Exhibit 99.2
![](https://capedge.com/proxy/8-K/0001654954-19-009118/kins_ex991000.jpg)
Additional Financial Information for Q2 2019
Definitions and Non-GAAP Measures
Direct written premiums represents the total premiums charged on policies issued by the Company during the respective fiscal period. Net premiums written are direct written premiums less premiums ceded to reinsurers. Net premiums earned are net premiums written that are pro-rata earned during the fiscal period presented. All of the Company’s policies are written for a twelve month period. Management uses direct written premiums and net written premiums, along with other measures, to gauge the Company’s performance and evaluate results.
Expansion direct written premiums - represents the total premiums charged on policies issued by the Company during the respective fiscal period from its business located in newly licensed states (i.e., outside New York).
Net operating income - is net income exclusive of realized investment gains, net of tax. Net income is the GAAP measure most closely comparable to net operating income.
Operating return on average common equity - is net operating income divided by average common equity. Return on average common equity is the GAAP measure most closely comparable to operating return on average common equity.
Management uses net operating income and operating return on average common equity, along with other measures, to gauge the Company’s performance and evaluate results, which can be skewed when including realized investment gains, which may vary significantly between periods. Net operating income and operating return on average common equity are provided as supplemental information, are not a substitute for net income or return on average common equity and do not reflect the Company’s overall profitability or return on average common equity.
Net loss ratio excluding Commercial Lines - is a non-GAAP ratio, which is computed as the difference between GAAP net loss ratio and commercial lines net loss ratio.
Net loss ratio excluding the effect of catastrophes - is a non-GAAP ratio, which is computed as the difference between GAAP net loss ratio and the effect of catastrophes on the net loss ratio. Net combined ratio excluding the effect of catastrophes - is a non-GAAP ratio, which is computed as the difference between GAAP net combined ratio and the effect of catastrophes on the net combined ratio.
We believe that these ratios are useful to investors and they are used by management to reveal the trends in our business that may be obscured by catastrophe losses. Catastrophe losses cause our loss trends to vary significantly between periods as a result of their incidence of occurrence and magnitude, and can have a significant impact on the net loss ratio and net combined ratio. We believe these measures are useful for investors to evaluate these components separately and in the aggregate when reviewing our underwriting performance. We also provide them to facilitate a comparison to our outlook on the net combined ratio excluding the effect of catastrophes. The most directly comparable GAAP measure are the net loss ratio and net combined ratio. The net loss ratio excluding the effect of catastrophes and net combined ratio excluding the effect of catastrophes should not be considered a substitute for the net loss ratio and the net combined ratio and do not reflect the Company’s net loss ratio and net combined ratio.
1
Book Value Per Share
The Company’s book value per share at June 30, 2019 was $8.14, a decrease of 2.2% compared to $8.32 at June 30, 2018.
30-Jun-19 | 31-Mar-19 | 31-Dec-18 | 30-Sep-18 | 30-Jun-18 | |
Book Value Per Share | $8.14 | $7.78 | $8.25 | $8.54 | $8.32 |
% Increase from specified period to 6/30/19 | 4.6% | -1.4% | -4.7% | -2.2% |
The table below details the direct written premiums, net written premiums, and net premiums earned for the periods indicated:
For the Three Months Ended | For the Six Months Ended | |||||||
June 30, | June 30, | |||||||
2019 | 2018 | $ Change | % Change | 2019 | 2018 | $ Change | % Change | |
(000’s except percentages) | ||||||||
Direct and Net Written Premiums Reconciliation: | ||||||||
Direct written premiums | $44,821 | $36,864 | $7,957 | 21.6% | $82,310 | $68,390 | $13,920 | 20.4% |
Assumed written premiums | - | - | - | na % | - | 1 | (1) | (100.0) % |
Ceded written premiums | (8,200) | (8,899) | 699 | (7.9)% | (15,328) | (16,726) | 1,398 | (8.4) % |
Net written premiums | 36,621 | 27,965 | 8,656 | 31.0% | 66,982 | 51,665 | 15,317 | 29.6% |
Change in unearned premiums | (5,420) | (3,860) | (1,560) | 40.4% | (6,185) | (4,723) | (1,462) | 31.0% |
Net premiums earned | $31,201 | $24,105 | $7,096 | 29.4% | $60,797 | $46,942 | $13,855 | 29.5% |
The table below details the Core direct written premiums, Expansion direct written premiums, and direct written premiums for the periods indicated:
For the Three Months Ended | For the Six Months Ended | |||||||
June 30, | June 30, | |||||||
2019 | 2018 | $ Change | % Change | 2019 | 2018 | $ Change | % Change | |
(000’s except percentages) | ||||||||
Core and Expansion Direct Written Premiums Reconciliation: | ||||||||
Core direct written premiums | $38,524 | $34,697 | $3,827 | 11.0% | $72,781 | $65,326 | $7,455 | 11.4% |
Expansion direct written premiums | 6,297 | 2,167 | 4,130 | 190.6% | 9,529 | 3,064 | 6,465 | 211.0% |
Direct written premiums | $44,821 | $36,864 | $7,957 | 21.6% | $82,310 | $68,390 | $13,920 | 20.4% |
2
The following table reconciles net operating income (loss) to net income (loss) and operating return on average common equity to return on average common equity for the periods indicated:
Three Months Ended | Three Months Ended | Six Months Ended | Six Months Ended | |||||
June 30, 2019 | June 30, 2018 | June 30, 2019 | June 30, 2018 | |||||
Amount | Diluted earnings per common share | Amount | Diluted earnings per common share | Amount | Diluted earnings per common share | Amount | Diluted earnings per common share | |
(000’s except per common share amounts and percentages) | ||||||||
Net Operating Income and Diluted Earnings per Common Share Reconciliation: | ||||||||
Net income (loss) | $1,639 | $0.15 | $2,757 | $0.25 | $(5,696) | $(0.53) | $39 | $0.00 |
Net realized (gain) loss on investments | (679) | 107 | (2,714) | 630 | ||||
Less tax (expense) benefit on net realized (gain) loss | (143) | 22 | (570) | 132 | ||||
Net realized (gain) loss on investments, net of taxes | (536) | $(0.05) | 85 | $0.01 | (2,144) | $(0.20) | 498 | $0.05 |
Net operating income (loss) | $1,103 | $0.10 | $2,842 | $0.26 | $(7,840) | $(0.73) | $537 | $0.05 |
Weighted average diluted shares outstanding | 10,785,064 | 10,820,322 | 10,764,824 | 10,828,020 | ||||
Operating Return on Average Common Equity (Annualized for Quarterly Periods) Reconciliation: | ||||||||
Net income (loss) | $1,639 | $2,757 | $(5,696) | $39 | ||||
Average common equity | $85,722 | $88,444 | $88,168 | $91,652 | ||||
Return on average common equity (annualized for quarterly periods) | 7.6% | 12.5% | -12.9% | 0.1% | ||||
Net realized (gain) loss on investments, net of taxes | $(536) | $85 | $(2,144) | $498 | ||||
Average common equity | $85,722 | $88,444 | $88,168 | $91,652 | ||||
Effect of net realized loss on investments, net of taxes, on return on average common equity (annualized for quarterly periods) | -2.5% | 0.4% | -4.9% | 1.1% | ||||
Net operating income (loss) | $1,103 | $2,842 | $(7,840) | $537 | ||||
Average common equity | $85,722 | $88,444 | $88,168 | $91,652 | ||||
Operating return on average common equity (annualized for quarterly periods) | 5.1% | 12.9% | -17.8% | 1.2% |
3
The following table reconciles the net loss ratio excluding commercial lines to the net loss ratio for the periods indicated:
For the Three Months Ended | For the Six Months Ended | |||||||
June 30, | June 30, | |||||||
2019 | 2018 | Change | 2019 | 2018 | Change | |||
Net Loss Ratio Excluding Commercial lines Reconciliation: | ||||||||
Net loss and loss adjustment expenses ("Net loss") | ||||||||
Net loss excluding commercial lines | $13,905 | $10,375 | $3,530 | 34.0% | $36,370 | $25,192 | $11,178 | 44.4% |
Commercial lines net loss | 3,767 | 801 | 2,966 | 370.3% | 10,436 | 3,250 | 7,186 | 221.1% |
Net loss | 17,672 | 11,176 | 6,496 | 58.1% | 46,806 | 28,442 | 18,364 | 64.6% |
Net premiums earned | ||||||||
Net premiums earned excluding commercial lines | 27,509 | 20,681 | 6,828 | 33.0% | 53,506 | 40,288 | 13,218 | 32.8% |
Commercial lines net premiums earned | 3,692 | 3,424 | 268 | 7.8% | 7,291 | 6,654 | 637 | 9.6% |
Net premiums earned | 31,201 | 24,105 | 7,096 | 29.4% | 60,797 | 46,942 | 13,855 | 29.5% |
Net loss ratio excluding commercial lines | 50.5% | 50.2% | 0.3 | pts | 68.0% | 62.5% | 5.5 | pts |
Net loss ratio | 56.6% | 46.4% | 10.2 | pts | 77.0% | 60.6% | 16.4 | pts |
The following table reconciles the net loss ratio excluding the effects of catastrophes to the net loss ratio for the periods indicated:
For the Three Months Ended | For the Six Months Ended | |||||||
June 30, | June 30, | |||||||
2019 | 2018 | Percentage Point Change | 2019 | 2018 | Percentage Point Change | |||
Net Loss Ratio Excluding the Effect of Catastrophes Reconciliation: | ||||||||
Net loss ratio excluding the effect of catastrophes | 52.0% | 45.6% | 6.4 | pts | 66.3% | 48.4% | 17.9 | pts |
Effect of catastrophe losses | 4.6% | 0.8% | 3.8 | pts | 10.7% | 12.2% | (1.5) | pts |
Net loss ratio | 56.6% | 46.4% | 10.2 | pts | 77.0% | 60.6% | 16.4 | pts |
4
The following table reconciles the net combined ratio excluding the effects of catastrophes to the net combined ratio for the periods indicated:
For the Three Months Ended | For the Six Months Ended | |||||||
June 30, | June 30, | |||||||
2019 | 2018 | Percentage Point Change | 2019 | 2018 | Percentage Point Change | |||
Net Combined Ratio Excluding the Effect of Catastrophes Reconciliation: | ||||||||
Net combined ratio excluding the effect of catastrophes | 89.5% | 82.9% | 6.6 | pts | 104.3% | 85.8% | 18.5 | pts |
Effect of catastrophe losses | ||||||||
Net loss and loss adjustment expenses | 4.6% | 0.8% | 3.8 | pts | 10.7% | 12.2% | (1.5) | pts |
Net underwriting expense ratio | 0.0% | 0.5% | (0.5) | pts | 0.0% | 0.8% | (0.8) | pts |
Total effect of catastrophe losses | 4.6% | 1.3% | 3.3 | pts | 10.7% | 13.0% | (2.3) | pts |
Net combined ratio | 94.1% | 84.2% | 9.9 | pts | 115.0% | 98.8% | 16.2 | pts |
The following table reconciles net operating income (loss) and diluted operating earnings (loss) per share exclusive of catastrophe financial impact to net operating income (loss) and diluted operating earnings (loss) per share for the periods indicated:
For the Three Months Ended | For the Six Months Ended | |||||||
June 30, | June 30, | |||||||
2019 | 2018 | 2019 | 2018 | |||||
Amount | Diluted earnings per common share | Amount | Diluted earnings per common share | Amount | Diluted earnings per common share | Amount | Diluted earnings per common share | |
(000’s except per common share amounts) | ||||||||
Net Operating Income and Diluted Operating Earnings per Share Exclusive of Catastrophe Financial Impact: | ||||||||
Net operating income (loss) | $1,103 | $0.10 | $2,842 | $0.26 | $(7,840) | $(0.73) | $537 | $0.05 |
Catastrophe financial impact | ||||||||
Ceding commission revenue | - | 125 | - | 459 | ||||
Total expenses | 1,437 | 160 | 6,501 | 4,868 | ||||
Income from operations before taxes | 1,437 | 285 | 6,501 | 5,327 | ||||
Income tax expense | 302 | 25 | 1,365 | 1,119 | ||||
Total catastrophe financial impact | 1,135 | $0.11 | 260 | $0.02 | 5,136 | $0.48 | 4,208 | $0.39 |
Net operating income (loss) exclusive of catastrophe financial impact | $2,238 | $0.21 | $3,102 | $0.28 | $(2,704) | $(0.25) | $4,745 | $0.44 |
Weighted average diluted shares outstanding | 10,785,064 | 10,820,322 | 10,764,824 | 10,828,020 |
5
The following table summarizes gross and net written premiums, net premiums earned, and loss and loss adjustment expenses by major product type, which were determined based primarily on similar economic characteristics and risks of loss.
For the Three Months Ended | For the Six Months Ended | |||
June 30, | June 30, | |||
2019 | 2018 | 2019 | 2018 | |
Gross premiums written: | ||||
Personal lines | $38,047,987 | $29,652,128 | $68,146,956 | $54,477,580 |
Livery physical damage | 2,878,749 | 2,424,499 | 5,608,835 | 4,778,569 |
Other(1) | 61,806 | 56,093 | 134,877 | 116,799 |
Total without commercial lines | 40,988,542 | 32,132,720 | 73,890,668 | 59,372,948 |
Commercial lines (in run-off effective July 2019)(2) | 3,832,848 | 4,731,445 | 8,419,236 | 9,017,836 |
Total gross premiums written | $44,821,390 | $36,864,165 | $82,309,904 | $68,390,784 |
Net premiums written: | ||||
Personal lines(3) | $30,340,230 | $21,219,892 | $53,844,093 | $38,663,803 |
Livery physical damage | 2,878,749 | 2,422,499 | 5,608,835 | 4,778,569 |
Other(1) | 55,984 | 48,228 | 122,280 | 96,260 |
Total without commercial lines | 33,274,963 | 23,690,619 | 59,575,208 | 43,538,632 |
Commercial lines (in run-off effective July 2019)(2) | 3,346,540 | 4,274,058 | 7,406,901 | 8,126,429 |
Total net premiums written | $36,621,503 | $27,964,676 | $66,982,109 | $51,665,060 |
Net premiums earned: | ||||
Personal lines(3) | $24,828,974 | $18,231,382 | $48,249,848 | $35,271,638 |
Livery physical damage | 2,620,857 | 2,401,376 | 5,138,539 | 4,922,060 |
Other(1) | 59,404 | 48,144 | 117,421 | 94,851 |
Total without commercial lines | 27,509,235 | 20,680,902 | 53,505,808 | 40,288,549 |
Commercial lines (in run-off effective July 2019)(2) | 3,692,044 | 3,423,712 | 7,291,360 | 6,653,682 |
Total net premiums earned | $31,201,279 | $24,104,614 | $60,797,168 | $46,942,231 |
Net loss and loss adjustment expenses(4): | ||||
Personal lines | $11,874,563 | $8,482,526 | $32,277,107 | $21,443,732 |
Livery physical damage | 1,203,457 | 1,101,715 | 2,420,760 | 2,265,796 |
Other(1) | 176,061 | 318,304 | 326,565 | 376,978 |
Unallocated loss adjustment expenses | 651,142 | 472,876 | 1,345,792 | 1,105,647 |
Total without commercial lines | 13,905,223 | 10,375,421 | 36,370,224 | 25,192,153 |
Commercial lines (in run-off effective July 2019)(2) | 3,767,085 | 800,664 | 10,436,308 | 3,250,262 |
Total net loss and loss adjustment expenses | $17,672,308 | $11,176,085 | $46,806,532 | $28,442,415 |
Net loss ratio(4): | ||||
Personal lines | 47.8% | 46.5% | 66.9% | 60.8% |
Livery physical damage | 45.9% | 45.9% | 47.1% | 46.0% |
Other(1) | 296.4% | 661.2% | 278.1% | 397.4% |
Total without commercial lines | 50.5% | 50.2% | 68.0% | 62.5% |
Commercial lines (in run-off effective July 2019)(2) | 102.0% | 23.4% | 143.1% | 48.8% |
Total | 56.6% | 46.4% | 77.0% | 60.6% |
1.
“Other” includes, among other things, premiums and loss and loss adjustment expenses from our participation in a mandatory state joint underwriting association and loss and loss adjustment expenses from commercial auto.
2.
In July 2019, the Company decided that it will no longer underwrite Commercial Liability risks. See discussions above regarding the discontinuation of this line of business.
3.
See discussions above with regard to “Net Written Premiums and Net Premiums Earned”, as to changes in quota share ceding rates, effective July 1, 2018 and 2017.
4.
See discussions above with regard to “Net Loss and LAE”, as to catastrophe losses in 2019 and 2018.
6
KINGSTONE COMPANIES, INC. AND SUBSIDIARIES | |||||||
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (Unaudited) |
For the Three Months Ended | For the Six Months Ended | |||
June 30, | June 30, | |||
2019 | 2018 | 2019 | 2018 | |
Revenues | ||||
Net premiums earned | $31,201,279 | $24,104,614 | $60,797,168 | $46,942,231 |
Ceding commission revenue | 675,695 | 1,691,168 | 1,953,378 | 3,386,326 |
Net investment income | 1,719,769 | 1,556,866 | 3,343,481 | 2,940,855 |
Net gains (losses) on investments | 678,655 | (106,733) | 2,714,018 | (629,860) |
Other income | 329,972 | 300,271 | 695,873 | 608,504 |
Total revenues | 34,605,370 | 27,546,186 | 69,503,918 | 53,248,056 |
Expenses | ||||
Loss and loss adjustment expenses | 17,672,308 | 11,176,085 | 46,806,532 | 28,442,415 |
Commission expense | 7,299,173 | 6,017,189 | 14,152,589 | 11,817,137 |
Other underwriting expenses | 5,416,449 | 5,075,986 | 11,552,440 | 10,107,489 |
Other operating expenses | 1,097,468 | 843,816 | 2,068,640 | 1,090,674 |
Depreciation and amortization | 627,669 | 424,161 | 1,230,001 | 833,592 |
Interest expense | 456,545 | 451,962 | 913,090 | 908,507 |
Total expenses | 32,569,612 | 23,989,199 | 76,723,292 | 53,199,814 |
Income (loss) before taxes | 2,035,758 | 3,556,987 | (7,219,374) | 48,242 |
Income tax expense (benefit) | 396,378 | 799,690 | (1,523,564) | 8,879 |
Net income (loss) | 1,639,380 | 2,757,297 | (5,695,810) | 39,363 |
Other comprehensive income (loss), net of tax | ||||
Gross change in unrealized gains (losses) | ||||
on available-for-sale-securities | 3,679,475 | (1,475,767) | 7,868,191 | (4,349,246) |
Reclassification adjustment for losses | ||||
included in net income | 12,364 | 76,126 | 34,795 | 319,899 |
Net change in unrealized gains (losses) | 3,691,839 | (1,399,641) | 7,902,986 | (4,029,347) |
Income tax benefit (expense) related to items | ||||
of other comprehensive income (loss) | (775,285) | 293,723 | (1,659,626) | 845,961 |
Other comprehensive income (loss), net of tax | 2,916,554 | (1,105,918) | 6,243,360 | (3,183,386) |
Comprehensive income (loss) | $4,555,934 | $1,651,379 | $547,550 | $(3,144,023) |
Earnings (loss) per common share: | ||||
Basic | $0.15 | $0.26 | $(0.53) | $0.00 |
Diluted | $0.15 | $0.25 | $(0.53) | $0.00 |
Weighted average common shares outstanding | ||||
Basic | 10,771,717 | 10,664,806 | 10,764,824 | 10,667,385 |
Diluted | 10,785,064 | 10,820,322 | 10,764,824 | 10,828,020 |
Dividends declared and paid per common share | $0.1000 | $0.1000 | $0.2000 | $0.2000 |
7
KINGSTONE COMPANIES, INC. AND SUBSIDIARIES | ||
Condensed Consolidated Balance Sheets |
June 30, | December 31, | |
2019 | 2018 | |
(unaudited) | ||
Assets | ||
Fixed-maturity securities, held-to-maturity, at amortized cost (fair value of | ||
$4,114,072 at June 30, 2019 and $4,426,416 at December 31, 2018) | $3,824,620 | $4,222,855 |
Fixed-maturity securities, available-for-sale, at fair value (amortized cost of | ||
$160,085,628 at June 30, 2019 and $155,431,261 at December 31, 2018) | 164,334,869 | 151,777,516 |
Equity securities, at fair value (cost of $22,254,788 at June 30, 2019 and | ||
$18,305,986 at December 31, 2018) | 22,738,950 | 16,572,616 |
Other investments | 2,335,874 | 1,855,225 |
Total investments | 193,234,313 | 174,428,212 |
Cash and cash equivalents | 18,895,805 | 21,138,403 |
Premiums receivable, net | 14,958,200 | 13,961,599 |
Reinsurance receivables, net | 28,643,360 | 26,367,115 |
Deferred policy acquisition costs | 19,413,809 | 17,907,737 |
Intangible assets, net | 500,000 | 670,000 |
Property and equipment, net | 7,350,068 | 6,056,929 |
Deferred income taxes, net | 216,474 | 354,233 |
Other assets | 6,256,815 | 5,867,850 |
Total assets | $289,468,844 | $266,752,078 |
Liabilities | ||
Loss and loss adjustment expense reserves | $69,675,120 | $56,197,106 |
Unearned premiums | 85,488,146 | 79,032,131 |
Advance premiums | 3,468,225 | 2,107,629 |
Reinsurance balances payable | 2,806,903 | 1,933,376 |
Deferred ceding commission revenue | 3,100,156 | 2,686,677 |
Accounts payable, accrued expenses and other liabilities | 7,877,191 | 6,819,231 |
Income taxes payable | - | 15,035 |
Long-term debt, net | 29,383,341 | 29,295,251 |
Total liabilities | 201,799,082 | 178,086,436 |
Commitments and Contingencies | ||
Stockholders' Equity | ||
Preferred stock, $.01 par value; authorized 2,500,000 shares | - | - |
Common stock, $.01 par value; authorized 20,000,000 shares; issued 11,802,087 shares | ||
at June 30, 2019 and 11,775,148 shares at December 31, 2018; outstanding | ||
10,774,648 shares at June 30, 2019 and 10,747,709 shares at December 31, 2018 | 118,020 | 117,751 |
Capital in excess of par | 68,373,590 | 67,763,940 |
Accumulated other comprehensive income (loss) | 3,359,047 | (2,884,313) |
Retained earnings | 18,531,657 | 26,380,816 |
90,382,314 | 91,378,194 | |
Treasury stock, at cost, 1,027,439 shares at June 30, 2019 | ||
and at December 31, 2018 | (2,712,552) | (2,712,552) |
Total stockholders' equity | 87,669,762 | 88,665,642 |
Total liabilities and stockholders' equity | $289,468,844 | $266,752,078 |
8