UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark one)

☑

☒

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

For the quarterly period ended September 30, ~~2017~~

2023

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

For the transition period from _________to _________

Commission File Number 0-1665

~~KINGSTONE COMPANIES, INC.~~

~~(Exact name of registrant as specified in its charter)~~

		KINGSTONE COMPANIES, INC.
(Exact name of registrant as specified in its charter)

Delaware

36-2476480

(State or other jurisdiction of

incorporation or organization)

~~36-2476480~~

(I.R.S. Employer

Identification Number)

15 Joys Lane

Kingston, NY 12401

(Address of principal executive offices)

(845) 802-7900

(Registrant’s telephone number, including area code)

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

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

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

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes ☑☒ No ☐

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

Large accelerated filer	☐	☐	Accelerated filer		☐
Non-accelerated filer	☒	☐ ~~(Do not check if a smaller reporting company)~~	Smaller reporting company		☑ ☒
			Emerging growth company	☐	☐

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

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

☒

As of November ~~9, 2017,~~20, 2023, there were ~~10,626,402~~10,759,330 shares of the registrant’s common stock outstanding.

~~KINGSTONE COMPANIES, INC.~~

~~INDEX~~



					~~PAGE~~

KINGSTONE COMPANIES, INC.

INDEX

							PAGE

PART I — FINANCIAL INFORMATION				2
		Item 1 —		Financial Statements		2 4
				Condensed Consolidated Balance Sheets at September 30, ~~2017~~2023 (Unaudited) and December 31, ~~2016~~2022		2 4
				Condensed Consolidated Statements of ~~Income~~Operations and Comprehensive ~~Income~~Loss for the three months and nine months ended September 30, ~~2017~~2023 (Unaudited) and ~~2016~~2022 (Unaudited)		3 5
				~~Condensed Consolidated Statement of Stockholders’ Equity for the nine months ended September 30, 2017 (Unaudited)~~		4
			Condensed Consolidated Statements of ~~Cash Flows~~Stockholders’ Equity for the three months and nine months ended September 30, ~~2017~~2023 (Unaudited) and ~~2016~~2022 (Unaudited)		5 6-7
	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2023 (Unaudited) and 2022 (Unaudited)			8-9
	Notes to Condensed Consolidated Financial Statements (Unaudited)			6 10
		Item 2 —		Management’s Discussion and Analysis of Financial Condition and Results of Operations		34 44
		Item 3 —		Quantitative and Qualitative Disclosures About Market Risk		68 78
		Item 4 —		Controls and Procedures		68 78

PART II — OTHER INFORMATION				69 79
		Item 1 —		Legal Proceedings		69 79
		Item 1A —		Risk Factors		69 79
		Item 2 —		Unregistered Sales of Equity Securities and Use of Proceeds		69 79
		Item 3 —		Defaults Upon Senior Securities		69 79
Item 4 —	Mine Safety Disclosures			79
Item 5 —	Other Information			79
Item 6 —	Exhibits			80
Signatures				81


	~~Item 4 —~~	~~Mine Safety Disclosures~~	69	2
	~~Item 5 —~~	~~Other Information~~	69
	~~Item 6 —~~	~~Exhibits~~	70	Table of Contents
~~Signatures~~			71
~~EXHIBIT 3(a)~~ ~~EXHIBIT 3(b)~~ ~~EXHIBIT 31(a)~~
~~EXHIBIT 31(b)~~
~~EXHIBIT 32~~
~~EXHIBIT 101.INS XBRL Instance Document~~ ~~EXHIBIT 101.SCH XBRL Taxonomy Extension Schema~~ ~~EXHIBIT 101.CAL XBRL Taxonomy Extension Calculation Linkbase~~ ~~EXHIBIT 101.DEF XBRL Taxonomy Extension Definition Linkbase~~ ~~EXHIBIT 101.LAB XBRL Taxonomy Extension Label Linkbase~~ ~~EXHIBIT 101.PRE XBRL Taxonomy Extension Presentation Linkbase~~

Forward-Looking Statements

This Quarterly Report ~~on Form 10-Q~~ contains ~~forward-looking~~forward‑looking statements ~~as that term is defined in~~within the ~~federal securities laws.~~meaning of the Private Securities Litigation Reform Act of 1995. The events described in ~~forward-looking~~forward‑looking statements contained in this Quarterly Report may not occur. Generally, these statements relate to business plans or strategies, projected or anticipated ~~benefits~~results or other consequences of our plans or strategies, projected or anticipated ~~benefits~~results from acquisitions to be made by us, or projections involving anticipated revenues, earnings, costs or other aspects of our operating results. The words ~~"may," "will," "expect," "believe," "anticipate," "project," "plan," "intend," "estimate,"~~“may,” “will,” “expect,” “believe,” “anticipate,” “project,” “plan,” “intend,” “estimate,” and ~~"continue,"~~“continue,” and their opposites and similar expressions are intended to identify ~~forward-looking~~forward‑looking statements. We caution you that these statements are not guarantees of future performance or events and are subject to a number of uncertainties, risks and other influences, many of which are beyond our control, ~~that~~which may influence the accuracy of the statements and the projections upon which the statements are based. Factors which may ~~affect our~~cause actual results and outcomes to differ materially from those contained in the forward-looking statements include, but are not limited to the risks and uncertainties discussed in Part I, Item 71A (“Risk Factors”) of our Annual Report on Form 10-K for the year ended December 31, ~~2016 under “Factors That May Affect Future Results~~2022, Part I, Item 2 of this Quarterly Report and ~~Financial Condition.”~~

Part II, Item 1A of this Quarterly Report.

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

otherwise except as required by law.

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

KINGSTONE COMPANIES, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets

September 30,

December 31,

2017

2016

(unaudited)

Assets

Fixed-maturity securities, held-to-maturity, at amortized cost (fair value of

$5,181,159 at September 30, 2017 and $5,298,119 at December 31, 2016)
$4,846,349
$5,094,902
Fixed-maturity securities, available-for-sale, at fair value (amortized cost of


$110,315,798 at September 30, 2017 and $80,596,628 at December 31, 2016)
  111,789,752
  80,428,828
Equity securities, available-for-sale, at fair value (cost of $12,706,538


at September 30, 2017 and $9,709,385 at December 31, 2016)
  13,221,116
  9,987,686
Total investments
  129,857,217
  95,511,416
Cash and cash equivalents
  25,880,306
  12,044,520
Premiums receivable, net
  13,394,800
  11,649,398
Reinsurance receivables, net
  24,971,272
  32,197,765
Deferred policy acquisition costs
  14,381,976
  12,239,781
Intangible assets, net
  1,095,000
  1,350,000
Property and equipment, net
  4,187,325
  3,011,373
Other assets
  1,638,899
  1,442,209
Total assets
$215,406,795
$169,446,462



Liabilities


Loss and loss adjustment expense reserves
$42,290,797
$41,736,719
Unearned premiums
  63,442,903
  54,994,375
Advance premiums
  2,086,589
  1,421,560
Reinsurance balances payable
  1,812,348
  2,146,017
Deferred ceding commission revenue
  3,953,749
  6,851,841
Accounts payable, accrued expenses and other liabilities
  6,874,636
  5,448,448
Deferred income taxes
  1,128,088
  166,949
Total liabilities
  121,589,110
  112,765,909



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 11,610,216 shares


at September 30, 2017 and 8,896,335 at December 31, 2016; outstanding


10,623,407 shares at September 30, 2017 and 7,921,866 shares at December 31, 2016
  116,102
  88,963
Capital in excess of par
  68,306,831
  37,950,401
Accumulated other comprehensive income
  1,312,431
  72,931
Retained earnings
  26,254,620
  20,563,720

  95,989,984
  58,676,015
Treasury stock, at cost, 986,809 shares at September 30, 2017


and 974,469 shares at December 31, 2016
  (2,172,299)
  (1,995,462)
Total stockholders' equity
  93,817,685
  56,680,553



Total liabilities and stockholders' equity
$215,406,795
$169,446,462

KINGSTONE COMPANIES, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
	September 30,			December 31,
	2023			2022
	(unaudited)
Assets
Fixed-maturity securities, held-to-maturity, at amortized cost (fair value of $5,699,498 at September 30, 2023 and $6,600,388 at December 31, 2022)	$	7,053,825		$	7,766,140
Fixed-maturity securities, available-for-sale, at fair value (amortized cost of $154,459,849 at September 30, 2023 and $174,918,427 at December 31, 2022)		132,786,899			154,715,163
Equity securities, at fair value (cost of $17,986,783 at September 30, 2023 and $18,086,700 at December 31, 2022)		13,907,651			13,834,390
Other investments		3,213,318			2,771,652
Total investments		156,961,693			179,087,345
Cash and cash equivalents		15,132,969			11,958,228
Premiums receivable, net		13,326,369			13,880,504
Reinsurance receivables, net		84,257,926			66,465,061
Deferred policy acquisition costs		20,532,322			23,819,453
Intangible assets		500,000			500,000
Property and equipment, net		9,594,500			10,541,935
Deferred income taxes, net		12,789,160			10,331,158
Other assets		3,893,322			3,748,847
Total assets	$	316,988,261		$	320,332,531

Liabilities
Loss and loss adjustment expense reserves	$	121,674,947		$	118,339,513
Unearned premiums		103,161,550			107,492,777
Advance premiums		6,288,223			2,839,028
Reinsurance balances payable		20,263,484			13,061,966
Deferred ceding commission revenue		9,393,051			10,619,569
Accounts payable, accrued expenses and other liabilities		4,453,452			6,651,723
Debt, net		25,224,693			25,158,523
Total liabilities		290,459,400			284,163,099

Commitments and Contingencies (Note 11)

Stockholders' Equity
Preferred stock, $.01 par value; authorized 2,500,000 shares		-			-
Common stock, $.01 par value; authorized 20,000,000 shares; issued 12,227,562 shares at September 30, 2023 and 12,171,512 shares at December 31, 2022; outstanding 10,756,156 shares at September 30, 2023 and 10,700,106 shares at December 31, 2022		122,275			121,715
Capital in excess of par		75,153,808			74,519,590
Accumulated other comprehensive loss		(17,119,479	)		(15,958,428	)
Accumulated deficit		(26,060,262	)		(16,945,964	)
		32,096,342			41,736,913
Treasury stock, at cost, 1,471,406 shares at September 30, 2023 and December 31, 2022		(5,567,481	)		(5,567,481	)
Total stockholders' equity		26,528,861			36,169,432

Total liabilities and stockholders' equity	$	316,988,261		$	320,332,531

See accompanying notes to condensed consolidated financial statements.

KINGSTONE COMPANIES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Income and Comprehensive Income (Unaudited)

For the Three Months Ended

For the Nine Months Ended

September 30,

September 30,

2017

2016

2017

2016

Revenues

Net premiums earned
$21,514,408
$15,646,181
$54,837,883
$45,188,731
Ceding commission revenue
  1,717,610
  2,934,928
  8,208,000
  8,274,290
Net investment income
  1,033,307
  709,072
  2,917,111
  2,286,199
Net realized gains on investments
  20,998
  241,035
  96,915
  604,903
Other income
  328,330
  297,181
  926,189
  831,036
Total revenues
  24,614,653
  19,828,397
  66,986,098
  57,185,159





Expenses




Loss and loss adjustment expenses
  7,073,323
  5,134,854
  22,821,241
  20,405,545
Commission expense
  5,500,483
  4,603,755
  15,491,027
  13,400,029
Other underwriting expenses
  4,475,455
  4,039,209
  12,887,488
  10,981,784
Other operating expenses
  1,069,005
  530,261
  2,731,499
  1,292,196
Depreciation and amortization
  378,518
  262,387
  1,023,390
  835,388
Total expenses
  18,496,784
  14,570,466
  54,954,645
  46,914,942





Income from operations before taxes
  6,117,869
  5,257,931
  12,031,453
  10,270,217
Income tax expense
  2,043,948
  1,797,305
  3,976,560
  3,426,298
Net income
  4,073,921
  3,460,626
  8,054,893
  6,843,919





Other comprehensive income, net of tax




Gross change in unrealized gains




on available-for-sale-securities
  499,077
  60,391
  1,974,946
  2,418,305





Reclassification adjustment for gains




included in net income
  (20,998)
  (241,035)
  (96,915)
  (604,903)
Net change in unrealized gains (losses)
  478,079
  (180,644)
  1,878,031
  1,813,402
Income tax (expense) benefit related to items




of other comprehensive income (loss)
  (162,547)
  61,419
  (638,531)
  (616,557)
Other comprehensive income (loss), net of tax
  315,532
  (119,225)
  1,239,500
  1,196,845





Comprehensive income
$4,389,453
$3,341,401
$9,294,393
$8,040,764





Earnings per common share:




Basic
$0.38
$0.44
$0.78
$0.89
Diluted
$0.38
$0.43
$0.77
$0.89





Weighted average common shares outstanding




Basic
  10,626,242
  7,911,353
  10,307,689
  7,676,887
Diluted
  10,832,739
  7,972,925
  10,500,272
  7,729,712





Dividends declared and paid per common share
$0.0800
$0.0625
$0.2225
$0.1875

Table of Contents

KINGSTONE COMPANIES, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited)
	For the Three Months Ended						For the Nine Months Ended
	September 30,						September 30,
	2023			2022			2023			2022
Revenues
Net premiums earned	$	27,938,318		$	29,360,976		$	85,701,467		$	83,936,424
Ceding commission revenue		5,536,327			4,886,094			16,393,944			14,283,077
Net investment income		1,444,360			1,418,521			4,437,208			3,411,946
Net (losses) gains on investments		(824,370	)		(397,658	)		597,643			(9,313,436	)
Other income		142,036			269,702			454,160			750,169
Total revenues		34,236,671			35,537,635			107,584,422			93,068,180

Expenses
Loss and loss adjustment expenses		21,932,453			22,027,516			66,552,565			63,624,755
Commission expense		8,210,430			8,702,190			25,221,374			25,534,307
Other underwriting expenses		6,318,625			7,276,101			19,873,882			20,717,047
Other operating expenses		441,963			809,597			1,868,011			2,357,367
Depreciation and amortization		741,059			824,975			2,327,691			2,472,348
Interest expense		988,699			456,545			3,004,564			1,369,635
Total expenses		38,633,229			40,096,924			118,848,087			116,075,459

Loss from operations before taxes		(4,396,558	)		(4,559,289	)		(11,263,665	)		(23,007,279	)
Income tax benefit		(858,987	)		(561,668	)		(2,149,367	)		(4,432,507	)
Net loss		(3,537,571	)		(3,997,621	)		(9,114,298	)		(18,574,772	)

Other comprehensive loss, net of tax
Gross change in unrealized losses on available-for-sale-securities		(2,821,785	)		(5,047,679	)		(1,486,887	)		(22,556,319	)

Reclassification adjustment for losses included in net loss		4,181			4,247			17,201			55,927
Net change in unrealized losses, on available-for-sale-securities		(2,817,604	)		(5,043,432	)		(1,469,686	)		(22,500,392	)
Income tax benefit related to items of other comprehensive loss		591,697			1,059,120			308,635			4,725,083
Other comprehensive loss, net of tax		(2,225,907	)		(3,984,312	)		(1,161,051	)		(17,775,309	)

Comprehensive loss	$	(5,763,478	)	$	(7,981,933	)	$	(10,275,349	)	$	(36,350,081	)

Loss per common share:
Basic	$	(0.33	)	$	(0.38	)	$	(0.85	)	$	(1.75	)
Diluted	$	(0.33	)	$	(0.38	)	$	(0.85	)	$	(1.75	)

Weighted average common shares outstanding
Basic		10,756,156			10,645,675			10,754,709			10,640,290
Diluted		10,756,156			10,645,675			10,754,709			10,640,290

Dividends declared and paid per common share	$	-		$	0.04		$	-		$	0.12

See accompanying notes to condensed consolidated financial statements.

KINGSTONE COMPANIES, INC. AND SUBSIDIARIES

Condensed Consolidated Statement of Stockholders' Equity (Unaudited)

Nine months ended September 30, 2017

Accumulated

Capital

Other

Preferred Stock

Common Stock

in Excess

Comprehensive

Retained
Treasury Stock

Shares

Amount

Shares

Amount

of Par

Income

Earnings

Shares

Amount

Total

Balance, January 1, 2017
  -
$-
  8,896,335
$88,963
$37,950,401
$72,931
$20,563,720
  974,469
$(1,995,462)
$56,680,553
Proceeds from public offering, net of










offering costs of $2,173,000
  -
  -
  2,692,500
  26,925
  30,109,774
  -
  -
  -
  -
  30,136,699
Stock-based compensation
  -
  -
  -
  -
  198,046
  -
  -
  -
  -
  198,046
Vesting of restricted stock awards
  -
  -
  8,966
90
  (90)
  -
  -
  -
  -
  -
Shares deducted from restricted stock










awards for payment of withholding taxes


  (1,163)
  (12)
  (17,681)




  (17,693)
Exercise of stock options
  -
  -
  13,578
  136
  66,381
  -
  -
  -
  -
  66,517
Acquisition of treasury stock
  -
  -
  -
  -
  -
  -
  -
  12,340
  (176,837)
  (176,837)
Dividends
  -
  -
  -
  -
  -
  -
  (2,363,993)
  -
  -
  (2,363,993)
Net income
  -
  -
  -
  -
  -
  -
  8,054,893
  -
  -
  8,054,893
Change in unrealized gains on available-










for-sale securities, net of tax
  -
  -
  -
  -
  -
  1,239,500
  -
  -
  -
  1,239,500
Balance, September 30, 2017
  -
$-
  11,610,216
$116,102
$68,306,831
$1,312,431
$26,254,620
  986,809
$(2,172,299)
$93,817,685

Table of Contents

KINGSTONE COMPANIES, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Stockholders' Equity (Unaudited)
Three months ended September 30, 2023 and 2022

											Accumulated
									Capital		Other
	Preferred Stock				Common Stock				in Excess		Comprehensive			Accumulated			Treasury Stock
	Shares		Amount		Shares		Amount		of Par		Loss			Deficit			Shares		Amount			Total
Balance, July 1, 2022		-	$	-		12,117,081	$	121,171	$	73,102,513	$	(11,994,258	)	$	(8,572,521	)		1,471,406	$	(5,567,481	)	$	47,089,424
Stock-based compensation		-		-		-		-		188,422		-			-			-		-			188,422
Dividends		-		-		-		-		-		-			(425,800	)		-		-			(425,800	)
Net loss		-		-		-		-		-		-			(3,997,621	)		-		-			(3,997,621	)
Change in unrealized losses on available-for-sale securities, net of tax		-		-		-		-		-		(3,984,312	)		-			-		-			(3,984,312	)
Balance, September 30, 2022		-	$	-		12,117,081	$	121,171	$	73,290,935	$	(15,978,570	)	$	(12,995,942	)		1,471,406	$	(5,567,481	)	$	38,870,113


											Accumulated
									Capital		Other
	Preferred Stock				Common Stock				in Excess		Comprehensive			Accumulated			Treasury Stock
	Shares		Amount		Shares		Amount		of Par		Loss			Deficit			Shares		Amount			Total
Balance, July 1, 2023		-	$	-		12,227,562	$	122,275	$	74,946,685	$	(14,893,572	)	$	(22,522,691	)		1,471,406	$	(5,567,481	)	$	32,085,216
Stock-based compensation		-		-		-		-		207,123		-			-			-		-			207,123
Net loss		-		-		-		-		-		-			(3,537,571	)		-		-			(3,537,571	)
Change in unrealized losses on available-for-sale securities, net of tax		-		-		-		-		-		(2,225,907	)		-			-		-			(2,225,907	)
Balance, September 30, 2023		-	$	-		12,227,562	$	122,275	$	75,153,808	$	(17,119,479	)	$	(26,060,262	)		1,471,406	$	(5,567,481	)	$	26,528,861

See accompanying notes to condensed consolidated financial statements.

KINGSTONE COMPANIES, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows (Unaudited)

Nine months ended September 30,

2017

2016

Cash flows from operating activities:

Net income
$8,054,893
$6,843,919
Adjustments to reconcile net income to net cash flows provided by operating activities:


Net realized gains on sale of investments
  (96,915)
  (604,903)
Depreciation and amortization
  1,023,390
  835,388
Amortization of bond premium, net
  405,832
  310,838
Stock-based compensation
  198,046
  89,814
Deferred income tax expense (benefit)
  322,608
  (172,835)
(Increase) decrease in operating assets:


Premiums receivable, net
  (1,745,402)
  (894,774)
Reinsurance receivables, net
  7,226,493
  57,259
Deferred policy acquisition costs
  (2,142,195)
  (1,197,101)
Other assets
  (219,189)
  (308,505)
Increase (decrease) in operating liabilities:


Loss and loss adjustment expense reserves
  554,078
  (74,177)
Unearned premiums
  8,448,528
  4,873,607
Advance premiums
  665,029
  846,905
Reinsurance balances payable
  (333,669)
  2,307,504
Deferred ceding commission revenue
  (2,898,092)
  217,786
Accounts payable, accrued expenses and other liabilities
  1,426,188
  343,707
Net cash flows provided by operating activities
  20,889,623
  13,474,432



Cash flows from investing activities:


Purchase - fixed-maturity securities available-for-sale
  (38,612,403)
  (33,295,669)
Purchase - equity securities available-for-sale
  (5,298,781)
  (6,728,540)
Redemption - fixed-maturity securities held-to-maturity
  200,000
  -
Sale or maturity - fixed-maturity securities available-for-sale
  8,385,874
  16,374,028
Sale - equity securities available-for-sale
  2,571,122
  6,065,744
Acquisition of fixed assets
  (1,944,342)
  (521,533)
Other investing activities
  -
  250,448
Net cash flows used in investing activities
  (34,698,530)
  (17,855,522)



Cash flows from financing activities:


Net proceeds from issuance of common stock
  30,136,699
  4,807,631
Proceeds from exercise of stock options
  66,517
  12,725
Purchase of treasury stock
  (176,837)
  (113,267)
Withholding taxes paid on vested retricted stock awards
  (17,693)
  -
Dividends paid
  (2,363,993)
  (1,446,684)
Net cash flows provided by financing activities
  27,644,693
  3,260,405



Increase (decrease) in cash and cash equivalents
$13,835,786
$(1,120,685)
Cash and cash equivalents, beginning of period
  12,044,520
  13,551,372
Cash and cash equivalents, end of period
$25,880,306
$12,430,687



Supplemental disclosures of cash flow information:


Cash paid for income taxes
$3,936,000
$3,799,671

Table of Contents

KINGSTONE COMPANIES, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Stockholders' Equity (Unaudited)
Nine months ended September 30, 2023 and 2022

														Accumulated			Retained
											Capital			Other			Earnings
	Preferred Stock				Common Stock						in Excess			Comprehensive			(Accumulated			Treasury Stock
	Shares		Amount		Shares			Amount			of Par			Income (Loss)			Deficit)			Shares		Amount			Total
Balance, January 1, 2022		-	$	-		11,955,660		$	119,557		$	72,467,483		$	1,796,739		$	6,855,896			1,471,406	$	(5,567,481	)	$	75,672,194
Stock-based compensation		-		-		-			-			1,204,865			-			-			-		-			1,204,865
Vesting of restricted stock awards		-		-		234,219			2,342			(2,342	)		-			-			-		-			-

Shares deducted from restricted stock awards for payment of withholding taxes		-		-		(72,798	)		(728	)		(379,071	)		-			-			-		-			(379,799	)
Dividends		-		-		-			-			-			-			(1,277,066	)		-		-			(1,277,066	)
Net loss		-		-		-			-			-			-			(18,574,772	)		-		-			(18,574,772	)
Change in unrealized losses on available-for-sale securities, net of tax		-		-		-			-			-			(17,775,309	)		-			-		-			(17,775,309	)
Balance, September 30, 2022		-	$	-		12,117,081		$	121,171		$	73,290,935		$	(15,978,570	)	$	(12,995,942	)		1,471,406	$	(5,567,481	)	$	38,870,113


														Accumulated
											Capital			Other
	Preferred Stock				Common Stock						in Excess			Comprehensive			Accumulated			Treasury Stock
	Shares		Amount		Shares			Amount			of Par			Loss			Deficit			Shares		Amount			Total
Balance, January 1, 2023		-	$	-		12,171,512		$	121,715		$	74,519,590		$	(15,958,428	)	$	(16,945,964	)		1,471,406	$	(5,567,481	)	$	36,169,432
Stock-based compensation		-		-		-			-			636,178			-			-			-		-			636,178
Vesting of restricted stock awards		-		-		56,977			569			(569	)		-			-			-		-			-
Shares deducted from restricted stock awards for payment of withholding taxes		-		-		(927	)		(9	)		(1,391	)		-			-			-		-			(1,400	)
Net loss		-		-		-			-			-			-			(9,114,298	)		-		-			(9,114,298	)
Change in unrealized losses on available-for-sale securities, net of tax		-		-		-			-			-			(1,161,051	)		-			-		-			(1,161,051	)
Balance, September 30, 2023		-	$	-		12,227,562		$	122,275		$	75,153,808		$	(17,119,479	)	$	(26,060,262	)		1,471,406	$	(5,567,481	)	$	26,528,861

See accompanying notes to condensed consolidated financial statements.

Table of Contents

KINGSTONE COMPANIES, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows (Unaudited)
Nine Months ended September 30,	2023			2022

Cash flows from operating activities:
Net loss	$	(9,114,298	)	$	(18,574,772	)
Adjustments to reconcile net loss to net cash flows used in operating activities:
Net losses (gains) on investments		17,201			(599,773	)
Net unrealized (gains) losses on equity investments		(173,178	)		7,549,640
Net unrealized (gains) losses on other investments		(441,666	)		2,363,568
Depreciation and amortization		2,327,691			2,472,348
Bad debt expense		59,099			43,365
Amortization of bond premium, net		118,280			922,257
Amortization of discount and issuance costs on debt		890,758			132,135
Stock-based compensation		636,178			1,204,865
Deferred income tax benefit		(2,149,367	)		(3,939,612	)
Decrease (increase) in operating assets:
Premiums receivable, net		495,036			(616,493	)
Reinsurance receivables, net		(17,792,865	)		(19,073,499	)
Deferred policy acquisition costs		3,287,131			(966,697	)
Other assets		(144,475	)		95,613
Increase (decrease) in operating liabilities:
Loss and loss adjustment expense reserves		3,335,434			11,980,153
Unearned premiums		(4,331,227	)		6,029,773
Advance premiums		3,449,195			3,933,809
Reinsurance balances payable		7,201,518			(1,486,321	)
Deferred ceding commission revenue		(1,226,518	)		571,862
Accounts payable, accrued expenses and other liabilities		(2,198,271	)		36,341
Net cash flows used in operating activities		(15,754,344	)		(7,921,438	)

Cash flows from investing activities:
Purchase - fixed-maturity securities held-to-maturity		-			(498,711	)
Purchase - fixed-maturity securities available-for-sale		(13,167,937	)		(24,874,443	)
Purchase - equity securities		-			(637,897	)
Redemption - fixed-maturity securities held-to-maturity		750,000			1,000,000
Sale and maturity - fixed-maturity securities available-for-sale		33,453,349			14,213,435
Sale - equity securities		99,917			11,962,513
Redemption - other investments		-			2,576,272
Acquisition of property and equipment		(1,380,256	)		(3,342,258	)
Net cash flows provided by investing activities		19,755,073			398,911

Cash flows from financing activities:
Principal payments on equipment financing		(810,289	)		-
Issue costs on 2022 Notes		(14,299	)		-
Withholding taxes paid on vested retricted stock awards		(1,400	)		(379,799	)
Dividends paid		-			(1,277,066	)
Net cash flows used in financing activities		(825,988	)		(1,656,865	)

See accompanying notes to condensed consolidated financial statements.

Table of Contents

KINGSTONE COMPANIES, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows (Unaudited) (Continued)
Nine Months ended September 30,	2023			2022

Increase (decrease) in cash and cash equivalents	$	3,174,741		$	(9,179,392	)
Cash and cash equivalents, beginning of period		11,958,228			24,290,598
Cash and cash equivalents, end of period	$	15,132,969		$	15,111,206

Supplemental disclosures of cash flow information:
Cash paid for income taxes	$	-		$	-
Cash paid for interest	$	1,628,357		$	825,000

Supplemental schedule of non-cash investing and financing activities:
Other comprehensive loss, net of tax	$	(1,161,051	)	$	(17,775,309	)

See accompanying notes to condensed consolidated financial statements.

Table of Contents

KINGSTONE COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1 - Nature of Business and Basis of Presentation

Kingstone Companies, Inc. (referred to herein as "Kingstone" or the “Company” or, on a standalone basis for the parent company only, the “Holding Company”), through its ~~wholly owned~~wholly-owned subsidiary, Kingstone Insurance Company (“KICO”), underwrites property and casualty insurance ~~to small businesses and individuals~~ exclusively through ~~independent~~retail and wholesale agents and brokers. KICO is a licensed insurance company in the States of New York, New Jersey, ~~Connecticut, Pennsylvania,~~ Rhode Island, Massachusetts, Pennsylvania, Connecticut, Maine and ~~Texas.~~New Hampshire. KICO is ~~currently offering~~actively writing its property and casualty insurance products in New York. For the three months ended September 30, 2023 and 2022, 88.5% and 80.5%, respectively, of KICO’s direct written premiums came from the New York policies. For the nine months ended September 30, 2023 and 2022, 88.1% and 80.3%, respectively, of KICO’s direct written premiums came from the New ~~Jersey and Pennsylvania. Although New Jersey is now~~York policies. Kingstone, through its wholly owned subsidiary, Cosi Agency, Inc. (“Cosi”), a ~~growing expansion market~~multi-state licensed general agency, receives commission revenue from KICO for the ~~Company, the majority of KICO’s business is written in the State of New York. In October 2017, a homeowners rate, rule,~~policies it places with others and ~~form filing was approved for use by the State of Rhode Island. KICO anticipates writing business there in the fourth quarter of 2017.~~

pays commissions to these agencies.

The accompanying unaudited condensed consolidated financial statements ~~included in this report~~ have been prepared in accordance with U.S. generally accepted accounting principles ~~generally accepted in the United States~~ (“GAAP”) ~~for interim financial information and the instructions to Securities and Exchange Commission (“SEC”) Form 10-Q and Article 8-03 of SEC Regulation S-X.~~. The principles for condensed interim financial information do not require the inclusion of all the information and footnotes required by ~~generally accepted accounting principles~~GAAP for complete financial statements. Therefore, these condensed consolidated financial statements should be read in conjunction with the consolidated financial statements as of and for the year ended December 31, ~~2016~~2022 and notes thereto included in the Company’s Annual Report on Form 10-K filed with the ~~SEC~~Securities and Exchange Commission (the “SEC”) on March ~~16, 2017.~~31, 2023. The accompanying condensed consolidated financial statements have not been audited by an independent registered public accounting firm in accordance with standards of the Public Company Accounting Oversight Board (United States) but, in the opinion of management, such financial statements include all adjustments, consisting only of normal recurring adjustments, necessary for a fair ~~statement~~presentation of the Company’s financial position and results of operations. The results of operations for the nine months ended September 30, ~~2017~~2023 may not be indicative of the results that may be expected for the year ending December 31, ~~2017.~~

2023.

Components of ceded premiums within prior year net earned premiums in Note 6 were reclassified to conform with an elected change in the current year presentation by recording ceded written premiums for the 12 months of the contract term at inception, rather than monthly over the contract term, providing a full disclosure of the premium ceded. The reclassification had no effect on the Company’s previously reported financial condition, results of operations or cash flows.

Note 2 – Accounting Policies

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. ~~Such~~Actual results could differ from these estimates and assumptions, which include the reserves for losses and loss adjustment expenses “(LAE)”, which are subject to ~~considerable~~ estimation ~~error~~errors due to the inherent uncertainty in projecting ultimate claim amounts that will be reported and settled over a period of ~~several~~many years. In addition, estimates and assumptions associated with receivables under reinsurance contracts related to contingent ceding commission revenue require ~~considerable judgment~~judgments by management. On an ~~on-going~~ongoing basis, management reevaluates its assumptions and the methods offor calculating ~~its~~these estimates. Actual results may differ significantly from the estimates ~~and assumptions~~ used in preparing the condensed consolidated financial statements.

Table of Contents

Principles of Consolidation

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

Recent Accounting ~~Changes~~

Pronouncements

In ~~May 2015,~~June 2016, the Financial Accounting Standards Board ~~(“FASB”)~~ issued Accounting Standards Update (“ASU”) 2015-09, Financial Services – Insurance (Topic 944): Disclosures About Short-Duration Contracts. The updated accounting guidance requires expanded disclosures for insurance entities that issue short-duration contracts. The expanded disclosures are designed to provide additional insight into an insurance entity’s ability to underwrite and anticipate costs associated with insurance claims. The disclosures include information about incurred and paid claims development by accident year, on a net basis after reinsurance, for the number of years claims incurred that typically remain outstanding, not to exceed ten years. Each period presented in the disclosure about claims development that precedes the current reporting period is considered required supplementary information. The expanded disclosures also include information about significant changes in methodologies and assumptions, a reconciliation of incurred and paid claims development to the carrying amount of the liability for unpaid claims and claim adjustment expenses, the total amount of incurred but not reported liabilities plus expected development, claims frequency information including the methodology used to determine claim frequency and any changes to that methodology, and claim duration. The guidance became effective for annual periods beginning after December 15, 2015, and interim periods beginning after December 15, 2016, and has been applied retrospectively. The new guidance affected disclosures only and had no impact on the Company’s results of operations or financial position.

Effective January 1, 2017, the Company has adopted the provisions of 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 interim 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 interim period ended September 30, 2017.

~~Accounting Pronouncements~~

In May 2014, FASB issued ASU 2014-09 – Revenue from Contracts with Customers (Topic 606). The standard excludes from its scope the accounting for insurance contracts, financial instruments, and certain other agreements that are governed under other GAAP guidance. 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. Early adoption is permitted for annual reporting periods beginning after December 15, 2016. The Company will apply the guidance using a modified retrospective approach. The Company does not expect these amendments to have a material effect on its 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. The updated accounting guidance requires changes to the reporting model for financial instruments. The primary change for the Company is expected to be the requirement for equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income. The updated guidance is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company is currently evaluating the effect the updated guidance will have on its consolidated financial statements.

In February 2016, FASB issued ASU 2016-02 – Leases (Topic 842). 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.~~Instruments (“ASU 2016-13”). This new guidance applies to reinsurance and insurance receivables and other financing receivables. For available-for-sale fixed maturity securities carried at fair value, estimated credit losses will continue to be measured at the present value of expected cash flows; however, the other than temporary impairment (“OTTI”) concept has been eliminated. Under the previous guidance, estimated credit impairments resulted in a write-down of amortized cost. Under the new guidance, estimated credit losses are recognized through an allowance and reversals of the allowance are permitted if the estimate of credit losses declines. For available-for-sale fixed maturity securities where the Company has an intent to sell, impairment will continue to result in a write-down of amortized cost. ASU 2016-13 was effective for the Company on January 1, 2023. The ~~revised~~Company determined as of the date of adoption that the updated guidance did not have an impact on its consolidated financial statements. Below is a summary of the significant accounting ~~guidance requires~~policies impacted by the ~~measurement~~adoption of ~~all~~ASU 2016-13.

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

The Company has made a policy election to present accrued interest balances separately from the amortized cost basis of assets and ~~underwriting standards of~~has elected the practical expedient to exclude the accrued interest from the tabular disclosures for available-for-sale and held-to-maturity securities. The Company has elected not to estimate an ~~organization’s portfolio. In addition, ASU 2016-13 amends the accounting~~allowance for credit losses on accrued interest receivable. The accrual of ~~available-for-sale debt securities~~interest income is discontinued and ~~purchased financial~~the asset is placed on nonaccrual status in the quarter that payment becomes delinquent. Interest accrued but not received for assets ~~with credit deterioration. ASU 2016-13 will be effective~~ on ~~January 1, 2020.~~nonaccrual status is reversed through investment income. Interest received for assets that are on nonaccrual status is recognized as payment is received. The ~~Company~~asset is ~~currently evaluating~~returned to accrual status when the ~~effect~~principal and interest amounts contractually due are brought current and future payments are expected. Interest receivable is presented as a component of other assets on the ~~updated guidance will have on its~~condensed consolidated balance sheet.

Table of Contents

See Note 3 and Note 6 to the condensed 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. The revised ASU provides accounting guidance~~statements 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.

additional information regarding credit losses.

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

Note 3 - Investments

~~Available-for-Sale~~

Fixed-Maturity Securities

The amortized cost, ~~and~~estimated fair value, ofand gross unrealized gains and losses on investments in ~~available-for-sale~~ fixed-maturity securities ~~and equity securities~~classified as available-for-sale for which an allowance for credit loss has not been recorded, as of September 30, ~~2017~~ 2023 and December 31, ~~2016~~2022 are summarized as follows:

September 30, 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
$11,428,403
$286,360
$(21,223)
$-
$11,693,540
$265,137







Corporate and other bonds






Industrial and miscellaneous
  77,734,988
  1,416,060
  (204,904)
  (109,623)
  78,836,521
  1,101,533







Residential mortgage and other






asset backed securities (1)
  21,152,407
  291,172
  (120,346)
  (63,542)
  21,259,691
  107,284
Total fixed-maturity securities
  110,315,798
  1,993,592
  (346,473)
  (173,165)
  111,789,752
  1,473,954







Equity Securities:






Preferred stocks
  6,056,783
  59,374
  (26,360)
  (107,477)
  5,982,320
  (74,463)
Common stocks and exchange






traded mutual funds
  6,649,755
  725,638
  (77,429)
  (59,168)
  7,238,796
  589,041
Total equity securities
  12,706,538
  785,012
  (103,789)
  (166,645)
  13,221,116
  514,578







Total
$123,022,336
$2,778,604
$(450,262)
$(339,810)
$125,010,868
$1,988,532

~~(1)~~

KICO placed certain residential mortgage backed securities as eligible collateral in a designated custodian account related to our relationship with the Federal Home Loan Bank of New York ("FHLBNY"). The eligible collateral would be pledged to FHLBNY if KICO draws an advance from the FHBLNY credit line. As of September 30, 2017, the fair value of the eligible investments was $7,028,101. KICO will retain all rights regarding all securities if pledged as collateral. As of September 30, 2017, there was no outstanding balance on the credit line.

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

	September 30, 2023

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

Fixed-Maturity Securities:
U.S. Treasury securities and obligations of U.S. government corporations and agencies (1)	$	8,224,680	$	-	$	(56,835	)	$	-		$	8,167,845	$	(56,835	)

Political subdivisions of States,
Territories and Possessions		16,615,369		-		-			(4,201,015	)		12,414,354		(4,201,015	)

Corporate and other bonds
Industrial and miscellaneous		78,116,754		-		-			(8,651,516	)		69,465,238		(8,651,516	)

Residential mortgage and other asset backed securities (2)		51,503,046		63,626		(5,987	)		(8,821,223	)		42,739,462		(8,763,584	)
Total fixed-maturity securities	$	154,459,849	$	63,626	$	(62,822	)	$	(21,673,754	)	$	132,786,899	$	(21,672,950	)

Table of Contents

	December 31, 2022

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

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

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

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

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

	(1)	In October 2022, KICO placed certain U.S. Treasury securities to fulfill the required collateral for a sale leaseback transaction in a designated custodian account (see Note 7 – Debt - “Equipment Financing”). As of September 30, 2023 and December 31, 2022, the amount of required collateral was approximately $7,422,000 and $8,691,000, respectively. As of September 30, 2023 and December 31, 2022, the estimated fair value of the eligible collateral was approximately $8,168,000 and $8,691,000, respectively.
	(2)	KICO has placed certain residential mortgage backed securities as eligible collateral in a designated custodian account related to its membership in the Federal Home Loan Bank of New York ("FHLBNY") (see Note 7 – Debt – “Federal Home Loan Bank”). The eligible collateral would be pledged to FHLBNY if KICO draws an advance from the FHLBNY credit line. As of September 30, 2023 and December 31, 2022, the estimated fair value of the eligible investments was approximately $10,911,000 and $12,228,000, respectively. KICO will retain all rights regarding all securities if pledged as collateral. As of September 30, 2023 and December 31, 2022 there was no outstanding balance on the FHLBNY credit line.

A summary of the amortized cost and estimated fair value of the Company’s investments in available-for-sale fixed-maturity securities by contractual maturity as of September 30, ~~2017~~ 2023 and December 31, ~~2016~~2022 is shown below:

September 30, 2017

December 31, 2016

Amortized

Amortized

Remaining Time to Maturity

Cost

Fair Value

Cost

Fair Value

Less than one year
$2,366,279
$2,376,210
$1,752,501
$1,765,795
One to five years
  31,925,436
  32,558,980
  29,541,568
  29,913,308
Five to ten years
  52,234,361
  52,888,971
  30,487,775
  30,211,974
More than 10 years
  2,637,315
  2,705,900
  -
  -
Residential mortgage and other asset backed securities
  21,152,407
  21,259,691
  18,814,784
  18,537,751
Total
$110,315,798
$111,789,752
$80,596,628
$80,428,828

	September 30, 2023				December 31, 2022
	Amortized		Estimated		Amortized		Estimated
Remaining Time to Maturity	Cost		Fair Value		Cost		Fair Value

Less than one year	$	11,053,509	$	10,894,062	$	16,359,100	$	16,307,991
One to five years		44,834,816		42,323,786		18,605,987		14,085,113
Five to ten years		30,124,267		24,401,458		54,559,158		52,230,283
More than 10 years		16,944,211		12,428,131		31,796,918		26,469,581
Residential mortgage and other asset backed securities		51,503,046		42,739,462		53,597,264		45,622,195
Total	$	154,459,849	$	132,786,899	$	174,918,427	$	154,715,163

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

Table of Contents

Equity Securities

The cost and estimated fair value of, and gross unrealized gains and losses on, investments in equity securities as of September 30, 2023 and December 31, 2022 are as follows:

	September 30, 2023
			Gross		Gross			Estimated
Category	Cost		Gains		Losses			Fair Value

Equity Securities:
Preferred stocks	$	13,583,942	$	-	$	(3,384,701	)	$	10,199,241
Common stocks, mutual funds, and exchange traded funds		4,402,841		225,001		(919,432	)		3,708,410
Total	$	17,986,783	$	225,001	$	(4,304,133	)	$	13,907,651

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

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

Other Investments

The cost and estimated fair value of, and gross gains on, the Company’s other investments as of September 30, 2023 and December 31, 2022 are as follows:

	September 30, 2023						December 31, 2022
			Gross		Estimated				Gross		Estimated
Category	Cost		Gains		Fair Value		Cost		Gains		Fair Value

Other Investments:
Hedge fund	$	1,987,040	$	1,226,278	$	3,213,318	$	1,987,040	$	784,612	$	2,771,652

Table of Contents

Held-to-Maturity Securities

The cost or amortized cost and estimated fair value of, and unrealized gross gains and losses on, investments in held-to-maturity fixed-maturity securities as of September 30, ~~2017~~ 2023 and December 31, ~~2016~~2022 are summarized as follows:

September 30, 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
$606,456
$147,583
$-
$-
$754,039
$147,583







Political subdivisions of States,






Territories and Possessions
  1,099,032
  68,375
  -
  -
  1,167,407
  68,375







Corporate and other bonds






Industrial and miscellaneous
  3,140,861
  124,122
  (5,270)
  -
  3,259,713
  118,852







Total
$4,846,349
$340,080
$(5,270)
$-
$5,181,159
$334,810

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

	September 30, 2023

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

Held-to-Maturity Securities:
U.S. Treasury securities	$	1,228,783	$	-	$	(49,795	)	$	(31,495	)	$	1,147,493	$	(81,290	)

Political subdivisions of States, Territories and Possessions		499,036		-		(9,046	)		-			489,990		(9,046	)

Exchange traded debt		304,111		-		(51,611	)		-			252,500		(51,611	)

Corporate and other bonds
Industrial and miscellaneous		5,021,895		-		-			(1,212,380	)		3,809,515		(1,212,380	)
Total	$	7,053,825	$	-	$	(110,452	)	$	(1,243,875	)	$	5,699,498	$	(1,354,327	)

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

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

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

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

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

Held-to-maturity U.S. Treasury securities are held in trust pursuant to ~~the New York State Department of Financial Services’~~various states’ minimum funds ~~requirement.~~

requirements.

Table of Contents

A summary of the amortized cost and estimated fair value of the Company’s investments in held-to-maturity securities by contractual maturity as of September 30, ~~2017~~2023 and December 31, ~~2016~~2022 is shown below:

September 30, 2017

December 31, 2016

Amortized

Amortized

Remaining Time to Maturity

Cost

Fair Value

Cost

Fair Value

Less than one year
$-
$-
$-
$-
One to five years
  1,745,332
  1,806,484
  650,000
  642,455
Five to ten years
  2,494,561
  2,620,636
  3,838,475
  3,901,625
More than 10 years
  606,456
  754,039
  606,427
  754,039
Total
$4,846,349
$5,181,159
$5,094,902
$5,298,119

	September 30, 2023				December 31, 2022
	Amortized		Estimated		Amortized		Estimated
Remaining Time to Maturity	Cost		Fair Value		Cost		Fair Value

Less than one year	$	-	$	-	$	708,535	$	743,575
One to five years		1,121,091		1,069,974		1,120,507		1,088,522
Five to ten years		1,411,819		1,166,505		1,402,704		1,200,720
More than 10 years		4,520,915		3,463,019		4,534,394		3,567,571
Total	$	7,053,825	$	5,699,498	$	7,766,140	$	6,600,388

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

Investment Income

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

Three months ended

Nine months ended

September 30,

September 30,

2017

2016

2017

2016

Income:

Fixed-maturity securities
$926,170
$602,337
$2,607,166
$1,952,589
Equity securities
  143,826
  135,809
  408,812
  416,412
Cash and cash equivalents
  5,772
  5,674
  14,446
  14,852
Total
  1,075,768
  743,820
  3,030,424
  2,383,853
Expenses:




Investment expenses
  42,461
  34,748
  113,313
  97,654
Net investment income
$1,033,307
$709,072
$2,917,111
$2,286,199

	Three months ended				Nine months ended
	September 30,				September 30,
	2023		2022		2023		2022

Income:
Fixed-maturity securities	$	1,245,353	$	1,234,427	$	3,982,573	$	2,832,557
Equity securities		187,018		247,275		540,788		872,005
Cash and cash equivalents		98,763		26,630		171,015		29,796
Total		1,531,134		1,508,332		4,694,376		3,734,358
Expenses:
Investment expenses		86,774		89,811		257,168		322,412
Net investment income	$	1,444,360	$	1,418,521	$	4,437,208	$	3,411,946

Proceeds from the redemption of fixed-maturity securities held-to-maturity were ~~$200,000~~$750,000 and ~~$-0-~~$1,000,000 for the nine months ended September 30, ~~2017~~2023 and ~~2016,~~2022, respectively.

Proceeds from the sale ~~and~~or maturity of fixed-maturity securities available-for-sale were ~~$8,385,874~~$33,453,349 and ~~$16,347,028~~$14,213,435 for the nine months ended September 30, ~~2017~~2023 and ~~2016,~~2022, respectively.

Proceeds from the sale of equity securities ~~available-for-sale~~ were ~~$2,571,122~~$99,917 and ~~$6,065,744~~$11,962,513 for the nine months ended September 30, ~~2017~~2023 and ~~2016,~~2022, respectively.

Table of Contents

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

Three months ended

Nine months ended

September 30,

September 30,

2017

2016

2017

2016

Fixed-maturity securities:

Gross realized gains
$5,542
$21,173
$67,260
$333,066
Gross realized losses (1)
  (56,783)
  (51,085)
  (167,340)
  (222,056)

  (51,241)
  (29,912)
  (100,080)
  111,010





Equity securities:




Gross realized gains
  229,792
  270,947
  386,057
  586,564
Gross realized losses
  (107,553)
  -
  (139,062)
  (22,760)

  122,239
  270,947
  246,995
  563,804





Other-than-temporary impairment losses:




Fixed-maturity securities
  (50,000)
  -
  (50,000)
  (69,911)





Net realized gains
$20,998
$241,035
$96,915
$604,903

~~(1)~~

~~Gross realized losses~~

	Three months ended						Nine months ended
	September 30,						September 30,
	2023			2022			2023			2022
Realized (Losses) Gains

Fixed-maturity securities:
Gross realized gains	$	263		$	363		$	1,207		$	102,774
Gross realized losses		(4,444	)		(4,610	)		(18,408	)		(158,701	)
		(4,181	)		(4,247	)		(17,201	)		(55,927	)

Equity securities:
Gross realized gains		-			907,079			-			1,384,432
Gross realized losses		-			(92,159	)		-			(728,732	)
		-			814,920			-			655,700

Other Investments:
Gross realized gains		-			589,233			-			589,233
Gross realized losses		-			-			-			-
		-			589,233			-			589,233

Net realized (losses) gains		(4,181	)		1,399,906			(17,201	)		1,189,006

Unrealized (Losses) Gains

Equity Securities:
Gross gains		-			-			173,178			-
Gross losses		(483,967	)		(1,132,595	)		-			(7,549,640	)
		(483,967	)		(1,132,595	)		173,178			(7,549,640	)

Other Investments:
Gross gains		-			-			441,666			-
Gross losses		(336,222	)		(664,969	)		-			(2,952,802	)
		(336,222	)		(664,969	)		441,666			(2,952,802	)

Net unrealized (losses) gains		(820,189	)		(1,797,564	)		614,844			(10,502,442	)

Net (losses) gains on investments	$	(824,370	)	$	(397,658	)	$	597,643		$	(9,313,436	)

Allowance for Credit Loss

For available-for-sale fixed maturity securities, a credit loss exists if the ~~nine months ended September 30, 2017 include $747~~present value of ~~loss from the redemption of fixed-maturity securities held-to-maturity.~~

~~Impairment Review~~

~~Impairment of investment securities results in a charge to operations when a market decline below cost is deemed~~cash flows expected to be ~~other-than-temporary.~~collected is less than the amortized cost basis. The ~~Company regularly reviews its fixed-maturity~~allowance for credit loss related to available-for-sale fixed maturity securities is the difference between present value of cash flows expected to be collected and ~~equity securities portfolios to evaluate~~ the ~~necessity of recording impairment losses for other-than-temporary declines in~~amortized cost basis, limited by the amount that the fair value ~~of investments. In evaluating potential impairment, GAAP specifies (i) if~~is less than the amortized cost basis. 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 isconsiders all available evidence when determining whether an investment requires a credit ~~loss. When~~loss write-down or allowance to be recorded. Changes in 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~~allowance are presented as a 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 basednet (losses) gains 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 securityinvestments on the ~~basis of timing of future estimated cash flows of the security.~~

~~OTTI losses are recorded in the~~accompanying condensed consolidated statements of ~~income~~operations 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. loss.

At September 30, ~~2017~~2023 and December 31, ~~2016,~~2022, there were 67150 and 85155 fixed-maturity securities, respectively, that accounted for the gross unrealized loss. As of September 30, 2017, the Company’s held-to-maturity debt securities included an investment in one bond 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 three months ended September 30, 2017. The total of the two OTTI write-downs of this investment as of September 30, 2017 was $119,911.losses. The Company determined that none of the ~~other~~ unrealized losses were deemed to be ~~OTTI~~credit losses for its portfolio of ~~fixed-maturity~~ investments ~~and equity securities~~ for the nine months ended September 30, ~~2017~~2023 and ~~2016.~~2022. Significant factors influencing the Company’s determination that unrealized losses were temporary included credit quality considerations, the magnitude of the unrealized losses in relation to each security’s cost, the nature of the investment and interest rate environment factors, and management’s intent and ability to ~~retain~~hold the investment for a period of time sufficient to allow for an anticipated recovery of estimated fair value to the Company’s cost basis.

Table of Contents

The Company held available-for-sale securities with unrealized losses representing declines that were considered temporary at September 30, ~~2017 and~~2023 as follows:

	September 30, 2023
	Less than 12 months							12 months or more							Total
	Estimated					No. of		Estimated					No. of		Estimated
	Fair		Unrealized			Positions		Fair		Unrealized			Positions		Fair		Unrealized
Category	Value		Losses			Held		Value		Losses			Held		Value		Losses

Fixed-Maturity Securities:
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	8,167,845	$	(56,835	)		2	$	-		-			-	$	8,167,845	$	(56,835	)

Political subdivisions of States, Territories and Possessions		-		-			-		12,414,354		(4,201,015	)		13		12,414,354		(4,201,015	)

Corporate and other bonds industrial and miscellaneous		-		-			-		69,465,238		(8,651,516	)		88		69,465,238		(8,651,516	)

Residential mortgage and other asset backed securities		204,418		(5,987	)		9		38,962,381		(8,821,223	)		38		39,166,799		(8,827,210	)

Total fixed-maturity securities	$	8,372,263	$	(62,822	)		11	$	120,841,973	$	(21,673,754	)		139	$	129,214,236	$	(21,736,576	)

The Company held available-for-sale securities with unrealized losses representing declines that were considered temporary at December 31, ~~2016~~2022 as follows:

September 30, 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
$2,183,221
$(21,223)
  4
$-
$-
  -
$2,183,221
$(21,223)









Corporate and other








bonds industrial and








miscellaneous
  11,306,993
  (204,904)
  20
  4,967,629
  (109,623)
  9
  16,274,622
  (314,527)









Residential mortgage and other








asset backed securities
  13,999,289
  (120,346)
  16
  1,241,754
  (63,542)
  5
  15,241,043
  (183,888)









Total fixed-maturity








securities
$27,489,503
$(346,473)
  40
$6,209,383
$(173,165)
  14
$33,698,886
$(519,638)









Equity Securities:








Preferred stocks
$1,738,380
$(26,360)
  6
$1,786,150
$(107,477)
  3
$3,524,530
$(133,837)
Common stocks and








exchange traded mutual funds
  1,612,300
  (77,429)
  3
  299,250
  (59,168)
  1
  1,911,550
  (136,597)









Total equity securities
$3,350,680
$(103,789)
  9
$2,085,400
$(166,645)
  4
$5,436,080
$(270,434)









Total
$30,840,183
$(450,262)
  49
$8,294,783
$(339,810)
  18
$39,134,966
$(790,072)

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)

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

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

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

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

Residential mortgage and other asset backed securities		10,145,880		(882,664	)		22		34,753,178		(7,150,803	)		26		44,899,058		(8,033,467	)

Total fixed-maturity securities	$	93,944,813	$	(8,881,859	)		109	$	55,096,312	$	(11,381,282	)		46	$	149,041,125	$	(20,263,141	)

Table of Contents

Note 4 - Fair Value Measurements

~~Fair value is~~

The following table presents information about the ~~price~~Company’s investments that ~~would be received upon sale of an asset or paid to transfer a liability in an orderly transaction between market participants~~are measured at ~~the measurement date. The valuation technique used by the Company to~~ fair value ~~its financial instruments is~~on a recurring basis at September 30, 2023 and December 31, 2022 indicating the ~~market approach, which uses prices and other relevant information generated by market transactions involving identical or comparable assets.~~

~~The~~ fair value hierarchy ~~gives~~of the ~~highest priority~~valuation inputs the Company utilized to ~~quoted prices~~determine such fair value:

	September 30, 2023
	Level 1		Level 2		Level 3		Total

Fixed-maturity securities available-for-sale
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	8,167,845	$	-	$	-	$	8,167,845

Political subdivisions of States, Territories and Possessions		-		12,414,354		-		12,414,354

Corporate and other bonds industrial and miscellaneous		69,465,238		-		-		69,465,238

Residential mortgage and other asset backed securities		-		42,739,462		-		42,739,462
Total fixed maturities		77,633,083		55,153,816		-		132,786,899
Equity securities		13,907,651		-		-		13,907,651
Total investments	$	91,540,734	$	55,153,816	$	-	$	146,694,550

	December 31, 2022
	Level 1		Level 2		Level 3		Total

Fixed-maturity securities available-for-sale
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	23,869,096	$	-	$	-	$	23,869,096

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

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

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

Table of Contents

The following table sets forth the Company’s investment in ~~active markets~~a hedge fund measured at Net Asset Value (“NAV”) per share as of September 30, 2023 and December 31, 2022. The Company measures this investment at fair value on a recurring basis. Fair value using NAV per share is as follows as of the dates indicated:

Category	September 30, 2023		December 31, 2022

Other Investments
Hedge fund	$	3,213,318	$	2,771,652

The hedge fund investment is generally redeemable with at least 45 days prior written notice. The hedge fund investment is accounted for ~~identical assets or liabilities (Level 1)~~as a limited partnership by the Company. Income is earned based upon the Company’s allocated share of the partnership's changes in unrealized gains and losses to its partners. Such amounts have been recorded in the condensed consolidated statements of operations and comprehensive loss within net (losses) gains on investments.

The estimated fair value and the ~~lowest priority to unobservable inputs (Level 3). If the inputs used to measure the assets or liabilities fall within different levels~~level of ~~the hierarchy, the classification is based on the lowest level input that is significant to~~ the fair value ~~measurement~~hierarchy of the ~~asset or liability. Classification~~Company’s long-term debt as 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~~—Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities traded in active markets. Included are those investments traded on an active exchange (such as the NASDAQ Global Select Market), U.S. Treasury securities and obligations of U.S. government agencies, together with corporate debt securities that are generally investment grade.

~~Level 2~~—Inputs to the valuation methodology include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability and market-corroborated inputs. Municipal and corporate bonds, and residential mortgage-backed securities, that are traded in less active markets are classified as Level 2. These securities are valued using market price quotations for recently executed transactions.

~~Level 3~~—Inputs to the valuation methodology are unobservable for the asset or liability and are significant to the fair value measurement. Material assumptions and factors considered in pricing investment securities and other assets may include appraisals, projected cash flows, market clearing activity or liquidity circumstances in the security or similar securities that may have occurred since the prior pricing period.

~~The Company’s investments are allocated among pricing input levels at~~ September 30, ~~2017~~2023 and December 31, ~~2016~~2022 not measured at fair value is as follows:

September 30, 2017

Level 1

Level 2

Level 3

Total

Fixed-maturity securities available-for-sale

Political subdivisions of

States, Territories and

Possessions
$-
$11,693,540
$-
$11,693,540





Corporate and other




bonds industrial and




miscellaneous
  74,017,938
  4,818,583
  -
  78,836,521





Residential mortgage and other asset backed securities
  -
  21,259,691
  -
  21,259,691
Total fixed maturities
  74,017,938
  37,771,814
  -
  111,789,752
Equity securities
  13,221,116
  -
  -
  13,221,116
Total investments
$87,239,054
$37,771,814
$-
$125,010,868

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

	September 30, 2023
	Level 1		Level 2		Level 3		Total
Debt

Senior Notes due 2024	$	-	$	17,314,915	$	-	$	17,314,915


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

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

Note 5 - Fair Value of Financial Instruments and Real Estate

~~The Company uses the following methods and assumptions in estimating its fair value disclosures for financial instruments and real estate:~~

~~Equity securities and fixed income securities:Fair value is based on quoted market prices from a recognized pricing service.~~

~~Cash and cash equivalents:~~ ~~The carrying values of cash and cash equivalents approximate their fair values because of the short-term nature of these instruments.~~

~~Premiums receivable and reinsurance receivables:~~ ~~The carrying values reported in the accompanying condensed consolidated balance sheets for these financial instruments approximate their fair values due to the short-term nature of the assets.~~

~~Real estate:~~ The fair value of the land and building included in property and equipment, which is used in the Company’s operations, approximates the carrying value. The fair value was based on an appraisal prepared using the sales comparison approach and income approach, and accordingly the real estate is a Level 3 asset under the fair value hierarchy.

~~Reinsurance balances payable:~~ ~~The carrying value reported in the condensed consolidated balance sheets for these financial instruments approximates fair value.~~

The estimated fair values of the Company’s financial instruments and real estate, including their fair value level as of September 30, ~~2017~~2023 and December 31, ~~2016~~2022 are as follows:

September 30, 2017

December 31, 2016

Carrying Value

Fair Value

Carrying Value

Fair Value

Fixed-maturity securities held-to-maturity
$4,846,349
$5,181,159
$5,094,902
$5,298,119
Cash and cash equivalents
$25,880,306
$25,880,306
$12,044,520
$12,044,520
Premiums receivable
$13,394,800
$13,394,800
$11,649,398
$11,649,398
Reinsurance receivables
$24,971,272
$24,971,272
$32,197,765
$32,197,765
Real estate, net of accumulated depreciation
$1,848,264
$1,925,000
$1,659,405
$1,925,000
Reinsurance balances payable
$1,812,348
$1,812,348
$2,146,017
$2,146,017

	September 30, 2023				December 31, 2022
	Carrying Value		Fair Value		Carrying Value		Fair Value

Fixed-maturity securities-held-to maturity, Level 1	$	7,053,825	$	5,699,498	$	7,766,140	$	6,600,388
Cash and cash equivalents, Level 1	$	15,132,969	$	15,132,969	$	11,958,228	$	11,958,228
Premiums receivable, net, Level 1	$	13,326,369	$	13,326,369	$	13,880,504	$	13,880,504
Reinsurance receivables, net, Level 3	$	84,257,926	$	84,257,926	$	66,465,061	$	66,465,061
Real estate, net of accumulated depreciation, Level 3	$	2,015,414	$	2,800,000	$	2,050,644	$	2,800,000
Reinsurance balances payable, Level 3	$	20,263,484	$	20,263,484	$	13,061,966	$	13,061,966

Table of Contents

Note 6 – Property and Casualty Insurance Activity

Premiums Earned

Premiums written, ceded and earned are as follows:

Direct

Assumed

Ceded

Net

Nine months ended September 30, 2017

Premiums written
$89,423,758
$18,203
$(20,719,037)
$68,722,924
Change in unearned premiums
  (8,456,690)
  8,162
  (5,436,513)
  (13,885,041)
Premiums earned
$80,967,068
$26,365
$(26,155,550)
$54,837,883





Nine months ended September 30, 2016




Premiums written
$76,375,159
$14,631
$(27,542,953)
$48,846,837
Change in unearned premiums
  (4,875,664)
  2,058
  1,215,500
   (3,658,106)
Premiums earned
$71,499,495
$16,689
$(26,327,453)
$45,188,731





Three months ended September 30, 2017




Premiums written
$32,839,891
$11,910
$(590,482)
$32,261,319
Change in unearned premiums
  (4,407,894)
  (165)
  (6,338,852)
  (10,746,911)
Premiums earned
$28,431,997
$11,745
$(6,929,334)
$21,514,408





Three months ended September 30, 2016




Premiums written
$27,170,743
$(1,367)
$(9,937,096)
$17,232,280
Change in unearned premiums
  (2,302,119)
  (1,479)
  717,499
  (1,586,099)
Premiums earned
$24,868,624
$(2,846)
$(9,219,597)
$15,646,181

	Direct			Assumed		Ceded			Net

Nine months ended September 30, 2023
Premiums written	$	147,236,636		$	-	$	(91,009,861	)	$	56,226,775
Change in unearned premiums		4,331,226			-		25,143,466			29,474,692
Premiums earned	$	151,567,862		$	-	$	(65,866,395	)	$	85,701,467

Nine months ended September 30, 2022
Premiums written	$	147,353,911		$	-	$	(81,313,211	)	$	66,040,700
Change in unearned premiums		(6,029,774	)		-		23,925,498			17,895,724
Premiums earned	$	141,324,137		$	-	$	(57,387,713	)	$	83,936,424

Three months ended September 30, 2023
Premiums written	$	51,992,246		$	-	$	(48,316,946	)	$	3,675,300
Change in unearned premiums		(1,246,657	)		-		25,509,675			24,263,018
Premiums earned	$	50,745,589		$	-	$	(22,807,271	)	$	27,938,318

Three months ended September 30, 2022
Premiums written	$	54,591,551		$	-	$	(43,494,819	)	$	11,096,732
Change in unearned premiums		(5,636,421	)		-		23,900,665			18,264,244
Premiums earned	$	48,955,130		$	-	$	(19,594,154	)	$	29,360,976

Premium receipts in advance of the policy effective date are recorded as advance premiums. The balance of advance premiums as of September 30, ~~2017~~2023 and December 31, ~~2016~~2022 was ~~approximately $2,087,000~~$6,288,223 and ~~$1,422,000,~~$2,839,028, respectively.

Table of Contents

Loss and Loss Adjustment Expense Reserves

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

Nine months ended

September 30,

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
  23,071,466
  20,572,367
Prior years
  (250,225)
  (166,822)
Total incurred
  22,821,241
  20,405,545



Paid related to:


Current year
  12,955,928
  11,855,911
Prior years
  8,176,715
  7,359,828
Total paid
  21,132,643
  19,215,739



Net balance at end of period
  27,648,437
  24,359,942
Add reinsurance recoverables
  14,642,360
  15,442,381
Balance at end of period
$42,290,797
$39,802,323

	Nine months ended
	September 30,
	2023			2022

Balance at beginning of period	$	118,339,513		$	94,948,745
Less reinsurance recoverables		(27,659,500	)		(10,637,679	)
Net balance, beginning of period		90,680,013			84,311,066

Incurred related to:
Current year		66,568,985			62,910,967
Prior years		(16,420	)		713,788
Total incurred		66,552,565			63,624,755

Paid related to:
Current year		37,932,760			35,774,958
Prior years		29,928,162			26,938,462
Total paid		67,860,922			62,713,420

Net balance at end of period		89,371,656			85,222,401
Add reinsurance recoverables		32,303,291			21,706,497
Balance at end of period	$	121,674,947		$	106,928,898

Incurred losses and LAE are net of reinsurance recoveries under reinsurance contracts of ~~$8,503,237~~$34,019,370 and ~~$8,676,621~~$27,230,814 for the nine months ended September 30, ~~2017~~2023 and ~~2016,~~2022, respectively.

Prior year incurred loss and LAE development is based upon estimates by line of business and accident year. Prior year loss and LAE development incurred during the nine months ended September 30, ~~2017~~2023 and ~~2016~~2022 was ~~$(250,225)~~$16,420 favorable and ~~$(166,822) favorable,~~$713,788 unfavorable, respectively. ~~The Company’s management continually monitors~~Management, on a quarterly basis, performs a review of open liability claims ~~activity~~ to assess ~~the appropriateness of~~ carried case and incurred but not reported (“IBNR”) ~~reserves,~~reserve levels, giving consideration to both 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 claim severity and frequency, the length of time before losses will develop to their ultimate level (‘tail’ factors), and the likelihood of changes in the law or other external factors that are beyond the Company’s control. Several actuarial reserving methodologies are used to estimate required loss reserves. The process produces carried reserves set by management based upon the actuaries’ best estimate and is the cumulative combination of the best estimates made by line of business, accident year, and loss and LAE. The amount of loss and LAE reserves for individual reported claims (the “case reserve”) is determined by the claims department and changes over time as new information is gathered. Such information is critical to the review of appropriate IBNR reserves and includes a review of coverage applicability, comparative liability on the part of the insured, injury severity, property damage, replacement cost estimates, and any other information considered pertinent to estimating the exposure presented by the claim. The amounts of loss and LAE reserves for unreported claims and development on known claims (IBNR reserves) are determined using historical information aggregated by line of insurance as adjusted to current conditions. Since this process produces loss reserves set by management based upon the actuaries’ best estimate, there is no explicit or implicit provision for uncertainty in the carried loss reserves.

Table of Contents

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~~period’s results. Reserves are closely monitored and are recomputed periodically using the most recent information on reported claims and a variety of statistical techniques. On at least a ~~monthly~~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.~~periods. Several methods are used, varying by ~~product~~ line of business and accident year, in order to ~~determine~~select the ~~required IBNR~~estimated period-end loss reserves. These methods include the following:

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

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

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

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

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

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

Table of Contents

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~~

Three key assumptions that materially affect the estimate of loss reserves are the loss ratio estimate for the current accident year used in the BF methods, ~~described above, and~~ the loss development factor selections used in the loss development methods, and the loss severity assumptions used in the frequency / severity method described above. The loss ratio estimates used in the BF methods are selected after reviewing historical accident year loss ratios adjusted for rate changes, trend, and mix of business.

The severity assumptions used in the frequency / severity method are determined by reviewing historical average claim severity for older more mature accident periods, trended forward to less mature accident periods.

The Company reviews the carried reserves levels on a regular basis as additional information becomes available and makes adjustments in the periods in which such adjustments are determined to be necessary. The Company is not aware of any ~~claims~~claim trends that have emerged or that would cause future adverse development that have not already been ~~considered~~contemplated in ~~existing case~~setting current carried reserves ~~and in its current loss development factors.~~

levels.

In New York State, lawsuits for negligence are subject to certain limitations and must be commenced within three years from the date of the accident or are otherwise barred. Accordingly, the Company’s exposure to unreported claims ~~(‘pure’~~(“pure” IBNR) for accident dates of September 30, ~~2014~~2020 and prior is limited, although there remains the possibility of adverse development on reported claims (‘(“case ~~development’~~development” IBNR).

In certain rare circumstances states have retroactively revised a statute of limitations. The Company is not aware of any such effort that would have a material impact on the Company’s results.

The following is information about incurred and paid claims development as of September 30, ~~2017,~~2023, net of reinsurance, as well as the cumulative reported claims by accident year and total IBNR reserves as of September 30, ~~2017~~2023 included in the net incurred loss and allocated expense amounts. The historical information regarding incurred and paid claims development for the years ended December 31, ~~2008~~2014 to December 31, ~~2015~~2022 is presented as supplementary unaudited information.

Table of Contents

All Lines of Business
*(in thousands, except reported claims data)*
																					As of
	Incurred Loss and Allocated Loss Adjustment Expenses, Net of Reinsurance																				September 30, 2023
	For the Years Ended December 31,																		Nine Months Ended September 30,		IBNR		Cumulative Number of Reported Claims by Accident Year
Accident Year	2014		2015		2016		2017		2018		2019		2020		2021		2022		2023
	(Unaudited 2014 - 2022)																		(Unaudited)

2014	$	14,193	$	14,260	$	14,218	$	14,564	$	15,023	$	16,381	$	16,428	$	16,434	$	16,486	$	16,486	$	17		2,138
2015				22,340		21,994		22,148		22,491		23,386		23,291		23,528		23,533		23,464		300		2,559
2016						26,062		24,941		24,789		27,887		27,966		27,417		27,352		27,300		125		2,881
2017								31,605		32,169		35,304		36,160		36,532		36,502		36,731		260		3,400
2018										54,455		56,351		58,441		59,404		61,237		61,024		909		4,233
2019												75,092		72,368		71,544		71,964		72,811		1,126		4,501
2020														63,083		62,833		63,217		63,255		2,431		5,883
2021																96,425		96,673		95,839		4,099		5,808
2022																		79,835		79,978		8,691		4,674
2023																				63,392		14,044		2,840
																	Total		$	540,280

All Lines of Business
*(in thousands)*
	Cumulative Paid Loss and Allocated Loss Adjustment Expenses, Net of Reinsurance
	For the Years Ended December 31,																		Nine Months Ended September 30,
Accident Year	2014		2015		2016		2017		2018		2019		2020		2021		2022		2023
	(Unaudited 2014 - 2022)																		(Unaudited)

2014	$	5,710	$	9,429	$	10,738	$	11,770	$	13,819	$	14,901	$	15,491	$	15,770	$	16,120	$	16,133
2015				12,295		16,181		18,266		19,984		21,067		22,104		22,318		22,473		22,516
2016						15,364		19,001		21,106		23,974		25,234		25,750		26,382		26,732
2017								16,704		24,820		28,693		31,393		32,529		33,522		34,606
2018										32,383		44,516		50,553		52,025		54,424		55,373
2019												40,933		54,897		58,055		60,374		63,311
2020														39,045		50,719		53,432		55,830
2021																56,282		77,756		80,267
2022																		45,856		64,417
2023																				35,801
																	Total		$	454,987

Net liability for unpaid loss and allocated loss adjustment expenses for the accident years presented	$	85,293
All outstanding liabilities before 2014, net of reinsurance		172
Liabilities for loss and allocated loss adjustment expenses, net of reinsurance	$	85,465

(Components may not sum to totals due to rounding)

Table of Contents

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

September 30, 2017

For the Years Ended December 31,



Accident Year

2008

2009

2010

2011

2012

2013

2014

2015

2016

Nine Months Ended September 30,2017

IBNR

Cumulative Number of Reported Claims by Accident Year

(Unaudited 2008 - 2015)

(Unaudited)

2008
$4,505
$4,329
$4,223
$4,189
$4,068
$4,055
$4,056
$4,040
$4,038
$4,035
$1
  1,133
2009

  4,403
  4,254
  4,287
  4,384
  4,511
  4,609
  4,616
  4,667
  4,674
  11
  1,136
2010


  5,598
  5,707
  6,429
  6,623
  6,912
  6,853
  6,838
  6,846
  9
  1,616
2011



  7,603
  7,678
  8,618
  9,440
  9,198
  9,066
  9,155
  27
  1,913
2012




  9,539
  9,344
  10,278
  10,382
  10,582
  10,805
  91
  4,702(1)
2013





  10,728
  9,745
  9,424
  9,621
  9,936
  300
  1,556
2014






  14,193
  14,260
  14,218
  14,511
  935
  2,123
2015







  22,340
  21,994
  21,974
  1,640
  2,523
2016








  26,062
  24,940
  3,320
  2,829
2017









  21,572
  5,078
  2,259










Total

$128,448

~~(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,

Nine Months Ended September 30,

Accident Year

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

(Unaudited 2008 - 2015)

(Unaudited)

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
  4,475
2010


  2,566
  3,947
  4,972
  5,602
  6,323
  6,576
  6,720
  6,771
2011



  3,740
  5,117
  6,228
  7,170
  8,139
  8,540
  8,691
2012




  3,950
  5,770
  7,127
  8,196
  9,187
  10,116
2013





  3,405
  5,303
  6,633
  7,591
  8,086
2014






  5,710
  9,429
  10,738
  11,628
2015







  12,295
  16,181
  17,473
2016








  15,364
  18,867
2017









  12,047










Total

$102,185












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

$26,264

All outstanding liabilities before 2008, net of reinsurance

  274

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

$26,538

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

	~~As of~~
~~(in thousands)~~	~~September 30, 2017~~
~~Liabilities for loss and loss adjustment expenses, net of reinsurance~~	$~~26,538~~
~~Total reinsurance recoverable on unpaid losses~~	~~14,642~~
~~Unallocated loss adjustment expenses~~	~~1,111~~
~~Total gross liability for loss and LAE reserves~~	$~~42,291~~

Reconciliation of the Disclosure of Incurred and Paid Loss Development
to the Liability for Loss and LAE Reserves

	As of
*(in thousands)*	September 30, 2023
Liabilities for allocated loss and loss adjustment expenses, net of reinsurance	$	85,465
Total reinsurance recoverable on unpaid losses		32,303
Unallocated loss adjustment expenses		3,907
Total gross liability for loss and LAE reserves	$	121,675

(Components may not sum to totals due to rounding)

Reinsurance

~~The Company’s~~

Effective December 31, 2021, the Company entered into a 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 nine months ended~~ ~~September 30, 2017~~treaty for its personal lines business, which primarily consists of homeowners’ and dwelling fire policies, ~~were covered under~~covering the period from December 31, 2021 through January 1, 2023 (“2021/2023 Treaty”). Upon the expiration of the 2021/2023 Treaty on January 1, 2023, the Company entered into a new 30% quota share reinsurance treaty for its personal lines business, covering the period from January 1, 2023 through January 1, 2024 (“2023/2024 Treaty”).

The Company’s excess of loss and catastrophe reinsurance treaties expired on June 30, 2023 and the Company entered into new excess of loss and catastrophe reinsurance treaties effective July 1, ~~2016/June 30, 2017~~2023. Effective January 1, 2022, the Company entered into an underlying excess of loss reinsurance treaty ~~year~~ (“~~2016/2017~~Underlying XOL Treaty”) ~~and July~~covering the period from January 1, ~~2017/June 30, 2018~~2022 through January 1, 2023. The treaty ~~year (“2017/2019 Treaty”) (two year treaty as described below). The Company’s quota share~~provides 50% reinsurance coverage for losses of $400,000 in excess of $600,000. Losses from named storms are excluded from the treaty. Effective January 1, 2023, the Underlying XOL Treaty was renewed covering the period from January 1, 2023 through January 1, 2024. Material terms for reinsurance treaties in effect for the ~~nine months ended September 30, 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 has the option under certain circumstances to reduce the quota share ceding rate or terminate the 2017/2019 Treaty effective July 1, 2018 by giving advance notice to the two reinsurers who participate in the quota share reinsurance treaty. Such two reinsurers who participate in the treaty have the option under certain limited circumstances to reduce the quota share ceding rate or terminate the 2017/2019 Treaty effective July 1, 2018 by giving advance notice to the Company.

~~The Company’s 2015/2016 Treaty, 2016/2017 Treaty, and 2017/2019 Treaty provide for the following material terms:~~

  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 (terminated effective July 1, 2014)
   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, 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~~years shown below are as follows:

	~~July 1, 2017 - June 30, 2018~~
~~Treaty~~	~~Extent 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~~26
	~~$1,000,000 - $5,000,000~~	~~None~~
Table of Contents

	Treaty Period
			2023/2024 Treaty						2021/2023 Treaty
	January 2,		July 1,			January 1,			July 1,			December 31,
	2024		2023			2023			2022			2021
	to		to			to			to			to
	June 30,		January 1,			June 30,			January 1,			June 30,
Line of Business	2024		2024			2023			2023			2022

Personal Lines:
Homeowners, dwelling fire and canine legal liability
Quota share treaty:
Percent ceded (7)		(6)		30	%		30	%		30	%		30	%
Risk retained on initial $1,000,000 of losses (5) (6) (7)	$	1,000,000	$	700,000		$	700,000		$	700,000		$	700,000
Losses per occurrence subject to quota share reinsurance coverage		(6)	$	1,000,000		$	1,000,000		$	1,000,000		$	1,000,000
Expiration date		(6)	January 1, 2024			January 1, 2024			January 1, 2023			January 1, 2023
Excess of loss coverage and facultative facility coverage (1) (5) (6)	$	8,000,000	$	8,400,000		$	8,400,000		$	8,400,000		$	8,400,000
	in excess of		in excess of			in excess of			in excess of			in excess of
	$	1,000,000	$	600,000		$	600,000		$	600,000		$	600,000

Total reinsurance coverage per occurrence (5) (6)	$	8,000,000	$	8,500,000		$	8,500,000		$	8,500,000		$	8,500,000

Losses per occurrence subject to reinsurance coverage	$	8,000,000	$	8,000,000		$	8,000,000		$	9,000,000		$	9,000,000
Expiration date (6)	June 30, 2024		June 30, 2024			June 30, 2023			June 30, 2023			June 30, 2022

Catastrophe Reinsurance:
Initial loss subject to personal lines quota share treaty (6)	$	10,000,000	$	10,000,000		$	10,000,000		$	10,000,000		$	10,000,000

Risk retained per catastrophe occurrence (6) (7) (8)	$	10,000,000	$	8,750,000		$	8,750,000		$	7,400,000		$	7,400,000

Catastrophe loss coverage in excess of quota share coverage (2) (6)	$	315,000,000	$	315,000,000		$	335,000,000		$	335,000,000		$	490,000,000

Reinstatement premium protection (3) (4)	Yes		Yes			Yes			Yes			Yes

(1)	~~Over $5,000,000~~	~~100%~~ For personal lines, includes the addition of an automatic facultative facility allowing KICO to obtain homeowners single risk coverage up to $9,000,000 in total insured value, which covers direct losses from $3,500,000 to $9,000,000 through June 30, 2024.
(2)	Catastrophe coverage is limited on an annual basis to two times the per occurrence amounts. Duration of 168 consecutive hours for a catastrophe occurrence from windstorm, hail, tornado, hurricane and cyclone.
(3)	For the period December 31, 2021 through June 30, 2022, reinstatement premium protection for $70,000,000 of catastrophe coverage in excess of $10,000,000.
(4)	For the period July 1, 2022 through June 30, 2023, reinstatement premium protection for $9,800,000 of catastrophe coverage in excess of $10,000,000. For the period July 1, 2023 through June 30, 2024, reinstatement premium protection for $12,500,000 of catastrophe coverage in excess of $10,000,000
(5)	For the period January 1, 2022 through January 1, 2024, underlying excess of loss treaty provides 50% reinsurance coverage for losses of $400,000 in excess of $600,000. Reduces retention to $500,000 from $700,000 under the 2021/2023 Treaty and 2023/2024 Treaty. Excludes losses from named storms.
(6)	Personal lines quota share (homeowners, dwelling fire and canine liability) and underlying excess of loss reinsurance will expire on January 1, 2024; reinsurance coverage in effect from January 2, 2024 through June 30, 2024 is only for excess of loss and catastrophe reinsurance treaties.
(7)	For the 2021/2023 Treaty, 4% of the 30% total of losses ceded under this treaty are excluded from a named catastrophe event. For the 2023/2024 Treaty, 17.5% of the 30% total of losses ceded under this treaty are excluded from a named catastrophe event.
(8)	Plus losses in excess of catastrophe coverage


~~Commercial Lines~~	~~Initial $750,000~~	~~$750,000~~27
	~~$750,000 - $4,500,000~~	~~None(3)~~
Table of Contents

		Treaty Year
		July 1, 2023		July 1, 2022			July 1, 2021
		to		to			to
Line of Business		June 30, 2024		June 30, 2023			June 30, 2022

Personal Lines:
Personal Umbrella
Quota share treaty:
Percent ceded - first $1,000,000 of coverage		90	%		90	%		90	%
Percent ceded - excess of $1,000,000 dollars of coverage		95	%		95	%		95	%
Risk retained	$	300,000		$	300,000		$	300,000
Total reinsurance coverage per occurrence	$	4,700,000		$	4,700,000		$	4,700,000
Losses per occurrence subject to quota share reinsurance coverage	$	5,000,000		$	5,000,000		$	5,000,000
Expiration date		June 30, 2024		June 30, 2023			June 30, 2022

Commercial Lines (1)

	(1)	~~Over $4,500,000~~	~~100%~~ Coverage on all commercial lines policies expired in September 2020; reinsurance coverage is based on treaties in effect on the date of loss.

~~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. The Company and the reinsurers have the option to reduce quota share rate or terminate on June 30, 2018 as discussed above.~~

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

Ceding Commission Revenue

The Company ~~earns~~earned ceding commission revenue under the 2023/2024 Treaty for the three months and nine months ended September 30, 2023, and under the 2021/2023 Treaty for the three months and nine months ended September 30, 2022, based on a fixed provisional commission rate at which provisional ceding commissions are earned. The Company earned ceding commission revenue under its expired quota share reinsurance agreements based on: (i) a fixed provisional commission rate at which provisional ceding commissions ~~are~~were earned, and (ii) a continuing sliding scale of commission rates and ultimate treaty year loss ratios on the policies reinsured under each of these agreements based upon which contingent ceding commissions are earned. The sliding scale includes minimum and maximum commission rates in relation to specified ultimate loss ratios. The commission rate and contingent ceding commissions earned ~~increases~~increase when the estimated ultimate loss ratio decreases and, conversely, the commission rate and contingent ceding commissions earned ~~decreases~~decrease when the estimated ultimate loss ratio increases.

The Company’s estimated ultimate treaty year loss ratios (“Loss Ratio(s)”) for treaties in effect for the three months ended September 30, 2017 are attributable to contracts for the 2017/2019 Treaty and for the nine months ended September 30, 2017 are attributable to the contracts for the 2017/2019 Treaty and 2016/2017 Treaty. The Company’s estimated ultimate treaty year Loss Ratios for treaties in effect for the three months ended September 30, 2016 are attributable to contracts for the 2016/2017 Treaty and for the nine months ended September 30, 2016 are attributable to the contracts for the 2016/2017 Treaty and 2015/2016 Treaty.

~~Treaties in effect for the three months and nine months ended September 30, 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 September 30, 2017 (attributable to the 2017/2019 Treaty), and from July 1, 2016 through June 30, 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 three months and nine months ended September 30, 2017 with respect to these treaties.

~~Treaties in effect for the three months and nine months ended September 30,~~ ~~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 September 30, 2016 (attributable to the 2016/2017 Treaty), and from July 1, 2015 through June 30, 2016 (attributable to the 2015/2016 Treaty), were higher than the contractual Loss Ratio at which provisional ceding commissions were earned. Accordingly, for the three months and nine months ended September 30, 2016, the Company’s contingent ceding commission earned was reduced as a result of the estimated Loss Ratios for the 2016/2017 Treaty and 2015/2016 Treaty.

In addition to the treaties that were in effect for the three months and nine months ended September 30, 2017 and 2016, the Loss Ratios from prior years’ treaties are subject to change as incurred losses from those periods increase or decrease, resulting in an increase or decrease in the commission rate and contingent ceding commissions earned.

Table of Contents

Ceding commission revenue consists of the following:

Three months ended

Nine months ended

September 30,

September 30,

2017

2016

2017

2016

Provisional ceding commissions earned
$1,921,457
$3,185,748
$8,689,803
$9,508,213
Contingent ceding commissions earned
  (203,847)
  (250,820)
  (481,803)
  (1,233,923)

$1,717,610
$2,934,928
$8,208,000
$8,274,290

	Three months ended				Nine months ended
	September 30,				September 30,
	2023		2022		2023		2022

Provisional ceding commissions earned	$	4,992,312	$	4,881,580	$	15,733,145	$	14,116,044
Contingent ceding commissions earned		544,015		4,514		660,799		167,033
	$	5,536,327	$	4,886,094	$	16,393,944	$	14,283,077

Provisional ceding commissions are settled monthly. Balances due from reinsurers for contingent ceding commissions on quota share treaties are settled ~~annually~~periodically based on the ~~loss ratio~~Loss Ratio of each treaty year that ends on June ~~30.~~30, for the expired treaties that were subject to contingent commissions. As discussed above, the Loss Ratios from prior years’ treaties are subject to change as incurred losses from those periods develop, resulting in an increase or decrease in the commission rate and contingent ceding commissions earned. ~~Contingent ceding commissions earned in any period include the combined effect of changes recorded for all active treaties.~~ As of September 30, ~~2017~~2023 and December 31, ~~2016,~~2022, net contingent ceding commissions payable to reinsurers under all treaties was approximately ~~$1,719,000~~$2,007,000 and ~~$773,000,~~$2,667,000, respectively, which ~~are~~is recorded in reinsurance balances payable inon the accompanying condensed consolidated balance sheets.

Expected Credit Losses – Uncollectible Reinsurance

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

Note 7 – ~~Credit Facility~~

Debt

Federal Home Loan Bank

In July 2017, KICO became a member of, and invested in, the ~~Federal Home Loan Bank~~FHLBNY. KICO is required to maintain an investment in capital stock of ~~New York (“FHLBNY”). The aggregate investment~~FHLBNY. Based on redemption provisions of ~~dividend bearing common~~FHLBNY, the stock ~~was $22,500 as~~has no quoted market value and is carried at cost. At its discretion, FHLBNY may declare dividends on the stock. Management reviews for impairment based on the ultimate recoverability of the cost basis in the stock. At September 30, ~~2017. Members~~2023 and December 31, 2022, no impairment has been recognized. FHLBNY members have access to a variety of flexible, low cost funding through FHLBNY’s credit products, enabling members to customize ~~advances. Advances~~advances, which are to be fully ~~collateralized; eligible~~collateralized. Eligible collateral to pledge to FHLBNY includes residential and commercial ~~mortgage backed~~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, 2016~~the previous quarter and are due and payable within one year of borrowing. ~~The~~KICO is currently able to borrow on an overnight basis. If KICO has collateral, based on KICO’s net admitted assets, the maximum allowable advance ~~is approximately $6,212,000~~ as of September 30, ~~2017.~~2023 and December 31, 2022 was approximately $12,668,000 and $13,192,000, respectively. Available collateral as of September 30, 2023 and December 31, 2022 was approximately $10,911,000 and $12,228,000, respectively. Advances are limited to 85% of the amount of available collateral. There were no borrowings under this facility during the ~~three~~nine months ended September 30, ~~2017.~~

2023 and 2022.

Table of Contents

Debt

Debt as of September 30, 2023 and December 31, 2022 consists of the following:

	September 30,		December 31,
	2023		2022

2022 Notes, net	$	18,129,327	$	17,252,868
Equipment financing		7,095,366		7,905,655
Balance at end of period	$	25,224,693	$	25,158,523

Note and Warrant Exchange

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

2022 Notes

On December 15, 2022, the Company issued $19,950,000 of its 2022 Notes pursuant to the Exchange Agreement. Interest is payable semi-annually in arrears on June 30 and December 30 of each year, which commenced on June 30, 2023 at the rate of 12.0% per annum. Warrants were issued with a fair value of $993,200 (see Note 8 – Stockholders’ Equity) and transaction costs were $1,758,112, for an effective yield of 13.92% per annum. The balance of the 2022 Notes as of September 30, 2023 and December 31, 2022 is as follows:

	September 30,			December 31,
	2023			2022

12.0% Senior Unsecured Notes	$	19,950,000		$	19,950,000
Warrants		(734,763	)		(979,684	)
Issuance costs		(1,085,910	)		(1,717,448	)
2022 Notes, net	$	18,129,327		$	17,252,868

Table of Contents

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

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

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

Period:	Percentage

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

As of the end of each calendar quarter, commencing with the calendar quarter ending December 31, 2022, the Company is subject to a leverage maintenance test (“Leverage Maintenance Test”), which requires that the Total Consolidated Indebtedness (as defined below) of the Company not be greater than 30% of Total Consolidated Capitalization (as defined below). As of September 30, 2023 and December 31, 2022, the ratio as defined under the Leverage Maintenance Test was 31.4% and 26.7%, respectively. On November 7, 2023, a majority of the holders of the outstanding 2022 Notes (on behalf of all holders of the 2022 Notes) agreed to a waiver regarding the satisfaction of the Leverage Maintenance Test as of September 30, 2023. See Note 13 – Subsequent Events. “Total Consolidated Indebtedness” is the aggregate principal amount (or accreted value in the case of any Indebtedness issued with more than de minimis original issue discount) of all outstanding long-term of the Company except for the sale leaseback transaction described below under “Equipment Financing”, any refinancing or any future sale leaseback transaction. “Total Consolidated Capitalization” is the amount equal to the sum of (x) Total Consolidated Indebtedness outstanding as of such date and (y) the total consolidated shareholders’ equity of the Company, excluding accumulated other comprehensive (loss) income, as recorded on the Company’s condensed consolidated balance sheet.

Table of Contents

Equipment Financing

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

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

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

A provision of the Financing requires KICO to pledge collateral for the lease obligation. As of September 30, 2023 and December 31, 2022, the amount of required collateral was approximately $7,422,000 and $8,691,000, respectively. As of September 30, 2023 and December 31, 2022, the fair value of KICO’s pledged collateral was approximately $8,168,000 and $8,691,000, respectively, in United States Treasury securities.

Future contractual payment obligations under the Financing as of September 30, 2023 are as follows:

For the Year
Ending
December 31,	Total
Remainder of 2023	$	278,083
2024		1,153,862
2025		1,223,293
2026		1,296,901
2027		1,119,021
		5,071,160
2027 purchase price		2,024,206
Total	$	7,095,366

Note 8 – 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.

Dividends Declared and Paid

Dividends declared and paid on Common Stock were ~~$2,363,993~~$-0- and ~~$1,446,684~~$1,277,066 for the nine months ended September 30, ~~2017~~2023 and ~~2016~~,2022, respectively. ~~The~~On November 11, 2022, the Company’s Board of Directors ~~approved a~~determined to suspend regular quarterly dividends. Future dividend ~~on November 8, 2017 of $.08 per share payable in cash on December 15, 2017 to stockholders of record as of November 30, 2017 (see Note 12).~~

~~Stock Options~~

~~Pursuant~~policy will be subject 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 sharesdiscretion of the Company’s ~~Common Stock are permitted to be issued pursuant to options granted and restricted stock issued. Pursuant to~~Board of Directors.

2014 Equity Participation Plan

Effective August 12, 2014, the ~~Company’s~~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~~were initially authorized to be issued pursuant to the grant of incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock and stock bonuses. Incentive stock options granted under the 2014 Plan ~~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). Non-statutory stock options granted under the 2014 Plan expire no later than ten years from the date of grant. The Board of Directors or the Compensation Committee ~~of the Board~~ determines ~~the expiration date with respect to non-statutory stock options and~~ the vesting provisions for ~~restricted~~ stock awards granted under the 2014 Plan, ~~and 2005~~subject to the provisions of the 2014 Plan.

On August 5, 2020, the Company’s stockholders approved amendments to the 2014 Plan, including an increase in the maximum number of shares of Common Stock of the Company that are authorized to be issued pursuant to the 2014 Plan to 1,400,000. On August 9, 2023, the Company’s stockholders approved an amendment to the 2014 Plan to increase the maximum number of shares of Common Stock of the Company that are authorized to be issued pursuant to the 2014 Plan to 1,900,000.

Table of Contents

Stock Options

The results of operations for the three months ended September 30, ~~2017~~2023 and ~~2016~~2022 include stock-based ~~stock option~~ compensation expense for stock options totaling approximately ~~$5,000~~$-0- and ~~$23,000, respectively, which is recorded in other operating expenses on the accompanying condensed consolidated statements of income and comprehensive income.~~$2,000, respectively. The results of operations for the nine months ended September 30, ~~2017~~2023 and ~~2016~~2022 include stock-based ~~stock option~~ compensation expense for stock options totaling approximately ~~$35,000~~$-0- and ~~$90,000,~~$9,000, respectively. Stock-based compensation expense related to stock options for the nine months ended September 30, 2022 is net of estimated forfeitures of ~~17% for the three months and nine months ended September 30, 2017 and 2016.~~approximately 18%. Such amounts have been included in the condensed consolidated statements of ~~income~~operations and comprehensive ~~income~~loss within other operating expenses.

Stock-based compensation expense for the nine months ended September 30, 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 nine months ended September 30, ~~2017. The weighted average estimated fair value of stock options granted during the nine months ended~~ ~~September 30, 2016~~ ~~was $1.87 per share.~~2023 and 2022. The fair value of stock options at the grant date ~~was~~are estimated using the Black-Scholes option-pricing model. The ~~following weighted average assumptions were used for grants during the following periods:~~

Nine months ended

September 30,
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~~- pricing model was developed for use in estimating the fair value of traded options, which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility. Because ~~our~~the Company’s stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management's opinion, the existing models do not necessarily provide a reliable single measure of the fair value of ~~our~~the Company’s stock options.

A summary of stock option activity under the Company’s 2014 Plan ~~and 2005 Plan~~ for the nine months ended September 30, ~~2017~~2023 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
  (14,500)
$5.55

$133,058
Forfeited
  -
$-

$-





Outstanding at September 30, 2017
  348,250
$6.66
  1.90
$3,355,953





Vested and Exercisable at September 30, 2017
  278,250
$6.53
  1.78
$2,717,978

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

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

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

Outstanding at September 30, 2023		107,201	$	8.31		1.18	$	-

Vested and Exercisable at September 30, 2023		107,201	$	8.31		1.18	$	-

The aggregate intrinsic value of options outstanding and options exercisable at September 30, ~~2017~~2023 is calculated as the difference between the exercise price of the underlying options and the market price of the Company’s Common Stock for the options that had exercise prices that were lower than the ~~$16.30~~$1.79 closing price of the Company’s Common Stock on September 30, ~~2017~~.

2023. No options were exercised, forfeited or expired during the nine months ended September 30, 2023. The total intrinsic value of options when forfeited are determined as of the date of forfeiture. The total intrinsic value of options when expired are determined as of the date of expiration.

Table of Contents

Participants in the ~~2005 and~~ 2014 ~~Plans~~Plan may exercise their outstanding vested options, in whole or in part, by having the Company reduce the number of shares otherwise issuable by a number of shares having a fair market value equal to the exercise price of the option being exercised, ~~(“Net Exercise”). The Company received cash proceeds~~or by exchanging a number of ~~$66,517 from~~shares owned for a period of greater than one year having a fair market value equal to the exercise price of ~~options for~~ the ~~purchase~~option being exercised.

As of ~~11,750 shares of Common Stock during the nine months ended~~ September 30, ~~2017. The remaining 2,750~~ ~~options exercised during the nine months ended~~2023, there were no unvested options.

As of September 30, ~~2017 were Net Exercises, resulting in the issuance of 1,828 shares of Common Stock.~~ ~~The Company received cash proceeds of $12,725 from the exercise of options for the purchase of 2,500 shares of Common Stock during the nine months ended September 30, 2016.~~

~~As of~~ ~~September 30, 2017, the fair value of unamortized compensation cost related to unvested stock option awards was approximately $9,000. Unamortized compensation cost as of~~ ~~September 30, 2017~~ ~~is expected to be recognized over a remaining weighted-average vesting period of 0.87 years.~~

~~As of~~ ~~September 30, 2017~~,2023, there were ~~551,758~~591,383 shares reserved for grants under the 2014 Plan.

~~Other Equity Compensation~~

~~In January 2017,~~

Restricted Stock Awards

A summary of the ~~Company granted a total of 8,000 shares of~~ restricted Common Stock activity under the 2014 Plan to its then four non-employee directors. In January 2016, the Company granted a total of 6,000 shares of restricted Common Stock under the 2014 Plan to its three then non-employee directors. In March 2016, the Company granted 1,500 shares of restricted Common Stock under the 2014 Plan to a newly elected non-employee director. In May 2017 and August 2017, the Company granted 1,250 shares and 795 shares, respectively, of restricted Common Stock under the 2014 Plan to two newly elected non-employee directors. One-third of the shares granted will vest on each of the three annual anniversaries following the grant date.

In February 2017, the Company granted a total of 16,000 shares of restricted Common Stock under the 2014 Plan to two executive officers. In April 2017 the Company granted a total of 24,010 shares of restricted Common Stock under the 2014 Plan to four executive officers and thirteen employees. The shares granted to executives and employees will vest on a monthly basis over the three year period following the grant date.

~~In August and~~for nine months ended September 2017, the Company granted a total of 4,020 shares of restricted Common Stock under the 2014 Plan to three employees. The shares granted will vest on each of the three annual anniversaries following the grant date.

30, 2023 is as follows:

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

Balance at January 1, 2023		366,597		$	6.97	$	2,555,181

Granted		272,682		$	1.37	$	373,499
Vested		(56,977	)	$	6.67	$	(380,199	)
Forfeited		(12,620	)	$	4.11	$	(51,926	)

Balance at September 30, 2023		569,682		$	3.83	$	2,181,882

Fair value was calculated using the closing price of the Company’s Common Stock on the grant date. For the three months ~~and nine months~~ ended September 30, ~~2017,~~2023 and 2022, stock-based compensation ~~of approximately $65,000 and $163,000, respectively,~~ for these grants was approximately $207,000 and $186,000, respectively, which is included in other operating expenses on the accompanying condensed consolidated statements of ~~income~~operations and comprehensive ~~incom~~e.loss. For the nine months ended September 30, 2023 and 2022, stock-based compensation for these grants was approximately $636,000 and $1,180,000, respectively, which is included in other operating expenses on the accompanying condensed consolidated statements of operations and comprehensive loss. These amounts reflect the Company’s accounting expense and do not correspond to the actual value that will be recognized by the directors, executives and employees.

Employee Stock Purchase Plan

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

Table of Contents

The initial offering period under the ESPP was from November 1, 2021 through October 31, 2022 (“2021/2022 Offering”). There is currently no offering pursuant to the ESPP subsequent to October 31, 2022. For the three months and nine months ended September 30, 2022, stock-based compensation under the 2021/2022 Offering was approximately $5,000 and $16,000, respectively, which is included in other operating expenses on the accompanying condensed consolidated statements of operations and comprehensive loss.

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

Warrants

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

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

As of September 30, 2023, all warrants for the purchase of an aggregate of 969,525 shares of Common Stock were outstanding.

No warrants were granted during the nine months ended September 30, 2023 and 2022.

Note 9 – Income Taxes

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

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

Table of Contents

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

September 30,

December 31,

2017

2016

Deferred tax asset:

Net operating loss carryovers (1)
$112,760
$131,626
Claims reserve discount
  444,517
  417,349
Unearned premium
  3,866,770
  2,877,365
Deferred ceding commission revenue
  1,344,275
  2,329,626
Other
  504,338
  188,675
Total deferred tax assets
  6,272,660
  5,944,641



Deferred tax liability:


Investment in KICO (2)
  1,169,000
  1,169,000
Deferred acquisition costs
  4,889,872
  4,161,526
Intangibles
  372,300
  459,000
Depreciation and amortization
  287,861
  265,671
Net unrealized appreciation of securities - available for sale
  681,715
  56,393
Total deferred tax liabilities
  7,400,748
  6,111,590



Net deferred income tax liability
$(1,128,088)
$(166,949)

	September 30,		December 31,
	2023		2022

Deferred tax asset:
Net operating loss carryovers (1)	$	6,411,993	$	3,828,947
Claims reserve discount		1,220,674		1,238,544
Unearned premium		2,395,542		3,574,840
Deferred ceding commission revenue		1,972,541		2,230,109
Net unrealized losses on securities		4,912,057		4,920,837
Other		1,193,445		503,692
Total deferred tax assets		18,106,252		16,296,969

Deferred tax liability:
Investment in KICO (2)		759,543		759,543
Deferred acquisition costs		4,311,788		5,002,085
Intangibles		105,000		105,000
Depreciation and amortization		140,761		99,183
Total deferred tax liabilities		5,317,092		5,965,811

Net deferred income tax asset	$	12,789,160	$	10,331,158

(1)

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

Type of NOL

September 30, 2017

December 31, 2016

Expiration
State only (A)
$786,240
$655,719
December 31, 2037
Valuation allowance
  (680,280)
  (534,293)

State only, net of valuation allowance
  105,960
  121,426

Amount subject to Annual Limitation, federal only (B)
  6,800
  10,200
December 31, 2019
Total deferred tax asset from net operating loss carryovers
$112,760
$131,626

	September 30,			December 31,
Type of NOL	2023			2022			Expiration

Federal only, NOL from 2021 - 2023	$	6,411,993		$	3,828,947		None

State only (A)		2,555,609			2,276,595		December 2027 - December 2043
Valuation allowance		(2,555,609	)		(2,276,595	)
State only, net of valuation allowance		-			-

Total deferred tax asset from net operating loss carryovers	$	6,411,993		$	3,828,947

(A) Kingstone generates operating losses for state purposes and has prior year NOLs available. The state NOL as of September 30, ~~2017~~2023 and December 31, ~~2016~~2022 was approximately ~~$12,095,996~~ $39,317,000 and ~~$10,088,000,~~$35,025,000, respectively. KICO, the Company’s insurance underwriting subsidiary, is not subject to state income taxes. KICO’s state tax obligations are paid through a gross premiums tax, which is included in the condensed consolidated statements of ~~income~~operations and comprehensive ~~income~~loss within other underwriting ~~expenses. A~~expenses. Kingstone has recorded a valuation allowance ~~has been recorded~~ 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 NOL 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.

2043.

Table of Contents

(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. A temporary difference with an indefinite life exists when the parent has a lower carrying value of its subsidiary for income tax purposes. The deferred tax liability was reduced to $759,543 upon the reduction of federal income tax rates as of December 31, 2017. The Company is required to maintain its deferred tax liability of ~~$1,169,000~~$759,543 related to this temporary difference until the stock of KICO is sold, or the assets of KICO are sold or KICO and the parent are merged.

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

The Company had no material unrecognized tax benefit and no adjustments to liabilities or operations were required. There were no interest or penalties related to income taxes that have been accrued or recognized as of and for the nine months ended September 30, ~~2017~~2023 and ~~2016.~~2022. If any had been recognized these would have been reported in income tax expense.

Generally, taxing authorities may examine the Company’s tax returns for the three years from the date of filing. The Company’s tax returns for the years ended December 31, ~~2014~~2019 through December 31, ~~2016~~2022 remain subject to examination.

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

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

The computation of diluted ~~earnings~~loss per common share excludes outstanding options, warrants and non-vested restricted stock awards in periods where the exercise of such options and warrants or vesting of such restricted stock awards would be anti-dilutive. For the three months and nine months ended September 30,~~, 2017~~ 2023 and ~~2016, the inclusion of -0- and 27,500~~2022, no options, ~~respectively,~~warrants or restricted stock awards were included in the computation of diluted ~~earnings~~loss per common share as they would have been anti-dilutive for the relevant periods and, as a result, the weighted average number of ~~common~~ shares of Common Stock used in the calculation of diluted ~~earnings~~loss per common share has not been adjusted for the effect of such ~~options. For the nine months ended September 30, 2017~~options, warrants and 2016, the inclusion of -0- and 22,664 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.

non-vested restricted stock awards.

Table of Contents

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

Three months ended

Nine months ended

September 30,

September 30,

2017

2016

2017

2016

Weighted average number of shares outstanding
  10,626,242
  7,911,353
  10,307,689
  7,676,887
Effect of dilutive securities, common share equivalents:




Stock options
  197,133
  -
  189,211
  -
Restricted stock awards
  9,364
  61,572
  3,373
  52,825





Weighted average number of shares outstanding,




used for computing diluted earnings per share
  10,832,739
  7,972,925
  10,500,272
  7,729,712

	Three months ended				Nine months ended
	September 30,				September 30,
	2023		2022		2023		2022

Weighted average number of shares outstanding		10,756,156		10,645,675		10,754,709		10,640,290

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

Weighted average number of shares outstanding,
used for computing diluted loss per share		10,756,156		10,645,675		10,754,709		10,640,290

Note 11 - Commitments and Contingencies

Litigation

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

Office Lease

The Company enters into lease agreements for real estate that is ~~not subject to any other pending legal proceedings that management believes~~primarily used for office space in the ordinary course of business. These leases are ~~likely to have~~accounted for as operating leases, whereby lease expense is recognized on a ~~material adverse effect on~~straight-line basis over the ~~condensed consolidated financial statements.~~

~~Office Lease~~

term of the 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,~~York expiring March 31, 2024.

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

Table of Contents

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

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

The following table presents the contractual maturities of the Company’s lease liabilities as of September 30, 2023:

	Three months ended						Nine months ended
	September 30,						September 30,
Lease cost	2023			2022			2023			2022

Operating lease (1) (2)	$	41,342		$	41,342		$	124,026		$	131,152
Total lease cost (1) (2)	$	41,342		$	41,342		$	124,026		$	131,152

Other information on operating leases
Cash payments included in the measurement of lease
liability reported in operating cash flows	$	49,145		$	47,483		$	145,774		$	147,969
Discount rate		5.50	%		5.50	%		5.50	%		5.50	%
Remaining lease term in years		0.50			1.50			0.50			1.50

(1)

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

The following table presents the contractual maturities of the Company’s lease liabilities as of September 30, 2023:

For the Nine Months
Ending
September 30,	Total
Remainder of 2023	$	49,145
2024		49,145
Total undiscounted lease payments		98,290
Less: present value adjustment		8,993
Operating lease liability (1)	$	89,297

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

Rent expense for the three months ended September 30, 2023 and 2022 amounted to $41,342 for both periods and is included in the accompanying condensed consolidated statements of operations and comprehensive loss within other underwriting expenses. Rent expense for the nine ~~months.~~months ended September 30, 2023 and 2022 amounted to $124,026 and $131,152, respectively, and is included in the accompanying condensed consolidated statements of operations and comprehensive loss within other underwriting expenses.

Table of Contents

Employment Agreements

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

Employment Agreement effective as of January 1, 2020

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

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

Table of Contents

Pursuant to the Second Amended Goldstein Employment Agreement, in January 2020, Mr. Goldstein received a grant of 157,431 shares of restricted stock under the terms of the Company’s 2014 Plan determined by dividing $1,250,000 by the fair market value of the Company’s Common Stock on the date of grant. This 2020 grant vested with respect to one-third of the award on each of the first and second anniversaries of the grant date and was scheduled to vest with respect to one-sixth of the award on each of December 29, 2023 and December 30, 2024 based on the continued provision of services through such dates. On September 18, 2023, Mr. Goldstein and the Company agreed to extend the vesting date of the one-sixth of the award that was scheduled to vest on December 29, 2023 to December 30, 2024. Also pursuant to the Second Amended Goldstein Employment Agreement, Mr. Goldstein received a grant, under the terms of the 2014 Plan, during January 2021, of 230,769 shares of restricted stock determined by dividing $1,500,000 by the fair market value of the Company’s Common Stock on the date of grant. This 2021 grant vested with respect to one-half of the award on the first anniversary of the grant date and was scheduled to vest with respect to one-fourth of the award on each of December 29, 2023 and December 30, 2024 based on the continued provision of services through such dates. On September 18, 2023, Mr. Goldstein and the Company agreed to extend the vesting date of the one-fourth of the award that was scheduled to vest on December 29, 2023 to December 30, 2024. Further, pursuant to the Second Amended Goldstein Employment Agreement, Mr. Goldstein received in 2020, 2021, and 2022 a grant, under the terms of the 2014 Plan of a number of shares of restricted stock determined by dividing $136,500 by the fair market value of the Company’s Common Stock on the date of grant. In January 2020, Mr. Goldstein was granted 17,191 shares of restricted stock pursuant to this provision. This grant vested with respect to one-third of the award on each of the first and second anniversaries of the grant date and was scheduled to vest with respect to one-sixth of the award on each of December 29, 2023 and December 30, 2024 based on the continued provision of services through such dates. On September 18, 2023, Mr. Goldstein and the Company agreed to extend the vesting date for the one-sixth of the award that was scheduled to vest on December 29, 2023 to December 30, 2024. In January 2021, Mr. Goldstein was granted 21,000 shares of restricted stock pursuant to this provision. This grant vested with respect to one-half of the award on the first anniversary of the grant date and was scheduled to vest with respect to one-fourth of the award on each of December 29, 2023 and December 30, 2024 based on the continued provision of services through such dates. On September 18, 2023, Mr. Goldstein and the Company agreed to extend the vesting date for the one-fourth of the award that was scheduled to vest on December 29, 2023 to December 30, 2024. In January 2022, Mr. Goldstein was granted 27,300 shares of restricted stock pursuant to this provision. This grant was scheduled to vest with respect to one-half of the award on each of December 29, 2023 and December 30, 2024 based on the continued provision of services through such dates. On September 18, 2023, Mr. Goldstein and the Company agreed to extend the vesting date for the one-half of the award that was scheduled to vest on December 29, 2023 to December 30, 2024. Pursuant to the 2014 Plan, Mr. Goldstein’s unvested restricted stock awards will vest in the event of a change in control of the Company. In addition, in the event of the termination of Mr. Goldstein’s employment with the Company for any reason, his unvested restricted stock will vest.

Employment Agreement effective as of January 1, 2023

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

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

Table of Contents

Employment Agreement effective as of October 1, 2023

On August 9, 2023, the Company and Mr. Goldstein entered into an amendment to the Third Amended Goldstein Employment Agreement which took effect as of October 1, 2023. Pursuant to the amendment, effective as of October 1, 2023, Mr. Goldstein is no longer serving as President and Chief Executive Officer of the Company, the expiration date of the Third Amended Goldstein Employment Agreement shall be the earlier of (a) December 31, 2024 or (b) in the event Mr. Goldstein is not re-elected as Chairman of the Board of the Company following its 2024 annual meeting of stockholders, then the date of such annual meeting, Mr. Goldstein’s salary was reduced to $300,000 per annum, and Mr. Goldstein is no longer entitled to receive a bonus based upon the Company’s net income.

Meryl Golden, Chief Operating Officer (See Note 13 – Subsequent Events)

Employment Agreement effective as of January 1, 2021

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

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

Employment Agreement effective as of January 1, 2023

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

Pursuant to the Second Amended Golden Employment Agreement, Ms. Golden is entitled to receive an annual base salary of $500,000 and an annual bonus equal to 3% of the Company’s consolidated income from operations before taxes, exclusive of the Company’s consolidated net investment income (loss), net unrealized gains (losses) on equity securities and net realized gains (losses) on investments, up to a maximum of 1.25 times her base salary. In addition, pursuant to the Second Amended Golden Employment Agreement, Ms. Golden is entitled to receive a grant, under the terms of the 2014 Plan, during each of January 2023 and January 2024, under certain circumstances, of a number of shares of restricted stock determined by dividing $136,500 by the fair market value of the Company’s Common Stock on the date of grant. In January 2023, Ms. Golden was granted 101,111 shares of restricted stock pursuant to this provision. The 2023 grant will vest with respect to one-half of the award on the first anniversary of the grant date and one-half of the award on December 31, 2024, based on the continued provision of services through such dates. The 2024 grant will vest on December 31, 2024, based on the continued provision of services through such date. In the event that the Company is precluded from making a grant in 2024, then instead Ms. Golden shall be entitled to receive a cash bonus of $136,500 for such year. Further, pursuant to the Second Amended Golden Employment Agreement, Ms. Golden would be entitled to receive, under certain circumstances, a payment equal to 1.5 times her then annual base salary and her accrued bonus in the event of the termination of her employment within eighteen months following a change of control of the Company.

Table of Contents

Effective as of October 1, 2023, Ms. Golden was appointed to the position of President and Chief Executive Officer of the Company to succeed Mr. Goldstein.

Note 12 – Employee Benefit Plans

Employee Bonus Plan

For the nine months ended September 30, 2023 and 2022 the Company did not accrue for, or pay, bonuses related to ~~be measured from~~an employee bonus plan.

401(k) Plan

The Company maintains a salary reduction plan under Section 401(k) of the ~~additional premises commencement date.~~Internal Revenue Code (the “401(k) Plan”) for its qualified employees. The ~~additional premises commencement date was~~Company matches 100% of each participant’s contribution up to 4% of the participant’s eligible contribution. The Company incurred approximately $90,000 and $71,000, respectively, of expense for the three months ended September ~~19, 2016,~~30, 2023 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~~2022, related to the ~~base rental costs, occupancy lease agreements generally provide~~401(k) Plan, which is recorded in other underwriting expenses on the accompanying condensed consolidated statements of operations and comprehensive loss. The Company incurred approximately $249,000 and $207,000, respectively, of expense 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~~nine months ended September 30, ~~2017, cumulative rent expense exceeded cumulative rent payments by $89,219. This difference~~2023 and 2022, related to the 401(k) Plan, which is recorded in other underwriting expenses on the accompanying condensed consolidated statements of operations and comprehensive loss.

Deferred Compensation Plan

On June 18, 2018, the Company adopted the Kingstone Companies, Inc. Deferred Compensation Plan (the "Deferred Compensation Plan"). Effective December 22, 2022, the Company terminated the Deferred Compensation Plan. The assets of the Deferred Compensation Plan will be liquidated by making payments to Participants in full satisfaction of their interest in the Deferred Compensation Plan (“Termination Payments”), which Termination Payments will be made no earlier than December 22, 2023 and will be completed no later than December 22, 2024.

The deferred compensation liability as ~~deferred rent~~of September 30, 2023 and December 31, 2022 amounted to $873,768 and $1,155,860, respectively, and is ~~included~~recorded in accounts payable, accrued expenses and other liabilities in the accompanying condensed consolidated balance sheets.

~~As of September 30, 2017, aggregate future minimum rental commitments under the Company’s modified lease agreement are as follows:~~

For the Year

Ending

December 31,

Total

2017 (three months)
$39,980
2018
  164,117
2019
  169,861
2020
  175,806
2021
  181,959
Thereafter
  432,392
Total
$1,164,115

Rent expense for the three months ended September 30, 2017 and 2016 amounted to $41,342 and $26,126, respectively. Rent expense for the nine months ended September 30, 2017 and 2016 amounted to $124,026 and $78,377 respectively. Rent expense is ~~included in the condensed consolidated statements of income and comprehensive income within~~ ~~other underwriting expenses.~~

Note 1213 – Subsequent Events

The Company has evaluated events that occurred subsequent to September 30, ~~2017~~2023 through the date these condensed consolidated financial statements were issued for matters that required disclosure or adjustment in these condensed consolidated financial statements.

~~Dividends Declared~~

Debt

On November ~~8, 2017,~~7, 2023, a majority of the ~~Company’s Board~~holders of ~~Directors approved~~the outstanding 2022 Notes (on behalf of all holders of the 2022 Notes) agreed to a ~~quarterly dividend~~waiver regarding the satisfaction of ~~$.08 per share payable in cash on December 15, 2017 to stockholders of record~~the Leverage Maintenance Test as of September 30, 2023. See Note 7 – Debt.

Employment Agreements

Effective as of October 1, 2023, Ms. Golden was appointed to the ~~close~~position of ~~business on November 30, 2017.~~

President and Chief Executive Officer of the Company to succeed Mr. Goldstein. See Note 11 – Commitments and Contingencies.

Table of Contents

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

~~Overview~~

We offer property and casualty insurance products ~~to individuals and small businesses in New York State and other markets~~ through our wholly owned subsidiary, Kingstone Insurance Company (“KICO”). ~~KICO’s insureds are located~~KICO is actively writing personal lines and physical damage coverage for taxi and livery vehicles primarily in downstate New York, consisting of New York City, Long Island and Westchester County. ~~We are~~KICO is also licensed in the States of New Jersey, ~~Connecticut, Pennsylvania,~~ Rhode Island, Connecticut, Massachusetts, Pennsylvania, Maine, and ~~Texas. We began writing homeowners business in~~ New ~~Jersey on May 4, 2017. Although New Jersey is now a growing expansion market for us,~~Hampshire. For the ~~majority~~three months and nine months ended September 30, 2023, respectively, 88.5% and 88.1% of KICO’s direct written premiums came from the New York policies. We refer to our New York business as our “Core” business and the business outside of New York as our “non-Core” business.

In addition, our subsidiary, Cosi Agency, Inc. (“Cosi”), a multi-state licensed general agency, receives commission revenue from KICO for the policies it places with others and pays commissions to these agencies. Cosi retains the profit between the commission revenue received and the commission expense paid (“Net Cosi Revenue”). Commission expense is ~~written~~reduced by Net Cosi Revenue. Cosi-related operating expenses are minimal and are included in other operating expenses. Cosi-related operating expenses are not included in our stand-alone insurance underwriting business and, accordingly, Cosi’s expenses are not included in the State of New York. In October 2017, a homeowners rate, rule, and form filing was approved for use by the State of Rhode Island. We anticipate writing business there in the fourth quarter of 2017. In October 2017, KICO received tentative approval for a Massachusetts insurance license. KICO expects to have final approval and file a Massachusetts homeowners rate, rule, and form filing in the fourth quarter of 2017.

In November 2016, we commenced a plan of action to upgrade KICO’s A. M. Best rating. In April 2017, A.M. Best upgraded the Financial Strength Rating (FSR) of KICO to A- (Excellent) from B++ (Good). We believe that the A.M. Best rating of A- has opened new growth opportunities for KICO. The plan required us to raise capital and to contribute a portion of the proceeds to KICO while also reducing KICO’s reliance on quota share reinsurance. On January 31, 2017, we closed on an underwritten public offering of 2,500,000 sharescalculation of our common stock. On February 14, 2017, we closed on the underwriters’ purchase option for an additional 192,500 shares of our common stock. The public offering price for the 2,692,500 shares sold was $12.00 per share. The aggregate net proceeds to us were approximately $30,137,000. On March 1, 2017, we used $23,000,000 of the net proceeds from the offering to contribute capital to KICO. This capital was required for its ratings upgrade plan and to support additional growth. The remainder of the net proceeds will be used for general corporate purposes. In March 2017, KICO bound its personal lines quota share treaty effective July 1, 2017, reducing the quota share ceding rate to 20% from the previous 40%.

combined ratio as described below.

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

Our holding company earns investment income from its cash holdings.

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

Other operating expenses include our corporate expenses as a holding company. These corporate expenses include legal and auditing fees, executive employment costs, and other costs directly associated with being a public company.

Product Lines

Our ~~active~~ product lines include the following:

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

Commercial liability: ~~We offer~~Through July 2019, we offered businessowners policies, which consist primarily of small business retail, service, and office risks, ~~without a residential exposure.~~with limited property exposures. We also ~~write~~wrote artisan’s liability policies for small independent contractors with ~~seven or fewer employees.~~smaller sized workforces. In addition, we ~~write~~wrote special multi-peril policies for larger and more specialized businessowners risks, including those with limited residential exposures. ~~We also offer~~Further, we offered commercial umbrella policies written above our supporting commercial lines policies.

Table of Contents

In May 2019, due to the poor performance of this line we placed a moratorium on new commercial lines and new commercial umbrella submissions while we further reviewed this business. In July 2019, due to the continuing poor performance of these lines, we made the decision to no longer underwrite commercial lines or commercial umbrella risks. In-force policies as of July 31, 2019 for these lines were non-renewed at the end of their annual terms. As of September 30, 2023 and December 31, 2022, there were no commercial liability policies in-force. As of September 30, 2023 and December 31, 2022, these expired policies represent approximately 15.5% and 17.9%, respectively, of loss and LAE reserves net of reinsurance recoverables. See discussion below under “Additional Financial Information”.

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

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

Key Measures

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

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

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

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

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

Table of Contents

Critical Accounting Policies and Estimates

Our condensed consolidated financial statements include the accounts of Kingstone Companies, Inc. and all majority-owned and controlled subsidiaries. The preparation of financial statements in conformity with ~~accounting principles generally accepted in the United States~~GAAP requires our management to make estimates and assumptions in certain circumstances that affect amounts reported in our condensed consolidated financial statements and related notes. In preparing these condensed consolidated financial statements, our management has utilized information including our past history, industry standards, and the current economic environment, and other factors, in forming its estimates and judgments ~~for~~of certain amounts included in the condensed consolidated financial statements, giving due consideration to materiality. It is possible that the ultimate outcome as anticipated by our management in formulating its estimates in these financial statements may not materialize. ~~However, application~~Application of the critical accounting policies involves the exercise of judgment and use of assumptions as to future uncertainties and, as a result, actual results could differ from these estimates. In addition, other companies may utilize different estimates, which may impact ~~the~~ comparability of our results of operations to those of similar companies.

See the Critical Accounting Policies and Estimates section within Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, 2022 for further information.

We believe that the most critical accounting policies relate to the reporting of reserves for loss and LAE, including losses that have occurred but have not ~~yet~~ been reported prior to the reporting date, amounts recoverable from third party reinsurers, ~~deferred ceding commission revenue, deferred policy acquisition costs,~~ deferred income taxes, ~~the impairment~~allowance for credit losses of investment securities, ~~intangible assets~~ and the valuation of ~~stock-based compensation.~~warrants. See Note 2 to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2022 and Note 2 of the condensed consolidated financial statements ~~- “Accounting Policies”~~included in this Quarterly Report for ~~information related~~accounting policies regarding the adoption of ASU 2016-13 effective January 1, 2023.

Kingstone 2.0 (completed) and Kingstone 3.0 (underway)

Beginning in the fourth quarter of 2019, a series of strategic initiatives, coined “Kingstone 2.0” were commenced to ~~updated accounting policies.~~

modernize our Company. The pillars of the new strategy were as follows:

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

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

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

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

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

	1.	Aggressively reducing the non-Core book of business, which has had a disproportionately negative impact on underwriting results, by slowing new business, re-underwriting the book, culling the agent base, reducing commissions, or other means, subject to regulatory constraints. We stopped writing all new non-Core business and have been aggressively reducing policy count this year. As of September 30, 2023, our non-Core policy count is down by 38.9% compared to September 30, 2022;

	2.	Adjusting pricing to stay ahead of loss trends, including inflation, by filing the maximum annual rate change that can be supported in each state and product and ensuring all policyholders are insured to value. Inflation has been a dominant headwind that is showing signs of stabilizing. We have been cognizant that inflation’s impact on loss costs places added pressure on premiums and, as such, we have been more frequent and aggressive with our rate change requests. Similarly, home replacement values reflect that same inflationary pressure. In September 2023, we completed our first cycle of valuation adjustments, making sure that all homes were insured to value. As a result, we have seen a rise in premiums attributable to the heightened replacement costs. Overall average written premium for our Legacy Core homeowners policies for the last 12 months, reflecting both rate and replacement cost changes, increased by 25.5%;

	3.	Tightly managing reinsurance requirements and costs, using risk selection and other underwriting capabilities to manage the growth rate of our PML. We needed to contain our exposure to spiking reinsurance pricing. We did so and were able to reduce the required limit to be purchased while maintaining our same risk tolerance. We used all the tools available to us to limit new business that was deemed to be too expensive and at the same time re-underwrote the book to cull those risks which presented the greatest risk. The combination of stricter new business underwriting and increased non-renewals gave rise to the 4.5% decline in policy count for our Core business. We have now reverted most of our new business underwriting standards back to what they were previously so Core new business growth should increase going forward; and

	4.	Continuing expense reduction focus with a goal of reducing the net expense ratio to 33% by year-end 2024. For the three months ended September 30, 2023, the net underwriting expense ratio was 31.7%, a reduction of 5.2 points in spite of the 4.8% decline in net premiums earned. For the nine months ended September 30, 2023, we achieved our 33% goal.

Table of Contents

See tables below comparing the quarterly trends and changes from our Core and non-Core business for policies in force and direct written premiums from September 30, 2022 through September 30, 2023. For the three months ended September 30, 2023, our Core direct written premiums have increased by 4.7% compared to the three months ended September 30, 2022, while policies in force have decreased by 4.5% as of September 30, 2023. For the same periods, our non-Core policies in force have decreased by 38.9% and direct written premiums have decreased by 43.9%. We believe that the above actions taken will continue to have the intended effect and will result in a return to profitability for the Company

	For the Three Months Ended
	September 30,		December 31,			March 31,			June 30,			September 30,
	2022		2022			2023			2023			2023

(000’s except percentages and Policies in Force)

Policies In Force, as of end of Three Month Period
Core		71,705		71,359			72,081			70,132			68,498
Non-Core		22,007		20,695			18,945			16,224			13,457
Total policies in force		93,712		92,054			91,026			86,356			81,955

Direct written premiums
Core	$	43,949	$	43,923		$	41,427		$	42,211		$	46,025
Non-Core		10,642		9,978			6,170			5,435			5,966
Total direct written premiums	$	54,592	$	53,901		$	47,597		$	47,647		$	51,992

Change from September 30, 2022
Core
Policies In Force
$ change	na		$	(346	)	$	376		$	(1,573	)	$	(3,207	)
% change	na			-0.5	%		0.5	%		-2.2	%		-4.5	%
Direct written premiums
$ change	na		$	(26	)	$	(2,522	)	$	(1,738	)	$	2,076
% change	na			-0.1	%		-5.7	%		-4.0	%		4.7	%

Non- Core
Policies In Force
$ change	na		$	(1,312	)	$	(3,062	)	$	(5,783	)	$	(8,550	)
% change	na			-6.0	%		-13.9	%		-26.3	%		-38.9	%
Direct written premiums
$ change	na		$	(664	)	$	(4,472	)	$	(5,207	)	$	(4,676	)
% change	na			-6.2	%		-42.0	%		-48.9	%		-43.9	%

(Components may not sum due to rounding)

Table of Contents

Consolidated Results of Operations

Nine Months Ended September 30, ~~2017~~2023 Compared to Nine Months Ended September 30, ~~2016~~

2022

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

Nine months ended September 30,

($ in thousands)

2017

2016

Change

Percent

Revenues

Direct written premiums
$89,424
$76,375
$13,049
  17.1%
Assumed written premiums
  18
  15
  3
  20.0%

  89,442
  76,390
  13,052
  17.1%
Ceded written premiums




Ceded to quota share treaties in force during the period
  18,943
  19,463
  (520)
  (2.7)%
Return of premiums previously ceded to prior quota share treaties (1)
  (7,140)
  -
  (7,140)

na

Ceded to quota share treaties
  11,803
  19,463
  (7,660)
  (39.4)%
Ceded to excess of loss treaties
  903
  1,078
  (175)
  (16.2)%
Ceded to catastrophe treaties
  8,013
  7,002
  1,011
  14.4%
Total ceded written premiums
  20,719
  27,543
  (6,824)
  (24.8)%





Net written premiums
  68,723
  48,847
  19,876
  40.7%





Change in unearned premiums




Direct and assumed
  (8,448)
  (4,874)
  (3,574)
  73.3%
Ceded to quota share treaties
  (5,437)
  1,216
  (6,653)
  (547.1)%
Change in net unearned premiums
  (13,885)
  (3,658)
  (10,227)
  279.6%





Premiums earned




Direct and assumed
  80,994
  71,516
  9,478
  13.3%
Ceded to quota share treaties
  (26,156)
  (26,327)
  171
  (0.6)%
Net premiums earned
  54,838
  45,189
  9,649
  21.4%
Ceding commission revenue
  8,208
  8,274
  (66)
  (0.8)%
Net investment income
  2,917
  2,286
  631
  27.6%
Net realized gain on investments
  97
  605
  (508)
  (84.0)%
Other income
  926
  831
  95
  11.4%
Total revenues
  66,986
  57,185
  9,801
  17.1%

(1) Effective July 1, 2017, we decreased the quota share ceding rate in our personal lines quota share treaty from 40% to 20%. The Cut-off of this treaty on July 1, 2017 resulted in a $7,140,000 return of unearned premiums from our reinsurers that were previously ceded under the expiring personal lines quota share treaty.

Nine months ended September 30,

($ in thousands)

2017

2016

Change

Percent

Total revenues (continued)
  66,986
  57,185
  9,801
  17.1%





Expenses




Loss and loss adjustment expenses




Direct and assumed:




Loss and loss adjustment expenses excluding the effect of catastrophes
  31,324
  26,746
  4,578
  17.1%
Losses from catastrophes (1)
  -
  2,337
  (2,337)
  (100.0)%
Total direct and assumed loss and loss adjustment expenses
  31,324
  29,083
  2,241
  7.7%





Ceded loss and loss adjustment expenses:




Loss and loss adjustment expenses excluding the effect of catastrophes
  8,503
  7,742
  761
  9.8%
Losses from catastrophes (1)
  -
  935
  (935)
  (100.0)%
Total ceded loss and loss adjustment expenses
  8,503
  8,677
  (174)
  (2.0)%





Net loss and loss adjustment expenses:




Loss and loss adjustment expenses excluding the effect of catastrophes
  22,821
  19,004
  3,817
  20.1%
Losses from catastrophes (1)
  -
  1,402
  (1,402)
  (100.0)%
Net loss and loss adjustment expenses
  22,821
  20,406
  2,415
  11.8%





Commission expense
  15,491
  13,400
  2,091
  15.6%
Other underwriting expenses
  12,887
  10,982
  1,905
  17.3%
Other operating expenses
  2,731
  1,292
  1,439
  111.4%
Depreciation and amortization
  1,023
  835
  188
  22.5%
Total expenses
  54,954
  46,915
  8,038
  17.1%





Income from operations before taxes
  12,031
  10,270
  1,761
  17.1%
Provision for income tax
  3,976
  3,426
  550
  16.1%
Net income
$8,055
$6,844
$1,211
  17.7%

(1) For the nine months ended September 30, 2016, includes the effects of severe winter weather (which we define as a catastrophe). We define a “catastrophe” as an event or series of related events that involve multiple first party policyholders, or an event or series of events that produce a number of claims in excess of a preset, per-event threshold of average claims in a specific area, occurring within a certain amount of time constituting the event or series of events. Catastrophes are caused by various natural events including high winds, excessive rain, winter storms, severe winter weather, tornadoes, hailstorms, wildfires, tropical storms, and hurricanes.

Nine months ended September 30,

2017

2016

Percentage Point Change

Percent Change

Key ratios:

Net loss ratio
  41.6%
  45.2%
  (3.6)
  (8.0)%
Net underwriting expense ratio
  35.2%
  33.8%
  1.4
  4.1%
Net combined ratio
  76.8%
  79.0%
  (2.2)
  (2.8)%

	Nine months ended September 30,
($ in thousands)	2023			2022			Change			Percent
Revenues
Direct written premiums	$	147,237		$	147,354		$	(117	)		(0.1	)%
Assumed written premiums		-			-			-			na	%
		147,237			147,354			(117	)		(0.1	)%
Ceded written premiums
Ceded to quota share treaties (1)		38,832			34,868			3,964			11.4	%
Ceded to excess of loss treaties		3,861			2,937			924			31.5	%
Ceded to catastrophe treaties		48,316			43,508			4,808			11.1	%
Total ceded written premiums		91,009			81,313			9,696			11.9	%

Net written premiums		56,228			66,041			(9,813	)		(14.9	)%

Change in unearned premiums
Direct and assumed		4,331			(6,030	)		10,361			na	%
Ceded to reinsurance treaties (1)		25,143			23,925			1,218			5.1	%
Change in net unearned premiums		29,474			17,895			11,579		na		%

Premiums earned
Direct and assumed		151,568			141,324			10,244			7.2	%
Ceded to reinsurance treaties		(65,866	)		(57,388	)		(8,478	)		(14.8	)%
Net premiums earned		85,701			83,936			1,766			2.1	%

Ceding commission revenue (1)		16,394			14,283			2,111			14.8	%
Net investment income		4,437			3,412			1,025			30.0	%
Net gains (losses) on investments		598			(9,313	)		9,911		na		%
Other income		454			750			(296	)		(39.5	)%
Total revenues		107,584			93,068			14,517			15.6	%
Expenses
Loss and loss adjustment expenses
Direct and assumed:
Loss and loss adjustment expenses excluding the effect of catastrophes		89,826			83,346			6,480			7.8	%
Losses from catastrophes (2)		10,746			7,510			3,236			43.1	%
Total direct and assumed loss and loss adjustment expenses		100,572			90,856			9,716			10.7	%

Ceded loss and loss adjustment expenses:
Loss and loss adjustment expenses excluding the effect of catastrophes		30,558			23,187			7,371			31.8	%
Losses from catastrophes (2)		3,461			4,044			(583	)		(14.4	)%
Total ceded loss and loss adjustment expenses		34,019			27,231			6,788			24.9	%

Net loss and loss adjustment expenses:
Loss and loss adjustment expenses excluding the effect of catastrophes		59,268			60,159			(891	)		(1.5	)%
Losses from catastrophes (2)		7,285			3,466			3,819			110.2	%
Net loss and loss adjustment expenses		66,553			63,625			2,928			4.6	%

Commission expense		25,221			25,534			(313	)		(1.2	)%
Other underwriting expenses		19,874			20,717			(843	)		(4.1	)%
Other operating expenses		1,868			2,357			(489	)		(20.7	)%
Depreciation and amortization		2,328			2,472			(144	)		(5.8	)%
Interest expense		3,005			1,370			1,635			119.3	%
Total expenses		118,848			116,075			2,774			2.4	%

Loss before taxes		(11,264	)		(23,007	)		11,743			51.0	%
Income tax benefit		(2,149	)		(4,433	)		2,284			51.5	%
Net loss	$	(9,114	)	$	(18,575	)	$	9,461			50.9	%

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

	(1)	Effective December 31, 2021, we entered into a 30% personal lines quota share treaty.
	(2)	The nine months ended September 30, 2023 and 2022 include catastrophe losses, which are defined as losses from an event for which a catastrophe bulletin and related serial number has been issued by the Property Claims Services (PCS) unit of the Insurance Services Office (ISO). PCS catastrophe bulletins are issued for events that cause more than $25 million in total insured losses and affect a significant number of policyholders and insurers.

Table of Contents

	Nine months ended September 30,
	2023			2022			Percentage Point Change			Percent Change

Key ratios:
Net loss ratio		77.7	%		75.8	%		1.9			2.5	%
Net underwriting expense ratio		33.0	%		37.2	%		(4.2	)		(11.3	)%
Net combined ratio		110.7	%		113.0	%		(2.3	)		(2.0	)%

Direct Written Premiums

Direct written premiums during the nine months ended September 30, ~~2017~~2023 (“~~2017”~~Nine Months 2023”) were ~~$89,424,000~~ $147,237,000 compared to ~~$76,375,000~~ $147,354,000 during the nine months ended September 30, ~~2016~~ 2022 (“~~2016”~~Nine Months 2022”). The ~~increase~~decrease of ~~$13,049,000~~, $117,000, or ~~17.1%~~0.1%, was primarily due to a decrease in premiums from our personal lines business.

Direct written premiums from our personal lines business for Nine Months 2023 were $136,601,000, a decrease of $1,597,000, or 1.2%, from $138,198,000 in Nine Months 2022. The 1.2% decrease in premiums from our personal lines business was primarily due to the decrease in premiums associated with a 14.0% decrease in policies in force as of September 30, 2023 compared to September 30, 2022, offset by rate increases. The rate increases achieved along with a decrease in policies in force is in accordance with both our Kingstone 2.0 and Kingstone 3.0 strategic plans.

Direct written premiums from our livery physical damage business for Nine Months 2023 were $10,559,000, an increase of $1,522,000, or 16.8%, from $9,037,000 in Nine Months 2022. The increase in livery physical damage direct written premiums was due to an increasing number of policies and an increase in ~~policies in-force during 2017 as compared to 2016 driven by continued growth~~the values of the autos insured.

Beginning in new business. We wrote more new policies as a result of continued demand for our products in the markets that we serve. We believe that a portion of our growth in new policies is attributable to our upgraded A.M. Best rating of A- that we received in April 2017. In May 2017, we commenced our non-Core business and started writing ~~Homeowners’~~personal lines policies in New Jersey. ~~Policies in-force increased by 14.6% as of September 30, 2017~~Through 2019 we expandedour non-Core business to Rhode Island, Massachusetts and Connecticut.Direct written premiums from our Core business were $129,665,000 in Nine Months 2023 compared to ~~September 30, 2016~~ $118,332,000 in Nine Months 2022, an increase of $11,333,000, or 9.6%.

Policies in force from our Core business decreased by 4.5% in Nine Months 2023 compared to Nine Months 2022. Direct written premiums from our non-Core business were $17,572,000 in Nine Months 2023 down from $29,022,000 in Nine Months 2022, a decrease of $11,450,000, or 39.5%. The decrease in direct written premiums from our non-Core business is a result of our decision to aggressively reduce the book of business in these states. Policies in force from our non-Core business decreased by 38.9% in Nine Months 2023 compared to Nine Months 2022. The increase in our Core business and the decrease in our non-Core business is consistent with a key pillar of our Kingstone 3.0 strategy to reduce our non-Core business due to profitability concerns.

Table of Contents

Net Written Premiums and Net Premiums Earned

The following table describes the quota share reinsurance ceding rates in effect during 2017 and 2016. For purposes of the discussion herein, the change in quota share ceding rates on July 1, 2017 will be referred to as “the Cut-off”. This table should be referred to in conjunction with the discussions for net written premiums, net premiums earned, ceding commission revenue and net loss and loss adjustment expenses that follow.

Nine months ended September 30, 2017

Nine months ended September 30, 2016

January 1,

July 1,

January 1,

July 1,

to

to

to

to

June 30,

September 30,

June 30,

September 30,

("2016/2017 Treaty")

("2017/2019 Treaty")

("2015/2016 Treaty")

("2016/2017 Treaty")

Quota share reinsurance rates

Personal lines
40%
20%
40%
40%

~~See “Reinsurance” below for changes to our personal lines quota share treaty effective July 1, 2017.~~

Net written premiums ~~increased~~ ~~$19,876,000~~,decreased $9,813,000, or ~~40.7%~~14.9%, to ~~$68,723,000~~ $56,228,000 in ~~2017~~Nine Months 2023 from ~~$48,847,000~~ $66,041,000 in ~~2016.~~Nine Months 2022. Net written premiums include direct ~~and assumed~~ premiums, less the amount of written premiums ceded under our reinsurance treaties (quota share, excess of loss, and catastrophe). The decrease in Nine Months 2023 is primarily due to a decrease in direct written premiums and an increase in catastrophe premiums rates.

Quota share reinsurance treaties

Effective December 31, 2021, we entered into a quota share reinsurance treaty for our personal lines business covering the period from December 31, 2021 through January 1, 2023 (“2021/2023 Treaty”). Upon the expiration of the 2021/2023 Treaty on January 1, 2023, we entered into a new 30% quota share reinsurance treaty for our personal lines business, covering the period from January 1, 2023 through January 1, 2024 (“2023/2024 Treaty”). In Nine Months 2023, our premiums ceded under quota share treaties increased by $3,964,000 in comparison to ceded premiums in Nine Months 2022 (see table above). The increase in Nine Months 2023 was attributable to the runoff of an 8.5% portion of the 30% 2021/2023 Treaty. The remainder of the 2021/2023 Treaty was on a cutoff basis and the new 2023/2024 Treaty was placed for 30% on January 1, 2023. Our personal lines business ~~is currently~~was subject to ~~a quota share treaty. A reduction to~~ the ~~quota share percentage or elimination of a quota share treaty will reduce our ceded written premiums, which will result~~2023/2024 Treaty in ~~a corresponding increase to our net written premiums.~~

~~Change~~Nine Months 2023, and the 2021-2023 Treaty in ~~quota share ceding rate~~

Effective July 1, 2017, we decreased the quota share ceding rate in our personal lines quota share treaty from 40% to 20%. The Cut-off of this treaty on July 1, 2017 resulted in a $7,140,000 return of unearned premiums from our reinsurers that were previously ceded under the expiring personal lines quota share treaty. We did not change our quota share ceding rate on July 1, 2016, and accordingly, there was no return of unearned premiums from our reinsurers (in contrast with what occurred on July 1, 2017), thus magnifying the percentage increase in net written premiums in 2017. The table below shows the effect of the $7,140,000 return of ceded premiums on net written premiums for 2017:

Nine months ended September 30,

($ in thousands)

2017

2016

Change

Percent

Net written premiums
$68,723
$48,847
$19,876
  40.7%
Return of premiums previously ceded to prior quota share treaties
  7,140
  -
  7,140

na

Net written premiums without the effect of the July 1, 2017 Cut-off
$61,583
$48,847
$12,736
  26.1%

~~Without the $7,140,000 effect of the Cut-off in 2017, net written premiums increased by $12,736,000, or 26.1%, in 2017 compared to 2016.~~

Nine Months 2022.

Excess of loss reinsurance treaties

An increase in written premiums will ~~also~~ increase the premiums ceded under our excess of loss ~~treaties, which incrementally reduces our net written premiums.~~treaties. In ~~2017,~~Nine Months 2023, our ceded excess of loss reinsurance premiums ~~decreased~~increased by ~~$175,000~~$924,000 over the comparable ceded premiums for ~~2016.~~Nine Months 2022. The ~~decrease~~increase was due to ~~more favorable reinsurance rates in 2017, partially offset by~~ an increase in subject premiums ~~subject to~~and the heightened cost of coverage obtained. Effective January 1, 2022, we entered into an underlying excess of loss ~~reinsurance.~~

reinsurance treaty covering the period from January 1, 2022 through January 1, 2023. The treaty provides 50% reinsurance coverage for losses of $400,000 in excess of $600,000. Losses from named storms are excluded from the treaty. Effective January 1, 2023, the Underlying XOL Treaty was renewed covering the period from January 1, 2023 through January 1, 2024.

Catastrophe reinsurance ~~treaty~~

treaties

Most of the premiums written under our personal lines policies are also subject to our catastrophe ~~treaty.~~treaties. An increase in our personal lines business gives rise to more property exposure, which increases our exposure to catastrophe risk; therefore, our premiums ~~for~~ceded under catastrophe ~~insurance~~treaties will increase. ~~This~~An increase in our personal lines business results in an increase in premiums ceded under our catastrophe ~~treaty, which reduces net written premiums. In 2017, our catastrophe~~treaties if reinsurance rates are stable or are increasing. Catastrophe premiums increased ~~by $1,011,000 over the comparable ceded premiums for 2016.~~$4,808,000, or 11.1%, to $48,316,000 in Nine Months 2023 from $43,508,000 in Nine Months 2022. The increase was primarily due to an increase in catastrophe reinsurance rates. In accordance with our ~~catastrophe coverage~~Kingstone 2.0 and anKingstone 3.0 goals, we have reduced our PML in Nine Months 2023, which partially offset the increase in premiums ~~subject to catastrophe reinsurance, partially offset by more favorable reinsurance rates in 2017~~

~~Our ceded catastrophe premiums are paid based on the total direct written premiums subject to the catastrophe reinsurance treaty.~~

effective July 1, 2023.

Net premiums earned

Net premiums earned increased ~~$9,649,000,~~$1,766,000, or ~~21.4%~~2.1%, to ~~$54,838,000~~$85,701,000 in ~~2017~~Nine Months 2023 from ~~$45,189,000~~$83,936,000 in ~~2016.~~Nine Months 2022. The increase was due in part to the ~~increase~~increased premiums written in ~~written premiums discussed above~~prior periods due to rate increases and ~~our retaining more earned premiums effective July 1, 2017, as~~increased replacement costs. The run-off of a ~~result~~portion of the ~~reduction~~2021-2023 Treaty increased the premiums ceded and reduced the growth of the quota share percentage in our personal lines quota share treaty. The decrease in our quota share ceding percentage from the July 1, 2017 Cut-off gave us a $7,140,000 return of premiums previously ceded, which led to an increase in our net premiums ~~earned during the period after the Cut-off.~~

earned.

Table of Contents

Ceding Commission Revenue

The following table details the quota share provisional ceding commission rates in effect during 2017 and 2016. This table should be referred to in conjunction with the discussion for ceding commission revenue that follows.

Nine months ended September 30, 2017 Nine months ended September 30, 2016
January 1, July 1, January 1, July 1,
to to to to
June 30, September 30, June 30, September 30,
("2016/2017 Treaty") ("2017/2019 Treaty") ("2015/2016 Treaty") ("2016/2017 Treaty")

Provisional ceding commission rate on quota share treaty
Personal lines 52% 53% 55% 52%

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

Nine months ended September 30,

($ in thousands)

2017

2016

Change

Percent

Provisional ceding commissions earned
$8,690
$9,508
$(818)
  (8.6)%
Contingent ceding commissions earned
  (482)
  (1,234)
  752
  60.9%





Total ceding commission revenue
$8,208
$8,274
$(66)
  (0.8)%

	Nine months ended September 30,
($ in thousands)	2023		2022		Change		Percent

Provisional ceding commissions earned	$	15,733	$	14,116	$	1,617		11.5	%
Contingent ceding commissions earned		661		167		494		295.8	%

Total ceding commission revenue	$	16,394	$	14,283	$	2,111		14.8	%

Ceding commission revenue was ~~$8,208,000~~ $16,394,000 in ~~2017~~Nine Months 2023 compared to ~~$8,274,000~~ $14,283,000 in ~~2016.~~Nine Months 2022. The ~~decrease~~increase of ~~$66,000,~~ ~~or 0.8%,~~ $2,111,000 was due to ~~a decrease~~an increase in provisional ceding commissions earned ~~partially offset by a reduction~~and an increase in ~~negative~~ contingent ceding commissions earned.

See below for a discussion of provisional ceding commissions earned and contingent ceding commissions earned.

Provisional Ceding Commissions Earned

~~We receive a~~

In Nine Months 2023 we earned provisional ceding ~~commission based on~~commissions of $15,733,000 from personal lines earned premiums ceded ~~written premiums. In 2017 our~~under the 2023/2024 Treaty, and in Nine Months 2022 we earned provisional ceding ~~rate was 52%~~commissions of $14,116,000 from ~~January 1, 2017 through June 30, 2017~~personal lines earned premiums ceded under the 2016/2017 Treaty and was increased to 53% effective July 1, 2017 under the 2017/2019 Treaty. In 2016 our provisional ceding rate was 55% from January 1, 2016 through June 30, 2016 under the 2015/2016 Treaty and was decreased to 52% effective July 1, 2016 under the 2016/20172021/2023 Treaty. The ~~$818,000 decrease~~increase of $1,617,000 in provisional ceding commissions earned ~~is primarily~~was due to the decrease in quota share ceding rate effective July 1, 2017 to 20%, from the 40% rate in effect from January 1, 2016 through June 30, 2017; thus there was less ceded premiums beginning July 1, 2017 available to earn ceding commissions than there was in 2016. The decrease was partially offset by an increase in ~~personal lines direct written~~ premiums ~~subject~~ceded under these treaties during Nine Months 2023 compared to Nine Months 2022.

Contingent Ceding Commissions Earned

The structure of the ~~quota share~~2023/2024 Treaty and by the ~~increase in our~~2021/2023 Treaty calls for a fixed provisional ceding commission ~~rate as discussed above.~~

~~Contingent Ceding Commissions Earned~~

~~We receive~~with no opportunity to earn additional contingent ceding commissions. Under our prior years’ quota share treaties, we received a contingent ceding commission based on a sliding scale in relation to the losses incurred under our quota share treaties. The lower the ceded loss ratio, the more contingent commission we receive. The amount of contingent ceding commissions we are eligible to receive under the personal lines quota share treaties detailed in the table above that were in effect during 2017 are subject to change based on losses incurred from claims with accident dates beginning July 1, 2016. The amount of contingent ceding commissions we are eligible to receive under our prior years’ quota share treaties is subject to change based on losses incurred related to claims with accident dates before July 1, 2016.

The 2017/2019 Treaty, 2016/2017 Treaty and 2015/2016 Treaty structure limits the amount of contingent ceding commissions that we can receive by setting the provisional commission rate higher than the rates we received in prior years. As a result of the higher upfront provisional ceding commissions that we receive, there is only a limited opportunity to earn contingent ceding commissions under these treaties. Under our current “net” treaty structure, catastrophe losses in excess of the $5,000,000 retention will fall outside of the quota share treaty and such losses will not have an impact on contingent ceding commissions. See “Reinsurance” below for changes to our personal lines quota share treaty effective July 1, 2017.

received.

Net Investment Income

Net investment income was ~~$2,917,000~~ $4,437,000 in ~~2017~~Nine Months 2023 compared to ~~$2,286,000~~ $3,412,000 in ~~2016.~~Nine Months 2022, an increase of $1,025,000, or 30.0%. The increase in investment income is attributable to a $766,000 reversal in Nine Months 2022 of ~~$631,000, or 27.6%,~~ prior years’ estimated accrued interest income stemming from an error in third party investment reporting. The increase was also due to ~~an increase in average invested assets in 2017.~~higher interest rates earned on cash balances. The average yield on non-cash invested assets was ~~3.63%~~3.73% as of September 30, ~~2017~~2023 compared to ~~3.90%~~3.48% as of September 30, ~~2016. The pre-tax equivalent yield on invested assets was 3.84% and 4.17% as of September 30, 2017 and 2016, respectively.~~

2022.

Cash and invested assets were ~~$155,738,000~~$172,095,000 as of September 30, ~~2017,~~2023 compared to ~~$108,968,000~~$192,229,000 as of September 30, ~~2016.~~2022. The ~~$46,770,000 increase~~$20,134,000 decrease in cash and invested assets ~~resulted~~was primarily ~~from~~attributable to increased disbursements of losses in connection with higher severity and inflation’s impact on losses along with catastrophe losses incurred in 2023 and prior periods. An increase in unrealized losses on our investment portfolio also contributed to the reduction.

Table of Contents

Net Gains (Losses) on Investments

Net gains on investments were $598,000 in Nine Months 2023 compared to net ~~proceeds~~(losses) of ~~approximately $30,137,000 that we received~~$(9,313,000) in ~~January~~Nine Months 2022. Unrealized gains on our equity securities and ~~February 2017 from our public offering and increased operating cash flows for the period after~~ ~~September 30, 2016~~.

other investments in Nine Months 2023 were $615,000, compared to net unrealized (losses) of $(10,502,000) in Nine Months 2022. Realized (losses) on sales of investments were $(17,000) in Nine Months 2023 compared to realized gains of $1,189,000 in Nine Months 2022.

Other Income

Other income was ~~$926,000~~$454,000 in ~~2017~~Nine Months 2023 compared to ~~$831,000~~$750,000 in ~~2016. The increase~~Nine Months 2022, a decrease of ~~$95,000,~~$296,000, or ~~11.4%, was primarily due to an increase in installment and finance fees earned in our insurance underwriting business.~~

39.5%.

Net Loss and LAE

Net loss and LAE was ~~$22,821,000 in 2017~~$66,553,000 for Nine Months 2023 compared to ~~$20,406,000 in 2016.~~$63,625,000 for Nine Months 2022. The net loss ratio was ~~41.6%~~77.7% in ~~2017~~Nine Months 2023 compared to ~~45.2%~~75.8% in ~~2016, a decrease~~Nine Months 2022, an increase of ~~3.6~~1.9 percentage points.

The following graph summarizes the changes in the components of net loss ratio for the periods ~~indicated:~~

~~During 2017,~~indicated, along with the comparable components excluding commercial lines business:

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

Table of Contents

For Nine Months 2023, the net loss ratio ~~decreased compared~~was higher than for Nine Months 2022 mainly due to ~~2016 due primarily~~a larger impact from catastrophe losses.

The net catastrophe losses were $7,285,000 for Nine Months 2023, which contributed 8.5 points to the ~~reduced impact from severe~~loss ratio. There were two winter ~~weather. We record~~storm events including a major freezing event at the beginning of February, eight wind and thunderstorm events, and one tropical storm classified as catastrophe ~~impact~~ for ~~this component if losses incurred from winter weather claims exceed those expected in an average winter. The 2017 winter season was milder than average, and we did not record~~Nine Months 2023. By comparison, catastrophe events had a ~~catastrophe impact. In 2016 through three quarters, we recorded a 3.1 point catastrophe impact, resulting in a reduction in the overall~~ loss ratio from 2016 to 2017 of 3.1 points. In addition, we have recorded 0.5 points of favorable prior year loss development in 2017 compared to 0.4 points of favorable prior year development in 2016, or an increase in the favorable impact of ~~0.1~~4.1 points ~~year to date. Finally, the core~~for Nine Months 2022.

The underlying loss ratio (loss ratio excluding the impact of ~~severe winter weather~~catastrophe and prior year ~~development~~development) was ~~42.1% in 2017, compared to 42.4% in 2016,~~69.2% for Nine Months 2023, a decrease of ~~0.3 points. Overall claim~~1.6 points from the 70.8% underlying loss ratio recorded for Nine Months 2022. The underlying loss experience in Nine Months 2023 was improved due to lower frequency, ~~excluding~~but was offset by increasing severity resulting from inflation and an elevated number of large losses.

Prior year development was stable for Nine Months 2023. There was an overall favorable development of $16,000, which had marginal impact on the ~~impact of severe winter weather has declined during 2017, contributing to the reduction in the core~~ loss ratio.

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

Commission Expense

Commission expense was ~~$15,491,000~~$25,221,000 in ~~2017~~Nine Months 2023 or ~~19.1%~~16.6% of direct earned premiums. Commission expense was ~~$13,400,000~~$25,534,000 in ~~2016~~Nine Months 2022 or ~~18.7%~~18.1% of direct earned premiums. The ~~increase~~decrease of ~~$2,091,000 is~~$313,000 was primarily due to a reduction of commission rates on our legacy policies in accordance with Kingstone 3.0 as well as the lower commission rate paid on Select products as compared to legacy products but offset in part by an increase in direct earned premiums of $10,244,000 to $151,568,000.

Other Underwriting Expenses

Other underwriting expenses were $19,874,000, or 13.1% of direct earned premiums, in ~~2017 as~~Nine Months 2023 compared to ~~2016.~~

~~Other Underwriting Expenses~~

~~Other underwritingexpenses were $12,887,000~~$20,717,000, or 14.7% of direct earned premiums, in ~~2017 compared to $10,982,000 in 2016.~~Nine Months 2022. The ~~increase~~decrease of ~~$1,905,000,~~$843,000, or ~~17.3%~~4.1%, was primarily due to decreases in professional fees, credit card fees and policy management system fees as result of the completion of our policy management system conversion, allowing us to eliminate multiple legacy systems. The decreases were partially offset by increases in salaries and employment costs.

Our largest single component of other underwriting expenses ~~related~~is salaries and employment costs, with costs of $8,692,000 in Nine Months 2023 compared to ~~growth~~$8,027,000 in Nine Months 2022. The increase of $665,000, or 8.3%, is compared unfavorably to the 0.1% decrease in direct written premiums. ~~We are also incurring expenses related~~In the periods following Nine Months 2022, we continued to ~~expansion into~~strengthen our professional team by investing in the ~~states where we are newly licensed~~hiring of higher-level and higher compensated managers and staff needed to ~~write~~manage the business ~~(“Expansion Expenses”). Expenses directly related to the~~consistent with our Kingstone 2.0 and Kingstone 3.0 strategies. The increase in ~~direct written premiums primarily consist~~salaries was partially offset by a reduction in our staff in June and July of ~~underwriting expenses, software usage fees, and state premium taxes. Expenses indirectly related to the increase in direct written premiums primarily consist~~2023 as we have been reducing our non-Core business. The effect of ~~salaries along with related other employment costs. Expansion Expenses were $710,000 in 2017 compared to $272,000 in 2016. The increase of $438,000 includes the costs of~~staff reductions on salaries and employment costs ~~professional fees, IT and data services specifically attributable~~is expected to ~~the expansion into new states.~~

~~Salaries and employment costs, excluding Expansion Expenses costs discussed above, were $5,451,000 in 2017 compared~~have a greater impact on year to $4,985,000 in 2016. The increase of $466,000, or 9.3%, was less than the 17.1% increase in direct written premiums, which is not yet materially affected by our expansion business. Our employee bonus plan is aligned with our combined ratio. The lower the combined ratio, the greater the bonus percentage that our employees receive relative to their annual salaries. The combined ratio has decreased by 2.2 percentage points in 2017, resulting in a $211,000 increase in the 2017 accrued bonus. The remaining increase in employment costs was due to hiring of additional staff to service our current level of business and anticipated growth in volume as well as annual rate increases in salaries. Otherdate other underwriting expenses ~~as a percentage of direct written premiums remained constant at 14.4~~ in ~~both 2017 and 2016. Other underwriting expenses as a percentage of direct premiums earned increased to 15.9% in 2017 compared to 15.4% in 2016.~~

Other underwriting expenses as a percentage of net premiums earned was 23.5% in 2017 compared to 24.2% in 2016. The table below provides an analysis of the significant components of the 0.7 percentage point decrease. future periods.

Table of Contents

Our net underwriting expense ratio in ~~2017, including the impact of ceding commissions,~~Nine Months 2023 was ~~35.2%~~33.0% compared ~~with 33.8%~~to 37.2% in ~~2016.~~Nine Months 2022. The following table shows the individual components of our net underwriting expense ratio for the periods indicated:

Nine months ended

September 30,

Percentage

2017

2016

Point Change

Ceding commission revenue - provisional
  (15.8)%
  (21.0)%
  5.2
Ceding commission revenue - contingent
  0.9
  2.7
  (1.8)
Other income
  (1.6)
  (1.8)
  0.2

Acquisition costs and other underwriting expenses:



Commission expense
  28.2
  29.7
  (1.5)

  11.7
  9.6
  2.1
  Other underwriting expenses



Employment costs attributable to core NY business
  9.9
  11.0
  (1.1)
Expansion Expenses
  1.3
  0.6
  0.7
IT expenses
  2.0
  1.7
  0.3
Other expenses
  10.3
  10.9
  (0.6)
Total other underwriting expenses
  23.5
  24.2
  (0.7)




Net underwriting expense ratio
  35.2%
  33.8%
  1.4

The other underwriting expenses ratio, excluding the impact of ceding commission revenue and commission expense, declined 0.7 points, from 24.2% in 2016 to 23.5% in 2017. This decrease is driven by a decline in the impact from employment costs attributable to our growing core New York business and other expenses, partially offset by the impact from increased costs related to expansion and IT expenses.

The overall increase of 1.4 percentage points in the net underwriting expense ratio was impacted by the change in our quota share ceding rates and its impact on provisional ceding commission revenue as a result of the additional retention resulting from the Cut-off to our quota share treaties on July 1, 2017.The increase to the net underwriting expense ratio was impacted more by reductions in the reinsurance ceding commission revenue components than it was to changes in the commission expense and other underwriting expense components, each of which declined as a ratio to net premiums earned.

	Nine months ended
	September 30,
	2023			2022			Percentage Point Change
Other underwriting expenses
Employment costs		10.1	%		9.6	%		0.5
Underwriting fees (inspections/surveys)		1.6			1.7			(0.1	)
IT expenses		3.0			4.2			(1.2	)
Professional fees		1.0			1.4			(0.4	)
Other expenses		7.3			7.7			(0.4	)
Total other underwriting expenses		23.0			24.6			(1.6	)

Commission expense		29.4			30.4			(1.0	)

Ceding commission revenue
Provisional		(18.4	)		(16.8	)		(1.6	)
Contingent		(0.8	)		(0.2	)		(0.6	)
Total ceding commission revenue		(19.2	)		(17.0	)		(2.2	)

Other income		(0.5	)		(0.9	)		0.4

Net underwriting expense ratio		33.0	%		37.2	%		(4.2	)

(Components may not sum to totals due to rounding)

Table of Contents

Other Operating Expenses

Other operating expenses, related to the expenses of our holding company and Cosi, were ~~$2,731,000 in 2017~~$1,868,000 for Nine Months 2023 compared to ~~$1,292,000~~$2,357,000 for Nine Months 2022. The following table shows a breakdown of the significant components of other operating expenses for the periods indicated:

	Nine months ended
	September 30,
($ in thousands)	2023		2022			Change			Percent

Other operating expenses
Employment costs	$	235	$	(101	)	$	336		na		%
Bonuses		-		-			-		na
Equity compensation		636		1,205			(569	)		(47.2	)
Professional		223		524			(301	)		(57.4	)
Directors fees		206		245			(39	)		(15.9	)
Insurance		139		115			24			20.9
Other expenses		429		369			60			16.3
Total other operating expenses	$	1,868	$	2,357		$	(489	)		(20.7	)%

(Components may not sum to totals due to rounding)

The decrease in ~~2016. The increase in 2017~~Nine Months 2023 of ~~$1,439,000,~~$489,000, or ~~111.4%~~20.7%, as compared to Nine Months 2022 was primarily due to ~~increases~~a decrease in ~~executive bonus compensation, executive compensation due to annual rate increases and hiring of additional staff,~~ equity compensation and professional ~~fees.~~fees, partially offset by an increase in employment costs. The increase in ~~executive bonus compensation includes $709,000 of accrued long-term bonus compensation pursuant~~employment costs was due to the ~~three year employment agreement effective January 1, 2017 with~~hiring of our new Chief ~~Executive Officer. In 2016 there was no long-term bonus~~Financial Officer in Nine Months 2023 and fluctuations in deferred compensation ~~plan~~liability related to changes in ~~place.~~

the underlying invested portfolio. The decrease in professional fees is due to $316,000 incurred in Nine Months 2022 related to a then contemplated transaction that would have resulted in a third party acquiring all of the outstanding equity of our company.

Depreciation and Amortization

Depreciation and amortization was ~~$1,023,000~~$2,328,000 in ~~2017~~Nine Months 2023 compared to ~~$835,000~~$2,472,000 in ~~2016.~~Nine Months 2022. The ~~increase~~decrease of ~~$188,000,~~$144,000, or ~~22.5%~~5.8%, in depreciation and amortization was primarily due to ~~depreciation~~the completion and deployment of our ~~new~~customized policy management software as planned for in Kingstone 2.0, now allowing us to consolidate multiple legacy systems into one efficient system ~~platform for handling business being written~~and retire those older more costly and less reliable systems. Depreciation on older assets that were retired, which had a shorter useful life, is greater than the depreciation on newly acquired assets which have a longer useful life.

Interest Expense

Interest expense in ~~expansion states. The~~Nine Months 2023 was $3,005,000 compared to $1,370,000 in Nine Months 2022, an increase ~~was also impacted by newly purchased assets used to upgrade our systems infrastructure and improvements~~of $1,635,000 or 119.3%. In Nine Months 2023, as disclosed in Note 7 to the ~~Kingston, New York home office building from~~condensed consolidated financial statements, we incurred increased interest expense in connection with the 2022 Notes, which provide for interest at the rate of 12% per annum, and the 2022 equipment financing. In Nine Months 2022, we ~~operate.~~

incurred interest expense in connection with the 2017 Notes, our $30.0 million issuance of long-term debt in December 2017, which provided for interest at the rate of 5.5% per annum.

Income Tax ~~Expense~~

Benefit

Income tax ~~expense~~benefit in ~~2017~~Nine Months 2023 was ~~$3,976,000,~~$2,149,000, which resulted in an effective tax benefit rate of 19.1%. Income tax benefit in Nine Months 2022 was $4,433,000 which resulted in an effective tax rate of ~~33.1%~~19.3%. ~~Income tax expense~~Loss before taxes was $11,264,000 in ~~2016 was $3,426,000, which resulted~~Nine Months 2023 compared to $23,007,000 in anNine Months 2022. The difference in effective tax rate is due to the effect of ~~33.4%. Income before taxes was $12,031,000~~permanent differences in ~~2017~~Nine Months 2023 compared to ~~$10,270,000~~Nine Months 2022.

Net Loss

Net loss was $9,114,000 in ~~2016.~~

~~Net Income~~

~~Net income was $8,055,000 in 2017~~Nine Months 2023 compared to ~~$6,844,000~~$18,575,000 in ~~2016.~~Nine Months 2022. The ~~increase~~decrease in net ~~income~~loss of ~~$1,211,000, or 17.7%,~~$9,461,000 was due to the circumstances described above that caused the increase in our net premiums earned, net investment income and other income and a decrease in our net loss ratio, partially offset by a decrease in ceding commission revenue and net realized gains on investments, and increases in other underwriting expenses related to premium growth, other operating expenses, and depreciation and amortization.

above.

Table of Contents

Three Months Ended September30, ~~2017~~2023 Compared to Three Months EndedSeptember30, ~~2016~~

2022

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

Three months ended September 30,

($ in thousands)

2017

2016

Change

Percent

Revenues

Direct written premiums
$32,840
$27,171
$5,669
  20.9%
Assumed written premiums
  12
  (1)
  13
  (1,300.0)%

  32,852
  27,170
  5,682
  20.9%
Ceded written premiums




Ceded to quota share treaties in force during the period
  4,635
  7,082
  (2,447)
  (34.6)%
Return of premiums previously ceded to prior quota share treaties (1)
  (7,140)
  -
  (7,140)
na
Ceded to quota share treaties
  (2,505)
  7,082
  (9,587)
  (135.4)%
Ceded to excess of loss treaties
  267
  429
  (162)
  (37.8)%
Ceded to catastrophe treaties
  2,829
  2,427
  402
  16.6%
Total ceded written premiums
  591
  9,938
  (9,347)
  (94.1)%





Net written premiums
  32,261
  17,232
  15,029
  87.2%





Change in unearned premiums




Direct and assumed
  (4,409)
  (2,304)
  (2,105)
  91.4%
Ceded to quota share treaties
  (6,339)
  718
  (7,057)
  (982.9)%
Change in net unearned premiums
  (10,748)
  (1,586)
  (9,162)
  577.7%





Premiums earned




Direct and assumed
  28,445
  24,866
  3,579
  14.4%
Ceded to quota share treaties
  (6,931)
  (9,220)
  2,289
  (24.8)%
Net premiums earned
  21,514
  15,646
  5,868
  37.5%
Ceding commission revenue
  1,718
  2,935
  (1,217)
  (41.5)%
Net investment income
  1,033
  709
  324
  45.7%
Net realized gain on investments
  21
  241
  (220)
  (91.3)%
Other income
  328
  297
  31
  10.4%
Total revenues
  24,614
  19,828
  4,786
  24.1%

Three months ended September 30,

($ in thousands)

2017

2016

Change

Percent

Total revenues (continued)
  24,614
  19,828
  4,786
  24.1%





Expenses




Loss and loss adjustment expenses




Direct and assumed
  8,150
  6,708
  1,442
  21.5%
Ceded
  1,077
  1,573
  (496)
  (31.5)%
Net loss and loss adjustment expenses
  7,073
  5,135
  1,938
  37.7%
Commission expense
  5,500
  4,604
  896
  19.5%
Other underwriting expenses
  4,475
  4,039
  436
  10.8%
Other operating expenses
  1,069
  530
  539
  101.7%
Depreciation and amortization
  379
  262
  117
  44.7%
Total expenses
  18,496
  14,570
  3,926
  26.9%





Income from operations before taxes
  6,118
  5,258
  860
  16.4%
Provision for income tax
  2,044
  1,797
  247
  13.7%
Net income
$4,074
$3,461
$613
  17.7%

Three months ended September 30,

2017

2016

Percentage Point Change

Percent Change

Key ratios:

Net loss ratio
  32.9%
  32.8%
  0.1
  0.3%
Net underwriting expense ratio
  36.9%
  34.6%
  2.3
  6.6%
Net combined ratio
  69.8%
  67.4%
  2.4
  3.6%

	Three months ended September 30,
($ in thousands)	2023			2022			Change			Percent
Revenues
Direct written premiums	$	51,992		$	54,592		$	(2,600	)		(4.8	)%
Assumed written premiums		-			-			-		na		%
		51,992			54,592			(2,600	)		(4.8	)%
Ceded written premiums
Ceded to quota share treaties (1)		12,210			12,919			(709	)		(5.5	)%
Ceded to excess of loss treaties		1,726			1,194			532			44.6	%
Ceded to catastrophe treaties		34,380			29,382			4,998			17.0	%
Total ceded written premiums		48,316			43,494			4,821			11.1	%

Net written premiums		3,675			11,097			(7,422	)		(66.9	)%

Change in unearned premiums
Direct and assumed		(1,247	)		(5,636	)		4,389			77.9	%
Ceded to reinsurance treaties (1)		25,509			23,900			1,609			6.7	%
Change in net unearned premiums		24,262			18,264			5,998		na		%

Premiums earned
Direct and assumed		50,745			48,955			1,790			3.7	%
Ceded to reinsurance treaties		(22,807	)		(19,594	)		(3,213	)		(16.4	)%
Net premiums earned		27,938			29,361			(1,423	)		(4.8	)%

Ceding commission revenue (1)		5,536			4,886			650			13.3	%
Net investment income		1,444			1,419			25			1.8	%
Net losses on investments		(824	)		(397	)		(427	)		(107.6	)%
Other income		142			270			(128	)		(47.4	)%
Total revenues		34,237			35,538			(1,303	)		(3.7	)%
Expenses
Loss and loss adjustment expenses
Direct and assumed:
Loss and loss adjustment expenses excluding the effect of catastrophes		29,570			30,514			(944	)		(3.1	)%
Losses from catastrophes (2)		2,871			477			2,394			501.9	%
Total direct and assumed loss and loss adjustment expenses		32,441			30,991			1,450			4.7	%

Ceded loss and loss adjustment expenses:
Loss and loss adjustment expenses excluding the effect of catastrophes		9,797			8,820			977			11.1	%
Losses from catastrophes (2)		712			143			569			397.9	%
Total ceded loss and loss adjustment expenses		10,509			8,963			1,546			17.2	%

Net loss and loss adjustment expenses:
Loss and loss adjustment expenses excluding the effect of catastrophes		19,773			21,694			(1,921	)		(8.9	)%
Losses from catastrophes (2)		2,159			334			1,825			546.4	%
Net loss and loss adjustment expenses		21,932			22,028			(96	)		(0.4	)%

Commission expense		8,210			8,702			(492	)		(5.7	)%
Other underwriting expenses		6,319			7,276			(957	)		(13.2	)%
Other operating expenses		442			810			(368	)		(45.4	)%
Depreciation and amortization		741			825			(84	)		(10.2	)%
Interest expense		989			457			532			116.4	%
Total expenses		38,633			40,097			(1,465	)		(3.7	)%

Loss before taxes		(4,397	)		(4,559	)		162			3.6	%
Income tax benefit		(859	)		(562	)		(297	)		(52.8	)%
Net loss	$	(3,538	)	$	(3,998	)	$	460			11.5	%

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

	(1)	Effective December 31, 2021, we entered into a 30% personal lines quota share treaty.
	(2)	The three months ended September 30, 2023 and 2022 include catastrophe losses, which are defined as losses from an event for which a catastrophe bulletin and related serial number has been issued by the Property Claims Services (PCS) unit of the Insurance Services Office (ISO). PCS catastrophe bulletins are issued for events that cause more than $25 million in total insured losses and affect a significant number of policyholders and insurers.

Table of Contents

	Three months ended September 30,
	2023			2022			Percentage Point Change			Percent Change

Key ratios:
Net loss ratio		78.5	%		75.0	%		3.5			4.7	%
Net underwriting expense ratio		31.7	%		36.9	%		(5.2	)		(14.1	)%
Net combined ratio		110.2	%		111.9	%		(1.7	)		(1.5	)%

Direct Written Premiums

Direct written premiums during the three months ended September 30, ~~2017~~2023 (“~~Q3-2017”~~Three Months 2023”) were ~~$32,840,000~~$51,992,000 compared to ~~$27,171,000~~$54,592,000 during the three months ended September 30, ~~2016~~2022 (“~~Q3-2016”~~Three Months 2022”). The ~~increase~~decrease of ~~$5,669,000,~~$2,600,000, or ~~20.9%~~4.8%, was primarily due to a decrease in premiums from our personal lines business, partially offset by an increase in premiums from our livery physical damage business.

Direct written premiums from our personal lines business for Three Months 2023 were $48,419,000, a decrease of $2,824,000, or 5.5%, from $51,243,000 in Three Months 2022. The 5.5% decrease in premiums from our personal lines business was primarily due to a decrease in premiums associated with a 14.0% decrease in policies ~~in-force during Q3-2017~~in force as of September 30, 2023 compared to ~~Q3-2016. We wrote more new~~September 30, 2022, offset by rate increases. The rate increases achieved along with a decrease in policies ~~as a result~~in force is in accordance with both our Kingstone 2.0 and Kingstone 3.0 strategic plans.

Direct written premiums from our livery physical damage business for Three Months 2023 were $3,544,000, an increase of ~~continued demand for our products~~$234,000, or 7.1%, from $3,310,000 in Three Months 2022. The increase in livery physical damage direct written premiums was due to an increasing number of policies and an increase in the ~~markets that we serve. We believe that a large driver~~values of ~~our growth~~the autos insured.

Beginning in ~~new policies is attributable to our upgraded A.M. Best rating of A- that we received in April 2017. In May~~ 2017, we commenced our non-Core business and started writing ~~Homeowners’~~personal lines policies in New Jersey. ~~Policies in-force increased by 14.6% as of September 30, 2017~~Through 2019 we expanded our non-Core business to Rhode Island, Massachusetts and Connecticut. Direct written premiums from our Core business were $46,025,000 in Three Months 2023 compared to ~~September 30, 2016.~~

$43,949,000 in Three Months 2022, an increase of $2,076,000, or 4.7%. Policies in force from our Core business decreased by 4.5% in Three Months 2023 compared to Three Months 2022. Direct written premiums from our non-Core business were $5,966,000 in Three Months 2023 down from $10,642,000 in Three Months 2022, a decrease of $4,676,000, or 43.9%. The decrease in direct written premiums from our non-Core business is a result of our decision to aggressively reduce the book of business in these states. Policies in force from our non-Core business decreased by 38.9% in Three Months 2023 compared to Three Months 2022. The increase in direct written premiums in our Core business and the decrease in our non-Core business is consistent with a key pillar of our Kingstone 3.0 strategy to reduce our non-Core business due to profitability concerns.

Table of Contents

Net Written Premiums and Net Premiums Earned

The following table describes the quota share reinsurance ceding rates in effect during Q3-2017 and Q3-2016. For purposes of the discussion herein, the change in quota share ceding rates on July 1, 2017 will be referred to as “the Cut-off”. This table should be referred to in conjunction with the discussions for net written premiums, net premiums earned, ceding commission revenue and net loss and loss adjustment expenses that follow.

Three months ended
September 30,
2017 2016
("2017/2019 Treaty") ("2016/2017 Treaty")
Quota share reinsurance rates
Personal lines 20% 40%

~~See “Reinsurance” below for changes to our personal lines quota share treaty effective July 1, 2017.~~

Net written premiums ~~increased $15,029,000,~~decreased $7,422,000, or ~~87.2%~~66.9%, to ~~$32,261,000~~$3,675,000 in ~~Q3-2017~~Three Months 2023 from ~~$17,232,000~~$11,097,000 in ~~Q3-2016.~~Three Months 2022. Net written premiums include direct ~~and assumed~~ premiums, less the amount of written premiums ceded under our reinsurance treaties (quota share, excess of loss, and catastrophe). The decrease in Three Months 2023 is primarily due to changes in the terms of our catastrophe reinsurance treaty. See catastrophe reinsurance treaties discussion below.

Quota share reinsurance treaties

Effective December 31, 2021, we entered into a quota share reinsurance treaty for our personal lines business covering the period from December 31, 2021 through January 1, 2023 (“2021/2023 Treaty”). Upon the expiration of the 2021/2023 Treaty on January 1, 2023, we entered into a new 30% quota share reinsurance treaty for our personal lines business, covering the period from January 1, 2023 through January 1, 2024 (“2023/2024 Treaty”). In Three Months 2023, our premiums ceded under quota share treaties decreased by $709,000 in comparison to ceded premiums in Three Months 2022 (see table above). The decrease in Three Months 2023 was attributable to the decrease in direct written premiums discussed above, partially offset by the runoff of an 8.5% portion of the 30% 2021/2023 Treaty. The remainder of the 2021/2023 Treaty was on a cutoff basis and the new 2023/2024 Treaty was placed for 30% on January 1, 2023. Our personal lines business ~~is currently~~was subject to ~~a quota share treaty. A reduction to~~ the ~~quota share percentage or elimination of a quota share treaty will reduce our ceded written premiums, which will result~~2023/2024 Treaty in ~~a corresponding increase to our net written premiums.~~

~~Change~~Three Months 2023, and the 2021-2023 Treaty in ~~quota share ceding rate~~

Effective July 1, 2017, we decreased the quota share ceding rate in our personal lines quota share treaty from 40% to 20%. The Cut-off of this treaty on July 1, 2017 resulted in a $7,140,000 return of unearned premiums from our reinsurers that were previously ceded under the expiring personal lines quota share treaty. We did not change our quota share ceding rate on July 1, 2016, and accordingly, there was no return of unearned premiums from our reinsurers (in contrast with what occurred on July 1, 2017), thus magnifying the percentage increase in net written premiums in Q3-2017. The table below shows the effect of the $7,140,000 return of ceded premiums on net written premiums for Q3-2017:

Three months ended September 30,

($ in thousands)

2017

2016

Change

Percent

Net written premiums
$32,261
$17,232
$15,029
  87.2%
Return of premiums previously ceded to prior quota share treaties
  7,140
  -
  7,140

na

Net written premiums without the effect of the July 1, 2017 Cut-off
$25,121
$17,232
$7,889
  45.8%

~~Without the $7,140,000 effect of the Cut-off in Q3-2017, net written premiums increased by $7,889,000, or 45.8%, in Q3-2017 compared to Q3-2016.~~

Three Months 2022.

Excess of loss reinsurance treaties

An increase in written premiums will ~~also~~ increase the premiums ceded under our excess of loss ~~treaties, which incrementally reduces our net written premiums.~~treaties. In ~~Q3-2017,~~Three Months 2023, our ceded excess of loss reinsurance premiums ~~decreased~~increased by ~~$162,000~~$532,000 over the comparable ceded premiums for ~~Q3-2016.~~Three Months 2022. The ~~decrease~~increase was due to ~~more favorable reinsurance rates in Q3-2017, partially offset by~~ an increase in subject premiums ~~subject to~~and the heightened cost of coverage obtained. Effective January 1, 2022, we entered into an underlying excess of loss ~~reinsurance.~~

Catastrophe reinsurance ~~treaty~~

treaties

Most of the premiums written under our personal lines policies are also subject to our catastrophe ~~treaty.~~treaties. An increase in our personal lines business gives rise to more property exposure, which increases our exposure to catastrophe risk; therefore, our premiums ~~for~~ceded under catastrophe ~~insurance~~treaties will increase. ~~This~~An increase in our personal lines business results in an increase in premiums ceded under our catastrophe ~~treaty, which reduces net written premiums. In Q3-2017, our catastrophe~~treaties if reinsurance rates are stable or are increasing. Catastrophe premiums increased ~~by $402,000 over the comparable ceded premiums for Q3-2016.~~$4,998,000, or 17.0%, to $34,380,000 in Three Months 2023 from $29,382,000 in Three Months 2022. The increase was primarily due to an increase in catastrophe reinsurance rates. In accordance with our ~~catastrophe coverage~~Kingstone 2.0 and Kingstone 3.0 goals, we have reduced our PML in Three Months 2023, which partially offset the increase in premiums effective July 1, 2023.

Net premiums earned

Net premiums earned decreased $1,423,000, or 4.8%, to $27,938,000 in Three Months 2023 from $29,361,000 in Three Months 2022. The decrease was due to the 4.8% decrease in direct written premiums during Three Months 2023, the run-off of a portion of the 2021-2023 Treaty, which increased the premiums ceded and reduced the net premiums earned, and an increase in catastrophe premiums ~~subject~~rates, which also reduced net premiums earned. These reductions to ~~catastrophe reinsurance,~~net premiums earned were partially offset by ~~more favorable reinsurance rates~~the increased premiums written in ~~Q3-2017.~~

~~Our ceded catastrophe premiums are paid based on the total direct written premiums subject to the catastrophe reinsurance treaty.~~

~~Net premiums earned~~

~~Net premiums earned increased $5,868,000, or 37.5%, to $21,514,000 in Q3-2017 from $15,646,000 in Q3-2016. The increase was~~prior periods due to ~~the increase in written premiums discussed above~~rate increases and to increased retention effective July 1, 2017, as a result of the reduction of the quota share percentage in our personal lines quota share treaty. The decrease in our quota share ceding percentage from the July 1, 2017 Cut-off gave us a $7,140,000 return of premiums previously ceded, which led to an increase in our net premiums earned during the period after the Cut-off.

replacement costs.

Table of Contents

Ceding Commission Revenue

The following table details the quota share provisional ceding commission rates in effect during Q3-2017 and Q3-2016. This table should be referred to in conjunction with the discussion for ceding commission revenue that follows.

Three months ended
September 30,
2017 2016
("2017/2019 Treaty") ("2016/2017 Treaty")
Provisional ceding commission rate on quota share treaty
Personal lines 53% 52%

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

Three months ended September 30,

($ in thousands)

2017

2016

Change

Percent

Provisional ceding commissions earned
$1,922
$3,186
$(1,264)
  (39.7)%
Contingent ceding commissions earned
  (204)
  (251)
  47
  18.7%





Total ceding commission revenue
$1,718
$2,935
$(1,217)
  (41.5)%

	Three months ended September 30,
($ in thousands)	2023		2022		Change		Percent

Provisional ceding commissions earned	$	4,992	$	4,882	$	110		2.3	%
Contingent ceding commissions earned		544		4		540		13,500.0	%

Total ceding commission revenue	$	5,536	$	4,886	$	650		13.3	%

Ceding commission revenue was ~~$1,718,000~~$5,536,000 in ~~Q3-2017~~Three Months 2023 compared to ~~$2,935,000~~$4,886,000 in ~~Q3-2016.~~Three Months 2022. The ~~decrease~~increase of ~~$1,217,000, or 41.5%,~~$650,000 was due to ~~a decrease~~an increase in provisional ceding commissions earned ~~partially offset by a reduction~~and an increase in ~~negative~~ contingent ceding commissions earned.

See below for a discussion of provisional ceding commissions earned and contingent ceding commissions earned.

Provisional Ceding Commissions Earned

~~We receive a~~

In Three Months 2023 we earned provisional ceding ~~commission based on~~commissions of $4,992,000 from personal lines earned premiums ceded ~~written premiums. In Q3-2017 our~~under the 2023/2024 Treaty, and in Three Months 2022 we earned provisional ceding ~~rate was 53% effective July 1, 2017~~commissions of $4,882,000 from personal lines earned premiums ceded under the ~~2017/2019 Treaty. In Q3-2016 our provisional ceding rate was 52% effective July 1, 2016 under the 2016/2017~~2021/2023 Treaty. The ~~$1,264,000 decrease~~increase of $110,000 in provisional ceding commissions earned ~~is primarily~~was due to the ~~decrease in quota share ceding rate effective July 1, 2017 to 20%, from~~runoff of an 8.5% portion of the ~~40% rate in effect during Q3-2016; thus there was less ceded premiums in Q3-2017 available to earn ceding commissions than there was in Q3-2016. The decrease was~~30% 2021/2023 Treaty, partially offset by ~~an increase~~a decrease in ~~personal lines~~premiums subject to quota share treaties as a result of the decrease in direct written premiums ~~subject to~~discussed above.

Contingent Ceding Commissions Earned

The structure of the ~~quota share~~2023/2024 Treaty and by the ~~increase in our~~2021/2023 Treaty calls for a fixed provisional ceding commission ~~rate as discussed above.~~

~~Contingent Ceding Commissions Earned~~

~~We receive~~with no opportunity to earn additional contingent ceding commissions. Under our prior years’ quota share treaties, we received a contingent ceding commission based on a sliding scale in relation to the losses incurred under our quota share treaties. The lower the ceded loss ratio, the more contingent commission we receive. The amount of contingent ceding commissions we are eligible to receive under the personal lines quota share treaties detailed in the table above that were in effect during Q3-2017 are subject to change based on losses incurred from claims with accident dates beginning July 1, 2017. The amount of contingent ceding commissions we are eligible to receive under our prior years’ quota share treaties is subject to change based on losses incurred related to claims with accident dates before July 1, 2017 under those treaties.

The 2017/2019 Treaty and 2016/2017 Treaty structure limits the amount of contingent ceding commissions that we can receive by setting the provisional commission rate higher than the rates we received in prior years. As a result of the higher upfront provisional ceding commissions that we receive, there is only a limited opportunity to earn contingent ceding commissions under these treaties. Under the current “net” treaty structure, catastrophe losses in excess of the $5,000,000 retention will fall outside of the quota share treaty and such losses will not have an impact on contingent ceding commissions, as was the case under previous “gross” treaties. See “Reinsurance” below for changes to our personal lines quota share effective July 1, 2017.

received.

Net Investment Income

Net investment income was ~~$1,033,000~~$1,444,000 in ~~Q3-2017~~Three Months 2023 compared to ~~$709,000~~$1,419,000 in ~~Q3-2016.~~Three Months 2022, an increase of $25,000, or 1.8%. The increase ~~of $324,000, or 45.7%, was due~~in investment income is attributable to ~~an increase in average invested assets in Q3-2017.~~higher interest rates earned on cash balances. The average yield on non-cash invested assets was ~~3.63%~~3.73% as of September 30, ~~2017~~2023 compared to ~~3.90%~~3.48% as of September 30, ~~2016. The pre-tax equivalent yield on invested assets was 3.84% and 4.17% as of September 30, 2017 and 2016, respectively.~~

2022.

Table of Contents

Net Gains (Losses) on Investments

Net (losses) on investments were $(824,000) in Three Months 2023 compared to net ~~proceeds~~(losses) of ~~approximately $30,137,000 that we received~~$(398,000) in ~~January~~Three Months 2022. Unrealized (losses) on our equity securities and ~~February 2017 from our public offering and increased operating cash flows for the period after~~ ~~September 30, 2016~~.

other investments in Three Months 2023 were $(820,000) compared to net unrealized (losses) of $(1,798,000) in Three Months 2022. Realized (losses) on sales of investments were $(4,000) in Three Months 2023 compared to realized gains of $1,400,000 in Three Months 2022.

Other Income

Other income was ~~$328,000~~$142,000 in ~~Q3-2017~~Three Months 2023 compared to ~~$297,000~~$270,000 in ~~Q3-2016. The increase~~Three Months 2022, a decrease of ~~$31,000,~~$128,000, or ~~10.4%, was primarily due to an increase in installment and finance fees earned in our insurance underwriting business.~~

47.4%.

Net Loss and LAE

Net loss and LAE was ~~$7,073,000 in Q3-2017~~$21,932,000 for Three Months 2023 compared to ~~$5,135,000 in Q3-2016.~~$22,028,000 for Three Months 2022. The net loss ratio was ~~32.9%~~78.5% in ~~Q3-2017~~Three Months 2023 compared to ~~32.8%~~75.0% in ~~Q3-2016,~~Three Months 2022, an increase of ~~0.1~~3.5 percentage points.

The following graph summarizes the changes in the components of net loss ratio for the periods ~~indicated:~~

~~During Q3-2017,~~indicated, along with the comparable components excluding commercial lines business:

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

Table of Contents

For Three Months 2023, the net loss ratio was ~~relatively stable compared to Q3-2016, increasing 0.1 points to 32.9% from 32.8% in Q3-2016. The core~~higher than for Three Months 2022. Although the catastrophe impact for Three Months 2023 was larger than for Three Months 2022, the underlying loss ratio (loss ratio excluding the impact of ~~severe winter weather~~catastrophe and prior year development) was lower.

There were six newly designated catastrophe events for Three Months 2023. The estimated total net catastrophe losses for the calendar quarter were $2,159,000, which contributed 7.7 points to the loss ~~development~~ratio. By comparison, the catastrophe impact for Three Months 2022 was ~~33.1% in Q3-2017 compared to 33.2% in Q3-2016, or~~1.1 points.

The underlying loss ratio was 70.8% for Three Months 2023, a decrease of ~~0.1 points.~~1.6 points from the 72.4% underlying loss ratio recorded for Three Months 2022. The ~~small decrease~~underlying loss experience for Three Months 2023 was improved due to lower frequency which is ~~driven~~believed to be the result of the Company’s new product rollout as well as the Company’s active efforts to manage less profitable segments. The improvement in frequency was offset by ~~continued improvements in claim frequency for personal lines. In addition, we recorded 0.2 points of favorable prior year loss development in Q3-2017, compared~~increased severity due to ~~0.4 points of favorable development in Q3-2016, or a reduction~~inflation and large losses, similar to what was observed in the ~~impact~~first six months of ~~favorable prior~~2023.

Prior year development ~~of 0.2 points.~~was stable for Three Months 2023. There was noan overall unfavorable development of $3,000, which had marginal impact ~~from severe winter weather recorded in either Q3-2017 or Q3-2016.~~

on the loss ratio.

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

Commission Expense

Commission expense was ~~$5,500,000~~$8,210,000 in ~~Q3-2017~~Three Months 2023 or ~~19.3%~~16.2% of direct earned premiums. Commission expense was ~~$4,604,000~~$8,702,000 in ~~Q3-2016~~Three Months 2022 or ~~18.5%~~17.8% of direct earned premiums. The ~~increase~~decrease of ~~$896,000 is~~$492,000 was primarily due to a reduction of commission rates on our legacy policies in accordance with Kingstone 3.0 as well as the lower commission rate paid on Select products as compared to legacy products, but offset by an increase in direct earned premiums ~~in Q3-2017 as compared~~of $1,791,000 to ~~Q3-2016.~~

$50,746,000.

Other Underwriting Expenses

Other underwriting expenses were ~~$4,475,000~~$6,319,000, or 12.5% of direct earned premiums in ~~Q3-2017~~Three Months 2023 compared to ~~$4,039,000~~$7,276,000, or 14.9% of direct earned premiums, in ~~Q3-2016.~~Three Months 2022. The ~~increase~~decrease of ~~$436,000,~~$957,000, or ~~10.8%~~13.2%, was primarily due to decreases in salaries and employment costs, credit card fees, and policy management system fees as result of the completion of our policy management system conversion, allowing us to eliminate multiple legacy systems.

Our largest single component of other underwriting expenses ~~related~~is salaries and employment costs, with costs of $2,817,000 in Three Months 2023 compared to ~~growth~~$2,961,000 in Three Months 2022. The decrease of $144,000, or 4.9%, compared favorably to the 4.8% decrease in direct written premiums. ~~We are also incurring expenses related to expansion into the states where we are newly licensed to write business (“Expansion Expenses”). Expenses directly related to the increase~~The decrease in direct written premiums primarily consist of underwriting expenses, software usage fees and state premium taxes. Expenses indirectly related to the increase in direct written premiums primarily consist of salaries along with related other employment costs. Expansion Expenses were $212,000 in Q3-2017 compared to $160,000 in Q3-2016. The increase of $52,000 includes the costs of salaries and ~~employment costs, professional fees, IT and data services specifically attributable to the expansion into new states.~~

Salaries and employment costs, excluding Expansion Expenses costs discussed above, were $1,946,000 in Q3-2017 compared to $1,795,000 in Q3-2016. The increase of $151,000, or 8.4%, was less than the 20.9% increase in overall direct premiums written, which is not yet materially affected by our expansion business. Our employee bonus plan is aligned with our year to date combined ratio. The lower the year to date combined ratio, the greater the bonus percentage that our employees receive relative to their annual salaries. The year to date combined ratio has decreased by 2.2 percentage points through Q3-2017, resulting in a $52,000 increase in the Q3-2017 accrued bonus. The remaining increase in employment costs was due to a reduction in our staff in June and July of 2023 as we have been reducing our non-Core business. As an offset to the decrease in employment costs from staff reductions, in the periods following Three Months 2022, we continued to strengthen our professional team by investing in the hiring of ~~additional~~higher-level and higher compensated managers and staff needed to ~~service~~manage the business consistent with our ~~current level of business~~Kingstone 2.0 and anticipated growth in volume as well as annual rate increases in salaries. Other underwriting expenses as a percentage of direct written premiums decreased to 13.6% in Q3-2017 from 14.9% in Q3-2016. Other underwriting expenses as a percentage of direct premiums earned decreased to 15.7% in Q3-2017 compared to 16.2% in Q3-2016.

Other underwriting expenses as a percentage of net premiums earned was 20.8% in Q3-2017 compared to 25.9% in Q3-2016. The table below provides an analysis of the significant components of the 5.1 percentage point decrease. Kingstone 3.0 strategies.

Table of Contents

Our net underwriting expense ratio ~~including the impact of ceding commissions,~~in Three Months 2023 was 31.7% compared to 36.9% in ~~Q3-2017, compared with 34.6% in Q3-2016.~~Three Months 2022. The following table shows the individual components of our net underwriting expense ratio for the periods indicated:

Three months ended

September 30,

Percentage

2017

2016

Point Change

Ceding commission revenue - provisional
  (8.9)%
  (20.4)%
  11.5
Ceding commission revenue - contingent
  0.9
  1.6
  (0.7)
Other income
  (1.5)
  (1.9)
  0.4

Acquisition costs and other underwriting expenses:



Commission expense
  25.6
  29.4
  (3.8)

  16.1
  8.7
  7.4
Other underwriting expenses



Employment costs attributable to core NY business
  9.0
  11.5
  (2.5)
Expansion Expenses
  1.0
  1.0
  -
IT expenses
  1.9
  1.7
  0.2
Other expenses
  8.9
  11.7
  (2.8)
Total other underwriting expenses
  20.8
  25.9
  (5.1)




Net underwriting expense ratio
  36.9%
  34.6%
  2.3

The other underwriting expenses ratio, excluding the impact of ceding commission revenue and commission expense, declined 5.1 points, from 25.9% in 2016 to 20.8% in 2017. This decrease is driven by a decline in the impact from employment costs attributable to our growing core New York business and other expenses.

The overall increase of 2.3 percentage points in the net underwriting expense ratio was impacted by the change in our quota share ceding rate and its impact on provisional ceding commission revenue as a result of the additional retention resulting from the Cut-off to our quota share treaties on July 1, 2017. The increase to the net underwriting expense ratio was impacted more by reductions in the reinsurance ceding commission revenue components than it was to changes in the commission expenses and other underwriting expense components, each of which declined as a ratio to net premiums earned.

	Three months ended
	September 30,
	2023			2022			Percentage Point Change
Other underwriting expenses
Employment costs		10.1	%		10.1	%		-
Underwriting fees (inspections/surveys)		1.5			1.6			(0.1	)
IT expenses		2.9			4.2			(1.3	)
Professional fees		1.1			1.1			-
Other expenses		7.0			7.8			(0.8	)
Total other underwriting expenses		22.6			24.8			(2.2	)

Commission expense		29.4			29.6			(0.2	)

Ceding commission revenue
Provisional		(17.9	)		(16.6	)		(1.3	)
Contingent		(1.9	)		-			(1.9	)
Total ceding commission revenue		(19.8	)		(16.6	)		(3.2	)

Other income		(0.5	)		(0.9	)		0.4

Net underwriting expense ratio		31.7	%		36.9	%		(5.2	)

(Components may not sum to totals due to rounding)

Table of Contents

Other Operating Expenses

Other operating expenses, related to the expenses of our holding company and Cosi, were ~~$1,069,000 in Q3-2017~~$442,000 for Three Months 2023 compared to ~~$530,000~~$810,000 for Three Months 2022. The following table shows a breakdown of the significant components of other operating expenses for the periods indicated:

	Three months ended
	September 30,
($ in thousands)	2023			2022			Change			Percent

Other operating expenses
Employment costs	$	36		$	(5	)	$	41		na		%
Bonuses		-			-			-		na
Equity compensation		207			188			19			10.1
Professional		(9	)		378			(387	)	na
Directors fees		69			82			(13	)		(15.9	)
Insurance		53			38			15			39.5
Other expenses		86			129			(43	)		(33.3	)
Total other operating expenses	$	442		$	810		$	(368	)		(45.4	)%

(Components may not sum to totals due to rounding)

The decrease in ~~Q3-2016. The increase in Q3-2017~~Three Months 2023 of ~~$539,000,~~$368,000, or ~~101.7%~~45.4%, as compared to Three Months 2022 was primarily due to ~~increases~~a decrease in ~~executive bonus compensation, executive compensation~~professional fees, partially offset by an increase in employment costs. The decrease in professional fees is due to ~~annual rate increases and hiring~~$268,000 incurred in Three Months 2022 related to a then contemplated transaction that would have resulted in a third party acquiring all of ~~additional staff,~~the outstanding equity ~~compensation, and consulting fees.~~of our company. The negative balance of professional fees in Three Months 2023 is due to credits received on previously billed amounts. The increase in ~~executive bonus compensation includes $236,000 of accrued long-term bonus compensation pursuant~~employment costs was due to the ~~three year employment agreement effective~~hiring of our new Chief Financial Officer in January ~~1, 2017 with our Chief Executive Officer. In Q3-2016 there was no long-term bonus~~2023 and fluctuations in deferred compensation ~~plan~~liability related to changes in ~~place.~~

the underlying invested portfolio.

Depreciation and Amortization

Depreciation and amortization was ~~$379,000~~$741,000 in ~~Q3-2017~~Three Months 2023 compared to ~~$262,000~~$825,000 in ~~Q3-2016.~~Three Months 2022. The ~~increase~~decrease of ~~$117,000,~~$84,000, or ~~44.7%~~10.2%, in depreciation and amortization was primarily due to ~~depreciation~~the completion and deployment of our ~~new~~customized policy management software as planned for in Kingstone 2.0, now allowing us to consolidate multiple legacy systems into one efficient system ~~platform for handling business being written~~and retire those older more costly and less reliable systems. Depreciation on older assets that were retired, which had a shorter useful life, is greater than the depreciation on newly acquired assets which have a longer useful life.

Interest Expense

Interest expense in ~~expansion states. The~~Three Months 2023 was $989,000 compared to $457,000 in Three Months 2022, an increase ~~was also impacted by newly purchased assets used to upgrade our systems infrastructure and improvements~~of $532,000 or 116.4%. In Three Months 2023, as disclosed in Note 7 to the ~~Kingston, New York home office building from~~condensed consolidated financial statements, we incurred increased interest expense in connection with the 2022 Notes, which provide for interest at the rate of 12% per annum, and the 2022 equipment financing. In Three Months 2022, we ~~operate.~~

incurred interest expense in connection with the 2017 Notes, our $30.0 million issuance of long-term debt in December 2017, which provided for interest at the rate of 5.5% per annum.

Income Tax ~~Expense~~

Benefit

Income tax ~~expense~~benefit in ~~Q3-2017~~Three Months 2023 was ~~$2,044,000,~~$859,000, which resulted in an effective tax benefit rate of 19.5%. Income tax benefit in Three Months 2022 was $562,000, which resulted in an effective tax rate of ~~33.4%~~12.3%. ~~Income tax expense~~Loss before taxes was $4,397,000 in ~~Q3-2016 was $1,797,000, which resulted~~Three Months 2023 compared to $4,559,000 in anThree Months 2022. The difference in effective tax rate is due to the effect of ~~34.2%. Income before taxes was $6,118,000~~permanent differences in ~~Q3-2017~~Three Months 2023 compared to ~~$5,258,000~~Three Months 2022.

Net Loss

Net loss was $3,538,000 in ~~Q3-2016.~~

~~Net Income~~

~~Net income was $4,074,000 in Q3-2017~~Three Months 2023 compared to ~~$3,461,000~~$3,998,000 in ~~Q3-2016.~~Three Months 2022. The ~~increase~~decrease in net ~~income~~loss of ~~$613,000, or 17.7%,~~$460,000 was due to the circumstances described above that caused the increase in our net premiums earned, net investment income and other income and a decrease in our net loss ratio, partially offset by a decrease in ceding commission revenue and net realized gains on investments, and increases in other underwriting expenses related to premium growth, other operating expenses, and depreciation and amortization.

above.

Table of Contents

Additional Financial Information

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

For the Three Months Ended

For the Nine Months Ended

September 30,

September 30,

2017

2016

2017

2016

Gross premiums written:

Personal lines
$26,729,634
$21,357,900
$69,331,085
$58,496,825
Commercial lines
  3,634,037
  3,111,308
  11,380,912
  9,916,605
Livery physical damage
  2,422,352
  2,640,531
  8,549,878
  7,792,984
Other(1)
  65,778
  59,637
  180,086
  183,376
Total
$32,851,801
$27,169,376
$89,441,961
$76,389,790





Net premiums written:




Personal lines




Excluding the effect of quota share




adjustments on July 1
$19,373,782
$11,893,952
$42,684,254
$32,111,287
Return of premiums previously ceded to




prior quota share treaties
  7,140,088
  -
  7,140,088
  -
Personal lines (2)
  26,513,870
  11,893,952
  49,824,342
  32,111,287
Commercial lines
  3,250,326
  2,760,623
  10,196,459
  8,919,387
Livery physical damage
  2,422,352
  2,640,531
  8,549,878
  7,792,984
Other(1)
  74,771
  (62,826)
  152,245
  23,179
Total
$32,261,319
$17,232,280
$68,722,924
$48,846,837





Net premiums earned:




Personal lines (2)
$15,395,435
$10,388,403
$37,125,043
$29,678,863
Commercial lines
  3,125,137
  2,828,473
  8,953,476
  8,282,020
Livery physical damage
  2,939,032
  2,487,975
  8,616,365
  7,106,718
Other(1)
  54,804
  (58,670)
  142,999
  121,130
Total
$21,514,408
$15,646,181
$54,837,883
$45,188,731





Net loss and loss adjustment expenses:




Personal lines
$3,553,087
$2,383,297
$13,304,934
$13,069,461
Commercial lines
  1,535,862
  1,178,963
  4,294,440
  3,271,253
Livery physical damage
  1,417,332
  1,236,780
  3,643,007
  3,171,434
Other(1)
  10,226
  (145,932)
  32,824
  (430,869)
Unallocated loss adjustment expenses
  556,816
  481,746
  1,546,036
  1,324,266
Total
$7,073,323
$5,134,854
$22,821,241
$20,405,545





Net loss ratio:




Personal lines
  23.1%
  22.9%
  35.8%
  44.0%
Commercial lines
  49.1%
  41.7%
  48.0%
  39.5%
Livery physical damage
  48.2%
  49.7%
  42.3%
  44.6%
Other(1)
  18.7%
  248.7%
  23.0%
  -355.7%
Total
  32.9%
  32.8%
  41.6%
  45.2%

~~(1)~~

~~“Other” includes, among other things, premiums and loss and loss adjustment expenses from commercial auto and our participation in a mandatory state joint underwriting association.~~

~~(2)~~

~~See discussions above with regard to “Net Written Premiums and Net Premiums Earned”, as to change in quota share ceding rate effective July 1, 2017.~~

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2023			2022			2023			2022
Gross premiums written:
Personal lines	$	48,418,956		$	51,242,544		$	136,601,070		$	138,197,960
Livery physical damage		3,543,810			3,309,845			10,559,310			9,036,713
Other(1)		29,480			39,162			76,256			119,238
Total gross premiums written	$	51,992,246		$	54,591,551		$	147,236,636		$	147,353,911

Net premiums written:
Personal lines	$	110,328		$	7,758,513		$	45,616,286		$	56,917,763
Livery physical damage		3,543,810			3,309,845			10,559,310			9,036,713
Other(1)		21,162			28,374			51,179			86,224
Total net premiums written	$	3,675,300		$	11,096,732		$	56,226,775		$	66,040,700

Net premiums earned:
Personal lines	$	24,346,521		$	26,407,939		$	75,441,482		$	75,747,009
Livery physical damage		3,571,160			2,920,335			10,192,773			8,082,173
Other(1)		20,637			32,702			67,212			107,242
Total net premiums earned	$	27,938,318		$	29,360,976		$	85,701,467		$	83,936,424

Net loss and loss adjustment expenses(3):
Personal lines	$	19,132,159		$	18,719,715		$	59,627,739		$	56,296,473
Livery physical damage		1,720,620			1,716,383			3,999,787			3,727,175
Other(1)		(13,757	)		9,494			137,886			(14,873	)
Unallocated loss adjustment expenses		733,061			919,738			2,453,114			2,870,115
Total without commercial lines		21,572,083			21,365,330			66,218,526			62,878,890
Commercial lines (in run-off effective July 2019)(2)		360,370			662,186			334,039			745,865
Total net loss and loss adjustment expenses	$	21,932,453		$	22,027,516		$	66,552,565		$	63,624,755

Net loss ratio(3):
Personal lines		78.6	%		70.9	%		79.0	%		74.3	%
Livery physical damage		48.2	%		58.8	%		39.2	%		46.1	%
Other(1)		-66.7	%		29.0	%		205.2	%		-13.9	%
Total without commercial lines		77.2	%		72.8	%		77.3	%		74.9	%
Commercial lines (in run-off effective July 2019)(2)	na			na			na			na
Total		78.5	%		75.0	%		77.7	%		75.8	%

	(1)	“Other” includes, among other things, premiums and loss and loss adjustment expenses from our participation in a mandatory state joint underwriting association and loss and loss adjustment expenses from commercial auto.
	(2)	In July 2019, we decided that we will no longer underwrite Commercial Liability risks. See discussions above regarding the discontinuation of this line of business.
	(3)	See discussion above with regard to “Net Loss and LAE”, as to catastrophe losses in the three months and nine months ended September 30, 2023 and 2022.

Table of Contents

Insurance Underwriting Business on a Standalone Basis

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

Three months ended

Nine months ended

September 30,

September 30,

2017

2016

2017

2016

Revenues

Net premiums earned
$21,514,408
$15,646,181
$54,837,883
$45,188,731
Ceding commission revenue
  1,717,610
  2,934,928
  8,208,000
  8,274,290
Net investment income
  1,033,307
  709,072
  2,917,111
  2,286,199
Net realized gain (loss) on investments
  20,998
  241,035
  96,915
  604,903
Other income
  317,269
  294,373
  880,930
  820,472
Total revenues
  24,603,592
  19,825,589
  66,940,839
  57,174,595





Expenses




Loss and loss adjustment expenses
  7,073,323
  5,134,854
  22,821,241
  20,405,545
Commission expense
  5,500,483
  4,603,755
  15,491,027
  13,400,029
Other underwriting expenses
  4,475,455
  4,039,209
  12,887,488
  10,981,784
Depreciation and amortization
  378,518
  262,097
  1,023,390
  834,519
Total expenses
  17,427,779
  14,039,915
  52,223,146
  45,621,877





Income from operations
  7,175,813
  5,785,674
  14,717,693
  11,552,718
Income tax expense
  2,399,048
  2,114,016
  4,911,977
  3,881,232
Net income
$4,776,765
$3,671,658
$9,805,716
$7,671,486










Key Measures:




Net loss ratio
  32.9%
  32.8%
  41.6%
  45.2%
Net underwriting expense ratio
  36.9%
  34.6%
  35.2%
  33.8%
Net combined ratio
  69.8%
  67.4%
  76.8%
  79.0%





Reconciliation of net underwriting expense ratio:




Acquisition costs and other




underwriting expenses
$9,975,938
$8,642,964
$28,378,515
$24,381,813
Less: Ceding commission revenue
  (1,717,610)
  (2,934,928)
  (8,208,000)
  (8,274,290)
Less: Other income
  (317,269)
  (294,373)
  (880,930)
  (820,472)
Net underwriting expenses
$7,941,059
$5,413,663
$19,289,585
$15,287,051





Net premiums earned
$21,514,408
$15,646,181
$54,837,883
$45,188,731





Net Underwriting Expense Ratio
  36.9%
  34.6%
  35.2%
  33.8%

follows:

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2023			2022			2023			2022
Revenues
Net premiums earned	$	27,938,318		$	29,360,976		$	85,701,467		$	83,936,424
Ceding commission revenue		5,536,327			4,886,094			16,393,944			14,283,077
Net investment income		1,444,360			1,418,521			4,437,208			3,411,946
Net (losses) gains on investments		(799,348	)		(366,411	)		531,277			(9,098,008	)
Other income		141,711			269,297			449,782			740,424
Total revenues		34,261,368			35,568,477			107,513,678			93,273,863

Expenses
Loss and loss adjustment expenses		21,932,453			22,027,516			66,552,565			63,624,755
Commission expense		8,210,430			8,702,190			25,221,374			25,534,307
Other underwriting expenses		6,318,625			7,276,101			19,873,882			20,717,047
Depreciation and amortization		741,059			803,568			2,327,691			2,430,769
Interest expense		106,580			-			331,606			-
Total expenses		37,309,147			38,809,375			114,307,118			112,306,878

Loss from operations		(3,047,779	)		(3,240,898	)		(6,793,440	)		(19,033,015	)
Income tax benefit		(585,797	)		(345,080	)		(1,246,788	)		(3,702,374	)
Net loss	$	(2,461,982	)	$	(2,895,818	)	$	(5,546,652	)	$	(15,330,641	)

Key Measures:
Net loss ratio		78.5	%		75.0	%		77.7	%		75.8	%
Net underwriting expense ratio		31.7	%		36.9	%		33.0	%		37.2	%
Net combined ratio		110.2	%		111.9	%		110.7	%		113.0	%

Reconciliation of net underwriting expense ratio:
Acquisition costs and other underwriting expenses	$	14,529,055		$	15,978,291		$	45,095,256		$	46,251,354
Less: Ceding commission revenue		(5,536,327	)		(4,886,094	)		(16,393,944	)		(14,283,077	)
Less: Other income		(141,711	)		(269,297	)		(449,782	)		(740,424	)
Net underwriting expenses	$	8,851,017		$	10,822,900		$	28,251,530		$	31,227,853

Net premiums earned	$	27,938,318		$	29,360,976		$	85,701,467		$	83,936,424

Net Underwriting Expense Ratio		31.7	%		36.9	%		33.0	%		37.2	%

Table of Contents

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

Direct

Assumed

Ceded

Net

Nine months ended September 30, 2017

Written premiums
$89,423,758
$18,203
$(20,719,037)
$68,722,924
Change in unearned premiums
  (8,456,690)
  8,162
  (5,436,513)
  (13,885,041)
Earned premiums
$80,967,068
$26,365
$(26,155,550)
$54,837,883





Loss and loss adjustment expenses excluding




the effect of catastrophes
$31,281,727
$42,751
$(8,503,237)
$22,821,241
Catastrophe loss
  -
  -
  -
  -
Loss and loss adjustment expenses
$31,281,727
$42,751
$(8,503,237)
$22,821,241





Loss ratio excluding the effect of catastrophes
  38.6%
  162.2%
  32.5%
  41.6%
Catastrophe loss
  0.0%
  0.0%
  0.0%
  0.0%
Loss ratio
  38.6%
  162.2%
  32.5%
  41.6%





Nine months ended September 30, 2016




Written premiums
$76,375,159
$14,631
$(27,542,953)
$48,846,837
Change in unearned premiums
  (4,875,664)
  2,058
  1,215,500
  (3,658,106)
Earned premiums
$71,499,495
$16,689
$(26,327,453)
$45,188,731





Loss and loss adjustment expenses excluding




the effect of catastrophes
$26,712,184
$32,521
$(7,741,637)
$19,003,068
Catastrophe loss
  2,337,461
  -
  (934,984)
  1,402,477
Loss and loss adjustment expenses
$29,049,645
$32,521
$(8,676,621)
$20,405,545





Loss ratio excluding the effect of catastrophes
  37.4%
  194.9%
  29.4%
  42.1%
Catastrophe loss
  3.3%
  0.0%
  3.5%
  3.2%
Loss ratio
  40.7%
  194.9%
  33.0%
  45.2%





Three months ended September 30, 2017




Written premiums
$32,839,891
$11,910
$(590,482)
$32,261,319
Change in unearned premiums
  (4,407,894)
  (165)
  (6,338,852)
  (10,746,911)
Earned premiums
$28,431,997
$11,745
$(6,929,334)
$21,514,408





Loss and loss adjustment expenses excluding




the effect of catastrophes
$8,123,601
$26,418
$(1,076,696)
$7,073,323
Catastrophe loss
  -
  -
  -
  -
Loss and loss adjustment expenses
$8,123,601
$26,418
$(1,076,696)
$7,073,323





Loss ratio excluding the effect of catastrophes
  28.6%
  224.9%
  15.5%
  32.9%
Catastrophe loss
  0.0%
  0.0%
  0.0%
  0.0%
Loss ratio
  28.6%
  224.9%
  15.5%
  32.9%





Three months ended September 30, 2016




Written premiums
$27,170,743
$(1,367)
$(9,937,096)
$17,232,280
Change in unearned premiums
  (2,302,119)
  (1,479)
  717,499
  (1,586,099)
Earned premiums
$24,868,624
$(2,846)
$(9,219,597)
$15,646,181





Loss and loss adjustment expenses excluding




the effect of catastrophes
$6,705,294
$2,226
$(1,572,666)
$5,134,854
Catastrophe loss
  -
  -
  -
  -
Loss and loss adjustment expenses
$6,705,294
$2,226
$(1,572,666)
$5,134,854





Loss ratio excluding the effect of catastrophes
  27.0%
  -78.2%
  17.1%
  32.8%
Catastrophe loss
  0.0%
  0.0%
  0.0%
  0.0%
Loss ratio
  27.0%
  -78.2%
  17.1%
  32.8%

	Direct			Assumed			Ceded			Net
Nine months ended September 30, 2023
Written premiums	$	147,236,636		$	-		$	(91,009,861	)	$	56,226,775
Change in unearned premiums		4,331,226			-			25,143,466			29,474,692
Earned premiums	$	151,567,862		$	-		$	(65,866,395	)	$	85,701,467

Loss and loss adjustment expenses excluding the effect of catastrophes	$	89,825,751		$	-		$	(30,558,103	)	$	59,267,648
Catastrophe loss		10,746,184			-			(3,461,267	)		7,284,917
Loss and loss adjustment expenses	$	100,571,935		$	-		$	(34,019,370	)	$	66,552,565

Loss ratio excluding the effect of catastrophes		59.3	%		0.0	%		46.4	%		69.2	%
Catastrophe loss		7.1	%		0.0	%		5.3	%		8.5	%
Loss ratio		66.4	%		0.0	%		51.7	%		77.7	%

Nine months ended September 30, 2022
Written premiums	$	147,353,911		$	-		$	(81,313,211	)	$	66,040,700
Change in unearned premiums		(6,029,774	)		-			23,925,498			17,895,724
Earned premiums	$	141,324,137		$	-		$	(57,387,713	)	$	83,936,424

Loss and loss adjustment expenses excluding the effect of catastrophes	$	83,345,972		$	-		$	(23,186,898	)	$	60,159,074
Catastrophe loss		7,509,597			-			(4,043,916	)		3,465,681
Loss and loss adjustment expenses	$	90,855,569		$	-		$	(27,230,814	)	$	63,624,755

Loss ratio excluding the effect of catastrophes		59.0	%		0.0	%		40.4	%		71.7	%
Catastrophe loss		5.3	%		0.0	%		7.0	%		4.1	%
Loss ratio		64.3	%		0.0	%		47.4	%		75.8	%

Three months ended September 30, 2023
Written premiums	$	51,992,246		$	-		$	(48,316,946	)	$	3,675,300
Change in unearned premiums		(1,246,657	)		-			25,509,675			24,263,018
Earned premiums	$	50,745,589		$	-		$	(22,807,271	)	$	27,938,318

Loss and loss adjustment expenses excluding the effect of catastrophes	$	29,569,767		$	-		$	(9,796,769	)	$	19,772,998
Catastrophe loss		2,871,300			-			(711,845	)		2,159,455
Loss and loss adjustment expenses	$	32,441,067		$	-		$	(10,508,614	)	$	21,932,453

Loss ratio excluding the effect of catastrophes		58.3	%		0.0	%		43.0	%		70.8	%
Catastrophe loss		5.7	%		0.0	%		3.1	%		7.7	%
Loss ratio		64.0	%		0.0	%		46.1	%		78.5	%

Three months ended September 30, 2022
Written premiums	$	54,591,551		$	-		$	(43,494,819	)	$	11,096,732
Change in unearned premiums		(5,636,421	)		-			23,900,665			18,264,244
Earned premiums	$	48,955,130		$	-		$	(19,594,154	)	$	29,360,976

Loss and loss adjustment expenses excluding the effect of catastrophes	$	30,513,819		$	-		$	(8,820,270	)	$	21,693,549
Catastrophe loss		477,127			-			(143,160	)		333,967
Loss and loss adjustment expenses	$	30,990,946		$	-		$	(8,963,430	)	$	22,027,516

Loss ratio excluding the effect of catastrophes		62.3	%		0.0	%		45.0	%		73.9	%
Catastrophe loss		1.0	%		0.0	%		0.7	%		1.1	%
Loss ratio		63.3	%		0.0	%		45.7	%		75.0	%

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

Table of Contents

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

Three months ended

Nine months ended

September 30,

September 30,

2017

2016

2017

2016

Net premiums earned
$21,514,408
$15,646,181
$54,837,883
$45,188,731
Ceding commission revenue
  1,717,610
  2,934,928
  8,208,000
  8,274,290
Other income
  317,269
  294,373
  880,930
  820,472





Loss and loss adjustment expenses (1)
  7,073,323
  5,134,854
  22,821,241
  20,405,545





Acquisition costs and other underwriting expenses:




Commission expense
  5,500,483
  4,603,755
  15,491,027
  13,400,029
Other underwriting expenses
  4,475,455
  4,039,209
  12,887,488
  10,981,784
Total acquisition costs and other




underwriting expenses
  9,975,938
  8,642,964
  28,378,515
  24,381,813





Underwriting income
$6,500,026
$5,097,664
$12,727,057
$9,496,135





Key Measures:




Net loss ratio excluding the effect of catastrophes
  32.9%
  32.8%
  41.6%
  42.1%
Effect of catastrophe loss on net loss ratio (1) (2)
  0.0%
  0.0%
  0.0%
  3.1%
Net loss ratio
  32.9%
  32.8%
  41.6%
  45.2%





Net underwriting expense ratio excluding the




effect of catastrophes
  36.9%
  34.6%
  35.2%
  33.8%
Effect of catastrophe loss on net underwriting




expense ratio (2)
  0.0%
  0.0%
  0.0%
  0.0%
Net underwriting expense ratio
  36.9%
  34.6%
  35.2%
  33.8%





Net combined ratio excluding the effect




of catastrophes
  69.8%
  67.4%
  76.8%
  75.9%
Effect of catastrophe loss on net combined




ratio (1) (2)
  0.0%
  0.0%
  0.0%
  3.1%
Net combined ratio
  69.8%
  67.4%
  76.8%
  79.0%





Reconciliation of net underwriting expense ratio:




Acquisition costs and other




underwriting expenses
$9,975,938
$8,642,964
$28,378,515
$24,381,813
Less: Ceding commission revenue
  (1,717,610)
  (2,934,928)
  (8,208,000)
  (8,274,290)
Less: Other income
  (317,269)
  (294,373)
  (880,930)
  (820,472)

$7,941,059
$5,413,663
$19,289,585
$15,287,051





Net earned premium
$21,514,408
$15,646,181
$54,837,883
$45,188,731





Net Underwriting Expense Ratio
  36.9%
  34.6%
  35.2%
  33.8%

~~(1) For the nine months ended September 30, 2016, includes the sum of net catastrophe losses and loss adjustment expenses of $1,402,477 resulting from severe winter weather.~~

(2) For the nine months ended September 30, 2016, the effect of catastrophe loss from severe winter weather on our net combined ratio includes the direct effects of loss and loss adjustment expenses and there were no indirect effects in other underwriting expenses.

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2023			2022			2023			2022

Net premiums earned	$	27,938,318		$	29,360,976		$	85,701,467		$	83,936,424
Ceding commission revenue		5,536,327			4,886,094			16,393,944			14,283,077
Other income		141,711			269,297			449,782			740,424

Loss and loss adjustment expenses (1)		21,932,453			22,027,516			66,552,565			63,624,755

Acquisition costs and other underwriting expenses:
Commission expense		8,210,430			8,702,190			25,221,374			25,534,307
Other underwriting expenses		6,318,625			7,276,101			19,873,882			20,717,047
Total acquisition costs and other underwriting expenses		14,529,055			15,978,291			45,095,256			46,251,354

Underwriting loss	$	(2,845,152	)	$	(3,489,440	)	$	(9,102,628	)	$	(10,916,184	)

Key Measures:
Net loss ratio excluding the effect of catastrophes		70.8	%		73.9	%		69.2	%		71.7	%
Effect of catastrophe loss on net loss ratio (1)		7.7	%		1.1	%		8.5	%		4.1	%
Net loss ratio		78.5	%		75.0	%		77.7	%		75.8	%

Net underwriting expense ratio excluding the effect of catastrophes		31.7	%		36.9	%		33.0	%		37.2	%
Effect of catastrophe loss on net underwriting expense ratio		0.0	%		0.0	%		0.0	%		0.0	%
Net underwriting expense ratio		31.7	%		36.9	%		33.0	%		37.2	%

Net combined ratio excluding the effect of catastrophes		102.5	%		110.8	%		102.2	%		108.9	%
Effect of catastrophe loss on net combined ratio (1)		7.7	%		1.1	%		8.5	%		4.1	%
Net combined ratio		110.2	%		111.9	%		110.7	%		113.0	%

Reconciliation of net underwriting expense ratio:
Acquisition costs and other underwriting expenses	$	14,529,055		$	15,978,291		$	45,095,256		$	46,251,354
Less: Ceding commission revenue		(5,536,327	)		(4,886,094	)		(16,393,944	)		(14,283,077	)
Less: Other income		(141,711	)		(269,297	)		(449,782	)		(740,424	)
	$	8,851,017		$	10,822,900		$	28,251,530		$	31,227,853

Net earned premium	$	27,938,318		$	29,360,976		$	85,701,467		$	83,936,424

Net Underwriting Expense Ratio		31.7	%		36.9	%		33.0	%		37.2	%

(1)

For the three months ended September 30, 2023 and 2022, includes the sum of net catastrophe losses and loss adjustment expenses of $2,159,455 and $333,967, respectively. For the nine months ended September 30, 2023 and 2022, includes the sum of net catastrophe losses and loss adjustment expenses of $7,284,917 and $3,465,681, respectively.

Table of Contents

Investments

Portfolio Summary

Fixed-Maturity Securities

The following table presents a breakdown of the amortized cost, estimated fair value, and gross unrealized gains and losses ~~by investment type~~of our investments in fixed-maturity securities classified as available-for-sale for which an allowance for credit loss has not been recorded, as of September 30,~~, 2017~~ 2023 and December 31, ~~2016:~~

~~Available-for-Sale Securities~~

September 30, 2017

Cost or

Gross

Gross Unrealized Losses

% of

Amortized

Unrealized

Less than 12

More than 12

Fair

Fair

Category

Cost

Gains

Months

Months

Value

Value

Political subdivisions of States,

Territories and Possessions
$11,428,403
$286,360
$(21,223)
$-
$11,693,540
  9.4%







Corporate and other bonds






Industrial and miscellaneous
  77,734,988
  1,416,060
  (204,904)
  (109,623)
  78,836,521
  63.0%







Residential mortgage and other






asset backed securities (1)
  21,152,407
  291,172
  (120,346)
  (63,542)
  21,259,691
  17.0%
Total fixed-maturity securities
  110,315,798
  1,993,592
  (346,473)
  (173,165)
  111,789,752
  89.4%
Equity Securities
  12,706,538
  785,012
  (103,789)
  (166,645)
  13,221,116
  10.6%
Total
$123,022,336
$2,778,604
$(450,262)
$(339,810)
$125,010,868
  100.0%

2022:

	September 30, 2023

	Cost or		Gross		Gross Unrealized Losses						Estimated		% of
	Amortized		Unrealized		Less than 12			More than 12			Fair		Estimated
Category	Cost		Gains		Months			Months			Value		Fair Value
U.S. Treasury securities and obligations of U.S. government corporations and agencies (1)	$	8,224,680	$	-	$	(56,835	)	$	-		$	8,167,845		6.2	%

Political subdivisions of States, Territories and Possessions		16,615,369		-		-			(4,201,015	)		12,414,354		9.3	%

Corporate and other bonds
Industrial and miscellaneous		78,116,754		-		-			(8,651,516	)		69,465,238		52.3	%

Residential mortgage and other asset backed securities (2)		51,503,046		63,626		(5,987	)		(8,821,223	)		42,739,462		32.2	%
Total fixed-maturity securities	$	154,459,849	$	63,626	$	(62,822	)	$	(21,673,754	)	$	132,786,899		100.0	%

	December 31, 2022

	Cost or		Gross		Gross Unrealized Losses						Estimated		% of
	Amortized		Unrealized		Less than 12			More than 12			Fair		Estimated
Category	Cost		Gains		Months			Months			Value		Fair Value
U.S. Treasury securities and obligations of U.S. government corporations and agencies (1)	$	23,874,545	$	1,479	$	(6,928	)	$	-		$	23,869,096		15.4	%

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

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

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

(1) In October 2022, KICO placed certain U.S. Treasury securities to fulfill the required collateral for a sale leaseback transaction in a designated custodian account (see Note 7 – Debt - “Equipment Financing”). As of September 30, 2023 and December 31, 2022, the amount of required collateral was approximately $7,422,000 and $8,691,000, respectively. As of September 30, 2023 and December 31, 2022, the estimated fair value of the eligible collateral was approximately $8,168,000 and $8,691,000, respectively.

Table of Contents

(2) KICO has placed certain residential mortgage backed securities as eligible collateral in a designated custodian account related to ~~our relationship with~~its membership in the Federal Home Loan Bank of New York ("FHLBNY") (see Note 7 – Debt – “Federal Home Loan Bank”). The eligible collateral would be pledged to FHLBNY if KICO draws an advance from the ~~FHBLNY~~FHLBNY credit line. As of September 30, ~~2017,~~2023 and December 31, 2022, the estimated fair value of the eligible investments was ~~$7,028,101.~~approximately $10,911,000 and $12,228,000, respectively. KICO will retain all rights regarding all securities if pledged as collateral. As of September 30, ~~2017,~~2023 and December 31, 2022 there was no outstanding balance on the FHLBNY credit line.

December 31, 2016

Cost or

Gross

Gross Unrealized Losses

% of

Amortized

Unrealized

Less than 12

More than 12

Fair

Fair

Category

Cost

Gains

Months

Months

Value

Value

Political subdivisions of States,

Territories and Possessions
$8,053,449
$199,028
$(46,589)
$-
$8,205,888
  9.1%







Corporate and other bonds






Industrial and miscellaneous
  53,728,395
  600,519
  (638,113)
  (5,612)
  53,685,189
  59.4%







Residential mortgage backed






securities
  18,814,784
  70,682
  (309,273)
  (38,442)
  18,537,751
  20.5%
Total fixed-maturity securities
  80,596,628
  870,229
  (993,975)
  (44,054)
  80,428,828
  89.0%
Equity Securities
  9,709,385
  701,641
  (255,301)
  (168,039)
  9,987,686
  11.0%
Total
$90,306,013
$1,571,870
$(1,249,276)
$(212,093)
$90,416,514
  100.0%

Equity Securities

The following table presents a breakdown of the cost and estimated fair value of, and gross gains and losses on, investments in equity securities as of September 30, 2023 and December 31, 2022:

	September 30, 2023
										% of
			Gross		Gross			Estimated		Estimated
Category	Cost		Gains		Losses			Fair Value		Fair Value

Equity Securities:
Preferred stocks	$	13,583,942	$	-	$	(3,384,701	)	$	10,199,241		73.3	%
Common stocks and exchange traded funds		4,402,841		225,001		(919,432	)		3,708,410		26.7	%
Total	$	17,986,783	$	225,001	$	(4,304,133	)	$	13,907,651		100.0	%

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

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

Other Investments

The following table presents a breakdown of the cost and estimated fair value of, and gross gains on our other investments as of September 30, 2023 and December 31, 2022:

	September 30, 2023						December 31, 2022
			Gross		Estimated				Gross		Estimated
Category	Cost		Gains		Fair Value		Cost		Gains		Fair Value

Other Investments:
Hedge fund	$	1,987,040	$	1,226,278	$	3,213,318	$	1,987,040	$	784,612	$	2,771,652

Table of Contents

Held-to-Maturity Securities

September 30, 2017

Cost or

Gross

Gross Unrealized Losses

% of

Amortized

Unrealized

Less than 12

More than 12

Fair

Fair

Category

Cost

Gains

Months

Months

Value

Value

U.S. Treasury securities
$606,456
$147,583
$-
$-
$754,039
  14.6%







Political subdivisions of States,






Territories and Possessions
  1,099,032
  68,375
  -
  -
  1,167,407
  22.5%







Corporate and other bonds






Industrial and miscellaneous
  3,140,861
  124,122
  (5,270)
  -
  3,259,713
  62.9%







Total
$4,846,349
$340,080
$(5,270)
$-
$5,181,159
  100.0%

December 31, 2016

Cost or

Gross

Gross Unrealized Losses

% of

Amortized

Unrealized

Less than 12

More than 12

Fair

Fair

Category

Cost

Gains

Months

Months

Value

Value

U.S. Treasury securities
$606,427
$147,612
$-
$-
$754,039
  14.2%







Political subdivisions of States,






Territories and Possessions
  1,349,916
  37,321
  -
  -
  1,387,237
  26.2%







Corporate and other bonds






Industrial and miscellaneous
  3,138,559
  72,784
  (7,619)
  (46,881)
  3,156,843
  59.6%







Total
$5,094,902
$257,717
$(7,619)
$(46,881)
$5,298,119
  100.0%

The following table presents a breakdown of the amortized cost and estimated fair value of, and gross unrealized gains and losses on, investments in held-to-maturity securities as of September 30, 2023 and December 31, 2022:

	September 30, 2023

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

Held-to-Maturity Securities:
U.S. Treasury securities	$	1,228,783	$	-	$	(49,795	)	$	(31,495	)	$	1,147,493		20.1	%

Political subdivisions of States, Territories and Possessions		499,036		-		(9,046	)		-			489,990		8.6	%

Exchange traded debt		304,111		-		(51,611	)		-			252,500		4.4	%

Corporate and other bonds
Industrial and miscellaneous		5,021,895		-		-			(1,212,380	)		3,809,515		66.9	%

Total	$	7,053,825	$	-	$	(110,452	)	$	(1,243,875	)	$	5,699,498		100.0	%

	December 31, 2022

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

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

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

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

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

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

Held-to-maturity U.S. Treasury ~~securities included in held-to-maturity~~ securities are held in trust pursuant to ~~the New York State Department of Financial Services’~~various states’ minimum ~~funds requirement.~~

fund requirements.

Table of Contents

A summary of the amortized cost and fair value of ~~the Company’s~~our investments in held-to-maturity securities by contractual maturity as of September 30, ~~2017~~2023 and December 31, ~~2016~~2022 is shown below:

	September 30, 2023				December 31, 2022
	Amortized		Estimated		Amortized		Estimated
Remaining Time to Maturity	Cost		Fair Value		Cost		Fair Value

Less than one year	$	-	$	-	$	708,535	$	743,575
One to five years		1,121,091		1,069,974		1,120,507		1,088,522
Five to ten years		1,411,819		1,166,505		1,402,704		1,200,720
More than 10 years		4,520,915		3,463,019		4,534,394		3,567,571
Total	$	7,053,825	$	5,699,498	$	7,766,140	$	6,600,388

Credit Rating of Fixed-Maturity Securities

The table below summarizes the credit quality of our available-for-sale fixed-maturity securities as of September 30,~~, 2017~~ 2023 and December 31, ~~2016~~2022 as rated by Standard & Poor’s (or, if unavailable from Standard & Poor’s, then Moody’s, Fitch, or ~~Fitch)~~Kroll):

September 30, 2017

December 31, 2016

Percentage of

Percentage of

Fair Market

Fair Market

Fair Market

Fair Market

Value

Value

Value

Value

Rating

U.S. Treasury securities

$-
  0.0%
$-
  0.0%






Corporate and municipal bonds






AAA

  1,571,341
  1.4%
  1,801,106
  2.2%

AA

  11,498,555
  10.3%
  7,236,457
  9.0%
   A
  17,319,455
  15.6%
  13,944,784
  17.3%

BBB

  59,211,360
  53.0%
  38,908,731
  48.4%

BB

  929,350
  0.8%
  -
  0.0%

Total corporate and municipal bonds

  90,530,061
  81.1%
  61,891,078
  76.9%






Residential mortgage and other asset backed securities






AAA

  2,021,700
  1.8%
  -
  0.0%

AA

  11,564,239
  10.3%
  14,143,828
  17.7%
   A
  3,908,071
  3.5%
  173,973
  0.2%

CCC

  1,415,748
  1.3%
  513,369
  0.6%

CC

  126,335
  0.1%
  -
  0.0%
   C
  30,318
  0.0%
  112,136
  0.1%
   D
  1,811,320
  1.6%
  3,594,444
  4.5%

Not rated

  381,960
  0.3%
  -
  0.0%

Total residential mortgage and other asset backed securities

  21,259,691
  18.9%
  18,537,750
  23.1%






Total

$111,789,752
  100.0%
$80,428,828
  100.0%

	September 30, 2023					December 31, 2022
	Estimated		Percentage of			Estimated		Percentage of
	Fair		Estimated			Fair		Estimated
	Value		Fair Value			Value		Fair Value

Rating
U.S. Treasury securities	$	8,167,845		6.2	%	$	23,869,096		15.4	%

Corporate and municipal bonds
AAA		1,716,858		1.3	%		1,824,478		1.2	%
AA		9,196,422		6.9	%		9,785,908		6.3	%
A		31,296,689		23.6	%		31,099,075		20.2	%
BBB+		15,436,321		11.6	%		16,682,159		10.8	%
BBB		22,592,113		17.0	%		19,664,051		12.7	%
BBB-		-		0.0	%		4,516,713		2.9	%
Total corporate and municipal bonds		80,238,403		60.4	%		83,572,384		54.1	%

Residential mortgage backed, asset backed, and other collateralized obligations
AAA		12,028,321		9.1	%		16,497,621		10.7	%
AA		21,295,991		16.0	%		23,062,233		14.9	%
A		6,806,737		5.1	%		6,722,902		4.3	%
BBB+		15,373		0.0	%		-		0.0	%
BBB		-		0.0	%		20,067		0.0	%
CCC		411,851		0.3	%		457,683		0.3	%
CC		88,531		0.1	%		99,600		0.1	%
D		-		0.0	%		40,474		0.0	%
Non rated		3,733,847		2.8	%		373,103		0.2	%
Total residential mortgage backed, asset backed, and other collateralized obligations		44,380,651		33.4	%		47,273,683		30.5	%

Total	$	132,786,899		100.0	%	$	154,715,163		100.0	%

Table of Contents

The table below summarizes the average yield by type of fixed-maturity security as of September 30,~~, 2017~~ 2023 and December 31, ~~2016:~~

Category

September 30, 2017

December 31, 2016

U.S. Treasury securities and

obligations of U.S. government

corporations and agencies
  3.44%
  3.44%



Political subdivisions of States,


Territories and Possessions
  3.56%
  3.87%



Corporate and other bonds


Industrial and miscellaneous
  4.02%
  3.86%



Residential mortgage and other asset backed securities
  1.68%
  3.83%



Total
  3.54%
  3.85%

2022:

Category	September 30, 2023			December 31, 2022


U.S. Treasury securities and obligations of U.S. government corporations and agencies		4.53	%		2.58	%

Political subdivisions of States, Territories and Possessions		3.61	%		3.58	%

Corporate and other bonds
Industrial and miscellaneous		3.72	%		3.68	%

Residential mortgage backed securities		2.97	%		2.70	%

Total		3.53	%	3.20%

The table below lists the weighted average maturity and effective duration in years on our fixed-maturity securities as of September 30,~~, 2017~~ 2023 and December 31, ~~2016:~~

September 30, 2017

December 31, 2016

Weighted average effective maturity
  5.5
  5.0



Weighted average final maturity
  7.9
  8.3



Effective duration
  4.8
  4.4

2022:

	September 30, 2023		December 31, 2022
Weighted average effective maturity		8.4		5.8

Weighted average final maturity		12.6		13.5

Effective duration		4.3		4.5

Fair Value Consideration

~~As disclosed in Note 4 to the Condensed Consolidated Financial Statements, with respect to “Fair Value Measurements,” we define fair~~

Fair value asis the price that would be received to sell an asset or paid to transfer a liability in a transaction involving identical or comparable assets or liabilities between market participants (an “exit price”). The fair value hierarchy distinguishes between inputs based on market data from independent sources (“observable inputs”) and a reporting entity’s internal assumptions based upon the best information available when external market data is limited or unavailable (“unobservable inputs”). The fair value hierarchy prioritizes fair value measurements into three levels based on the nature of the inputs. Quoted prices in active markets for identical assets have the highest priority (“Level 1”), followed by observable inputs other than quoted prices including prices for similar but not identical assets or liabilities (“Level 2”), and unobservable inputs, including the reporting entity’s estimates of the assumption that market participants would use, having the lowest priority (“Level 3”). As of September 30,~~, 2017~~ 2023 and December 31, ~~2016, 70%~~2022, 62% and 65%, respectively, of the investment portfolio recorded at fair value was priced based upon quoted market prices.

As more fully described in Note 3 to our Condensed Consolidated Financial Statements, “Investments—Impairment Review,” we completed a detailed review of all our securities in a continuous loss position as of September 30~~, 2017~~ and December 31, 2016. As of September 30, 2017, our held-to-maturity debt securities included an investment in one bond 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, we recorded the first credit loss component of ~~other-than-temporary impairment (“~~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, we recorded an additional credit loss component of OTTI on this investment in the amount of $50,000 during the three months ended September 30, 2017. The total of the two OTTI write-downs of this investment as of September 30, 2017 was $119,911. We concluded that the other unrealized losses in these asset classes are temporary in nature and the result of a decrease in value due to technical spread widening and broader market sentiment, rather than fundamental collateral deterioration.

Table of Contents

The table below summarizes the gross unrealized losses of our fixed-maturity securities available-for-sale and equity securities by length of time the security has continuously been in an unrealized loss position as of September 30,~~, 2017~~ 2023 and December 31, ~~2016:~~

2022:

	September 30, 2023
	Less than 12 months							12 months or more							Total
	Estimated					No. of		Estimated					No. of		Estimated
	Fair		Unrealized			Positions		Fair		Unrealized			Positions		Fair		Unrealized
Category	Value		Losses			Held		Value		Losses			Held		Value		Losses

Fixed-Maturity Securities:
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	8,167,845	$	(56,835	)		2	$	-		-			-	$	8,167,845	$	(56,835	)

Political subdivisions of States, Territories and Possessions		-		-			-		12,414,354		(4,201,015	)		13		12,414,354		(4,201,015	)

Corporate and other bonds industrial and miscellaneous		-		-			-		69,465,238		(8,651,516	)		88		69,465,238		(8,651,516	)

Residential mortgage and other asset backed securities		204,418		(5,987	)		9		38,962,381		(8,821,223	)		38		39,166,799		(8,827,210	)

Total fixed-maturity securities	$	8,372,263	$	(62,822	)		11	$	120,841,973	$	(21,673,754	)		139	$	129,214,236	$	(21,736,576	)

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

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

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

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

Residential mortgage and other asset backed securities		10,145,880		(882,664	)		22		34,753,178		(7,150,803	)		26		44,899,058		(8,033,467	)

Total fixed-maturity securities	$	93,944,813	$	(8,881,859	)		109	$	55,096,312	$	(11,381,282	)		46	$	149,041,125	$	(20,263,141	)

Table of Contents

There were 67150 securities at September 30,~~, 2017~~ 2023 that accounted for the gross unrealized loss of our fixed-maturity securities available-for-sale, none of which were deemed ~~by us~~ to be ~~other than temporarily impaired.~~credit losses by us. There were 85155 securities at December 31, ~~2016~~2022 that accounted for the gross unrealized loss of our fixed-maturity securities available-for-sale, none of which were deemed ~~by us~~ to be ~~other than temporarily impaired.~~credit losses by us. Significant factors influencing our determination that unrealized losses were temporary included credit quality considerations, the magnitude of the unrealized losses in relation to each security’s cost, the nature of the investment and interest rate environment factors, management’s intent not to sell these securities and it being not more likely than not that we will be required to sell these investments before anticipated recovery of fair value to our cost basis.

Liquidity and Capital Resources

Cash Flows

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

On January 31, 2017, we closed on an underwritten public offering of 2,500,000 shares of our common stock. On February 14, 2017, we closed on the underwriters’ purchase option for an additional 192,500 shares of our common stock.

The public offering price for the 2,692,500 shares sold was $12.00 per share. The aggregate net proceeds to us were approximately $30,137,000. On March 1, 2017, we used $23,000,000 of the net proceeds of the offering to contribute capital to KICO, to support its ratings upgrade plan and additional growth. The remainder of the net proceeds will be used for general corporate purposes.

~~Through the quarter ended September~~ ~~30, 2017, the~~ primary source of cash flow for our holding company are dividends and distributions received from KICO, which are subject to statutory restrictions. For the nine months ended September 30, ~~2017~~,2023, KICO paid ~~dividends~~a dividend of ~~$2,100,000~~$1,250,000 to us.

As of September 30, 2023, KICO had a negative unassigned surplus and currently will not be able to pay any distributions to us without prior regulatory approval. In September 2023, KICO received regulatory approval and paid us a $2,700,000 distribution from paid in capital.

KICO is a member of the ~~Federal Home Loan Bank of New York (“FHLBNY”),~~FHLBNY, which provides additional access to liquidity. Members have access to a variety of flexible, low cost funding through FHLBNY’s credit products, enabling members to customize advances. Advances are to be fully collateralized; eligible collateral to pledge to FHLBNY includes residential and commercial mortgage backed securities, along with USU.S. Treasury and agency securities. See Note 3 – Investments to ~~the~~our condensed consolidated financial statements ~~– 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, 2016~~the end of the previous quarter, which is June 30, 2023, and are due and payable within ~~one year~~90 days of borrowing. The maximum allowable advance as of September 30, ~~2017 is~~2023, based on the net admitted assets as of June 30, 2023, was approximately ~~$6,212,000.~~$13,268,000. Available collateral as of September 30, 2023 was approximately $10,911,000. Advances are limited to 85% of the amount of available collateral. There were no borrowings under this facility during the ~~three~~nine months ended September 30, ~~2017.~~

If2023.

On December 15, 2022, we issued $19,950,000 of our 2022 Notes pursuant to the ~~aforementioned sources~~Exchange Agreement. We are required to make a mandatory redemption payment with regard to the 2022 Notes on December 30, 2023 in an amount discussed in Note 7 – Debt of ~~cash flow currently available~~the condensed consolidated financial statements included in this Quarterly Report. We are ~~insufficient~~also required to ~~cover our holding company cash requirements, we will seek to obtain additional financing.~~

~~Our reconciliation~~make semi-annual interest payments in arrears on June 30 and December 30 of ~~net income to net cash provided by operations~~each year. The maturity date of the 2022 Notes is ~~generally influenced by the collection of premiums in advance of paid losses, the timing of reinsurance, issuing company settlements and loss payments.~~

December 30, 2024.

Table of Contents

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

Nine Months Ended September 30,

2017

2016

Cash flows provided by (used in):

Operating activities
$20,889,623
$13,474,432
Investing activities
  (34,698,530)
  (17,855,522)
Financing activities
  27,644,693
  3,260,405
Net increase (decrease) in cash and cash equivalents
  13,835,786
  (1,120,685)
Cash and cash equivalents, beginning of period
  12,044,520
  13,551,372
Cash and cash equivalents, end of period
$25,880,306
$12,430,687

Nine Months ended September 30,	2023			2022

Cash flows (used in) provided by:
Operating activities	$	(15,754,344	)	$	(7,921,438	)
Investing activities		19,755,073			398,911
Financing activities		(825,988	)		(1,656,865	)
Net increase (decrease) in cash and cash equivalents		3,174,741			(9,179,392	)
Cash and cash equivalents, beginning of period		11,958,228			24,290,598
Cash and cash equivalents, end of period	$	15,132,969		$	15,111,206

Net cash ~~provided by~~used in operating activities was ~~$20,889,000~~$15,754,000 in ~~2017~~Nine Months 2023 as compared to ~~$13,474,000~~$7,921,000 used in ~~2016.~~operating activities in Nine Months 2022. The ~~$7,415,000~~$7,833,000 increase in cash flows ~~provided by~~used in operating activities in ~~2017~~Nine Months 2023 as compared to Nine Months 2022 was primarily athe result of an increase in cash arising from net fluctuations in operating assets and liabilities, ~~relating~~partially offset by a decrease in net loss (adjusted for non-cash items) of $597,000. The increase in cash used in operating activities is also partially offset by the payment of $13,245,000 to reinsurers in Nine Months 2022 pursuant to the inception of our quota share reinsurance treaty, effective December 31, 2021. The net fluctuations in assets and liabilities are related to operating activities of KICO as affected by ~~the~~ growth or declines in its operations, payments on claims and other changes, which are described ~~above, and by an increase in net income (adjusted for non-cash items) of $2,606,000.~~

Net cash used in investing activities was $34,699,000 in 2017 compared to $17,856,000 in 2016. The $16,843,000 increase in net cash used in investing activities is the result of a $3,900,000 increase in acquisitions of invested assets, an $11,283,000 decrease in sales or maturities of invested assets and a $1,423,000 increase in the amount of fixed asset acquisitions in 2017.

above.

Net cash provided by ~~financing~~investing activities was ~~$27,645,000~~$19,755,000 in ~~2017~~Nine Months 2023 compared to ~~$3,260,000~~$399,000 provided by investing activities in ~~2016. The $24,385,000~~Nine Months 2022 resulting in a $19,356,000 increase in net cash provided by investing activities. In Nine Months 2023, we had net cash provided by our investment portfolio of $21,135,000, compared to $3,741,000 provided in Nine Months 2022. In addition, we decreased our acquisition of fixed assets by $1,962,000 in Nine Months 2023 compared to Nine Months 2022.

Net cash used in financing activities ~~is the result of the $30,137,000~~was $826,000 in Nine Months 2023 compared to $1,657,000 used in Nine Months 2022. The $831,000 decrease in net ~~proceeds we received from the public offering of our common stock~~cash used in ~~January/February 2017, offset partially by the $4,808,000 net proceeds we received from the private placement of our common stock~~financing activities was attributable to no dividends being paid to shareholders in ~~April 2016~~Nine Months 2023 compared to $1,277,000 being paid in Nine Months 2022 and a ~~$917,000 increase~~$378,000 decrease in ~~dividends~~withholding taxes paid ~~due to an increase~~on the vesting of restricted stock awards. The decreases in cash used in financing activities were partially offset by $810,000 of principal payments on the ~~shares outstanding and dividend paid per share.~~

equipment financing in connection with KICO’s sale-leaseback transaction.

Reinsurance

~~Our~~

Effective December 31, 2021, we entered into a 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.~~

~~Our quota share reinsurance~~ treaty ~~in effect for 2017~~ for our personal lines business, which primarily consists of homeowners’ and dwelling fire policies, ~~was covered under~~covering the ~~2016/2017~~period from December 31, 2021 through January 1, 2023 (“2021/2023 Treaty”). Upon the expiration of the 2021/2023 Treaty ~~and the 2017/2019 Treaty. Our~~on January 1, 2023, we entered into a new quota share reinsurance treaty ~~in effect for 2016~~ for our personal lines business, ~~which primarily consists of homeowners’ policies, was covered under~~covering the ~~2015/2016 Treaty and 2016/2017 Treaty.~~

In March 2017, we bound our 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 the 40% in the 2016/2017 Treaty, and an increase in the provisional ceding commission rate to 53%, from the 52% in the 2016/2017 Treaty. The new treaty covers a two year period from ~~July~~January 1, ~~2017~~2023 through ~~June 30, 2019~~January 1, 2024 (“~~2017/2019~~2023/2024 Treaty”).

We have the option under certain circumstances to reduce the quota share ceding rate or terminate the 2017/2019 Treaty effective July 1, 2018 by giving advance notice to the two reinsurers who participate in the quota share reinsurance treaty. Such two reinsurers who participate in the quota share reinsurance treaty have the option under limited circumstances to reduce the quota share ceding rate or terminate the 2017/2019 Treaty effective July 1, 2018 by giving advance notice to us.

~~Our 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, 2019

June 30, 2017

June 30, 2016




Commercial Lines:



General liability commercial policies, except for commercial auto



Quota share treaty:



Percent ceded (terminated effective July 1, 2014)
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)~~

~~(2)~~

~~Plus losses in~~entered into new excess of loss and catastrophe ~~coverage.~~

~~(3)~~

~~(4)~~

~~From July 1, 2015 through June 30, 2016, 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 we are subject under the new~~reinsurance treaties effective July 1, ~~2017~~2023. Effective January 1, 2022, we entered into an underlying excess of loss reinsurance treaty (“Underlying XOL Treaty”) covering the period from January 1, 2022 through January 1, 2023. The Underlying XOL Treaty provides 50% reinsurance coverage for losses of $400,000 in excess of $600,000. Losses from named storms are excluded from the Underlying XOL Treaty. Effective January 1, 2023, the Underlying XOL Treaty was renewed covering the period from January 1, 2023 through January 1, 2024. Material terms for our reinsurance treaties in effect for the treaty years shown below are as follows:

	~~July 1, 2017 - June 30, 2018~~
~~Treaty~~	~~Extent of Loss~~	~~Risk Retained~~
~~Personal Lines (1)~~	~~Initial $1,000,000~~	~~$800,000~~
	~~$1,000,000 - $10,000,000~~	~~None(2)~~
	~~Over $10,00,000~~	~~100%~~

~~Personal Umbrella~~	~~Initial $1,000,000~~	~~$100,000~~75
	~~$1,000,000 - $5,000,000~~	~~None~~
Table of Contents

	Treaty Period
			2023/2024 Treaty						2021/2023 Treaty
	January 2, 2024		July 1, 2023			January 1, 2023			July 1, 2022			December 31, 2021
	to		to			to			to			to
Line of Business	June 30, 2024		January 1, 2024			June 30, 2023			January 1, 2023			June 30, 2022

Personal Lines:
Homeowners, dwelling fire and canine legal liability
Quota share treaty:
Percent ceded (7)		(6)		30	%		30	%		30	%		30	%
Risk retained on intial $1,000,000 of losses (5) (6) (7)	$	1,000,000	$	700,000		$	700,000		$	700,000		$	700,000
Losses per occurrence subject to quota share reinsurance coverage		(6)	$	1,000,000		$	1,000,000		$	1,000,000		$	1,000,000

Expiration date		(6)	January 1, 2024			January 1, 2024			January 1, 2023			January 1, 2023
Excess of loss coverage and facultative facility coverage (1) (5) (6)	$	8,000,000	$	8,400,000		$	8,400,000		$	8,400,000		$	8,400,000
	in excess of		in excess of			in excess of			in excess of			in excess of
	$	1,000,000	$	600,000		$	600,000		$	600,000		$	600,000
Total reinsurance coverage per occurrence (5) (6)	$	8,000,000	$	8,500,000		$	8,500,000		$	8,500,000		$	8,500,000
Losses per occurrence subject to reinsurance coverage	$	8,000,000	$	8,000,000		$	8,000,000		$	9,000,000		$	9,000,000
Expiration date (6)	June 30, 2024		June 30, 2024			June 30, 2023			June 30, 2023			June 30, 2022

Catastrophe Reinsurance:
Initial loss subject to personal lines quota share treaty (6)	$	10,000,000	$	10,000,000		$	10,000,000		$	10,000,000		$	10,000,000
Risk retained per catastrophe occurrence (6) (7) (8)	$	10,000,000	$	8,750,000		$	8,750,000		$	7,400,000		$	7,400,000
Catastrophe loss coverage
in excess of quota share
coverage (2) (6)	$	315,000,000	$	315,000,000		$	335,000,000		$	335,000,000		$	490,000,000

Reinstatement premium
protection (3) (4)	Yes		Yes			Yes			Yes			Yes

(1)	~~Over $5,000,000~~	~~100%~~ For personal lines, includes the addition of an automatic facultative facility allowing KICO to obtain homeowners single risk coverage up to $9,000,000 in total insured value, which covers direct losses from $3,500,000 to $9,000,000 through September 30, 2024.
(2)	Catastrophe coverage is limited on an annual basis to two times the per occurrence amounts. Duration of 168 consecutive hours for a catastrophe occurrence from windstorm, hail, tornado, hurricane and cyclone.
(3)	For the period December 31, 2021 through June 30, 2022, reinstatement premium protection for $70,000,000 of catastrophe coverage in excess of $10,000,000.
(4)	For the period July 1, 2022 through June 30, 2023, reinstatement premium protection for $9,800,000 of catastrophe coverage in excess of $10,000,000. For the period July 1, 2023 through June 30, 2024, reinstatement premium protection for $12,500,000 of catastrophe coverage in excess of $10,000,000


~~Commercial Lines~~	~~Initial $750,000~~	~~$750,000~~76
	~~$750,000 - $4,500,000~~	~~None(3)~~
Table of Contents

	~~Over $4,500,000~~	~~100%~~
(5)	For the period January 1, 2022 through January 1, 2024, underlying excess of loss treaty provides 50% reinsurance coverage for losses of $400,000 in excess of $600,000. Reduces retention to $500,000 from $700,000 under the 2021/2023 Treaty and 2022/2023 Treaty. Excludes losses from named storms.
(6)	Personal lines quota share (homeowners, dwelling fire and canine liability) and underlying excess of loss reinsurance will expire on January 1, 2024; reinsurance coverage in effect from January 2, 2024 through June 30, 2024 is only for excess of loss and catastrophe reinsurance treaties.
(7)	For the 2021/2023 Treaty, 4% of the 30% total of losses ceded under this treaty are excluded from a named catastrophe event. For the 2023/2024 Treaty, 17.5% of the 30% total of losses ceded under this treaty are excluded from a named catastrophe event.
(8)	Plus losses in excess of catastrophe coverage

	Treaty Year
	July 1, 2023			July 1, 2022			July 1, 2021
	to			to			to
Line of Business	June 30, 2024			June 30, 2023			June 30, 2022

Personal Lines:
Personal Umbrella
Quota share treaty:
Percent ceded - first $1,000,000 of coverage		90	%		90	%		90	%
Percent ceded - excess of $1,000,000 dollars of coverage		95	%		95	%		95	%
Risk retained	$	3,00,000		$	3,00,000		$	3,00,000
Total reinsurance coverage per occurrence	$	47,00,000		$	47,00,000		$	47,00,000
Losses per occurrence subject to quota share reinsurance coverage	$	50,00,000		$	50,00,000		$	50,00,000
Expiration date	June 30, 2024			June 30, 2023			June 30, 2022

Commercial Lines (1)

(1)

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

Inflation

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

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

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


~~Commercial Umbrella~~	~~Initial $1,000,000~~	~~$100,000~~77
	~~$1,000,000 - $5,000,000~~	~~None~~
	~~Over $5,000,000~~	~~100%~~Table of Contents

~~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. We and the reinsurers have the option to reduce quota share rate or terminate on June 30, 2018 as discussed above.~~

~~(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 we are subject under the new 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 Extent of Loss Risk Retained Extent 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.~~

Off-Balance Sheet Arrangements

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

~~Factors That May Affect Future Results~~

Outlook

Our net premiums earned may be impacted by a number of factors. Net premiums earned are a function of net written premium volume. Net written premiums comprise both renewal business and ~~Financial Condition~~

~~Based upon~~new business and are recognized as earned premium over the ~~factors set forth under “Factors That May Affect Future Results~~term of the underlying policies. Net written premiums from both renewal and ~~Financial Condition” in Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2016~~new business are impacted by competitive market conditions as well as ~~other factors affecting our operating results~~general economic conditions. We have made underwriting changes to emphasize profitability over growth and ~~financial condition, past financial performance should~~have culled out the type of risks that do not ~~be considered~~generate an acceptable level of return. This action has led, and may continue to belead, to a ~~reliable indicator of future performance, and investors should not use historical trends to anticipate results or trends~~slowdown in ~~future periods. In addition, such factors, among others, may affect the accuracy of certain forward-looking statements contained~~premium growth, particularly in ~~our periodic reports, including this Quarterly Report.~~

new business.

Item 3.Quantitative and Qualitative Disclosures About Market Risk.

~~Not~~

This item is not applicable

to smaller reporting companies.

Item 4.Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

We maintain a system of disclosure controls and procedures ~~(as~~as defined in Rule 13a-15(e) under the Exchange Act ~~Rule 13a-15(e))~~ that are designed to assure that information required to be disclosed in ~~our~~the reports we file or submit under the Exchange Act ~~reports~~ is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.

Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of September 30, 2023, our disclosure controls and procedures were: (i) effective in recording, processing, summarizing, and reporting information on a timely basis that we are required to disclose in the reports that we file or submit under the Exchange Act, and (ii) effective in ensuring that information that we are required to disclose in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

As required by Exchange Act Rule 13a-15(b), as of the end of the period covered by this Quarterly Report, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, we evaluated the effectiveness of our disclosure controls and procedures. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of September 30, ~~2017.~~

2023.

Changes in Internal Control over Financial Reporting

There ~~was no change~~have not been any changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during our most recently completed fiscal quarter that ~~has~~ materially affected, or isare reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitation on Effectiveness of Controls

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

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

Table of Contents

PART II. OTHER INFORMATION

Item 1.Legal Proceedings.

~~None~~

None.

Item 1A.Risk Factors.

~~Not applicable~~

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

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

~~(a) None~~

~~(b) Not applicable~~

~~(c) The following table sets forth certain information with respect to purchases of common stock made by us or any “affiliated purchaser” during the quarter ended September 30, 2017:~~

Period

Total
Number of Shares Purchased(1)

Average
Price Paid
per Share

Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs

Maximum Number of Shares that May Be Purchased Under the Plans or Programs

7/1/17 – 7/31/17
  -
  -
  -
  -
8/1/17 – 8/31/17
  1,012
$15.14
  -
  -
9/1/17 – 9/30/17
  8,000
$14.08
  -
  -
Total
  9,012
$14.20
  -
  -

~~(1)~~

~~Purchases were made by us in open market transactions.~~

	(a)	None.

	(b)	Not applicable.

	(c)	None.

Item 3.Defaults Upon Senior Securities.

~~None~~

None.

Item 4.Mine Safety Disclosures.

Not ~~applicable~~

applicable.

Item 5.Other Information.

~~None~~

None.

Table of Contents

Item 6.Exhibits.

3(a)		Restated Certificate of Incorporation, as amended1 (incorporated by reference to Exhibit 3(a) to the Company’s Quarterly Report on Form 10-Q for the period ended March 31, 2014 filed on May 15, 2014).

3(b)		By-laws, as amended2 (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on November 9, 2009).

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

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

3232+		Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS		XBRL Instance Document

101.SCH		101.SCH XBRL Taxonomy Extension Schema.

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

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

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

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

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

Table of Contents

1~~Denotes document filed as Exhibit 3 (a) to our Quarterly Report on Form 10-Q for the period ended March 31, 2014 and incorporated herein by reference.~~

2~~Denotes document filed Exhibit 3.1 to our Current Report on Form 8-K for an event dated November 5, 2009 and incorporated herein by reference.~~

SIGNATURES

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

	KINGSTONE COMPANIES, INC.

Dated: November 20, 2023	By:	/s/ Meryl Golden
		Meryl Golden
		Chief Executive Officer

Dated: November 20, 2023	By:	/s/ Jennifer Gravelle
		Jennifer Gravelle
		Chief Financial Officer


			81
~~Date:November 9, 2017~~	~~By:~~	~~/s/~~ ~~Barry B. Goldstein~~
		~~Barry B. Goldstein~~
		~~President~~


~~Date:November 9, 2017~~	~~By:~~	~~/s/~~ ~~Victor Brodsky~~
		~~Victor Brodsky~~
		~~Chief Financial Officer~~

KINGSTONE COMPANIES, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
	September 30,	December 31,
	2017	2016
	(unaudited)
Assets
Fixed-maturity securities, held-to-maturity, at amortized cost (fair value of
$5,181,159 at September 30, 2017 and $5,298,119 at December 31, 2016)	$4,846,349	$5,094,902
Fixed-maturity securities, available-for-sale, at fair value (amortized cost of
$110,315,798 at September 30, 2017 and $80,596,628 at December 31, 2016)	111,789,752	80,428,828
Equity securities, available-for-sale, at fair value (cost of $12,706,538
at September 30, 2017 and $9,709,385 at December 31, 2016)	13,221,116	9,987,686
Total investments	129,857,217	95,511,416
Cash and cash equivalents	25,880,306	12,044,520
Premiums receivable, net	13,394,800	11,649,398
Reinsurance receivables, net	24,971,272	32,197,765
Deferred policy acquisition costs	14,381,976	12,239,781
Intangible assets, net	1,095,000	1,350,000
Property and equipment, net	4,187,325	3,011,373
Other assets	1,638,899	1,442,209
Total assets	$215,406,795	$169,446,462

Liabilities
Loss and loss adjustment expense reserves	$42,290,797	$41,736,719
Unearned premiums	63,442,903	54,994,375
Advance premiums	2,086,589	1,421,560
Reinsurance balances payable	1,812,348	2,146,017
Deferred ceding commission revenue	3,953,749	6,851,841
Accounts payable, accrued expenses and other liabilities	6,874,636	5,448,448
Deferred income taxes	1,128,088	166,949
Total liabilities	121,589,110	112,765,909

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 11,610,216 shares
at September 30, 2017 and 8,896,335 at December 31, 2016; outstanding
10,623,407 shares at September 30, 2017 and 7,921,866 shares at December 31, 2016	116,102	88,963
Capital in excess of par	68,306,831	37,950,401
Accumulated other comprehensive income	1,312,431	72,931
Retained earnings	26,254,620	20,563,720
	95,989,984	58,676,015
Treasury stock, at cost, 986,809 shares at September 30, 2017
and 974,469 shares at December 31, 2016	(2,172,299)	(1,995,462)
Total stockholders' equity	93,817,685	56,680,553

Total liabilities and stockholders' equity	$215,406,795	$169,446,462

KINGSTONE COMPANIES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Income and Comprehensive Income (Unaudited)
	For the Three Months Ended		For the Nine Months Ended
	September 30,		September 30,
	2017	2016	2017	2016
Revenues
Net premiums earned	$21,514,408	$15,646,181	$54,837,883	$45,188,731
Ceding commission revenue	1,717,610	2,934,928	8,208,000	8,274,290
Net investment income	1,033,307	709,072	2,917,111	2,286,199
Net realized gains on investments	20,998	241,035	96,915	604,903
Other income	328,330	297,181	926,189	831,036
Total revenues	24,614,653	19,828,397	66,986,098	57,185,159

Expenses
Loss and loss adjustment expenses	7,073,323	5,134,854	22,821,241	20,405,545
Commission expense	5,500,483	4,603,755	15,491,027	13,400,029
Other underwriting expenses	4,475,455	4,039,209	12,887,488	10,981,784
Other operating expenses	1,069,005	530,261	2,731,499	1,292,196
Depreciation and amortization	378,518	262,387	1,023,390	835,388
Total expenses	18,496,784	14,570,466	54,954,645	46,914,942

Income from operations before taxes	6,117,869	5,257,931	12,031,453	10,270,217
Income tax expense	2,043,948	1,797,305	3,976,560	3,426,298
Net income	4,073,921	3,460,626	8,054,893	6,843,919

Other comprehensive income, net of tax
Gross change in unrealized gains
on available-for-sale-securities	499,077	60,391	1,974,946	2,418,305

Reclassification adjustment for gains
included in net income	(20,998)	(241,035)	(96,915)	(604,903)
Net change in unrealized gains (losses)	478,079	(180,644)	1,878,031	1,813,402
Income tax (expense) benefit related to items
of other comprehensive income (loss)	(162,547)	61,419	(638,531)	(616,557)
Other comprehensive income (loss), net of tax	315,532	(119,225)	1,239,500	1,196,845

Comprehensive income	$4,389,453	$3,341,401	$9,294,393	$8,040,764

Earnings per common share:
Basic	$0.38	$0.44	$0.78	$0.89
Diluted	$0.38	$0.43	$0.77	$0.89

Weighted average common shares outstanding
Basic	10,626,242	7,911,353	10,307,689	7,676,887
Diluted	10,832,739	7,972,925	10,500,272	7,729,712

Dividends declared and paid per common share	$0.0800	$0.0625	$0.2225	$0.1875

KINGSTONE COMPANIES, INC. AND SUBSIDIARIES

Condensed Consolidated Statement of Stockholders' Equity (Unaudited)
Nine months ended September 30, 2017


						Accumulated
					Capital	Other
	Preferred Stock		Common Stock		in Excess	Comprehensive	Retained	Treasury Stock
	Shares	Amount	Shares	Amount	of Par	Income	Earnings	Shares	Amount	Total
Balance, January 1, 2017	-	$-	8,896,335	$88,963	$37,950,401	$72,931	$20,563,720	974,469	$(1,995,462)	$56,680,553
Proceeds from public offering, net of
offering costs of $2,173,000	-	-	2,692,500	26,925	30,109,774	-	-	-	-	30,136,699
Stock-based compensation	-	-	-	-	198,046	-	-	-	-	198,046
Vesting of restricted stock awards	-	-	8,966	90	(90)	-	-	-	-	-
Shares deducted from restricted stock
awards for payment of withholding taxes			(1,163)	(12)	(17,681)					(17,693)
Exercise of stock options	-	-	13,578	136	66,381	-	-	-	-	66,517
Acquisition of treasury stock	-	-	-	-	-	-	-	12,340	(176,837)	(176,837)
Dividends	-	-	-	-	-	-	(2,363,993)	-	-	(2,363,993)
Net income	-	-	-	-	-	-	8,054,893	-	-	8,054,893
Change in unrealized gains on available-
for-sale securities, net of tax	-	-	-	-	-	1,239,500	-	-	-	1,239,500
Balance, September 30, 2017	-	$-	11,610,216	$116,102	$68,306,831	$1,312,431	$26,254,620	986,809	$(2,172,299)	$93,817,685

KINGSTONE COMPANIES, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows (Unaudited)
Nine months ended September 30,	2017	2016

Cash flows from operating activities:
Net income	$8,054,893	$6,843,919
Adjustments to reconcile net income to net cash flows provided by operating activities:
Net realized gains on sale of investments	(96,915)	(604,903)
Depreciation and amortization	1,023,390	835,388
Amortization of bond premium, net	405,832	310,838
Stock-based compensation	198,046	89,814
Deferred income tax expense (benefit)	322,608	(172,835)
(Increase) decrease in operating assets:
Premiums receivable, net	(1,745,402)	(894,774)
Reinsurance receivables, net	7,226,493	57,259
Deferred policy acquisition costs	(2,142,195)	(1,197,101)
Other assets	(219,189)	(308,505)
Increase (decrease) in operating liabilities:
Loss and loss adjustment expense reserves	554,078	(74,177)
Unearned premiums	8,448,528	4,873,607
Advance premiums	665,029	846,905
Reinsurance balances payable	(333,669)	2,307,504
Deferred ceding commission revenue	(2,898,092)	217,786
Accounts payable, accrued expenses and other liabilities	1,426,188	343,707
Net cash flows provided by operating activities	20,889,623	13,474,432

Cash flows from investing activities:
Purchase - fixed-maturity securities available-for-sale	(38,612,403)	(33,295,669)
Purchase - equity securities available-for-sale	(5,298,781)	(6,728,540)
Redemption - fixed-maturity securities held-to-maturity	200,000	-
Sale or maturity - fixed-maturity securities available-for-sale	8,385,874	16,374,028
Sale - equity securities available-for-sale	2,571,122	6,065,744
Acquisition of fixed assets	(1,944,342)	(521,533)
Other investing activities	-	250,448
Net cash flows used in investing activities	(34,698,530)	(17,855,522)

Cash flows from financing activities:
Net proceeds from issuance of common stock	30,136,699	4,807,631
Proceeds from exercise of stock options	66,517	12,725
Purchase of treasury stock	(176,837)	(113,267)
Withholding taxes paid on vested retricted stock awards	(17,693)	-
Dividends paid	(2,363,993)	(1,446,684)
Net cash flows provided by financing activities	27,644,693	3,260,405

Increase (decrease) in cash and cash equivalents	$13,835,786	$(1,120,685)
Cash and cash equivalents, beginning of period	12,044,520	13,551,372
Cash and cash equivalents, end of period	$25,880,306	$12,430,687

Supplemental disclosures of cash flow information:
Cash paid for income taxes	$3,936,000	$3,799,671

	September 30, 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	$11,428,403	$286,360	$(21,223)	$-	$11,693,540	$265,137

Corporate and other bonds
Industrial and miscellaneous	77,734,988	1,416,060	(204,904)	(109,623)	78,836,521	1,101,533

Residential mortgage and other
asset backed securities (1)	21,152,407	291,172	(120,346)	(63,542)	21,259,691	107,284
Total fixed-maturity securities	110,315,798	1,993,592	(346,473)	(173,165)	111,789,752	1,473,954

Equity Securities:
Preferred stocks	6,056,783	59,374	(26,360)	(107,477)	5,982,320	(74,463)
Common stocks and exchange
traded mutual funds	6,649,755	725,638	(77,429)	(59,168)	7,238,796	589,041
Total equity securities	12,706,538	785,012	(103,789)	(166,645)	13,221,116	514,578

Total	$123,022,336	$2,778,604	$(450,262)	$(339,810)	$125,010,868	$1,988,532

	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

	Three months ended		Nine months ended
	September 30,		September 30,
	2017	2016	2017	2016
Income:
Fixed-maturity securities	$926,170	$602,337	$2,607,166	$1,952,589
Equity securities	143,826	135,809	408,812	416,412
Cash and cash equivalents	5,772	5,674	14,446	14,852
Total	1,075,768	743,820	3,030,424	2,383,853
Expenses:
Investment expenses	42,461	34,748	113,313	97,654
Net investment income	$1,033,307	$709,072	$2,917,111	$2,286,199

	September 30, 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	$2,183,221	$(21,223)	4	$-	$-	-	$2,183,221	$(21,223)

Corporate and other
bonds industrial and
miscellaneous	11,306,993	(204,904)	20	4,967,629	(109,623)	9	16,274,622	(314,527)

Residential mortgage and other
asset backed securities	13,999,289	(120,346)	16	1,241,754	(63,542)	5	15,241,043	(183,888)

Total fixed-maturity
securities	$27,489,503	$(346,473)	40	$6,209,383	$(173,165)	14	$33,698,886	$(519,638)

Equity Securities:
Preferred stocks	$1,738,380	$(26,360)	6	$1,786,150	$(107,477)	3	$3,524,530	$(133,837)
Common stocks and
exchange traded mutual funds	1,612,300	(77,429)	3	299,250	(59,168)	1	1,911,550	(136,597)

Total equity securities	$3,350,680	$(103,789)	9	$2,085,400	$(166,645)	4	$5,436,080	$(270,434)

Total	$30,840,183	$(450,262)	49	$8,294,783	$(339,810)	18	$39,134,966	$(790,072)

	September 30, 2017
	Level 1	Level 2	Level 3	Total

Fixed-maturity securities available-for-sale
Political subdivisions of
States, Territories and
Possessions	$-	$11,693,540	$-	$11,693,540

Corporate and other
bonds industrial and
miscellaneous	74,017,938	4,818,583	-	78,836,521

Residential mortgage and other asset backed securities	-	21,259,691	-	21,259,691
Total fixed maturities	74,017,938	37,771,814	-	111,789,752
Equity securities	13,221,116	-	-	13,221,116
Total investments	$87,239,054	$37,771,814	$-	$125,010,868

	September 30, 2017		December 31, 2016
	Carrying Value	Fair Value	Carrying Value	Fair Value

Fixed-maturity securities held-to-maturity	$4,846,349	$5,181,159	$5,094,902	$5,298,119
Cash and cash equivalents	$25,880,306	$25,880,306	$12,044,520	$12,044,520
Premiums receivable	$13,394,800	$13,394,800	$11,649,398	$11,649,398
Reinsurance receivables	$24,971,272	$24,971,272	$32,197,765	$32,197,765
Real estate, net of accumulated depreciation	$1,848,264	$1,925,000	$1,659,405	$1,925,000
Reinsurance balances payable	$1,812,348	$1,812,348	$2,146,017	$2,146,017

	Direct	Assumed	Ceded	Net

Nine months ended September 30, 2017
Premiums written	$89,423,758	$18,203	$(20,719,037)	$68,722,924
Change in unearned premiums	(8,456,690)	8,162	(5,436,513)	(13,885,041)
Premiums earned	$80,967,068	$26,365	$(26,155,550)	$54,837,883

Nine months ended September 30, 2016
Premiums written	$76,375,159	$14,631	$(27,542,953)	$48,846,837
Change in unearned premiums	(4,875,664)	2,058	1,215,500	(3,658,106)
Premiums earned	$71,499,495	$16,689	$(26,327,453)	$45,188,731

Three months ended September 30, 2017
Premiums written	$32,839,891	$11,910	$(590,482)	$32,261,319
Change in unearned premiums	(4,407,894)	(165)	(6,338,852)	(10,746,911)
Premiums earned	$28,431,997	$11,745	$(6,929,334)	$21,514,408

Three months ended September 30, 2016
Premiums written	$27,170,743	$(1,367)	$(9,937,096)	$17,232,280
Change in unearned premiums	(2,302,119)	(1,479)	717,499	(1,586,099)
Premiums earned	$24,868,624	$(2,846)	$(9,219,597)	$15,646,181

											As of
	Incurred Loss and Allocated Loss Adjustment Expenses, Net of Reinsurance										September 30, 2017
	For the Years Ended December 31,
Accident Year	2008	2009	2010	2011	2012	2013	2014	2015	2016	Nine Months Ended September 30,2017	IBNR	Cumulative Number of Reported Claims by Accident Year
	(Unaudited 2008 - 2015)									(Unaudited)

2008	$4,505	$4,329	$4,223	$4,189	$4,068	$4,055	$4,056	$4,040	$4,038	$4,035	$1	1,133
2009		4,403	4,254	4,287	4,384	4,511	4,609	4,616	4,667	4,674	11	1,136
2010			5,598	5,707	6,429	6,623	6,912	6,853	6,838	6,846	9	1,616
2011				7,603	7,678	8,618	9,440	9,198	9,066	9,155	27	1,913
2012					9,539	9,344	10,278	10,382	10,582	10,805	91	4,702(1)
2013						10,728	9,745	9,424	9,621	9,936	300	1,556
2014							14,193	14,260	14,218	14,511	935	2,123
2015								22,340	21,994	21,974	1,640	2,523
2016									26,062	24,940	3,320	2,829
2017										21,572	5,078	2,259
									Total	$128,448

	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

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

	July 1, 2016 - June 30, 2017		July 1, 2015 - June 30, 2016
Treaty	Extent of Loss	Risk Retained	Extent 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%

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	(14,500)	$5.55		$133,058
Forfeited	-	$-		$-

Outstanding at September 30, 2017	348,250	$6.66	1.90	$3,355,953

Vested and Exercisable at September 30, 2017	278,250	$6.53	1.78	$2,717,978

Type of NOL	September 30, 2017	December 31, 2016	Expiration
State only (A)	$786,240	$655,719	December 31, 2037
Valuation allowance	(680,280)	(534,293)
State only, net of valuation allowance	105,960	121,426
Amount subject to Annual Limitation, federal only (B)	6,800	10,200	December 31, 2019
Total deferred tax asset from net operating loss carryovers	$112,760	$131,626

For the Year
Ending
December 31,	Total
2017 (three months)	$39,980
2018	164,117
2019	169,861
2020	175,806
2021	181,959
Thereafter	432,392
Total	$1,164,115

	Nine months ended September 30,
($ in thousands)	2017	2016	Change	Percent
Revenues
Direct written premiums	$89,424	$76,375	$13,049	17.1%
Assumed written premiums	18	15	3	20.0%
	89,442	76,390	13,052	17.1%
Ceded written premiums
Ceded to quota share treaties in force during the period	18,943	19,463	(520)	(2.7)%
Return of premiums previously ceded to prior quota share treaties (1)	(7,140)	-	(7,140)	na
Ceded to quota share treaties	11,803	19,463	(7,660)	(39.4)%
Ceded to excess of loss treaties	903	1,078	(175)	(16.2)%
Ceded to catastrophe treaties	8,013	7,002	1,011	14.4%
Total ceded written premiums	20,719	27,543	(6,824)	(24.8)%

Net written premiums	68,723	48,847	19,876	40.7%

Change in unearned premiums
Direct and assumed	(8,448)	(4,874)	(3,574)	73.3%
Ceded to quota share treaties	(5,437)	1,216	(6,653)	(547.1)%
Change in net unearned premiums	(13,885)	(3,658)	(10,227)	279.6%

Premiums earned
Direct and assumed	80,994	71,516	9,478	13.3%
Ceded to quota share treaties	(26,156)	(26,327)	171	(0.6)%
Net premiums earned	54,838	45,189	9,649	21.4%
Ceding commission revenue	8,208	8,274	(66)	(0.8)%
Net investment income	2,917	2,286	631	27.6%
Net realized gain on investments	97	605	(508)	(84.0)%
Other income	926	831	95	11.4%
Total revenues	66,986	57,185	9,801	17.1%

	Nine months ended September 30, 2017		Nine months ended September 30, 2016
	January 1,	July 1,	January 1,	July 1,
	to	to	to	to
	June 30,	September 30,	June 30,	September 30,
	("2016/2017 Treaty")	("2017/2019 Treaty")	("2015/2016 Treaty")	("2016/2017 Treaty")
Quota share reinsurance rates
Personal lines	40%	20%	40%	40%

	Nine months ended
	September 30,		Percentage
	2017	2016	Point Change

Ceding commission revenue - provisional	(15.8)%	(21.0)%	5.2
Ceding commission revenue - contingent	0.9	2.7	(1.8)
Other income	(1.6)	(1.8)	0.2
Acquisition costs and other underwriting expenses:
Commission expense	28.2	29.7	(1.5)
	11.7	9.6	2.1
Other underwriting expenses
Employment costs attributable to core NY business	9.9	11.0	(1.1)
Expansion Expenses	1.3	0.6	0.7
IT expenses	2.0	1.7	0.3
Other expenses	10.3	10.9	(0.6)
Total other underwriting expenses	23.5	24.2	(0.7)

Net underwriting expense ratio	35.2%	33.8%	1.4

	Three months ended September 30,
($ in thousands)	2017	2016	Change	Percent
Revenues
Direct written premiums	$32,840	$27,171	$5,669	20.9%
Assumed written premiums	12	(1)	13	(1,300.0)%
	32,852	27,170	5,682	20.9%
Ceded written premiums
Ceded to quota share treaties in force during the period	4,635	7,082	(2,447)	(34.6)%
Return of premiums previously ceded to prior quota share treaties (1)	(7,140)	-	(7,140)	na
Ceded to quota share treaties	(2,505)	7,082	(9,587)	(135.4)%
Ceded to excess of loss treaties	267	429	(162)	(37.8)%
Ceded to catastrophe treaties	2,829	2,427	402	16.6%
Total ceded written premiums	591	9,938	(9,347)	(94.1)%

Net written premiums	32,261	17,232	15,029	87.2%

Change in unearned premiums
Direct and assumed	(4,409)	(2,304)	(2,105)	91.4%
Ceded to quota share treaties	(6,339)	718	(7,057)	(982.9)%
Change in net unearned premiums	(10,748)	(1,586)	(9,162)	577.7%

Premiums earned
Direct and assumed	28,445	24,866	3,579	14.4%
Ceded to quota share treaties	(6,931)	(9,220)	2,289	(24.8)%
Net premiums earned	21,514	15,646	5,868	37.5%
Ceding commission revenue	1,718	2,935	(1,217)	(41.5)%
Net investment income	1,033	709	324	45.7%
Net realized gain on investments	21	241	(220)	(91.3)%
Other income	328	297	31	10.4%
Total revenues	24,614	19,828	4,786	24.1%

	September 30, 2017		December 31, 2016
		Percentage of		Percentage of
	Fair Market	Fair Market	Fair Market	Fair Market
	Value	Value	Value	Value

Rating
U.S. Treasury securities	$-	0.0%	$-	0.0%

Corporate and municipal bonds
AAA	1,571,341	1.4%	1,801,106	2.2%
AA	11,498,555	10.3%	7,236,457	9.0%
A	17,319,455	15.6%	13,944,784	17.3%
BBB	59,211,360	53.0%	38,908,731	48.4%
BB	929,350	0.8%	-	0.0%
Total corporate and municipal bonds	90,530,061	81.1%	61,891,078	76.9%

Residential mortgage and other asset backed securities
AAA	2,021,700	1.8%	-	0.0%
AA	11,564,239	10.3%	14,143,828	17.7%
A	3,908,071	3.5%	173,973	0.2%
CCC	1,415,748	1.3%	513,369	0.6%
CC	126,335	0.1%	-	0.0%
C	30,318	0.0%	112,136	0.1%
D	1,811,320	1.6%	3,594,444	4.5%
Not rated	381,960	0.3%	-	0.0%
Total residential mortgage and other asset backed securities	21,259,691	18.9%	18,537,750	23.1%

Total	$111,789,752	100.0%	$80,428,828	100.0%

Period	Total Number of Shares Purchased(1)	Average Price Paid per Share	Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares that May Be Purchased Under the Plans or Programs

7/1/17 – 7/31/17	-	-	-	-
8/1/17 – 8/31/17	1,012	$15.14	-	-
9/1/17 – 9/30/17	8,000	$14.08	-	-
Total	9,012	$14.20	-	-