstanding warrants in cash, or, in whole or in part, by having the Company reduce the number of shares otherwise issuable by a number of shares having a fair market value equal to the exercise price of the warrants being exercised.

As of March 31, 2023, all warrants for the purchase of an aggregate of 969,525 shares of Common Stock were outstanding.

No warrants were granted during the three months ended March 31, 2023 and 2022.

Note 9 – Income Taxes

The Company files a consolidated U.S. federal income tax return that includes all ~~wholly owned~~wholly-owned subsidiaries. State tax returns are filed on a consolidated or separate return basis depending on applicable laws. The Company records adjustments related to prior years’ taxes during the period when they are identified, generally when the tax returns are filed. The effect of these adjustments on the current and prior periods (during which the differences originated) is evaluated based upon quantitative and qualitative factors and are considered in relation to the consolidated financial statements taken as a whole for the respective periods.

Deferred tax assets and liabilities are determined using the enacted tax rates applicable to the period the temporary differences are expected to be recovered. Accordingly, the current period income tax provision can be affected by the enactment of new tax rates. The net deferred income taxes on the balance sheets reflect temporary differences between the carrying amounts of the assets and liabilities for financial reporting purposes and income tax purposes, tax effected at various rates depending on whether the temporary differences are subject to federal taxes, state taxes, or both.

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Significant components of the Company’s deferred tax assets and liabilities are as follows:

	March 31,		December 31,
	2022		2021		March 31,		December 31,
					2023		2022
Deferred tax asset:
Net operating loss carryovers (1)	$	3,301,658	$	1,112,318	$	5,284,865	$	3,828,947
Claims reserve discount		1,169,042		1,186,789		1,280,017		1,238,544
Unearned premium		3,279,286		3,246,364		3,513,318		3,574,840
Deferred ceding commission revenue		1,990,698		2,047,187		2,255,280		2,230,109
Net unrealized losses on securities		509,869		0		4,006,763		4,920,837
Other		1,066,609		1,220,898		478,495		503,692
Total deferred tax assets		11,317,162		8,813,556		16,818,738		16,296,969

Deferred tax liability:
Investment in KICO (2)		759,543		759,543		759,543		759,543
Deferred acquisition costs		4,547,882		4,670,187		4,765,329		5,002,085
Intangibles		105,000		105,000		105,000		105,000
Depreciation and amortization		1,537,104		1,046,817		127,448		99,183
Net unrealized gains on securities		0		2,039,756
Total deferred tax liabilities		6,949,529		8,621,303		5,757,320		5,965,811

Net deferred income tax asset	$	4,367,633	$	192,253	$	11,061,418	$	10,331,158


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~~(1)~~	~~The deferred tax assets from net operating loss carryovers (“NOL”) are as follows:~~ Table of Contents

March 31,
December 31,
Type of NOL
2022
2021
Expiration
Federal only, NOL from 2022 and 2021
$ 3,301,658 $ 1,112,318
NOL carried back
0 0
Federal only, NOL from 2022 and 2021
3,301,658 1,112,318
None
State only (A)
2,127,859 2,099,239
December 2027 - December 2042
Valuation allowance
(2,127,859 ) (2,099,239 )
State only, net of valuation allowance
0 0
Total deferred tax asset from net operating loss carryovers
$ 3,301,658 $ 1,112,318

(1) The deferred tax assets from net operating loss carryovers (“NOL”) are as follows:

	March 31,			December 31,
Type of NOL	2023			2022			Expiration

Federal only, NOL from 2021 - 2023	$	5,284,865		$	3,828,947		None

State only (A)		2,375,669			2,276,595		December 2027 - December 2043
Valuation allowance		(2,375,669	)		(2,276,595	)
State only, net of valuation allowance		-			-

Total deferred tax asset from net operating loss carryovers	$	5,284,865		$	3,828,947

(A) Kingstone generates operating losses for state purposes and has prior year NOLs available. The state NOL as of March 31, ~~2022~~2023 and December 31, ~~2021~~2022 was approximately ~~$32,736,000~~$36,549,000 and ~~$32,296,000,~~$35,025,000, respectively. KICO, the Company’s insurance underwriting subsidiary, is not subject to state income taxes. KICO’s state tax obligations are paid through a gross premiums tax, which is included in the condensed consolidated statements of operations and comprehensive ~~loss~~income (loss) within other underwriting expenses. Kingstone has recorded a valuation allowance due to the uncertainty of generating enough state taxable income to utilize 100% of the available state NOLs over their remaining lives, which expire between 2027 and ~~2042.~~2043.

(2) Deferred tax liability – Investment in KICO

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On July 1, 2009, the Company completed the acquisition of 100% of the issued and outstanding common stock of KICO (formerly known as Commercial Mutual Insurance Company (“CMIC”)) pursuant to the conversion of CMIC from an advance premium cooperative to a stock property and casualty insurance company. Pursuant to the plan of conversion, the Company acquired a 100% equity interest in KICO, in consideration for the exchange of $3,750,000 principal amount of surplus notes of CMIC. In addition, the Company forgave all accrued and unpaid interest on the surplus notes as of the date of conversion. As of the date of acquisition, unpaid accrued interest on the surplus notes along with the accretion of the discount on the original purchase of the surplus notes totaled $2,921,319 (together “Untaxed Interest”). As of the date of acquisition, the deferred tax liability on the Untaxed Interest was $1,169,000. A temporary difference with an indefinite life exists when the parent has a lower carrying value of its subsidiary for income tax purposes. The deferred tax liability was reduced to $759,543 upon the reduction of federal income tax rates as of December 31, 2017. The Company is required to maintain its deferred tax liability of $759,543 related to this temporary difference until the stock of KICO is sold, or the assets of KICO are sold or KICO and the parent are merged.

In assessing the valuation of deferred tax assets, the Company considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. No valuation allowance against deferred tax assets has been established, except for NOL limitations, as the Company believes it is more likely than not the deferred tax assets will be realized based on the historical taxable income of KICO, or by offset to deferred tax liabilities.

The Company had no material unrecognized tax benefit and no adjustments to liabilities or operations were required. There were no interest or penalties related to income taxes that have been accrued or recognized as of and for the three months ended March 31, ~~2022~~2023 and ~~2021.~~2022. If any had been recognized these would have been reported in income tax expense.

Generally, taxing authorities may examine the Company’s tax returns for the three years from the date of filing. The Company’s tax returns for the years ended December 31, ~~2018~~2019 through December 31, ~~2020~~2021 remain subject to examination.

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Note 10 ~~–Loss~~– Loss Per Common Share

Basic net loss per common share is computed by dividing net loss ~~available to common shareholders~~ by the weighted-average number of shares of Common Stock outstanding. Diluted loss per common share ~~reflect,~~reflects, in periods in which ~~they have~~it has a dilutive effect, the impact of common shares issuable upon exercise of stock options and warrants as well as non-vested restricted stock awards. The computation of diluted loss per common share excludes those options and warrants with an exercise price in excess of the average market price of the Company’s Common Stock during the periods presented.

The computation of diluted loss per common share excludes outstanding options, warrants and non-vested restricted stock awards in periods where the exercise of such options and warrants or vesting of such restricted stock awards would be anti-dilutive. For the three months ended March 31, ~~2022~~2023 and ~~2021,~~2022, no options, warrants or restricted stock awards were included in the computation of diluted loss per common share as they would have been anti-dilutive for the relevant periods and, as a result, the weighted average number of shares of Common Stock used in the calculation of diluted loss per common share has not been adjusted for the effect of such ~~options.~~options, warrants and non-vested restricted stock awards.

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The reconciliation of the weighted average number of shares of Common Stock used in the calculation of basic and diluted loss per common share follows:

	Three months ended				Three months ended
	March 31,				March 31,
	2022		2021		2023		2022

Weighted average number of shares outstanding		10,630,450		10,676,298		10,756,913		10,630,450

Effect of dilutive securities, common share equivalents:
Stock options		-		-		-		-
Warrants						-		-
Restricted stock awards		-		-		-		-

Weighted average number of shares outstanding, used for computing diluted loss per share		10,630,450		10,676,298		10,756,913		10,630,450

Note 11 - Commitments and Contingencies

Litigation

From time to time, the Company is involved in various legal proceedings in the ordinary course of business. For example, to the extent a claim is asserted by a third party in a lawsuit against one of the Company’s insureds covered by a particular policy, the Company may have a duty to defend the insured party against the claim. These claims may relate to bodily injury, property damage or other compensable injuries as set forth in the policy. Such proceedings are considered in estimating the liability for loss and LAE expenses.

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Office Lease

The Company enters into lease agreements for real estate that is primarily used for office space in the ordinary course of business. These leases are accounted for as operating leases, whereby lease expense is recognized on a straight-line basis over the term of the lease. ~~See Note 2 - Accounting Policies for additional information regarding the accounting for leases.~~

The Company is a party to a non-cancellable operating lease, dated March 27, 2015, for its office facility for KICO located in Valley Stream, New York expiring March 31, 2024.

On July 8, 2019, the Company entered into a lease agreement for an additional office facility for Cosi located in Valley Stream, New York under a non-cancelable operating lease. The lease had a term of seven years and two months expiring December 31, 2026. During January 2022, pursuant to a mutual agreement with the landlord at a cost of $40,000, the Cosi lease was terminated effective as of January 31, 2022.

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Additional information regarding the Company’s office operating leases is as follows:

	Threee months ended			Threee months ended			Three months ended			Three months ended
Lease cost	March 31, 2022			March 31, 2021			March 31, 2023			March 31, 2022
Operating lease	$	46,938		$	60,518
Short-term leases		0			0
Total lease cost (1) (2)	$	46,938		$	60,518
Operating lease (1) (2)							$	40,815		$	46,938

Other information on operating leases
Cash payments included in the measurement of lease liability reported in operating cash flows	$	53,003		$	64,979		$	47,483		$	53,003
Discount rate		5.50	%		5.50	%		5.50	%		5.50	%
Remaing lease term in years
Remaining lease term in years
KICO	2 years			3 years				1.00			2.00
Cosi		-		5.75 years

	(1)	~~Included~~KICO rent expense is included in the condensed consolidated statements of operations and comprehensive ~~loss~~income (loss) within other underwriting ~~expenses for KICO~~expenses.
	(2)	Cosi rent expense is included in the condensed consolidated statements of operations and comprehensive income (loss) within other operating ~~expenses for Cosi.~~expenses.

The following table presents the contractual maturities of the Company’s lease liabilities as of March 31, ~~2022:~~2023:

For the Year
Ending
December 31,
Total
Remainder of 2022
$ 142,450
2023
194,919
2024
49,145
Total undiscounted lease payments
386,514
Less: present value adjustment
40,098
Operating lease liability (1)
$ 346,416

For the Three Months Ending March 31,	Total
Remainder of 2023	$	147,436
2024		49,145
Total undiscounted lease payments		196,581
Less: present value adjustment		15,595
Operating lease liability (1)	$	180,986

(1)

The operating lease liability is recorded in accounts payable, accrued expenses and other liabilities in the accompanying condensed consolidated balance sheets.

Rent expense for the three months ended March 31, ~~2022~~2023 and ~~2021~~2022 amounted to $40,815 and $46,938, respectively, and ~~$60,518, respectively. Rent expense~~ is included in the accompanying condensed consolidated statements of operations and comprehensive ~~loss~~income (loss) within other underwriting expenses.

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Employment Agreements

Barry Goldstein, President, Chief Executive Officer and Executive Chairman of the Board

Employment Agreement effective as of January 1, 2020

On October 14, 2019, the Company and Barry B. Goldstein, the Company’s President, Chief Executive Officer and Executive Chairman of the Board, entered into a Second Amended and Restated Employment Agreement (the ~~“Amended~~“Second Amended Goldstein Employment Agreement”). The Second Amended Goldstein Employment Agreement became effective as of January 1, 2020 and ~~expires~~expired on December 31, 2022. The Second Amended Goldstein Employment Agreement ~~extends~~extended the expiration date of the employment agreement in effect for Mr. Goldstein from December 31, 2021 to December 31, 2022.

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Pursuant to the Second Amended Goldstein Employment Agreement, Mr. Goldstein iswas entitled to receive an annual base salary of $500,000 and an annual bonus equal to 6% of the Company’s consolidated income from operations before taxes, exclusive of the Company’s consolidated net investment income (loss), net unrealized gains (losses) on equity securities and net realized gains (losses) on investments, up to a maximum of 2.5 times his base salary. In addition, pursuant to the Second Amended Goldstein Employment Agreement, Mr. Goldstein iswas entitled to receive a long-term compensation (“LTC”) award of between $945,000 and $2,835,000 based on a specified minimum increase in the Company’s adjusted book value per share (as defined in the Second Amended Goldstein Employment Agreement) as of December 31, 2022 as compared to December 31, 2019 (with the maximum LTC payment being due if the average per annum increase iswas at least 14%). ~~Further, pursuant~~Pursuant to the Third Amended Goldstein Employment Agreement (discussed below), Mr. Goldstein relinquished the right to receive the LTC. Pursuant to the Second Amended Goldstein Employment Agreement, in the event that Mr. Goldstein’s employment iswas terminated by the Company without cause or he ~~resigns~~resigned for good reason (each as defined in the Second Amended Goldstein Employment Agreement), Mr. Goldstein would behave been entitled to receive his base salary and the 6% bonus ~~and the LTC payment~~ for the remainder of the term. In addition, in the event of Mr. Goldstein’s death, his estate would behave been entitled to receive his base salary ~~accrued bonus~~ and accrued ~~LTC payment~~bonus through the date of death. Further, in the event that Mr. Goldstein’s employment iswas terminated by the Company without cause or he ~~resigns~~resigned for good reason, or, in the event of the termination of Mr. Goldstein’s employment due to disability or death, Mr. Goldstein’s granted but unvested restricted stock awards ~~will vest.~~would have vested. Mr. Goldstein would behave been entitled, under certain circumstances, to a payment equal to 3.82 times his then annual salary ~~the target LTC payment of $1,890,000~~ and his accrued 6% bonus in the event of the termination of his employment within eighteen months following a change of control of the Company.

Pursuant to the Second Amended Goldstein Employment Agreement, in January 2020, Mr. Goldstein received a grant of 157,431 shares of restricted stock under the terms of the Company’s 2014 Plan determined by dividing $1,250,000 by the fair market value of the Company’s Common Stock on the date of grant. This 2020 grant vested with respect to one-third of the award on each of the first and second anniversaries of the grant date and will vest with respect to ~~one-third~~one-sixth of the award on each of December ~~31, 2022~~29, 2023 and December 30, 2024 based on the continued provision of services through such ~~date.~~dates. Also pursuant to the Second Amended Goldstein Employment Agreement, Mr. Goldstein received a grant, under the terms of the 2014 Plan, during January 2021, of 230,769 shares of restricted stock determined by dividing $1,500,000 by the fair market value of the Company’s Common Stock on the date of grant. This 2021 grant vested with respect to one-half of the award on the first anniversary of the grant date and will vest with respect to ~~one-half~~one-fourth of the award on each of December ~~31, 2022~~29, 2023 and December 30, 2024 based on the continued provision of services through such ~~date.~~dates. Further, pursuant to the Second Amended Goldstein Employment Agreement, Mr. Goldstein received in 2020, 2021, and 2022 a grant, under the terms of the 2014 Plan of a number of shares of restricted stock determined by dividing $136,500 by the fair market value of the Company’s Common Stock on the date of grant. In January 2020, Mr. Goldstein was granted 17,191 shares of restricted stock pursuant to this provision. This grant vested with respect to one-third of the award on each of the first and second anniversaries of the grant date and will vest with respect to ~~one-third~~one-sixth of the award on each of December ~~31, 2022~~29, 2023 and December 30, 2024 based on the continued provision of services through such ~~date.~~dates. In January 2021, Mr. Goldstein was granted 21,000 shares of restricted stock pursuant to this provision. This grant vested with respect to one-half of the award on the first anniversary of the grant date and will vest with respect to ~~one-half~~one-fourth of the award on each of December ~~31, 2022~~29, 2023 and December 30, 2024 based on the continued provision of services through such ~~date.~~dates. In January 2022, Mr. Goldstein was granted 27,300 shares of restricted stock pursuant to this provision. This grant will vest with respect to one-half of the award on each of December ~~31, 2022~~29, 2023 and December 30, 2024 based on the continued provision of services through such ~~date.~~dates. Pursuant to the 2014 Plan, Mr. Goldstein’s unvested restricted stock awards will vest in the event of a change in control of the Company. In addition, in the event of the termination of Mr. Goldstein’s employment with the Company for any reason, his unvested restricted stock will vest.

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Employment Agreement effective as of January 1, 2023

On June 27, 2022, the Company and Mr. Goldstein entered into a third amended and restated employment agreement which took effect as of January 1, 2023, and expires on December 31, 2024 (the “Third Amended Goldstein Employment Agreement”).

Pursuant to the Third Amended Goldstein Employment Agreement, Mr. Goldstein is entitled to receive an annual base salary of $500,000 and an annual bonus equal to 3% of the Company’s consolidated income from operations before taxes, exclusive of the Company’s consolidated net investment income (loss), net unrealized gains (losses) on equity securities and net realized gains (losses) on investments, up to a maximum of 1.25 times his base salary. Pursuant to the Third Amended Goldstein Employment Agreement, Mr. Goldstein would be entitled to receive, under certain circumstances, a payment equal to 1.5 times his then annual base salary and his accrued bonus in the event of the termination of his employment within eighteen months following a change of control of the Company.

Meryl Golden, Chief Operating Officer

Employment Agreement effective as of January 1, 2021

On September 16, 2019, the Company and Meryl Golden entered into an employment agreement (the “Golden Employment Agreement”) pursuant to which Ms. Golden serves as the Company’s Chief Operating Officer. Ms. Golden also serves as KICO’s President and Chief Operating Officer. The Golden Employment Agreement became effective as of September 25, 2019 (amended on December 24, 2020) and ~~now expires~~expired on December 31, 2022.

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Pursuant to the Golden Employment Agreement, Ms. Golden iswas entitled to receive an annual salary of $500,000. The Golden Employment Agreement also ~~provides~~provided for the grant on the effective date of a five year option for the purchase of 50,000 shares of the Company’s Common Stock pursuant to the 2014 Plan. The options granted ~~vest~~vested in four equal installments, with the first installment vesting on the grant date, and the remaining installments vesting on the first, second, and third anniversaries of the grant ~~date, subject to the terms of the stock option agreement between the Company and Ms. Golden.~~date. Pursuant to the Golden Employment Agreement, as amended, in each of January 2021 and January 2022, Ms. Golden was granted 30,000 shares of restricted Common Stock pursuant to the 2014 Plan. Each such grant will vest in three equal installments on each of the first, second and third anniversaries of the grant date. Pursuant to the 2014 Plan, Ms. Golden’s outstanding stock options and restricted stock awards will vest in the event of a change in control of the Company.

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~~COVID-19~~Employment Agreement effective as of January 1, 2023

~~The outbreak~~On June 27, 2022, the Company and Ms. Golden entered into a second amended and restated employment agreement which took effect as of January 1, 2023, and expires on December 31, 2024 (the “Second Amended Golden Employment Agreement”).

Pursuant to the Second Amended Golden Employment Agreement, Ms. Golden is entitled to receive an annual base salary of $500,000 and an annual bonus equal to 3% of the coronavirus, also known as “COVID-19”, has spread across the globe and is impacting worldwide economic activity. Conditions surrounding the coronavirus including the emergence of new strains continue to rapidly evolve and government authorities have implemented emergency measures to mitigate the spreadCompany’s consolidated income from operations before taxes, exclusive of the ~~virus. The outbreak~~Company’s consolidated net investment income (loss), net unrealized gains (losses) on equity securities and net realized gains (losses) on investments, up to a maximum of 1.25 times her base salary. In addition, pursuant to the ~~related mitigation measures have had~~Second Amended Golden Employment Agreement, Ms. Golden is entitled to receive a grant, under the terms of the 2014 Plan, during each of January 2023 and ~~will continue to have~~January 2024, under certain circumstances, of a ~~material adverse impact on global economic conditions as well as~~number of shares of restricted stock determined by dividing $136,500 by the fair market value of the Company’s Common Stock on the ~~Company’s business activities. Although the impact has been manageable thus far, the extent~~date of grant. In January 2023, Ms. Golden was granted 101,111 shares of restricted stock pursuant to ~~which COVID-19 may impact the Company’s business activities~~this provision. The 2023 grant will ~~depend on future developments, such as the ultimate geographic spread~~vest with respect to one-half of the ~~disease,~~award on the ~~duration~~first anniversary of the ~~outbreak, travel restrictions, business disruptions,~~grant date and one-half of the ~~effectiveness~~award on December 31, 2024, based on the continued provision of ~~actions taken~~services through such dates. The 2024 grant will vest on December 31, 2024, based on the continued provision of services through such date. In the event that the Company is precluded from making a grant in 2024, then instead Ms. Golden shall be entitled to receive a cash bonus of $136,500 for such year. Further, pursuant to the Second Amended Golden Employment Agreement, Ms. Golden would be entitled to receive, under certain circumstances, a payment equal to 1.5 times her then annual base salary and her accrued bonus in the ~~United States and other countries to contain, prevent and treat~~event of the ~~disease. These events are highly uncertain and, as such,~~termination of her employment within eighteen months following a change of control of the ~~Company cannot determine their financial impact at this time. No adjustments have been made to the amounts reported in these condensed consolidated financial statements as a result of this matter.~~Company.

Note 12 – Employee Benefit Plans

Employee Bonus Plan

For the three months ended March 31, ~~2022~~2023 and ~~year ended December 31, 2021~~2022 the Company did not accrue for, or pay, bonuses related to ~~the~~an employee bonus plan.

401 (k) Plan

The Company maintains a salary reduction plan under Section 401(k) of the Internal Revenue Code (the “401(k) Plan”) for its qualified employees. The Company matches 100% of each participant’s contribution up to 4% of the participant’s eligible contribution. The Company incurred approximately $85,000 and $62,000, ~~and $56,000~~respectively, of expense for the three months ended March 31, ~~2022~~2023 and ~~2021, respectively,~~2022, related to the 401(k) Plan, which is recorded in other ~~operating~~underwriting expenses on the accompanying condensed consolidated statements of operations and comprehensive ~~loss.~~income (loss).

Deferred Compensation Plan

On June 18, 2018, the Company adopted the Kingstone Companies, Inc. Deferred Compensation Plan (the “Deferred Compensation Plan”). Effective December 22, 2022, the Company terminated the Deferred Compensation Plan. The assets of the Deferred Compensation Plan ~~is offered~~will be liquidated by making payments to a select group (“Participants”), consisting of management and highly compensated employees as a method of recognizing and retaining such Participants. The Deferred Compensation Plan provides for eligible Participants ~~to elect to defer up to 75%~~in full satisfaction of their base compensation and up to 100% of bonuses and other compensation and to have such deferred amounts deemed to be invested in specified investment options. In addition to the Participant deferrals, the Company may choose to make matching contributions to some or all of the Participantsinterest in the Deferred Compensation Plan to the extent the Participant did not receive the maximum matching or non-elective contributions permissible under the Company’s 401(k) Plan due to limitations under the Internal Revenue Code or the 401(k) Plan. Participants may elect to receive payment of their account balances in a single cash payment or in annual installments for a period of up to ten years. (“Termination Payments”), which Termination Payments will be made no earlier than December 22, 2023 and will be completed no later than December 22, 2024.

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The deferred compensation liability as of March 31, ~~2022~~2023 and December 31, ~~2021~~2022 amounted to ~~$947,184~~$855,580 and ~~$907,914,~~$1,155,860, respectively, and is recorded in accounts payable, accrued expenses and other liabilities in the accompanying condensed consolidated balance sheets. ~~The Company did not make any voluntary contributions for the three months ended March 31, 2022 and 2021.~~

Note 13 – Subsequent Events

The Company has evaluated events that occurred subsequent to March 31, ~~2022~~2023 through the date these condensed consolidated financial statements were issued for matters that required disclosure or adjustment in these condensed consolidated financial statements.

~~Preliminary Non-binding Indication of Interest~~A.M. Best

On May 4, ~~2022,~~2023, KICO’s A.M. Best financial strength rating was downgraded from B (Fair) to B- (Fair) and its long-term issuer credit rating was downgraded from “bb” (Fair) to “bb-” (Fair). The outlook of the credit ratings remained at negative.

Equity Participation Plan

On May 10, 2023, the Company’s Board of Directors ~~received a preliminary non-binding indication~~approved an amendment to the 2014 Plan, subject to shareholder approval, to increase the maximum shares of ~~interest from Griffin Highline Capital LLC with regard to an acquisition of all~~Common Stock of the ~~outstanding equity of~~Company that are authorized to be issued pursuant to the ~~Company. See Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for further details.~~

~~Dividends Declared~~

~~On May 2, 2022, the Company announced that its Board of Directors approved a quarterly dividend of $0.04 per share payable in cash on June 15, 2022~~2014 Plan to ~~stockholders of record as of the close of business on May 31, 2022~~1,900,000 (see Note 8 – Stockholders’ Equity).

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

We offer property and casualty insurance products ~~to individuals~~ through our wholly owned subsidiary, Kingstone Insurance Company (“KICO”). KICO’s insureds are located primarily in downstate New York, consisting of New York City, Long Island and Westchester County, although we are ~~actively~~ writing business in New Jersey, Rhode Island, Connecticut and Massachusetts. We are licensed in the States of New York, New Jersey, Rhode Island, Connecticut, Massachusetts, Pennsylvania, Maine, and New Hampshire. For the three months ended March 31, ~~2022, 80.6%~~2023, 87.0% of KICO’s direct written premiums came from the New York policies.

In addition, ~~through~~ our subsidiary, Cosi Agency, Inc. (“Cosi”), a multi-state licensed general agency, ~~we access alternative distribution channels. Cosi~~ receives commission revenue from KICO for the policies it places with others and pays commissions to these agencies. Cosi retains the profit between the commission revenue received and the commission expense paid (“Net Cosi Revenue”). Commission expense is reduced by Net Cosi Revenue and Cosi-related operating expenses are included in other operating expenses. Cosi-related operating expenses are not included in our stand-alone insurance underwriting business and, accordingly, Cosi’s expenses are not included in the calculation of our combined ratio as described below.

We derive substantially all of our revenue from KICO, which includes revenues from earned premiums, ceding commissions from quota share reinsurance, net investment income generated from its portfolio, and net realized gains and losses on investment securities. All of KICO’s insurance policies are written for a one-year term. Earned premiums represent premiums received from insureds, which are recognized as revenue over the period of time that insurance coverage is provided (i.e., ratably over the one-year life of the policy). A significant period of time can elapse from the receipt of insurance premiums to the payment of insurance claims. During this time, KICO invests the premiums, earns investment income and generates net realized and unrealized investment gains and losses on investments. Our holding company earns investment income from its cash ~~holdings and may also generate net realized and unrealized investment gains and losses on future investments.~~holdings.

Our expenses include the insurance underwriting expenses of KICO and other operating expenses. Insurance companies incur a significant amount of their total expenses from losses incurred by policyholders, which are referred to as claims. In settling these claims, various loss adjustment expenses (“LAE”) are incurred such as insurance adjusters’ fees and legal expenses. In addition, insurance companies incur policy acquisition costs. Policy acquisition costs include commissions paid to producers, premium taxes, and other expenses related to the underwriting process, including employees’ compensation and benefits.

Other operating expenses include our corporate expenses as a holding company and operating expenses of Cosi. These corporate expenses include legal and auditing fees, executive employment costs, and other costs directly associated with being a public company. Cosi operating expenses are primarily, ~~include employment,~~ occupancy and consulting costs.

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Product Lines

Our product lines include the following:

Personal lines: Our largest line of business is personal lines, consisting of homeowners, dwelling fire, cooperative/condominium, renters, and personal umbrella policies.

Commercial liability: Through July 2019, we offered businessowners policies, which consist primarily of small business retail, service, and office risks, with limited property exposures. We also wrote artisan’s liability policies for small independent contractors with smaller sized workforces. In addition, we wrote special multi-peril policies for larger and more specialized businessowners risks, including those with limited residential exposures. Further, we offered commercial umbrella policies written above our supporting commercial lines policies.

In May 2019, due to the poor performance of this line we placed a moratorium on new commercial lines and new commercial umbrella submissions while we further reviewed this business. In July 2019, due to the continuing poor performance of these lines, we made the decision to no longer underwrite commercial lines or commercial umbrella risks. In-force policies as of July 31, 2019 for these lines were non-renewed at the end of their annual terms. As of March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, there were no commercial liability policies in-force. As of March 31, 2023 and December 31, 2022, these expired policies represent approximately ~~19.9%~~16.3% and 17.9%, respectively, of loss and LAE reserves net of reinsurance recoverables. See discussion below under “Additional Financial Information”.

Livery physical damage: We write for-hire vehicle physical damage only policies for livery and car service vehicles and taxicabs. These policies insure only the physical damage portion of insurance for such vehicles, with no liability coverage included.

Other: We write canine legal liability policies and have a small participation in mandatory state joint underwriting associations.

Key Measures

We utilize the following key measures in analyzing the results of our insurance underwriting business:

Net loss ratio: The net loss ratio is a measure of the underwriting profitability of an insurance company’s business. Expressed as a percentage, this is the ratio of net losses and LAE incurred to net premiums earned.

Net underwriting expense ratio: The net underwriting expense ratio is a measure of an insurance company’s operational efficiency in administering its business. Expressed as a percentage, this is the ratio of the sum of acquisition costs (the most significant being commissions paid to our producers) and other underwriting expenses less ceding commission revenue less other income to net premiums earned.

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Net combined ratio: The net combined ratio is a measure of an insurance company’s overall underwriting profit. This is the sum of the net loss and net underwriting expense ratios. If the net combined ratio is at or above 100 percent, an insurance company cannot be profitable without investment income, and may not be profitable if investment income is insufficient.

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Underwriting income: Underwriting income is net pre-tax income attributable to our insurance underwriting business before investment activity. It excludes net investment income, net realized gains from investments, and depreciation and amortization (net premiums earned less expenses included in combined ratio). Underwriting income is a measure of an insurance company’s overall operating profitability before items such as investment income, depreciation and amortization, interest expense and income taxes.

Critical Accounting Policies and Estimates

Our condensed consolidated financial statements include the accounts of Kingstone Companies, Inc. and all majority-owned and controlled subsidiaries. The preparation of financial statements in conformity with GAAP requires our management to make estimates and assumptions in certain circumstances that affect amounts reported in our condensed consolidated financial statements and related notes. In preparing these condensed consolidated financial statements, our management has utilized information including our past history, industry standards, and the current economic environment, and other factors, in forming its estimates and judgments of certain amounts included in the condensed consolidated financial statements, giving due consideration to materiality. It is possible that the ultimate outcome as anticipated by our management in formulating its estimates in these financial statements may not materialize. Application of the critical accounting policies involves the exercise of judgment and use of assumptions as to future uncertainties and, as a result, actual results could differ from these estimates. In addition, other companies may utilize different estimates, which may impact comparability of our results of operations to those of similar companies. See the Critical Accounting Policies and Estimates section within Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, ~~2021~~2022 for further information.

We believe that the most critical accounting policies relate to the reporting of reserves for loss and LAE, including losses that have occurred but have not been reported prior to the reporting date, amounts recoverable from third party reinsurers, deferred income taxes, ~~the impairment~~allowance for credit losses of investment securities, and the valuation of ~~stock-based compensation.~~warrants. See Note 2 to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~

~~Preliminary Non-binding Indication of Interest~~

~~On May 4,~~ 2022 ~~our Board of Directors received a preliminary non-binding indication of interest from Griffin Highline Capital LLC (“Griffin Highline”) with regard to an acquisition of all~~and Note 2 of the outstanding equity of our company. TigerRisk Capital Markets & Advisory has been engaged to advise our Board of Directors regarding strategic transactions. Our Board of Directors will carefully review the proposal to determine the course of action that it believes is in the best interest of our company and all of our stockholders. Due to the uncertainty as to the consummation of a transaction of the type sought by Griffin Highline, nothingcondensed consolidated financial statements included in this Quarterly Report ~~including~~for accounting policies regarding the ~~financial statements comprising~~adoption of ASU 2016-13 effective January 1, 2023.

Kingstone 2.0 (completed) and Kingstone 3.0 (underway)

Beginning in the fourth quarter of 2019, a ~~portion hereof, include any adjustments~~series of strategic initiatives, coined “Kingstone 2.0” were commenced to ~~reflect the possible effects~~modernize our Company. The pillars of the ~~consummation of such a transaction.~~new strategy were as follows:

	1.	Strengthen the management team by adding highly qualified professionals with deep domain experience and diverse backgrounds;

	2.	Reduce expenses and increase efficiency by embracing technology including converting to a new policy management system, retiring multiple legacy systems and starting up a new claims system, among other technology initiatives;

	3.	Develop and implement a new, more highly segmented product suite (Kingstone Select) which better matches rate to risk using advanced analytics and an abundance of data; and

	4.	Better manage the Company’s catastrophe exposure in order to reduce loss cost and the growth rate of our Probable Maximum Loss (“PML”) in order to mitigate the impact of the emerging “hard market” in catastrophe reinsurance.

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We announced the substantive completion of Kingstone 2.0 in late 2022 and embarked on a new strategy to optimize our in-force business, which we coined as “Kingstone 3.0”. The four pillars of this new strategy entail:

	1.	Aggressively reducing the book of business in non-New York states, which has had a disproportionately negative impact on underwriting results, by slowing new business, re-underwriting the book, culling the agent base, reducing commissions, or other means, subject to regulatory constraints;

	2.	Adjusting pricing to stay ahead of loss trends, including inflation, by filing the maximum annual rate change that can be supported in each state and product and ensuring all policyholders are insured to value;

	3.	Tightly managing reinsurance requirements and costs, using risk selection and other underwriting capabilities to manage the growth rate of our PML; and

	4.	Continuing expense reduction focus with a goal of reducing the net expense ratio to 33% by year-end 2024.

We believe that the actions taken will have the intended effect and will result in a return to profitability for the Company beginning in 2023.

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Consolidated Results of Operations

Three Months Ended March 31, ~~2022~~2023 Compared to Three Months Ended March 31, ~~2021~~2022

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

	Three months ended March 31,												Three months ended March 31,
($ in thousands)	2022			2021			Change			Percent			2023			2022			Change			Percent
Revenues
Direct written premiums	$	42,984		$	38,129		$	4,855			12.7	%	$	47,597		$	42,984		$	4,613			10.7	%
Assumed written premiums		-			-			-		na		%		-			-			-			na	%
		42,984			38,129			4,855			12.7	%		47,597			42,984			4,613			10.7	%
Ceded written premiums
Ceded to quota share treaties (1)		10,146			138			10,008			7,252.2	%		15,588			10,146			5,442			53.6	%
Ceded to excess of loss treaties		857			524			333			63.5	%		1,073			857			216			25.2	%
Ceded to catastrophe treaties		7,063			6,668			395			5.9	%		6,967			7,063			(96	)		(1.4	)%
Total ceded written premiums		18,066			7,330			10,736			146.5	%		23,628			18,066			5,562			30.8	%

Net written premiums		24,918			30,799			(5,881	)		(19.1	)%		23,969			24,918			(949	)		(3.8	)%

Change in unearned premiums
Direct and assumed		2,393			3,789			(1,396	)		(36.8	)%		2,333			2,393			(60	)		(2.5	)%
Ceded to quota share treaties (1)		(638	)		-			(638	)	na		%		1,953			(638	)		2,591			na	%
Change in net unearned premiums		1,755			3,789			(2,034	)		(53.7	)%		4,286			1,755			2,531			144.2	%

Premiums earned
Direct and assumed		45,378			41,918			3,460			8.3	%		49,930			45,376			4,554			10.0	%
Ceded to reinsurance treaties		(18,705	)		(7,329	)		(11,376	)		(155.2	)%		(21,675	)		(18,703	)		(2,972	)		(15.9	)%
Net premiums earned		26,673			34,589			(7,916	)		(22.9	)%		28,255			26,673			1,582			5.9	%

Ceding commission revenue (1)		4,681			(1	)		4,682		na		%		5,445			4,681			764			16.3	%
Net investment income		1,359			1,783			(424	)		(23.8	)%		1,541			1,359			182			13.4	%
Net (losses) gains on investments		(4,398	)		2,960			(7,358	)		(248.6	)%
Net gains (losses) on investments														1,225			(4,398	)		5,623			na	%
Other income		236			172			64			37.2	%		161			236			(75	)		(31.8	)%
Total revenues		28,551			39,503			(10,952	)		(27.7	)%		36,628			28,551			8,076			28.3	%
Expenses
Loss and loss adjustment expenses
Direct and assumed:
Loss and loss adjustment expenses excluding the effect of catastrophes		26,509			23,156			3,353			14.5	%		31,910			26,509			5,401			20.4	%
Losses from catastrophes (2)		6,837			229			6,608			2,885.6	%		5,386			6,837			(1,451	)		(21.2	)%
Total direct and assumed loss and loss adjustment expenses		33,346			23,385			9,961			42.6	%		37,296			33,346			3,950			11.8	%

Ceded loss and loss adjustment expenses:
Loss and loss adjustment expenses excluding the effect of catastrophes		6,587			824			5,763			699.4	%		10,614			6,587			4,027			61.1	%
Losses from catastrophes (2)		3,818			-			3,818		na		%		1,643			3,818			(2,175	)		(57.0	)%
Total ceded loss and loss adjustment expenses		10,405			824			9,581			1,162.7	%		12,257			10,405			1,852			17.8	%

Net loss and loss adjustment expenses:
Loss and loss adjustment expenses excluding the effect of catastrophes		19,922			22,332			(2,410	)		(10.8	)%		21,296			19,922			1,374			6.9	%
Losses from catastrophes (2)		3,019			229			2,790			1,218.3	%		3,743			3,019			724			24.0	%
Net loss and loss adjustment expenses		22,941			22,561			380			1.7	%		25,039			22,941			2,098			9.1	%

Commission expense		8,351			8,223			128			1.6	%		8,540			8,351			189			2.3	%
Other underwriting expenses		6,816			6,467			349			5.4	%		6,872			6,816			56			0.8	%
Other operating expenses		882			1,352			(470	)		(34.8	)%		663			882			(219	)		(24.8	)%
Depreciation and amortization		770			822			(52	)		(6.3	)%		808			770			38			4.9	%
Interest expense		457			457			-		-		%		1,010			457			553			121.0	%
Total expenses		40,217			39,882			335			0.8	%		42,931			40,217			2,715			6.7	%

Loss before taxes		(11,666	)		(379	)		(11,287	)		(2,978.1	)%		(6,304	)		(11,666	)		5,362			46.0	%
Income tax benefit		(2,468	)		(68	)		(2,400	)		(3,529.4	)%		(1,249	)		(2,468	)		1,219			49.4	%
Net loss	$	(9,198	)	$	(311	)	$	(8,887	)		(2,857.6	)%	$	(5,055	)	$	(9,198	)	$	4,142			45.0	%

(Columns in the table above may not sum to totals due to rounding)

(Columns in the table above may not sum to totals due to rounding)

	(1)	Effective December 31, 2021, we entered into a 30% personal lines quota share treaty.
	(2)	The three months ended March 31, ~~2022~~2023 and ~~2021~~2022 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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	Three months ended March 31,												Three months ended March 31,
	2022			2021			Percentage Point Change			Percent Change			2023			2022			Percentage Point Change			Percent Change

Key ratios:
Net loss ratio		86.0	%		65.2	%		20.8			31.9	%		88.6	%		86.0	%		2.6			3.0	%
Net underwriting expense ratio		38.5	%		42.0	%		(3.5	)		(8.3	)%		34.7	%		38.5	%		(3.8	)		(9.9	)%
Net combined ratio		124.5	%		107.2	%		17.3			16.1	%		123.3	%		124.5	%		(1.2	)		(1.0	)%

Direct Written Premiums

Direct written premiums during the three months ended March 31, ~~2022~~2023 (“Three Months ~~2022”~~2023”) were ~~$42,984,000~~$47,597,000 compared to ~~$38,129,000~~$42,984,000 during the three months ended March 31, ~~2021~~2022 (“Three Months ~~2021”~~2022”). The increase of ~~$4,855,000,~~$4,613,000, or ~~12.7%~~10.7%, was primarily due an increase in premiums from our personal lines business.

Direct written premiums from our personal lines business for Three Months ~~2022~~2023 were ~~$40,163,000,~~$44,171,000, an increase of ~~$4,005,000,~~$4,008,000, or ~~11.1%~~10.0%, from ~~$36,158,000~~$40,163,000 in Three Months ~~2021.~~2022. The 10.0% increase in premiums from our personal lines business was primarily due to rate increases ~~and, to~~offset by the decrease in premiums associated with a ~~lesser extent, an increase~~2.1% decrease in policies in ~~force.~~ force as of March 31, 2023 compared to March 31, 2022. The rate increases achieved along with a decrease in policies in force is in accordance with both our Kingstone 2.0 and Kingstone 3.0 strategic plans.

Direct written premiums from our livery physical damage business for Three Months ~~2022~~2023 were ~~$2,773,000,~~$3,406,000, an increase of ~~$869,000,~~$633,000, or ~~45.7%~~22.8%, from ~~$1,904,000~~$2,773,000 in Three Months ~~2021.~~2022. The increase in livery physical damage direct written premiums was due to an increasing number of policies and an increase in the ~~declining effect~~values of the ~~COVID-19 pandemic in our geographic area.~~autos insured.

Beginning in 2017, we started writing ~~homeowners~~personal lines 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 Core business were ~~$34,648,000~~$41,424,000 in Three Months ~~2022~~2023 compared to ~~$30,917,000~~$34,684,000 in Three Months ~~2021.~~2022. Direct written premiums from our Expansion business were $6,173,000 in Three Months 2023 down from $8,336,000 in Three Months 2022 ~~compared~~consistent with a key pillar of our Kingstone 3.0 strategy to ~~$7,212,000 in Three Months 2021.~~reduce our Expansion business due to profitability concerns.

Net Written Premiums and Net Premiums Earned

Effective December 31, 2021, we entered into a quota share reinsurance treaty for our personal lines business covering the period from December 31, 2021 through January 1, 2023 (“2021/2023 Treaty”). ~~There was no~~Upon the expiration of the 2021/2023 Treaty on January 1, 2023, we entered into a new quota share reinsurance treaty ~~in effect in Three Months 2021.~~for our personal lines business, covering the period from January 1, 2023 through January 1, 2024 (“2023/2024 Treaty”). Net written premiums decreased ~~$5,881,000,~~$949,000, or ~~19.1%~~3.8%, to $23,969,000 in Three Months 2023 from $24,918,000 in Three Months ~~2022 from $30,799,000 in Three Months 2021.~~2022. 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). In Three Months ~~2022,~~2023, our premiums ceded under quota share treaties increased by ~~$10,008,000~~$5,442,000 in comparison to ceded premiums in Three Months ~~2021~~2022 (see table above). The increase in Three Months 2023 was attributable to the runoff of an 8.5% portion of the 30% 2021/2023 Treaty. The remainder of the 2021/2023 Treaty was on a cutoff basis and the new 2023/2024 Treaty was placed for 30% on January 1, 2023. Our personal lines business was subject to the ~~2021/2023~~2023/2024 Treaty in Three Months ~~2022, compared to no personal lines quota share treaty~~2023, and the 2021-2023 Treaty in Three Months ~~2021.~~2022.

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Excess of loss reinsurance treaties

An increase in written premiums will increase the premiums ceded under our excess of loss treaties. In Three Months ~~2022,~~2023, our ceded excess of loss reinsurance premiums increased by ~~$333,000~~$216,000 over the comparable ceded premiums for Three Months ~~2021.~~2022. The increase was due to an increase in subject premiums and ~~additional~~the heightened cost of coverage obtained. Effective January 1, 2022, we entered into an underlying excess of loss reinsurance treaty covering the period from January 1, 2022 through January 1, 2023. The treaty provides 50% reinsurance coverage for losses of $400,000 in excess of $600,000. Losses from named storms are excluded from the treaty. Effective January 1, 2023, the Underlying XOL Treaty was renewed covering the period from January 1, 2023 through January 1, 2024.

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~~An increase in our personal lines business results in an increase in premiums ceded under our catastrophe treaties ~~provided that~~if reinsurance rates are stable or are increasing. In accordance with our Kingstone 2.0 and Kingstone 3.0 goals, we have reduced our PML, and in the Three Months ~~2022,~~2023, our premiums ceded under catastrophe treaties ~~increased~~decreased by ~~$395,000 over~~$96,000 as compared to the comparable ceded premiums in Three Months ~~2021. Effective~~2022, in spite of a large catastrophe reinsurance rate increase on our book effective July 1, 2020, and continuing through June 30, 2021, our ceded catastrophe premiums were paid based on the total insured value of our risks calculated as of August 31, 2020. Effective July 1, 2021, and continuing through June 30, 2022, our ceded catastrophe premiums will be paid based on the total insured value of our risks as of August 31, 2021.2022.

Net premiums earned

Net premiums earned ~~decreased $7,916,000,~~increased $1,582,000, or ~~22.9%~~5.9%, to $28,255,000 in Three Months 2023 from $26,673,000 in Three Months ~~2022 from $34,589,000 in Three Months 2021.~~2022. The ~~decrease~~increase was due in part to ~~less retention in Three Months 2022 as a result of~~ the ~~inception of the 2021/2023 Treaty on December 31, 2021. The decrease resulting from the 2021/2023 Treaty in Three Months 2022 was partially offset by an~~10.7% increase in direct written ~~premium.~~premiums during Three Months 2023, but also from the increased premiums written in prior periods due to rate increases and increased replacement costs. The run-off of a portion of the 2021-2023 Treaty increased the premiums ceded and reduced the growth of net premiums earned.

Ceding Commission Revenue

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

	Three months ended March 31,
($ in thousands)	2023			2022		Change			Percent

Provisional ceding commissions earned	$	5,447		$	4,542	$	905			19.9	%
Contingent ceding commissions earned		(1	)		140		(141	)		n/a	%

Total ceding commission revenue	$	5,445		$	4,681	$	764			16.3	%

(Columns in the table above may not sum to totals due to rounding)

Three months ended March 31,
($ in thousands)
2022
2021
Change
Percent
Provisional ceding commissions earned
$ 4,541 $ 45 $ 4,496 9,991.1 %
Contingent ceding commissions earned
140 (46 ) 186
n/a
%
Total ceding commission revenue
$ 4,681 $ (1 ) $ 4,682
n/a
%

Table of Contents

Ceding commission revenue was $5,445,000 in Three Months 2023 compared to $4,681,000 in Three Months ~~2022 compared to $(1,000) in Three Months 2021.~~2022. The increase of ~~$4,682,000~~$764,000 was due to an increase in ~~both~~ provisional ceding commissions earned ~~and~~offset by a decrease in contingent ceding commissions earned. See below for a discussion of provisional ceding commissions earned and contingent ceding commissions earned.

~~Table Of Contents~~

Provisional Ceding Commissions Earned

In Three Months 2023 we earned provisional ceding commissions of $5,447,000 from personal lines earned premiums ceded under the 2023/2024 Treaty, and in Three Months 2022 we earned provisional ceding commissions of $4,542,000 from personal lines earned premiums ceded under the 2021/2023 ~~Treaty which~~Treaty. The increase of $905,000 in provisional ceding commissions earned was ~~effective as of December 31, 2021. There was no personal lines quota share in effect in~~due to the increase premiums ceded under these treaties during Three Months ~~2021.~~2023 compared to Three Months 2022.

Contingent Ceding Commissions Earned

The structure of the 2023/2024 Treaty and the 2021/2023 Treaty calls for a fixed provisional ceding commission with no opportunity to earn additional contingent ceding commissions. 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 received.

Net Investment Income

Net investment income was $1,541,000 in Three Months 2023 compared to $1,359,000 in Three Months 2022, ~~compared~~an increase of $182,000, or 13.4%. The increase was due to ~~$1,783,000 in Three Months 2021, a decrease of $424,000, or 23.8%.~~higher interest rates earned on cash balances The average yield on non-cash invested assets was 3.35% as of March 31, 2023 compared to 3.39% as of March 31, ~~2022 compared to 3.52% as of March 31, 2021.~~2022.

Cash and invested assets were $190,665,000 as of March 31, 2023 compared to $203,888,000 as of March 31, ~~2022 compared to $220,726,000 as of March 31, 2021~~2022. The ~~$16,838,000~~$13,223,000 decrease in cash and invested assets was primarily attributable to ~~cash paid to reinsurers at the inception~~increased disbursements of ~~the 2021/2023 Treaty,~~loss costs in connection with higher severity and inflation’s impact on losses ~~paid in connection~~along with catastrophe losses incurred in ~~2021~~2023 and prior periods. An increase in unrealized losses on our investment ~~portfolio.~~portfolio also contributed to the reduction.

Net Gains ~~and Losses~~(Losses) on Investments

Net ~~losses~~gains on investments were ~~$4,398,000~~$1,225,000 in Three Months ~~2022~~2023 compared to net ~~gains~~(losses) of ~~$2,960,000~~$(4,398,000) in Three Months ~~2021.~~2022. Unrealized ~~losses~~gains on our equity securities and other investments in Three Months ~~2022~~2023 were ~~$4,476,000,~~$1,228,000, compared to net ~~gains~~unrealized (losses) of ~~$1,833,000~~$(4,476,000) in Three Months ~~2021.~~2022. Realized ~~gains~~(losses) on sales of investments were $(3,000) in Three Months 2023 compared to realized gains of $78,000 in Three Months ~~2022 compared to $1,127,000 in Three Months 2021.~~2022.

Other Income

Other income was $161,000 in Three Months 2023 compared to $236,000 in Three Months 2022, ~~compared to $172,000 in Three Months 2021, an increase~~a decrease of ~~$64,000,~~$75,000, or ~~37.2%~~31.8%.

Net Loss and LAE

Net loss and LAE was $25,039,000 for Three Months 2023 compared to $22,941,000 for Three Months ~~2022 compared to $22,561,000 for Three Months 2021.~~2022. The net loss ratio was 88.6% in Three Months 2023 compared to 86.0% in Three Months 2022, ~~compared to 65.2% in Three Months 2021,~~ an increase of ~~20.8~~2.6 percentage points.

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

~~During~~For Three Months ~~2022,~~2023, the net loss ratio was higher than ~~Three Months 2021 mainly due to a higher frequency of water damage property claims related to winter weather.~~

~~The impact of weather-related losses~~ for Three Months 2022 ~~both catastrophe~~mainly driven by an increased number of large losses, attendant to fire and ~~non-catastrophe, were higher than a typical year.~~ water claims.

There were ~~four catastrophe~~two winter storm events ~~this quarter, two of which were~~ classified as ~~winter events. Net~~a catastrophe for Three Months 2023, including a major one at the beginning of February. The estimated total net catastrophe losses ~~in Three Months 2022~~for the calendar quarter were ~~$3,019,000,~~$3,743,000, which contributed ~~11.3~~13.2 points to the loss ratio. ~~As a comparison,~~This compares to an 11.3-point impact from catastrophe events ~~had a loss ratio impact of only 0.7 point~~ for Three Months ~~2021 due to a very mild winter season last year.~~ 2022.

The underlying loss ratio ~~(excluding~~(loss ratio excluding the impact of ~~catastrophes~~catastrophe and prior year development) was 75.4% for Three Months 2023, an increase of 0.7 points from the 74.7% inunderlying loss ratio recorded for Three Months 2022. Unlike Three Months 2022 ~~compared to 64.6% in~~which was heavily impacted by non-catastrophe weather losses, the Three Months ~~2021,~~2023 underlying loss ratio was high due to an ~~increase~~increased number of ~~10.1 points. This was also driven by many winter-related water damage claims resulting from freezing temperature.~~large non-weather losses, primarily water.

Table of Contents

Prior year development ~~continued to be~~was stable for Three Months 2023 as compared to Three Months 2022. There was an overall favorable development of ~~$4,000,~~$3,000, which had ~~marginal~~a minimal impact on the net loss ratio.

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

~~Table Of Contents~~

Commission Expense

Commission expense was $8,540,000 in Three Months 2023 or 17.1% of direct earned premiums. Commission expense was $8,351,000 in Three Months ~~Ended~~ 2022 or 18.4% of direct earned premiums. ~~Commission expense was $8,223,000 in Three Months 2021 or 19.6% of direct earned premiums.~~ The increase of ~~$128,000~~$189,000 was primarily due to an increase in direct earned premiums ~~resulting~~of $4,554,000 to $49,930,000 but offset in ~~greater commission expenses, offset~~part by a ~~decrease~~reduction of commission rates on our on our legacy policies in ~~estimated contingent commissions due to the metrics used to calculate the year-to-date amount through March 31, 2022. Commission expense will decline~~accordance with Kingsone 3.0 as well as the ~~percentage~~lower commission rate paid on ~~new policies bound under our new product offering called “Select”, which went live during Three Months 2022, is lower than the commission rate paid in our legacy product offering.~~ Select products as compared to legacy.

Other Underwriting Expenses

Other underwriting expenses were ~~$6,816,000~~$6,872,000, or 13.8% of direct earned premiums, in Three Months ~~2022~~2023 compared to ~~$6,467,000~~$6,816,000, or 15.0% of direct earned premiums, in Three Months ~~2021.~~2022. The increase of ~~$349,000,~~$56,000, or ~~5.4%~~0.8%, was primarily due to increases in expenses related to our growth in direct earned premiums and salaries, partially offset by decreases in professional fees and policy management system fees as result of the completion of our ~~continuing initiative~~policy management system conversion, allowing us to ~~reduce expenses with the use of investments in technology.~~eliminate multiple legacy systems.

Our largest single component of other underwriting expenses is salaries and employment costs, with costs of $2,933,000 in Three Months 2023 compared to $2,549,000 in Three Months ~~2022 compared to $2,539,000 in Three Months 2021.~~2022. The ~~modest~~ increase of ~~$10,000,~~$384,000, or ~~0.4%~~15.1%, ~~compares favorably with~~is greater than the ~~12.7%~~10.7% increase in direct written premiums. In the periods following Three Months 2022, we continued to strengthen our professional team by investing in the hiring of higher-level and higher compensated managers and staff needed to manage the business consistent with our Kingstone 2.0 and Kingstone 3.0 strategies.

Table of Contents

Our net underwriting expense ratio in Three Months ~~2022~~2023 was ~~38.5%~~34.7% compared to ~~42.0%~~38.5% in Three Months ~~2021.~~2022. The following table shows the individual components of our net underwriting expense ratio for the periods indicated:

	Three months ended									Three months ended
	March 31,						Percentage			March 31,						Percentage
	2022			2021			Point Change			2023			2022			Point Change
Other underwriting expenses
Employment costs		9.6	%		7.3	%		2.3			10.4	%		9.6	%		0.8
Underwriting fees (inspections/surveys)		1.9			1.4			0.5			1.8			1.9			(0.1	)
IT expenses		4.1			3.0			1.1			3.1			4.1			(1.0	)
Profesional fees		1.9			1.3			0.6
Professional fees											1.3			1.9			(0.6	)
Other expenses		8.1			5.7			2.4			7.7			8.1			(0.4	)
Total other underwriting expenses		25.6			18.7			6.9			24.3			25.6			(1.3	)

Commission expense		31.3			23.8			7.5			30.2			31.3			(1.1	)

Ceding commission revenue
Provisional		(17.0	)		(0.1	)		(16.9	)		(19.3	)		(17.0	)		(2.3	)
Contingent		(0.5	)		0.1			(0.6	)		-			(0.5	)		0.5
Total ceding commission revenue		(17.5	)		-			(17.5	)		(19.3	)		(17.5	)		(1.8	)

Other income		(0.9	)		(0.5	)		(0.4	)		(0.6	)		(0.9	)		0.3

Net underwriting expense ratio		38.5	%		42.0	%		(3.5	)		34.7	%		38.5	%		(3.8	)

(Components may not sum to totals due to rounding)

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The overall 17.5 percentage point increase in the benefit from ceding commissions in Three Months 2022 was driven by the increase in provisional ceding commission revenue due to the inception of the 2021/2023 Treaty on December 31, 2021. The components of our net underwriting expense ratio related to other underwriting expenses and commissions increased due to less retention, given the increase of ceded premiums after the inception of the 2021/2023 Treaty.

Other Operating Expenses

Other operating expenses, related to the expenses of our holding company and Cosi, were $663,000 for Three Months 2023 compared to $882,000 for Three Months ~~2022 compared to $1,352,000 for Three Months 2021.~~2022. The following table shows a breakdown of the significant components of other operating expenses for the periods indicated:

	Three months ended										Three months ended
	March 31,										March 31,
($ in thousands)	2022		2021		Change			Percent			2023		2022		Change			Percent

Other operating expenses
Employement costs	$	6	$	443	$	(438	)		(98.8	)%	$	94	$	6	$	88			1,466.7	%
Bonuses		-		-		-		na				-		-		-			na
Equity compensation		530		495		35			7.1			217		530		(313	)		(59.1	)
Professional		49		110		(61	)		(55.5	)		92		49		43			87.8
Directors fees		82		82		-			-			69		82		(13	)		(15.9	)
Insurance		40		76		(36	)		(47.4	)		38		40		(2	)		(5.0	)
Other expenses		175		146		30			20.4			153		175		(22	)		(12.6	)
Total other operating expenses	$	882	$	1,352	$	(470	)		(34.8	)%	$	663	$	882	$	(219	)		(24.8	)%

(Components may not sum to ~~toals~~totals due to rounding)

The decrease in Three Months ~~2022~~2023 of ~~$470,000,~~$219,000, or ~~34.8%~~24.8%, as compared to Three Months ~~2021~~2022 was primarily due to a decrease in equity compensation, partially offset by an increase in employment costs. The ~~decrease~~increase in employment costs was due to ~~staff reductions~~the hiring of our new Chief Financial Officer in Three Months 2023 and fluctuations in deferred compensation liability related to changes in the underlying invested portfolio.

Depreciation and Amortization

Depreciation and amortization was $808,000 in Three Months 2023 compared to $770,000 in Three Months ~~2022 compared to $822,000 in Three Months 2021.~~2022. The ~~decrease~~increase of ~~$52,000,~~$38,000, or ~~6.3%~~4.9%, in depreciation and amortization was primarily due to ~~assets previously put~~the completion and deployment of our customized policy management software as planned for in Kingstone 2.0, now allowing us to consolidate multiple legacy systems into ~~service that are currently being utilized~~one efficient system and being fully depreciated. Due to the extended useful life of assets related to our system platforms, Management has determined that such systems, currently put into service, should be depreciated over five years reflecting their expected useful lives as compared to the previous three years.retire those older more costly and less reliable systems.

Interest Expense

Interest expense in Three Months 2023 was $1,010,000 compared to $457,000 ~~for both~~in Three Months 2022, ~~and~~an increase of $553,000 or 121.0%. In Three Months ~~2021. We~~2023, as disclosed in Note 7 to the condensed consolidated financial statements, we incurred increased interest expense in connection with the 2022 Notes, which provide for interest at the rate of 12% per annum, and the 2022 equipment financing. In Three Months 2022, we incurred interest expense in connection with the 2017 Notes, our $30.0 million issuance of long-term debt in December ~~2017.~~2017, which provided for interest at the rate of 5.5% per annum.

Income Tax ~~Expense~~Benefit

Income tax benefit in Three Months 2023 was $1,249,000, which resulted in an effective tax benefit rate of 19.8%. Income tax benefit in Three Months 2022 was $2,468,000, which resulted in an effective tax ~~benefit~~ rate of 21.2%~~. Income tax benefit in Three Months 2021 was $68,000, which resulted in an effective tax benefit rate of 18.0%~~. Loss before taxes was $6,304,000 in Three Months 2023 compared to $11,666,000 in Three Months ~~2022 compared to loss before taxes of $379,000 in Three Months 2021.~~2022. The difference in effective tax ~~benefit~~rate is due to the effect of permanent differences in Three Months ~~2022~~2023 compared to Three Months ~~2021.~~2022.

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Net Loss

Net loss was $5,055,000 in Three Months 2023 compared to $9,198,000 in Three Months ~~2022 compared to net loss of $311,000 in Three Months 2021.~~2022. The ~~increase~~decrease in net loss of ~~$8,887,000~~$4,142,000 was due to the circumstances described above.

Additional Financial Information

We operate our business as one segment, property and casualty insurance. Within this segment, we offer an array of property and casualty policies to our producers. The following table summarizes gross and net written premiums, net premiums earned, and net loss and loss adjustment expenses by major product type, which were determined based primarily on similar economic characteristics and risks of loss.

	Three Months Ended						Three Months Ended
	March 31,						March 31,
	2022			2021			2023			2022
Gross premiums written:
Personal lines(3)	$	40,163,149		$	36,158,493
Personal lines							$	44,170,938		$	40,163,149
Livery physical damage		2,773,280			1,903,992			3,405,668			2,773,280
Other(1)		47,468			67,107			20,840			47,468
Total without commercial lines		42,983,897			38,129,592
Commercial lines (in run-off effective July 2019)(2)		-			(475	)
Total gross premiums written	$	42,983,897		$	38,129,117		$	47,597,446		$	42,983,897

Net premiums written:
Personal lines(3)	$	22,110,665		$	28,829,812
Personal lines							$	20,551,687		$	22,110,665
Livery physical damage		2,773,280			1,903,992			3,405,668			2,773,280
Other(1)		34,243			66,281			11,392			34,243
Total without commercial lines		24,918,188			30,800,085
Commercial lines (in run-off effective July 2019)(2)		-			(475	)
Total net premiums written	$	24,918,188		$	30,799,610		$	23,968,747		$	24,918,188

Net premiums earned:
Personal lines(3)	$	24,160,216		$	32,765,087
Personal lines							$	25,019,085		$	24,160,216
Livery physical damage		2,474,565			1,765,276			3,211,834			2,474,565
Other(1)		38,599			59,330			24,034			38,599
Total without commercial lines		26,673,380			34,589,693
Commercial lines (in run-off effective July 2019)(2)		-			(475	)
Total net premiums earned	$	26,673,380		$	34,589,218		$	28,254,953		$	26,673,380

Net loss and loss adjustment expenses(4):
Net loss and loss adjustment expenses(3):
Personal lines	$	20,426,641		$	20,756,653		$	22,569,609		$	21,036,154
Livery physical damage		830,569			687,412			1,385,141			830,569
Other(1)		(23,400	)		30,349			151,607			(23,400	)
Unallocated loss adjustment expenses		1,578,906			1,006,281			891,090			969,393
Total without commercial lines		22,812,716			22,480,695			24,997,447			22,812,716
Commercial lines (in run-off effective July 2019)(2)		128,482			79,977			41,963			128,482
Total net loss and loss adjustment expenses	$	22,941,198		$	22,560,672		$	25,039,410		$	22,941,198

Net loss ratio(4):
Net loss ratio(3):
Personal lines		84.5	%		63.3	%		90.2	%		87.1	%
Livery physical damage		33.6	%		38.9	%		43.1	%		33.6	%
Other(1)		-60.6	%		51.2	%		630.8	%		-60.6	%
Total without commercial lines		85.4	%		64.9	%		88.5	%		85.5	%
Commercial lines (in run-off effective July 2019)(2)	na			na			na				na
Total		86.0	%		65.2	%		88.6	%		86.0	%

	(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 change in quota share ceding rate, effective December 31, 2021.~~
	~~(4)~~	~~See discussion above with regard to “Net~~ Loss and LAE”, as to catastrophe losses in the three months ended March 31, ~~2022~~2023 and ~~2021.~~2022.

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Insurance Underwriting Business on a Standalone Basis

Our insurance underwriting business reported on a standalone basis for the periods indicated is as follows:

	Three Months ended						Three Months Ended
	March 31,						March 31,
	2022			2021			2023			2022

Revenues
Net premiums earned	$	26,673,380		$	34,589,218		$	28,254,953		$	26,673,380
Ceding commission revenue		4,681,396			(1,065	)		5,445,407			4,681,396
Net investment income		1,359,100			1,783,196			1,541,492			1,359,100
Net (losses) gains on investments		(4,351,744	)		2,912,525
Net gains (losses) on investments								1,184,248			(4,351,744	)
Other income		228,507			170,309			158,826			228,507
Total revenues		28,590,639			39,454,183			36,584,926			28,590,639

Expenses
Loss and loss adjustment expenses		22,941,198			22,560,672			25,039,410			22,941,198
Commission expense		8,351,086			8,223,839			8,539,762			8,351,086
Other underwriting expenses		6,815,949			6,467,042			6,871,619			6,815,949
Depreciation and amortization		760,015			788,835			808,130			760,015
Interest expense								114,472			-
Total expenses		38,868,248			38,040,388			41,373,393			38,868,248

(Loss) income from operations		(10,277,609	)		1,413,795
Income tax (benefit) expense		(2,187,260	)		251,565
Net (loss) income	$	(8,090,349	)	$	1,162,230
Loss from operations								(4,788,467	)		(10,277,609	)
Income tax benefit								(938,223	)		(2,187,260	)
Net loss							$	(3,850,244	)	$	(8,090,349	)


Key Measures:
Net loss ratio		86.0	%		65.2	%		88.6	%		86.0	%
Net underwriting expense ratio		38.5	%		42.0	%		34.7	%		38.5	%
Net combined ratio		124.5	%		107.2	%		123.3	%		124.5	%

Reconciliation of net underwriting expense ratio:
Acquisition costs and other underwriting expenses	$	15,167,035		$	14,690,881		$	15,411,381		$	15,167,035
Less: Ceding commission revenue		(4,681,396	)		1,065			(5,445,407	)		(4,681,396	)
Less: Other income		(228,507	)		(170,309	)		(158,826	)		(228,507	)
Net underwriting expenses	$	10,257,132		$	14,521,637		$	9,807,148		$	10,257,132

Net premiums earned	$	26,673,380		$	34,589,218		$	28,254,953		$	26,673,380

Net Underwriting Expense Ratio		38.5	%		42.0	%		34.7	%		38.5	%

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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			Direct			Assumed			Ceded			Net
Three months ended March 31, 2023
Written premiums													$	47,597,446		$	-		$	(23,628,699	)	$	23,968,747
Change in unearned premiums														2,332,884			-			1,953,322			4,286,206
Earned premiums													$	49,930,330		$	-		$	(21,675,377	)	$	28,254,953

Loss and loss adjustment expenses excluding the effect of catastrophes													$	31,910,005		$	-		$	(10,613,543	)	$	21,296,462
Catastrophe loss														5,385,831			-			(1,642,883	)		3,742,948
Loss and loss adjustment expenses													$	37,295,836		$	-		$	(12,256,426	)	$	25,039,410

Loss ratio excluding the effect of catastrophes														63.9	%		0.0	%		49.0	%		75.4	%
Catastrophe loss														10.8	%		0.0	%		7.6	%		13.2	%
Loss ratio														74.7	%		0.0	%		56.5	%		88.6	%

Three months ended March 31, 2022
Written premiums	$	42,983,897		$	-		$	(18,065,709	)	$	24,918,188		$	42,983,897		$	-		$	(18,065,709	)	$	24,918,188
Change in unearned premiums		2,392,727			-			(637,535	)		1,755,192			2,392,727			-			(637,535	)		1,755,192
Earned premiums	$	45,376,624		$	-		$	(18,703,244	)	$	26,673,380		$	45,376,624		$	-		$	(18,703,244	)	$	26,673,380

Loss and loss adjustment expenses excluding the effect of catastrophes	$	26,508,664		$	-		$	(6,586,890	)	$	19,921,774		$	26,508,664		$	-		$	(6,586,890	)	$	19,921,774
Catastrophe loss		6,837,400			-			(3,817,976	)		3,019,424			6,837,400			-			(3,817,976	)		3,019,424
Loss and loss adjustment expenses	$	33,346,064		$	-		$	(10,404,866	)	$	22,941,198		$	33,346,064		$	-		$	(10,404,866	)	$	22,941,198

Loss ratio excluding the effect of catastrophes		58.4	%		0.0	%		35.2	%		74.7	%		58.4	%		0.0	%		35.2	%		74.7	%
Catastrophe loss		15.1	%		0.0	%		20.4	%		11.3	%		15.1	%		0.0	%		20.4	%		11.3	%
Loss ratio		73.5	%		0.0	%		55.6	%		86.0	%		73.5	%		0.0	%		55.6	%		86.0	%

Three months ended March 31, 2021
Written premiums	$	38,129,117		$	-		$	(7,329,507	)	$	30,799,610
Change in unearned premiums		3,789,478			-			130			3,789,608
Earned premiums	$	41,918,595		$	-		$	(7,329,377	)	$	34,589,218

Loss and loss adjustment expenses excluding the effect of catastrophes	$	23,155,733		$	-		$	(823,856	)	$	22,331,877
Catastrophe loss		228,795			-			-			228,795
Loss and loss adjustment expenses	$	23,384,528		$	-		$	(823,856	)	$	22,560,672

Loss ratio excluding the effect of catastrophes		55.2	%		0.0	%		11.2	%		64.7	%
Catastrophe loss		0.5	%		0.0	%		0.1	%		0.7	%
Loss ratio		55.8	%		0.0	%		11.2	%		65.2	%

(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						Three Months Ended
	March 31,						March 31,
	2022			2021			2023			2022

Net premiums earned	$	26,673,380		$	34,589,218		$	28,254,953		$	26,673,380
Ceding commission revenue		4,681,396			(1,065	)		5,445,407			4,681,396
Other income		228,507			170,309			158,826			228,507

Loss and loss adjustment expenses (1)		22,941,198			22,560,672			25,039,410			22,941,198

Acquisition costs and other underwriting expenses:
Commission expense		8,351,086			8,223,839			8,539,762			8,351,086
Other underwriting expenses		6,815,949			6,467,042			6,871,619			6,815,949
Total acquisition costs and other underwriting expenses		15,167,035			14,690,881			15,411,381			15,167,035

Underwriting loss	$	(6,524,950	)	$	(2,493,091	)	$	(6,591,605	)	$	(6,524,950	)

Key Measures:
Net loss ratio excluding the effect of catastrophes		74.7	%		64.5	%		75.4	%		74.7	%
Effect of catastrophe loss on net loss ratio (1)		11.3	%		0.7	%		13.2	%		11.3	%
Net loss ratio		86.0	%		65.2	%		88.6	%		86.0	%

Net underwriting expense ratio excluding the effect of catastrophes		38.5	%		42.0	%		34.7	%		38.5	%
Effect of catastrophe loss on net underwriting expense ratio		0.0	%		0.0	%		0.0	%		0.0	%
Net underwriting expense ratio		38.5	%		42.0	%		34.7	%		38.5	%

Net combined ratio excluding the effect of catastrophes		113.2	%		106.5	%		110.1	%		113.2	%

Effect of catastrophe loss on net combined ratio (1)		11.3	%		0.7	%		13.2	%		11.3	%
Net combined ratio		124.5	%		107.2	%		123.3	%		124.5	%

Reconciliation of net underwriting expense ratio:
Acquisition costs and other
underwriting expenses	$	15,167,035		$	14,690,881
Acquisition costs and other underwriting expenses							$	15,411,381		$	15,167,035
Less: Ceding commission revenue		(4,681,396	)		1,065			(5,445,407	)		(4,681,396	)
Less: Other income		(228,507	)		(170,309	)		(158,826	)		(228,507	)
	$	10,257,132		$	14,521,637		$	9,807,148		$	10,257,132

Net earned premium	$	26,673,380		$	34,589,218		$	28,254,953		$	26,673,380

Net Underwriting Expense Ratio		38.5	%		42.0	%		34.7	%		38.5	%

(1)	For the three months ended March 31, ~~2022~~2023 and ~~2021,~~2022, includes the sum of net catastrophe losses and loss adjustment expenses of ~~$3,019,424~~$3,742,948 and ~~$228,795,~~$3,019,424, respectively.

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Investments

Portfolio Summary

Fixed-Maturity Securities

The following table presents a breakdown of the amortized cost, estimated fair value, and gross unrealized gains and losses of our investments in fixed-maturity securities classified as available-for-sale for which an allowance for credit loss has not been recorded, as of March 31, ~~2022~~2023 and December 31, ~~2021:~~2022:

March 31, 2022
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
Political subdivisions of States,
Territories and Possessions
$ 17,227,562 $ 5,692 $ (1,614,463 ) $ - $ 15,618,791 10.3 %
Corporate and other bonds
Industrial and miscellaneous
85,566,044 336,272 (3,143,378 ) - 82,758,938 54.5 %
Residential mortgage and other asset backed securities (1)
56,656,711 289,836 (3,119,931 ) (306,849 ) 53,519,767 35.2 %
Total fixed-maturity securities
$ 159,450,317 $ 631,800 $ (7,877,772 ) $ (306,849 ) $ 151,897,496 100.0 %
December 31, 2021
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
Political subdivisions of States,
Territories and Possessions
$ 17,236,750 $ 246,748 $ (197,984 ) $ - $ 17,285,514 10.9 %
Corporate and other bonds
Industrial and miscellaneous
80,534,769 2,603,411 (126,926 ) - 83,011,254 52.5 %
Residential mortgage and other asset backed securities (1)
58,036,959 355,985 (489,258 ) (120,344 ) 57,783,342 36.6 %
Total fixed-maturity securities
$ 155,808,478 $ 3,206,144 $ (814,168 ) $ (120,344 ) $ 158,080,110 100.0 %

	March 31, 2023
	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 (1)	$	21,988,099	$	36,038	$	(674	)	$	-		$	22,023,463		14.2	%

Political subdivisions of States, Territories and Possessions		17,098,969		-		(5,153	)		(3,338,913	)		13,754,903		8.9	%

Corporate and other bonds Industrial and miscellaneous		80,264,856		-		(777,717	)		(6,479,111	)		73,008,028		47.2	%

Residential mortgage and other asset backed securities (2)		53,022,594		67,556		(496,219	)		(6,739,006	)		45,854,925		29.7	%
Total fixed-maturity securities	$	172,374,518	$	103,594	$	(1,279,763	)	$	(16,557,030	)	$	154,641,319		100.0	%

	December 31, 2022
	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 (1)	$	23,874,545	$	1,479	$	(6,928	)	$	-		$	23,869,096		15.4	%

Political subdivisions of States, Territories and Possessions		17,108,154		-		(2,195,273	)		(1,771,494	)		13,141,387		8.5	%

Corporate and other bonds Industrial and miscellaneous		80,338,464		-		(5,796,994	)		(2,458,985	)		72,082,485		46.6	%

Residential mortgage and other asset backed securities (2)		53,597,264		58,398		(882,664	)		(7,150,803	)		45,622,195		29.5	%
Total fixed-maturity securities	$	174,918,427	$	59,877	$	(8,881,859	)	$	(11,381,282	)	$	154,715,163		100.0	%

	(1)	In October 2022, KICO placed certain U.S. Treasury securities to fulfill the required collateral for a sale leaseback transaction in a designated custodian account (see Note 7 – Debt - “Equipment Financing”). As of March 31, 2023 and December 31, 2022, the amount of required collateral was approximately $8,268,000 and $8,691,000, respectively. As of March 31, 2023 and December 31, 2022, the estimated fair value of the eligible collateral was approximately $11,475,000 and $8,691,000, respectively.

	(2)	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 – Debt – “Federal Home Loan Bank”). The eligible collateral would be pledged to FHLBNY if KICO draws an advance from the FHLBNY credit line. As of March 31, 2023 and December 31, 2022, the estimated fair value of the eligible investments was approximately $12,199,000 and $12,228,000, respectively. KICO will retain all rights regarding all securities if pledged as collateral. As of March 31, 2023 and December 31, 2022 there was no outstanding balance on the FHLBNY credit line.

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Equity Securities

The following table presents a breakdown of the cost and estimated fair value of, and gross gains and losses on, investments in equity securities as of March 31, ~~2022~~2023 and December 31, ~~2021:~~2022:

	March 31, 2022												March 31, 2023
										% of												% of
			Gross		Gross			Estimated		Estimated					Gross		Gross			Estimated		Estimated
Category	Cost		Gains		Losses			Fair Value		Fair Value			Cost		Gains		Losses			Fair Value		Fair Value

Equity Securities:
Preferred stocks	$	19,944,128	$	333,811	$	(1,793,476	)	$	18,484,463		58.2	%	$	13,583,942	$	-	$	(2,906,623	)	$	10,677,319		73.0	%
Common stocks and exchange traded funds		13,145,504		837,696		(702,254	)		13,280,946		41.8	%		4,427,204		199,258		(681,232	)		3,945,230		27.0	%
Total	$	33,089,632	$	1,171,507	$	(2,495,730	)	$	31,765,409		100.0	%	$	18,011,146	$	199,258	$	(3,587,855	)	$	14,622,549		100.0	%

	December 31, 2021
										% of
			Gross		Gross			Estimated		Estimated
Category	Cost		Gains		Losses			Fair Value		Fair Value

Equity Securities:
Preferred stocks	$	22,019,509	$	1,007,009	$	(184,617	)	$	22,841,901		57.6	%
Common stocks and exchange traded funds		15,451,160		1,573,653		(179,712	)		16,845,101		42.4	%
Total	$	37,470,669	$	2,580,662	$	(364,329	)	$	39,687,002		100.0	%

	December 31, 2022
										% of
			Gross		Gross			Estimated		Estimated
Category	Cost		Gains		Losses			Fair Value		Fair Value

Equity Securities:
Preferred stocks	$	13,583,942	$	-	$	(3,589,313	)	$	9,994,629		72.2	%
Common stocks and exchange traded funds		4,502,758		158,635		(821,632	)		3,839,761		27.8	%
Total	$	18,086,700	$	158,635	$	(4,410,945	)	$	13,834,390		100.0	%

Other Investments

The following table presents a breakdown of the cost and estimated fair value of, and gross gains on our other investments as of March 31, ~~2022~~2023 and December 31, ~~2021:~~2022:

	March 31, 2022						December 31, 2021						March 31, 2023						December 31, 2022
			Gross		Estimated				Gross		Estimated				Gross		Estimated				Gross		Estimated
Category	Cost		Gains		Fair Value		Cost		Gains		Fair Value		Cost		Gains		Fair Value		Cost		Gains		Fair Value

Other Investments:
Hedge fund	$	3,999,381	$	2,626,502	$	6,625,883	$	3,999,381	$	3,562,034	$	7,561,415	$	1,987,040	$	1,148,409	$	3,135,449	$	1,987,040	$	784,612	$	2,771,652

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Held-to-Maturity Securities

The following table presents a breakdown of the amortized cost and estimated fair value of, and gross unrealized gains and losses on, investments in held-to-maturity securities as of March 31, ~~2022~~2023 and December 31, ~~2021:~~2022:

	March 31, 2022
															March 31, 2023
	Cost or		Gross		Gross Unrealized Losses					Estimated		% of			Cost or		Gross		Gross Unrealized Losses						Estimated		% of
	Amortized		Unrealized		Less than 12			More than 12		Fair		Estimated			Amortized		Unrealized		Less than 12			More than 12			Fair		Estimated
Category	Cost		Gains		Months			Months		Value		Fair Value			Cost		Gains		Months			Months			Value		Fair Value

Held-to-Maturity Securities:
U.S. Treasury securities	$	729,654	$	202,788	$	(1,177	)	$	-	$	931,265		12.2	%	$	304,111	$	-	$	(56,461	)	$	-		$	247,650		3.6	%

Political subdivisions of States,
Territories and Possessions		498,249		8,421		-			-		506,670		6.6	%
Political subdivisions of States, Territories and Possessions																1,228,634		47,886		(24,108	)		-			1,252,412		18.3	%

Exchange traded debt		304,111		-		(21,611	)				282,500		3.7	%		498,769		1,661		-			-			500,430		7.3	%

Corporate and other bonds
Industrial and miscellaneous		6,233,124		56,601		(380,860	)		-		5,908,865		77.4	%
Corporate and other bonds Industrial and miscellaneous																5,733,582		40,048		(57,910	)		(890,603	)		4,825,117		70.8	%

Total	$	7,765,138	$	267,810	$	(403,648	)	$	-	$	7,629,300		100.0	%	$	7,765,096	$	89,595	$	(138,479	)	$	(890,603	)	$	6,825,609		100.0	%

	December 31, 2021

	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

Held-to-Maturity Securities:
U.S. Treasury securities	$	729,642	$	209,633	$	-		$	-	$	939,275		10.7	%

Political subdivisions of States,
Territories and Possessions		998,239		22,856		-			-		1,021,095		11.7	%

Exchange traded debt		304,111		85		(13,921	)				290,275		3.3	%

Corporate and other bonds
Industrial and miscellaneous		6,234,342		280,951		(12,779	)		-		6,502,514		74.3	%

Total	$	8,266,334	$	513,525	$	(26,700	)	$	-	$	8,753,159		100.0	%

	December 31, 2022
	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

Held-to-Maturity Securities:
U.S. Treasury securities	$	1,228,560	$	28,400	$	(34,077	)	$	-		$	1,222,883		18.5	%

Political subdivisions of States, Territories and Possessions		498,638		2,092		-			-			500,730		7.6	%

Exchange traded debt		304,111		-		(29,111	)		-			275,000		4.2	%

Corporate and other bonds Industrial and miscellaneous		5,734,831		36,968		(809,746	)		(360,278	)		4,601,775		69.7	%

Total	$	7,766,140	$	67,460	$	(872,934	)	$	(360,278	)	$	6,600,388		100.0	%

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

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A summary of the amortized cost and fair value of our investments in held-to-maturity securities by contractual maturity as of March 31, ~~2022~~2023 and December 31, ~~2021~~2022 is shown below:

	March 31, 2022				December 31, 2021				March 31, 2023				December 31, 2022
	Amortized		Estimated		Amortized		Estimated		Amortized		Estimated		Amortized		Estimated
Remaining Time to Maturity	Cost		Fair Value		Cost		Fair Value		Cost		Fair Value		Cost		Fair Value

Less than one year	$	494,595	$	501,795	$	994,712	$	1,008,180	$	708,744	$	747,483	$	708,535	$	743,575
One to five years		1,206,159		1,262,780		1,205,829		1,290,465		1,120,700		1,098,253		1,120,507		1,088,522
Five to ten years		1,516,810		1,494,773		1,513,942		1,648,808		1,405,680		1,215,945		1,402,704		1,200,720
More than 10 years		4,547,574		4,369,952		4,551,851		4,805,706		4,529,972		3,763,928		4,534,394		3,567,571
Total	$	7,765,138	$	7,629,300	$	8,266,334	$	8,753,159	$	7,765,096	$	6,825,609	$	7,766,140	$	6,600,388

Credit Rating of Fixed-Maturity Securities

The table below summarizes the credit quality of our available-for-sale fixed-maturity securities as of March 31, ~~2022~~2023 and December 31, ~~2021~~2022 as rated by Standard & Poor’s (or, if unavailable from Standard & Poor’s, then Moody’s, Fitch, or Kroll):

	March 31, 2022					December 31, 2021					March 31, 2023					December 31, 2022
	Estimated		Percentage of			Estimated		Percentage of			Estimated		Percentage of			Estimated		Percentage of
	Fair		Estimated			Fair		Estimated			Fair		Estimated			Fair		Estimated
	Value		Fair Value			Value		Fair Value			Value		Fair Value			Value		Fair Value

Rating
U.S. Treasury securities	$	-		0.0	%	$	-		0.0	%	$	22,023,463		14.2	%	$	23,869,096		15.4	%

Corporate and municipal bonds
AAA		2,245,760		1.5	%		1,321,809		0.8	%		3,459,148		2.2	%		1,824,478		1.2	%
AA		12,316,338		8.1	%		11,532,572		7.3	%		8,645,706		5.6	%		9,785,908		6.3	%
A		32,664,514		21.5	%		38,272,571		24.2	%		31,859,418		20.7	%		31,099,075		20.2	%
BBB+		20,651,573		13.6	%		17,936,359		11.3	%		16,818,834		10.9	%		16,682,159		10.8	%
BBB		23,866,792		15.7	%		25,161,776		15.9	%		20,709,839		13.4	%		19,664,051		12.7	%
BBB-		4,867,458		3.2	%		4,193,401		2.7	%		3,612,910		2.3	%		4,516,713		2.9	%
Total corporate and municipal bonds		96,612,435		63.6	%		98,418,488		62.2	%		85,105,855		55.1	%		83,572,384		54.1	%

Residential mortgage backed, asset backed, and other collateralized obligations
AAA		17,992,573		11.8	%		17,350,192		11.0	%		36,783,170		23.8	%		16,497,621		10.7	%
AA		28,895,548		19.0	%		34,241,907		21.7	%		2,926,345		1.9	%		23,062,233		14.9	%
A		7,142,509		4.7	%		6,306,161		4.0	%		6,862,045		4.4	%		6,722,902		4.3	%
BBB		23,684		0.0	%		24,254		0.0	%		17,867		0.0	%		20,067		0.0	%
CCC		577,944		0.4	%		664,628		0.4	%		453,796		0.3	%		457,683		0.3	%
CC		-		0.0	%		125,412		0.1	%		97,266		0.1	%		99,600		0.1	%
D		77,605		0.1	%		55,306		0.0	%		-		0.0	%		40,474		0.0	%
Non rated		456,119		0.3	%		893,762		0.6	%		371,512		0.2	%		373,103		0.2	%
Total residential mortgage backed, asset backed, and other collateralized obligations		55,285,061		36.4	%		59,661,622		37.8	%		47,512,001		30.7	%		47,273,683		30.5	%

Total											$	154,641,319		100.0	%	$	154,715,163		100.0	%

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The table below summarizes the average yield by type of fixed-maturity security as of March 31, ~~2022~~2023 and December 31, ~~2021:~~2022:

Category	March 31, 2022			December 31, 2021			March 31, 2023			December 31, 2022
U.S. Treasury securities and obligations of U.S. government corporations and agencies		3.09	%		3.06	%		2.23	%		2.58	%

Political subdivisions of States, Territories and Possessions		3.05	%		2.77	%		3.42	%		3.58	%

Corporate and other bonds Industrial and miscellaneous		3.32	%		3.23	%		3.62	%		3.68	%

Residential mortgage backed securities		2.60	%		2.77	%		2.75	%		2.70	%

Total		3.05	%		2.92	%		3.16	%		3.20	%

The table below lists the weighted average maturity and effective duration in years on our fixed-maturity securities as of March 31, ~~2022~~2023 and December 31, ~~2021:~~2022:

	March 31, 2022		December 31, 2021		March 31, 2023		December 31, 2022
Weighted average effective maturity		7.0		8.0		5.7		5.8

Weighted average final maturity		16.7		13.8		13.1		13.5

Effective duration		5.5		5.1		4.3		4.5

Fair Value Consideration

Fair value is the price that would be received to sell an asset or paid to transfer a liability in a transaction involving identical or comparable assets or liabilities between market participants (an “exit price”). The fair value hierarchy distinguishes between inputs based on market data from independent sources (“observable inputs”) and a reporting entity’s internal assumptions based upon the best information available when external market data is limited or unavailable (“unobservable inputs”). The fair value hierarchy prioritizes fair value measurements into three levels based on the nature of the inputs. Quoted prices in active markets for identical assets have the highest priority (“Level 1”), followed by observable inputs other than quoted prices including prices for similar but not identical assets or liabilities (“Level 2”), and unobservable inputs, including the reporting entity’s estimates of the assumption that market participants would use, having the lowest priority (“Level 3”). As of March 31, ~~2022~~2023 and December 31, ~~2021, 62%~~2022, 65% of the investment portfolio recorded at fair value was priced based upon quoted market prices.

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The table below summarizes the gross unrealized losses of our fixed-maturity securities available-for-sale and equity securities by length of time the security has continuously been in an unrealized loss position as of March 31, ~~2022~~2023 and December 31, ~~2021:~~2022:

	March 31, 2022																			March 31, 2023
	Less than 12 months							12 months or more							Total					Less than 12 months							12 months or more							Total
	Estimated					No. of		Estimated					No. of		Estimated					Estimated					No. of		Estimated					No. of		Estimated
	Fair		Unrealized			Positions		Fair		Unrealized			Positions		Fair		Unrealized			Fair		Unrealized			Positions		Fair		Unrealized			Positions		Fair		Unrealized
Category	Value		Losses			Held		Value		Losses			Held		Value		Losses			Value		Losses			Held		Value		Losses			Held		Value		Losses

Fixed-Maturity Securities:
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	-	$	-			-	$	-		-			-	$	-	$	-		$	5,542,768	$	(674	)		1	$	-		-			-	$	5,542,768	$	(674	)

Political subdivisions of States, Territories and Possessions		14,959,121		(1,614,463	)		12		-		-			-		14,959,121		(1,614,463	)		549,276		(5,153	)		2		13,205,628		(3,338,913	)		12		13,754,904		(3,344,066	)

Corporate and other bonds industrial and miscellaneous		51,973,548		(3,143,378	)		55		-		-			-		51,973,548		(3,143,378	)		24,592,198		(777,717	)		33		48,415,831		(6,479,111	)		57		73,008,029		(7,256,828	)

Residential mortgage and other asset backed securities		40,310,519		(3,119,931	)		31		2,733,402		(306,849	)		2		43,043,921		(3,426,780	)		8,454,568		(496,219	)		15		36,667,595		(6,739,006	)		32		45,122,163		(7,235,225	)

Total fixed-maturity securities	$	107,243,188	$	(7,877,772	)		98	$	2,733,402	$	(306,849	)		2	$	109,976,590	$	(8,184,621	)	$	39,138,810	$	(1,279,763	)		51	$	98,289,054	$	(16,557,030	)		101	$	137,427,864	$	(17,836,793	)

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December 31, 2021
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
6,768,123 (197,984 ) 5 - - - 6,768,123 (197,984 )
Corporate and other bonds industrial and miscellaneous
17,593,707 (126,926 ) 15 - - - 17,593,707 (126,926 )
Residential mortgage and other asset backed securities
45,399,451 (489,258 ) 26 2,923,182 (120,344 ) 2 48,322,633 (609,602 )
Total fixed-maturity securities
$ 69,761,281 $ (814,168 ) 46 $ 2,923,182 $ (120,344 ) 2 $ 72,684,463 $ (934,512 )
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~~Table Of Contents~~

December 31, 2022

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

$ 18,918,196

$ (6,928 )

3

$ -

-

-

$ 18,918,196

$ (6,928 )

Political subdivisions of States, Territories and Possessions

7,970,633

(2,195,273 )

9

5,170,753

(1,771,494 )

5

13,141,386

(3,966,767 )

Corporate and other bonds industrial and miscellaneous

56,910,104

(5,796,994 )

75

15,172,381

(2,458,985 )

15

72,082,485

(8,255,979 )

Residential mortgage and other asset backed securities

10,145,880

(882,664 )

22

34,753,178

(7,150,803 )

26

44,899,058

(8,033,467 )

Total fixed-maturity securities

$ 93,944,813

$ (8,881,859 )

109

$ 55,096,312

$ (11,381,282 )

46

$ 149,041,125

$ (20,263,141 )

There were ~~100~~152 securities at March 31, 2023 that accounted for the gross unrealized loss of our fixed-maturity securities available-for-sale, none of which were deemed to be credit losses by us. There were 155 securities at December 31, 2022 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 48 securities at December 31, 2021 that accounted for the gross unrealized loss, none of which were deemed~~credit losses by ~~us to be other than temporarily impaired.~~us. Significant factors influencing our determination that unrealized losses were temporary included credit quality considerations, the magnitude of the unrealized losses in relation to each security’s cost, the nature of the investment and interest rate environment factors, 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.
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Liquidity and Capital Resources

Cash Flows

The primary sources of cash flow are from our insurance underwriting subsidiary, KICO, and include direct premiums written, ceding commissions from our quota share reinsurers, loss recovery payments from our reinsurers, investment income and proceeds from the sale or maturity of investments. Funds are used by KICO for ceded premium payments to reinsurers, which are paid on a net basis after subtracting losses paid on reinsured claims and reinsurance commissions. KICO also uses funds for loss payments and loss adjustment expenses on our net business, commissions to producers, salaries and other underwriting expenses as well as to purchase investments and fixed assets.

~~For the three months ended March 31, 2022, the~~The primary source of cash flow for our holding company ~~was the~~are dividends received from KICO, which are subject to statutory restrictions. For the three months ended March 31, ~~2022,~~2023, KICO paid ~~dividends~~a dividend of ~~$1,500,000~~$1,250,000 to us. As of March 31, 2023, KICO had a negative unassigned surplus and currently will not be able to pay any distributions to us without prior regulatory approval.

KICO is a member of the Federal Home Loan Bank of New York (“FHLBNY”), which provides additional access to liquidity. Members have access to a variety of flexible, low cost funding through FHLBNY’s credit products, enabling members to customize advances. Advances are to be fully collateralized; eligible collateral to pledge to FHLBNY includes residential and commercial mortgage backed securities, along with U.S. Treasury and agency securities. ~~KICO currently does not have any securities pledged~~See Note 3 – Investments to ~~FHLBNY;~~our condensed consolidated financial statements for eligible collateral held in a designated custodian account available for future advances. Advances are limited to 5% of KICO’s net admitted assets as ~~such, there~~of the end of the previous quarter, which is December 31, 2022, and are due and payable within 90 days of borrowing. The maximum allowable advance as of March 31, 2023, based on the net admitted assets as of December 31, 2022, was approximately $13,059,000. Available collateral as of March 31, 2023 was approximately $12,199,000. Advances are limited to 85% of the amount of available collateral. There were no borrowings under this facility during the three months ended March 31, ~~2022 and 2021.~~2023.

On December ~~19, 2017,~~15, 2022, we issued ~~$30 million~~$19,950,000 of our ~~5.50% Senior Unsecured~~2022 Notes ~~due~~pursuant to the Exchange Agreement. We are required to make a mandatory redemption payment with regard to the 2022 Notes on December 30, ~~2022. As~~2023 in an amount discussed in Note 7 – Debt of ~~March 31, 2022, invested assets and cash in our holding company was approximately $3,812,000. If~~ the aforementioned sources of cash flow currently available are insufficient to cover our holding company debt service and other cash requirements, we will seek to obtain additional financing. See Notes 2 and 7 to our Condensed Consolidated Financial Statementscondensed consolidated financial statements included in this Quarterly ~~Report for a discussion~~Report. We are also required to make semi-annual interest payments in arrears on June 30 and December 30 of ~~our plans in this regard.~~
~~Our reconciliation~~each year, commencing on June 30, 2023. The maturity date of ~~net income to net cash provided by operations~~the 2022 Notes is ~~generally influenced by the collection of premiums in advance of paid losses, the timing of reinsurance, issuing company settlements and loss payments.~~December 30, 2024.

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Cash flow and liquidity are categorized into three sources: (1) operating activities; (2) investing activities; and (3) financing activities, which are shown in the following table:

Three months ended March 31,
2022
2021
Three Months ended March 31,

2023

2022

Cash flows (used in) provided by:

Operating activities
$ (17,388,078 ) $ 1,392,800

$ (3,366,805 )

$ (17,388,078 )
Investing activities
(285,069 ) 1,963,156

2,189,590

(285,069 )
Financing activities
(783,565 ) (639,738 )

(280,260 )

(783,565 )
Net (decrease) increase in cash and cash equivalents
(18,456,712 ) 2,716,218
Net decrease in cash and cash equivalents

(1,457,475 )

(18,456,712 )
Cash and cash equivalents, beginning of period
24,290,598 19,463,742

11,958,228

24,290,598

Cash and cash equivalents, end of period
$ 5,833,886 $ 22,179,960

$ 10,500,753

$ 5,833,886

Net cash used in operating activities was ~~$17,388,000~~$3,367,000 in Three Months ~~2022~~2023 as compared to ~~$1,393,000 provided by~~$17,388,000 used in operating activities in Three Months ~~2021.~~2022. The ~~$18,781,000~~$14,021,000 decrease in cash flows ~~provided by~~used in operating activities in Three Months 2023 as compared to Three Months 2022 was primarily the result of a decrease in cash arising from net fluctuations in operating assets and liabilities, partially offset by net loss (adjusted for non-cash items) of ~~$3,530,000.~~$744,000. The ~~increase of~~decrease in cash used in operating activities is also attributable to the payment of $13,245,000 to reinsurers in Three Months 2022 pursuant to the inception of our quota share reinsurance treaty, effective December 31, 2021. The net fluctuations in assets and liabilities are related to operating activities of KICO as affected by growth or declines in its operations, payments on claims and other changes, which are described above.

Net cash provided by investing activities was $2,190,000 in Three Months 2023 compared to $285,000 used in investing activities ~~was $285,000~~ in Three Months 2022 ~~compared to $1,963,000 provided by investing activities~~resulting in ~~There Months 2021. The $2,248,000~~a $2,475,000 increase in net cash provided by investing activities. In Three Months 2023, we had net cash provided by our investment portfolio of $2,656,000, compared to $3,715,000 used in ~~investing activities was the result of a $2,305,000 decrease in disposals of invested assets and a $531,000 increase in the~~Three Months 2022. In addition, we decreased our acquisition of ~~property and equipment~~fixed assets by $1,099,000 in Three Months 2023 compared to Three Months 2022.

Net cash used in financing activities was ~~$784,000~~$280,000 in Three Months ~~2022~~2023 compared to ~~$640,000~~$784,000 used in Three Months ~~2021.~~2022. The ~~$144,000 increase~~$504,000 decrease in net cash used in financing activities was attributable to no dividends being paid to shareholders in Three Months 2023 compared to $424,000 being paid in Three Months 2022 and a ~~$211,000 increase~~$357,000 decrease in withholding taxes paid on the vesting of restricted stock ~~awards~~awards. The decreases in ~~Three Months 2022 compared to Three Months 2021.~~cash used in financing activities were partially offset by $266,000 of principal payments on the equipment financing in connection with KICO’s sale-leaseback transaction.

Reinsurance

Effective December 31, 2021, we entered into a quota share reinsurance treaty for our personal lines business, which primarily consists of homeowners’ and dwelling fire policies, covering the period from December 31, 2021 through January 1, 2023 (“2021/2023 Treaty”). Upon the expiration of the 2021/2023 Treaty on January 1, 2023, we entered into a new quota share reinsurance treaty for our personal lines business, covering the period from January 1, 2023 through January 1, 2024 (“2023/2024 Treaty”).

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We entered into new excess of loss and catastrophe reinsurance treaties effective July 1, 2021. Effective October 18, 2021, we entered into a stub catastrophe reinsurance treaty covering the period from October 18, 2021 through December 31, 2021. The treaty provides reinsurance coverage for catastrophe losses of $5,000,000 in excess of $5,000,000.2022. Effective January 1, 2022, we entered into an underlying excess of loss reinsurance treaty (“Underlying XOL Treaty”) covering the period from January 1, 2022 through January 1, 2023. The ~~treaty~~Underlying XOL Treaty provides 50% reinsurance coverage for losses of $400,000 in excess of $600,000. Losses from named storms are excluded from the ~~treaty.~~Underlying XOL Treaty. Effective January 1, 2023, the Underlying XOL Treaty was renewed covering the period from January 1, 2023 through January 1, 2024. Material terms for our reinsurance treaties in effect for the treaty years shown below are as follows:

Treaty Year

Treaty Period

(2021/2023 Treaty)

2023/2024 Treaty

2021/2023 Treaty

July 1,
December 31,
July 1,
December 31,

July 1,

January 1,

July 1,

December 31,

2022
2021
2021
2020

2023

2023

2022

2021

to
to
to
to

to

to

to

to

January 1,
June 30,
December 30,
June 30,

January 1,

June 30,

January 1,

June 30,

Line of Business
2023
2022
2021
2021

2024

2023

2023

2022

Personal Lines:

Homeowners, dwelling fire and and canine legal liability

Quota share treaty:

Percent ceded ~~(9)~~(8)
30 % 30 %
None (5
)
None (5
)

30 %

30 %

30 %

30 %

Risk retained on intial $1,000,000 of losses (5) (7) (9)
$ 700,000 $ 700,000 $ 1,000,000 $ 1,000,000
Risk retained on intial $1,000,000 of losses (6) (7) (8)

$ 700,000

$ 700,000

$ 700,000

$ 700,000

Losses per occurrence subject to quota share reinsurance coverage
$ 1,000,000 $ 1,000,000
None (5
)
None (5
)

$ 1,000,000

$ 1,000,000

$ 1,000,000

$ 1,000,000

Expiration date
January 1, 2023
January 1, 2023
NA (5
)
NA (5
)

January 1, 2024

January 1, 2024

January 1, 2023

January 1, 2023

Excess of loss coverage and facultative facility coverage (1) (7)
$ 400,000 $ 8,400,000 $ 8,000,000 $ 8,000,000
Excess of loss coverage and facultative facility coverage (1) (6)

(7)

$ 8,400,000

$ 8,400,000

$ 8,400,000

in excess of
in excess of
in excess of
in excess of

in excess of

in excess of

in excess of

$ 600,000 $ 600,000 $ 1,000,000 $ 1,000,000

$ 600,000

$ 600,000

$ 600,000

Total reinsurance coverage per occurrence (5) (7) (8)
$ 500,000 $ 8,500,000 $ 8,000,000 $ 8,000,000
Losses per occurrence subject to reinsurance coverage (5) (8)
$ 1,000,000 $ 9,000,000 $ 9,000,000 $ 9,000,000
Total reinsurance coverage per occurrence (6) (7)

$ 500,000

$ 8,500,000

$ 8,500,000

$ 8,500,000

Losses per occurrence subject to reinsurance coverage

(7)

$ 8,000,000

$ 9,000,000

$ 9,000,000

Expiration date
(8 )
June 30, 2022
June 30, 2022
June 30, 2021

(7)

June 30, 2023

June 30, 2023

June 30, 2022

Catastrophe Reinsurance:

Initial loss subject to personal lines quota share treaty

10,000,000

10,000,000

None (5
)

None (5
)
Risk retained per catastrophe occurrence (5) (9) (10)
None (8
)
$ 7,400,000 $ 10,000,000 $ 10,000,000
Catastrophe loss coverage in excess of quota share coverage (2) (5)
None (8
)
$ 490,000,000 $ 490,000,000 $ 475,000,000
Catastrophe stub coverage for the period from October 18, 2021 through December 31, 2021 (6)
NA
NA
$
5,000,000
NA
Initial loss subject to personal lines quota share treaty (7)

$ 10,000,000

$ 10,000,000

$ 10,000,000

$ 10,000,000

Risk retained per catastrophe occurrence (8) (9)

(7)

$ 8,750,000

$ 7,400,000

$ 7,400,000

Catastrophe loss coverage in excess of quota share coverage (2)

(7)

$ 335,000,000

$ 335,000,000

$ 490,000,000

Catastrophe stub coverage for the period from October 18, 2021 through December 31, 2021 (5)

NA

NA

NA

NA

in excess of

$ 5,000,000
Reinstatement premium protection (3) (4) (8)
None
Yes
Yes
Yes
Reinstatement premium protection (3) (4)

(7)

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 $9,000,000 in total insured value, which covers direct losses from $3,500,000 to $9,000,000 through June 30, ~~2022.~~2023.
(2)
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.
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Table of Contents
(3)
For the period ~~July 1, 2020 through June 30, 2021, reinstatement premium protection for $70,000,000 of catastrophe coverage in excess of $10,000,000.~~
~~(4)~~
~~For the period July 1,~~December 31, 2021 through June 30, 2022, reinstatement premium protection for $70,000,000 of catastrophe coverage in excess of $10,000,000.
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~~Table Of Contents~~
(4)
~~(5)~~
~~The personal lines quota share (homeowners, dwelling fire and canine legal liability) expired on December~~For the period July 1, 2022 through June 30, ~~2020; reinsurance~~2023, reinstatement premium protection for $9,800,000 of catastrophe coverage ~~from December 31, 2020 through December 30, 2021 is only for~~in excess of ~~loss and catastrophe reinsurance.~~$10,000,000.
~~(6)~~(5)
Excludes freeze and freeze related claims.
~~(7)~~(6)
For the period January 1, 2022 through January 1, ~~2023,~~2024, underlying excess of loss treaty provides 50% reinsurance coverage for losses of $400,000 in excess of $600,000. Reduces retention to $500,000 from $700,000 under the 2021/2023 Treaty and 2022/2023 Treaty. Excludes losses from named storms.
~~(8)~~(7)
Excess of loss and facultative facility, and catastrophe ~~reinsurance~~ treaties will expire on June 30, ~~2022;~~2023; reinsurance coverage in effect from July 1, ~~2022~~2023 through January 1, ~~2023~~2024 is only for ~~personal~~Personal lines quota share (homeowners, dwelling fire and canine ~~legal~~ liability) and underlying excess of loss reinsurance.
~~(9)~~(8)
For the 2021/2023 Treaty, 4% of the 30% total of losses ceded under this treaty are excluded from a named catastrophe event. For the 2023/2024 Treaty, 17.5% of the 30% total of losses ceded under this treaty are excluded from a named catastrophe event.
~~(10)~~(9)
Plus losses in excess of catastrophe ~~coverage.~~coverage

Treaty Year

Treaty Year

July 1, 2021
July 1, 2020

July 1, 2022

July 1, 2021

to
to

to

to

Line of Business
June 30, 2022
June 30, 2021

June 30, 2023

June 30, 2022

Personal Lines:

Personal Umbrella

Quota share treaty:

Percent ceded - first $1,000,000 of coverage
90 % 90 %

90 %

90 %
Percent ceded - excess of $1,000,000 dollars of coverage
95 % 95 %

95 %

95 %
Risk retained
$ 300,000 $ 300,000

$ 300,000

$ 300,000

Total reinsurance coverage per occurrence
$ 4,700,000 $ 4,700,000

$ 4,700,000

$ 4,700,000

Losses per occurrence subject to quota share reinsurance coverage
$ 5,000,000 $ 5,000,000

$ 5,000,000

$ 5,000,000

Expiration date
June 30, 2022
June 30, 2021

June 30, 2023

June 30, 2022

Commercial Lines (1):
General liability commercial policies
Quota share treaty
None
Risk retained
$ 750,000
Excess of loss coverage above risk retained
$ 3,750,000
in excess of
$ 750,000
Total reinsurance coverage per occurrence
$ 3,750,000
Losses per occurrence subject to reinsurance coverage
$ 4,500,000
Commercial Umbrella
Quota share treaty
None
Commercial Lines (1)

(1)
Coverage on all commercial lines policies expired in September 2020; reinsurance coverage is based on treaties in effect on the date of loss.

Inflation

Premiums are established before we know the amount of losses and loss adjustment expenses or the extent to which inflation may affect such amounts. We attempt to anticipate the potential impact of inflation in establishing our reserves, especially as it relates to medical and hospital rates where historical inflation rates have exceeded the general level of inflation. Inflation in excess of the levels we have assumed could cause loss and loss adjustment expenses to be higher than we anticipated, which would require us to increase reserves and reduce earnings.

62
~~Table Of Contents~~
                Fluctuations in rates of inflation also influence interest rates, which in turn impact the market value of our investment portfolio and yields on new investments. Operating expenses, including salaries and benefits, generally are impacted by inflation.

~~This quarter~~Three Months 2023 included ~~elevated~~continuing economic inflation, which resulted in a ~~significant~~sustained increase in interest rates, a widening of credit spreads, lower public equity valuations, and significant financial market volatility. The higher interest rates and widening of credit spreads previously reduced the value of our fixed income securities, saw a reversal which had previously lowered our stockholders’ equity materially ~~for~~in prior quarters. For Three Months ~~2022. The higher~~2023, the continuing economic inflation impacted our loss and loss adjustment expenses as well; should these trends continue in the near-term, it would in all likelihood negatively impact our ~~profitability.~~results of operations.
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Table of Contents

Off-Balance Sheet Arrangements

                We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

Outlook

                The COVID-19 pandemic caused significant financial market volatility, economic uncertainty, and interruptions to normal business activities. As of the date of this report, we expect the effect of the COVID-19 pandemic on claims currently under our coverages to be manageable, based on the information presently available. However, the effects of the COVID-19 pandemic, including the emergence of variant strains, continue to evolve and we cannot predict the extent to which our business, results of operations, financial condition, liquidity and capital position, the value of investments we hold in our investment portfolio, the premiums ~~and~~we charge, the demand for our products, ~~and~~ our ability to collect premiums or any requirement to return premiums to our policyholders will ultimately be impacted. The impact of COVID-19 on our results for the three months ended March 31, 2023 may not be indicative of its impact on our future results. For additional information on the risks posed by COVID-19, see “The impact of ~~COVID-19~~pandemics and other public heath issues (like COVID-19) and related risks could materially affect our results of operations, financial position and/or liquidity” included in Part ~~II,~~I, Item 1A— “Risk Factors” in ~~this Quarterly Report.~~our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC.

                Our net premiums earned may be impacted by a number of factors.  Net premiums earned are a function of net written premium volume.  Net written premiums comprise both renewal business and new business and are recognized as earned premium over the term of the underlying policies. Net written premiums from both renewal and new business are impacted by competitive market conditions as well as general economic conditions.  As a result of COVID-19, economic conditions in the United States rapidly deteriorated. The decreased levels of economic activity ~~have~~ negatively impacted ~~and may continue to negatively impact,~~ premium volumes generated by new business. We began to experience this impact in March 2020 and it became more significant in the second and third quarters of 2020. While we are now seeing a reversal of this impact, it may resume in the future, but the degree of any new impact will depend on the extent and duration of any economic contraction and could be material. We have also made underwriting changes to emphasize profitability over growth and have culled out the type of risks that do not generate an acceptable level of return.  This action has led, and may continue to lead, to a slowdown in premium growth, particularly in new business.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

This item is not applicable to smaller reporting companies.

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Table Ofof Contents

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

We maintain a system of disclosure controls and procedures as defined in Rule 13a-15(e) under the Exchange Act that are designed to assure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer and ~~Principal~~Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.  Based on this evaluation, our Chief Executive Officer and ~~Principal~~Chief Financial Officer have concluded that, as of March 31, ~~2022,~~2023, our disclosure controls and procedures were: (i) effective in recording, processing, summarizing, and reporting information on a timely basis that we are required to disclose in the reports that we file or submit under the Exchange Act, and (ii) effective in ensuring that information that we are required to disclose in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and ~~Principal~~Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

As required by Exchange Act Rule 13a-15(b), as of the end of the period covered by this Quarterly Report, under the supervision and with the participation of our Chief Executive Officer and ~~Principal~~Chief Financial Officer, we evaluated the effectiveness of our disclosure controls and procedures. Based on this evaluation, our Chief Executive Officer and ~~Principal~~Chief Financial Officer concluded that our disclosure controls and procedures were effective as of March 31, ~~2022.~~2023.
Changes in Internal Control over Financial Reporting

There have not been any changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during our most recently completed fiscal quarter that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitation on Effectiveness of Controls

Internal control over financial reporting is a process designed by, or under the supervision of, our Chief Executive Officer and Principal Financial Officer, and effected by the board of directors, management, and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP including those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets, (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP and that receipts and expenditures are being made only in accordance with authorizations of our management and directors, and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the financial statements.

                Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with policies and procedures may deteriorate.

6470
Table Ofof Contents

PART II.  OTHER INFORMATION

Item 1. Legal Proceedings.

None.

Item 1A. Risk Factors.

For a discussion of the Company’s potential risks and uncertainties, see Part I, Item 1A— “Risk Factors” and Part II, Item 7— “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s ~~2021~~2022 Annual Report filed with the SEC, and Part I, Item 2—“”Management’s Discussion and Analysis of Financial Condition and Results of Operations” herein, in each case as updated by the ~~Company's~~Company’s periodic filings with the SEC.  Except as discussed under Part I, Item 2 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Preliminary Non-Binding Indication of Interest” herein, thereThere have been no material changes to the risk factors disclosed in Part I, Item 1A of the Company’s ~~2021~~2022 Annual Report.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

(a)
~~(a) None.~~
~~(b) Not applicable.~~
~~(c)~~ None.
(b)
Not applicable.
(c)
None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

6571
Table Ofof Contents

Item 6. Exhibits.

3(a)

Restated Certificate of Incorporation, as amended (incorporated by reference to Exhibit 3(a) to the Company’s Quarterly Report on Form 10-Q for the period ended March 31, 2014 filed on May 15, 2014).

3(b)

By-laws, as amended (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on November 9, 2009).

31(a)

Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31(b)

Rule 13a-14(a)/15d-14(a) Certification of ~~Principal~~Chief Financial Officer as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32+

Certification of Chief Executive Officer and ~~Principal~~Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS

XBRL Instance Document

101.SCH

101.SCH    XBRL Taxonomy Extension Schema.

101.CAL

101.CAL   XBRL Taxonomy Extension Calculation Linkbase.

101.DEF

101.DEF     XBRL Taxonomy Extension Definition Linkbase.

101.LAB

101.LAB     XBRL Taxonomy Extension Label Linkbase.

101.PRE

101.PRE    XBRL Taxonomy Extension Presentation Linkbase.

+

This exhibit will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section.  Such exhibit shall not be deemed incorporated into any filing under the Securities Act of 1933, as amended, or the Securities Act of 1934, as amended.

6672
Table Ofof Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

KINGSTONE COMPANIES, INC.

Dated: May ~~16, 2022~~15, 2023 By: /s/ Barry B. Goldstein

Barry B. Goldstein
Chief Executive Officer
Dated: May ~~16, 2022~~15, 2023
By:
/s/ ~~Richard Swartz~~ Jennifer Gravelle

~~Richard Swartz~~
Jennifer Gravelle
~~Principal~~
Chief Financial Officer

6773

For the Year
Ending
December 31,	Total
Remainder of 2022	$	142,450
2023		194,919
2024		49,145
Total undiscounted lease payments		386,514
Less: present value adjustment		40,098
Operating lease liability (1)	$	346,416

	(a)	~~(a) None.~~ ~~(b) Not applicable.~~ ~~(c)~~ None.

	(b)	Not applicable.

	(c)	None.

3(a)		Restated Certificate of Incorporation, as amended (incorporated by reference to Exhibit 3(a) to the Company’s Quarterly Report on Form 10-Q for the period ended March 31, 2014 filed on May 15, 2014).

3(b)		By-laws, as amended (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on November 9, 2009).

31(a)		Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31(b)		Rule 13a-14(a)/15d-14(a) Certification of ~~Principal~~Chief Financial Officer as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32+		Certification of Chief Executive Officer and ~~Principal~~Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS		XBRL Instance Document

101.SCH		101.SCH XBRL Taxonomy Extension Schema.

101.CAL		101.CAL XBRL Taxonomy Extension Calculation Linkbase.

101.DEF		101.DEF XBRL Taxonomy Extension Definition Linkbase.

101.LAB		101.LAB XBRL Taxonomy Extension Label Linkbase.

101.PRE		101.PRE XBRL Taxonomy Extension Presentation Linkbase.


+		This exhibit will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section. Such exhibit shall not be deemed incorporated into any filing under the Securities Act of 1933, as amended, or the Securities Act of 1934, as amended.

	KINGSTONE COMPANIES, INC.

Dated: May ~~16, 2022~~15, 2023	By:	/s/ Barry B. Goldstein
		Barry B. Goldstein
		Chief Executive Officer


Dated: May ~~16, 2022~~15, 2023	By:	/s/ ~~Richard Swartz~~ Jennifer Gravelle
		~~Richard Swartz~~ Jennifer Gravelle
		~~Principal~~	Chief Financial Officer