Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Dec. 31, 2017 | Mar. 12, 2018 | Jun. 30, 2017 | |
Document And Entity Information | |||
Entity Registrant Name | KINGSTONE COMPANIES, INC. | ||
Entity Central Index Key | 33,992 | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2017 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --12-31 | ||
Is Entity a Well-known Seasoned Issuer? | No | ||
Is Entity a Voluntary Filer? | No | ||
Is Entity's Reporting Status Current? | Yes | ||
Entity Filer Category | Accelerated Filer | ||
Entity Public Float | $ 149,176,821 | ||
Entity Common Stock, Shares Outstanding | 10,684,329 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2,017 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 |
Assets | ||
Fixed-maturity securities, held-to-maturity, at amortized cost (fair value of $5,150,076 at December 31, 2017 and $5,298,119 at December 31, 2016) | $ 4,869,808 | $ 5,094,902 |
Fixed-maturity securities, available-for-sale, at fair value (amortized cost of $119,122,106 at December 31, 2017 and $80,596,628 at December 31, 2016) | 119,988,256 | 80,428,828 |
Equity securities, available-for-sale, at fair value (cost of $13,761,841 at December 31, 2017 and $9,709,385 at December 31, 2016) | 14,286,198 | 9,987,686 |
Total investments | 139,144,262 | 95,511,416 |
Cash and cash equivalents | 48,381,633 | 12,044,520 |
Investment subscription receivable | 2,000,000 | 0 |
Premiums receivable, net | 13,217,698 | 11,649,398 |
Reinsurance receivables, net | 28,519,130 | 32,197,765 |
Deferred policy acquisition costs | 14,847,236 | 12,239,781 |
Intangible assets, net | 1,010,000 | 1,350,000 |
Property and equipment, net | 4,772,577 | 3,011,373 |
Other assets | 2,655,527 | 1,442,209 |
Total assets | 254,548,063 | 169,446,462 |
Liabilities | ||
Loss and loss adjustment expense reserves | 48,799,622 | 41,736,719 |
Unearned premiums | 65,647,663 | 54,994,375 |
Advance premiums | 1,477,693 | 1,421,560 |
Reinsurance balances payable | 2,563,966 | 2,146,017 |
Deferred ceding commission revenue | 4,266,412 | 6,851,841 |
Accounts payable, accrued expenses and other liabilities | 7,487,654 | 5,448,448 |
Deferred income taxes | 600,342 | 166,949 |
Long-term debt, net | 29,126,965 | 0 |
Total liabilities | 159,970,317 | 112,765,909 |
Commitments and Contingencies | ||
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 11,618,646 shares at December 31, 2017 and 8,896,335 at December 31, 2016; outstanding 10,631,837 shares at December 31, 2017 and 7,921,866 shares at December 31, 2016 | 116,186 | 88,963 |
Capital in excess of par | 68,380,390 | 37,950,401 |
Accumulated other comprehensive income | 1,100,647 | 72,931 |
Retained earnings | 27,152,822 | 20,563,720 |
Total | 96,750,045 | 58,676,015 |
Treasury stock, at cost, 986,809 shares at December 31, 2017 and 974,469 shares at December 31, 2016 | (2,172,299) | (1,995,462) |
Total stockholders' equity | 94,577,746 | 56,680,553 |
Total liabilities and stockholders' equity | $ 254,548,063 | $ 169,446,462 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 |
Deferred Acquisition Costs And Deferred Ceding Commission Revenue Details 1 | ||
Fixed-maturity securities, held to maturity, fair value | $ 5,150,076 | $ 5,298,119 |
Fixed-maturity securities, available for sale, amortized cost | 119,122,106 | 80,596,628 |
Equity securities, available-for-sale, cost | $ 13,761,841 | $ 9,709,385 |
Stockholders' Equity | ||
Preferred stock,par value | $ 0.01 | $ 0.01 |
Preferred stock,authorized shares | 2,500,000 | 2,500,000 |
Common stock, par value | $ 0.01 | $ 0.01 |
Common stock, authorized shares | 20,000,000 | 20,000,000 |
Common stock, issued shares | 11,618,646 | 8,896,335 |
Common stock, outstanding shares | 10,631,837 | 7,921,866 |
Treasury stock, Shares | 986,809 | 974,469 |
Consolidated Statements of Inco
Consolidated Statements of Income and Comprehensive Income - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Revenues | ||
Net premiums earned | $ 77,351,023 | $ 61,407,906 |
Ceding commission revenue | 9,933,133 | 11,268,241 |
Net investment income | 4,132,586 | 3,115,583 |
Net realized gains on sales of investments | 84,313 | 529,448 |
Other income | 1,268,255 | 1,115,486 |
Total revenues | 92,769,310 | 77,436,664 |
Expenses | ||
Loss and loss adjustment expenses | 34,185,537 | 27,789,661 |
Commission expense | 21,182,254 | 18,327,190 |
Other underwriting expenses | 18,115,614 | 14,866,646 |
Other operating expenses | 3,512,927 | 1,909,779 |
Depreciation and amortization | 1,402,928 | 1,124,921 |
Interest expense | 60,335 | 0 |
Total expenses | 78,459,595 | 64,018,197 |
Income from operations before taxes | 14,309,715 | 13,418,467 |
Income tax expense | 4,323,230 | 4,518,701 |
Net income | 9,986,485 | 8,899,766 |
Other comprehensive income (loss), net of tax | ||
Gross change in unrealized gains (losses) on available-for-sale-securities | 1,364,319 | (93,718) |
Reclassification adjustment for gains included in net income | (84,313) | (529,448) |
Net change in unrealized gains (losses) | 1,280,006 | (623,166) |
Income tax (expense) benefit related to items of other comprehensive income (loss) | (435,202) | 211,877 |
Other comprehensive income (loss), net of tax | 844,804 | (411,289) |
Comprehensive income | $ 10,831,289 | $ 8,488,477 |
Earnings per common share: | ||
Basic | $ 0.96 | $ 1.15 |
Diluted | $ 0.94 | $ 1.14 |
Weighted average common shares outstanding | ||
Basic | 10,388,440 | 7,736,594 |
Diluted | 10,581,577 | 7,807,263 |
Dividends declared and paid per common share | $ 0.3025 | $ 0.2500 |
Consolidated Statement of Stock
Consolidated Statement of Stockholders' Equity - USD ($) | Preferred Stock | Common Stock | Capital in Excess of Par | Accumulated Other Comprehensive Income (Loss) | Retained Earnings | Treasury Stock | Total |
Beginning Balance, Amount at Dec. 31, 2015 | $ 0 | $ 82,896 | $ 32,987,082 | $ 484,220 | $ 13,605,225 | $ (1,882,195) | $ 45,277,228 |
Beginning Balance, Shares at Dec. 31, 2015 | 0 | 8,289,606 | 960,969 | ||||
Proceeds from private placement, net of closing costs of $192,369, Shares | 595,238 | ||||||
Proceeds from private placement, net of closing costs of $192,369, Amount | $ 5,952 | 4,801,679 | 4,807,631 | ||||
Stock-based compensation, Amount | 106,882 | 106,882 | |||||
Exercise of stock options, Shares | 11,491 | ||||||
Exercise of stock options, Amount | $ 115 | 54,195 | 54,310 | ||||
Excess tax benefit from exercise of stock options | 563 | 563 | |||||
Acquisition of treasury stock, Amount | $ (113,267) | (113,267) | |||||
Acquisition of treasury stock, Shares | 13,500 | ||||||
Dividends | (1,941,271) | (1,941,271) | |||||
Net income | 8,899,766 | 8,899,766 | |||||
Change in unrealized gains on available for sale securities, net of tax | (411,289) | (411,289) | |||||
Ending Balance, Amount at Dec. 31, 2016 | $ 0 | $ 88,963 | 37,950,401 | 72,931 | 20,563,720 | $ (1,995,462) | 56,680,553 |
Ending Balance, Shares at Dec. 31, 2016 | 0 | 8,896,335 | 974,469 | ||||
Proceeds from public offering, net of offering costs of $2,173,000, Shares | 2,692,500 | ||||||
Proceeds from public offering, net of offering costs of $2,173,000, Amount | $ 26,925 | 30,109,774 | 30,136,699 | ||||
Stock-based compensation, Amount | 270,231 | 270,231 | |||||
Vesting of restricted stock awards, Shares | 12,311 | ||||||
Vesting of restricted stock awards, Amount | $ 123 | (123) | |||||
Shares deducted from restricted stock awards for payment of withholding taxes, Shares | (1,730) | ||||||
Shares deducted from restricted stock awards for payment of withholding taxes, Amount | $ (18) | (27,627) | (27,645) | ||||
Exercise of stock options, Shares | 19,230 | ||||||
Exercise of stock options, Amount | $ 193 | 77,734 | $ 77,927 | ||||
Acquisition of treasury stock, Amount | $ 12,340 | ||||||
Acquisition of treasury stock, Shares | (176,837) | (176,837) | |||||
Dividends | (3,214,471) | $ (3,214,471) | |||||
Net income | 9,986,485 | 9,986,485 | |||||
Change in unrealized gains on available for sale securities, net of tax | 844,804 | 844,804 | |||||
Reclassify stranded tax effects from accumulated other comprehensive income to retained earnings | 182,912 | (182,912) | |||||
Ending Balance, Amount at Dec. 31, 2017 | $ 116,186 | $ 68,380,390 | $ 1,100,647 | $ 27,152,822 | $ (2,172,299) | $ 94,577,746 | |
Ending Balance, Shares at Dec. 31, 2017 | 11,618,646 | 986,809 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Cash Flows - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Cash flows from operating activities: | ||
Net income | $ 9,986,485 | $ 8,899,766 |
Adjustments to reconcile net income to net cash flows provided by operating activities: | ||
Net realized gains on sale of investments | (84,313) | (529,448) |
Depreciation and amortization | 1,402,928 | 1,124,921 |
Amortization of bond premium, net | 548,846 | 449,632 |
Amortization of discount and issuance costs on long-term debt | 5,335 | 0 |
Stock-based compensation | 270,231 | 106,882 |
Excess tax benefit from exercise of stock options | 0 | (563) |
Deferred income tax expense | (1,809) | (293,364) |
(Increase) decrease in operating assets: | ||
Premiums receivable, net | (1,568,300) | (1,027,743) |
Reinsurance receivables, net | 3,678,635 | (927,530) |
Deferred policy acquisition costs | (2,607,455) | (1,404,475) |
Other assets | (1,228,493) | (615,681) |
Increase (decrease) in operating liabilities: | ||
Loss and loss adjustment expense reserves | 7,062,903 | 1,860,219 |
Unearned premiums | 10,653,288 | 6,104,134 |
Advance premiums | 56,133 | 222,184 |
Reinsurance balances payable | 417,949 | 457,095 |
Deferred ceding commission revenue | (2,585,429) | 416,773 |
Accounts payable, accrued expenses and other liabilities | 2,039,206 | 358,223 |
Net cash flows provided by operating activities | 28,046,140 | 15,201,025 |
Cash flows from investing activities: | ||
Purchase - fixed-maturity securities held-to-maturity | (121,271) | 0 |
Purchase - fixed-maturity securities available-for-sale | (50,396,228) | (36,551,218) |
Purchase - equity securities available-for-sale | (7,526,326) | (7,464,764) |
Sale and redemption - fixed-maturity securities held-to-maturity | 247,500 | 0 |
Sale or maturity - fixed-maturity securities available-for-sale | 11,132,000 | 17,752,130 |
Sale - equity securities available-for-sale | 3,862,127 | 7,073,773 |
Investment subscription receivable | (2,000,000) | 0 |
Acquisition of fixed assets | (2,824,132) | (576,212) |
Other investing activities | 0 | 250,448 |
Net cash flows used in investing activities | (47,626,330) | (19,515,843) |
Cash flows from financing activities: | ||
Net proceeds from issuance of common stock | 30,136,699 | 4,807,631 |
Net proceeds from issuance of long-term debt | 29,121,630 | 0 |
Proceeds from exercise of stock options | 77,927 | 54,310 |
Excess tax benefit from exercise of stock options | 0 | 563 |
Withholding taxes paid on net exercise of stock options | (27,645) | 0 |
Purchase of treasury stock | (176,837) | (113,267) |
Dividends paid | (3,214,471) | (1,941,271) |
Net cash flows provided by financing activities | 55,917,303 | 2,807,966 |
Increase (decrease) in cash and cash equivalents | 36,337,113 | (1,506,852) |
Cash and cash equivalents, beginning of period | 12,044,520 | 13,551,372 |
Cash and cash equivalents, end of period | 48,381,633 | 12,044,520 |
Supplemental disclosures of cash flow information: | ||
Cash paid for income taxes | $ 5,773,000 | $ 6,028,671 |
1. Nature of Business
1. Nature of Business | 12 Months Ended |
Dec. 31, 2017 | |
Weighted average amortization period of identified intangible assets of finite useful life | |
1. Nature of Business | Kingstone Companies, Inc. (referred to herein as "Kingstone" or the “Company”), through its wholly owned subsidiary, Kingstone Insurance Company (“KICO”), underwrites property and casualty insurance to small businesses and individuals exclusively through independent agents and brokers. KICO is a licensed insurance company in the States of New York, New Jersey, Connecticut, Pennsylvania, Rhode Island, Massachusetts and Texas. KICO is currently offering its property and casualty insurance products in New York, New Jersey, Rhode Island and Pennsylvania. Although New Jersey and Rhode Island are now growing expansion markets for the Company, 98.5% of KICO’s direct written premiums for the year ended December 31, 2017 were written in the State of New York. In February 2018, a homeowners rate, rule, and form filing was made with the State of Massachusetts. KICO anticipates writing business there in 2018. |
2. Summary of Significant Accou
2. Summary of Significant Accounting Policies | 12 Months Ended |
Dec. 31, 2017 | |
Weighted average amortization period of identified intangible assets of finite useful life | |
2. Summary of Significant Accounting Policies | Basis of Presentation The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Principles of Consolidation The consolidated financial statements consist of Kingstone and its wholly owned subsidiaries: KICO and its 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. All significant inter-company account balances and transactions have been eliminated in consolidation. Revenue Recognition Net Premiums Earned Insurance policies issued by the Company are short-duration contracts. Accordingly, premium revenues, net of premiums ceded to reinsurers, are recognized as earned in proportion to the amount of insurance protection provided, on a pro-rata basis over the terms of the underlying policies. Unearned premiums represent premiums applicable to the unexpired portions of in-force insurance contracts at the end of each year. Ceding Commission Revenue Commissions on reinsurance premiums ceded are earned in a manner consistent with the recognition of the costs of the reinsurance, generally on a pro-rata basis over the terms of the policies reinsured. Unearned amounts are recorded as deferred ceding commission revenue. Certain reinsurance agreements contain provisions whereby the ceding commission rates vary based on the loss experience under the agreements. The Company records ceding commission revenue based on its current estimate of subject losses. The Company records adjustments to the ceding commission revenue in the period that changes in the estimated losses are determined. Loss and Loss Adjustment Expenses (“LAE”) Reserves The liability for loss and LAE represents management’s best estimate of the ultimate cost of all reported and unreported losses that are unpaid as of the balance sheet date. The liability for losses and LAE is estimated on an undiscounted basis, using individual case-basis valuations, statistical analyses and various actuarial reserving methodologies. The projection of future claim payment and reporting is based on an analysis of the Company’s historical experience, supplemented by analyses of industry loss data. Management believes that the reserves for loss and LAE are adequate to cover the ultimate cost of losses and claims to date; however, because of the uncertainty from various sources, including changes in reporting patterns, claims settlement patterns, judicial decisions, legislation, and economic conditions, actual loss experience may not conform to the assumptions used in determining the estimated amounts for such liability at the balance sheet date. Adjustments to these estimates are reflected in expense for the period in which the estimates are changed. Because of the nature of the business historically written, management believes that the Company has limited exposure to environmental claim liabilities. Reinsurance In the normal course of business, the Company seeks to reduce the loss that may arise from catastrophes or other events that cause unfavorable underwriting results. This is done by reinsuring certain levels of risk in various areas of exposure with a panel of financially secure reinsurance carriers. Reinsurance receivables represents management’s best estimate of paid and unpaid loss and LAE recoverable from reinsurers, and ceded losses receivable and unearned ceded premiums under reinsurance agreements. Ceded losses receivable are estimated using techniques and assumptions consistent with those used in estimating the liability for loss and LAE. Management believes that reinsurance receivables as recorded represent its best estimate of such amounts; however, as changes in the estimated ultimate liability for loss and LAE are determined, the estimated ultimate amount receivable from the reinsurers will also change. Accordingly, the ultimate receivable could be significantly in excess of or less than the amount recorded in the consolidated financial statements. Adjustments to these estimates are reflected in the period in which the estimates are changed. Loss and LAE incurred as presented in the consolidated statement of income and comprehensive income are net of reinsurance recoveries. Management has evaluated its reinsurance arrangements and determined that significant insurance risk is transferred to the reinsurers. Reinsurance agreements have been determined to be short-duration prospective contracts and, accordingly, the costs of the reinsurance are recognized over the life of the contract in a manner consistent with the earning of premiums on the underlying policies subject to the reinsurance contract. Management estimates uncollectible amounts receivable from reinsurers based on an assessment of factors including the creditworthiness of the reinsurers and the adequacy of collateral obtained, where applicable. There was no allowance for uncollectible reinsurance as of December 31, 2017 and 2016. The Company did not expense any uncollectible reinsurance for the years ended December 31, 2017 and 2016. Significant uncertainties are inherent in the assessment of the creditworthiness of reinsurers and estimates of any uncollectible amounts due from reinsurers. Any change in the ability of the Company’s reinsurers to meet their contractual obligations could have a material adverse effect on the consolidated financial statements as well as KICO’s ability to meet its regulatory capital and surplus requirements. Cash and Cash Equivalents The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. The Company maintains its cash balances at several financial institutions. Investments The Company classifies its fixed-maturity securities as either held-to-maturity or available-for-sale and its equity securities as available-for-sale. The Company may sell its available-for-sale securities in response to changes in interest rates, risk/reward characteristics, liquidity needs or other factors. Fixed-maturity securities that the Company has the specific intent and ability to hold until maturity are classified as such and carried at amortized cost. Available-for-sale securities are reported at their estimated fair values based on quoted market prices from a recognized pricing service, with unrealized gains and losses, net of tax effects, reported as a separate component of accumulated other comprehensive income in the consolidated statements of stockholders’ equity. Realized gains and losses are determined on the specific identification method and recognized in the consolidated statements of income and comprehensive income. Investment income is accrued to the date of the consolidated financial statements and includes amortization of premium and accretion of discount on fixed-maturities. Interest is recognized when earned, while dividends are recognized when declared. Due and accrued investment income was approximately $1,136,000 and $694,000 as of December 31, 2017 and 2016, respectively, and is included in other assets on the accompanying consolidated balance sheets. Premiums Receivable Premiums receivable are presented net of an allowance for doubtful accounts of approximately $291,000 and $212,000 as of December 31, 2017 and 2016, respectively. The allowance for uncollectible amounts is based on an analysis of amounts receivable giving consideration to historical loss experience and current economic conditions and reflects an amount that, in management’s judgment, is adequate. Uncollectible premiums receivable balances of approximately $138,000 and $98,000 were written off for the years ended December 31, 2017 and 2016, respectively. Deferred Policy Acquisition Costs Deferred policy acquisition costs represent the costs of writing business that vary with, and are primarily related to, the successful production of insurance business (principally commissions, premium taxes and certain underwriting salaries). Policy acquisition costs are deferred and recognized as expense as related premiums are earned. Intangible Assets The Company has recorded acquired identifiable intangible assets. The cost of a group of assets acquired in a transaction is allocated to the individual assets including identifiable intangible assets based on their relative fair values. Identifiable intangible assets with a finite useful life are amortized over the period that the asset is expected to contribute directly or indirectly to the future cash flows of the Company. Intangible assets with an indefinite life are not amortized, however are subject to impairment testing if events or changes in circumstances indicate that it is more likely than not the asset is impaired. All identifiable intangible assets are tested for recoverability whenever events or changes in circumstances indicate that a carrying amount may not be recoverable. No impairment losses from intangible assets were recognized for the years ended December 31, 2017 and 2016. Property and Equipment Building and building improvements, furniture, computer equipment, and software are reported at cost less accumulated depreciation. Depreciation is provided using the straight-line method over the estimated useful lives of the assets. The Company estimates the useful life for computer equipment, computer software, automobile, furniture and other equipment is three years, and building and building improvements is 39 years. The Company reviews its real estate assets used as its headquarters to evaluate the necessity of recording impairment losses for market changes due to declines in the fair value of the property. In evaluating potential impairment, management considers the current estimated fair value compared to the carrying value of the asset. At December 31, 2017 and 2016, the fair value of the real estate assets is estimated to be in excess of the carrying value. Income Taxes Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis and for operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The Company files a consolidated tax return with its subsidiaries. At December 31, 2017, the Company had no material unrecognized tax benefits and no adjustments to liabilities or operations were required. On December 22, 2017, the Tax Cuts and Jobs Act of 2017 was enacted (see Note 15 - Income Taxes). Assessments Insurance related assessments are accrued in the period in which they have been incurred. A typical obligating event would be the issuance of an insurance policy or the occurrence of a claim. The Company is subject to a variety of assessments. Concentration and Credit Risk Financial instruments that potentially subject the Company to concentration of credit risk are primarily cash and cash equivalents, investments, and premium and reinsurance receivables. Investments are diversified through many industries and geographic regions based upon KICO’s Investment Committee’s guidelines, which employs a variety of investment strategies. The Company believes that no significant concentration of credit risk exists with respect to investments. At times, cash may be uninsured or in deposit accounts that exceed the Federal Deposit Insurance Corporation (“FDIC”) insurance limits. The Company has not experienced any losses in such accounts and management believes the Company is not exposed to any significant credit risk. Cash equivalents are not insured by the FDIC. As of December 31, 2017 and 2016, the Company’s cash equivalents were as follows: December 31, December 31, 2017 2016 Collateralized bank repurchase agreement (1) $ 10,249,985 $ 6,268,647 Money market funds 35,874,700 3,121,155 Total $ 46,124,685 $ 9,389,802 (1) The Company has a security interest in certain of the bank's holdings of direct obligations of the United States or one or more agencies thereof. The collateral is held in a hold-in-custody arrangement with a third party who maintains physical possession of the collateral on behalf of the bank. At December 31, 2017, the outstanding premiums receivable balance is generally diversified due to the large number of individual insureds comprising the Company’s customer base. The Company’s customer base is concentrated in the New York City metropolitan area. The Company also has receivables from its reinsurers. Reinsurance contracts do not relieve the Company of its obligations to policyholders. Failure of reinsurers to honor their obligations could result in losses to the Company. The Company periodically evaluates the financial condition of its reinsurers to minimize its exposure to significant losses from reinsurer insolvencies. See Note 7 for reinsurance recoverables on unpaid and paid losses by reinsurer. Management’s policy is to review all outstanding receivables quarterly as well as the bad debt write-offs experienced in the past and establish an allowance for doubtful accounts, if deemed necessary. Direct premiums earned from lines of business in excess of 10% of the total subject the Company to concentration risk for the years ended December 31, 2017 and 2016 as follows: Years ended December 31, 2017 2016 Personal Lines 77.2 % 76.8 % Commercial Lines 12.2 % 12.8 % Livery physical damage 10.3 % 10.1 % Total premiums earned subject to concentration 99.7 % 99.7 % Premiums earned not subject to concentration 0.3 % 0.3 % Total premiums earned 100.0 % 100.0 % 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. The actual results could differ from these estimates and assumptions, which include the reserves for losses and loss adjustment expenses, 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 on-going basis, management reevaluates its assumptions and the methods for calculating these estimates. Actual results may differ significantly from the estimates and assumptions used in preparing the consolidated financial statements. Earnings per share Basic earnings per common share is computed by dividing income available to common stockholders by the weighted-average number of common shares outstanding. Diluted earnings per common share reflect, in periods in which they have a dilutive effect, the impact of common shares issuable upon the exercise of stock options. The computation of diluted earnings per share excludes those options with an exercise price in excess of the average market price of the Company’s common shares during the periods presented. Advertising Costs Advertising costs are charged to operations when the advertising is initiated. Advertising costs are included in other underwriting expenses in the accompanying consolidated statements of income and comprehensive income, and were approximately $202,000 and $169,000 for the years ended December 31, 2017 and 2016, respectively. Stock-based Compensation Stock-based compensation expense in 2017 and 2016 is the estimated fair value of restricted stock awards and options granted, amortized on a straight-line basis over the requisite service period for the entire portion of the award less an estimate for anticipated forfeitures. The Company uses the “simplified” method to estimate the expected term of the options because the Company’s historical share option exercise experience does not provide a reasonable basis upon which to estimate expected term. Compensated Absences Employees of the Company are entitled to paid vacations, sick days, and other time off depending on job classification, length of service and other factors. It is impracticable to estimate the amount of compensation of future absences and, accordingly, no liability has been recorded in the accompanying consolidated financial statements. The Company’s policy is to recognize the cost of compensated absences when paid to employees. Comprehensive Income Comprehensive income refers to revenue, expenses, gains and losses that are included in comprehensive income but are excluded from net income as these amounts are recorded directly as an adjustment to stockholders' equity, primarily from changes in unrealized gains and losses on available-for-sale securities. Accounting Changes Effective January 1, 2017, the Company has adopted the provisions of Accounting Standards Update (“ASU”) 2016-09 – Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, which requires recognition of all income tax effects from share-based payments arising on or after January 1, 2017 (the Company’s adoption date) in income tax expense. As a result, the Company realized windfall tax benefits in the period of adoption of approximately $5,000, which was recognized as a discrete period income tax benefit as required by this ASU. This benefit had no effect on the Company’s effective tax rate for the year ended December 31, 2017. In February 2018, the Financial Accounting Standards Board (“FASB”) issued ASU 2018-02 - Income Statement – Reporting Comprehensive Income (Topic 220) – Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (“AOCI”) (“ASU 2018-02”). The deferred income tax liability for unrealized gains on available-for-sale securities that were re-measured due to the reduction in corporate income tax rates under the Tax Cuts and Jobs Act of 2017 (the “Act”) resulted in a stranded tax effect within AOCI. This is due to the effect of the tax rate change being recorded through continuing operations as required under Accounting Standards Codification 740 (“ASC 740”). The revised ASU allows for the reclassification of the stranded tax effects as a result of the Act from AOCI to retained earnings and requires certain other disclosures. The Company chose to early adopt the provisions of ASU 2018-02 and recorded a one-time reclassification of $182,912 from AOCI to retained earnings for the stranded tax effects resulting from the newly enacted corporate tax rate. The amount of the reclassification was the difference between the historical corporate tax rate and the newly enacted 21% corporate tax rate (see Consolidated Statement of Stockholders’ Equity). Recent Accounting Pronouncements In May 2014, FASB issued ASU 2014-09 – Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”). The core principle of the new guidance is that an entity should recognize revenue to reflect the transfer of goods and services to customers in an amount equal to the consideration the entity receives or expects to receive. ASU 2014-09, as amended by ASU 2015-14, ASU 2016-08, ASU 2016-10 and ASU 2016-20, is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. The Company adopted the new revenue standard on January 1, 2018 using the modified retrospective approach. The standard excludes from its scope the accounting for insurance contracts, financial instruments, and certain other agreements that are governed under other GAAP guidance. Accordingly, the adoption of ASU 2014-09 did not have a material effect on the Company’s consolidated financial statements. In January 2016, FASB issued ASU 2016-01 – Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”). The updated accounting guidance requires changes to the reporting model for financial instruments. ASU 2016-01 addresses certain aspects of recognition, measurement, presentation and disclosure of financial instruments. Most significantly, ASU 2016-01 requires companies to measure equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) at fair value with changes in fair value recognized in net income. ASU 2016-01 is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Adopting ASU 2016-01 will have no impact on the Company’s total Stockholders’ Equity as of January 1, 2018, but will result in an increase to Retained Earnings of approximately $414,000, with a corresponding reduction to AOCI. Subsequent to adoption, ASU 2016-01 is expected to cause increased volatility in the Company’s Consolidated Statements of Income and Comprehensive Income. In February 2016, FASB issued ASU 2016-02 – Leases (Topic 842) (“ASU 2016-02”). Under this ASU, lessees will recognize a right-of-use-asset and corresponding liability on the balance sheet for all leases, except for leases covering a period of fewer than 12 months. The liability is to be measured as the present value of the future minimum lease payments taking into account renewal options if applicable plus initial incremental direct costs such as commissions. The minimum payments are discounted using the rate implicit in the lease or, if not known, the lessee’s incremental borrowing rate. The lessee’s income statement treatment for leases will vary depending on the nature of what is being leased. A financing type lease is present when, among other matters, the asset is being leased for a substantial portion of its economic life or has an end-of-term title transfer or a bargain purchase option as in today’s practice. The payment of the liability set up for such leases will be apportioned between interest and principal; the right-of use asset will be generally amortized on a straight-line basis. If the lease does not qualify as a financing type lease, it will be accounted for on the income statement as rent on a straight-line basis. The guidance will be effective for the Company for interim and annual reporting periods beginning after December 15, 2018. The Company will apply the guidance using a modified retrospective approach. Early application is permitted. The Company is evaluating whether the adoption of ASU 2016-02 will have a significant impact on its consolidated results of operations, financial position or cash flows. In June 2016, FASB issued ASU 2016-13 - Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). The revised accounting guidance requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts and requires enhanced disclosures related to the significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an organization’s portfolio. In addition, 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 effective on January 1, 2020. The Company is currently evaluating the effect the updated guidance will have on its consolidated financial statements. In August 2016, FASB issued ASU 2016-15 - Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (“ASU 2016-15”). The revised ASU provides accounting guidance for eight specific cash flow issues. FASB issued the standard to clarify areas where GAAP has been either unclear or lacking in specific guidance. ASU 2016-15 will be effective for the Company for interim and annual reporting periods beginning after December 15, 2018. Early adoption is permitted, including adoption in an interim period. The Company is currently evaluating the effect the updated guidance will have on its consolidated statement of cash flows. In May 2017, the FASB issued ASU 2017-09, Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting (“ASU 2017-09”). ASU 2017-09 clarifies when to account for a change to the terms or conditions of a share-based payment award as a modification. Under the new guidance, modification accounting is required only if the fair value, the vesting conditions, or the classification of the award (as equity or liability) changes as a result of the change in terms or conditions. The amendment should be applied on a prospective basis. The effective date of ASU 2017-09 is for interim and annual reporting periods, beginning after December 15, 2017. The ASU has not yet been adopted; however, it will not have a material impact on the Company's consolidated financial position, cash flows or results of operations. 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. |
3. Investments
3. Investments | 12 Months Ended |
Dec. 31, 2017 | |
Weighted average amortization period of identified intangible assets of finite useful life | |
3. Investments | Available-for-Sale Securities The amortized cost and fair value of investments in available-for-sale fixed-maturity securities and equity securities as of December 31, 2017 and December 31, 2016 are summarized as follows: December 31, 2017 Net Cost or Gross Gross Unrealized Losses 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 $ 11,096,122 $ 250,135 $ (30,814 ) $ — $ 11,315,443 $ 219,321 Corporate and other bonds Industrial and miscellaneous 87,562,631 1,189,207 (269,857 ) (340,516 ) 88,141,465 578,834 Residential mortgage and other asset backed securities (1) 20,463,353 305,499 (48,482 ) (189,022 ) 20,531,348 67,995 Total fixed-maturity securities 119,122,106 1,744,841 (349,153 ) (529,538 ) 119,988,256 866,150 Equity Securities: Preferred stocks 7,081,099 60,867 (20,313 ) (120,712 ) 7,000,941 (80,158 ) Common stocks and exchange traded mutual funds 6,680,742 841,250 (222,205 ) (14,530 ) 7,285,257 604,515 Total equity securities 13,761,841 902,117 (242,518 ) (135,242 ) 14,286,198 524,357 Total $ 132,883,947 $ 2,646,958 $ (591,671 ) $ (664,780 ) $ 134,274,454 $ 1,390,507 (1) In 2017, KICO placed certain residential mortgage backed securities as eligible collateral in a designated custodian account related to its relationship with the Federal Home Loan Bank of New York ("FHLBNY") (see Note 9). The eligible collateral would be pledged to FHLBNY if KICO draws an advance from FHBLNY. As of December 31, 2017, the fair value of the eligible investments was approximately $6,703,000. KICO will retain all rights regarding all securities if pledged as collateral. As of December 31, 2017, there were no outstanding advances. December 31, 2016 Net Cost or Gross Gross Unrealized Losses 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 $ 8,053,449 $ 199,028 $ (46,589 ) $ — $ 8,205,888 $ 152,439 Corporate and other bonds Industrial and miscellaneous 53,728,395 600,519 (638,113 ) (5,612 ) 53,685,189 (43,206 ) Residential mortgage backed securities 18,814,784 70,682 (309,273 ) (38,442 ) 18,537,751 (277,033 ) Total fixed-maturity securities 80,596,628 870,229 (993,975 ) (44,054 ) 80,428,828 (167,800 ) Equity Securities: Preferred stocks 5,986,588 10,317 (241,333 ) (70,571 ) 5,685,001 (301,587 ) Common stocks and exchange traded mutual funds 3,722,797 691,324 (13,968 ) (97,468 ) 4,302,685 579,888 Total equity securities 9,709,385 701,641 (255,301 ) (168,039 ) 9,987,686 278,301 Total $ 90,306,013 $ 1,571,870 $ (1,249,276 ) $ (212,093 ) $ 90,416,514 $ 110,501 A summary of the amortized cost and fair value of the Company’s investments in available-for-sale fixed-maturity securities by contractual maturity as of December 31, 2017 and 2016 is shown below: The actual maturities may differ from contractual maturities because certain borrowers have the right to call or prepay obligations with or without penalties. December 31, 2017 December 31, 2016 Amortized Amortized Remaining Time to Maturity Cost Fair Value Cost Fair Value Less than one year $ 2,585,479 $ 2,595,938 $ 1,752,501 $ 1,765,795 One to five years 31,716,345 32,065,197 29,541,568 29,913,308 Five to ten years 62,702,945 63,129,543 30,487,775 30,211,974 More than ten years 1,653,984 1,666,230 — — Residential mortgage and other asset backed securities 20,463,353 20,531,348 18,814,784 18,537,751 Total $ 119,122,106 $ 119,988,256 $ 80,596,628 $ 80,428,828 Held-to-Maturity Securities The amortized cost and fair value of investments in held-to-maturity fixed-maturity securities as of December 31, 2017 and 2016 are summarized as follows: December 31, 2017 Cost or Gross Gross Unrealized Losses Net Amortized Unrealized Less than 12 More than 12 Fair Unrealized Category Cost Gains Months Months Value Gains U.S. Treasury securities $ 729,466 $ 147,573 $ (1,729 ) $ — $ 875,310 $ 145,844 Political subdivisions of States, Territories and Possessions 998,984 50,366 — — 1,049,350 50,366 Corporate and other bonds Industrial and miscellaneous 3,141,358 90,358 — (6,300 ) 3,225,416 84,058 Total $ 4,869,808 $ 288,297 $ (1,729 ) $ (6,300 ) $ 5,150,076 $ 280,268 December 31, 2016 Cost or Gross Gross Unrealized Losses Net Amortized Unrealized Less than 12 More than 12 Fair Unrealized Category Cost Gains Months Months Value Gains U.S. Treasury securities $ 606,427 $ 147,612 $ — $ — $ 754,039 $ 147,612 Political subdivisions of States, Territories and Possessions 1,349,916 37,321 — — 1,387,237 37,321 Corporate and other bonds Industrial and miscellaneous 3,138,559 72,784 (7,619 ) (46,881 ) 3,156,843 18,284 Total $ 5,094,902 $ 257,717 $ (7,619 ) $ (46,881 ) $ 5,298,119 $ 203,217 Held-to-maturity U.S. Treasury securities are held in trust pursuant to various states’ minimum fund requirements. A summary of the amortized cost and fair value of the Company’s investments in held-to-maturity securities by contractual maturity as of December 31, 2017 and 2016 is shown below: December 31, 2017 December 31, 2016 Amortized Amortized Remaining Time to Maturity Cost Fair Value Cost Fair Value Less than one year $ — $ — $ — $ — One to five years 2,546,459 2,601,898 650,000 642,455 Five to ten years 1,716,884 1,794,139 3,838,475 3,901,625 More than ten years 606,465 754,039 606,427 754,039 Total $ 4,869,808 $ 5,150,076 $ 5,094,902 $ 5,298,119 Investment Income Major categories of the Company’s net investment income are summarized as follows: Year ended December 31, 2017 2016 Income: Fixed-maturity securities $ 3,664,577 $ 2,668,148 Equity securities 564,071 557,919 Cash and cash equivalents 56,075 19,047 Other — 794 Total 4,284,723 3,245,908 Expenses: Investment expenses 152,137 130,325 Net investment income $ 4,132,586 $ 3,115,583 Proceeds from the sale and redemption of fixed-maturity securities held-to-maturity for the year ended December 31, 2017 includes one redemption of $200,000 and one sale of $47,500. The sale was to dispose of a bond issued by the Commonwealth of Puerto Rico that was deemed to have a permanent credit impairment by the Company (see Impairment Review Below). There were no proceeds from the sale and redemption of fixed-maturity securities held-to-maturity for the year ended December 31, 2016. Proceeds from the sale and maturity of fixed-maturity securities available-for-sale were $11,132,000 and $17,752,130 for the years ended December 31, 2017 and 2016, respectively. Proceeds from the sale of equity securities available-for-sale were $3,862,127 and $7,073,773 for the years ended December 31, 2017 and 2016, respectively. The Company’s net realized gains on sales of investments are summarized as follows: Year ended December 31, 2017 2016 Fixed-maturity securities: Gross realized gains $ 70,478 $ 354,071 Gross realized losses (1) (309,247 ) (302,087 ) (238,769 ) 51,984 Equity securities: Gross realized gains 636,880 637,249 Gross realized losses (263,798 ) (89,874 ) 373,082 547,375 Other-than-temporary impairment losses: Fixed-maturity securities (50,000 ) (69,911 ) (50,000 ) (69,911 ) Net realized gains $ 84,313 $ 529,448 (1) Gross realized losses for the year ended December 31, 2017 includes $59,916 loss from the sale of a fixed-maturity security held-to-maturity issued by the Commonwealth of Puerto Rico (see impairment review below) and $747 of loss from the redemption of a fixed-maturity security held-to-maturity. Impairment Review Impairment of investment 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 and equity securities portfolios to evaluate the necessity of recording impairment losses for other-than-temporary declines in the fair 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 other comprehensive income. The credit loss component recognized in earnings is identified as the amount of principal cash flows not expected to be received over the remaining term of the security as projected based on cash flow projections. For held-to-maturity debt securities, the amount of OTTI recorded in other comprehensive income for the noncredit portion of a previous OTTI is amortized prospectively over the remaining life of the security on the basis of timing of future estimated cash flows of the security. OTTI losses are recorded in the consolidated statements of income and comprehensive income 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. At December 31, 2017 and 2016, there were 75 and 85 securities, respectively, that accounted for the gross unrealized loss. In December 2017, the Company disposed of one of its held-to-maturity debt securities that was previously included in OTTI, the bond was issued by the Commonwealth of Puerto Rico (“PR”). In July 2016, PR defaulted on its interest payment to bondholders. Due to the credit deterioration of PR, the Company recorded its first credit loss component of OTTI on this investment as of June 30, 2016. As of December 31, 2016, the full amount of the write-down was recognized as a credit component of OTTI in the amount of $69,911. In September 2017, Hurricane Maria significantly affected Puerto Rico. The impact of this event further contributed to the credit deterioration of PR and, as a result, the Company recorded an additional credit loss component of OTTI on this investment for the amount of $50,000 during the quarter ended September 30, 2017. The total of the two OTTI write-downs of this investment through December 31, 2017 was $119,911. The Company determined that none of the other unrealized losses were deemed to be OTTI for its portfolio of fixed-maturity investments and equity securities for the years ended December 31, 2017 and 2016. Significant factors influencing the Company’s determination that unrealized losses were temporary included the magnitude of the unrealized losses in relation to each security’s cost, the nature of the investment and management’s intent and ability to retain the investment for a period of time sufficient to allow for an anticipated recovery of fair value to the Company’s cost basis. The Company held available-for-sale securities with unrealized losses representing declines that were considered temporary at December 31, 2017 and 2016 as follows: December 31, 2017 Less than 12 months 12 months or more Total No. of No. of Aggregate Fair Unrealized Positions Fair Unrealized Positions Fair Unrealized Category Value Losses Held Value Losses Held Value Losses Fixed-Maturity Securities: Political subdivisions of States, Territories and Possessions $ 1,549,839 $ (30,814 ) 4 $ — $ — — $ 1,549,839 $ (30,814 ) Corporate and other bonds industrial and miscellaneous 15,036,462 (269,857 ) 20 9,113,924 (340,516 ) 17 24,150,386 (610,373 ) Residential mortgage and other asset backed securities 6,956,371 (48,482 ) 6 7,867,572 (189,022 ) 15 14,823,943 (237,504 ) Total fixed-maturity securities $ 23,542,672 $ (349,153 ) 30 $ 16,981,496 $ (529,538 ) 32 $ 40,524,168 $ (878,691 ) Equity Securities: Preferred stocks $ 1,605,217 $ (20,313 ) 5 $ 1,776,675 $ (120,712 ) 3 $ 3,381,892 $ (141,025 ) Common stocks and exchange traded mutual funds 1,446,375 (222,205 ) 4 124,900 (14,530 ) 1 1,571,275 (236,735 ) Total equity securities $ 3,051,592 $ (242,518 ) 9 $ 1,901,575 $ (135,242 ) 4 $ 4,953,167 $ (377,760 ) Total $ 26,594,264 $ (591,671 ) 39 $ 18,883,071 $ (664,780 ) 36 $ 45,477,335 $ (1,256,451 ) December 31, 2016 Less than 12 months 12 months or more Total No. of No. of Aggregate Fair Unrealized Positions Fair Unrealized Positions Fair Unrealized Category Value Losses Held Value Losses Held Value Losses Fixed-Maturity Securities: Political subdivisions of States, Territories and Possessions $ 1,067,574 $ (46,589 ) 3 $ — $ — — $ 1,067,574 $ (46,589 ) Corporate and other bonds industrial and miscellaneous 19,859,293 (638,113 ) 34 239,970 (5,612 ) 1 20,099,263 (643,725 ) Residential mortgage backed securities 15,918,090 (309,273 ) 30 675,316 (38,442 ) 6 16,593,406 (347,715 ) Total fixed-maturity securities $ 36,844,957 $ (993,975 ) 67 $ 915,286 $ (44,054 ) 7 $ 37,760,243 $ (1,038,029 ) Equity Securities: Preferred stocks $ 3,759,850 $ (241,333 ) 8 $ 660,750 $ (70,571 ) 1 $ 4,420,600 $ (311,904 ) Common stocks and exchange traded mutual funds 288,075 (13,968 ) 1 424,550 (97,468 ) 1 712,625 (111,436 ) Total equity securities $ 4,047,925 $ (255,301 ) 9 $ 1,085,300 $ (168,039 ) 2 $ 5,133,225 $ (423,340 ) Total $ 40,892,882 $ (1,249,276 ) 76 $ 2,000,586 $ (212,093 ) 9 $ 42,893,468 $ (1,461,369 ) |
4. Fair Value Measurements
4. Fair Value Measurements | 12 Months Ended |
Dec. 31, 2017 | |
Weighted average amortization period of identified intangible assets of finite useful life | |
4. Fair Value Measurements | Fair value is the price that would be received upon sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The valuation technique used by the Company to fair value its financial instruments is the market approach, which uses prices and other relevant information generated by market transactions involving identical or comparable assets. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used to measure the assets or liabilities fall within different levels of the hierarchy, the classification is based on the lowest level input that is significant to the fair value measurement of the asset or liability. Classification of assets and liabilities within the hierarchy considers the markets in which the assets and liabilities are traded, including during period of market disruption, and the reliability and transparency of the assumptions used to determine fair value. The hierarchy requires the use of observable market data when available. The levels of the hierarchy and those investments included in each are as follows: Level 1 Level 2 Level 3 The availability of observable inputs varies and is affected by a wide variety of factors. When the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires significantly more judgment. The degree of judgment exercised by management in determining fair value is greatest for investments categorized as Level 3. For investments in this category, the Company considers prices and inputs that are current as of the measurement date. In periods of market dislocation, as characterized by current market conditions, the ability to observe prices and inputs may be reduced for many instruments. This condition could cause a security to be reclassified between levels. The Company’s investments measured at fair value on a recurring basis are allocated among pricing input levels at December 31, 2017 and 2016 as follows: December 31, 2017 Level 1 Level 2 Level 3 Total Fixed-maturity securities available-for-sale Political subdivisions of States, Territories and Possessions $ — $ 11,315,443 $ — $ 11,315,443 Corporate and other bonds industrial and miscellaneous 83,597,300 4,544,165 — 88,141,465 Residential mortgage backed securities — 20,531,348 — 20,531,348 Total fixed maturities 83,597,300 36,390,956 — 119,988,256 Equity securities 14,286,198 — — 14,286,198 Total investments $ 97,883,498 $ 36,390,956 $ — $ 134,274,454 December 31, 2016 Level 1 Level 2 Level 3 Total Fixed-maturity securities available-for-sale Political subdivisions of States, Territories and Possessions $ — $ 8,205,888 $ — $ 8,205,888 Corporate and other bonds industrial and miscellaneous 48,356,317 5,328,872 — 53,685,189 Residential mortgage backed securities — 18,537,751 — 18,537,751 Total fixed maturities 48,356,317 32,072,511 — 80,428,828 Equity securities 9,987,686 — — 9,987,686 Total investments $ 58,344,003 $ 32,072,511 $ — $ 90,416,514 |
5. Fair Value of Financial Inst
5. Fair Value of Financial Instruments | 12 Months Ended |
Dec. 31, 2017 | |
Weighted average amortization period of identified intangible assets of finite useful life | |
5. Fair Value of Financial Instruments | The Company uses the following methods and assumptions in estimating the fair value of financial instruments: Equity securities and fixed income securities available-for-sale: Cash and cash equivalents: Premiums receivable, reinsurance receivables, and investment subscription receivable: Real estate: Reinsurance balances payable: Long-term debt: The estimated fair values of the Company’s financial instruments as of December 31, 2017 and 2016 are as follows: December 31, 2017 December 31, 2016 Carrying Value Fair Value Carrying Value Fair Value Fixed-maturity securities-held-to maturity $ 4,869,808 $ 5,150,076 $ 5,094,902 $ 5,298,119 Cash and cash equivalents $ 48,381,633 $ 48,381,633 $ 12,044,520 $ 12,044,520 Investment subscription receivable $ 2,000,000 $ 2,000,000 $ — $ — Premiums receivable, net $ 13,217,698 $ 13,217,698 $ 11,649,398 $ 11,649,398 Reinsurance receivables, net $ 28,519,130 $ 28,519,130 $ 32,197,765 $ 32,197,765 Real estate, net of accumulated depreciation $ 2,261,829 $ 2,705,000 $ 1,659,405 $ 1,925,000 Reinsurance balances payable $ 2,563,966 $ 2,563,966 $ 2,146,017 $ 2,146,017 Long-term debt, net $ 29,126,965 $ 29,126,965 $ — $ — |
6. Intangibles
6. Intangibles | 12 Months Ended |
Dec. 31, 2017 | |
Weighted average amortization period of identified intangible assets of finite useful life | |
6. Intangibles | Intangible assets consist of finite and indefinite life assets. Finite life intangible assets include customer and producer relationships and other identifiable intangibles. The insurance company license is considered an indefinite life intangible asset subject to annual impairment testing. The remaining weighted average amortization period of identified intangible assets of finite useful life is approximately 1.5 years as of December 31, 2017. The components of intangible assets and their useful lives, accumulated amortization, and net carrying value as of December 31, 2017 and 2016 are summarized as follows: December 31, 2017 December 31, 2016 Useful Gross Net Gross Net Life Carrying Accumulated Carrying Carrying Accumulated Carrying (in yrs) Value Amortization Amount Value Amortization Amount Insurance license — $ 500,000 $ — $ 500,000 $ 500,000 $ — $ 500,000 Customer relationships 10 3,400,000 2,890,000 510,000 3,400,000 2,550,000 850,000 Other identifiable intangibles 7 950,000 950,000 — 950,000 950,000 — Total $ 4,850,000 $ 3,840,000 $ 1,010,000 $ 4,850,000 $ 3,500,000 $ 1,350,000 Intangible asset impairment testing and amortization The Company performs an analysis annually as of December 31, or sooner if there are indicators that the asset may be impaired, to identify potential impairment of intangible assets with both finite and indefinite lives and measures the amount of any impairment loss that may need to be recognized. Intangible asset impairment testing requires an evaluation of the estimated fair value of each identified intangible asset to its carrying value. An impairment charge would be recorded if the estimated fair value is less than the carrying amount of the intangible asset. No impairments have been identified in the years ended December 31, 2017 and 2016. The Company recorded amortization expense related to intangibles of $340,000 and $407,816, respectively, for the years ended December 31, 2017 and 2016. The estimated aggregate amortization expense for the remaining life of finite life intangibles is as follows: 2018 $ 340,000 2019 170,000 $ 510,000 |
7. Reinsurance
7. Reinsurance | 12 Months Ended |
Dec. 31, 2017 | |
Weighted average amortization period of identified intangible assets of finite useful life | |
7. Reinsurance | The Company’s quota share reinsurance treaties are on a July 1 through June 30 fiscal year basis; therefore, for year to date fiscal periods after June 30, two separate treaties will be included in such periods. The Company’s quota share reinsurance treaties in effect for the year ended December 31, 2017 for its personal lines business, which primarily consists of homeowners’ policies, were covered under the July 1, 2016/June 30, 2017 treaty year (“2016/2017 Treaty”) and July 1, 2017/June 30, 2018 treaty year (“2017/2019 Treaty”) (two year treaty as described below). The Company’s quota share reinsurance treaties in effect for the year ended December 31, 2016 were covered under the July 1, 2015/June 30, 2016 treaty year (“2015/2016 Treaty”) and the 2016/2017 Treaty. In March 2017, the Company bound its personal lines quota share reinsurance treaty effective July 1, 2017. The treaty provides for a reduction in the quota share ceding rate to 20%, from 40% in the 2016/2017 Treaty, and an increase in the provisional ceding commission rate to 53%, from 52% in the 2016/2017 Treaty. The 2017/2019 Treaty covers a two year period from July 1, 2017 through June 30, 2019. The Company’s 2015/2016 Treaty, 2016/2017 Treaty, and 2017/2019 Treaty provide for the following material terms: Treaty Year July 1, 2017 July 1, 2016 July 1, 2015 to to to Line of Business June 30, 2018 June 30, 2017 June 30, 2016 Personal Lines: Homeowners, dwelling fire and canine legal liability Quota share treaty: Percent ceded 20 % 40 % 40 % Risk retained $ 800,000 $ 500,000 $ 450,000 Losses per occurrence subject to quota share reinsurance coverage $ 1,000,000 $ 833,333 $ 750,000 Excess of loss coverage and facultative facility above quota share coverage (1) $ 9,000,000 $ 3,666,667 $ 3,750,000 in excess of in excess of in excess of $ 1,000,000 $ 833,333 $ 750,000 Total reinsurance coverage per occurrence $ 9,200,000 $ 4,000,000 $ 4,050,000 Losses per occurrence subject to reinsurance coverage $ 10,000,000 $ 4,500,000 $ 4,500,000 Expiration date June 30, 2019 June 30, 2017 June 30, 2016 Personal Umbrella Quota share treaty: Percent ceded - first $1,000,000 of coverage 90 % 90 % 90 % Percent ceded - excess of $1,000,000 dollars of coverage 100 % 100 % 100 % Risk retained $ 100,000 $ 100,000 $ 100,000 Total reinsurance coverage per occurrence $ 4,900,000 $ 4,900,000 $ 2,900,000 Losses per occurrence subject to quota share reinsurance coverage $ 5,000,000 $ 5,000,000 $ 3,000,000 Expiration date June 30, 2018 June 30, 2017 June 30, 2016 Commercial Lines: General liability commercial policies, except for commercial auto Quota share treaty: Percent ceded None None None Risk retained $ 750,000 $ 500,000 $ 425,000 Losses per occurrence subject to quota share reinsurance coverage None None None Excess of loss coverage above quota share coverage $ 3,750,000 $ 4,000,000 $ 4,075,000 in excess of in excess of in excess of $ 750,000 $ 500,000 $ 425,000 Total reinsurance coverage per occurrence $ 3,750,000 $ 4,000,000 $ 4,075,000 Losses per occurrence subject to reinsurance coverage $ 4,500,000 $ 4,500,000 $ 4,500,000 Commercial Umbrella Quota share treaty: Percent ceded - first $1,000,000 of coverage 90 % 90 % Percent ceded - excess of $1,000,000 of coverage 100 % 100 % Risk retained $ 100,000 $ 100,000 Total reinsurance coverage per occurrence $ 4,900,000 $ 4,900,000 Losses per occurrence subject to quota share reinsurance coverage $ 5,000,000 $ 5,000,000 Expiration date June 30, 2018 June 30, 2017 Commercial Auto: Risk retained $ 300,000 Excess of loss coverage in excess of risk retained $ 1,700,000 in excess of $ 300,000 Catastrophe Reinsurance: Initial loss subject to personal lines quota share treaty $ 5,000,000 $ 5,000,000 $ 4,000,000 Risk retained per catastrophe occurrence (2) $ 4,000,000 $ 3,000,000 $ 2,400,000 Catastrophe loss coverage in excess of quota share coverage (3) (4) $ 315,000,000 $ 247,000,000 $ 176,000,000 Severe winter weather aggregate (4) No No Yes Reinstatement premium protection (5) Yes Yes Yes 1. For personal lines, the 2017/2019 Treaty includes the addition of an automatic facultative facility allowing KICO to obtain homeowners single risk coverage up to $10,000,000 in total insured value, which covers direct losses from $3,500,000 to $10,000,000. 2. Plus losses in excess of catastrophe coverage. 3. Catastrophe coverage is limited on an annual basis to two times the per occurrence amounts. Effective July 1, 2016, the duration of a catastrophe occurrence from windstorm, hail, tornado, hurricane and cyclone was extended to 168 consecutive hours from 120 consecutive hours. 4. From July 1, 2015 through June 30, 2016, the catastrophe treaty also covered losses caused by severe winter weather during any consecutive 28 day period. 5. Effective July 1, 2015, reinstatement premium protection for $16,000,000 of catastrophe coverage in excess of $4,000,000. Effective July 1, 2016, reinstatement premium protection for $20,000,000 of catastrophe coverage in excess of $5,000,000. Effective July 1, 2017, reinstatement premium protection for $145,000,000 of catastrophe coverage in excess of $5,000,000. The single maximum risks per occurrence to which the Company is subject under the new treaties effective July 1, 2017 are as follows: July 1, 2017 - June 30, 2018 Treaty Range of Loss Risk Retained Personal Lines (1) Initial $1,000,000 $800,000 $1,000,000 - $10,000,000 None(2) Over $10,000,000 100% Personal Umbrella Initial $1,000,000 $100,000 $1,000,000 - $5,000,000 None Over $5,000,000 100% Commercial Lines Initial $750,000 $750,000 $750,000 - $4,500,000 None(3) Over $4,500,000 100% Commercial Umbrella Initial $1,000,000 $100,000 $1,000,000 - $5,000,000 None Over $5,000,000 100% Catastrophe (4) Initial $5,000,000 $4,000,000 $5,000,000 - $320,000,000 None Over $320,000,000 100% ________________ (1) Two year treaty with expiration date of June 30, 2019. (2) Covered by excess of loss treaties up to $3,500,000 and by facultative facility from $3,500,000 to $10,000,000. (3) Covered by excess of loss treaties. (4) Catastrophe coverage is limited on an annual basis to two times the per occurrence amounts. The single maximum risks per occurrence to which the Company is subject under the treaties that expired on June 30, 2017 and 2016 are as follows: July 1, 2016 - June 30, 2017 July 1, 2015 - June 30, 2016 Treaty Range of Loss Risk Retained Range of Loss Risk Retained Personal Lines Initial $833,333 $500,000 Initial $750,000 $450,000 $833,333 - $4,500,000 None(1) $750,000 - $4,500,000 None(1) Over $4,500,000 100% Over $4,500,000 100% Personal Umbrella Initial $1,000,000 $100,000 Initial $1,000,000 $100,000 $1,000,000 - $5,000,000 None $1,000,000 - $3,000,000 None Over $5,000,000 100% Over $3,000,000 100% Commercial Lines Initial $500,000 $500,000 Initial $425,000 $425,000 $500,000 - $4,500,000 None(1) $425,000 - $4,500,000 None(1) Over $4,500,000 100% Over $4,500,000 100% Commercial Umbrella Initial $1,000,000 $100,000 $1,000,000 - $5,000,000 None Over $5,000,000 100% Catastrophe (2) Initial $5,000,000 $3,000,000 Initial $4,000,000 $2,400,000 $5,000,000 - $252,000,000 None $4,000,000 - $180,000,000 None Over $252,000,000 100% Over $180,000,000 100% ________________ (1) Covered by excess of loss treaties. (2) Catastrophe coverage is limited on an annual basis to two times the per occurrence amounts. The Company’s reinsurance program is structured to enable the Company to significantly grow its premium volume while maintaining regulatory capital and other financial ratios generally within or below the expected ranges used for regulatory oversight purposes. The reinsurance program also provides income as a result of ceding commissions earned pursuant to the quota share reinsurance contracts. The Company’s participation in reinsurance arrangements does not relieve the Company of its obligations to policyholders. Approximate reinsurance recoverables on unpaid and paid losses by reinsurer at December 31, 2017 and 2016 are as follows: Unpaid Paid ($ in thousands) Losses Losses Total Security December 31, 2017 Maiden Reinsurace Company $ 8,160 $ 968 $ 9,128 $ 10,583 (1 ) Swiss Reinsurance America Corporation 4,299 600 4,899 - SCOR Reinsurance Company 851 209 1,060 - Allied World Assurance Company 1,649 188 1,837 - Others 1,789 568 2,357 205 (2 ) Total $ 16,748 $ 2,533 $ 19,281 $ 10,788 December 31, 2016 Maiden Reinsurace Company $ 7,640 $ 985 $ 8,625 $ 13,113 (1 ) Swiss Reinsurance America Corporation 4,310 671 4,981 - SCOR Reinsurance Company 1,440 152 1,592 - Allied World Assurance Company 392 300 692 - Others 1,995 211 2,206 164 (3 ) Total $ 15,777 $ 2,319 $ 18,096 $ 13,277 (1) Secured pursuant to collateralized trust agreements. (2) Represents $202,000 secured pursuant to collateralized trust agreement and $3,000 guaranteed by an irrevocable letter of credit. (3) Represents $161,000 secured pursuant to collateralized trust agreement and $3,000 guaranteed by an irrevocable letter of credit Assets held in the trusts referred to in footnotes (1) to (3) in the table above are not included in the Company’s invested assets and investment income earned on these assets is credited to the two reinsurers respectively. In addition to reinsurance recoverables on unpaid and paid losses, reinsurance receivables in the accompanying consolidated balance sheets as of December 31, 2017 and 2016 include unearned ceded premiums of $9,237,180 and $14,101,745, respectively. Ceding Commission Revenue The Company earns ceding commission revenue under its quota share reinsurance agreements based on: (i) a fixed provisional commission rate at which provisional ceding commissions are earned, and (ii) a 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 when the estimated ultimate loss ratio decreases and, conversely, the commission rate and contingent ceding commissions earned decreases when the estimated ultimate loss ratio increases. The Company’s estimated ultimate treaty year loss ratios (“Loss Ratio(s)”) for treaties in effect for the year ended December 31, 2017 are attributable to contracts for the 2017/2019 Treaty and the 2016/2017 Treaty. The Company’s estimated ultimate treaty year Loss Ratios for treaties in effect for the year ended December 31, 2016 are attributable to contracts for the 2016/2017 Treaty and the 2015/2016 Treaty. Treaties in effect for the year ended December 31, 2017 Under the 2017/2019 Treaty, the Company receives, and under the 2016/2017 Treaty, the Company received, an upfront fixed provisional rate that is subject to a sliding scale contingent adjustment based upon Loss Ratio. Under this arrangement, the Company earns and earned provisional ceding commissions that are subject to later adjustment dependent on changes to the estimated Loss Ratio for the 2017/2019 Treaty and 2016/2017 Treaty. The Company’s Loss Ratios for the period July 1, 2017 through December 31, 2017 attributable to the 2017/2019 Treaty, and from July 1, 2016 through December 31, 2017 attributable to the 2016/2017 Treaty, were consistent with the contractual Loss Ratio at which the provisional ceding commissions were earned and therefore no additional contingent commission was recorded for the year ended December 31, 2017 with respect to these treaties. Treaties in effect for the year ended December 31, 2016 Under the 2016/2017 Treaty and the 2015/2016 Treaty, the Company received an upfront fixed provisional rate that was subject to a sliding scale contingent rate adjustment based on Loss Ratio. Under this arrangement, the Company earned provisional ceding commissions that were subject to later adjustment dependent on changes to the estimated Loss Ratio for the 2016/2017 Treaty and 2015/2016 Treaty. The Company’s Loss Ratio for the period July 1, 2016 through December 31, 2016 attributable to the 2016/2017 Treaty, were consistent with the contractual Loss Ratio at which provisional ceding commissions were earned and therefore no additional contingent commission was recorded for the year ended December 31, 2016 with respect to this treaty. The Company’s Loss Ratio for the period July 1, 2015 through December 31, 2016 attributable to the 2015/2016 Treaty were higher than the contractual Loss Ratio at which provisional ceding commissions were earned. Accordingly, for the year ended December 31, 2016, the Company’s contingent ceding commission earned was reduced as a result of the estimated Loss Ratio for the 2015/2016 Treaty. In addition to the treaties that were in effect for the years ended December 31, 2017 and 2016, the Loss Ratios from prior years’ treaties are subject to change as loss reserves from those periods increase or decrease, resulting in an increase or decrease in the commission rate and contingent ceding commissions earned. Ceding commissions earned consists of the following: Years ended December 31, 2017 2016 Provisional ceding commissions earned $ 10,677,214 $ 12,769,404 Contingent ceding commissions earned (744,081 ) (1,501,163 ) $ 9,933,133 $ 11,268,241 Provisional ceding commissions are settled monthly. Balances due from reinsurers for contingent ceding commissions on quota share treaties are settled annually based on the Loss Ratio of each treaty year that ends on June 30. 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 December 31, 2017 and 2016, net contingent ceding commissions payable to reinsurers under all treaties was approximately $1,850,000 and $773,000, respectively. |
8. Deferred Policy Acquisition
8. Deferred Policy Acquisition Costs and Deferred Ceding Commission Revenue | 12 Months Ended |
Dec. 31, 2017 | |
Weighted average amortization period of identified intangible assets of finite useful life | |
8. Deferred Policy Acquisition Costs and Deferred Ceding Commission Revenue | Deferred policy acquisition costs incurred and policy-related ceding commission revenue are deferred and amortized to income on property and casualty insurance business as follows: Year ended December 31, 2017 2016 Net deferred policy acquisition costs, net of ceding commission revenue, beginning of year $ 5,387,940 $ 4,400,238 Cost incurred and deferred: Commissions and brokerage 23,093,880 19,566,982 Other underwriting and policy acquisition costs 6,669,904 5,470,285 Ceding commission revenue (8,091,785 ) (13,186,177 ) Net deferred policy acquisition costs 21,671,999 11,851,090 Return of deferred ceding commission revenue due to reduction of quota share (3,648,859 ) — Amortization (12,830,256 ) (10,863,388 ) 5,192,884 987,702 Net deferred policy acquisition costs, net of ceding commission revenue, end of year $ 10,580,824 $ 5,387,940 Ending balances for deferred policy acquisition costs and deferred ceding commission revenue as of December 31, 2017 and 2016 follows: December 31, 2017 2016 Deferred policy acquisition costs $ 14,847,236 $ 12,239,781 Deferred ceding commission revenue (4,266,412 ) (6,851,841 ) Balance at end of period $ 10,580,824 $ 5,387,940 |
9. Debt
9. Debt | 12 Months Ended |
Dec. 31, 2017 | |
Debt | |
9. Debt | Short-term Debt In July 2017, KICO became a member of, and invested in, the Federal Home Loan Bank of New York (“FHLBNY”). The aggregate investment of dividend bearing common stock was $22,500 as of December 31, 2017. 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. 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 December 31 of the previous year and are due and payable within one year of borrowing. The maximum allowable advance was approximately $9,849,000 as of December 31, 2017. Advances are limited to the amount of available collateral, which was approximately $6,703,000 as of December 31, 2017. There were no borrowings under this facility during the period ended December 31, 2017. Long-term Debt On December 19, 2017, the Company issued $30 million of its 5.50% Senior Unsecured Notes due December 30, 2022 (the “Notes”) in an underwritten public offering. Interest will be payable semi-annually in arrears on June 30 and December 30 of each year, beginning on June 30 2018 at the rate of 5.50% per year from December 19, 2017. The net proceeds of the issuance were $29,121,630, net of discount of $163,200 and transaction costs of $715,170, for an effective yield of 5.67%. The balance of long-term debt as of December 31, 2017 is as follows: 5.50% Senior Unsecured Notes $ 30,000,000 Discount (162,209 ) Issuance costs (710,826 ) Long-term debt, net $ 29,126,965 The Notes are unsecured obligations of the Company and are not the obligations of or guaranteed by any of the Company's subsidiaries. The 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 Notes. The Notes rank equally in right of payment to all of the Company's existing and future senior indebtedness, but will be effectively subordinated to any secured indebtedness to the extent of the value of the collateral securing such secured indebtedness. In addition, the Notes will be structurally subordinated to the indebtedness and other obligations of the Company's subsidiaries. The Company may redeem the Notes, at any time in whole or from time to time in part, at the redemption price equal to the greater of: (i) 100% of the principal amount of the Notes to be redeemed; and (ii) the sum of the present values of the remaining scheduled payments of principal and interest on the Notes to 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. On December 20, 2017, the Company used $25,000,000 of the net proceeds from the offering to contribute capital to KICO, to support additional growth. The remainder of the net proceeds will be used for general corporate purposes. A registration statement relating to the debt issued in the offering was filed with the Securities Exchange Commission (the “SEC”) and became effective on November 28, 2017. |
10. Property and Equipment
10. Property and Equipment | 12 Months Ended |
Dec. 31, 2017 | |
Weighted average amortization period of identified intangible assets of finite useful life | |
10. Property and Equipment | The components of property and equipment are summarized as follows: Accumulated Cost Depreciation Net December 31, 2017 Building $ 2,146,950 $ (460,819 ) $ 1,686,131 Land 575,698 — 575,698 Furniture office equipment 707,524 (493,558 ) 213,966 Computer equipment and software 4,657,174 (2,360,392 ) 2,296,782 Automobile 20,298 (20,298 ) — Total $ 8,107,644 $ (3,335,067 ) $ 4,772,577 December 31, 2016 Building $ 1,887,347 $ (381,039 ) $ 1,506,308 Land 153,097 — 153,097 Furniture office equipment 620,440 (388,853 ) 231,587 Computer equipment and software 2,602,330 (1,481,949 ) 1,120,381 Automobile 81,394 (81,394 ) — Total $ 5,344,608 $ (2,333,235 ) $ 3,011,373 Depreciation expense for the years ended December 31, 2017 and 2016 was $1,062,928 and $717,105, respectively. |
11. Property and Casualty Insur
11. Property and Casualty Insurance Activity | 12 Months Ended |
Dec. 31, 2017 | |
Weighted average amortization period of identified intangible assets of finite useful life | |
11. Property and Casualty Insurance Activity | Premiums written, ceded and earned are as follows: Direct Assumed Ceded Net Year ended December 31, 2017 Premiums written $ 121,575,178 $ 22,847 $ (28,729,149 ) $ 92,868,876 Change in unearned premiums (10,662,744 ) 9,456 (4,864,565 ) (15,517,853 ) Premiums earned $ 110,912,434 $ 32,303 $ (33,593,714 ) $ 77,351,023 Year ended December 31, 2016 Premiums written $ 103,191,995 $ 28,522 $ (37,294,330 ) $ 65,926,187 Change in unearned premiums (6,110,225 ) 6,091 1,585,853 (4,518,281 ) Premiums earned $ 97,081,770 $ 34,613 $ (35,708,477 ) $ 61,407,906 Premium receipts in advance of the policy effective date are recorded as advance premiums. The balance of advance premiums as of December 31, 2017 and 2016 was $1,477,693 and $1,421,560, respectively. The components of the liability for loss and LAE expenses and related reinsurance receivables as of December 31, 2017 and 2016 are as follows: Gross Reinsurance Liability Receivables December 31, 2017 Case-basis reserves $ 30,499,592 $ 11,987,693 Loss adjustment expenses 8,635,199 1,990,506 IBNR reserves 9,664,831 2,770,709 Recoverable on unpaid losses 16,748,908 Recoverable on paid losses — 2,533,042 Total loss and loss adjustment expenses $ 48,799,622 19,281,950 Unearned premiums 9,237,180 Total reinsurance receivables $ 28,519,130 December 31, 2016 Case-basis reserves $ 25,000,733 $ 10,804,341 Loss adjustment expenses 7,752,617 1,893,094 IBNR reserves 8,983,369 3,079,445 Recoverable on unpaid losses 15,776,880 Recoverable on paid losses — 2,319,140 Total loss and loss adjustment expenses $ 41,736,719 18,096,020 Unearned premiums 14,101,745 Total reinsurance receivables $ 32,197,765 The following table provides a reconciliation of the beginning and ending balances for unpaid losses and LAE: Years ended December 31, 2017 2016 Balance at beginning of period $ 41,736,719 $ 39,876,500 Less reinsurance recoverables (15,776,880 ) (16,706,364 ) Net balance, beginning of period 25,959,839 23,170,136 Incurred related to: Current year 34,246,081 27,853,010 Prior years (60,544 ) (63,349 ) Total incurred 34,185,537 27,789,661 Paid related to: Current year 18,194,860 16,496,648 Prior years 9,899,802 8,503,310 Total paid 28,094,662 24,999,958 Net balance at end of period 32,050,714 25,959,839 Add reinsurance recoverables 16,748,908 15,776,880 Balance at end of period $ 48,799,622 $ 41,736,719 Incurred losses and LAE are net of reinsurance recoveries under reinsurance contracts of $14,067,027 and $11,796,714 for the years ended December 31, 2017 and 2016, respectively. Prior year incurred loss and LAE development results from changes in ultimate loss and LAE estimates by line of business and accident year. Prior year loss and LAE development incurred during the years ended December 31, 2017 and 2016 was favorable $(60,544) and favorable $(63,349), respectively. The Company’s management continually monitors claims activity to assess the appropriateness of carried case and incurred but not reported (“IBNR”) reserves, giving consideration to Company and industry trends. 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 claims 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 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 year’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 years. Several methods are used, varying by line of business and accident year, in order to select the estimated year-end loss reserves. These methods include the following: Paid Loss Development Incurred Loss Development Paid Bornhuetter-Ferguson (“BF”) Incurred Bornhuetter-Ferguson (“BF”) Incremental Claim-Based Methods Management’s best estimate of required reserves is generally based on an average of the methods above, with appropriate weighting of the various 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. Two 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 described above, and the loss development factor selections used in the loss development methods 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 Company is not aware of any claims trends that have emerged or that would cause future adverse development that have not already been considered in existing case reserves and in its current loss development factors. 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 December 31, 2014 and prior is limited although there remains the possibility of adverse development on reported claims (‘case development’ IBNR). The following is information about incurred and paid claims development as of December 31, 2017, net of reinsurance, as well as the cumulative reported claims by accident year and total IBNR reserves as of December 31, 2017 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, 2008 to December 31, 2016 is presented as supplementary unaudited information. 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. All Lines of Business (in thousands, except reported claims data) As of Incurred Loss and Allocated Loss Adjustment Expenses, Net of Reinsurance December 31, 2017 For the Years Ended December 31, Accident Year 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 IBNR Cumulative Number of Reported Claims by Accident Year (Unaudited 2008 - 2016) 2008 $ 4,505 $ 4,329 $ 4,223 $ 4,189 $ 4,068 $ 4,055 $ 4,056 $ 4,040 $ 4,038 $ 4,034 $ — 1,133 2009 4,403 4,254 4,287 4,384 4,511 4,609 4,616 4,667 4,690 6 1,136 2010 5,598 5,707 6,429 6,623 6,912 6,853 6,838 6,840 (0 ) 1,616 2011 7,603 7,678 8,618 9,440 9,198 9,066 9,144 6 1,913 2012 9,539 9,344 10,278 10,382 10,582 10,790 33 4,702 (1) 2013 10,728 9,745 9,424 9,621 10,061 271 1,558 2014 14,193 14,260 14,218 14,564 552 2,125 2015 22,340 21,994 22,148 1,278 2,525 2016 26,062 24,941 2,571 2,841 2017 31,605 6,024 3,128 Total $ 138,817 (1) Reported claims for accident year 2012 includes 3,406 claims from Superstorm Sandy. All Lines of Business (in thousands) Cumulative Paid Loss and Allocated Loss Adjustment Expenses, Net of Reinsurance For the Years Ended December 31, Accident Year 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 (Unaudited 2008 - 2016) 2008 $2,406 $3,346 $3,730 $3,969 $4,003 $4,029 $4,028 $4,031 $4,031 $4,031 2009 2,298 3,068 3,607 3,920 4,134 4,362 4,424 4,468 4,487 2010 2,566 3,947 4,972 5,602 6,323 6,576 6,720 6,772 2011 3,740 5,117 6,228 7,170 8,139 8,540 8,702 2012 3,950 5,770 7,127 8,196 9,187 10,236 2013 3,405 5,303 6,633 7,591 8,407 2014 5,710 9,429 10,738 11,770 2015 12,295 16,181 18,266 2016 15,364 19,001 2017 16,704 Total $108,376 Net liability for unpaid loss and allocated loss adjustment expenses for the accident years presented $30,441 All outstanding liabilities before 2008, net of reinsurance 225 Liabilities for loss and allocted loss adjustment expenses, net of reinsurance $30,666 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 claims development tables to the liability for loss and LAE reserves in the consolidated balance sheet is as follows: As of (in thousands) December 31, 2017 Liabilities for loss and loss adjustment expenses, net of reinsurance $ 30,666 Total reinsurance recoverable on unpaid losses 16,749 Unallocated loss adjustment expenses 1,385 Total gross liability for loss and LAE reserves $ 48,800 The following is supplementary unaudited information about average historical claims duration as of December 31, 2017: Average Annual Percentage Payout of Incurred Loss and Allocated Loss Adjustment Expenses by Age, Net of Reinsurance Years 1 2 3 4 5 6 7 8 9 10 All Lines of Business 46.7 % 18.7 % 11.5 % 8.4 % 7.3 % 4.7 % 1.3 % 0.6 % 0.2 % 0.0 % The percentages in the above table do not add up to 100% because the percentages represent averages across all accident years at each development stage. |
12. Stockholders' Equity
12. Stockholders' Equity | 12 Months Ended |
Dec. 31, 2017 | |
Weighted average amortization period of identified intangible assets of finite useful life | |
12. Stockholders' Equity | Public Offering of Common Stock On January 31, 2017, the Company closed on an underwritten public offering of 2,500,000 shares of its Common Stock. On February 14, 2017, the Company closed on the underwriters’ purchase option for an additional 192,500 shares of its Common Stock. The public offering price for the 2,692,500 shares sold was $12.00 per share. The aggregate net proceeds to the Company were approximately $30,137,000, after deducting underwriting discounts and commissions and other offering expenses in the aggregate amount of approximately $2,173,000. On March 1, 2017, the Company used $23,000,000 of the net proceeds from the offering to contribute capital to its insurance subsidiary, KICO, to support its ratings upgrade plan and additional growth. The remainder of the net proceeds will be used for general corporate purposes. A shelf registration statement relating to the shares sold in the offering was filed with the SEC and became effective on January 19, 2017. Private Placement of Common Stock In April 2016, the Company sold 595,238 newly issued shares of its Common Stock to RenaissanceRe Ventures Ltd., a subsidiary of RenaissanceRe Holdings Ltd. (NYSE:RNR) (“RenaissanceRe”), in a private placement. RenaissanceRe is a global provider of catastrophe and specialty reinsurance and insurance. The new shares of Common Stock were sold to RenaissanceRe at a price of $8.40 per share. The Company received net proceeds of approximately $4,808,000 from the private placement. In June 2016, the Company invested $3,000,000 of the proceeds in KICO as additional surplus to support its continued growth. The Company intends to use the remaining net proceeds of the offering for general corporate purposes. Dividend Declared Dividends declared and paid on Common Stock were $3,214,471 and $1,941,271 for the years ended December 31, 2017 and 2016, respectively. The Company’s Board of Directors approved a quarterly dividend on February 2, 2018 of $.10 per share payable in cash on March 15, 2018 to stockholders of record as of February 28, 2018 (see Note 19 - Subsequent Events). Stock Options Pursuant to the Company’s 2005 Equity Participation Plan (the “2005 Plan”), which provides for the issuance of incentive stock options, non-statutory stock options and restricted stock, a maximum of 700,000 shares of the Company’s Common Stock are permitted to be issued pursuant to options granted and restricted stock issued. 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 are authorized to be issued pursuant to the grant of incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock and stock bonuses. The stockholders approved the 2014 Plan on August 11, 2015. Incentive stock options granted under the 2014 Plan and 2005 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). The Board of Directors or the Stock Option Committee determines the expiration date with respect to non-statutory stock options and the vesting provisions for restricted stock granted under the 2014 Plan and 2005 Plan. The results of operations for the years ended December 31, 2017 and 2016 include stock-based compensation expense totaling $38,025 and $106,882, respectively. Stock-based compensation expense related to stock options is net of estimated forfeitures of 17% for the years ended December 31, 2017 and 2016. Such amounts have been included in the consolidated statements of income and comprehensive income within other operating expenses. Stock-based compensation expense in 2017 and 2016 is the estimated fair value of options granted amortized on a straight-line basis over the requisite service period for the entire portion of the award less an estimate for anticipated forfeitures. The Company uses the “simplified” method to estimate the expected term of the options because the Company’s historical share option exercise experience does not provide a reasonable basis upon which to estimate expected term. No options were granted during the year ended December 31, 2017. The weighted average estimated fair value of stock options granted during the year ended December 31, 2016 was $1.87 per share. The fair value of stock options at the grant date was estimated using the Black-Scholes option-pricing model. The following weighted average assumptions were used for grants during the following periods: Years ended December 31, 2017 2016 Dividend Yield n/a 2.74% - 3.18% Volatility n/a 31.61% - 31.81% Risk-Free Interest Rate n/a 1.01% - 1.11% Expected Life n/a 3.25 years The Black-Scholes option valuation 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 our 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 our stock options. A summary of stock option activity under the Company’s 2014 Plan and 2005 Plan for the year ended December 31, 2017 is as follows: Stock Options Number of Shares Weighted Average Exercise Price per Share Weighted Average Remaining Contractual Term Aggregate Intrinsic Value Outstanding at January 1, 2017 362,750 $ 6.62 2.61 $ 2,586,748 Granted — $ — — $ — Exercised (21,600 ) $ 5.48 — $ 221,012 Forfeited — $ — — $ — Outstanding at December 31, 2017 341,150 $ 6.69 1.67 $ 4,131,028 Vested and Exercisable at December 31, 2017 321,150 $ 6.59 1.53 $ 3,921,553 The aggregate intrinsic value of options outstanding and options exercisable at December 31, 2017 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 $18.80 closing price of the Company’s Common Stock on December 31, 2017. The total intrinsic value of options exercised in the year ended December 31, 2017 was $221,012, determined as of the date of exercise. Participants in the 2005 and 2014 Plans 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”). The Company received cash proceeds of $77,927 from the exercise of options for the purchase of 13,750 shares of Common Stock during the year ended December 31, 2017. The remaining 7,850 options exercised during the year ended December 31, 2017 were Net Exercises, resulting in the issuance of 5,840 shares of Common Stock. The Company received cash proceeds of $54,310 from the exercise of options for the purchase of 11,000 shares of Common Stock during the year ended December 31, 2016. The remaining 1,000 options exercised during the year ended December 31, 2016 were Net Exercises. As of December 31, 2017, the fair value of unamortized compensation cost related to unvested stock option awards was approximately $7,000. Unamortized compensation cost as of December 31, 2017 is expected to be recognized over a remaining weighted-average vesting period of 0.68 years. As of December 31, 2017, there were 550,352 shares reserved for grants under the 2014 Plan. Restricted Stock Awards A summary of the restricted common stock activity under the Company’s 2014 Plan for the year ended December 31, 2017 is as follows: Restricted Stock Awards Shares Weighted Average Grant Date Fair Value per Share Aggregate Fair Value Balance at January 1, 2017 7,500 $ 8.67 $ 64,995 Granted 55,481 $ 14.80 $ 821,164 Vested (12,311 ) $ 13.70 $ 178,651 Forfeited (3,333 ) $ 11.51 $ 38,377 Balance at December 31, 2017 47,337 $ 14.35 $ 679,180 Fair value was calculated using the closing price of the Company’s Common Stock on the grant date. For the year ended December 31, 2017, stock-based compensation for these grants was approximately $232,000 which is included in other operating expenses on the accompanying consolidated statements of income and comprehensive income. 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. |
13. Statutory Financial Informa
13. Statutory Financial Information and Accounting Policies | 12 Months Ended |
Dec. 31, 2017 | |
Weighted average amortization period of identified intangible assets of finite useful life | |
13. Statutory Financial Information and Accounting Policies | For regulatory purposes, KICO prepares its statutory basis financial statements in accordance with Statements of Statutory Accounting Principles (“statutory basis” or “SAP”) as promulgated by the National Association of Insurance Commissioners (the “NAIC”) and the prescribed or permitted practices of the New York State Department of Financial Services (the “DFS”). The more significant SAP variances from GAAP are as follows: ● Policy acquisition costs are charged to operations in the year such costs are incurred, rather than being deferred and amortized as premiums are earned over the terms of the policies. ● Ceding commission revenues are earned when ceded premiums are written except for ceding commission revenues in excess of anticipated acquisition costs, which are deferred and amortized as ceded premiums are earned. GAAP requires that all ceding commission revenues be earned as the underlying ceded premiums are earned over the term of the reinsurance agreements. ● Certain assets including certain receivables, a portion of the net deferred tax asset, prepaid expenses and furniture and equipment are not admitted. ● Investments in fixed-maturity securities are valued at NAIC value for statutory financial purposes, which is primarily amortized cost. GAAP requires certain investments in fixed-maturity securities classified as available for sale, to be reported at fair value. ● Certain amounts related to ceded reinsurance are reported on a net basis within the statutory basis financial statements. GAAP requires these amounts to be shown gross. ● For SAP purposes, changes in deferred income taxes relating to temporary differences between net income for financial reporting purposes and taxable income are recognized as a separate component of gains and losses in surplus rather than included in income tax expense or benefit as required under GAAP. State insurance laws restrict the ability of KICO to declare dividends. These restrictions are related to surplus and net investment income. Dividends are restricted to the lesser of 10% of surplus or 100% of investment income (on a statutory accounting basis) for the trailing 36 months, net of dividends paid by KICO during such period. State insurance regulators require insurance companies to maintain specified levels of statutory capital and surplus. Generally, dividends may only be paid out of unassigned surplus, and the amount of an insurer’s unassigned surplus following payment of any dividends must be reasonable in relation to the insurer’s outstanding liabilities and adequate to meet its financial needs. For the years ended December 31, 2017 and 2016, KICO paid dividends to Kingstone of $2,900,000 and $1,950,000, respectively. On February 22, 2018, KICO’s Board of Directors approved a cash dividend of $800,000 to Kingstone, which was paid on February 23, 2018. For the years ended December 31, 2017 and 2016, KICO had statutory basis net income of $7,907,743 and $9,212,126, respectively. At December 31, 2017 and 2016, KICO had reported statutory basis surplus as regards policyholders of $101,290,282 and $49,962,415, respectively, as filed with the DFS. |
14. Risk Based Capital
14. Risk Based Capital | 12 Months Ended |
Dec. 31, 2017 | |
Weighted average amortization period of identified intangible assets of finite useful life | |
14. Risk Based Capital | State insurance departments impose risk-based capital (“RBC”) requirements on insurance enterprises. The RBC Model serves as a benchmark for the regulation of insurance companies by state insurance regulators. RBC provides for targeted surplus levels based on formulas, which specify various weighting factors that are applied to financial balances or various levels of activity based on the perceived degree of risk, and are set forth in the RBC requirements. Such formulas focus on four general types of risk: (a) the risk with respect to the company’s assets (asset or default risk); (b) the risk of default on amounts due from reinsurers, policyholders, or other creditors (credit risk); (c) the risk of underestimating liabilities from business already written or inadequately pricing business to be written in the coming year (underwriting risk); and, (d) the risk associated with items such as excessive premium growth, contingent liabilities, and other items not reflected on the balance sheet (off-balance sheet risk). The amount determined under such formulas is called the authorized control level RBC (“ACL”). The RBC guidelines define specific capital levels based on a company’s ACL that are determined by the ratio of the company’s total adjusted capital (“TAC”) to its ACL. TAC is equal to statutory capital, plus or minus certain other specified adjustments. The Company’s TAC is far above the ACL for each of the last two years and is in compliance with RBC requirements as of December 31, 2017 and 2016. |
15. Income Taxes
15. Income Taxes | 12 Months Ended |
Dec. 31, 2017 | |
Weighted average amortization period of identified intangible assets of finite useful life | |
15. Income Taxes | The Company files a consolidated U.S. federal income tax return that includes all 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. The provision for income taxes is comprised of the following: Years ended December 31, 2017 2016 Current federal income tax expense $ 4,317,686 $ 4,824,655 Current state income tax expense (benefit) 7,353 (12,590 ) Deferred federal and state income tax benefit (1,809 ) (293,364 ) Provision for income taxes $ 4,323,230 $ 4,518,701 A reconciliation of the federal statutory rate to the Company’s effective tax rate is as follows: Years ended December 31, 2017 2016 Computed expected tax expense $ 5,008,400 35.0 % $ 4,696,463 35.0 % Change in enacted tax rates on net deferred tax liabilities (405,218 ) (2.8 ) — — State taxes, net of Federal benefit (101,858 ) (0.7 ) (71,428 ) (0.5 ) State valuation allowance 124,486 0.9 85,714 0.6 Benefit of lower tax brackets (100,000 ) (0.7 ) (100,000 ) (0.7 ) Permanent differences Dividends received deduction (138,197 ) (1.0 ) (136,690 ) (1.0 ) Non-taxable investment income (85,684 ) (0.6 ) (110,784 ) (0.8 ) Stock-based compensation (25,821 ) (0.2 ) Other permanent differences 46,962 0.3 48,139 0.3 Prior year tax matters 4,172 — 123,976 0.9 Other (4,012 ) — (16,689 ) (0.1 ) Total tax $ 4,323,230 30.2 % $ 4,518,701 33.7 % 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 a various rates depending on whether the temporary differences are subject to federal taxes, state taxes, or both. On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (the “Act”), was enacted by the U.S. federal government. The Act provides for significant changes to corporate taxation including the decrease of the corporate tax rate to 21%. The Company has accounted for the material impacts of the Act by re-measuring its deferred tax assets/(liabilities) at the 21% enacted tax rate as of December 31, 2017. Deferred income tax liability for unrealized gains on available-for-sale securities that were re-measured due to the Act resulted in a stranded tax effect within Accumulated Other Comprehensive Income (“AOCI”). This is due to the effect of the tax rate change being recorded through continuing operations as required under Accounting Standards Codification 740. On February 14, 2018, Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2018-02, Income Statement – Reporting Comprehensive Income (Topic 220) – Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (“ASU 2018-02”), which allows for the reclassification of the stranded tax effects as a result of the Act from AOCI to retained earnings and requires certain other disclosures. The Company chose to early adopt the provisions of ASU 2018-02 and recorded a one-time reclassification of $182,912 from AOCI to retained earnings for the stranded tax effects resulting from the newly enacted corporate tax rate. The amount of the reclassification was the difference between the historical corporate tax rate and the newly enacted 21% corporate tax rate (see Consolidated Statement of Consolidated Stockholders’ Equity). The impact of the change in tax rate was a decrease in net deferred income tax liabilities of $405,218 with a corresponding increase in deferred income tax benefit. Additionally, the Company re-measured the deferred tax effects of unrealized gains recorded in AOCI of $182,912 through a reclassification between AOCI and retained earnings. The Company’s net deferred income tax liability for the year ended December 31, 2016 remains at the previously enacted tax rate. Upon completion of the 2017 U.S. income tax return in 2018 the Company may identify additional re-measurement adjustments to its recorded deferred tax liabilities and the one-time transition tax. The Company will continue to assess its provision for income taxes as future guidance is issued, but do not currently anticipate significant revisions will be necessary. Any such revisions will be treated in accordance with the measurement period guidance outlined in Staff Accounting Bulletin No. 118. Significant components of the Company’s deferred tax assets and liabilities are as follows: December 31, December 31, 2017 2016 Deferred tax asset: Net operating loss carryovers (1) $ 103,655 $ 131,626 Claims reserve discount 300,005 417,349 Unearned premium 2,431,301 2,877,365 Deferred ceding commission revenue 895,947 2,329,626 Other 382,522 188,675 Total deferred tax assets 4,113,430 5,944,641 Deferred tax liability: Investment in KICO (2) 759,543 1,169,000 Deferred acquisition costs 3,117,920 4,161,526 Intangibles 212,100 459,000 Depreciation and amortization 328,735 265,671 Net unrealized appreciation of securities - available for sale 295,474 56,393 Total deferred tax liabilities 4,713,772 6,111,590 Net deferred income tax liability $ (600,342 ) $ (166,949 ) (1) The deferred tax assets from net operating loss carryovers are as follows: Type of NOL 2017 2016 Expiration State only (A) $ 824,996 $ 655,719 December 31, 2037 Valuation allowance (725,541 ) (534,293 ) State only, net of valuation allowance 99,455 121,426 Amount subject to Annual Limitation, federal only (B) 4,200 10,200 December 31, 2019 Total deferred tax asset from net operating loss carryovers $ 103,655 $ 131,626 (A) Kingstone generates operating losses for state purposes and has prior year NOLs available. The state NOL as of December 31, 2017 and 2016 was approximately $12,692,000 and $10,088,000, 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 consolidated statements of income and comprehensive income 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 2037. (B) The Company has an NOL of $20,000 that is subject to Internal Revenue Code Section 382, which places a limitation on the utilization of the federal net operating loss to approximately $10,000 per year (“Annual Limitation”) as a result of a greater than 50% ownership change of the Company in 1999. The losses subject to the Annual Limitation will be available for future years, expiring through December 31, 2019. (2) Deferred tax liability - investment in KICO 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. Under GAAP guidance for business combinations, a temporary difference with an indefinite life exists when the parent has a lower carrying value of its subsidiary for income tax purposes. The Company is required to maintain its deferred tax liability 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. The table below reconciles the changes in net deferred income tax liability to the deferred income tax provision for the year ended December 31, 2017: Change in net deferred income tax liabilities $ 433,393 Deferred tax expense allocated to other comprehensive income 435,202 Deferred income tax benefit $ (1,809 ) 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 material interest or penalties related to income taxes that have been accrued or recognized as of and for the years ended December 31, 2017 and 2016. If any had been recognized these would be 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, 2014 through December 31, 2016 remain subject to examination. In March 2018, the Company received a notice that its federal income tax return for the year ended December 31, 2016 was selected for examination by the Internal Revenue Service. |
16. Employee Benefit Plans
16. Employee Benefit Plans | 12 Months Ended |
Dec. 31, 2017 | |
Weighted average amortization period of identified intangible assets of finite useful life | |
16. Employee Benefit Plans | Employee Profit Sharing Plan The Company maintains a discretionary employee profit sharing plan (the “Profit Sharing Plan”) available to full-time employees who are employed as of December 31. For the years ended December 31, 2017 and 2016, the Profit Sharing Plan called for a bonus to be paid based on a formula that is tied to the annual GAAP combined ratio (“Combined Ratio”). The maximum the bonus can be is 25% of eligible wages at a Combined Ratio of 70%. The bonus decreases by 1% for each percentage point increase in the Combined Ratio. There is a minimum bonus of 5% at a Combined Ratio of 90% and above. The bonus is allocated 35% to the employees’ 401(k) account and 65% as cash through payroll. The Company incurred approximately $989,000 and $897,000 of expense for the years ended December 31, 2017 and 2016, respectively, related to the Profit Sharing 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, at its discretion, may allocate an amount for additional contributions (“Additional Contributions”) to the 401(k) Plan included in the Profit Sharing Plan as discussed above. The Company incurred approximately $545,000 and $483,000 of expense for the years ended December 31, 2017 and 2016, respectively, related to the 401(k) Plan. For the years ended December 31, 2017 and 2016, Additional Contributions totaled approximately $342,000 and $309,000, respectively. |
17. Commitments and Contingenci
17. Commitments and Contingencies | 12 Months Ended |
Dec. 31, 2017 | |
Weighted average amortization period of identified intangible assets of finite useful life | |
17. 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 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. The Company is not subject to any other pending legal proceedings that management believes are likely to have a material adverse effect on the financial statements. Office Lease 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. In June 2016, the Company entered into a lease modification agreement. The original lease had a term of seven years and nine months. The lease modification increased the space occupied by KICO and extended the lease term to seven years and nine months to be measured from the additional premises commencement date. The additional premises commencement date was September 19, 2016, and additional rent was payable beginning March 19, 2017. The original lease commencement date was July 1, 2015 and rent commencement began January 1, 2016. In addition to the base rental costs, occupancy lease agreements generally provide for rent escalations resulting from increased assessments from real estate taxes and other charges. Rent expense under the lease is recognized on a straight-line basis over the lease term. At December 31, 2017, cumulative rent expense exceeded cumulative rent payments by $90,582. This difference is recorded as deferred rent and is included in accounts payable, accrued expenses and other liabilities in the accompanying consolidated balance sheets. As of December 31, 2017, aggregate future minimum rental commitments under this agreement are as follows: For the Year Ending December 31, Total 2018 $ 164,117 2019 169,861 2020 175,806 2021 181,959 2022 188,328 Thereafter 244,064 Total $ 1,124,135 Rent expense for the years ended December 31, 2017 and 2016 amounted to $165,368 and $119,720, respectively, and is included in the consolidated statements of income and comprehensive income within other underwriting expenses. Employment Agreements – Chief Executive Officer Agreement in effect for the year ended December 31, 2016 Effective August 12, 2014, the Company entered into an amendment to its employment agreement with Barry Goldstein, its President, Chairman of the Board and Chief Executive Officer (as amended, the “Prior Goldstein Employment Agreement”), pursuant to which the term of the employment agreement was extended from December 31, 2014 to December 31, 2016 and, effective July 1, 2014 and continuing through the term of the agreement, Mr. Goldstein’s annual base salary was increased to $575,000 and his bonus was revised to equal 6% of the Company’s consolidated income from operations before taxes, net of the Company’s consolidated net investment income and net realized gains on sales of investments. In addition, in consideration of Mr. Goldstein entering into the amendment, the Company paid him a bonus in the amount of $62,500. Concurrently with the amendment, the Company granted to Mr. Goldstein, pursuant to the 2005 Plan, a five year option for the purchase of 200,000 shares of common stock at an exercise price of $6.73 per share, exercisable to the extent of 62,500 shares on the date of grant and each of the initial two anniversary dates of the grant and 12,500 shares on the third anniversary date of the grant. In addition, the Company granted to Mr. Goldstein, pursuant to the 2014 Plan, a five year option for the purchase of 50,000 shares of common stock at an exercise price of $6.73 per share, exercisable on the third anniversary of the date of the grant. The 50,000 share option grant was subject to stockholder approval of the 2014 Plan. The stockholders approved the 2014 Plan on August 11, 2015. Pursuant to the stock option agreements with Mr. Goldstein, the Company agreed that, under certain circumstances following a change of control of the Company, and the termination of his employment, or in the event Mr. Goldstein’s employment with the Company was terminated by the Company without cause or he resigned with good reason (each as defined in his employment agreement), all of the options granted to Mr. Goldstein would have become exercisable and would have remained exercisable until the first anniversary of the termination date. Pursuant to the Prior Goldstein Employment Agreement, the Company also agreed that, under certain circumstances following a change of control of Kingstone Companies, Inc. and the termination of his employment, Mr. Goldstein would have been entitled to a payout equal to one and one-half times his then annual salary. In the event of termination of Mr. Goldstein’s employment by the Company without cause or he resigned with good reason (as each term is defined in the Prior Goldstein Employment Agreement), Mr. Goldstein would have been entitled to receive his base salary and bonuses from the Company for the remainder of the term, and his outstanding options would have become exercisable and would have remained exercisable until the first anniversary of the termination date. In addition, in the event Mr. Goldstein’s employment with KICO was terminated by KICO with or without cause, he would have been entitled to receive a lump sum payment from KICO equal to six months base salary. The Prior Goldstein Employment Agreement expired on December 31, 2016 and in January 2017, Mr. Goldstein entered into a new employment agreement with the Company as discussed below. Agreement in effect as of January 1, 2017 On January 20, 2017, the Company and Mr. Goldstein, entered into a new employment agreement (the “2017 Goldstein Employment Agreement”). The 2017 Goldstein Employment Agreement is effective as of January 1, 2017 and expires on December 31, 2019. Pursuant to the 2017 Goldstein Employment Agreement, Mr. Goldstein is entitled to receive an annual base salary of $630,000 (an increase from $575,000 per annum in effect through December 31, 2016) 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) and net realized gains (losses) on investments (consistent with the bonus payable to Mr. Goldstein through December 31, 2016). In addition, pursuant to the 2017 Goldstein Employment Agreement, Mr. Goldstein is entitled to a long-term compensation payment ("LTC") of between $945,000 and $2,835,000 in the event the Company's adjusted book value per share (as defined in the 2017 Goldstein Employment Agreement) has increased by at least an average of 8% per annum as of December 31, 2019 as compared to December 31, 2016 (with the maximum LTC payment being due if the average per annum increase is at least 14%). Accrued LTC compensation of $945,000 for the year ended December 31, 2017 is included in other operating expenses on the accompanying consolidated statements of income and comprehensive income. Further, pursuant to the 2017 Goldstein Employment Agreement, in the event that Mr. Goldstein's employment is terminated by the Company without cause or he resigns for good reason (each as defined in the 2017 Goldstein Employment Agreement), Mr. Goldstein would be entitled to receive his base salary, the 6% bonus and the LTC payment for the remainder of the term. Mr. Goldstein would be entitled, under certain circumstances, to a payment equal to one and one-half times his then annual salary and the target LTC payment of $1,890,000 in the event of the termination of his employment following a change of control of the Company. In consideration of certain accomplishments during the three year period ended December 31, 2016, the Company also paid Mr. Goldstein a bonus in the amount of $200,000. Approval Required for Transactions with Subsidiary On July 1, 2009, Kingstone 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, Kingstone acquired a 100% equity interest in KICO. In connection with the plan of conversion of CMIC, the Company has agreed with the DFS that any intercompany transaction between itself and KICO must be filed with the DFS 30 days prior to implementation. |
18. Earnings Per Common Share
18. Earnings Per Common Share | 12 Months Ended |
Dec. 31, 2017 | |
Weighted average amortization period of identified intangible assets of finite useful life | |
18. Earnings Per Common Share | Basic net earnings per common share is computed by dividing income available to common shareholders by the weighted-average number of common shares outstanding. Diluted earnings per common share reflect, in periods in which they have a dilutive effect, the impact of common shares issuable upon exercise of stock options. The computation of diluted earnings per common share excludes those options with an exercise price in excess of the average market price of the Company’s common shares during the periods presented. The computation of diluted earnings per common share excludes outstanding options in periods where the exercise of such options would be anti-dilutive. For the years ended December 31, 2017 and 2016, the inclusion of -0- and 7,715 options, respectively, in the computation of diluted earnings per common share would have been anti-dilutive for the periods and, as a result, the weighted average number of common shares used in the calculation of diluted earnings per common share has not been adjusted for the effect of such options. The reconciliation of the weighted average number of common shares used in the calculation of basic and diluted earnings per common share follows: Year ended December 31, 2017 2016 Weighted average number of shares outstanding 10,388,440 7,736,594 Effect of dilutive securities, common share equivalents: Stock options 188,983 — Restricted stock awards 4,154 70,669 Weighted average number of shares outstanding, used for computing diluted earnings per share 10,581,577 7,807,263 |
19. Subsequent Events
19. Subsequent Events | 12 Months Ended |
Dec. 31, 2017 | |
Weighted average amortization period of identified intangible assets of finite useful life | |
19. Subsequent Events | The Company has evaluated events that occurred subsequent to December 31, 2017 through March 15, 2018, the date these consolidated financial statements were issued for matters that required disclosure or adjustment in these consolidated financial statements. Dividends Declared and Paid On February 2, 2018, the Company’s Board of Directors approved a dividend of $.10 per share, or $1,068,377, payable in cash on March 15, 2018 to stockholders of record as of February 28, 2018. Employment Agreement On March 14, 2018, the Company and Dale A. Thatcher, a director of the Company, entered into an employment agreement (the “Thatcher Employment Agreement”) pursuant to which Mr. Thatcher will serve as the Company’s Chief Operating Officer. Mr. Thatcher is also to serve as KICO’s President. The Thatcher Employment Agreement is effective as of March 15, 2018 and expires on December 31, 2018. Pursuant to the Thatcher Employment Agreement, Mr. Thatcher is entitled to receive a base salary of $500,000 per annum and a minimum bonus equal to 15% of his base salary. Concurrently with the execution of the Thatcher Employment Agreement, the Company granted to Mr. Thatcher 35,715 shares of restricted Common Stock under the 2014 Plan. The shares granted will vest in three equal installments on each of the three annual anniversaries following the grant date, subject to the terms of the restricted stock grant agreement between the Company and Mr. Thatcher. |
20. Quarterly Financial Data
20. Quarterly Financial Data | 12 Months Ended |
Dec. 31, 2017 | |
Quarterly Financial Information Disclosure [Abstract] | |
20. Quarterly Financial Data | The following is a summary of unaudited quarterly results of operations for the years ended December 31, 2017 and 2016: 2017 March 31, June 30, September 30, December 31, Total Net premiums earned $ 16,369,748 $ 16,953,727 $ 21,514,408 $ 22,513,140 $ 77,351,023 Ceding commission revenue 3,184,452 3,305,938 1,717,610 1,725,133 9,933,133 Net investment income 857,800 1,026,004 1,033,307 1,215,475 4,132,586 Net realized gain (loss) on sale of investments (54,506 ) 130,423 20,998 (12,602 ) 84,313 Total revenues 20,647,194 21,724,251 24,614,653 25,783,212 92,769,310 Loss and loss adjustment expenses 8,292,996 7,454,922 7,073,323 11,364,296 34,185,537 Commission expense and other underwriting expenses 9,101,395 9,301,182 9,975,938 10,919,353 39,297,868 Net income 1,470,580 2,510,392 4,073,921 1,931,592 9,986,485 Basic earnings per share $ 0.15 $ 0.24 $ 0.38 $ 0.18 $ 0.96 Diluted earnings per share $ 0.15 $ 0.23 $ 0.38 $ 0.18 $ 0.94 2016 March 31, June 30, September 30, December 31, Total Net premiums earned $ 14,531,675 $ 15,010,875 $ 15,646,181 $ 16,219,175 $ 61,407,906 Ceding commission revenue 2,770,337 2,569,025 2,934,928 2,993,951 11,268,241 Net investment income 813,057 764,070 709,072 829,384 3,115,583 Net realized gain (loss) on sale of investments 80,436 283,432 241,035 (75,455 ) 529,448 Total revenues 18,444,852 18,911,910 19,828,397 20,251,505 77,436,664 Loss and loss adjustment expenses 9,483,855 5,786,836 5,134,854 7,384,116 27,789,661 Commission expense and other underwriting expenses 7,616,507 8,122,342 8,642,964 8,812,023 33,193,836 Net income 541,032 2,842,261 3,460,626 2,055,847 8,899,766 Basic earnings per share $ 0.07 $ 0.36 $ 0.44 $ 0.26 $ 1.15 Diluted earnings per share $ 0.07 $ 0.36 $ 0.43 $ 0.26 $ 1.14 Due to changes in number of shares outstanding from quarter to quarter, the total earnings per share of the four quarters may not necessarily equal the earnings per share for the year. |
2. Summary of Significant Acc27
2. Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2017 | |
Summary Of Significant Accounting Policies Policies | |
Basis of Presentation | The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). |
Principles of Consolidation | The consolidated financial statements consist of Kingstone and its wholly owned subsidiaries: KICO and its 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. All significant inter-company account balances and transactions have been eliminated in consolidation. |
Revenue Recognition | Net Premiums Earned Insurance policies issued by the Company are short-duration contracts. Accordingly, premium revenues, net of premiums ceded to reinsurers, are recognized as earned in proportion to the amount of insurance protection provided, on a pro-rata basis over the terms of the underlying policies. Unearned premiums represent premiums applicable to the unexpired portions of in-force insurance contracts at the end of each year. Ceding Commission Revenue Commissions on reinsurance premiums ceded are earned in a manner consistent with the recognition of the costs of the reinsurance, generally on a pro-rata basis over the terms of the policies reinsured. Unearned amounts are recorded as deferred ceding commission revenue. Certain reinsurance agreements contain provisions whereby the ceding commission rates vary based on the loss experience under the agreements. The Company records ceding commission revenue based on its current estimate of subject losses. The Company records adjustments to the ceding commission revenue in the period that changes in the estimated losses are determined. |
Loss and Loss Adjustment Expenses ("LAE") Reserves | The liability for loss and LAE represents management’s best estimate of the ultimate cost of all reported and unreported losses that are unpaid as of the balance sheet date. The liability for losses and LAE is estimated on an undiscounted basis, using individual case-basis valuations, statistical analyses and various actuarial reserving methodologies. The projection of future claim payment and reporting is based on an analysis of the Company’s historical experience, supplemented by analyses of industry loss data. Management believes that the reserves for loss and LAE are adequate to cover the ultimate cost of losses and claims to date; however, because of the uncertainty from various sources, including changes in reporting patterns, claims settlement patterns, judicial decisions, legislation, and economic conditions, actual loss experience may not conform to the assumptions used in determining the estimated amounts for such liability at the balance sheet date. Adjustments to these estimates are reflected in expense for the period in which the estimates are changed. Because of the nature of the business historically written, management believes that the Company has limited exposure to environmental claim liabilities. |
Reinsurance | In the normal course of business, the Company seeks to reduce the loss that may arise from catastrophes or other events that cause unfavorable underwriting results. This is done by reinsuring certain levels of risk in various areas of exposure with a panel of financially secure reinsurance carriers. Reinsurance receivables represents management’s best estimate of paid and unpaid loss and LAE recoverable from reinsurers, and ceded losses receivable and unearned ceded premiums under reinsurance agreements. Ceded losses receivable are estimated using techniques and assumptions consistent with those used in estimating the liability for loss and LAE. Management believes that reinsurance receivables as recorded represent its best estimate of such amounts; however, as changes in the estimated ultimate liability for loss and LAE are determined, the estimated ultimate amount receivable from the reinsurers will also change. Accordingly, the ultimate receivable could be significantly in excess of or less than the amount recorded in the consolidated financial statements. Adjustments to these estimates are reflected in the period in which the estimates are changed. Loss and LAE incurred as presented in the consolidated statement of income and comprehensive income are net of reinsurance recoveries. Management has evaluated its reinsurance arrangements and determined that significant insurance risk is transferred to the reinsurers. Reinsurance agreements have been determined to be short-duration prospective contracts and, accordingly, the costs of the reinsurance are recognized over the life of the contract in a manner consistent with the earning of premiums on the underlying policies subject to the reinsurance contract. Management estimates uncollectible amounts receivable from reinsurers based on an assessment of factors including the creditworthiness of the reinsurers and the adequacy of collateral obtained, where applicable. There was no allowance for uncollectible reinsurance as of December 31, 2017 and 2016. The Company did not expense any uncollectible reinsurance for the years ended December 31, 2017 and 2016. Significant uncertainties are inherent in the assessment of the creditworthiness of reinsurers and estimates of any uncollectible amounts due from reinsurers. Any change in the ability of the Company’s reinsurers to meet their contractual obligations could have a material adverse effect on the consolidated financial statements as well as KICO’s ability to meet its regulatory capital and surplus requirements. |
Cash and Cash Equivalents | The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. The Company maintains its cash balances at several financial institutions. |
Investments | The Company classifies its fixed-maturity securities as either held-to-maturity or available-for-sale and its equity securities as available-for-sale. The Company may sell its available-for-sale securities in response to changes in interest rates, risk/reward characteristics, liquidity needs or other factors. Fixed-maturity securities that the Company has the specific intent and ability to hold until maturity are classified as such and carried at amortized cost. Available-for-sale securities are reported at their estimated fair values based on quoted market prices from a recognized pricing service, with unrealized gains and losses, net of tax effects, reported as a separate component of accumulated other comprehensive income in the consolidated statements of stockholders’ equity. Realized gains and losses are determined on the specific identification method and recognized in the consolidated statements of income and comprehensive income. Investment income is accrued to the date of the consolidated financial statements and includes amortization of premium and accretion of discount on fixed-maturities. Interest is recognized when earned, while dividends are recognized when declared. Due and accrued investment income was approximately $1,136,000 and $694,000 as of December 31, 2017 and 2016, respectively, and is included in other assets on the accompanying consolidated balance sheets. |
Premiums Receivable | Premiums receivable are presented net of an allowance for doubtful accounts of approximately $291,000 and $212,000 as of December 31, 2017 and 2016, respectively. The allowance for uncollectible amounts is based on an analysis of amounts receivable giving consideration to historical loss experience and current economic conditions and reflects an amount that, in management’s judgment, is adequate. Uncollectible premiums receivable balances of approximately $138,000 and $98,000 were written off for the years ended December 31, 2017 and 2016, respectively. |
Deferred Policy Acquisition Costs | Deferred policy acquisition costs represent the costs of writing business that vary with, and are primarily related to, the successful production of insurance business (principally commissions, premium taxes and certain underwriting salaries). Policy acquisition costs are deferred and recognized as expense as related premiums are earned. |
Intangible Assets | The Company has recorded acquired identifiable intangible assets. The cost of a group of assets acquired in a transaction is allocated to the individual assets including identifiable intangible assets based on their relative fair values. Identifiable intangible assets with a finite useful life are amortized over the period that the asset is expected to contribute directly or indirectly to the future cash flows of the Company. Intangible assets with an indefinite life are not amortized, however are subject to impairment testing if events or changes in circumstances indicate that it is more likely than not the asset is impaired. All identifiable intangible assets are tested for recoverability whenever events or changes in circumstances indicate that a carrying amount may not be recoverable. No impairment losses from intangible assets were recognized for the years ended December 31, 2017 and 2016. |
Property and Equipment | Building and building improvements, furniture, computer equipment, and software are reported at cost less accumulated depreciation. Depreciation is provided using the straight-line method over the estimated useful lives of the assets. The Company estimates the useful life for computer equipment, computer software, automobile, furniture and other equipment is three years, and building and building improvements is 39 years. The Company reviews its real estate assets used as its headquarters to evaluate the necessity of recording impairment losses for market changes due to declines in the fair value of the property. In evaluating potential impairment, management considers the current estimated fair value compared to the carrying value of the asset. At December 31, 2017 and 2016, the fair value of the real estate assets is estimated to be in excess of the carrying value. |
Income Taxes | Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis and for operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The Company files a consolidated tax return with its subsidiaries. At December 31, 2017, the Company had no material unrecognized tax benefits and no adjustments to liabilities or operations were required. On December 22, 2017, the Tax Cuts and Jobs Act of 2017 was enacted (see Note 15 - Income Taxes). |
Assessments | Insurance related assessments are accrued in the period in which they have been incurred. A typical obligating event would be the issuance of an insurance policy or the occurrence of a claim. The Company is subject to a variety of assessments. |
Concentration and Credit Risk | Financial instruments that potentially subject the Company to concentration of credit risk are primarily cash and cash equivalents, investments, and premium and reinsurance receivables. Investments are diversified through many industries and geographic regions based upon KICO’s Investment Committee’s guidelines, which employs a variety of investment strategies. The Company believes that no significant concentration of credit risk exists with respect to investments. At times, cash may be uninsured or in deposit accounts that exceed the Federal Deposit Insurance Corporation (“FDIC”) insurance limits. The Company has not experienced any losses in such accounts and management believes the Company is not exposed to any significant credit risk. Cash equivalents are not insured by the FDIC. As of December 31, 2017 and 2016, the Company’s cash equivalents were as follows: December 31, December 31, 2017 2016 Collateralized bank repurchase agreement (1) $ 10,249,985 $ 6,268,647 Money market funds 35,874,700 3,121,155 Total $ 46,124,685 $ 9,389,802 (1) The Company has a security interest in certain of the bank's holdings of direct obligations of the United States or one or more agencies thereof. The collateral is held in a hold-in-custody arrangement with a third party who maintains physical possession of the collateral on behalf of the bank. At December 31, 2017, the outstanding premiums receivable balance is generally diversified due to the large number of individual insureds comprising the Company’s customer base. The Company’s customer base is concentrated in the New York City metropolitan area. The Company also has receivables from its reinsurers. Reinsurance contracts do not relieve the Company of its obligations to policyholders. Failure of reinsurers to honor their obligations could result in losses to the Company. The Company periodically evaluates the financial condition of its reinsurers to minimize its exposure to significant losses from reinsurer insolvencies. See Note 7 for reinsurance recoverables on unpaid and paid losses by reinsurer. Management’s policy is to review all outstanding receivables quarterly as well as the bad debt write-offs experienced in the past and establish an allowance for doubtful accounts, if deemed necessary. Direct premiums earned from lines of business in excess of 10% of the total subject the Company to concentration risk for the years ended December 31, 2017 and 2016 as follows: Years ended December 31, 2017 2016 Personal Lines 77.2 % 76.8 % Commercial Lines 12.2 % 12.8 % Livery physical damage 10.3 % 10.1 % Total premiums earned subject to concentration 99.7 % 99.7 % Premiums earned not subject to concentration 0.3 % 0.3 % Total premiums earned 100.0 % 100.0 % |
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. The actual results could differ from these estimates and assumptions, which include the reserves for losses and loss adjustment expenses, 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 on-going basis, management reevaluates its assumptions and the methods for calculating these estimates. Actual results may differ significantly from the estimates and assumptions used in preparing the consolidated financial statements. |
Earnings per share | Basic earnings per common share is computed by dividing income available to common stockholders by the weighted-average number of common shares outstanding. Diluted earnings per common share reflect, in periods in which they have a dilutive effect, the impact of common shares issuable upon the exercise of stock options. The computation of diluted earnings per share excludes those options with an exercise price in excess of the average market price of the Company’s common shares during the periods presented. |
Advertising Costs | Advertising costs are charged to operations when the advertising is initiated. Advertising costs are included in other underwriting expenses in the accompanying consolidated statements of income and comprehensive income, and were approximately $202,000 and $169,000 for the years ended December 31, 2017 and 2016, respectively. |
Stock-based Compensation | Stock-based compensation expense in 2017 and 2016 is the estimated fair value of restricted stock awards and options granted, amortized on a straight-line basis over the requisite service period for the entire portion of the award less an estimate for anticipated forfeitures. The Company uses the “simplified” method to estimate the expected term of the options because the Company’s historical share option exercise experience does not provide a reasonable basis upon which to estimate expected term. |
Compensated Absences | Employees of the Company are entitled to paid vacations, sick days, and other time off depending on job classification, length of service and other factors. It is impracticable to estimate the amount of compensation of future absences and, accordingly, no liability has been recorded in the accompanying consolidated financial statements. The Company’s policy is to recognize the cost of compensated absences when paid to employees. |
Comprehensive Income | Comprehensive income refers to revenue, expenses, gains and losses that are included in comprehensive income but are excluded from net income as these amounts are recorded directly as an adjustment to stockholders' equity, primarily from changes in unrealized gains and losses on available-for-sale securities. |
Accounting Changes | Effective January 1, 2017, the Company has adopted the provisions of Accounting Standards Update (“ASU”) 2016-09 – Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, which requires recognition of all income tax effects from share-based payments arising on or after January 1, 2017 (the Company’s adoption date) in income tax expense. As a result, the Company realized windfall tax benefits in the period of adoption of approximately $5,000, which was recognized as a discrete period income tax benefit as required by this ASU. This benefit had no effect on the Company’s effective tax rate for the year ended December 31, 2017. In February 2018, the Financial Accounting Standards Board (“FASB”) issued ASU 2018-02 - Income Statement – Reporting Comprehensive Income (Topic 220) – Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (“AOCI”) (“ASU 2018-02”). The deferred income tax liability for unrealized gains on available-for-sale securities that were re-measured due to the reduction in corporate income tax rates under the Tax Cuts and Jobs Act of 2017 (the “Act”) resulted in a stranded tax effect within AOCI. This is due to the effect of the tax rate change being recorded through continuing operations as required under Accounting Standards Codification 740 (“ASC 740”). The revised ASU allows for the reclassification of the stranded tax effects as a result of the Act from AOCI to retained earnings and requires certain other disclosures. The Company chose to early adopt the provisions of ASU 2018-02 and recorded a one-time reclassification of $182,912 from AOCI to retained earnings for the stranded tax effects resulting from the newly enacted corporate tax rate. The amount of the reclassification was the difference between the historical corporate tax rate and the newly enacted 21% corporate tax rate (see Consolidated Statement of Stockholders’ Equity). |
Recent Accounting Pronouncements | In May 2014, FASB issued ASU 2014-09 – Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”). The core principle of the new guidance is that an entity should recognize revenue to reflect the transfer of goods and services to customers in an amount equal to the consideration the entity receives or expects to receive. ASU 2014-09, as amended by ASU 2015-14, ASU 2016-08, ASU 2016-10 and ASU 2016-20, is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. The Company adopted the new revenue standard on January 1, 2018 using the modified retrospective approach. The standard excludes from its scope the accounting for insurance contracts, financial instruments, and certain other agreements that are governed under other GAAP guidance. Accordingly, the adoption of ASU 2014-09 did not have a material effect on the Company’s consolidated financial statements. In January 2016, FASB issued ASU 2016-01 – Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”). The updated accounting guidance requires changes to the reporting model for financial instruments. ASU 2016-01 addresses certain aspects of recognition, measurement, presentation and disclosure of financial instruments. Most significantly, ASU 2016-01 requires companies to measure equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) at fair value with changes in fair value recognized in net income. ASU 2016-01 is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Adopting ASU 2016-01 will have no impact on the Company’s total Stockholders’ Equity as of January 1, 2018, but will result in an increase to Retained Earnings of approximately $414,000, with a corresponding reduction to AOCI. Subsequent to adoption, ASU 2016-01 is expected to cause increased volatility in the Company’s Consolidated Statements of Income and Comprehensive Income. In February 2016, FASB issued ASU 2016-02 – Leases (Topic 842) (“ASU 2016-02”). Under this ASU, lessees will recognize a right-of-use-asset and corresponding liability on the balance sheet for all leases, except for leases covering a period of fewer than 12 months. The liability is to be measured as the present value of the future minimum lease payments taking into account renewal options if applicable plus initial incremental direct costs such as commissions. The minimum payments are discounted using the rate implicit in the lease or, if not known, the lessee’s incremental borrowing rate. The lessee’s income statement treatment for leases will vary depending on the nature of what is being leased. A financing type lease is present when, among other matters, the asset is being leased for a substantial portion of its economic life or has an end-of-term title transfer or a bargain purchase option as in today’s practice. The payment of the liability set up for such leases will be apportioned between interest and principal; the right-of use asset will be generally amortized on a straight-line basis. If the lease does not qualify as a financing type lease, it will be accounted for on the income statement as rent on a straight-line basis. The guidance will be effective for the Company for interim and annual reporting periods beginning after December 15, 2018. The Company will apply the guidance using a modified retrospective approach. Early application is permitted. The Company is evaluating whether the adoption of ASU 2016-02 will have a significant impact on its consolidated results of operations, financial position or cash flows. In June 2016, FASB issued ASU 2016-13 - Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). The revised accounting guidance requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts and requires enhanced disclosures related to the significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an organization’s portfolio. In addition, 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 effective on January 1, 2020. The Company is currently evaluating the effect the updated guidance will have on its consolidated financial statements. In August 2016, FASB issued ASU 2016-15 - Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (“ASU 2016-15”). The revised ASU provides accounting guidance for eight specific cash flow issues. FASB issued the standard to clarify areas where GAAP has been either unclear or lacking in specific guidance. ASU 2016-15 will be effective for the Company for interim and annual reporting periods beginning after December 15, 2018. Early adoption is permitted, including adoption in an interim period. The Company is currently evaluating the effect the updated guidance will have on its consolidated statement of cash flows. In May 2017, the FASB issued ASU 2017-09, Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting (“ASU 2017-09”). ASU 2017-09 clarifies when to account for a change to the terms or conditions of a share-based payment award as a modification. Under the new guidance, modification accounting is required only if the fair value, the vesting conditions, or the classification of the award (as equity or liability) changes as a result of the change in terms or conditions. The amendment should be applied on a prospective basis. The effective date of ASU 2017-09 is for interim and annual reporting periods, beginning after December 15, 2017. The ASU has not yet been adopted; however, it will not have a material impact on the Company's consolidated financial position, cash flows or results of operations.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. |
2. Summary of Significant Acc28
2. Summary of Significant Accounting Policies (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Summary Of Significant Accounting Policies Tables | |
Summary of deposits of cash equivalents | December 31, December 31, 2017 2016 Collateralized bank repurchase agreement (1) $ 10,249,985 $ 6,268,647 Money market funds 35,874,700 3,121,155 Total $ 46,124,685 $ 9,389,802 |
Schedule of Concentration Risk | Years ended December 31, 2017 2016 Personal Lines 77.2 % 76.8 % Commercial Lines 12.2 % 12.8 % Livery physical damage 10.3 % 10.1 % Total premiums earned subject to concentration 99.7 % 99.7 % Premiums earned not subject to concentration 0.3 % 0.3 % Total premiums earned 100.0 % 100.0 % |
3. Investments (Tables)
3. Investments (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Investments Tables | |
Schedule of Available for Sale Securities | December 31, 2017 Net Cost or Gross Gross Unrealized Losses 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 $ 11,096,122 $ 250,135 $ (30,814 ) $ — $ 11,315,443 $ 219,321 Corporate and other bonds Industrial and miscellaneous 87,562,631 1,189,207 (269,857 ) (340,516 ) 88,141,465 578,834 Residential mortgage and other asset backed securities (1) 20,463,353 305,499 (48,482 ) (189,022 ) 20,531,348 67,995 Total fixed-maturity securities 119,122,106 1,744,841 (349,153 ) (529,538 ) 119,988,256 866,150 Equity Securities: Preferred stocks 7,081,099 60,867 (20,313 ) (120,712 ) 7,000,941 (80,158 ) Common stocks and exchange traded mutual funds 6,680,742 841,250 (222,205 ) (14,530 ) 7,285,257 604,515 Total equity securities 13,761,841 902,117 (242,518 ) (135,242 ) 14,286,198 524,357 Total $ 132,883,947 $ 2,646,958 $ (591,671 ) $ (664,780 ) $ 134,274,454 $ 1,390,507 (1) In 2017, KICO placed certain residential mortgage backed securities as eligible collateral in a designated custodian account related to its relationship with the Federal Home Loan Bank of New York ("FHLBNY") (see Note 9). The eligible collateral would be pledged to FHLBNY if KICO draws an advance from FHBLNY. As of December 31, 2017, the fair value of the eligible investments was approximately $6,703,000. KICO will retain all rights regarding all securities if pledged as collateral. As of December 31, 2017, there were no outstanding advances. December 31, 2016 Net Cost or Gross Gross Unrealized Losses 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 $ 8,053,449 $ 199,028 $ (46,589 ) $ — $ 8,205,888 $ 152,439 Corporate and other bonds Industrial and miscellaneous 53,728,395 600,519 (638,113 ) (5,612 ) 53,685,189 (43,206 ) Residential mortgage backed securities 18,814,784 70,682 (309,273 ) (38,442 ) 18,537,751 (277,033 ) Total fixed-maturity securities 80,596,628 870,229 (993,975 ) (44,054 ) 80,428,828 (167,800 ) Equity Securities: Preferred stocks 5,986,588 10,317 (241,333 ) (70,571 ) 5,685,001 (301,587 ) Common stocks and exchange traded mutual funds 3,722,797 691,324 (13,968 ) (97,468 ) 4,302,685 579,888 Total equity securities 9,709,385 701,641 (255,301 ) (168,039 ) 9,987,686 278,301 Total $ 90,306,013 $ 1,571,870 $ (1,249,276 ) $ (212,093 ) $ 90,416,514 $ 110,501 |
Schedule of Available for Sale Securities by contractual maturity | December 31, 2017 December 31, 2016 Amortized Amortized Remaining Time to Maturity Cost Fair Value Cost Fair Value Less than one year $ 2,585,479 $ 2,595,938 $ 1,752,501 $ 1,765,795 One to five years 31,716,345 32,065,197 29,541,568 29,913,308 Five to ten years 62,702,945 63,129,543 30,487,775 30,211,974 More than ten years 1,653,984 1,666,230 — — Residential mortgage and other asset backed securities 20,463,353 20,531,348 18,814,784 18,537,751 Total $ 119,122,106 $ 119,988,256 $ 80,596,628 $ 80,428,828 |
Schedule of Held to Maturity Securities | December 31, 2017 Cost or Gross Gross Unrealized Losses Net Amortized Unrealized Less than 12 More than 12 Fair Unrealized Category Cost Gains Months Months Value Gains U.S. Treasury securities $ 729,466 $ 147,573 $ (1,729 ) $ — $ 875,310 $ 145,844 Political subdivisions of States, Territories and Possessions 998,984 50,366 — — 1,049,350 50,366 Corporate and other bonds Industrial and miscellaneous 3,141,358 90,358 — (6,300 ) 3,225,416 84,058 Total $ 4,869,808 $ 288,297 $ (1,729 ) $ (6,300 ) $ 5,150,076 $ 280,268 December 31, 2016 Cost or Gross Gross Unrealized Losses Net Amortized Unrealized Less than 12 More than 12 Fair Unrealized Category Cost Gains Months Months Value Gains U.S. Treasury securities $ 606,427 $ 147,612 $ — $ — $ 754,039 $ 147,612 Political subdivisions of States, Territories and Possessions 1,349,916 37,321 — — 1,387,237 37,321 Corporate and other bonds Industrial and miscellaneous 3,138,559 72,784 (7,619 ) (46,881 ) 3,156,843 18,284 Total $ 5,094,902 $ 257,717 $ (7,619 ) $ (46,881 ) $ 5,298,119 $ 203,217 December 31, 2017 December 31, 2016 Amortized Amortized Remaining Time to Maturity Cost Fair Value Cost Fair Value Less than one year $ — $ — $ — $ — One to five years 2,546,459 2,601,898 650,000 642,455 Five to ten years 1,716,884 1,794,139 3,838,475 3,901,625 More than ten years 606,465 754,039 606,427 754,039 Total $ 4,869,808 $ 5,150,076 $ 5,094,902 $ 5,298,119 |
Schedule of Investment Income | Year ended December 31, 2017 2016 Income: Fixed-maturity securities $ 3,664,577 $ 2,668,148 Equity securities 564,071 557,919 Cash and cash equivalents 56,075 19,047 Other — 794 Total 4,284,723 3,245,908 Expenses: Investment expenses 152,137 130,325 Net investment income $ 4,132,586 $ 3,115,583 |
Schedule of net realized gains and losses on investments | Year ended December 31, 2017 2016 Fixed-maturity securities: Gross realized gains $ 70,478 $ 354,071 Gross realized losses (1) (309,247 ) (302,087 ) (238,769 ) 51,984 Equity securities: Gross realized gains 636,880 637,249 Gross realized losses (263,798 ) (89,874 ) 373,082 547,375 Other-than-temporary impairment losses: Fixed-maturity securities (50,000 ) (69,911 ) (50,000 ) (69,911 ) Net realized gains $ 84,313 $ 529,448 |
Schedule of Securities with Unrealized Losses | December 31, 2017 Less than 12 months 12 months or more Total No. of No. of Aggregate Fair Unrealized Positions Fair Unrealized Positions Fair Unrealized Category Value Losses Held Value Losses Held Value Losses Fixed-Maturity Securities: Political subdivisions of States, Territories and Possessions $ 1,549,839 $ (30,814 ) 4 $ — $ — — $ 1,549,839 $ (30,814 ) Corporate and other bonds industrial and miscellaneous 15,036,462 (269,857 ) 20 9,113,924 (340,516 ) 17 24,150,386 (610,373 ) Residential mortgage and other asset backed securities 6,956,371 (48,482 ) 6 7,867,572 (189,022 ) 15 14,823,943 (237,504 ) Total fixed-maturity securities $ 23,542,672 $ (349,153 ) 30 $ 16,981,496 $ (529,538 ) 32 $ 40,524,168 $ (878,691 ) Equity Securities: Preferred stocks $ 1,605,217 $ (20,313 ) 5 $ 1,776,675 $ (120,712 ) 3 $ 3,381,892 $ (141,025 ) Common stocks and exchange traded mutual funds 1,446,375 (222,205 ) 4 124,900 (14,530 ) 1 1,571,275 (236,735 ) Total equity securities $ 3,051,592 $ (242,518 ) 9 $ 1,901,575 $ (135,242 ) 4 $ 4,953,167 $ (377,760 ) Total $ 26,594,264 $ (591,671 ) 39 $ 18,883,071 $ (664,780 ) 36 $ 45,477,335 $ (1,256,451 ) December 31, 2016 Less than 12 months 12 months or more Total No. of No. of Aggregate Fair Unrealized Positions Fair Unrealized Positions Fair Unrealized Category Value Losses Held Value Losses Held Value Losses Fixed-Maturity Securities: Political subdivisions of States, Territories and Possessions $ 1,067,574 $ (46,589 ) 3 $ — $ — — $ 1,067,574 $ (46,589 ) Corporate and other bonds industrial and miscellaneous 19,859,293 (638,113 ) 34 239,970 (5,612 ) 1 20,099,263 (643,725 ) Residential mortgage backed securities 15,918,090 (309,273 ) 30 675,316 (38,442 ) 6 16,593,406 (347,715 ) Total fixed-maturity securities $ 36,844,957 $ (993,975 ) 67 $ 915,286 $ (44,054 ) 7 $ 37,760,243 $ (1,038,029 ) Equity Securities: Preferred stocks $ 3,759,850 $ (241,333 ) 8 $ 660,750 $ (70,571 ) 1 $ 4,420,600 $ (311,904 ) Common stocks and exchange traded mutual funds 288,075 (13,968 ) 1 424,550 (97,468 ) 1 712,625 (111,436 ) Total equity securities $ 4,047,925 $ (255,301 ) 9 $ 1,085,300 $ (168,039 ) 2 $ 5,133,225 $ (423,340 ) Total $ 40,892,882 $ (1,249,276 ) 76 $ 2,000,586 $ (212,093 ) 9 $ 42,893,468 $ (1,461,369 ) |
4. Fair Value Measurements (Tab
4. Fair Value Measurements (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Fair Value Measurements Tables | |
Schedule of Fair Value Measurements | December 31, 2017 Level 1 Level 2 Level 3 Total Fixed-maturity securities available-for-sale Political subdivisions of States, Territories and Possessions $ — $ 11,315,443 $ — $ 11,315,443 Corporate and other bonds industrial and miscellaneous 83,597,300 4,544,165 — 88,141,465 Residential mortgage backed securities — 20,531,348 — 20,531,348 Total fixed maturities 83,597,300 36,390,956 — 119,988,256 Equity securities 14,286,198 — — 14,286,198 Total investments $ 97,883,498 $ 36,390,956 $ — $ 134,274,454 December 31, 2016 Level 1 Level 2 Level 3 Total Fixed-maturity securities available-for-sale Political subdivisions of States, Territories and Possessions $ — $ 8,205,888 $ — $ 8,205,888 Corporate and other bonds industrial and miscellaneous 48,356,317 5,328,872 — 53,685,189 Residential mortgage backed securities — 18,537,751 — 18,537,751 Total fixed maturities 48,356,317 32,072,511 — 80,428,828 Equity securities 9,987,686 — — 9,987,686 Total investments $ 58,344,003 $ 32,072,511 $ — $ 90,416,514 |
5. Fair Value of Financial In31
5. Fair Value of Financial Instruments (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Fair Value Of Financial Instruments Tables | |
Schedule of Fair Value of Financial Instruments | December 31, 2017 December 31, 2016 Carrying Value Fair Value Carrying Value Fair Value Fixed-maturity securities-held-to maturity $ 4,869,808 $ 5,150,076 $ 5,094,902 $ 5,298,119 Cash and cash equivalents $ 48,381,633 $ 48,381,633 $ 12,044,520 $ 12,044,520 Investment subscription receivable $ 2,000,000 $ 2,000,000 $ — $ — Premiums receivable, net $ 13,217,698 $ 13,217,698 $ 11,649,398 $ 11,649,398 Reinsurance receivables, net $ 28,519,130 $ 28,519,130 $ 32,197,765 $ 32,197,765 Real estate, net of accumulated depreciation $ 2,261,829 $ 2,705,000 $ 1,659,405 $ 1,925,000 Reinsurance balances payable $ 2,563,966 $ 2,563,966 $ 2,146,017 $ 2,146,017 Long-term debt, net $ 29,126,965 $ 29,126,965 $ — $ — |
6. Intangibles (Tables)
6. Intangibles (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Intangibles Tables | |
Schedule of components of intangible assets and their useful lives, accumulated amortization, and net carrying value | December 31, 2017 December 31, 2016 Useful Gross Net Gross Net Life Carrying Accumulated Carrying Carrying Accumulated Carrying (in yrs) Value Amortization Amount Value Amortization Amount Insurance license — $ 500,000 $ — $ 500,000 $ 500,000 $ — $ 500,000 Customer relationships 10 3,400,000 2,890,000 510,000 3,400,000 2,550,000 850,000 Other identifiable intangibles 7 950,000 950,000 — 950,000 950,000 — Total $ 4,850,000 $ 3,840,000 $ 1,010,000 $ 4,850,000 $ 3,500,000 $ 1,350,000 |
Schedule of estimated aggregate amortization expense | 2018 $ 340,000 2019 170,000 $ 510,000 |
7. Reinsurance (Tables)
7. Reinsurance (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Reinsurance Tables | |
Line of Busines | Treaty Year July 1, 2017 July 1, 2016 July 1, 2015 to to to Line of Business June 30, 2018 June 30, 2017 June 30, 2016 Personal Lines: Homeowners, dwelling fire and canine legal liability Quota share treaty: Percent ceded 20 % 40 % 40 % Risk retained $ 800,000 $ 500,000 $ 450,000 Losses per occurrence subject to quota share reinsurance coverage $ 1,000,000 $ 833,333 $ 750,000 Excess of loss coverage and facultative facility above quota share coverage (1) $ 9,000,000 $ 3,666,667 $ 3,750,000 in excess of in excess of in excess of $ 1,000,000 $ 833,333 $ 750,000 Total reinsurance coverage per occurrence $ 9,200,000 $ 4,000,000 $ 4,050,000 Losses per occurrence subject to reinsurance coverage $ 10,000,000 $ 4,500,000 $ 4,500,000 Expiration date June 30, 2019 June 30, 2017 June 30, 2016 Personal Umbrella Quota share treaty: Percent ceded - first $1,000,000 of coverage 90 % 90 % 90 % Percent ceded - excess of $1,000,000 dollars of coverage 100 % 100 % 100 % Risk retained $ 100,000 $ 100,000 $ 100,000 Total reinsurance coverage per occurrence $ 4,900,000 $ 4,900,000 $ 2,900,000 Losses per occurrence subject to quota share reinsurance coverage $ 5,000,000 $ 5,000,000 $ 3,000,000 Expiration date June 30, 2018 June 30, 2017 June 30, 2016 Commercial Lines: General liability commercial policies, except for commercial auto Quota share treaty: Percent ceded None None None Risk retained $ 750,000 $ 500,000 $ 425,000 Losses per occurrence subject to quota share reinsurance coverage None None None Excess of loss coverage above quota share coverage $ 3,750,000 $ 4,000,000 $ 4,075,000 in excess of in excess of in excess of $ 750,000 $ 500,000 $ 425,000 Total reinsurance coverage per occurrence $ 3,750,000 $ 4,000,000 $ 4,075,000 Losses per occurrence subject to reinsurance coverage $ 4,500,000 $ 4,500,000 $ 4,500,000 Commercial Umbrella Quota share treaty: Percent ceded - first $1,000,000 of coverage 90 % 90 % Percent ceded - excess of $1,000,000 of coverage 100 % 100 % Risk retained $ 100,000 $ 100,000 Total reinsurance coverage per occurrence $ 4,900,000 $ 4,900,000 Losses per occurrence subject to quota share reinsurance coverage $ 5,000,000 $ 5,000,000 Expiration date June 30, 2018 June 30, 2017 Commercial Auto: Risk retained $ 300,000 Excess of loss coverage in excess of risk retained $ 1,700,000 in excess of $ 300,000 Catastrophe Reinsurance: Initial loss subject to personal lines quota share treaty $ 5,000,000 $ 5,000,000 $ 4,000,000 Risk retained per catastrophe occurrence (2) $ 4,000,000 $ 3,000,000 $ 2,400,000 Catastrophe loss coverage in excess of quota share coverage (3) (4) $ 315,000,000 $ 247,000,000 $ 176,000,000 Severe winter weather aggregate (4) No No Yes Reinstatement premium protection (5) Yes Yes Yes 1. For personal lines, the 2017/2019 Treaty includes the addition of an automatic facultative facility allowing KICO to obtain homeowners single risk coverage up to $10,000,000 in total insured value, which covers direct losses from $3,500,000 to $10,000,000. 2. Plus losses in excess of catastrophe coverage. 3. Catastrophe coverage is limited on an annual basis to two times the per occurrence amounts. Effective July 1, 2016, the duration of a catastrophe occurrence from windstorm, hail, tornado, hurricane and cyclone was extended to 168 consecutive hours from 120 consecutive hours. 4. From July 1, 2015 through June 30, 2016, the catastrophe treaty also covered losses caused by severe winter weather during any consecutive 28 day period. 5. Effective July 1, 2015, reinstatement premium protection for $16,000,000 of catastrophe coverage in excess of $4,000,000. Effective July 1, 2016, reinstatement premium protection for $20,000,000 of catastrophe coverage in excess of $5,000,000. |
Single maximum risks under treaties per occurrence | July 1, 2017 - June 30, 2018 Treaty Range of Loss Risk Retained Personal Lines (1) Initial $1,000,000 $800,000 $1,000,000 - $10,000,000 None(2) Over $10,000,000 100% Personal Umbrella Initial $1,000,000 $100,000 $1,000,000 - $5,000,000 None Over $5,000,000 100% Commercial Lines Initial $750,000 $750,000 $750,000 - $4,500,000 None(3) Over $4,500,000 100% Commercial Umbrella Initial $1,000,000 $100,000 $1,000,000 - $5,000,000 None Over $5,000,000 100% Catastrophe (4) Initial $5,000,000 $4,000,000 $5,000,000 - $320,000,000 None Over $320,000,000 100% ________________ (1) Two year treaty with expiration date of June 30, 2019. (2) Covered by excess of loss treaties up to $3,500,000 and by facultative facility from $3,500,000 to $10,000,000. (3) Covered by excess of loss treaties. (4) Catastrophe coverage is limited on an annual basis to two times the per occurrence amounts. July 1, 2016 - June 30, 2017 July 1, 2015 - June 30, 2016 Treaty Range of Loss Risk Retained Range of Loss Risk Retained Personal Lines Initial $833,333 $500,000 Initial $750,000 $450,000 $833,333 - $4,500,000 None(1) $750,000 - $4,500,000 None(1) Over $4,500,000 100% Over $4,500,000 100% Personal Umbrella Initial $1,000,000 $100,000 Initial $1,000,000 $100,000 $1,000,000 - $5,000,000 None $1,000,000 - $3,000,000 None Over $5,000,000 100% Over $3,000,000 100% Commercial Lines Initial $500,000 $500,000 Initial $425,000 $425,000 $500,000 - $4,500,000 None(1) $425,000 - $4,500,000 None(1) Over $4,500,000 100% Over $4,500,000 100% Commercial Umbrella Initial $1,000,000 $100,000 $1,000,000 - $5,000,000 None Over $5,000,000 100% Catastrophe (2) Initial $5,000,000 $3,000,000 Initial $4,000,000 $2,400,000 $5,000,000 - $252,000,000 None $4,000,000 - $180,000,000 None Over $252,000,000 100% Over $180,000,000 100% ________________ (1) Covered by excess of loss treaties. (2) Catastrophe coverage is limited on an annual basis to two times the per occurrence amounts. |
Schedule of approximate reinsurance recoverables | Unpaid Paid ($ in thousands) Losses Losses Total Security December 31, 2017 Maiden Reinsurace Company $ 8,160 $ 968 $ 9,128 $ 10,583 (1 ) Swiss Reinsurance America Corporation 4,299 600 4,899 - SCOR Reinsurance Company 851 209 1,060 - Allied World Assurance Company 1,649 188 1,837 - Others 1,789 568 2,357 205 (2 ) Total $ 16,748 $ 2,533 $ 19,281 $ 10,788 December 31, 2016 Maiden Reinsurace Company $ 7,640 $ 985 $ 8,625 $ 13,113 (1 ) Swiss Reinsurance America Corporation 4,310 671 4,981 - SCOR Reinsurance Company 1,440 152 1,592 - Allied World Assurance Company 392 300 692 - Others 1,995 211 2,206 164 (3 ) Total $ 15,777 $ 2,319 $ 18,096 $ 13,277 |
Schedule of Ceding commissions earned | Years ended December 31, 2017 2016 Provisional ceding commissions earned $ 10,677,214 $ 12,769,404 Contingent ceding commissions earned (744,081 ) (1,501,163 ) $ 9,933,133 $ 11,268,241 |
8. Deferred Policy Acquisitio34
8. Deferred Policy Acquisition Costs and Deferred Ceding Commission Revenue (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Deferred Policy Acquisition Costs And Deferred Ceding Commission Revenue Tables | |
Schedule of acquisition costs incurred | Year ended December 31, 2017 2016 Net deferred policy acquisition costs, net of ceding commission revenue, beginning of year $ 5,387,940 $ 4,400,238 Cost incurred and deferred: Commissions and brokerage 23,093,880 19,566,982 Other underwriting and policy acquisition costs 6,669,904 5,470,285 Ceding commission revenue (8,091,785 ) (13,186,177 ) Net deferred policy acquisition costs 21,671,999 11,851,090 Return of deferred ceding commission revenue due to reduction of quota share (3,648,859 ) — Amortization (12,830,256 ) (10,863,388 ) 5,192,884 987,702 Net deferred policy acquisition costs, net of ceding commission revenue, end of year $ 10,580,824 $ 5,387,940 |
Schedule of Ending balances for deferred acquisition costs and deferred ceding commission revenue | December 31, 2017 2016 Deferred policy acquisition costs $ 14,847,236 $ 12,239,781 Deferred ceding commission revenue (4,266,412 ) (6,851,841 ) Balance at end of period $ 10,580,824 $ 5,387,940 |
9. Debt (Tables)
9. Debt (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Debt Tables | |
Long-term debt | 5.50% Senior Unsecured Notes $ 30,000,000 Discount (162,209 ) Issuance costs (710,826 ) Long-term debt, net $ 29,126,965 |
10. Property and Equipment (Tab
10. Property and Equipment (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Property And Equipment Tables | |
Schedule of components of property and equipment | Accumulated Cost Depreciation Net December 31, 2017 Building $ 2,146,950 $ (460,819 ) $ 1,686,131 Land 575,698 — 575,698 Furniture office equipment 707,524 (493,558 ) 213,966 Computer equipment and software 4,657,174 (2,360,392 ) 2,296,782 Automobile 20,298 (20,298 ) — Total $ 8,107,644 $ (3,335,067 ) $ 4,772,577 December 31, 2016 Building $ 1,887,347 $ (381,039 ) $ 1,506,308 Land 153,097 — 153,097 Furniture office equipment 620,440 (388,853 ) 231,587 Computer equipment and software 2,602,330 (1,481,949 ) 1,120,381 Automobile 81,394 (81,394 ) — Total $ 5,344,608 $ (2,333,235 ) $ 3,011,373 |
11. Property and Casualty Ins37
11. Property and Casualty Insurance Activity (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Property And Casualty Insurance Activity Tables | |
Schedule of Earned Premiums | Direct Assumed Ceded Net Year ended December 31, 2017 Premiums written $ 121,575,178 $ 22,847 $ (28,729,149 ) $ 92,868,876 Change in unearned premiums (10,662,744 ) 9,456 (4,864,565 ) (15,517,853 ) Premiums earned $ 110,912,434 $ 32,303 $ (33,593,714 ) $ 77,351,023 Year ended December 31, 2016 Premiums written $ 103,191,995 $ 28,522 $ (37,294,330 ) $ 65,926,187 Change in unearned premiums (6,110,225 ) 6,091 1,585,853 (4,518,281 ) Premiums earned $ 97,081,770 $ 34,613 $ (35,708,477 ) $ 61,407,906 |
Schedule of Loss and Loss Adjustment Expenses | Gross Reinsurance Liability Receivables December 31, 2017 Case-basis reserves $ 30,499,592 $ 11,987,693 Loss adjustment expenses 8,635,199 1,990,506 IBNR reserves 9,664,831 2,770,709 Recoverable on unpaid losses 16,748,908 Recoverable on paid losses — 2,533,042 Total loss and loss adjustment expenses $ 48,799,622 19,281,950 Unearned premiums 9,237,180 Total reinsurance receivables $ 28,519,130 December 31, 2016 Case-basis reserves $ 25,000,733 $ 10,804,341 Loss adjustment expenses 7,752,617 1,893,094 IBNR reserves 8,983,369 3,079,445 Recoverable on unpaid losses 15,776,880 Recoverable on paid losses — 2,319,140 Total loss and loss adjustment expenses $ 41,736,719 18,096,020 Unearned premiums 14,101,745 Total reinsurance receivables $ 32,197,765 |
Schedule of Ceding Commission Revenue | Years ended December 31, 2017 2016 Balance at beginning of period $ 41,736,719 $ 39,876,500 Less reinsurance recoverables (15,776,880 ) (16,706,364 ) Net balance, beginning of period 25,959,839 23,170,136 Incurred related to: Current year 34,246,081 27,853,010 Prior years (60,544 ) (63,349 ) Total incurred 34,185,537 27,789,661 Paid related to: Current year 18,194,860 16,496,648 Prior years 9,899,802 8,503,310 Total paid 28,094,662 24,999,958 Net balance at end of period 32,050,714 25,959,839 Add reinsurance recoverables 16,748,908 15,776,880 Balance at end of period $ 48,799,622 $ 41,736,719 |
Incurred Claims and Allocated Claim Adjustment Expenses | All Lines of Business (in thousands, except reported claims data) As of Incurred Loss and Allocated Loss Adjustment Expenses, Net of Reinsurance December 31, 2017 For the Years Ended December 31, Accident Year 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 IBNR Cumulative Number of Reported Claims by Accident Year (Unaudited 2008 - 2016) 2008 $ 4,505 $ 4,329 $ 4,223 $ 4,189 $ 4,068 $ 4,055 $ 4,056 $ 4,040 $ 4,038 $ 4,034 $ — 1,133 2009 4,403 4,254 4,287 4,384 4,511 4,609 4,616 4,667 4,690 6 1,136 2010 5,598 5,707 6,429 6,623 6,912 6,853 6,838 6,840 (0 ) 1,616 2011 7,603 7,678 8,618 9,440 9,198 9,066 9,144 6 1,913 2012 9,539 9,344 10,278 10,382 10,582 10,790 33 4,702 (1) 2013 10,728 9,745 9,424 9,621 10,061 271 1,558 2014 14,193 14,260 14,218 14,564 552 2,125 2015 22,340 21,994 22,148 1,278 2,525 2016 26,062 24,941 2,571 2,841 2017 31,605 6,024 3,128 Total $ 138,817 (1) Reported claims for accident year 2012 includes 3,406 claims from Superstorm Sandy. |
Cumulative Paid Claims and Allocated Claim Adjustment Expenses | All Lines of Business (in thousands) Cumulative Paid Loss and Allocated Loss Adjustment Expenses, Net of Reinsurance For the Years Ended December 31, Accident Year 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 (Unaudited 2008 - 2016) 2008 $2,406 $3,346 $3,730 $3,969 $4,003 $4,029 $4,028 $4,031 $4,031 $4,031 2009 2,298 3,068 3,607 3,920 4,134 4,362 4,424 4,468 4,487 2010 2,566 3,947 4,972 5,602 6,323 6,576 6,720 6,772 2011 3,740 5,117 6,228 7,170 8,139 8,540 8,702 2012 3,950 5,770 7,127 8,196 9,187 10,236 2013 3,405 5,303 6,633 7,591 8,407 2014 5,710 9,429 10,738 11,770 2015 12,295 16,181 18,266 2016 15,364 19,001 2017 16,704 Total $108,376 Net liability for unpaid loss and allocated loss adjustment expenses for the accident years presented $30,441 All outstanding liabilities before 2008, net of reinsurance 225 Liabilities for loss and allocted loss adjustment expenses, net of reinsurance $30,666 |
Reconciliation of the net incurred and paid claims | As of (in thousands) December 31, 2017 Liabilities for loss and loss adjustment expenses, net of reinsurance $ 30,666 Total reinsurance recoverable on unpaid losses 16,749 Unallocated loss adjustment expenses 1,385 Total gross liability for loss and LAE reserves $ 48,800 |
Supplementary unaudited information about average historical claims duration | Average Annual Percentage Payout of Incurred Loss and Allocated Loss Adjustment Expenses by Age, Net of Reinsurance Years 1 2 3 4 5 6 7 8 9 10 All Lines of Business 46.7 % 18.7 % 11.5 % 8.4 % 7.3 % 4.7 % 1.3 % 0.6 % 0.2 % 0.0 % |
12. Stockholders' Equity (Table
12. Stockholders' Equity (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Stockholders Equity Tables | |
Weighted average assumptions | Years ended December 31, 2017 2016 Dividend Yield n/a 2.74% - 3.18% Volatility n/a 31.61% - 31.81% Risk-Free Interest Rate n/a 1.01% - 1.11% Expected Life n/a 3.25 years |
Schedule of Stock Options Activity | Stock Options Number of Shares Weighted Average Exercise Price per Share Weighted Average Remaining Contractual Term Aggregate Intrinsic Value Outstanding at January 1, 2017 362,750 $ 6.62 2.61 $ 2,586,748 Granted — $ — — $ — Exercised (21,600 ) $ 5.48 — $ 221,012 Forfeited — $ — — $ — Outstanding at December 31, 2017 341,150 $ 6.69 1.67 $ 4,131,028 Vested and Exercisable at December 31, 2017 321,150 $ 6.59 1.53 $ 3,921,553 Restricted Stock Awards Shares Weighted Average Grant Date Fair Value per Share Aggregate Fair Value Balance at January 1, 2017 7,500 $ 8.67 $ 64,995 Granted 55,481 $ 14.80 $ 821,164 Vested (12,311 ) $ 13.70 $ 178,651 Forfeited (3,333 ) $ 11.51 $ 38,377 Balance at December 31, 2017 47,337 $ 14.35 $ 679,180 |
15. Income Taxes (Tables)
15. Income Taxes (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Income Taxes Tables | |
Schedule of provision for income taxes from continuing operations | Years ended December 31, 2017 2016 Current federal income tax expense $ 4,317,686 $ 4,824,655 Current state income tax expense (benefit) 7,353 (12,590 ) Deferred federal and state income tax benefit (1,809 ) (293,364 ) Provision for income taxes $ 4,323,230 $ 4,518,701 |
Schedule of a reconciliation of the federal statutory rate | Years ended December 31, 2017 2016 Computed expected tax expense $ 5,008,400 35.0 % $ 4,696,463 35.0 % Change in enacted tax rates on net deferred tax liabilities (405,218 ) (2.8 ) — — State taxes, net of Federal benefit (101,858 ) (0.7 ) (71,428 ) (0.5 ) State valuation allowance 124,486 0.9 85,714 0.6 Benefit of lower tax brackets (100,000 ) (0.7 ) (100,000 ) (0.7 ) Permanent differences Dividends received deduction (138,197 ) (1.0 ) (136,690 ) (1.0 ) Non-taxable investment income (85,684 ) (0.6 ) (110,784 ) (0.8 ) Stock-based compensation (25,821 ) (0.2 ) Other permanent differences 46,962 0.3 48,139 0.3 Prior year tax matters 4,172 — 123,976 0.9 Other (4,012 ) — (16,689 ) (0.1 ) Total tax $ 4,323,230 30.2 % $ 4,518,701 33.7 % |
Schedule of Deferrred Tax Assets and Liabilities | December 31, December 31, 2017 2016 Deferred tax asset: Net operating loss carryovers (1) $ 103,655 $ 131,626 Claims reserve discount 300,005 417,349 Unearned premium 2,431,301 2,877,365 Deferred ceding commission revenue 895,947 2,329,626 Other 382,522 188,675 Total deferred tax assets 4,113,430 5,944,641 Deferred tax liability: Investment in KICO (2) 759,543 1,169,000 Deferred acquisition costs 3,117,920 4,161,526 Intangibles 212,100 459,000 Depreciation and amortization 328,735 265,671 Net unrealized appreciation of securities - available for sale 295,474 56,393 Total deferred tax liabilities 4,713,772 6,111,590 Net deferred income tax liability $ (600,342 ) $ (166,949 ) |
Schedule of net operating loss carryovers | Type of NOL 2017 2016 Expiration State only (A) $ 824,996 $ 655,719 December 31, 2037 Valuation allowance (725,541 ) (534,293 ) State only, net of valuation allowance 99,455 121,426 Amount subject to Annual Limitation, federal only (B) 4,200 10,200 December 31, 2019 Total deferred tax asset from net operating loss carryovers $ 103,655 $ 131,626 |
Schedule of changes in net deferred income tax liability to the deferred income tax provision | Change in net deferred income tax liabilities $ 433,393 Deferred tax expense allocated to other comprehensive income 435,202 Deferred income tax benefit $ (1,809 ) |
17. Commitments and Contingen40
17. Commitments and Contingencies (Tables) (USD $) | 12 Months Ended |
Dec. 31, 2017 | |
Commitments And Contingencies Tables Usd | |
Schedule of future minimum rental commitments | For the Year Ending December 31, Total 2018 $ 164,117 2019 169,861 2020 175,806 2021 181,959 2022 188,328 Thereafter 244,064 Total $ 1,124,135 |
18. Earnings Per Common Share (
18. Earnings Per Common Share (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Earnings per common share: | |
Reconciliation of the weighted average number of shares of Common Stock used in the calculation of basic and diluted earnings per common share | Year ended December 31, 2017 2016 Weighted average number of shares outstanding 10,388,440 7,736,594 Effect of dilutive securities, common share equivalents: Stock options 188,983 — Restricted stock awards 4,154 70,669 Weighted average number of shares outstanding, used for computing diluted earnings per share 10,581,577 7,807,263 |
20. Quarterly Financial Data (T
20. Quarterly Financial Data (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Quarterly Financial Data Tables | |
Schedule of Quarterly Financial Data | 2017 March 31, June 30, September 30, December 31, Total Net premiums earned $ 16,369,748 $ 16,953,727 $ 21,514,408 $ 22,513,140 $ 77,351,023 Ceding commission revenue 3,184,452 3,305,938 1,717,610 1,725,133 9,933,133 Net investment income 857,800 1,026,004 1,033,307 1,215,475 4,132,586 Net realized gain (loss) on sale of investments (54,506 ) 130,423 20,998 (12,602 ) 84,313 Total revenues 20,647,194 21,724,251 24,614,653 25,783,212 92,769,310 Loss and loss adjustment expenses 8,292,996 7,454,922 7,073,323 11,364,296 34,185,537 Commission expense and other underwriting expenses 9,101,395 9,301,182 9,975,938 10,919,353 39,297,868 Net income 1,470,580 2,510,392 4,073,921 1,931,592 9,986,485 Basic earnings per share $ 0.15 $ 0.24 $ 0.38 $ 0.18 $ 0.96 Diluted earnings per share $ 0.15 $ 0.23 $ 0.38 $ 0.18 $ 0.94 2016 March 31, June 30, September 30, December 31, Total Net premiums earned $ 14,531,675 $ 15,010,875 $ 15,646,181 $ 16,219,175 $ 61,407,906 Ceding commission revenue 2,770,337 2,569,025 2,934,928 2,993,951 11,268,241 Net investment income 813,057 764,070 709,072 829,384 3,115,583 Net realized gain (loss) on sale of investments 80,436 283,432 241,035 (75,455 ) 529,448 Total revenues 18,444,852 18,911,910 19,828,397 20,251,505 77,436,664 Loss and loss adjustment expenses 9,483,855 5,786,836 5,134,854 7,384,116 27,789,661 Commission expense and other underwriting expenses 7,616,507 8,122,342 8,642,964 8,812,023 33,193,836 Net income 541,032 2,842,261 3,460,626 2,055,847 8,899,766 Basic earnings per share $ 0.07 $ 0.36 $ 0.44 $ 0.26 $ 1.15 Diluted earnings per share $ 0.07 $ 0.36 $ 0.43 $ 0.26 $ 1.14 |
2. Accounting Policies and Basi
2. Accounting Policies and Basis of Presentation (Details) - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 |
Accounting Policies And Basis Of Presentation Details | ||
Collateralized bank repurchase agreement (1) | $ 10,249,985 | $ 6,268,647 |
Money market fund | 35,874,700 | 3,121,155 |
Total | $ 46,124,685 | $ 9,389,802 |
2. Accounting Policies and Ba44
2. Accounting Policies and Basis of Presentation (Details 1) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Total premiums earned subject to concentration | 99.70% | 99.70% |
Premiums earned not subject to concentration | 0.30% | 0.30% |
Total premiums earned | 100.00% | 100.00% |
Personal Lines [Member] | ||
Total premiums earned subject to concentration | 77.20% | 76.80% |
Commercial Lines [Member] | ||
Total premiums earned subject to concentration | 12.20% | 12.80% |
Commercial Auto [Member] | ||
Total premiums earned subject to concentration | 10.30% | 10.10% |
2. Accounting Policies and Ba45
2. Accounting Policies and Basis of Presentation (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Accounting Policies And Basis Of Presentation Details Narrative | ||
Allowance for uncollectible reinsurance | $ 0 | $ 0 |
Due and accrued investment income | 1,136,000 | 694,000 |
Allowance for doubtful accounts | 291,000 | 212,000 |
Uncollectible premiums receivable balances written off | 138,000 | 98,000 |
Advertising costs | $ 202,000 | $ 169,000 |
3. Investments (Details)
3. Investments (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Cost or Amortized Cost | $ 132,883,947 | $ 90,306,013 |
Gross Unrealized Gains | 2,646,958 | 1,571,870 |
Gross Unrealized Losses-Less than 12 Months | (591,671) | (1,249,276) |
Gross Unrealized Loss-More than 12 Months | (664,780) | (212,093) |
Fair Value | 134,274,454 | 90,416,514 |
Net Unrealized Gains/(Losses) | 1,390,507 | 110,501 |
Fixed Maturity Securities Political Subdivisions Of States Territories And Possessions | ||
Cost or Amortized Cost | 11,096,122 | 8,053,449 |
Gross Unrealized Gains | 250,135 | 199,028 |
Gross Unrealized Losses-Less than 12 Months | (30,814) | (46,589) |
Gross Unrealized Loss-More than 12 Months | 0 | 0 |
Fair Value | 11,315,443 | 8,205,888 |
Net Unrealized Gains/(Losses) | 219,321 | 152,439 |
Fixed Maturity Securities Corporate And Other Bonds Industrial And Miscellaneous | ||
Cost or Amortized Cost | 87,562,631 | 53,728,395 |
Gross Unrealized Gains | 1,189,207 | 600,519 |
Gross Unrealized Losses-Less than 12 Months | (269,857) | (638,113) |
Gross Unrealized Loss-More than 12 Months | (340,516) | (5,612) |
Fair Value | 88,141,465 | 53,685,189 |
Net Unrealized Gains/(Losses) | 578,834 | (43,206) |
Fixed Maturity Securities Residential mortgage backed securities | ||
Cost or Amortized Cost | 20,463,353 | 18,814,784 |
Gross Unrealized Gains | 305,499 | 70,682 |
Gross Unrealized Losses-Less than 12 Months | (48,482) | (309,273) |
Gross Unrealized Loss-More than 12 Months | (189,022) | (38,442) |
Fair Value | 20,531,348 | 18,537,751 |
Net Unrealized Gains/(Losses) | 67,995 | (277,033) |
Fixed Maturity Securities Total Fixed Maturity Securities | ||
Cost or Amortized Cost | 119,122,106 | 80,596,628 |
Gross Unrealized Gains | 1,744,841 | 870,229 |
Gross Unrealized Losses-Less than 12 Months | (349,153) | (993,975) |
Gross Unrealized Loss-More than 12 Months | (529,538) | (44,054) |
Fair Value | 119,988,256 | 80,428,828 |
Net Unrealized Gains/(Losses) | 866,150 | (167,800) |
Equity Securities Preferred Stocks | ||
Cost or Amortized Cost | 7,081,099 | 5,986,588 |
Gross Unrealized Gains | 60,867 | 10,317 |
Gross Unrealized Losses-Less than 12 Months | (20,313) | (241,333) |
Gross Unrealized Loss-More than 12 Months | (120,712) | (70,571) |
Fair Value | 7,000,941 | 5,685,001 |
Net Unrealized Gains/(Losses) | (80,158) | (301,587) |
Equity Securities Common Stocks | ||
Cost or Amortized Cost | 6,680,742 | 3,722,797 |
Gross Unrealized Gains | 841,250 | 691,324 |
Gross Unrealized Losses-Less than 12 Months | (222,205) | (13,968) |
Gross Unrealized Loss-More than 12 Months | (14,530) | (97,468) |
Fair Value | 7,285,257 | 4,302,685 |
Net Unrealized Gains/(Losses) | 604,515 | 579,888 |
Equity Securities Total Equity Securities | ||
Cost or Amortized Cost | 13,761,841 | 9,709,385 |
Gross Unrealized Gains | 902,117 | 701,641 |
Gross Unrealized Losses-Less than 12 Months | (242,518) | (255,301) |
Gross Unrealized Loss-More than 12 Months | (135,242) | (168,039) |
Fair Value | 14,286,198 | 9,987,686 |
Net Unrealized Gains/(Losses) | $ 524,357 | $ 278,301 |
3. Investments (Details 1)
3. Investments (Details 1) - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 |
Amortized Cost | $ 119,122,106 | $ 80,596,628 |
Fair Value | 119,988,256 | 80,428,828 |
Less Than One Year | ||
Amortized Cost | 2,585,479 | 1,752,501 |
Fair Value | 2,595,938 | 1,765,795 |
One To Five Years | ||
Amortized Cost | 31,716,345 | 29,541,568 |
Fair Value | 32,065,197 | 29,913,308 |
Five To Ten Years | ||
Amortized Cost | 62,702,945 | 30,487,775 |
Fair Value | 63,129,543 | 30,211,974 |
More Than 10 Years | ||
Amortized Cost | 1,653,984 | 0 |
Fair Value | 1,666,230 | 0 |
Residential mortgage backed securities | ||
Amortized Cost | 20,463,353 | 18,814,784 |
Fair Value | $ 20,531,348 | $ 18,537,751 |
3. Investments (Details 2)
3. Investments (Details 2) - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 |
Cost or Amortized Cost | $ 4,869,808 | $ 5,094,902 |
Gross Unrealized Gains | 288,297 | 257,717 |
Gross Unrealized Losses-Less than 12 Months | (1,729) | (7,619) |
Gross Unrealized Loss-More than 12 Months | (6,300) | (46,881) |
Fair Value | 5,150,076 | 5,298,119 |
Net Unrealized Gains/(Losses) | 280,268 | 203,217 |
US Treasury Securities | ||
Cost or Amortized Cost | 729,466 | 606,427 |
Gross Unrealized Gains | 147,573 | 147,612 |
Gross Unrealized Losses-Less than 12 Months | (1,729) | 0 |
Gross Unrealized Loss-More than 12 Months | 0 | 0 |
Fair Value | 875,310 | 754,039 |
Net Unrealized Gains/(Losses) | 145,844 | 147,612 |
Fixed Maturity Securities Political Subdivisions Of States Territories And Possessions | ||
Cost or Amortized Cost | 998,984 | 1,349,916 |
Gross Unrealized Gains | 50,366 | 37,321 |
Gross Unrealized Losses-Less than 12 Months | 0 | 0 |
Gross Unrealized Loss-More than 12 Months | 0 | 0 |
Fair Value | 1,049,350 | 1,387,237 |
Net Unrealized Gains/(Losses) | 50,366 | 37,321 |
Fixed Maturity Securities Corporate And Other Bonds Industrial And Miscellaneous | ||
Cost or Amortized Cost | 3,141,358 | 3,138,559 |
Gross Unrealized Gains | 90,358 | 72,784 |
Gross Unrealized Losses-Less than 12 Months | 0 | (7,619) |
Gross Unrealized Loss-More than 12 Months | (6,300) | (46,881) |
Fair Value | 3,225,416 | 3,156,843 |
Net Unrealized Gains/(Losses) | $ 84,058 | $ 18,284 |
3. Investments (Details 3)
3. Investments (Details 3) - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 |
Amortized Cost | $ 4,869,808 | $ 5,094,902 |
Fair Value | 5,150,076 | 5,298,119 |
Less Than One Year | ||
Amortized Cost | 0 | 0 |
Fair Value | 0 | 0 |
One To Five Years | ||
Amortized Cost | 2,546,459 | 650,000 |
Fair Value | 2,601,898 | 642,455 |
Five To Ten Years | ||
Amortized Cost | 1,716,884 | 3,838,475 |
Fair Value | 1,794,139 | 3,901,625 |
More Than 10 Years | ||
Amortized Cost | 606,465 | 606,427 |
Fair Value | $ 754,039 | $ 754,039 |
3. Investments (Details 4)
3. Investments (Details 4) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Income: | ||
Fixed-maturity securities | $ 3,664,577 | $ 2,668,148 |
Equity securities | 564,071 | 557,919 |
Cash and cash equivalents | 56,075 | 19,047 |
Other | 0 | 794 |
Total | 4,284,723 | 3,245,908 |
Expenses: | ||
Investment expenses | 152,137 | 130,325 |
Net investment income | $ 4,132,586 | $ 3,115,583 |
3. Investments (Details 5)
3. Investments (Details 5) - USD ($) | 3 Months Ended | 12 Months Ended | |||||||
Dec. 31, 2017 | Sep. 30, 2017 | Jun. 30, 2017 | Mar. 31, 2017 | Dec. 31, 2016 | Sep. 30, 2016 | Mar. 31, 2016 | Dec. 31, 2017 | Dec. 31, 2016 | |
Fixed-maturity securities: | |||||||||
Gross realized gains | $ 70,478 | $ 354,071 | |||||||
Gross realized losses | (309,247) | (302,087) | |||||||
Total | (238,769) | 51,984 | |||||||
Equity securities: | |||||||||
Gross realized gains | 636,880 | 637,249 | |||||||
Gross realized losses | (263,798) | (89,874) | |||||||
Total equity securities | 373,082 | 547,375 | |||||||
Fixed-maturity securities | (50,000) | (69,911) | |||||||
Net realized gains (losses) | $ (12,602) | $ 20,998 | $ 130,423 | $ (54,506) | $ (75,455) | $ 241,035 | $ 80,436 | $ 84,313 | $ 529,448 |
3. Investments (Details 6)
3. Investments (Details 6) | 12 Months Ended | |
Dec. 31, 2017USD ($)Claims | Dec. 31, 2016USD ($)Claims | |
Fair Value-Less than 12 months | $ 26,594,264 | $ 40,892,882 |
Unrealized Losses-Less than 12 Months | $ (591,671) | $ (1,249,276) |
No. of Positions Held-Less than 12 Months | Claims | 39 | 76 |
Fair Value-12 months or more | $ 18,883,071 | $ 2,000,586 |
Unrealized Losses-12 months or more | $ (664,780) | $ (212,093) |
No. of Positions Held-12 months or more | Claims | 36 | 9 |
Aggregate Fair Value-Total | $ 45,477,335 | $ 42,893,468 |
Unrealized Losses-Total | (1,256,451) | (1,461,369) |
Fixed Maturity Securities Political Subdivisions Of States Territories And Possessions | ||
Fair Value-Less than 12 months | 1,549,839 | 1,067,574 |
Unrealized Losses-Less than 12 Months | $ (30,814) | $ (46,589) |
No. of Positions Held-Less than 12 Months | Claims | 4 | 3 |
Fair Value-12 months or more | $ 0 | $ 0 |
Unrealized Losses-12 months or more | $ 0 | $ 0 |
No. of Positions Held-12 months or more | Claims | 0 | 0 |
Aggregate Fair Value-Total | $ 1,549,839 | $ 1,067,574 |
Unrealized Losses-Total | (30,814) | (46,589) |
Fixed Maturity Securities Corporate And Other Bonds Industrial And Miscellaneous | ||
Fair Value-Less than 12 months | 15,036,462 | 19,859,293 |
Unrealized Losses-Less than 12 Months | $ (269,857) | $ (638,113) |
No. of Positions Held-Less than 12 Months | Claims | 20 | 34 |
Fair Value-12 months or more | $ 9,113,924 | $ 239,970 |
Unrealized Losses-12 months or more | $ (340,516) | $ (5,612) |
No. of Positions Held-12 months or more | Claims | 17 | 1 |
Aggregate Fair Value-Total | $ 24,150,386 | $ 20,099,263 |
Unrealized Losses-Total | (610,373) | (643,725) |
Fixed Maturity Securities Residential mortgage backed securities | ||
Fair Value-Less than 12 months | 6,956,371 | 15,918,090 |
Unrealized Losses-Less than 12 Months | $ (48,482) | $ (309,273) |
No. of Positions Held-Less than 12 Months | Claims | 6 | 30 |
Fair Value-12 months or more | $ 7,867,572 | $ 675,316 |
Unrealized Losses-12 months or more | $ (189,022) | $ (38,442) |
No. of Positions Held-12 months or more | Claims | 15 | 6 |
Aggregate Fair Value-Total | $ 14,823,943 | $ 16,593,406 |
Unrealized Losses-Total | (237,504) | (347,715) |
Fixed Maturity Securities Total Fixed Maturity Securities | ||
Fair Value-Less than 12 months | 23,542,672 | 36,844,957 |
Unrealized Losses-Less than 12 Months | $ (349,153) | $ (993,975) |
No. of Positions Held-Less than 12 Months | Claims | 30 | 67 |
Fair Value-12 months or more | $ 16,981,496 | $ 915,286 |
Unrealized Losses-12 months or more | $ (529,538) | $ (44,054) |
No. of Positions Held-12 months or more | Claims | 32 | 7 |
Aggregate Fair Value-Total | $ 40,524,168 | $ 37,760,243 |
Unrealized Losses-Total | (878,691) | (1,038,029) |
Equity Securities Preferred Stocks | ||
Fair Value-Less than 12 months | 1,605,217 | 3,759,850 |
Unrealized Losses-Less than 12 Months | $ (20,313) | $ (241,333) |
No. of Positions Held-Less than 12 Months | Claims | 5 | 8 |
Fair Value-12 months or more | $ 1,776,675 | $ 660,750 |
Unrealized Losses-12 months or more | $ (120,712) | $ (70,571) |
No. of Positions Held-12 months or more | Claims | 3 | 1 |
Aggregate Fair Value-Total | $ 3,381,892 | $ 4,420,600 |
Unrealized Losses-Total | (141,025) | (311,904) |
Equity Securities Common Stocks | ||
Fair Value-Less than 12 months | 1,446,375 | 288,075 |
Unrealized Losses-Less than 12 Months | $ (222,205) | $ (13,968) |
No. of Positions Held-Less than 12 Months | Claims | 4 | 1 |
Fair Value-12 months or more | $ 124,900 | $ 424,550 |
Unrealized Losses-12 months or more | $ (14,530) | $ (97,468) |
No. of Positions Held-12 months or more | Claims | 1 | 1 |
Aggregate Fair Value-Total | $ 1,571,275 | $ 712,625 |
Unrealized Losses-Total | (236,735) | (111,436) |
Equity Securities Total Equity Securities | ||
Fair Value-Less than 12 months | 3,051,592 | 4,047,925 |
Unrealized Losses-Less than 12 Months | $ (242,518) | $ (255,301) |
No. of Positions Held-Less than 12 Months | Claims | 9 | 9 |
Fair Value-12 months or more | $ 1,901,575 | $ 1,085,300 |
Unrealized Losses-12 months or more | $ (135,242) | $ (168,039) |
No. of Positions Held-12 months or more | Claims | 4 | 2 |
Aggregate Fair Value-Total | $ 4,953,167 | $ 5,133,225 |
Unrealized Losses-Total | $ (377,760) | $ (423,340) |
3. Investments (Details Narrati
3. Investments (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Investments Details Narrative | ||
Proceeds from the sale and maturity of fixed-maturity securities, held to maturity | $ 247,500 | $ 0 |
Proceeds from the sale and maturity of fixed-maturity securities, available for sale | 11,132,000 | 17,752,130 |
Proceeds from the sale of equity securities | $ 3,862,127 | $ 7,073,773 |
4. Fair Value Measurements (Det
4. Fair Value Measurements (Details) - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 |
Political subdivisions of States, Territories and Possessions | $ 11,315,443 | $ 8,205,888 |
Corporate and other bonds industrial and miscellaneous | 88,141,465 | 53,685,189 |
Residential mortgage backed securities | 20,531,348 | 18,537,751 |
Total fixed maturities | 119,988,256 | 80,428,828 |
Equity investments | 14,286,198 | 9,987,686 |
Total investments | 134,274,454 | 90,416,514 |
Level 1 | ||
Political subdivisions of States, Territories and Possessions | 0 | 0 |
Corporate and other bonds industrial and miscellaneous | 83,597,300 | 48,356,317 |
Residential mortgage backed securities | 0 | 0 |
Total fixed maturities | 83,597,300 | 48,356,317 |
Equity investments | 14,286,198 | 9,987,686 |
Total investments | 97,883,498 | 58,344,003 |
Level 2 | ||
Political subdivisions of States, Territories and Possessions | 11,315,443 | 8,205,888 |
Corporate and other bonds industrial and miscellaneous | 4,544,165 | 5,328,872 |
Residential mortgage backed securities | 20,531,348 | 18,537,751 |
Total fixed maturities | 36,390,956 | 32,072,511 |
Equity investments | 0 | 0 |
Total investments | 36,390,956 | 32,072,511 |
Level 3 | ||
Political subdivisions of States, Territories and Possessions | 0 | 0 |
Corporate and other bonds industrial and miscellaneous | 0 | 0 |
Residential mortgage backed securities | 0 | 0 |
Total fixed maturities | 0 | 0 |
Equity investments | 0 | 0 |
Total investments | $ 0 | $ 0 |
5. Fair Value of Financial In55
5. Fair Value of Financial Instruments (Details) - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 |
Investment subscription receivable | $ 2,000,000 | $ 0 |
Reinsurance receivables | 28,519,130 | 32,197,765 |
Reinsurance balances payable | 2,563,966 | 2,146,017 |
Long-term debt, net | 29,126,965 | 0 |
Carrying Value | ||
Fixed-maturity investments held to maturity | 4,869,808 | 5,094,902 |
Cash and cash equivalents | 48,381,633 | 12,044,520 |
Investment subscription receivable | 2,000,000 | 0 |
Premiums receivable, net | 13,217,698 | 11,649,398 |
Reinsurance receivables | 28,519,130 | 32,197,765 |
Real estate net of accumulated depreciation | 2,261,829 | 1,659,405 |
Reinsurance balances payable | 2,563,966 | 2,146,017 |
Long-term debt, net | 29,126,965 | 0 |
Fair Value | ||
Fixed-maturity investments held to maturity | 5,150,076 | 5,298,119 |
Cash and cash equivalents | 48,381,633 | 12,044,520 |
Investment subscription receivable | 2,000,000 | 0 |
Premiums receivable, net | 13,217,698 | 11,649,398 |
Reinsurance receivables | 28,519,130 | 32,197,765 |
Real estate net of accumulated depreciation | 2,705,000 | 1,925,000 |
Reinsurance balances payable | 2,563,966 | 2,146,017 |
Long-term debt, net | $ 29,126,965 | $ 0 |
6. Intangibles (Details)
6. Intangibles (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Gross Carrying Value | $ 4,850,000 | $ 4,850,000 |
Accumulated Amortization | 3,840,000 | 3,500,000 |
Net Carrying Amount | $ 1,010,000 | 1,350,000 |
Useful Life (in yrs) | 1 year 6 months | |
Insurance license [Member] | ||
Gross Carrying Value | $ 500,000 | 500,000 |
Accumulated Amortization | 0 | 0 |
Net Carrying Amount | $ 500,000 | 500,000 |
Useful Life (in yrs) | 0 years | |
Customer relationships [Member] | ||
Gross Carrying Value | $ 3,400,000 | 3,400,000 |
Accumulated Amortization | 2,890,000 | 2,550,000 |
Net Carrying Amount | $ 510,000 | 850,000 |
Useful Life (in yrs) | 10 years | |
Other identifiable intangibles [Member] | ||
Gross Carrying Value | $ 950,000 | 950,000 |
Accumulated Amortization | 950,000 | 950,000 |
Net Carrying Amount | $ 0 | $ 0 |
Useful Life (in yrs) | 7 years |
6. Intangibles (Details 1)
6. Intangibles (Details 1) | Dec. 31, 2017USD ($) |
Goodwill and Intangible Assets Disclosure [Abstract] | |
2,018 | $ 340,000 |
2,019 | 170,000 |
Total | $ 510,000 |
6. Intangibles (Details Narrati
6. Intangibles (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Intangibles Details Narrative | ||
Weighted average amortization period of identified intangible assets of finite useful life | 1 year 6 months | |
Amortization expense, related to intangibles | $ 340,000 | $ 407,816 |
7. Reinsurance (Details)
7. Reinsurance (Details) - USD ($) | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Personal Lines [Member] | |||
Quota share treaty: | |||
Percent ceded | 20.00% | 40.00% | 40.00% |
Risk retained | $ 800,000 | $ 500,000 | $ 450,000 |
Losses per occurrence subject to quota share reinsurance coverage | 1,000,000 | 833,333 | 750,000 |
Excess of loss coverage above quota share coverage | 9,000,000 | 3,666,667 | 3,750,000 |
Total | 1,000,000 | 833,333 | 750,000 |
Total reinsurance coverage per occurrence | 9,200,000 | 4,000,000 | 4,050,000 |
Losses per occurrence subject to reinsurance coverage | $ 10,000,000 | $ 4,500,000 | $ 4,500,000 |
Expiration date | Jun. 30, 2019 | Jun. 30, 2017 | Jun. 30, 2016 |
Personal Umbrella [Member] | |||
Quota share treaty: | |||
Percent ceded - first million dollars of coverage | 90.00% | 90.00% | 90.00% |
Percent ceded - excess of one million dollars of coverage | 100.00% | 100.00% | 100.00% |
Risk retained | $ 100,000 | $ 100,000 | $ 100,000 |
Total reinsurance coverage per occurrence | 4,900,000 | 4,900,000 | 2,900,000 |
Losses per occurrence subject to reinsurance coverage | $ 5,000,000 | $ 5,000,000 | $ 3,000,000 |
Expiration date | Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2016 |
Commercial Lines [Member] | |||
Quota share treaty: | |||
Percent ceded | 0.00% | 0.00% | 0.00% |
Risk retained | $ 750,000 | $ 500,000 | $ 425,000 |
Losses per occurrence subject to quota share reinsurance coverage | 0 | 0 | 0 |
Excess of loss coverage above quota share coverage | 3,750,000 | 4,000,000 | 4,075,000 |
Total | 750,000 | 500,000 | 425,000 |
Total reinsurance coverage per occurrence | 3,750,000 | 4,000,000 | 4,075,000 |
Losses per occurrence subject to reinsurance coverage | $ 4,500,000 | $ 4,500,000 | 4,500,000 |
Commercial Umbrella [Member] | |||
Quota share treaty: | |||
Percent ceded - first million dollars of coverage | 90.00% | 90.00% | |
Percent ceded - excess of one million dollars of coverage | 100.00% | 100.00% | |
Risk retained | $ 100,000 | $ 100,000 | |
Total reinsurance coverage per occurrence | 4,900,000 | 4,900,000 | |
Losses per occurrence subject to reinsurance coverage | $ 5,000,000 | $ 5,000,000 | |
Expiration date | Jun. 30, 2018 | Jun. 30, 2017 | |
Commercial Auto [Member] | |||
Quota share treaty: | |||
Risk retained | $ 0 | $ 0 | 300,000 |
Excess of loss coverage above quota share coverage | 0 | 0 | 1,700,000 |
Total | 0 | 0 | 300,000 |
Catastrophe [Member] | |||
Quota share treaty: | |||
Initial loss subject to personal lines quota share treaty | 5,000,000 | 5,000,000 | 4,000,000 |
Risk retained per catastrophe occurrence (1) | 4,000,000 | 3,000,000 | 2,400,000 |
Catastrophe loss coverage in excess of quota share coverage (2) (3) | $ 315,000,000 | $ 247,000,000 | $ 176,000,000 |
Severe winter weather aggregate | No | No | Yes |
Reinstatement premium protection | Yes | Yes | Yes |
7. Reinsurance (Details 1)
7. Reinsurance (Details 1) | 12 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2016 | |
Catastrophe [Member] | Initial 4,000,000 [Member] | |||
Risk Retained | 2,400,000 | ||
Catastrophe [Member] | 4,000,000 - 180,000,000 [Member] | |||
Risk Retained | 0 | ||
Catastrophe [Member] | Over 180,000,000 [Member] | |||
Risk Retained | 100% | ||
Catastrophe [Member] | Initial $5,000,000 | |||
Risk Retained | 3,000,000 | ||
Catastrophe [Member] | $5,000,000 - $252,000,000 [Member] | |||
Risk Retained | 0 | ||
Catastrophe [Member] | Over $252,000,000 [Member] | |||
Risk Retained | 100% | ||
Catastrophe [Member] | Initial $5,000,000 | |||
Risk Retained | 4,000,000 | ||
Catastrophe [Member] | 5,000,000 - 320,000,000 [Member] | |||
Risk Retained | 0 | ||
Catastrophe [Member] | Over 320,000,000 [Member] | |||
Risk Retained | 100% | ||
Commercial Lines [Member] | Initial 425,000 [Member] | |||
Risk Retained | 425,000 | ||
Commercial Lines [Member] | 425,000 - 4,500,000 [Member] | |||
Risk Retained | 0 | ||
Commercial Lines [Member] | Over 4,500,000 [Member] | |||
Risk Retained | 100% | ||
Commercial Lines [Member] | Initial $500,000 [Member] | |||
Risk Retained | 500,000 | ||
Commercial Lines [Member] | $500,000 - $4,500,000 [Member] | |||
Risk Retained | 0 | ||
Commercial Lines [Member] | Over $4,500,000 | |||
Risk Retained | 100% | ||
Commercial Lines [Member] | Initial 750,000 [Member] | |||
Risk Retained | 750,000 | ||
Commercial Lines [Member] | 750,000 - 4,500,000 [Member] | |||
Risk Retained | 0 | ||
Commercial Lines [Member] | Over $4,500,000 | |||
Risk Retained | 100% | ||
Personal Umbrella [Member] | Initial 1,000,000 [Member] | |||
Risk Retained | 100,000 | ||
Personal Umbrella [Member] | 1,000,000 - 3,000,000 [Member] | |||
Risk Retained | 0 | ||
Personal Umbrella [Member] | Over 3,000,000 [Member] | |||
Risk Retained | 100% | ||
Personal Umbrella [Member] | Initial $1,000,000 | |||
Risk Retained | 100,000 | ||
Personal Umbrella [Member] | 1,000,000 - 5,000,000 [Member] | |||
Risk Retained | 0 | ||
Personal Umbrella [Member] | Over 5,000,000 [Member] | |||
Risk Retained | 100% | ||
Personal Umbrella [Member] | Initial $1,000,000 | |||
Risk Retained | 100,000 | ||
Personal Umbrella [Member] | $1,000,000 - $5,000,000 | |||
Risk Retained | 0 | ||
Personal Umbrella [Member] | Over $5,000,000 [Member] | |||
Risk Retained | 100% | ||
Personal Lines [Member] | Initial $750,000 [Member] | |||
Risk Retained | 450,000 | ||
Personal Lines [Member] | 750,000 - $4,500,000 [Member] | |||
Risk Retained | None1 | ||
Personal Lines [Member] | Over $4,500,000 [Member] | |||
Risk Retained | 100% | ||
Personal Lines [Member] | Initial 833,333 [Member] | |||
Risk Retained | 500,000 | ||
Personal Lines [Member] | $833,333 - $4,500,000 [Member] | |||
Risk Retained | 0 | ||
Personal Lines [Member] | Over $4,500,000 [Member] | |||
Risk Retained | 100% | ||
Personal Lines [Member] | Initial 1,000,000 [Member] | |||
Risk Retained | 800,000 | ||
Personal Lines [Member] | 1,000,000 - 10,000,000 [Member] | |||
Risk Retained | 0 | ||
Personal Lines [Member] | Over 10,000,000 [Member] | |||
Risk Retained | 100% | ||
Commercial Umbrella [Member] | Initial $1,000,000 | |||
Risk Retained | 100,000 | 100,000 | |
Commercial Umbrella [Member] | $1,000,000 - $5,000,000 | |||
Risk Retained | 0 | 0 | |
Commercial Umbrella [Member] | Over $5,000,000 | |||
Risk Retained | 100% | 100% |
7. Reinsurance (Details 2)
7. Reinsurance (Details 2) - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 |
Unpaid Losses | $ 16,748 | $ 15,777 |
Paid Losses | 2,533 | 2,319 |
Total | 19,281 | 18,096 |
Security | 10,788 | 13,277 |
Maiden Reinsurance Company [Member] | ||
Unpaid Losses | 8,160 | 7,640 |
Paid Losses | 968 | 985 |
Total | 9,128 | 8,625 |
Security | 10,583 | 13,113 |
Swiss Reinsurance America Corporation [Member] | ||
Unpaid Losses | 4,299 | 4,310 |
Paid Losses | 600 | 671 |
Total | 4,899 | 4,981 |
Security | 0 | 0 |
SCOR Reinsurance Company [Member] | ||
Unpaid Losses | 851 | 1,440 |
Paid Losses | 209 | 152 |
Total | 1,060 | 1,592 |
Security | 0 | 0 |
Allied World Assurance Company [Member] | ||
Unpaid Losses | 1,649 | 392 |
Paid Losses | 188 | 300 |
Total | 1,837 | 692 |
Security | 0 | 0 |
Others [Member] | ||
Unpaid Losses | 1,789 | 1,995 |
Paid Losses | 568 | 211 |
Total | 2,357 | 2,206 |
Security | $ 205 | $ 164 |
7. Reinsurance (Details 3)
7. Reinsurance (Details 3) - USD ($) | 3 Months Ended | 12 Months Ended | ||||||||
Dec. 31, 2017 | Sep. 30, 2017 | Jun. 30, 2017 | Mar. 31, 2017 | Dec. 31, 2016 | Sep. 30, 2016 | Jun. 30, 2016 | Mar. 31, 2016 | Dec. 31, 2017 | Dec. 31, 2016 | |
Reinsurance Details 3 | ||||||||||
Provisional ceding commissions earned | $ 10,677,214 | $ 12,769,404 | ||||||||
Contingent ceding commissions earned | (744,081) | (1,501,163) | ||||||||
Ceding commission revenue | $ 1,725,133 | $ 1,717,610 | $ 3,305,938 | $ 3,184,452 | $ 2,993,951 | $ 2,934,928 | $ 2,569,025 | $ 2,770,337 | $ 9,933,133 | $ 11,268,241 |
7. Reinsurance (Details Narrati
7. Reinsurance (Details Narrative) - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 |
Reinsurance Details Narrative | ||
Reinsurance receivables | $ 9,237,180 | $ 14,101,745 |
Reinsurance balances payable | $ 2,563,966 | $ 2,146,017 |
8. Deferred Policy Acquisitio64
8. Deferred Policy Acquisition Costs and Deferred Ceding Commission Revenue (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Deferred Acquisition Costs And Deferred Ceding Commission Revenue Details | ||
Net deferred policy acquisition costs, net of ceding commission revenue, beginning of year | $ 5,387,940 | $ 4,400,238 |
Cost incurred and deferred: | ||
Commission and brokerage | 23,093,880 | 19,566,982 |
Other underwriting and policy acquisition costs | 6,669,904 | 5,470,285 |
Ceding commission revenue | (8,091,785) | (13,186,177) |
Net deferred policy acquisition costs | 21,671,999 | 11,851,090 |
Return of deferred ceding commission revenue due to reduction of quota share | (3,648,859) | 0 |
Amortization | (12,830,256) | (10,863,388) |
Deferred acquisition costs | 5,192,884 | 987,702 |
Net deferred policy acquisition costs, net of ceding commission revenue, end of year | $ 10,580,824 | $ 5,387,940 |
8. Deferred Policy Acquisitio65
8. Deferred Policy Acquisition Costs and Deferred Ceding Commission Revenue (Details 1) - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 |
Deferred Acquisition Costs And Deferred Ceding Commission Revenue Details 1Abstract | ||
Deferred policy acquisition costs | $ 14,847,236 | $ 12,239,781 |
Deferred ceding commission revenue | (4,266,412) | (6,851,841) |
Balance at end of period | $ 10,580,824 | $ 5,387,940 |
9. Debt (Details)
9. Debt (Details) - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 |
Long-term debt, net | $ 29,126,965 | $ 0 |
Issuance costs | ||
Long-term debt, net | (710,826) | |
5.50% Senior Unsecured Notes | ||
Long-term debt, net | 30,000,000 | |
Discount | ||
Long-term debt, net | $ (162,209) |
10. Property and Equipment (Det
10. Property and Equipment (Details) - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 |
Cost | $ 8,107,644 | $ 5,344,608 |
Accumulated Depreciation | (3,335,067) | (2,333,235) |
Net | 4,772,577 | 3,011,373 |
Building | ||
Cost | 2,146,950 | 1,887,347 |
Accumulated Depreciation | (460,819) | (381,039) |
Net | 1,686,131 | 1,506,308 |
Land | ||
Cost | 575,698 | 153,097 |
Accumulated Depreciation | 0 | 0 |
Net | 575,698 | 153,097 |
Furniture office equipment | ||
Cost | 707,524 | 620,440 |
Accumulated Depreciation | (493,558) | (388,853) |
Net | 213,966 | 231,587 |
Computer equipment and software | ||
Cost | 4,657,174 | 2,602,330 |
Accumulated Depreciation | (2,360,392) | (1,481,949) |
Net | 2,296,782 | 1,120,381 |
Automobile | ||
Cost | 20,298 | 81,394 |
Accumulated Depreciation | (20,298) | (81,394) |
Net | $ 0 | $ 0 |
10. Property and Equipment (D68
10. Property and Equipment (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Property And Equipment Details Narrative | ||
Depreciation expense | $ 1,062,928 | $ 717,105 |
11. Property and Casualty Ins69
11. Property and Casualty Insurance Activity (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Premiums Written | ||
Direct | $ 121,575,178 | $ 103,191,995 |
Assumed | 22,847 | 28,522 |
Ceded | (28,729,149) | (37,294,330) |
Net | 92,868,876 | 65,926,187 |
Changes In Unearned Premiums | ||
Direct | (10,662,744) | (6,110,225) |
Assumed | 9,456 | 6,091 |
Ceded | (4,864,565) | 1,585,853 |
Net | (15,517,853) | (4,518,281) |
Premiums Earned | ||
Direct | 110,912,434 | 97,081,770 |
Assumed | 32,303 | 34,613 |
Ceded | (33,593,714) | (35,708,477) |
Net | $ 77,351,023 | $ 61,407,906 |
11. Property and Casualty Ins70
11. Property and Casualty Insurance Activity (Details 1) - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 |
Unearned premiums | $ 65,647,663 | $ 54,994,375 |
Gross Liability | ||
Case-basis reserves | 30,499,592 | 25,000,733 |
Loss adjustment expenses | 8,635,199 | 7,752,617 |
IBNR reserves | 9,664,831 | 8,983,369 |
Recoverable on paid losses | 0 | |
Total loss and loss adjustment expenses | 48,799,622 | 41,736,719 |
Reinsurance Receivables | ||
Case-basis reserves | 11,987,693 | 10,804,341 |
Loss adjustment expenses | 1,990,506 | 1,893,094 |
IBNR reserves | 2,770,709 | 3,079,445 |
Recoverable on unpaid losses | 16,748,908 | 15,776,880 |
Recoverable on paid losses | 2,533,042 | 2,319,140 |
Total loss and loss adjustment expenses | 19,281,950 | 18,096,020 |
Unearned premiums | 9,237,180 | 14,101,745 |
Total reinsurance receivables | $ 28,519,130 | $ 32,197,765 |
11. Property and Casualty Ins71
11. Property and Casualty Insurance Activity (Details 2) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Property And Casualty Insurance Activity Details 2 | ||
Balance at beginning of period | $ 41,736,719 | $ 39,876,500 |
Less reinsurance recoverables | (15,776,880) | (16,706,364) |
Net balance, beginning of period | 25,959,839 | 23,170,136 |
Incurred related to: | ||
Current year | 34,246,081 | 27,853,010 |
Prior years | (60,544) | (63,349) |
Total incurred | 34,185,537 | 27,789,661 |
Paid related to: | ||
Current year | 18,194,860 | 16,496,648 |
Prior years | 9,899,802 | 8,503,310 |
Total paid | 28,094,662 | 24,999,958 |
Net balance at end of period | 32,050,714 | 25,959,839 |
Add reinsurance recoverables | 16,748,908 | 15,776,880 |
Balance at end of period | $ 48,799,622 | $ 41,736,719 |
11. Property and Casualty Ins72
11. Property and Casualty Insurance Activity (Details 3) | 12 Months Ended |
Dec. 31, 2017USD ($)Claims | |
2,008 | |
2008 incurred claims | $ 4,505 |
IBNR | $ 0 |
Cumulative Number of Reported Claims | Claims | 1,133 |
2,009 | |
2008 incurred claims | $ 4,329 |
2009 incurred claims | 4,403 |
IBNR | $ 6 |
Cumulative Number of Reported Claims | Claims | 1,136 |
2,010 | |
2008 incurred claims | $ 4,223 |
2009 incurred claims | 4,254 |
2010 incurred claims | 5,598 |
IBNR | $ 0 |
Cumulative Number of Reported Claims | Claims | 1,616 |
2,011 | |
2008 incurred claims | $ 4,189 |
2009 incurred claims | 4,287 |
2010 incurred claims | 5,707 |
2011 incurred claims | 7,603 |
IBNR | $ 6 |
Cumulative Number of Reported Claims | Claims | 1,913 |
2,012 | |
2008 incurred claims | $ 4,068 |
2009 incurred claims | 4,384 |
2010 incurred claims | 6,429 |
2011 incurred claims | 7,678 |
2012 incurred claims | 9,539 |
IBNR | $ 33 |
Cumulative Number of Reported Claims | Claims | 4,702 |
2,013 | |
2008 incurred claims | $ 4,055 |
2009 incurred claims | 4,511 |
2010 incurred claims | 6,623 |
2011 incurred claims | 8,618 |
2012 incurred claims | 9,344 |
2013 incurred claims | 10,728 |
IBNR | $ 271 |
Cumulative Number of Reported Claims | Claims | 1,558 |
2,014 | |
2008 incurred claims | $ 4,056 |
2009 incurred claims | 4,609 |
2010 incurred claims | 6,912 |
2011 incurred claims | 9,440 |
2012 incurred claims | 10,278 |
2013 incurred claims | 9,745 |
2014 incurred claims | 14,193 |
IBNR | $ 552 |
Cumulative Number of Reported Claims | Claims | 2,125 |
2,015 | |
2008 incurred claims | $ 4,040 |
2009 incurred claims | 4,616 |
2010 incurred claims | 6,853 |
2011 incurred claims | 9,198 |
2012 incurred claims | 10,382 |
2013 incurred claims | 9,424 |
2014 incurred claims | 14,260 |
2015 incurred claims | 22,340 |
IBNR | $ 1,278 |
Cumulative Number of Reported Claims | Claims | 2,525 |
2,016 | |
2008 incurred claims | $ 4,038 |
2009 incurred claims | 4,667 |
2010 incurred claims | 6,838 |
2011 incurred claims | 9,066 |
2012 incurred claims | 10,582 |
2013 incurred claims | 9,621 |
2014 incurred claims | 14,218 |
2015 incurred claims | 21,994 |
2016 incurred claims | 26,062 |
IBNR | $ 2,571 |
Cumulative Number of Reported Claims | Claims | 2,841 |
2,017 | |
2008 incurred claims | $ 4,034 |
2009 incurred claims | 4,690 |
2010 incurred claims | 6,840 |
2011 incurred claims | 9,144 |
2012 incurred claims | 10,790 |
2013 incurred claims | 10,061 |
2014 incurred claims | 14,564 |
2015 incurred claims | 22,148 |
2016 incurred claims | 24,941 |
2017 incurred claims | 31,605 |
Total incurred claims | 138,817 |
IBNR | $ 6,024 |
Cumulative Number of Reported Claims | Claims | 3,128 |
11. Property and Casualty Ins73
11. Property and Casualty Insurance Activity (Details 4) | Dec. 31, 2017USD ($) |
Net liability for unpaid claim and allocated claim adjustment expenses for the accident years presented | $ 30,441 |
All outstanding liabilities before 2007, net of reinsurance | 225 |
Liabilities for claims and claim adjustment expenses, net of reinsurance | 30,666 |
2,008 | |
2,008 | 2,406 |
2,009 | |
2,008 | 3,346 |
2,009 | 2,298 |
2,010 | |
2,008 | 3,730 |
2,009 | 3,068 |
2,010 | 2,566 |
2,011 | |
2,008 | 3,969 |
2,009 | 3,607 |
2,010 | 3,947 |
2,011 | 3,740 |
2,012 | |
2,008 | 4,003 |
2,009 | 3,920 |
2,010 | 4,972 |
2,011 | 5,117 |
2,012 | 3,950 |
2,013 | |
2,008 | 4,029 |
2,009 | 4,134 |
2,010 | 5,602 |
2,011 | 6,228 |
2,012 | 5,770 |
2,013 | 3,405 |
2,014 | |
2,008 | 4,028 |
2,009 | 4,362 |
2,010 | 6,323 |
2,011 | 7,170 |
2,012 | 7,127 |
2,013 | 5,303 |
2,014 | 5,710 |
2,015 | |
2,008 | 4,031 |
2,009 | 4,424 |
2,010 | 6,576 |
2,011 | 8,139 |
2,012 | 8,196 |
2,013 | 6,633 |
2,014 | 9,429 |
2,015 | 12,295 |
2,016 | |
2,008 | 4,031 |
2,009 | 4,468 |
2,010 | 6,720 |
2,011 | 8,540 |
2,012 | 9,187 |
2,013 | 7,591 |
2,014 | 10,738 |
2,015 | 16,181 |
2,016 | 15,364 |
2,017 | |
2,008 | 4,031 |
2,009 | 4,487 |
2,010 | 6,772 |
2,011 | 8,702 |
2,012 | 10,236 |
2,013 | 8,407 |
2,014 | 11,770 |
2,015 | 18,266 |
2,016 | 19,001 |
2,017 | 16,704 |
Total | $ 108,376 |
11. Property and Casualty Ins74
11. Property and Casualty Insurance Activity (Details 5) | Dec. 31, 2017USD ($) |
Commissions and brokerage | |
Liabilities for claims and claim adjustment expenses, net of reinsurance | $ 30,666 |
Total reinsurance recoverable on unpaid claims | 16,749 |
Unallocated claims adjustment expenses | 1,385 |
Total gross liability for loss and LAE reserves | $ 48,800 |
11. Property and Casualty Ins75
11. Property and Casualty Insurance Activity (Details 6) | Dec. 31, 2017 |
Commissions and brokerage | |
Year One | 46.70% |
Year Two | 18.70% |
Year Three | 11.50% |
Year Four | 8.40% |
Year Five | 7.30% |
Year Six | 4.70% |
Year Seven | 1.30% |
Year Eight | 0.60% |
Year Nine | 0.20% |
Year Ten | 0.00% |
11. Property and Casualty Ins76
11. Property and Casualty Insurance Activity (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Property And Casualty Insurance Activity Details Narrative | ||
Advance premiums | $ 1,477,693 | $ 1,421,560 |
Incurred Losses and Loss Adjustment Expenses are net of reinsurance recoveries under reinsurance contracts | $ 14,067,027 | $ 11,796,714 |
12. Stockholders' Equity (Detai
12. Stockholders' Equity (Details) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Dividend Yield | 0.00% | |
Volatility | 0.00% | |
Risk-Free Interest Rate | 0.00% | |
Expected Life | 0 years | 3 years 3 months |
Minimum [Member] | ||
Dividend Yield | 2.74% | |
Volatility | 31.61% | |
Risk-Free Interest Rate | 1.01% | |
Maximum [Member] | ||
Dividend Yield | 3.18% | |
Volatility | 31.81% | |
Risk-Free Interest Rate | 1.11% |
12. Stockholders' Equity (Det78
12. Stockholders' Equity (Details 1) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Number of Options Outstanding, Beginning | 362,750 | |
Number of Options Granted | 0 | |
Number of Options Exercised | (21,600) | |
Number of Options Forfeited | 0 | |
Number of Options Outstanding, Ending | 341,150 | 362,750 |
Number of Options Vested and Exercisable | 321,150 | |
Weighted Average Exercise Price Outstanding, Beginning | $ 6.62 | |
Weighted Average Exercise Price Granted | 0 | |
Weighted Average Exercise Price Exercised | 5.48 | |
Weighted Average Exercise Price Forfeited | 0 | |
Weighted Average Exercise Price Outstanding, Ending | 6.69 | $ 6.62 |
Weighted Average Exercise Price Vested and Exercisable | $ 6.59 | |
Weighted Average Remaining Contractual Life (in years) Outstanding Beginning | 2 years 7 months 10 days | |
Weighted Average Remaining Contractual Life (in years) Outstanding Ending | 1 year 8 months 1 day | |
Weighted Average Remaining Contractual Life (in years) Vested and Exercisable | 1 year 6 months 11 days | |
Aggregate Intrinsic Value Outstanding, Beginning | $ 2,586,748 | |
Aggregate Intrinsic Value Granted | $ 0 | |
Aggregate Intrinsic Value Exercised | $ 221,012 | $ 80,985 |
Aggregate Intrinsic Value Forfeited/canceled | $ 0 | |
Aggregate Intrinsic Value Outstanding, Ending | $ 4,131,028 | $ 2,586,748 |
Aggregate Intrinsic Value Vested and Exercisable | $ 3,921,553 | |
Restricted Stock | ||
Number of Options Outstanding, Beginning | 7,500 | |
Number of Options Granted | 55,481 | |
Number of Options Exercised | (12,311) | |
Number of Options Forfeited | (3,333) | |
Number of Options Outstanding, Ending | 47,337 | 7,500 |
Weighted Average Exercise Price Outstanding, Beginning | $ 8.67 | |
Weighted Average Exercise Price Granted | 14.80 | |
Weighted Average Exercise Price Exercised | 13.70 | |
Weighted Average Exercise Price Forfeited | 11.51 | |
Weighted Average Exercise Price Outstanding, Ending | $ 14.35 | $ 8.67 |
Aggregate Intrinsic Value Outstanding, Beginning | $ 64,995 | |
Aggregate Intrinsic Value Granted | $ 821,164 | |
Aggregate Intrinsic Value Exercised | $ 178,651 | |
Aggregate Intrinsic Value Forfeited/canceled | $ 38,377 | |
Aggregate Intrinsic Value Outstanding, Ending | $ 679,180 | $ 64,995 |
12. Stockholders' Equity (Det79
12. Stockholders' Equity (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Employee Benefit Plans Details Narrative | ||
Dividends Declared | $ 3,214,471 | $ 1,941,271 |
Compensation Expense | $ 38,025 | $ 106,882 |
Stock-based compensation expense related to stock options is net of estimated forfeitures | 17.00% | 17.00% |
Weighted average estimated fair value of stock options granted | $ 1.87 | |
Intrisic Value-Options Exercised | $ 221,012 | $ 80,985 |
Options Exercised - Cash proceeds | $ 77,927 | $ 54,310 |
Options for the purchase of shares of Common Stock | 13,750 | 11,000 |
Unamortized compensation cost related to unvested stock option awards | $ 7,000 | $ 45,000 |
Unamortized compensation cost vesting period | 8 months 5 days | 1 year 14 days |
Shares reserved under the 2014 Plan | 550,352 | 602,500 |
13. Statutory Financial Infor80
13. Statutory Financial Information and Accounting Policies (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Statutory Financial Information And Accounting Policies Details Narrative | ||
Dividends paid | $ 2,900,000 | $ 1,950,000 |
Statutory basis net income | 7,907,743 | 9,212,125 |
Statutory basis surplus | $ 101,290,282 | $ 49,962,415 |
15. Income Taxes (Details)
15. Income Taxes (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Income Taxes Details | ||
Current federal income tax expense | $ 4,317,686 | $ 4,824,655 |
Current state income tax expense | 7,353 | (12,590) |
Deferred federal and state income tax expense (benefit) | (1,809) | (293,364) |
Provision for income taxes | $ 4,323,230 | $ 4,518,701 |
15. Income Taxes (Details 1)
15. Income Taxes (Details 1) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Income Taxes Details 4 | ||
Computed expected tax expense | $ 5,008,400 | $ 4,696,463 |
Change in enacted tax rates on net deferred tax liabilities | (405,218) | 0 |
State taxes, net of Federal benefit | (101,858) | (71,428) |
State valuation allowance | 124,486 | 85,714 |
Benefit of lower tax brackets | (100,000) | (100,000) |
Permanent differences | ||
Dividends received deduction | (138,197) | (136,690) |
Non-taxable investment income | (85,684) | (110,784) |
Stock-based compensation | (25,821) | 0 |
Other permanent differences | 46,962 | 48,139 |
Prior year tax matters | 4,172 | 123,976 |
Other | (4,012) | (16,689) |
Total tax | $ 4,323,230 | $ 4,518,701 |
Computed expected tax expense | 35.00% | 35.00% |
Change in enacted tax rates on net deferred tax liabilities | (2.80%) | 0.00% |
State taxes, net of Federal benefit | (0.70%) | (0.50%) |
State valuation allowance | 0.90% | 0.60% |
Benefit of lower tax brackets | (0.70%) | (0.70%) |
Permanent differences | ||
Dividends received deduction | (1.00%) | (1.00%) |
Non-taxable investment income | (0.60%) | (0.80%) |
Stock-based compensation | (0.20%) | 0.00% |
Other permanent differences | 0.30% | 0.30% |
Prior year tax matters | 0.00% | 0.90% |
Other | 0.00% | (0.10%) |
Total tax | 30.20% | 33.70% |
15. Income Taxes (Details 2)
15. Income Taxes (Details 2) - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 |
Deferred tax asset: | ||
Net operating loss carryovers (1) | $ 103,655 | $ 131,626 |
Claims reserve discount | 300,005 | 417,349 |
Unearned premium | 2,431,301 | 2,877,365 |
Deferred ceding commission revenue | 895,947 | 2,329,626 |
Other | 382,522 | 188,675 |
Total deferred tax assets | 4,113,430 | 5,944,641 |
Deferred tax liability: | ||
Investment in KICO (2) | 759,543 | 1,169,000 |
Deferred acquisition costs | 3,117,920 | 4,161,526 |
Intangibles | 212,100 | 459,000 |
Depreciation and amortization | 328,735 | 265,671 |
Net unrealized appreciation of securities - available for sale | 295,474 | 56,393 |
Total deferred tax liabilities | 4,713,772 | 6,111,590 |
Net deferred income tax liability | $ (600,342) | $ (166,949) |
15. Income Taxes (Details 3)
15. Income Taxes (Details 3) - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2017 | |
Intrisic Value-Options Exercised | ||
State only (A) | $ 655,719 | $ 824,996 |
Valuation allowance | (534,293) | (725,541) |
State only, net of valuation allowance | 121,426 | 99,455 |
Amount subject to Annual Limitation, Federal only (B) | 10,200 | 4,200 |
Total deferred tax asset from net operating loss carryovers | $ 131,626 | $ 103,655 |
State only (A) expiration date | 31-Dec-37 | |
Amount subject to Annual Limitation, Federal only (B) expiration date | 31-Dec-19 |
15. Income Taxes (Details 4)
15. Income Taxes (Details 4) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Income Taxes Details 4Abstract | ||
Change in net deferred income tax liabilities | $ 433,393 | |
Deferred tax expense (benefit) allocated to other comprehensive income | 435,202 | |
Deferred income tax provision | $ (1,809) | $ (293,364) |
15. Income Taxes (Details Narra
15. Income Taxes (Details Narrative) - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 |
Income Taxes Details Narrative Abstract | ||
Net operating loss carryover | $ 12,692,000 | $ 10,088,000 |
16. Employee Benefit Plans (Det
16. Employee Benefit Plans (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Employee Benefit Plans Details Narrative Abstract | ||
Contribution expense | $ 545,000 | $ 483,000 |
Additional contributions expense | $ 342,000 | $ 309,000 |
17. Commitments and Contingen88
17. Commitments and Contingencies (Details) | Dec. 31, 2017USD ($) |
Commitments And Contingencies Details | |
2,018 | $ 164,117 |
2,019 | 169,861 |
2,020 | 175,806 |
2,021 | 181,959 |
2,022 | 188,328 |
Thereafter | 244,064 |
Total | $ 1,124,135 |
17. Commitments and Contingen89
17. Commitments and Contingencies (Details Narrative) (USD $) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Commitments And Contingencies Details Narrative Usd | ||
Rent expenses | $ 165,368 | $ 119,720 |
18. Earnings Per Common Share90
18. Earnings Per Common Share (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Net Income Per Common Share Details | ||
Weighted average number of shares outstanding | 10,388,440 | 7,736,594 |
Effect of dilutive securities, common share equivalents: Stock options | $ 188,983 | $ 0 |
Effect of dilutive securities, common share equivalents: Restricted stock awards | $ 4,154 | $ 70,669 |
Weighted average number of shares outstanding, used for computing diluted earnings per share | 10,581,577 | 7,807,263 |
18. Earnings Per Common Share91
18. Earnings Per Common Share (Details Narrative) - shares | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Earnings Per Common Share Details Narrative | ||
Options computation of diluted earnings per share | 0 | 7,715 |
20. Quarterly Financial Data (D
20. Quarterly Financial Data (Details) - USD ($) | 3 Months Ended | 12 Months Ended | ||||||||
Dec. 31, 2017 | Sep. 30, 2017 | Jun. 30, 2017 | Mar. 31, 2017 | Dec. 31, 2016 | Sep. 30, 2016 | Jun. 30, 2016 | Mar. 31, 2016 | Dec. 31, 2017 | Dec. 31, 2016 | |
Quarterly Financial Data Tables | ||||||||||
Net premiums earned | $ 22,513,140 | $ 21,514,408 | $ 16,953,727 | $ 16,369,748 | $ 16,219,175 | $ 15,646,181 | $ 15,010,875 | $ 14,531,675 | $ 77,351,023 | $ 61,407,906 |
Ceding commission revenue | 1,725,133 | 1,717,610 | 3,305,938 | 3,184,452 | 2,993,951 | 2,934,928 | 2,569,025 | 2,770,337 | 9,933,133 | 11,268,241 |
Net investment income | 1,215,475 | 1,033,307 | 1,026,004 | 857,800 | 829,384 | 709,072 | 764,070 | 813,057 | 4,132,586 | 3,115,583 |
Net realized gain (loss) on sale of investments | (12,602) | 20,998 | 130,423 | (54,506) | (75,455) | 241,035 | 80,436 | 84,313 | 529,448 | |
Total revenues | 25,783,212 | 24,614,653 | 21,724,251 | 20,647,194 | 20,251,505 | 19,828,397 | 18,911,910 | 18,444,852 | 92,769,310 | 77,436,664 |
Loss and loss adjustment expenses | 11,364,296 | 7,073,323 | 7,454,922 | 8,292,996 | 7,384,116 | 5,134,854 | 5,786,836 | 9,483,855 | 34,185,537 | 27,789,661 |
Commission expense and other underwriting expenses | 10,919,353 | 9,975,938 | 9,301,182 | 9,101,395 | 8,812,023 | 8,642,964 | 8,122,342 | 7,616,507 | 39,297,868 | 33,193,836 |
Net income | $ 1,931,592 | $ 4,073,921 | $ 2,510,392 | $ 1,470,580 | $ 2,055,847 | $ 3,460,626 | $ 2,842,261 | $ 541,032 | $ 9,986,485 | $ 8,899,766 |
Basic earnings per share | $ 0.18 | $ 0.38 | $ 0.24 | $ 0.15 | $ 0.26 | $ 0.44 | $ 0.36 | $ 0.07 | $ 0.96 | $ 1.15 |
Diluted earnings per share | $ 0.18 | $ 0.38 | $ 0.23 | $ 0.15 | $ 0.26 | $ 0.43 | $ 0.36 | $ 0.07 | $ 0.94 | $ 1.14 |