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KC

KINGSTONE COMPANIES, INC. (KINS)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 delivered record profitability: total revenues $42.10M, net premiums earned $35.97M, diluted EPS $0.40, combined ratio 78.5% .
  • Management raised 2025 guidance: combined ratio 81–85% (from 82–86%), diluted EPS $1.75–$2.15 (from $1.45–$1.85), ROE 27–35% (from 24–32%)—citing higher earned premiums, reduced quota share to 16% (vs 27% in 2024), interest savings after fully paying off holding company debt, and expected gain on sale of HQ building .
  • Growth catalysts persisted: core direct premiums written up 49% in Q4 on competitor exits in NY; average premium up ~15–20% YoY; Q1 weather described as benign, supporting outlook .
  • Balance sheet and cash generation strengthened: investment income +21% YoY (Q4), portfolio repositioned to longer duration corporates; book yield 3.86%—positioning for sustained investment income lift as lower-yield bonds mature .

What Went Well and What Went Wrong

What Went Well

  • Core DPW up 49% in Q4, driven by market dislocation; homeowners new business policies up ~4x YoY; overall policy count +44%; average premium +15% .
  • Loss ratio improvements and no catastrophe losses in Q4: net loss ratio 48.7% (−8.1 pts YoY); catastrophe loss ratio 0.0% (−3.0 pts YoY); expense ratio down 2.9 pts YoY to 29.8% . CFO: “net income of $5.4M or $0.40 per diluted share” as fifth consecutive profitable quarter .
  • Debt fully repaid in Jan–Feb 2025; ~$800K 2025 interest savings, +$0.05 to diluted EPS; ATM paused following strengthened capital position . CEO: “paid off $20M of debt in just five months… Kingstone is now debt-free” .

What Went Wrong

  • Unrealized losses pressured AOCI in Q4 amid higher Treasury yields: other comprehensive loss of $3.135M; bond fair values down $3.1M (intent to hold to maturity) .
  • Non-core business remains a drag (shrinking by design): non-core DPW down 59.9% YoY in Q4; net loss ratio 56.0% vs 78.2% prior year; policies-in-force down ~31% sequentially .
  • Expense ratio still elevated vs long-term ambition given bonus and contingent commissions linked to strong underwriting; management targeting another 1 pt reduction in 2025 .

Financial Results

MetricQ2 2024Q3 2024Q4 2024
Total Revenues ($USD Millions)$36.50 $40.77 $42.10
Net Premiums Earned ($USD Millions)$30.30 $33.41 $35.97
EPS - Basic ($USD)$0.41 $0.61 $0.44
EPS - Diluted ($USD)$0.37 $0.55 $0.40
Net Income ($USD Millions)$4.51 $6.98 $5.44
Net Combined Ratio (%)78.2% 72.0% 78.5%
Net Underwriting Expense Ratio (%)31.2% 33.0% 29.8%
Net Loss Ratio (%)N/A39.0% 48.7%

Segment breakdown (Q4 2024):

SegmentDirect Premiums Written ($USD Thousands)Net Premiums Earned ($USD Thousands)Net Loss Ratio excl. Cat (%)Cat Loss Ratio (%)Net Loss Ratio (%)
Core (NY)$70,164 $34,700 48.4% 0.0% 48.4%
Non-Core (ex-NY)$2,370 $1,268 56.0% 0.0% 56.0%

Key KPIs (Q4 2024):

KPIQ4 2024
Direct Premiums Written ($USD Thousands)$72,533
Adjusted EBITDA ($USD Thousands)$9,303
Operating Net Income ($USD Thousands)$6,153
Net Investment Income ($USD Thousands)$1,906
ROE - Annualized (%)34.4%
Other Comprehensive (Loss) ($USD Thousands)$(3,135)
Portfolio Book Yield (%)3.86%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Core DPW growthFY202515%–25% 15%–25% Maintained
Combined ratioFY202582%–86% 81%–85% Raised (improved)
Net income per share – BasicFY2025$1.60–$2.00 $1.90–$2.30 Raised
Net income per share – DilutedFY2025$1.45–$1.85 $1.75–$2.15 Raised
Return on equityFY202524%–32% 27%–35% Raised
DriversFY2025—Higher earned premiums from Q4 DPW, quota share cut to 16% (vs 27% in 2024), interest savings from debt payoff, expected HQ sale gain —

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2024)Previous Mentions (Q3 2024)Current Period (Q4 2024)Trend
Market dislocation & growthAnnounced competitor exits (>60k policies), intent to grow profitably; DPW growth from price increases Best quarter ever; core DPW +43%; new business ~4x; estimating $25–30M incremental 2024 premium Core DPW +49% in Q4; homeowners new business ~4x; policy count +44% Accelerating then normalizing in 2025, still elevated
Pricing & underwriting (Select)Select matches rate to risk; annual replacement cost updates; price increases implemented Select frequency materially lower than legacy; by-peril pricing and insurance scores Select reduces frequency ~29% YoY; preferred risks, better scores, higher deductibles Consistent improvement
Expense ratio disciplineExpense ratio ~31.2%; bonuses/commissions lift ratio; target lowered longer term Net expense ratio 33% (higher due to bonuses/commissions) Net underwriting expense ratio 29.8%; goal to remove another 1 pt in 2025 Improving
Reinsurance & quota shareFlexibility to adjust quota share midstream; winter storm coverage lowers retention to ~$5M Planning reduced quota share in 2025 to retain more premiums/profit Quota share reduced to 16% for 2025 with higher ceding commission Favorable impact on earnings
Capital & debtSolution for maturing debt hinted ATM used to prepay debt; intent to retire debt by end-2025 Debt fully repaid; ~$800K interest savings; ATM paused Materially improved balance sheet
Investment portfolioShift towards 2–5Y corporates; avg book yield ~4.21% (Q3); OCI gains on rate drop EBITDA ~$11M supporting investments $39M deployed at ~5% yield; effective duration 5.25Y; Q4 OCI −$3.1M on rate rises; book yield 3.86% Positioned for higher future NII
Geographic expansionConsidering expansion to other states longer term —Studying catastrophe-exposed states; careful, thoughtful approach; plan later in 2025 Under evaluation
Weather/cat exposureGuidance assumed average cats in 2025 —Q1 looks good; more snow and colder than 2024 but low cat frequency Neutral/benign near term

Management Commentary

  • CEO: “We finished the year with 21% growth overall and 31% growth in our core business… core direct written premium grew by 49%” .
  • CEO: “We made 3 additional prepayments in January and February, and our debt has been fully paid off… roughly $800,000 in interest expense in 2025, contributing another $0.05 to earnings per diluted share” .
  • CFO: “Net income of $5.4 million or $0.40 per diluted share for the quarter… combined ratio improved by 11 percentage points to 78.5%” .
  • CFO: “Invested $39 million… achieving a book yield of about 5% and an effective duration of 5.25 years” .

Q&A Highlights

  • Growth sustainability: Hard market persists in Downstate NY; few carriers writing coastal properties; pricing confidence remains .
  • Expansion plans: Evaluating New England and other catastrophe-exposed states; will be “super thoughtful” and share plans later in year .
  • Expense ratio target: Cultural focus on low expenses; CEO aims to take another point out in 2025 with higher earned premium and lower quota share .
  • Weather backdrop: Q1 2025 has been colder with more snow than 2024, but no material cat events; frequency low; “Q1 is looking good” .
  • Investment yield: Book yield currently 3.86% per CFO .

Estimates Context

  • Wall Street consensus EPS and revenue estimates (S&P Global) for Q4 2024 were unavailable due to an SPGI daily request limit error encountered during retrieval. As a result, we cannot quantify beats/misses versus consensus for this quarter [GetEstimates errors shown above].

Key Takeaways for Investors

  • Margin quality improving: Q4 combined ratio 78.5% with no cat losses and lower expense ratio, underpinned by Select product’s ~29% frequency reduction vs legacy .
  • Earnings power reset for 2025: Guidance raised across combined ratio, EPS (basic and diluted), and ROE; quota share reduced to 16% and debt paydown add operating leverage .
  • Growth normalization but still strong: Post-2024 surge, 2025 core growth expected 15–25%, supported by producer expansion, moderated rate increases, and underwriting appetite updates (e.g., replacement cost limits) .
  • Capital position strengthened: Debt-free status, ATM paused, and statutory surplus supports growth even after quota share reduction .
  • Investment income tailwinds: Portfolio positioned to reinvest maturing lower-yield bonds (~$12M by end-2025, ~$34M by end-2026) at higher market rates; Q4 NII +21% YoY .
  • Near-term operational backdrop favorable: Q1 2025 weather benign with low catastrophe frequency; supports near-term underwriting results .
  • Potential catalysts: Formal expansion plan later in 2025, execution on raised 2025 guidance, and closing of HQ building sale contributing to results .