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, 20222023
OR
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from _________to _________
Commission File Number 0-1665
KINGSTONE COMPANIES, INC. |
(Exact name of registrant as specified in its charter) |
Delaware |
| 36-2476480 |
(State or other jurisdiction of incorporation or organization) |
| (I.R.S. Employer Identification Number) |
15 Joys Lane
Kingston, NY 12401
(Address of principal executive offices)
(845) 802-7900
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Common Stock, $0.01 par value per share | KINS | Nasdaq Capital Market |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, and “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer | ☐ | Accelerated filer | ☐ |
Non-accelerated | ☒ | 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 14, 2022,20, 2023, there were 10,684,49910,759,330 shares of the registrant’s common stock outstanding.
KINGSTONE COMPANIES, INC.
INDEX
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| 4 |
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| 6-7 |
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| 8-9 |
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| Notes to Condensed Consolidated Financial Statements (Unaudited) |
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| 10 |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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| 78 |
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| 81 |
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2 |
Table of Contents |
Forward-Looking Statements
This Quarterly Report contains forward‑looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The events described in forward‑looking statements contained in this Quarterly Report may not occur. Generally, these statements relate to business plans or strategies, projected or anticipated results or other consequences of our plans or strategies, projected or anticipated results from acquisitions to be made by us, or projections involving anticipated revenues, earnings, costs or other aspects of our operating results. The words “may,” “will,” “expect,” “believe,” “anticipate,” “project,” “plan,” “intend,” “estimate,” and “continue,” and their opposites and similar expressions are intended to identify forward‑looking statements. We caution you that these statements are not guarantees of future performance or events and are subject to a number of uncertainties, risks and other influences, many of which are beyond our control, which may influence the accuracy of the statements and the projections upon which the statements are based. Factors which may cause actual results and outcomes to differ materially from those contained in the forward-looking statements include, but are not limited to the risks and uncertainties discussed in Part I, Item 1A (“Risk Factors”) of our Annual Report under “Factors That May Affect Future Results and Financial Condition” on Form 10-K for the year ended December 31, 2021,2022, Part I, Item 2 of this Quarterly Report and Part II, Item 1A of this Quarterly Report.
Any one or more of these uncertainties, risks and other influences could materially affect our results of operations and whether forward‑looking statements made by us ultimately prove to be accurate. Our actual results, performance and achievements could differ materially from those expressed or implied in these forward‑looking statements. We undertake no obligation to publicly update or revise any forward‑looking statements, whether from new information, future events or otherwise except as required by law.
3 |
Table of Contents |
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
KINGSTONE COMPANIES, INC. AND SUBSIDIARIES | KINGSTONE COMPANIES, INC. AND SUBSIDIARIES | KINGSTONE COMPANIES, INC. AND SUBSIDIARIES | ||||||||||||||
Condensed Consolidated Balance Sheets |
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| September 30, |
| December 31, |
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| September 30, |
| December 31, |
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|
| 2022 |
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| 2021 |
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| 2023 |
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| 2022 |
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| (unaudited) |
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| (unaudited) |
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Assets |
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Fixed-maturity securities, held-to-maturity, at amortized cost (fair value of $6,611,858 at September 30, 2022 and $8,753,159 at December 31, 2021) |
| $ | 7,767,183 |
| $ | 8,266,334 |
| |||||||||
Fixed-maturity securities, available-for-sale, at fair value (amortized cost of $165,534,467 at September 30, 2022 and $155,808,478 at December 31, 2021) |
| 145,305,707 |
| 158,080,110 |
| |||||||||||
Equity securities, at fair value (cost of $26,776,016 at September 30, 2022 and $37,470,669 at December 31, 2021) |
| 21,468,446 |
| 39,687,002 |
| |||||||||||
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 |
|
| 2,576,272 |
|
|
| 7,561,415 |
|
|
| 3,213,318 |
|
|
| 2,771,652 |
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Total investments |
| 177,117,608 |
| 213,594,861 |
|
| 156,961,693 |
| 179,087,345 |
| ||||||
Cash and cash equivalents |
| 15,111,206 |
| 24,290,598 |
|
| 15,132,969 |
| 11,958,228 |
| ||||||
Premiums receivable, net |
| 12,891,464 |
| 12,318,336 |
|
| 13,326,369 |
| 13,880,504 |
| ||||||
Reinsurance receivables, net |
| 59,365,937 |
| 40,292,438 |
|
| 84,257,926 |
| 66,465,061 |
| ||||||
Deferred policy acquisition costs |
| 23,205,684 |
| 22,238,987 |
|
| 20,532,322 |
| 23,819,453 |
| ||||||
Intangible assets |
| 500,000 |
| 500,000 |
|
| 500,000 |
| 500,000 |
| ||||||
Property and equipment, net |
| 10,161,507 |
| 9,291,597 |
|
| 9,594,500 |
| 10,541,935 |
| ||||||
Deferred income taxes, net |
| 8,856,948 |
| 192,253 |
|
| 12,789,160 |
| 10,331,158 |
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Other assets |
|
| 8,497,592 |
|
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| 8,593,205 |
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| 3,893,322 |
|
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| 3,748,847 |
|
Total assets |
| $ | 315,707,946 |
|
| $ | 331,312,275 |
|
| $ | 316,988,261 |
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| $ | 320,332,531 |
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Liabilities |
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Loss and loss adjustment expense reserves |
| $ | 106,928,898 |
| $ | 94,948,745 |
|
| $ | 121,674,947 |
| $ | 118,339,513 |
| ||
Unearned premiums |
| 103,789,380 |
| 97,759,607 |
|
| 103,161,550 |
| 107,492,777 |
| ||||||
Advance premiums |
| 6,627,275 |
| 2,693,466 |
|
| 6,288,223 |
| 2,839,028 |
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Reinsurance balances payable |
| 11,475,247 |
| 12,961,568 |
|
| 20,263,484 |
| 13,061,966 |
| ||||||
Deferred ceding commission revenue |
| 10,320,370 |
| 9,748,508 |
|
| 9,393,051 |
| 10,619,569 |
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Accounts payable, accrued expenses and other liabilities |
| 7,740,737 |
| 7,704,396 |
|
| 4,453,452 |
| 6,651,723 |
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Debt, net |
|
| 29,955,926 |
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| 29,823,791 |
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| 25,224,693 |
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| 25,158,523 |
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Total liabilities |
|
| 276,837,833 |
|
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| 255,640,081 |
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| 290,459,400 |
|
|
| 284,163,099 |
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Commitments and Contingencies (Note 11) |
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Stockholders' Equity |
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Preferred stock, $0.01 par value; authorized 2,500,000 shares |
| - |
| - |
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Common stock, $0.01 par value; authorized 20,000,000 shares; issued 12,117,081 shares at September 30, 2022 and 11,955,660 shares at December 31, 2021; outstanding 10,645,675 shares at September 30, 2022 and 10,484,254 shares at December 31, 2021 |
| 121,171 |
| 119,557 |
| |||||||||||
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 |
| 73,290,935 |
| 72,467,483 |
|
| 75,153,808 |
| 74,519,590 |
| ||||||
Accumulated other comprehensive (loss) income |
| (15,978,570 | ) |
| 1,796,739 |
| ||||||||||
(Accumulated deficit) retained earnings |
|
| (12,995,942 | ) |
|
| 6,855,896 |
| ||||||||
Accumulated other comprehensive loss |
| (17,119,479 | ) |
| (15,958,428 | ) | ||||||||||
Accumulated deficit |
|
| (26,060,262 | ) |
|
| (16,945,964 | ) | ||||||||
|
| 44,437,594 |
| 81,239,675 |
|
| 32,096,342 |
| 41,736,913 |
| ||||||
Treasury stock, at cost, 1,471,406 shares at September 30, 2022 and December 31, 2021 |
|
| (5,567,481 | ) |
|
| (5,567,481 | ) | ||||||||
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 |
|
| 38,870,113 |
|
|
| 75,672,194 |
|
|
| 26,528,861 |
|
|
| 36,169,432 |
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Total liabilities and stockholders' equity |
| $ | 315,707,946 |
|
| $ | 331,312,275 |
|
| $ | 316,988,261 |
|
| $ | 320,332,531 |
|
See accompanying notes to condensed consolidated financial statements.
4 |
Table of Contents |
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KINGSTONE COMPANIES, INC. AND SUBSIDIARIES | KINGSTONE COMPANIES, INC. AND SUBSIDIARIES | KINGSTONE COMPANIES, INC. AND SUBSIDIARIES | ||||||||||||||||||||||||||||||||||
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Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (Unaudited) |
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Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited) | Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited) |
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| For the Three Months Ended |
| For the Nine Months Ended |
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| For the Three Months Ended September 30, |
| For the Nine Months Ended September 30, |
|
| September 30, |
| September 30, |
| ||||||||||||||||||||||||||
|
| 2022 |
| 2021 |
| 2022 |
| 2021 |
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| 2023 |
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| 2022 |
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| 2023 |
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| 2022 |
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Revenues |
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Net premiums earned |
| $ | 29,360,976 |
| $ | 36,803,251 |
| $ | 83,936,424 |
| $ | 106,828,895 |
|
| $ | 27,938,318 |
| $ | 29,360,976 |
| $ | 85,701,467 |
| $ | 83,936,424 |
| ||||||||||
Ceding commission revenue |
| 4,886,094 |
| (7,276 | ) |
| 14,283,077 |
| 37,400 |
|
| 5,536,327 |
| 4,886,094 |
| 16,393,944 |
| 14,283,077 |
| |||||||||||||||||
Net investment income |
| 1,418,521 |
| 1,676,596 |
| 3,411,946 |
| 5,137,867 |
|
| 1,444,360 |
| 1,418,521 |
| 4,437,208 |
| 3,411,946 |
| ||||||||||||||||||
Net (losses) gains on investments |
| (397,658 | ) |
| 204,534 |
| (9,313,436 | ) |
| 5,480,202 |
|
| (824,370 | ) |
| (397,658 | ) |
| 597,643 |
| (9,313,436 | ) | ||||||||||||||
Other income |
|
| 269,702 |
|
|
| 280,869 |
|
|
| 750,169 |
|
|
| 577,261 |
|
|
| 142,036 |
|
|
| 269,702 |
|
|
| 454,160 |
|
|
| 750,169 |
| ||||
Total revenues |
|
| 35,537,635 |
|
|
| 38,957,974 |
|
|
| 93,068,180 |
|
|
| 118,061,625 |
|
|
| 34,236,671 |
|
|
| 35,537,635 |
|
|
| 107,584,422 |
|
|
| 93,068,180 |
| ||||
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Expenses |
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Loss and loss adjustment expenses |
| 22,027,516 |
| 35,740,235 |
| 63,624,755 |
| 79,060,117 |
|
| 21,932,453 |
| 22,027,516 |
| 66,552,565 |
| 63,624,755 |
| ||||||||||||||||||
Commission expense |
| 8,702,190 |
| 8,201,935 |
| 25,534,307 |
| 24,711,115 |
|
| 8,210,430 |
| 8,702,190 |
| 25,221,374 |
| 25,534,307 |
| ||||||||||||||||||
Other underwriting expenses |
| 7,276,101 |
| 6,562,743 |
| 20,717,047 |
| 19,722,705 |
|
| 6,318,625 |
| 7,276,101 |
| 19,873,882 |
| 20,717,047 |
| ||||||||||||||||||
Other operating expenses |
| 809,597 |
| 855,499 |
| 2,357,367 |
| 3,141,077 |
|
| 441,963 |
| 809,597 |
| 1,868,011 |
| 2,357,367 |
| ||||||||||||||||||
Depreciation and amortization |
| 824,975 |
| 820,091 |
| 2,472,348 |
| 2,480,085 |
|
| 741,059 |
| 824,975 |
| 2,327,691 |
| 2,472,348 |
| ||||||||||||||||||
Interest expense |
|
| 456,545 |
|
|
| 456,545 |
|
|
| 1,369,635 |
|
|
| 1,369,635 |
|
|
| 988,699 |
|
|
| 456,545 |
|
|
| 3,004,564 |
|
|
| 1,369,635 |
| ||||
Total expenses |
|
| 40,096,924 |
|
|
| 52,637,048 |
|
|
| 116,075,459 |
|
|
| 130,484,734 |
|
|
| 38,633,229 |
|
|
| 40,096,924 |
|
|
| 118,848,087 |
|
|
| 116,075,459 |
| ||||
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Loss from operations before taxes |
| (4,559,289 | ) |
| (13,679,074 | ) |
| (23,007,279 | ) |
| (12,423,109 | ) |
| (4,396,558 | ) |
| (4,559,289 | ) |
| (11,263,665 | ) |
| (23,007,279 | ) | ||||||||||||
Income tax benefit |
|
| (561,668 | ) |
|
| (3,060,809 | ) |
|
| (4,432,507 | ) |
|
| (2,817,108 | ) |
|
| (858,987 | ) |
|
| (561,668 | ) |
|
| (2,149,367 | ) |
|
| (4,432,507 | ) | ||||
Net loss |
|
| (3,997,621 | ) |
|
| (10,618,265 | ) |
|
| (18,574,772 | ) |
|
| (9,606,001 | ) |
|
| (3,537,571 | ) |
|
| (3,997,621 | ) |
|
| (9,114,298 | ) |
|
| (18,574,772 | ) | ||||
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Other comprehensive loss, net of tax |
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Gross change in unrealized losses |
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on available-for-sale-securities |
| (5,047,679 | ) |
| (829,298 | ) |
| (22,556,319 | ) |
| (3,578,413 | ) | ||||||||||||||||||||||||
Gross change in unrealized losses on available-for-sale-securities |
| (2,821,785 | ) |
| (5,047,679 | ) |
| (1,486,887 | ) |
| (22,556,319 | ) | ||||||||||||||||||||||||
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Reclassification adjustment for losses (gains) |
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| |||||||||||||||||||||||||||
included in net loss |
|
| 4,247 |
|
|
| (335,668 | ) |
|
| 55,927 |
|
|
| (1,071,439 | ) | ||||||||||||||||||||
Net change in unrealized losses |
| (5,043,432 | ) |
| (1,164,966 | ) |
| (22,500,392 | ) |
| (4,649,852 | ) | ||||||||||||||||||||||||
Income tax benefit related to items |
|
|
|
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|
|
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| |||||||||||||||||||||||||||
of other comprehensive loss |
|
| 1,059,120 |
|
|
| 244,643 |
|
|
| 4,725,083 |
|
|
| 976,470 |
| ||||||||||||||||||||
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 |
|
| (3,984,312 | ) |
|
| (920,323 | ) |
|
| (17,775,309 | ) |
|
| (3,673,382 | ) |
|
| (2,225,907 | ) |
|
| (3,984,312 | ) |
|
| (1,161,051 | ) |
|
| (17,775,309 | ) | ||||
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| ||||||||||||||||||
Comprehensive loss |
| $ | (7,981,933 | ) |
| $ | (11,538,588 | ) |
| $ | (36,350,081 | ) |
| $ | (13,279,383 | ) |
| $ | (5,763,478 | ) |
| $ | (7,981,933 | ) |
| $ | (10,275,349 | ) |
| $ | (36,350,081 | ) | ||||
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|
|
|
|
|
|
|
|
|
| ||||||||||||||||||
Loss per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||
Basic |
| $ | (0.38 | ) |
| $ | (1.01 | ) |
| $ | (1.75 | ) |
| $ | (0.90 | ) |
| $ | (0.33 | ) |
| $ | (0.38 | ) |
| $ | (0.85 | ) |
| $ | (1.75 | ) | ||||
Diluted |
| $ | (0.38 | ) |
| $ | (1.01 | ) |
| $ | (1.75 | ) |
| $ | (0.90 | ) |
| $ | (0.33 | ) |
| $ | (0.38 | ) |
| $ | (0.85 | ) |
| $ | (1.75 | ) | ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||
Weighted average common shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||
Basic |
|
| 10,645,675 |
|
| 10,523,515 |
|
| 10,640,290 |
|
| 10,622,988 |
|
|
| 10,756,156 |
|
|
| 10,645,675 |
|
|
| 10,754,709 |
|
|
| 10,640,290 |
| |||||||
Diluted |
|
| 10,645,675 |
|
| 10,523,515 |
|
| 10,640,290 |
|
| 10,622,988 |
|
|
| 10,756,156 |
|
|
| 10,645,675 |
|
|
| 10,754,709 |
|
|
| 10,640,290 |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||
Dividends declared and paid per common share |
| $ | 0.04 |
| $ | 0.04 |
| $ | 0.12 |
| $ | 0.12 |
|
| $ | - |
|
| $ | 0.04 |
|
| $ | - |
|
| $ | 0.12 |
|
See accompanying notes to condensed consolidated financial statements.
5 |
Table of Contents |
KINGSTONE COMPANIES, INC. AND SUBSIDIARIES | ||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
Condensed Consolidated Statements of Stockholders' Equity (Unaudited) | ||||||||||||||||||||||||||||||||||||||||
Three months ended September 30, 2022 and 2021 | ||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
|
|
|
|
|
|
| |||||||||||||||||||
|
|
|
|
|
|
|
|
|
| Capital |
|
| Other |
|
|
|
|
|
|
|
|
| ||||||||||||||||||
|
| Preferred Stock |
|
| Common Stock |
|
| in Excess |
|
| Comprehensive |
|
| Retained |
|
| Treasury Stock |
|
|
| ||||||||||||||||||||
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| of Par |
|
| Income (Loss) |
|
| Earnings |
|
| Shares |
|
| Amount |
|
| Total |
| ||||||||||
Balance, July 1, 2021 |
|
| - |
|
| $ | - |
|
|
| 11,944,220 |
|
| $ | 119,442 |
|
| $ | 71,567,797 |
|
| $ | 7,127,003 |
|
| $ | 16,086,337 |
|
|
| 1,383,077 |
|
| $ | (4,935,933 | ) |
| $ | 89,964,646 |
|
Stock-based compensation |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 466,658 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 466,658 |
|
Vesting of restricted stock awards |
|
| - |
|
|
| - |
|
|
| 4,907 |
|
|
| 49 |
|
|
| (49 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Shares deducted from restricted stock awards for payment of withholding taxes |
|
| - |
|
|
| - |
|
|
| (1,508 | ) |
|
| (15 | ) |
|
| (9,371 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (9,386 | ) |
Acquisition of treasury stock |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 88,329 |
|
|
| (631,548 | ) |
|
| (631,548 | ) |
Dividends |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (420,525 | ) |
|
| - |
|
|
| - |
|
|
| (420,525 | ) |
Net loss |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (10,618,265 | ) |
|
| - |
|
|
| - |
|
|
| (10,618,265 | ) |
Change in unrealized losses on available- |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
|
|
|
for-sale securities, net of tax |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (920,323 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (920,323 | ) |
Balance, September 30, 2021 |
|
| - |
|
| $ | - |
|
|
| 11,947,619 |
|
| $ | 119,476 |
|
| $ | 72,025,035 |
|
| $ | 6,206,680 |
|
| $ | 5,047,547 |
|
|
| 1,471,406 |
|
| $ | (5,567,481 | ) |
| $ | 77,831,257 |
|
|
|
|
|
|
|
|
|
|
|
|
| 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 |
|
Vesting of restricted stock awards |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Shares deducted from restricted stock awards for payment of withholding taxes |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
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 |
|
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.
6 |
Table of Contents |
KINGSTONE COMPANIES, INC. AND SUBSIDIARIES | ||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
Condensed Consolidated Statements of Stockholders' Equity (Unaudited) | ||||||||||||||||||||||||||||||||||||||||
Nine months ended September 30, 2022 and 2021 | ||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
|
|
|
|
|
|
| |||||||||||||||||||
|
|
|
|
|
|
|
|
|
| Capital |
|
| Other |
|
|
|
|
|
|
|
|
| ||||||||||||||||||
|
| Preferred Stock |
|
| Common Stock |
|
| in Excess |
|
| Comprehensive |
|
| Retained |
|
| Treasury Stock |
|
|
| ||||||||||||||||||||
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| of Par |
|
| Income (Loss) |
|
| Earnings |
|
| Shares |
|
| Amount |
|
| Total |
| ||||||||||
Balance, January 1, 2021 |
|
| - |
|
| $ | - |
|
|
| 11,871,307 |
|
| $ | 118,713 |
|
| $ | 70,769,165 |
|
| $ | 9,880,062 |
|
| $ | 15,928,345 |
|
|
| 1,254,492 |
|
| $ | (3,895,883 | ) |
| $ | 92,800,402 |
|
Stock-based compensation |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 1,447,725 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 1,447,725 |
|
Vesting of restricted stock awards |
|
| - |
|
|
| - |
|
|
| 104,030 |
|
|
| 1,040 |
|
|
| (1,040 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Shares deducted from restricted stock awards for payment of withholding taxes |
|
| - |
|
|
| - |
|
|
| (27,718 | ) |
|
| (277 | ) |
|
| (190,815 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (191,092 | ) |
Acquisition of treasury stock |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 216,914 |
|
|
| (1,671,598 | ) |
|
| (1,671,598 | ) |
Dividends |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (1,274,797 | ) |
|
| - |
|
|
| - |
|
|
| (1,274,797 | ) |
Net loss |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (9,606,001 | ) |
|
| - |
|
|
| - |
|
|
| (9,606,001 | ) |
Change in unrealized losses on available-for-sale securities, net of tax |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (3,673,382 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (3,673,382 | ) |
Balance, September 30, 2021 |
|
| - |
|
| $ | - |
|
|
| 11,947,619 |
|
| $ | 119,476 |
|
| $ | 72,025,035 |
|
| $ | 6,206,680 |
|
| $ | 5,047,547 |
|
|
| 1,471,406 |
|
| $ | (5,567,481 | ) |
| $ | 77,831,257 |
|
|
|
|
|
|
|
|
|
|
|
|
| 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 |
|
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.
7 |
Table of Contents |
KINGSTONE COMPANIES, INC. AND SUBSIDIARIES | KINGSTONE COMPANIES, INC. AND SUBSIDIARIES | KINGSTONE COMPANIES, INC. AND SUBSIDIARIES | ||||||||||||||
|
|
|
|
|
|
| ||||||||||
Condensed Consolidated Statements of Cash Flows (Unaudited) |
|
|
|
|
|
|
| |||||||||
Nine months ended September 30, |
| 2022 |
| 2021 |
| |||||||||||
Nine Months ended September 30, |
| 2023 |
|
| 2022 |
| ||||||||||
|
|
|
|
|
|
|
|
|
|
| ||||||
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
| ||||||
Net loss |
| $ | (18,574,772 | ) |
| $ | (9,606,001 | ) |
| $ | (9,114,298 | ) |
| $ | (18,574,772 | ) |
Adjustments to reconcile net loss to net cash flows |
|
|
|
|
| |||||||||||
(used in) provided by operating activities: |
|
|
|
|
| |||||||||||
Net gains on investments |
| (599,773 | ) |
| (2,793,522 | ) | ||||||||||
Net unrealized losses (gains) on equity investments |
| 7,549,640 |
| (592,397 | ) | |||||||||||
Net unrealized losses (gains) on other investments |
| 2,363,568 |
| (2,094,283 | ) | |||||||||||
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 |
| 2,472,348 |
| 2,480,085 |
|
| 2,327,691 |
| 2,472,348 |
| ||||||
Bad debt expense |
| 43,365 |
| 150,024 |
|
| 59,099 |
| 43,365 |
| ||||||
Amortization of bond premium, net |
| 922,257 |
| 165,413 |
|
| 118,280 |
| 922,257 |
| ||||||
Amortization of discount and issuance costs on debt |
| 132,135 |
| 132,135 |
|
| 890,758 |
| 132,135 |
| ||||||
Stock-based compensation |
| 1,204,865 |
| 1,447,725 |
|
| 636,178 |
| 1,204,865 |
| ||||||
Deferred income tax benefit |
| (3,939,612 | ) |
| (2,642,595 | ) |
| (2,149,367 | ) |
| (3,939,612 | ) | ||||
Decrease (increase) in operating assets: |
|
|
|
|
|
|
|
|
|
| ||||||
Premiums receivable, net |
| (616,493 | ) |
| 360,296 |
|
| 495,036 |
| (616,493 | ) | |||||
Reinsurance receivables, net |
| (19,073,499 | ) |
| 22,498,715 |
|
| (17,792,865 | ) |
| (19,073,499 | ) | ||||
Deferred policy acquisition costs |
| (966,697 | ) |
| (1,119,401 | ) |
| 3,287,131 |
| (966,697 | ) | |||||
Other assets |
| 95,613 |
| (406,756 | ) |
| (144,475 | ) |
| 95,613 |
| |||||
Increase (decrease) in operating liabilities: |
|
|
|
|
|
|
|
|
|
| ||||||
Loss and loss adjustment expense reserves |
| 11,980,153 |
| 18,242,890 |
|
| 3,335,434 |
| 11,980,153 |
| ||||||
Unearned premiums |
| 6,029,773 |
| 2,644,506 |
|
| (4,331,227 | ) |
| 6,029,773 |
| |||||
Advance premiums |
| 3,933,809 |
| 2,665,160 |
|
| 3,449,195 |
| 3,933,809 |
| ||||||
Reinsurance balances payable |
| (1,486,321 | ) |
| (2,713,643 | ) |
| 7,201,518 |
| (1,486,321 | ) | |||||
Deferred ceding commission revenue |
| 571,862 |
| (5,673 | ) |
| (1,226,518 | ) |
| 571,862 |
| |||||
Accounts payable, accrued expenses and other liabilities |
|
| 36,341 |
|
|
| 267,109 |
|
|
| (2,198,271 | ) |
|
| 36,341 |
|
Net cash flows (used in) provided by operating activities |
|
| (7,921,438 | ) |
|
| 29,079,787 |
| ||||||||
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 | ) |
| (3,175,686 | ) |
| - |
| (498,711 | ) | |||||
Purchase - fixed-maturity securities available-for-sale |
| (24,874,443 | ) |
| (32,753,786 | ) |
| (13,167,937 | ) |
| (24,874,443 | ) | ||||
Purchase - equity securities |
| (637,897 | ) |
| (17,834,076 | ) |
| - |
| (637,897 | ) | |||||
Purchase - other investments |
| - |
| (2,000,000 | ) | |||||||||||
Redemption - fixed-maturity securities held-to-maturity |
| 1,000,000 |
| 1,312,500 |
|
| 750,000 |
| 1,000,000 |
| ||||||
Sale and maturity - fixed-maturity securities available-for-sale |
| 14,213,435 |
| 33,335,036 |
|
| 33,453,349 |
| 14,213,435 |
| ||||||
Sale - equity securities |
| 11,962,513 |
| 14,507,384 |
|
| 99,917 |
| 11,962,513 |
| ||||||
Sale - real estate partnership |
| - |
| 233,798 |
| |||||||||||
Redemption - other investments |
| 2,576,272 |
| - |
|
| - |
| 2,576,272 |
| ||||||
Acquisition of property and equipment |
|
| (3,342,258 | ) |
|
| (2,923,124 | ) |
|
| (1,380,256 | ) |
|
| (3,342,258 | ) |
Net cash flows provided by (used in) investing activities |
|
| 398,911 |
|
| (9,297,954 | ) | |||||||||
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 |
| (379,799 | ) |
| (191,092 | ) |
| (1,400 | ) |
| (379,799 | ) | ||||
Purchase of treasury stock |
| - |
| (1,671,598 | ) | |||||||||||
Dividends paid |
|
| (1,277,066 | ) |
|
| (1,274,797 | ) |
|
| - |
|
|
| (1,277,066 | ) |
Net cash flows used in financing activities |
|
| (1,656,865 | ) |
|
| (3,137,487 | ) |
|
| (825,988 | ) |
|
| (1,656,865 | ) |
|
|
|
|
|
| |||||||||||
(Decrease) increase in cash and cash equivalents |
| $ | (9,179,392 | ) |
| $ | 16,644,346 |
| ||||||||
Cash and cash equivalents, beginning of period |
|
| 24,290,598 |
|
|
| 19,463,742 |
| ||||||||
Cash and cash equivalents, end of period |
| $ | 15,111,206 |
| $ | 36,108,088 |
| |||||||||
|
|
|
|
|
| |||||||||||
Supplemental disclosures of cash flow information: |
|
|
|
|
| |||||||||||
Cash paid for income taxes |
| $ | - |
| $ | - |
| |||||||||
Cash paid for interest |
| $ | 825,000 |
| $ | 825,000 |
|
See accompanying notes to condensed consolidated financial statements.
8 |
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 subsidiary, Kingstone Insurance Company (“KICO”), underwrites property and casualty insurance exclusively through retail and wholesale agents and brokers. KICO is a licensed insurance company in the States of New York, New Jersey, Rhode Island, Massachusetts, Pennsylvania, Connecticut, Maine and New Hampshire. KICO is currently offeringactively writing its property and casualty insurance products in New York, New Jersey, Rhode Island, Massachusetts,York. For the three months ended September 30, 2023 and Connecticut. Although New Jersey, Rhode Island, Massachusetts2022, 88.5% and Connecticut continue to be growing markets for the Company,over 80%80.5%, respectively, of KICO’s direct written premiums for bothcame from the three months andNew 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 York policies. Kingstone, through its wholly-ownedwholly owned subsidiary, Cosi Agency, Inc. (“Cosi”), a multi-state licensed general agency, accesses alternate forms of distribution outside ofreceives commission revenue from KICO for the independent agentpolicies it places with others and broker network, through which KICO currently distributes its various products. Kingstone and its wholly-owned subsidiaries are collectively referredpays commissions to as the “Company”. these agencies.
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). The principles for condensed interim financial information do not require the inclusion of all the information and footnotes required by GAAP for complete financial statements. Therefore, these condensed consolidated financial statements should be read in conjunction with the consolidated financial statements as of and for the year ended December 31, 20212022 and notes thereto included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on April 4, 2022.March 31, 2023. The accompanying condensed consolidated financial statements have not been audited by an independent registered public accounting firm in accordance with standards of the Public Company Accounting Oversight Board (United States) but, in the opinion of management, such financial statements include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the Company’s financial position and results of operations. The results of operations for the nine months ended September 30, 20222023 may not be indicative of the results that may be expected for the year ending December 31, 2022.2023.
CertainComponents of ceded premiums within prior year balancesnet earned premiums in Note 6 were reclassified to conform with an elected change in the current year presentation.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
Basis of Presentation; Going Concern
See Note 2 to the Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 for further information.
Kingstone’s $30,000,000 5.5% Senior Unsecured Notes (the “Notes”) mature on December 30, 2022. The Company’s continuation as a going concern is dependent on its ability to obtain financing to satisfy the Notes at maturity unless agreements are entered into with the holders of a substantial principal amount of the Notes to extend the maturity date of the Notes or exchange the Notes for new debt and/or equity securities of Kingstone (see “Management’s Plan Related to Going Concern” below). Management believes that KICO’s insurance operations would be able to continue in the event that the required financing by Kingstone is not obtained and agreements with the holders of the Notes are not entered into.
In accordance with Accounting Standards Update (“ASU”) 2014-15, Presentation of Financial Statements—Going Concern (Subtopic 205-40) (“ASC 205-40”), the Company has the responsibility to evaluate whether conditions and/or events raise substantial doubt about its ability to meet its future financial obligations as they become due within one year after the date that the financial statements are issued. This evaluation requires management to perform two steps. First, management must evaluate whether there are conditions and events that raise substantial doubt about the entity’s ability to continue as a going concern. Second, if management concludes that substantial doubt is raised, management is required to consider whether it has plans in place to alleviate that doubt. Disclosures in the notes to the consolidated financial statements are required if management concludes that substantial doubt exists and if its plans alleviate the substantial doubt that was raised.
The accompanying condensed consolidated financial statements have been prepared in accordance with GAAP assuming that the Company will continue as a going concern. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result should the Company be unable to continue as a going concern.
Management’s Plan Related to Going Concern
In order to continue as a going concern, Kingstone will need to refinance the Notes that become due on December 30, 2022, either through (a) new debt or equity financing at Kingstone that will provide the funds necessary, together with available cash, to pay the Notes in full at maturity, (b) Kingstone entering into arrangements with holders of the Notes to exchange their Notes for new debt and/or equity securities of Kingstone or (c) a combination of (a) and (b). No assurance can be given that Kingstone will be successful in this regard. Management has been exploring and continues to explore a number of financing and other options and has engaged investment bankers to assist it in pursuing such options. Subject to regulatory requirements, Kingstone can also receive dividends and/or loans from its insurance subsidiary, KICO, that could be utilized to repay a portion of the Notes. As of September 30, 2022, the maximum distribution that KICO could pay to Kingstone without prior regulatory approval was approximately $3.0 million. Subsequent to September 30, 2022, Kingstone received a $3.0 million distribution from KICO. In addition, subsequent to September 30, 2022, Kingstone received a loan from KICO of $6.45 million without the need for prior regulatory approval and also received a Federal income tax refund of approximately $1.5 million. With the foregoing proceeds, together with liquid investments and available cash, Kingstone currently has total funds of approximately $12.0 million.
The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plan described above, which the Company believes is probable, but there can be no assurance in this regard.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates and assumptions, which include the reserves for losses and LAE,loss adjustment expenses “(LAE)”, which are subject to estimation errors due to the inherent uncertainty in projecting ultimate claim amounts that will be reported and settled over a period of many years. In addition, estimates and assumptions associated with receivables under reinsurance contracts related to contingent ceding commission revenue require judgments by management. On an ongoing basis, management reevaluates its assumptions and the methods for calculating these estimates. Actual results may differ significantly from the estimates used in preparing the condensed consolidated financial statements.
10 |
Table of Contents |
Principles of Consolidation
The condensed consolidated financial statements include the accounts of Kingstone and its wholly ownedwholly-owned subsidiaries: (1) KICO and its wholly ownedwholly-owned subsidiaries, CMIC Properties, Inc. (“Properties”) and 15 Joys Lane, LLC (“15 Joys Lane”), which together own the land and building from which KICO operates, and (2) Cosi. All significant inter-company account balances and transactions have been eliminated in consolidation.
Recent Accounting Pronouncements
In June 2016, the Financial Accounting Standards Board (the “FASB”) issued ASUAccounting Standards Update 2016-13 - Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). The revised accountingThis new guidance requires the measurement of all expectedapplies to reinsurance and insurance receivables and other financing receivables. For available-for-sale fixed maturity securities carried at fair value, estimated credit losses for financial assets heldwill continue to be measured at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts and requires enhanced disclosures related topresent value of expected cash flows; however, the significant estimates and judgments usedother than temporary impairment (“OTTI”) concept has been eliminated. Under the previous guidance, estimated credit impairments resulted in estimatinga write-down of amortized cost. Under the new guidance, estimated credit losses as well asare recognized through an allowance and reversals of the allowance are permitted if the estimate of credit quality and underwriting standardslosses declines. For available-for-sale fixed maturity securities where the Company has an intent to sell, impairment will continue to result in a write-down of an organization’s portfolio. In addition,amortized cost. ASU 2016-13 amends the accounting for credit losses of available-for-sale debt securities and purchased financial assets with credit deterioration. ASU 2016-13 will bewas effective for the Company on January 1, 2023. The Company is currently evaluatingdetermined as of the effectdate of adoption that the updated guidance willdid not have an impact on its consolidated financial statements. Below is a summary of the significant accounting policies impacted by the adoption of ASU 2016-13.
The allowance for credit losses is a valuation account that is reported as a reduction of a financial asset’s cost basis and is measured on a pool basis when similar risk characteristics exist. Management estimates the allowance using relevant available information from both internal and external sources. Historical credit loss experience provides the basis for the estimation of expected credit losses and adjustments may be made to reflect current conditions and reasonable and supportable forecasts. Adjustments to historical loss information are made for any additional factors that come to the Company’s attention. This could include significant shifts in counterparty financial strength ratings, aging of past due receivables, amounts sent to collection agencies, or other underlying portfolio changes. Amounts are considered past due when payments have not been received according to contractual terms. The Company also considers current and forecasted economic conditions, using a variety of economic metrics and forecast indices. The sensitivity of expected credit losses relative to changes to these forecasted economic conditions can vary by financial asset class. The Company considers a reasonable and supportable forecast period to be up to 24 months from the balance sheet date. After the forecast period, the Company reverts to historical credit experience. The Company uses collateral arrangements such as letters of credit and amounts held in beneficiary trusts to mitigate credit risk, which are considered in the estimate of net amount expected to be collected.
The Company has made a policy election to present accrued interest balances separately from the amortized cost basis of assets and has elected the practical expedient to exclude the accrued interest from the tabular disclosures for available-for-sale and held-to-maturity securities. The Company has elected not to estimate an allowance for credit losses on accrued interest receivable. The accrual of interest income is discontinued and the asset is placed on nonaccrual status in the quarter that payment becomes delinquent. Interest accrued but not received for assets on nonaccrual status is reversed through investment income. Interest received for assets that are on nonaccrual status is recognized as payment is received. The asset is returned to accrual status when the principal and interest amounts contractually due are brought current and future payments are expected. Interest receivable is presented as a component of other assets on the condensed consolidated balance sheet.
11 |
Table of Contents |
See Note 3 and Note 6 to the condensed consolidated financial statements.statements for additional information regarding credit losses.
The Company has determined that all other recently issued accounting pronouncements will not have a material impact on its consolidated financial position, results of operations and cash flows, or do not apply to its operations.
Note 3 - Investments
Fixed-Maturity Securities
The amortized cost, estimated fair value, and gross unrealized gains and losses on investments in fixed-maturity securities classified as available-for-sale for which an allowance for credit loss has not been recorded, as of September 30, 20222023 and December 31, 20212022 are summarized as follows:
|
| September 30, 2023 |
| |||||||||||||||||||||||||||||||||||||||||||||
|
| September 30, 2022 |
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||
|
| Cost or |
| Gross |
| Gross Unrealized Losses |
| Estimated |
| Net |
|
| Cost or |
| Gross |
| Gross Unrealized Losses |
| Estimated |
| Net |
| ||||||||||||||||||||||||||
|
| Amortized |
| Unrealized |
| Less than 12 |
| More than 12 |
| Fair |
| Unrealized |
|
| Amortized |
| Unrealized |
| Less than 12 |
| More than 12 |
| Fair |
| Unrealized |
| ||||||||||||||||||||||
Category |
| Cost |
|
| Gains |
|
| Months |
|
| Months |
|
| Value |
|
| Losses |
|
| Cost |
|
| Gains |
|
| Months |
|
| Months |
|
| Value |
|
| Losses |
| ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||
Fixed-Maturity Securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||
U.S. Treasury securities and obligations of U.S. government corporations and agencies |
| $ | 9,946,032 |
| $ | 930 |
| $ | (123 | ) |
| $ | - |
| $ | 9,946,839 |
| $ | 807 |
| ||||||||||||||||||||||||||||
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 |
| 17,117,473 |
| - |
| (3,250,196 | ) |
| (590,936 | ) |
| 13,276,341 |
| (3,841,132 | ) | |||||||||||||||||||||||||||||||||
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 |
| 84,163,055 |
| - |
| (9,154,182 | ) |
| (269,694 | ) |
| 74,739,179 |
| (9,423,876 | ) |
| 78,116,754 |
| - |
| - |
| (8,651,516 | ) |
| 69,465,238 |
| (8,651,516 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||
Residential mortgage and other asset backed securities (1) |
|
| 54,307,907 |
|
|
| 68,159 |
|
|
| (4,333,707 | ) |
|
| (2,699,011 | ) |
|
| 47,343,348 |
|
|
| (6,964,559 | ) | ||||||||||||||||||||||||
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 |
| $ | 165,534,467 |
|
| $ | 69,089 |
|
| $ | (16,738,208 | ) |
| $ | (3,559,641 | ) |
| $ | 145,305,707 |
|
| $ | (20,228,760 | ) |
| $ | 154,459,849 |
|
| $ | 63,626 |
|
| $ | (62,822 | ) |
| $ | (21,673,754 | ) |
| $ | 132,786,899 |
|
| $ | (21,672,950 | ) |
12 |
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 |
|
| December 31, 2021 |
| |||||||||||||||||||||
|
| Cost or |
|
| Gross |
|
| Gross Unrealized Losses |
|
|
|
| Net |
| ||||||||||
|
| Amortized |
|
| Unrealized |
|
| Less than 12 |
|
| More than 12 |
|
| Estimated Fair |
|
| Unrealized Gains/ |
| ||||||
Category |
| Cost |
|
| Gains |
|
| Months |
|
| Months |
|
| Value |
|
| (Losses) |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Fixed-Maturity Securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Political subdivisions of States, Territories and Possessions |
| $ | 17,236,750 |
|
| $ | 246,748 |
|
| $ | (197,984 | ) |
| $ | - |
|
| $ | 17,285,514 |
|
| $ | 48,764 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate and other bonds |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Industrial and miscellaneous |
|
| 80,534,769 |
|
|
| 2,603,411 |
|
|
| (126,926 | ) |
|
| - |
|
|
| 83,011,254 |
|
|
| 2,476,485 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage and other asset backed securities |
|
| 58,036,959 |
|
|
| 355,985 |
|
|
| (489,258 | ) |
|
| (120,344 | ) |
|
| 57,783,342 |
|
|
| (253,617 | ) |
Total fixed-maturity securities |
| $ | 155,808,478 |
|
| $ | 3,206,144 |
|
| $ | (814,168 | ) |
| $ | (120,344 | ) |
| $ | 158,080,110 |
|
| $ | 2,271,632 |
|
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, 20222023 and December 31, 20212022 is shown below:
|
| September 30, 2022 |
| December 31, 2021 |
|
| September 30, 2023 |
| December 31, 2022 |
| ||||||||||||||||||||||
|
| Amortized |
| Estimated |
| Amortized |
| Estimated |
|
| Amortized |
| Estimated |
| Amortized |
| Estimated |
| ||||||||||||||
Remaining Time to Maturity |
| Cost |
|
| Fair Value |
|
| Cost |
|
| Fair Value |
|
| Cost |
|
| Fair Value |
|
| Cost |
|
| Fair Value |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Less than one year |
| $ | 14,852,441 |
| $ | 14,824,136 |
| $ | 1,153,099 |
| $ | 1,156,636 |
|
| $ | 11,053,509 |
| $ | 10,894,062 |
| $ | 16,359,100 |
| $ | 16,307,991 |
| ||||||
One to five years |
| 44,959,185 |
| 42,305,309 |
| 43,007,110 |
| 44,914,759 |
|
| 44,834,816 |
| 42,323,786 |
| 18,605,987 |
| 14,085,113 |
| ||||||||||||||
Five to ten years |
| 30,271,976 |
| 24,680,308 |
| 26,808,853 |
| 27,332,581 |
|
| 30,124,267 |
| 24,401,458 |
| 54,559,158 |
| 52,230,283 |
| ||||||||||||||
More than 10 years |
| 21,142,958 |
| 16,152,606 |
| 26,802,457 |
| 26,892,792 |
|
| 16,944,211 |
| 12,428,131 |
| 31,796,918 |
| 26,469,581 |
| ||||||||||||||
Residential mortgage and other asset backed securities |
|
| 54,307,907 |
|
|
| 47,343,348 |
|
|
| 58,036,959 |
|
|
| 57,783,342 |
|
|
| 51,503,046 |
|
|
| 42,739,462 |
|
|
| 53,597,264 |
|
|
| 45,622,195 |
|
Total |
| $ | 165,534,467 |
|
| $ | 145,305,707 |
|
| $ | 155,808,478 |
|
| $ | 158,080,110 |
|
| $ | 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.
13 |
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, 20222023 and December 31, 20212022 are as follows:
|
| September 30, 2022 |
|
| September 30, 2023 |
| ||||||||||||||||||||||||||
|
|
| Gross |
| Gross |
| Estimated |
|
|
| Gross |
| Gross |
| Estimated |
| ||||||||||||||||
Category |
| Cost |
|
| Gains |
|
| Losses |
|
| Fair Value |
|
| Cost |
|
| Gains |
|
| Losses |
|
| Fair Value |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Equity Securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Preferred stocks |
| $ | 16,047,207 |
| $ | - |
| $ | (3,488,481 | ) |
| $ | 12,558,726 |
|
| $ | 13,583,942 |
| $ | - |
| $ | (3,384,701 | ) |
| $ | 10,199,241 |
| ||||
Common stocks, mutual funds, and exchange traded funds |
|
| 10,728,809 |
|
|
| 103,902 |
|
|
| (1,922,991 | ) |
|
| 8,909,720 |
|
|
| 4,402,841 |
|
|
| 225,001 |
|
|
| (919,432 | ) |
|
| 3,708,410 |
|
Total |
| $ | 26,776,016 |
|
| $ | 103,902 |
|
| $ | (5,411,472 | ) |
| $ | 21,468,446 |
|
| $ | 17,986,783 |
|
| $ | 225,001 |
|
| $ | (4,304,133 | ) |
| $ | 13,907,651 |
|
|
| December 31, 2021 |
| |||||||||||||
|
|
|
| Gross |
|
| Gross |
|
| Estimated |
| |||||
Category |
| Cost |
|
| Gains |
|
| Losses |
|
| Fair Value |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Equity Securities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Preferred stocks |
| $ | 22,019,509 |
|
| $ | 1,007,009 |
|
| $ | (184,617 | ) |
| $ | 22,841,901 |
|
Common stocks, mutual funds, and exchange traded funds |
|
| 15,451,160 |
|
|
| 1,573,653 |
|
|
| (179,712 | ) |
|
| 16,845,101 |
|
Total |
| $ | 37,470,669 |
|
| $ | 2,580,662 |
|
| $ | (364,329 | ) |
| $ | 39,687,002 |
|
|
| 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, 20222023 and December 31, 20212022 are as follows:
|
| September 30, 2022 |
| December 31, 2021 |
|
| September 30, 2023 |
| December 31, 2022 |
| ||||||||||||||||||||||||||||||||||||||
|
|
| Gross |
| Estimated |
|
| Gross |
| Estimated |
|
|
| Gross |
| Estimated |
|
| Gross |
| Estimated |
| ||||||||||||||||||||||||||
Category |
| Cost |
|
| Gains |
|
| Fair Value |
|
| Cost |
|
| Gains |
|
| Fair Value |
|
| Cost |
|
| Gains |
|
| Fair Value |
|
| Cost |
|
| Gains |
|
| Fair Value |
| ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||
Other Investments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||
Hedge fund |
| $ | 1,987,040 |
|
| $ | 589,232 |
|
| $ | 2,576,272 |
|
| $ | 3,999,381 |
|
| $ | 3,562,034 |
|
| $ | 7,561,415 |
|
| $ | 1,987,040 |
|
| $ | 1,226,278 |
|
| $ | 3,213,318 |
|
| $ | 1,987,040 |
|
| $ | 784,612 |
|
| $ | 2,771,652 |
|
14 |
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, 20222023 and December 31, 20212022 are summarized as follows:
|
| September 30, 2023 |
| |||||||||||||||||||||||||||||||||||||||||||||
|
| September 30, 2022 |
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||||
|
| Cost or |
| Gross |
| Gross Unrealized Losses |
| Estimated |
| Net |
|
| Cost or |
| Gross |
| Gross Unrealized Losses |
| Estimated |
| Net |
| ||||||||||||||||||||||||||
|
| Amortized |
| Unrealized |
| Less than 12 |
| More than 12 |
| Fair |
| Unrealized Gains/ |
|
| Amortized |
| Unrealized |
| Less than 12 |
| More than 12 |
| Fair |
| Unrealized |
| ||||||||||||||||||||||
Category |
| Cost |
|
| Gains |
|
| Months |
|
| Months |
|
| Value |
|
| (Losses) |
|
| Cost |
|
| Gains |
|
| Months |
|
| Months |
|
| Value |
|
| Losses |
| ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||
Held-to-Maturity Securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||
U.S. Treasury securities |
| $ | 1,228,485 |
| $ | 73,468 |
| $ | (36,802 | ) |
| $ | - |
| $ | 1,265,151 |
| $ | 36,666 |
|
| $ | 1,228,783 |
| $ | - |
| $ | (49,795 | ) |
| $ | (31,495 | ) |
| $ | 1,147,493 |
| $ | (81,290 | ) | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||
Political subdivisions of States, Territories and Possessions |
| 498,508 |
| - |
| (1,498 | ) |
| - |
| 497,010 |
| (1,498 | ) |
| 499,036 |
| - |
| (9,046 | ) |
| - |
| 489,990 |
| (9,046 | ) | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||
Exchange traded debt |
| 304,111 |
| - |
| (43,361 | ) |
| - |
| 260,750 |
| (43,361 | ) |
| 304,111 |
| - |
| (51,611 | ) |
| - |
| 252,500 |
| (51,611 | ) | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||
Corporate and other bonds |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||
Industrial and miscellaneous |
|
| 5,736,079 |
|
|
| 35,503 |
|
|
| (1,182,635 | ) |
|
| - |
|
|
| 4,588,947 |
|
|
| (1,147,132 | ) |
|
| 5,021,895 |
|
|
| - |
|
|
| - |
|
|
| (1,212,380 | ) |
|
| 3,809,515 |
|
|
| (1,212,380 | ) |
Total |
| $ | 7,767,183 |
|
| $ | 108,971 |
|
| $ | (1,264,296 | ) |
| $ | - |
|
| $ | 6,611,858 |
|
| $ | (1,155,325 | ) |
| $ | 7,053,825 |
|
| $ | - |
|
| $ | (110,452 | ) |
| $ | (1,243,875 | ) |
| $ | 5,699,498 |
|
| $ | (1,354,327 | ) |
|
| December 31, 2022 |
| |||||||||||||||||||||||||||||||||||||||||||||
|
| December 31, 2021 |
|
|
|
|
|
|
| Net |
| |||||||||||||||||||||||||||||||||||||
|
| Cost or |
| Gross |
| Gross Unrealized Losses |
| Estimated |
| Net |
|
| Cost or |
| Gross |
| Gross Unrealized Losses |
| Estimated |
| Unrealized |
| ||||||||||||||||||||||||||
|
| Amortized |
| Unrealized |
| Less than 12 |
| More than 12 |
| Fair |
| Unrealized Gains/ |
|
| Amortized |
| Unrealized |
| Less than 12 |
| More than 12 |
| Fair |
| Gains/ |
| ||||||||||||||||||||||
Category |
| Cost |
|
| Gains |
|
| Months |
|
| Months |
|
| Value |
|
| (Losses) |
|
| Cost |
|
| Gains |
|
| Months |
|
| Months |
|
| Value |
|
| (Losses) |
| ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||
Held-to-Maturity Securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||
U.S. Treasury securities |
| $ | 729,642 |
| $ | 209,633 |
| $ | - |
| $ | - |
| $ | 939,275 |
| $ | 209,633 |
|
| $ | 1,228,560 |
| $ | 28,400 |
| $ | (34,077 | ) |
| $ | - |
| $ | 1,222,883 |
| $ | (5,677 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||
Political subdivisions of States, Territories and Possessions |
| 998,239 |
| 22,856 |
| - |
| - |
| 1,021,095 |
| 22,856 |
|
| 498,638 |
| 2,092 |
| - |
| - |
| 500,730 |
| 2,092 |
| ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||
Exchange traded debt |
| 304,111 |
| 85 |
| (13,921 | ) |
|
|
| 290,275 |
| (13,836 | ) |
| 304,111 |
| - |
| (29,111 | ) |
| - |
| 275,000 |
| (29,111 | ) | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||
Corporate and other bonds |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||
Industrial and miscellaneous |
|
| 6,234,342 |
|
|
| 280,951 |
|
|
| (12,779 | ) |
|
| - |
|
|
| 6,502,514 |
|
|
| 268,172 |
|
|
| 5,734,831 |
|
|
| 36,968 |
|
|
| (809,746 | ) |
|
| (360,278 | ) |
|
| 4,601,775 |
|
|
| (1,133,056 | ) |
Total |
| $ | 8,266,334 |
|
| $ | 513,525 |
|
| $ | (26,700 | ) |
| $ | - |
|
| $ | 8,753,159 |
|
| $ | 486,825 |
|
| $ | 7,766,140 |
|
| $ | 67,460 |
|
| $ | (872,934 | ) |
| $ | (360,278 | ) |
| $ | 6,600,388 |
|
| $ | (1,165,752 | ) |
Held-to-maturity U.S. Treasury securities are held in trust pursuant to various states’ minimum funds requirements.
Table of Contents |
A summary of the amortized cost and estimated fair value of the Company’s investments in held-to-maturity securities by contractual maturity as of September 30, 20222023 and December 31, 20212022 is shown below:
|
| September 30, 2022 |
| December 31, 2021 |
|
| September 30, 2023 |
| December 31, 2022 |
| ||||||||||||||||||||||
|
| Amortized |
| Estimated |
| Amortized |
| Estimated |
|
| Amortized |
| Estimated |
| Amortized |
| Estimated |
| ||||||||||||||
Remaining Time to Maturity |
| Cost |
|
| Fair Value |
|
| Cost |
|
| Fair Value |
|
| Cost |
|
| Fair Value |
|
| Cost |
|
| Fair Value |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||
Less than one year |
| $ | 708,325 |
| $ | 742,533 |
| $ | 994,712 |
| $ | 1,008,180 |
|
| $ | - |
| $ | - |
| $ | 708,535 |
| $ | 743,575 |
| ||||||
One to five years |
| 1,120,315 |
| 1,082,015 |
| 1,205,829 |
| 1,290,465 |
|
| 1,121,091 |
| 1,069,974 |
| 1,120,507 |
| 1,088,522 |
| ||||||||||||||
Five to ten years |
| 1,399,725 |
| 1,177,545 |
| 1,513,942 |
| 1,648,808 |
|
| 1,411,819 |
| 1,166,505 |
| 1,402,704 |
| 1,200,720 |
| ||||||||||||||
More than 10 years |
|
| 4,538,818 |
|
|
| 3,609,765 |
|
|
| 4,551,851 |
|
|
| 4,805,706 |
|
|
| 4,520,915 |
|
|
| 3,463,019 |
|
|
| 4,534,394 |
|
|
| 3,567,571 |
|
Total |
| $ | 7,767,183 |
|
| $ | 6,611,858 |
|
| $ | 8,266,334 |
|
| $ | 8,753,159 |
|
| $ | 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 |
|
| Three months ended |
| Nine months ended |
| ||||||||||||||||||||||
|
| September 30 |
| September 30 |
|
| September 30, |
| September 30, |
| ||||||||||||||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Fixed-maturity securities |
| $ | 1,243,177 |
| $ | 1,288,277 |
| $ | 2,841,307 |
| $ | 4,238,746 |
|
| $ | 1,245,353 |
| $ | 1,234,427 |
| $ | 3,982,573 |
| $ | 2,832,557 |
| ||||||
Equity securities |
| 247,275 |
| 436,833 |
| 872,005 |
| 1,145,244 |
|
| 187,018 |
| 247,275 |
| 540,788 |
| 872,005 |
| ||||||||||||||
Cash and cash equivalents |
| 26,630 |
| 9,636 |
| 29,796 |
| 11,194 |
|
|
| 98,763 |
|
|
| 26,630 |
|
|
| 171,015 |
|
|
| 29,796 |
| |||||||
Other investments |
|
| - |
|
|
| 42,908 |
|
|
| - |
|
|
| - |
| ||||||||||||||||
Total |
| 1,517,082 |
| 1,777,654 |
| 3,743,108 |
| 5,395,184 |
|
| 1,531,134 |
| 1,508,332 |
| 4,694,376 |
| 3,734,358 |
| ||||||||||||||
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Investment expenses |
|
| 89,811 |
|
|
| 101,058 |
|
|
| 322,412 |
|
|
| 257,317 |
|
|
| 86,774 |
|
|
| 89,811 |
|
|
| 257,168 |
|
|
| 322,412 |
|
Net investment income |
| $ | 1,427,271 |
|
| $ | 1,676,596 |
|
| $ | 3,420,696 |
|
| $ | 5,137,867 |
|
| $ | 1,444,360 |
|
| $ | 1,418,521 |
|
| $ | 4,437,208 |
|
| $ | 3,411,946 |
|
Proceeds from the redemption of fixed-maturity securities held-to-maturity were $1,000,000$750,000 and $1,312,500$1,000,000 for the nine months ended September 30, 20222023 and 2021,2022, respectively.
Proceeds from the sale or maturity of fixed-maturity securities available-for-sale were $14,213,435$33,453,349 and $33,335,036$14,213,435 for the nine months ended September 30, 20222023 and 2021,2022, respectively.
Proceeds from the sale of equity securities were $11,962,513$99,917 and $14,507,384$11,962,513 for the nine months ended September 30, 20222023 and 2021,2022, respectively.
Table of Contents |
The Company’s net (losses) gains on investments are summarized as follows:
|
| Three months ended |
| Nine months ended |
|
| Three months ended |
| Nine months ended |
| ||||||||||||||||||||||
|
| September 30, |
| September 30, |
|
| September 30, |
| September 30, |
| ||||||||||||||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||||||
Realized Gains (Losses) |
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
Realized (Losses) Gains |
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Fixed-maturity securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Gross realized gains |
| $ | 364 |
| $ | 343,773 |
| $ | 102,774 |
| $ | 1,121,068 |
|
| $ | 263 |
| $ | 363 |
| $ | 1,207 |
| $ | 102,774 |
| ||||||
Gross realized losses |
|
| (4,620 | ) |
|
| (8,103 | ) |
|
| (158,701 | ) |
|
| (49,601 | ) |
|
| (4,444 | ) |
|
| (4,610 | ) |
|
| (18,408 | ) |
|
| (158,701 | ) |
|
|
| (4,256 | ) |
|
| 335,670 |
|
|
| (55,927 | ) |
|
| 1,071,467 |
|
|
| (4,181 | ) |
|
| (4,247 | ) |
|
| (17,201 | ) |
|
| (55,927 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Equity securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Gross realized gains |
| 907,089 |
| 639,626 |
| 1,384,432 |
| 2,015,574 |
|
| - |
| 907,079 |
| - |
| 1,384,432 |
| ||||||||||||||
Gross realized losses |
|
| (92,159 | ) |
|
| (26,031 | ) |
|
| (728,732 | ) |
|
| (293,519 | ) |
|
| - |
|
|
| (92,159 | ) |
|
| - |
|
|
| (728,732 | ) |
|
|
| 814,930 |
|
|
| 613,595 |
|
|
| 655,700 |
|
|
| 1,722,055 |
|
|
| - |
|
|
| 814,920 |
|
|
| - |
|
|
| 655,700 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Other Investments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Gross realized gains |
| 589,233 |
| 83,798 |
| 589,233 |
| 83,798 |
|
| - |
| 589,233 |
| - |
| 589,233 |
| ||||||||||||||
Gross realized losses |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
|
| 589,233 |
|
|
| 83,798 |
|
|
| 589,233 |
|
|
| 83,798 |
|
|
| - |
|
|
| 589,233 |
|
|
| - |
|
|
| 589,233 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Net realized gains |
|
| 1,399,907 |
|
|
| 1,033,063 |
|
|
| 1,189,006 |
|
|
| 2,877,320 |
| ||||||||||||||||
Net realized (losses) gains |
|
| (4,181 | ) |
|
| 1,399,906 |
|
|
| (17,201 | ) |
|
| 1,189,006 |
| ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Unrealized (Losses) Gains |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Equity Securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Gross gains |
| - |
| (1,331,675 | ) |
| - |
| 592,397 |
|
| - |
| - |
| 173,178 |
| - |
| |||||||||||||
Gross losses |
|
| (1,132,596 | ) |
|
|
|
|
|
| (7,549,640 | ) |
|
| - |
|
|
| (483,967 | ) |
|
| (1,132,595 | ) |
|
| - |
|
|
| (7,549,640 | ) |
|
|
| (1,132,596 | ) |
|
| (1,331,675 | ) |
|
| (7,549,640 | ) |
|
| 592,397 |
|
|
| (483,967 | ) |
|
| (1,132,595 | ) |
|
| 173,178 |
|
|
| (7,549,640 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Other Investments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Gross gains |
| - |
| 503,146 |
| - |
| 2,010,485 |
|
| - |
| - |
| 441,666 |
| - |
| ||||||||||||||
Gross losses |
|
| (664,969 | ) |
|
| - |
|
|
| (2,952,802 | ) |
|
| - |
|
|
| (336,222 | ) |
|
| (664,969 | ) |
|
| - |
|
|
| (2,952,802 | ) |
|
|
| (664,969 | ) |
|
| 503,146 |
|
|
| (2,952,802 | ) |
|
| 2,010,485 |
|
|
| (336,222 | ) |
|
| (664,969 | ) |
|
| 441,666 |
|
|
| (2,952,802 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Net unrealized (losses) gains |
|
| (1,797,565 | ) |
|
| (828,529 | ) |
|
| (10,502,442 | ) |
|
| 2,602,882 |
|
|
| (820,189 | ) |
|
| (1,797,564 | ) |
|
| 614,844 |
|
|
| (10,502,442 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Net (losses) gains on investments |
| $ | (397,658 | ) |
| $ | 204,534 |
|
| $ | (9,313,436 | ) |
| $ | 5,480,202 |
|
| $ | (824,370 | ) |
| $ | (397,658 | ) |
| $ | 597,643 |
|
| $ | (9,313,436 | ) |
Impairment ReviewAllowance for Credit Loss
Impairment of investmentFor available-for-sale fixed maturity securities, results in a charge to operations when a market decline below cost is deemed to be other-than-temporary. The Company regularly reviews its fixed-maturity securities to evaluatecredit loss exists if the necessity of recording impairment losses for other-than-temporary declines in the estimated fairpresent value of investments. In evaluating potential impairment, GAAP specifies (i) if the Company does not have the intent to sell a debt security prior to recovery and (ii) it is more likely than not that it will not have to sell the debt security prior to recovery, the security would not be considered other-than-temporarily impaired unless there is a credit loss. When the Company does not intend to sell the security and it is more likely than not that the Company will not have to sell the security before recovery of its cost basis, it will recognize the credit component of an other-than-temporary impairment (“OTTI”) of a debt security in earnings and the remaining portion in comprehensive income (loss). The credit loss component recognized in earnings is identified as the amount of principal cash flows not expected to be received overcollected is less than the remaining termamortized cost basis. The allowance for credit loss related to available-for-sale fixed maturity securities is the difference between present value of cash flows expected to be collected and the security based on cash flow projections. For held-to-maturity fixed-maturity securities,amortized cost basis, limited by the amount of OTTI recorded in comprehensive income (loss) forthat the noncredit portion offair value is less than the amortized cost basis. The Company considers all available evidence when determining whether an investment requires a previous OTTI is amortized prospectively over the remaining life of the security based on timing of future estimated cash flows of the security.
OTTI losses are recordedcredit loss write-down or allowance to be recorded. Changes in the allowance are presented as a component of net (losses) gains on investments on the accompanying condensed consolidated statements of operations and comprehensive income (loss) as net realized losses on investments and result in a permanent reduction of the cost basis of the underlying investment. The determination of OTTI is a subjective process and different judgments and assumptions could affect the timing of loss realization. loss.
At September 30, 20222023 and December 31, 2021,2022, there were 155150 and 48155 fixed-maturity securities, respectively, that accounted for the gross unrealized losses. The Company determined that none of the unrealized losses were deemed to be OTTIcredit losses for its portfolio of investments as offor the nine months ended September 30, 20222023 and December 31, 2021.2022. Significant factors influencing the Company’s determination that unrealized losses were temporary included credit quality considerations, the magnitude of the unrealized losses in relation to each security’s cost, the nature of the investment and interest rate environment factors, and management’s intent and ability to hold the investment for a period of time sufficient to allow for an anticipated recovery of estimated fair value to the Company’s cost basis.
The Company held available-for-sale securities with unrealized losses representing declines that were considered temporary at September 30, 2022 as follows:
|
| September 30, 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 |
| $ | 5,975,160 |
|
| $ | (123 | ) |
|
| 1 |
|
| $ | - |
|
| $ | - |
|
|
| - |
|
| $ | 5,975,160 |
|
| $ | (123 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Political subdivisions of States, Territories and Possessions |
|
| 11,461,126 |
|
|
| (3,250,196 | ) |
|
| 12 |
|
|
| 1,815,216 |
|
|
| (590,936 | ) |
|
| 2 |
|
|
| 13,276,342 |
|
|
| (3,841,132 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Corporate and other bonds industrial and miscellaneous |
|
| 73,921,209 |
|
|
| (9,154,182 | ) |
|
| 93 |
|
|
| 817,970 |
|
|
| (269,694 | ) |
|
| 1 |
|
|
| 74,739,179 |
|
|
| (9,423,876 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Residential mortgage and other asset backed securities |
|
| 27,985,270 |
|
|
| (4,333,707 | ) |
|
| 31 |
|
|
| 18,593,599 |
|
|
| (2,699,011 | ) |
|
| 15 |
|
|
| 46,578,869 |
|
|
| (7,032,718 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Total fixed-maturity securities |
| $ | 119,342,765 |
|
| $ | (16,738,208 | ) |
|
| 137 |
|
| $ | 21,226,785 |
|
| $ | (3,559,641 | ) |
|
| 18 |
|
| $ | 140,569,550 |
|
| $ | (20,297,849 | ) |
17 |
Table of Contents |
The Company held available-for-sale securities with unrealized losses representing declines that were considered temporary at September 30, 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, 20212022 as follows:
|
| December 31, 2021 |
|
| December 31, 2022 |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| Less than 12 months |
| 12 months or more |
| Total |
|
| Less than 12 months |
| 12 months or more |
| Total |
| ||||||||||||||||||||||||||||||||||||||||||||||||||
|
| Estimated |
|
| No. of |
| Estimated |
|
| No. of |
| Estimated |
|
|
| Estimated |
|
| No. of |
| Estimated |
|
| No. of |
| Estimated |
|
| ||||||||||||||||||||||||||||||||||||
|
| Fair |
| Unrealized |
| Positions |
| Fair |
| Unrealized |
| Positions |
| Fair |
| Unrealized |
|
| Fair |
| Unrealized |
| Positions |
| Fair |
| Unrealized |
| Positions |
| Fair |
| Unrealized |
| ||||||||||||||||||||||||||||||
Category |
| Value |
|
| Losses |
|
| Held |
|
| Value |
|
| Losses |
|
| Held |
|
| Value |
|
| Losses |
|
| Value |
|
| Losses |
|
| Held |
|
| Value |
|
| Losses |
|
| Held |
|
| Value |
|
| Losses |
| ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||
Fixed-Maturity Securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||||||||||||||
U.S. Treasury securities and obligations of U.S. government corporations and agencies |
| $ | - |
| $ | - |
| - |
| $ | - |
| $ | - |
| - |
| $ | - |
| $ | - |
|
| $ | 18,918,196 |
| $ | (6,928 | ) |
| 3 |
| $ | - |
| - |
| - |
| $ | 18,918,196 |
| $ | (6,928 | ) | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||
Political subdivisions of States, Territories and Possessions |
| 6,768,123 |
| (197,984 | ) |
| 5 |
| - |
| - |
| - |
| 6,768,123 |
| (197,984 | ) |
| 7,970,633 |
| (2,195,273 | ) |
| 9 |
| 5,170,753 |
| (1,771,494 | ) |
| 5 |
| 13,141,386 |
| (3,966,767 | ) | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||
Corporate and other bonds industrial and miscellaneous |
| 17,593,707 |
| (126,926 | ) |
| 15 |
| - |
| - |
| - |
| 17,593,707 |
| (126,926 | ) |
| 56,910,104 |
| (5,796,994 | ) |
| 75 |
| 15,172,381 |
| (2,458,985 | ) |
| 15 |
| 72,082,485 |
| (8,255,979 | ) | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||
Residential mortgage and other asset backed securities |
|
| 45,399,451 |
|
|
| (489,258 | ) |
|
| 26 |
|
|
| 2,923,182 |
|
|
| (120,344 | ) |
|
| 2 |
|
|
| 48,322,633 |
|
|
| (609,602 | ) |
|
| 10,145,880 |
|
|
| (882,664 | ) |
|
| 22 |
|
|
| 34,753,178 |
|
|
| (7,150,803 | ) |
|
| 26 |
|
|
| 44,899,058 |
|
|
| (8,033,467 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||
Total fixed-maturity securities |
| $ | 69,761,281 |
|
| $ | (814,168 | ) |
|
| 46 |
|
| $ | 2,923,182 |
|
| $ | (120,344 | ) |
|
| 2 |
|
| $ | 72,684,463 |
|
| $ | (934,512 | ) |
| $ | 93,944,813 |
|
| $ | (8,881,859 | ) |
|
| 109 |
|
| $ | 55,096,312 |
|
| $ | (11,381,282 | ) |
|
| 46 |
|
| $ | 149,041,125 |
|
| $ | (20,263,141 | ) |
18 |
Table of Contents |
Note 4 - Fair Value Measurements
The following table presents information about the Company’s investments that are measured at fair value on a recurring basis at September 30, 20222023 and December 31, 20212022 indicating the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
|
| September 30, 2022 |
|
| September 30, 2023 |
| ||||||||||||||||||||||||||
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Fixed-maturity securities available-for-sale |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
U.S. Treasury securities and obligations of U.S. government corporations and agencies |
| $ | 9,946,839 |
| $ | - |
| $ | - |
| $ | 9,946,839 |
|
| $ | 8,167,845 |
| $ | - |
| $ | - |
| $ | 8,167,845 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Political subdivisions of States, Territories and Possessions |
| - |
| 13,276,341 |
| - |
| 13,276,341 |
|
| - |
| 12,414,354 |
| - |
| 12,414,354 |
| ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Corporate and other bonds industrial and miscellaneous |
| 74,241,809 |
| 497,370 |
| - |
| 74,739,179 |
|
| 69,465,238 |
| - |
| - |
| 69,465,238 |
| ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Residential mortgage and other asset backed securities |
|
| - |
|
|
| 47,343,348 |
|
|
| - |
|
|
| 47,343,348 |
|
|
| - |
|
|
| 42,739,462 |
|
|
| - |
|
|
| 42,739,462 |
|
Total fixed maturities |
| 84,188,648 |
| 61,117,059 |
| - |
| 145,305,707 |
|
| 77,633,083 |
| 55,153,816 |
| - |
| 132,786,899 |
| ||||||||||||||
Equity securities |
|
| 21,468,446 |
|
|
| - |
|
|
| - |
|
|
| 21,468,446 |
|
|
| 13,907,651 |
|
|
| - |
|
|
| - |
|
|
| 13,907,651 |
|
Total investments |
| $ | 105,657,094 |
|
| $ | 61,117,059 |
|
| $ | - |
|
| $ | 166,774,153 |
|
| $ | 91,540,734 |
|
| $ | 55,153,816 |
|
| $ | - |
|
| $ | 146,694,550 |
|
|
| December 31, 2021 |
|
| December 31, 2022 |
| ||||||||||||||||||||||||||
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Fixed-maturity securities available-for-sale |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
U.S. Treasury securities and obligations of U.S. government corporations and agencies |
| $ | - |
| $ | - |
| $ | - |
| $ | - |
|
| $ | 23,869,096 |
| $ | - |
| $ | - |
| $ | 23,869,096 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Political subdivisions of States, Territories and Possessions |
| - |
| 17,285,514 |
| - |
| 17,285,514 |
|
| - |
| 13,141,387 |
| - |
| 13,141,387 |
| ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Corporate and other bonds industrial and miscellaneous |
| 82,500,779 |
| 510,475 |
| - |
| 83,011,254 |
|
| 71,585,115 |
| 497,370 |
| - |
| 72,082,485 |
| ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Residential mortgage and other asset backed securities |
|
| - |
|
|
| 57,783,342 |
|
|
| - |
|
|
| 57,783,342 |
|
|
| - |
|
|
| 45,622,195 |
|
|
| - |
|
|
| 45,622,195 |
|
Total fixed maturities |
| 82,500,779 |
| 75,579,331 |
| - |
| 158,080,110 |
|
| 95,454,211 |
| 59,260,952 |
| - |
| 154,715,163 |
| ||||||||||||||
Equity securities |
|
| 39,687,002 |
|
|
| - |
|
|
| - |
|
|
| 39,687,002 |
|
|
| 13,834,390 |
|
|
| - |
|
|
| - |
|
|
| 13,834,390 |
|
Total investments |
| $ | 122,187,781 |
|
| $ | 75,579,331 |
|
| $ | - |
|
| $ | 197,767,112 |
|
| $ | 109,288,601 |
|
| $ | 59,260,952 |
|
| $ | - |
|
| $ | 168,549,553 |
|
19 |
Table of Contents |
The following table sets forth the Company’s investment in a hedge fund measured at Net Asset Value (“NAV”) per share as of September 30, 20222023 and December 31, 2021.2022. The Company measures this investment at fair value on a recurring basis. Fair value using NAV per share is as follows as of the dates indicated:
Category |
| September 30, 2022 |
|
| December 31, 2021 |
|
| September 30, 2023 |
|
| December 31, 2022 |
| ||||
|
|
|
|
|
|
|
|
|
| |||||||
Other Investments |
|
|
|
|
|
|
|
|
|
| ||||||
Hedge fund |
| $ | 2,576,272 |
|
| $ | 7,561,415 |
|
| $ | 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 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 income (loss)loss within net (losses) gains on investments. As of September 30, 2022 the Company redeemed 50% of its investment in the hedge fund and recognized a realized gain of $589,233, which is recorded within net gains (losses) on investments in the condensed consolidated statements of operations and comprehensive income (loss).
The estimated fair value and the level of the fair value hierarchy of the Company’s long-term debt as of September 30, 20222023 and December 31, 20212022 not measured at fair value is as follows:
|
| September 30, 2022 |
| |||||||||||||
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
| ||||
Debt |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Senior Notes due 2022 |
| $ | - |
|
| $ | 29,601,120 |
|
| $ | - |
|
| $ | 29,601,120 |
|
|
| December 31, 2021 |
|
| September 30, 2023 |
| ||||||||||||||||||||||||||
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
| ||||||||
Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Senior Notes due 2022 |
| $ | - |
| $ | 28,436,019 |
| $ | - |
| $ | 28,436,019 |
| |||||||||||||||||||
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 estimated fair values of the Company’s financial instruments and real estate, including their fair value level as of September 30, 20222023 and December 31, 20212022 are as follows:
|
| September 30, 2022 |
| December 31, 2021 |
|
| September 30, 2023 |
| December 31, 2022 |
| ||||||||||||||||||||||
|
| Carrying Value |
|
| Fair Value |
|
| Carrying Value |
|
| Fair Value |
|
| Carrying Value |
|
| Fair Value |
|
| Carrying Value |
|
| Fair Value |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Fixed-maturity securities-held-to maturity, Level 1 |
| $ | 7,767,183 |
| $ | 6,611,858 |
| $ | 8,266,334 |
| $ | 8,753,159 |
|
| $ | 7,053,825 |
| $ | 5,699,498 |
| $ | 7,766,140 |
| $ | 6,600,388 |
| ||||||
Cash and cash equivalents, Level 1 |
| $ | 15,111,206 |
| $ | 15,111,206 |
| $ | 24,290,598 |
| $ | 24,290,598 |
|
| $ | 15,132,969 |
| $ | 15,132,969 |
| $ | 11,958,228 |
| $ | 11,958,228 |
| ||||||
Premiums receivable, net, Level 3 |
| $ | 12,891,464 |
| $ | 12,891,464 |
| $ | 12,318,336 |
| $ | 12,318,336 |
| |||||||||||||||||||
Premiums receivable, net, Level 1 |
| $ | 13,326,369 |
| $ | 13,326,369 |
| $ | 13,880,504 |
| $ | 13,880,504 |
| |||||||||||||||||||
Reinsurance receivables, net, Level 3 |
| $ | 59,365,937 |
| $ | 59,365,937 |
| $ | 40,292,438 |
| $ | 40,292,438 |
|
| $ | 84,257,926 |
| $ | 84,257,926 |
| $ | 66,465,061 |
| $ | 66,465,061 |
| ||||||
Real estate, net of accumulated depreciation, Level 3 |
| $ | 2,089,156 |
| $ | 3,025,000 |
| $ | 2,144,464 |
| $ | 3,025,000 |
|
| $ | 2,015,414 |
| $ | 2,800,000 |
| $ | 2,050,644 |
| $ | 2,800,000 |
| ||||||
Reinsurance balances payable, Level 3 |
| $ | 11,475,247 |
| $ | 11,475,247 |
| $ | 12,961,568 |
| $ | 12,961,568 |
|
| $ | 20,263,484 |
| $ | 20,263,484 |
| $ | 13,061,966 |
| $ | 13,061,966 |
|
20 |
Table of Contents |
Note 6 – Property and Casualty Insurance Activity
Premiums Earned
Premiums written, ceded and earned are as follows:
|
| Direct |
|
| Assumed |
|
| Ceded |
|
| Net |
|
| Direct |
|
| Assumed |
|
| Ceded |
|
| Net |
| ||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
Nine months ended September 30, 2023 | 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 |
| $ | - |
| $ | (58,743,773 | ) |
| $ | 88,610,138 |
|
| $ | 147,353,911 |
| $ | - |
| $ | (81,313,211 | ) |
| $ | 66,040,700 |
| ||||
Change in unearned premiums |
|
| (6,029,774 | ) |
|
| - |
|
|
| 1,356,060 |
|
|
| (4,673,714 | ) |
|
| (6,029,774 | ) |
|
| - |
|
|
| 23,925,498 |
|
|
| 17,895,724 |
|
Premiums earned |
| $ | 141,324,137 |
|
| $ | - |
|
| $ | (57,387,713 | ) |
| $ | 83,936,424 |
|
| $ | 141,324,137 |
|
| $ | - |
|
| $ | (57,387,713 | ) |
| $ | 83,936,424 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Nine months ended September 30, 2021 |
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
Three months ended September 30, 2023 |
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
Premiums written |
| $ | 131,609,930 |
| $ | - |
| $ | (21,854,398 | ) |
| $ | 109,755,532 |
|
| $ | 51,992,246 |
| $ | - |
| $ | (48,316,946 | ) |
| $ | 3,675,300 |
| ||||
Change in unearned premiums |
|
| (2,911,439 | ) |
|
| - |
|
|
| (15,198 | ) |
|
| (2,926,637 | ) |
|
| (1,246,657 | ) |
|
| - |
|
|
| 25,509,675 |
|
|
| 24,263,018 |
|
Premiums earned |
| $ | 128,698,491 |
|
| $ | - |
|
| $ | (21,869,596 | ) |
| $ | 106,828,895 |
|
| $ | 50,745,589 |
|
| $ | - |
|
| $ | (22,807,271 | ) |
| $ | 27,938,318 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Three months ended September 30, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Premiums written |
| $ | 54,591,551 |
| $ | - |
| $ | (20,925,381 | ) |
| $ | 33,666,170 |
|
| $ | 54,591,551 |
| $ | - |
| $ | (43,494,819 | ) |
| $ | 11,096,732 |
| ||||
Change in unearned premiums |
|
| (5,636,421 | ) |
|
| - |
|
|
| 1,331,227 |
|
|
| (4,305,194 | ) |
|
| (5,636,421 | ) |
|
| - |
|
|
| 23,900,665 |
|
|
| 18,264,244 |
|
Premiums earned |
| $ | 48,955,130 |
|
| $ | - |
|
| $ | (19,594,154 | ) |
| $ | 29,360,976 |
|
| $ | 48,955,130 |
|
| $ | - |
|
| $ | (19,594,154 | ) |
| $ | 29,360,976 |
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
Three months ended September 30, 2021 |
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
Premiums written |
| $ | 48,865,169 |
| $ | - |
| $ | (7,223,526 | ) |
| $ | 41,641,643 |
| ||||||||||||||||||
Change in unearned premiums |
|
| (4,848,145 | ) |
|
| - |
|
|
| 9,753 |
|
|
| (4,838,392 | ) | ||||||||||||||||
Premiums earned |
| $ | 44,017,024 |
|
| $ | - |
|
| $ | (7,213,773 | ) |
| $ | 36,803,251 |
|
Premium receipts in advance of the policy effective date are recorded as advance premiums. The balance of advance premiums as of September 30, 20222023 and December 31, 20212022 was $6,627,275$6,288,223 and $2,693,466,$2,839,028, respectively.
21 |
Table of Contents |
Loss and Loss Adjustment Expense Reserves
The following table provides a reconciliation of the beginning and ending balances for unpaid lossesloss and loss adjustment expense (“LAE”)LAE reserves:
|
| Nine months ended |
|
| Nine months ended |
| ||||||||||
|
| September 30, |
|
| September 30, |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
| ||||
|
|
|
|
|
|
|
|
|
| |||||||
Balance at beginning of period |
| $ | 94,948,745 |
| $ | 82,801,228 |
|
| $ | 118,339,513 |
| $ | 94,948,745 |
| ||
Less reinsurance recoverables |
|
| (10,637,679 | ) |
|
| (20,154,251 | ) |
|
| (27,659,500 | ) |
|
| (10,637,679 | ) |
Net balance, beginning of period |
|
| 84,311,066 |
|
|
| 62,646,977 |
|
|
| 90,680,013 |
|
|
| 84,311,066 |
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Incurred related to: |
|
|
|
|
|
|
|
|
|
| ||||||
Current year |
| 62,910,967 |
| 79,070,646 |
|
| 66,568,985 |
| 62,910,967 |
| ||||||
Prior years |
|
| 713,788 |
|
|
| (10,529 | ) |
|
| (16,420 | ) |
|
| 713,788 |
|
Total incurred |
|
| 63,624,755 |
|
|
| 79,060,117 |
|
|
| 66,552,565 |
|
|
| 63,624,755 |
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Paid related to: |
|
|
|
|
|
|
|
|
|
| ||||||
Current year |
| 35,774,958 |
| 35,408,412 |
|
| 37,932,760 |
| 35,774,958 |
| ||||||
Prior years |
|
| 26,938,462 |
|
|
| 17,586,958 |
|
|
| 29,928,162 |
|
|
| 26,938,462 |
|
Total paid |
|
| 62,713,420 |
|
|
| 52,995,370 |
|
|
| 67,860,922 |
|
|
| 62,713,420 |
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net balance at end of period |
| 85,222,401 |
| 88,711,724 |
|
| 89,371,656 |
| 85,222,401 |
| ||||||
Add reinsurance recoverables |
|
| 21,706,497 |
|
|
| 12,332,394 |
|
|
| 32,303,291 |
|
|
| 21,706,497 |
|
Balance at end of period |
| $ | 106,928,898 |
|
| $ | 101,044,118 |
|
| $ | 121,674,947 |
|
| $ | 106,928,898 |
|
Incurred losses and LAE are net of reinsurance recoveries under reinsurance contracts of $27,230,814$34,019,370 and $1,220,970$27,230,814 for the nine months ended September 30, 20222023 and 2021,2022, respectively.
Prior year incurred loss and LAE development is based upon estimates by line of business and accident year. Prior year loss and LAE development incurred during the nine months ended September 30, 2023 and 2022 was $16,420 favorable and 2021 was $713,788 unfavorable, and $10,529 favorable, respectively. Management, on a quarterly basis, performs a review of open liability claims to assess carried case and incurred but not reported (“IBNR”) reserve levels, giving consideration to both Company and industry trends.
Loss and LAE reservesReserves
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.
22 |
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 period’s results. Reserves are closely monitored and are recomputed periodically using the most recent information on reported claims and a variety of statistical techniques. On at least a quarterly basis, the Company reviews by line of business existing reserves, new claims, changes to existing case reserves, and paid losses with respect to the current and prior periods. Several methods are used, varying by line of business and accident year, in order to select the estimated period-end loss reserves. These methods include the following:
Paid Loss Development – historical patterns of paid loss development are used to project future paid loss emergence in order to estimate required reserves.
Incurred Loss Development – historical patterns of incurred loss development, reflecting both paid losses and changes in case reserves, are used to project future incurred loss emergence in order to estimate required reserves.
Paid Bornhuetter-Ferguson (“BF”) – an estimated loss ratio for a particular accident year is determined, and is weighted against the portion of the accident year claims that have been paid, based on historical paid loss development patterns. The estimate of required reserves assumes that the remaining unpaid portion of a particular accident year will pay out at a rate consistent with the estimated loss ratio for that year. This method can be useful for situations where an unusually high or low amount of paid losses exists at the early stages of the claims development process.
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.
23 |
Table of Contents |
Management’s best estimate of required reserves is generally based on an average of the methods above, with appropriate weighting of methods based on the line of business and accident year being projected. In some cases, additional methods or historical data from industry sources are employed to supplement the projections derived from the methods listed above.
Three key assumptions that materially affect the estimate of loss reserves are the loss ratio estimate for the current accident year used in the BF methods, the loss development factor selections used in the loss development methods, and the loss severity assumptions used in the frequency / severity method described above. The loss ratio estimates used in the BF methods are selected after reviewing historical accident year loss ratios adjusted for rate changes, trend, and mix of business. The severity assumptions used in the frequency / severity method are determined by reviewing historical average claim severity for older more mature accident periods, trended forward to less mature accident periods.
COVID-19 has introduced additional uncertainty to recent claim trends. The Company reviews the carried reserves levels on a regular basis as additional information becomes available and makes adjustments in the periods in which such adjustments are determined to be necessary. The Company is not aware of any other claim trends that have emerged or that would cause future adverse development that have not already been contemplated in setting current carried reserves levels.
In New York State, lawsuits for negligence are subject to certain limitations and must be commenced within three years from the date of the accident or are otherwise barred. Accordingly, the Company’s exposure to unreported claims (“pure” IBNR) for accident dates of September 30, 20192020 and prior is limited, although there remains the possibility of adverse development on reported claims (“case development” IBNR). In certain rare circumstances states have retroactively revised a statute of limitations. The Company is not aware of any such effort that would have a material impact on the Company’s results.
The following is information about incurred and paid claims development as of September 30, 2022,2023, net of reinsurance, as well as the cumulative reported claims by accident year and total IBNR reserves as of September 30, 20222023 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, 20132014 to December 31, 20212022 is presented as supplementary unaudited information.
All Lines of Business | ||||||||||||||||||||||||||||||||||||||||||||||||
(in thousands, except reported claims data) | ||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| As of |
| |||||||||||||||||||||||||
|
| Incurred Loss and Allocated Loss Adjustment Expenses, Net of Reinsurance |
|
| September 30, 2022 |
| ||||||||||||||||||||||||||||||||||||||||||
|
| For the Years Ended December 31, |
|
| Nine Months Ended September 30, |
|
|
|
| Cumulative Number of Reported Claims by Accident |
| |||||||||||||||||||||||||||||||||||||
Accident Year |
| 2013 |
|
| 2014 |
|
| 2015 |
|
| 2016 |
|
| 2017 |
|
| 2018 |
|
| 2019 |
|
| 2020 |
|
| 2021 |
|
| 2022 |
|
| IBNR | Year |
| ||||||||||||||
|
| (Unaudited 2013 - 2021) |
|
| (Unaudited) |
|
|
|
|
| ||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
2013 |
| $ | 10,728 |
|
| $ | 9,745 |
|
| $ | 9,424 |
|
| $ | 9,621 |
|
| $ | 10,061 |
|
| $ | 10,089 |
|
| $ | 10,607 |
|
| $ | 10,495 |
|
| $ | 10,529 |
|
| $ | 10,493 |
|
| $ | 3 |
|
|
| 1,564 |
|
2014 |
|
|
|
|
|
| 14,193 |
|
|
| 14,260 |
|
|
| 14,218 |
|
|
| 14,564 |
|
|
| 15,023 |
|
|
| 16,381 |
|
|
| 16,428 |
|
|
| 16,434 |
|
|
| 16,496 |
|
|
| 34 |
|
|
| 2,138 |
|
2015 |
|
|
|
|
|
|
|
|
|
| 22,340 |
|
|
| 21,994 |
|
|
| 22,148 |
|
|
| 22,491 |
|
|
| 23,386 |
|
|
| 23,291 |
|
|
| 23,528 |
|
|
| 23,533 |
|
|
| 239 |
|
|
| 2,559 |
|
2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 26,062 |
|
|
| 24,941 |
|
|
| 24,789 |
|
|
| 27,887 |
|
|
| 27,966 |
|
|
| 27,417 |
|
|
| 27,411 |
|
|
| 101 |
|
|
| 2,881 |
|
2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 31,605 |
|
|
| 32,169 |
|
|
| 35,304 |
|
|
| 36,160 |
|
|
| 36,532 |
|
|
| 36,553 |
|
|
| 270 |
|
|
| 3,398 |
|
2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 54,455 |
|
|
| 56,351 |
|
|
| 58,441 |
|
|
| 59,404 |
|
|
| 60,535 |
|
|
| 446 |
|
|
| 4,229 |
|
2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 75,092 |
|
|
| 72,368 |
|
|
| 71,544 |
|
|
| 71,386 |
|
|
| 3,074 |
|
|
| 4,494 |
|
2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 63,083 |
|
|
| 62,833 |
|
|
| 62,043 |
|
|
| 3,504 |
|
|
| 5,861 |
|
2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 96,425 |
|
|
| 97,038 |
|
|
| 9,236 |
|
|
| 5,779 |
|
2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 58,735 |
|
|
| 13,837 |
|
|
| 3,236 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total |
|
| $ | 464,223 |
|
|
|
|
|
|
|
|
|
24 |
Table of Contents |
All Lines of Business | All Lines of Business | All Lines of Business |
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(in thousands, except reported claims data) | (in thousands, except reported claims data) |
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| As of |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| Cumulative Paid Loss and Allocated Loss Adjustment Expenses, Net of Reinsurance |
|
| Incurred Loss and Allocated Loss Adjustment Expenses, Net of Reinsurance |
| September 30, 2023 |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| For the Years Ended December 31, |
| Nine Months Ended September 30, |
|
| For the Years Ended December 31, |
| Nine Months Ended September 30, |
| IBNR |
|
| Cumulative Number of Reported Claims by Accident Year |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accident Year |
| 2013 |
|
| 2014 |
|
| 2015 |
|
| 2016 |
|
| 2017 |
|
| 2018 |
|
| 2019 |
|
| 2020 |
|
| 2021 |
|
| 2022 |
|
| 2014 |
|
| 2015 |
|
| 2016 |
|
| 2017 |
|
| 2018 |
|
| 2019 |
|
| 2020 |
|
| 2021 |
|
| 2022 |
|
| 2023 |
|
|
| ||||||||||||||||||||||||||
|
| (Unaudited 2013 - 2021) |
| (Unaudited) |
|
| (Unaudited 2014 - 2022) |
| (Unaudited) |
|
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||||||||
2013 |
| $ | 3,405 |
| $ | 5,303 |
| $ | 6,633 |
| $ | 7,591 |
| $ | 8,407 |
| $ | 9,056 |
| $ | 9,717 |
| $ | 10,016 |
| $ | 10,392 |
| $ | 10,471 |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2014 |
|
|
| 5,710 |
| 9,429 |
| 10,738 |
| 11,770 |
| 13,819 |
| 14,901 |
| 15,491 |
| 15,770 |
| 16,083 |
|
| $ | 14,193 |
| $ | 14,260 |
| $ | 14,218 |
| $ | 14,564 |
| $ | 15,023 |
| $ | 16,381 |
| $ | 16,428 |
| $ | 16,434 |
| $ | 16,486 |
| $ | 16,486 |
| $ | 17 |
| 2,138 |
| |||||||||||||||||||||||||||||||
2015 |
|
|
|
|
| 12,295 |
| 16,181 |
| 18,266 |
| 19,984 |
| 21,067 |
| 22,104 |
| 22,318 |
| 22,462 |
|
|
|
| 22,340 |
| 21,994 |
| 22,148 |
| 22,491 |
| 23,386 |
| 23,291 |
| 23,528 |
| 23,533 |
| 23,464 |
| 300 |
| 2,559 |
| ||||||||||||||||||||||||||||||||||||||||||
2016 |
|
|
|
|
|
|
| 15,364 |
| 19,001 |
| 21,106 |
| 23,974 |
| 25,234 |
| 25,750 |
| 26,244 |
|
|
|
|
|
| 26,062 |
| 24,941 |
| 24,789 |
| 27,887 |
| 27,966 |
| 27,417 |
| 27,352 |
| 27,300 |
| 125 |
| 2,881 |
| ||||||||||||||||||||||||||||||||||||||||||
2017 |
|
|
| �� |
|
|
|
|
|
| 16,704 |
| 24,820 |
| 28,693 |
| 31,393 |
| 32,529 |
| 32,928 |
|
|
|
|
|
|
|
| 31,605 |
| 32,169 |
| 35,304 |
| 36,160 |
| 36,532 |
| 36,502 |
| 36,731 |
| 260 |
| 3,400 |
| |||||||||||||||||||||||||||||||||||||||||
2018 |
|
|
|
|
|
|
|
|
|
|
| 32,383 |
| 44,516 |
| 50,553 |
| 52,025 |
| 53,657 |
|
|
|
|
|
|
|
|
|
| 54,455 |
| 56,351 |
| 58,441 |
| 59,404 |
| 61,237 |
| 61,024 |
| 909 |
| 4,233 |
| ||||||||||||||||||||||||||||||||||||||||||
2019 |
|
|
|
|
|
|
|
|
|
|
|
|
| 40,933 |
| 54,897 |
| 58,055 |
| 59,933 |
|
|
|
|
|
|
|
|
|
|
|
| 75,092 |
| 72,368 |
| 71,544 |
| 71,964 |
| 72,811 |
| 1,126 |
| 4,501 |
| ||||||||||||||||||||||||||||||||||||||||||
2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 39,045 |
| 50,719 |
| 52,632 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 63,083 |
| 62,833 |
| 63,217 |
| 63,255 |
| 2,431 |
| 5,883 |
| ||||||||||||||||||||||||||||||||||||||||||
2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 56,282 |
| 75,291 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 96,425 |
| 96,673 |
| 95,839 |
| 4,099 |
| 5,808 |
| ||||||||||||||||||||||||||||||||||||||||||
2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 32,981 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 79,835 |
| 79,978 |
| 8,691 |
| 4,674 |
| |||||||||||||||||||||||||||||||||||||||||
2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 63,392 |
|
| 14,044 |
| 2,840 |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total |
| $ | 382,681 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total |
| $ | 540,280 |
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net liability for unpaid loss and allocated loss adjustment expenses for the accident years presented |
| $ | 81,542 |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
All outstanding liabilities before 2013, net of reinsurance |
|
| 264 |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Liabilities for loss and allocated loss adjustment expenses, net of reinsurance |
| $ | 81,806 |
|
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 |
|
(Components may not sum to totals due to rounding)
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) |
|
|
|
|
25 |
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.
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:
Reconciliation of the Disclosure of Incurred and Paid Loss Development | ||||
to the Liability for Loss and LAE Reserves | ||||
|
|
| ||
|
| As of |
| |
(in thousands) |
| September 30, 2022 |
| |
Liabilities for allocated loss and loss adjustment expenses, net of reinsurance |
| $ | 81,806 |
|
Total reinsurance recoverable on unpaid losses |
|
| 21,706 |
|
Unallocated loss adjustment expenses |
|
| 3,416 |
|
Total gross liability for loss and LAE reserves |
| $ | 106,929 |
|
(Components may not sum to totals due to rounding)
Reconciliation of the Disclosure of Incurred and Paid Loss Development | ||||
to the Liability for Loss and LAE Reserves | ||||
|
|
| ||
|
| As of |
| |
(in thousands) |
| 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
Effective December 31, 2021, the Company entered into a quota share reinsurance treaty for its personal lines business, which primarily consists of homeowners’ and dwelling fire policies, covering the period from December 31, 2021 through January 1, 2023 (“2021/2023 Treaty”). Upon the expiration of the 2021/2023 Treaty on January 1, 2023, the Company entered into a new 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, 20222023 and the Company entered into new excess of loss and catastrophe reinsurance treaties effective July 1, 2022. Effective October 20, 2021, the Company entered into a stub catastrophe reinsurance treaty covering the period from October 20, 2021 through December 31, 2021. The treaty provided reinsurance coverage for catastrophe losses of $5,000,000 in excess of $5,000,000.2023. Effective January 1, 2022, the Company entered into an underlying excess of loss reinsurance treaty (“Underlying XOL Treaty”) covering the period from January 1, 2022 through January 1, 2023. The treaty provides 50% reinsurance coverage for losses of $400,000 in excess of $600,000. Losses from named storms are excluded from the treaty. Effective January 1, 2023, the Underlying XOL Treaty was renewed covering the period from January 1, 2023 through January 1, 2024. Material terms for reinsurance treaties in effect for the treaty years shown below are as follows:
|
| Treaty Period |
| |||||||||||||||||
|
|
|
| (2021/2023 Treaty) |
|
|
|
|
| |||||||||||
|
| January 2, |
|
| July 1, |
|
| December 31, |
|
| July 1, |
|
| December 31, |
| |||||
|
| 2023 |
|
| 2022 |
|
| 2021 |
|
| 2021 |
|
| 2020 |
| |||||
|
| to |
|
| to |
|
| to |
|
| to |
|
| to |
| |||||
|
| June 30, |
|
| January 1, |
|
| June 30, |
|
| December 30, |
|
| June 30, |
| |||||
Line of Business |
| 2023 |
|
| 2023 |
|
| 2022 |
|
| 2021 |
|
| 2021 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Personal Lines: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Homeowners, dwelling fire and and canine legal liability |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Quota share treaty: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Percent ceded (9) |
| None (8) |
|
|
| 30 | % |
|
| 30 | % |
| None (5) |
|
| None (5) |
| |||
Risk retained on intial $1,000,000 of losses (5) (7) (8) (9) |
| $ | 1,000,000 |
|
| $ | 700,000 |
|
| $ | 700,000 |
|
| $ | 1,000,000 |
|
| $ | 1,000,000 |
|
Losses per occurrence subject to quota share reinsurance coverage |
| None (8) |
|
| $ | 1,000,000 |
|
| $ | 1,000,000 |
|
| None (5) |
|
| None (5) |
| |||
Expiration date |
|
| (8) |
| January 1, 2023 |
|
| January 1, 2023 |
|
| NA (5) |
|
| NA (5) |
| |||||
Excess of loss coverage and facultative facility coverage (1) (7) |
| $ | 8,000,000 |
|
| $ | 8,400,000 |
|
| $ | 8,400,000 |
|
| $ | 8,000,000 |
|
| $ | 8,000,000 |
|
|
| in excess of |
|
| in excess of |
|
| in excess of |
|
| in excess of |
|
| in excess of |
| |||||
|
| $ | 1,000,000 |
|
| $ | 600,000 |
|
| $ | 600,000 |
|
| $ | 1,000,000 |
|
| $ | 1,000,000 |
|
Total reinsurance coverage per occurrence (5) (7) (8) |
| $ | 8,000,000 |
|
| $ | 8,500,000 |
|
| $ | 8,500,000 |
|
| $ | 8,000,000 |
|
| $ | 8,000,000 |
|
Losses per occurrence subject to reinsurance coverage (5) (8) |
| $ | 8,000,000 |
|
| $ | 9,000,000 |
|
| $ | 9,000,000 |
|
| $ | 9,000,000 |
|
| $ | 9,000,000 |
|
Expiration date (8) |
| June 30, 2023 |
|
| June 30, 2023 |
|
| June 30, 2022 |
|
| June 30, 2022 |
|
| June 30, 2021 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Catastrophe Reinsurance: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Initial loss subject to personal lines quota share treaty |
|
| (8) |
|
| 10,000,000 |
|
|
| 10,000,000 |
|
| None (5) |
|
| None (5) |
| |||
Risk retained per catastrophe occurrence (5) (8) (9) (10) |
| $ | 10,000,000 |
|
| $ | 7,400,000 |
|
| $ | 7,400,000 |
|
| $ | 10,000,000 |
|
| $ | 10,000,000 |
|
Catastrophe loss coverage in excess of quota share coverage (2) (5) (8) |
| $ | 335,000,000 |
|
| $ | 335,000,000 |
|
| $ | 490,000,000 |
|
| $ | 490,000,000 |
|
| $ | 475,000,000 |
|
Catastrophe stub coverage for the period from October 18, 2021 through December 31, 2021 (6) |
| NA |
|
| NA |
|
| NA |
|
| $ | 5,000,000 |
|
| NA |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| in excess of |
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 5,000,000 |
|
|
|
|
|
Reinstatement premium protection (3) (4) |
| Yes |
|
| Yes |
|
| Yes |
|
| Yes |
|
| Yes |
|
26 |
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) | 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, | |
(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 | |
(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 January 1, 2022 through January 1, | |
| (6) | Personal lines quota share (homeowners, dwelling fire and canine liability) and underlying excess of loss reinsurance will expire on January 1, |
| (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 |
|
| Treaty Year |
| |||||||||
|
| July 1, 2022 |
|
| July 1, 2021 |
|
| July 1, 2020 |
| |||
|
| to |
|
| to |
|
| to |
| |||
Line of Business |
| June 30, 2023 |
|
| June 30, 2022 |
|
| June 30, 2021 |
| |||
|
|
|
|
|
|
|
|
|
| |||
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, 2023 |
|
| June 30, 2022 |
|
| June 30, 2021 |
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial Lines (1): |
|
|
|
|
|
|
|
|
|
|
|
|
General liability commercial policies |
|
|
|
|
|
|
|
|
|
|
|
|
Quota share treaty |
|
|
|
|
|
|
|
|
| None |
| |
Risk retained |
|
|
|
|
|
|
|
|
| $ | 750,000 |
|
Excess of loss coverage above risk retained |
|
|
|
|
|
|
|
|
| $ | 3,750,000 |
|
|
|
|
|
|
|
|
|
|
| in excess of |
| |
|
|
|
|
|
|
|
|
|
| $ | 750,000 |
|
Total reinsurance coverage per occurrence |
|
|
|
|
|
|
|
|
| $ | 3,750,000 |
|
Losses per occurrence subject to reinsurance coverage |
|
|
|
|
|
|
|
|
| $ | 4,500,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial Umbrella |
|
|
|
|
|
|
|
|
|
|
|
|
Quota share treaty |
|
|
|
|
|
|
|
|
| None |
|
27 |
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) | Coverage on all commercial lines policies expired in September 2020; reinsurance coverage is based on treaties in effect on the date of loss. |
The Company’s reinsurance program has been structured to enable the Company to grow its premium volume while maintaining regulatory capital and other financial ratios generally within or below the expected ranges used for regulatory oversight purposes. The reinsurance program also provides income as a result of ceding commissions earned pursuant to the quota share reinsurance contracts. The Company’s participation in reinsurance arrangements does not relieve the Company of its obligations to policyholders.
Ceding Commission Revenue
The Company 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 will beare earned. There was no quota share treaty in effect during the three months and nine months ended September 30, 2021. The Company earned ceding commission revenue under its expired quota share reinsurance agreements based on: (i) a fixed provisional commission rate at which provisional ceding commissions were earned, and (ii) a continuing sliding scale of commission rates and ultimate treaty year loss ratios on the policies reinsured under each of these agreements based upon which contingent ceding commissions are earned. The sliding scale includes minimum and maximum commission rates in relation to specified ultimate loss ratios. The commission rate and contingent ceding commissions earned increasesincrease when the estimated ultimate loss ratio decreases and, conversely, the commission rate and contingent ceding commissions earned decreasesdecrease when the estimated ultimate loss ratio increases.
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Ceding commission revenue consists of the following:
|
| Three months ended |
| Nine months ended |
|
| Three months ended |
| Nine months ended |
| ||||||||||||||||||||||
|
| September 30, |
| September 30, |
|
| September 30, |
| September 30, |
| ||||||||||||||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Provisional ceding commissions earned |
| $ | 4,881,580 |
| $ | 40,578 |
| $ | 14,116,044 |
| $ | 135,666 |
|
| $ | 4,992,312 |
| $ | 4,881,580 |
| $ | 15,733,145 |
| $ | 14,116,044 |
| ||||||
Contingent ceding commissions earned |
|
| 4,514 |
|
|
| (47,854 | ) |
|
| 167,033 |
|
|
| (98,266 | ) |
|
| 544,015 |
|
|
| 4,514 |
|
|
| 660,799 |
|
|
| 167,033 |
|
|
| $ | 4,886,094 |
|
| $ | (7,276 | ) |
| $ | 14,283,077 |
|
| $ | 37,400 |
|
| $ | 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 periodically based on the Loss Ratio of each treaty year that ends on June 30, for the expired treaties that were subject to contingent commissions. As discussed above, the Loss Ratios from prior years’ treaties are subject to change as incurred losses from those periods develop, resulting in an increase or decrease in the commission rate and contingent ceding commissions earned. As of September 30, 20222023 and December 31, 2021,2022, net contingent ceding commissions payable to reinsurers under all treaties was approximately $2,714,000$2,007,000 and $2,881,000,$2,667,000, respectively, which is recorded in reinsurance balances payable on the accompanying condensed consolidated balance sheets.
Expected Credit Losses – Uncollectible Reinsurance
The Company reviews reinsurance receivables which relate to both amounts already billed on ceded paid losses as well as ceded reserves that will be billed when losses are paid in the future. The Company has not recorded an allowance for uncollectible reinsurance as there is no perceived credit risk. The principal credit quality indicator used in the valuation of the allowance on reinsurance receivables is the financial strength rating of the reinsurer sourced from major rating agencies. Changes in the allowance are presented as a component of other underwriting expenses on the condensed consolidated statements of operations and comprehensive loss.
Note 7 – Debt
Federal Home Loan Bank
In July 2017, KICO became a member of, and invested in, the Federal Home Loan Bank of New York (“FHLBNY”).FHLBNY. KICO is required to maintain an investment in capital stock of FHLBNY. Based on redemption provisions of FHLBNY, the stock has no quoted market value and is carried at cost. At its discretion, FHLBNY may declare dividends on the stock. Management reviews for impairment based on the ultimate recoverability of the cost basis in the stock. At September 30, 20222023 and December 31, 2021,2022, no impairment has been recognized. FHLBNY members have access to a variety of flexible, low-costlow cost funding through FHLBNY’s credit products, enabling members to customize advances, which are to be fully collateralized. Eligible collateral to pledge to FHLBNY includes residential and commercial mortgage-backed securities, along with U.S. Treasury and agency securities. See Note 3 – Investments for eligible collateral held in a designated custodian account available for future advances. Advances are limited to 5% of KICO’s net admitted assets as of the previous quarter and are due and payable within one year of borrowing. KICO is currently able to borrow on an overnight basis. TheIf KICO has collateral, based on KICO’s net admitted assets, the maximum allowable advance as of September 30, 2023 and December 31, 2022 was approximately $12,414,000.$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. As of September 30, 2022, the estimated fair value of available collateral was $12,393,000. Accordingly, as of September 30, 2022, advancesThere were limited to $10,534,000. As of December 31, 2021, there was no available collateral. There have been no borrowings under this facility since KICO became a member of FHLBNY.during the nine months ended September 30, 2023 and 2022.
29 |
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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 19, 2017,9, 2022, the Company issued $30 millionentered into a Note and Warrant Exchange Agreement (the “Exchange Agreement”) with several holders (the “Exchanging Noteholders”) of itsthe Company’s outstanding 5.50% Senior UnsecuredNotes due 2022 (the “2017 Notes”). On the date of the Exchange Agreement, the Exchanging Noteholders held 2017 Notes in the aggregate principal amount of $21,545,000 of the $30,000,000 aggregate principal amount of the 2017 Notes then outstanding. Pursuant to the Exchange Agreement, on December 15, 2022, the Exchanging Noteholders exchanged their respective 2017 Notes for the following: (i) new 12.0% Senior Notes due December 30, 2024 of the Company in the aggregate approximate principal amount of $19,950,000 (the “2022 Notes”); (ii) cash in the aggregate approximate amount of $1,595,000, together with accrued interest on the 2017 Notes; and (iii) three-year warrants for the purchase of an aggregate of 969,525 shares of Common Stock of the Company, exercisable at an exercise price of $1.00 per share (the “Warrants”). The remaining $8,455,000 principal amount of the 2017 Notes, together with accrued interest thereon, was paid on the maturity date of the 2017 Notes of December 30, 2022.
2022 (the “Notes”) in an underwritten public offering.Notes
On December 15, 2022, the Company issued $19,950,000 of its 2022 Notes pursuant to the Exchange Agreement. Interest is payable semi-annually in arrears on June 30 and December 30 of each year, which begancommenced on June 30, 20182023 at the rate of 5.50%12.0% per annum. The net proceedsWarrants were issued with a fair value of the issuance were $29,121,630, net of discount of $163,200$993,200 (see Note 8 – Stockholders’ Equity) and transaction costs of $715,170,were $1,758,112, for an effective yield of 5.67%13.92% per annum. The balance of debtthe 2022 Notes as of September 30, 20222023 and December 31, 20212022 is as follows:
|
| September 30, |
|
| December 31, |
| ||
|
| 2022 |
|
| 2021 |
| ||
|
|
|
|
|
|
| ||
5.50% Senior Unsecured Notes |
| $ | 30,000,000 |
|
| $ | 30,000,000 |
|
Discount |
|
| (8,110 | ) |
|
| (32,442 | ) |
Issuance costs |
|
| (35,964 | ) |
|
| (143,767 | ) |
Debt, net |
| $ | 29,955,926 |
|
| $ | 29,823,791 |
|
|
| 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 |
|
30 |
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'sCompany’s subsidiaries. The 2022 Notes rank senior in right of payment to any of the Company'sCompany’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'sCompany’s existing and future senior indebtedness, but will beare effectively subordinated to any secured indebtedness to the extent of the value of the collateral securing such secured indebtedness. In addition, the 2022 Notes will beare structurally subordinated to the indebtedness and other obligations of the Company'sCompany’s subsidiaries.
The Company may redeem2022 Notes are redeemable, at the Notes,Company’s option, in whole or in part, at any time or in whole orpart from time to time, in part,upon not less than fifteen (15) nor more than sixty (60) days’ notice, at the following redemption price equal to the greater of: (i) 100%prices (expressed as percentages of the principal amount thereof) if redeemed during the respective period set forth below, plus, in each case, accrued and unpaid interest, if any, to the date of redemption (subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date):
Period: | Percentage | |||
December 30, 2022 to December 29, 2023 | 102.00 | % | ||
December 30, 2023 to September 29, 2024 | 101.00 | % | ||
September 30, 2024 to December 29, 2024 | 100.00 | % |
As of the Notesend of each calendar quarter, commencing with the calendar quarter ending December 31, 2022, the Company is subject to be redeemed; and (ii)a leverage maintenance test (“Leverage Maintenance Test”), which requires that the sumTotal Consolidated Indebtedness (as defined below) of the present valuesCompany 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 remaining scheduled paymentsholders of principal and interest on the outstanding 2022 Notes (on behalf of all holders of the 2022 Notes) agreed to be redeemed that would be due if the Notes matured on the applicable redemption date (exclusive of interest accrued to the applicable redemption date) discounted to the redemption date on a semi-annual basis at the Treasury Rate, plus 50 basis points (“Make Whole Call”).
Due to the Make Whole Call, management intends to retire or otherwise satisfy the Notes at or close to the scheduled maturity date in December 2022. See Note 2 – Accounting Policies - Management’s Plan Related to Going Concern for a discussion of Kingstone’s plans with regard towaiver regarding the satisfaction of the Notes.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.
31 |
|
Table of Contents |
Capital LeaseEquipment 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 sale leasebackFinancing 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, commencingwhich commenced on October 27, 2022. The terms of the agreementFinancing 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 |
A provision of the sale leaseback agreementFinancing requires KICO to pledge collateral for the lease obligation. KICOAs 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 a total of $9,958,700collateral was approximately $8,168,000 and $8,691,000, respectively, in United States Treasury Bills. See Note 13 - Subsequent Events.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
Dividends Declared and Paid
Dividends declared and paid on Common Stock were $1,277,066$-0- and $1,274,797$1,277,066 for the nine months ended September 30, 2023 and 2022, and 2021, respectively. On November 11, 2022, the Company’s Board of Directors determined to suspend regular quarterly dividends. Future dividend policy will be subject to the discretion of the Company’s Board of Directors.
Stock Options2014 Equity Participation Plan
Effective August 12, 2014, the Company adopted the 2014 Equity Participation Plan (the “2014 Plan”) pursuant to which a maximum of 700,000 shares of Common Stock of the Company were initially authorized to be issued pursuant to the grant of incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock and stock bonuses. Incentive stock options granted under the 2014 Plan expire no later than ten years from the date of grant (except no later than five years for a grant to a 10% stockholder). Non-statutory stock options granted under the 2014 Plan expire no later than ten years from the date of grant. The Board of Directors or the Compensation Committee determines the vesting provisions for stock awards granted under the 2014 Plan, subject to the provisions of the 2014 Plan. On August 5, 2020, the Company’s stockholders approved amendments to the 2014 Plan, including an increase in the maximum number of shares of Common Stock of the Company that are authorized to be issued pursuant to the 2014 Plan to 1,400,000. On 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.
32 |
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Stock Options
The results of operations for the three months ended September 30, 20222023 and 20212022 include stock-based compensation expense for stock options totaling approximately $2,000$-0- and $14,000,$2,000, respectively. The results of operations for the nine months ended September 30, 20222023 and 20212022 include stock-based compensation expense for stock options totaling approximately $9,000$-0- and $43,000,$9,000, respectively. Stock-based compensation expense related to stock options for the three months and nine months ended September 30, 2022 and 2021 is net of estimated forfeitures of approximately 18% and 16%, respectively.. Such amounts have been included in the condensed consolidated statements of operations and comprehensive income (loss)loss within other operating expenses.
No options were granted during the nine months ended September 30, 2023 and 2022. The fair value of stock options at the grant date are estimated using the Black-Scholes option-pricing model. The Black-Scholes option - pricing model was developed for use in estimating the fair value of traded options, which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility. Because the Company’s stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management's opinion, the existing models do not necessarily provide a reliable single measure of the fair value of the Company’s stock options.
A summary of stock option activity under the Company’s 2014 Plan for the nine months ended September 30, 20222023 is as follows:
Stock Options |
| Number of Shares |
|
| Weighted Average Exercise Price per Share |
|
| Weighted Average Remaining Contractual Term |
|
| Aggregate Intrinsic Value |
|
| Number of Shares |
|
| Weighted Average Exercise Price per Share |
|
| Weighted Average Remaining Contractual Term |
|
| Aggregate Intrinsic Value |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Outstanding at January 1, 2022 |
| 107,201 |
| $ | 8.31 |
| 2.92 |
| $ | - |
| |||||||||||||||||||||
Outstanding at January 1, 2023 |
| 107,201 |
| $ | 8.31 |
| 1.92 |
| $ | - |
| |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Granted |
| - |
| $ | - |
| - |
| $ | - |
|
| - |
| $ | - |
| - |
| $ | - |
| ||||||||||
Exercised |
| - |
| $ | - |
| - |
| $ | - |
|
| - |
| $ | - |
| - |
| $ | - |
| ||||||||||
Expired/Forfeited |
|
| - |
|
| $ | - |
| - |
| $ | - |
|
|
| - |
|
| $ | - |
| - |
| $ | - |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Outstanding at September 30, 2022 |
|
| 107,201 |
|
| $ | 8.31 |
|
|
| 2.18 |
|
| $ | - |
| ||||||||||||||||
Outstanding at September 30, 2023 |
|
| 107,201 |
|
| $ | 8.31 |
|
|
| 1.18 |
|
| $ | - |
| ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Vested and Exercisable at September 30, 2022 |
|
| 94,701 |
|
| $ | 8.26 |
|
|
| 2.46 |
|
| $ | - |
| ||||||||||||||||
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, 20222023 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 $2.66$1.79 closing price of the Company’s Common Stock on September 30, 2022.2023. No options were exercised, forfeited or expired during the nine months ended September 30, 2022.2023. The total intrinsic value of options when forfeited are determined as of the date of forfeiture. The total intrinsic value of options when expired are determined as of the date of expiration.
33 |
Table of Contents |
Participants in the 2014 Plan may exercise their outstanding vested options, in whole or in part, by having the Company reduce the number of shares otherwise issuable by a number of shares having a fair market value equal to the exercise price of the option being exercised, (“Net Exercise”), or by exchanging a number of shares owned for a period of greater than one year having a fair market value equal to the exercise price of the option being exercised (“Share Exchange”).exercised.
As of September 30, 2022,2023, there were no unvested options.
As of September 30, 2022,2023, there were 364,271591,383 shares reserved for grants under the 2014 Plan.
Restricted Stock Awards
A summary of the restricted Common Stock activity under the Company’s 2014 Plan for nine months ended September 30, 20222023 is as follows:
Restricted Stock Awards |
| Shares |
|
| Weighted Average Grant Date Fair Value per Share |
|
| Aggregate Fair Value |
|
| Shares |
|
| Weighted Average Grant Date Fair Value per Share |
|
| Aggregate Fair Value |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Balance at January 1, 2022 |
| 535,410 |
| $ | 7.01 |
| $ | 3,753,224 |
| |||||||||||||||
Balance at January 1, 2023 |
| 366,597 |
| $ | 6.97 |
| $ | 2,555,181 |
| |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Granted |
| 98,456 |
| $ | 5.53 |
| $ | 544,503 |
|
| 272,682 |
| $ | 1.37 |
| $ | 373,499 |
| ||||||
Vested |
| (234,219 | ) |
| $ | 7.32 |
| $ | (1,715,220 | ) |
| (56,977 | ) |
| $ | 6.67 |
| $ | (380,199 | ) | ||||
Forfeited |
|
| (17,605 | ) |
| $ | - |
|
| $ | - |
|
|
| (12,620 | ) |
| $ | 4.11 |
| $ | (51,926 | ) | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Balance at September 30, 2022 |
|
| 382,042 |
|
| $ | 6.91 |
|
| $ | 2,582,506 |
| ||||||||||||
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 ended September 30, 20222023 and 2021,2022, stock-based compensation for these grants was approximately $186,000$207,000 and $452,000,$186,000, respectively, which is included in other operating expenses on the accompanying condensed consolidated statements of operations and comprehensive income (loss).loss. For the nine months ended September 30, 20222023 and 2021,2022, stock-based compensation for these grants was approximately $1,180,000$636,000 and $1,405,000,$1,180,000, respectively, which is included in other operating expenses on the accompanying condensed consolidated statements of operations and comprehensive income (loss).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.
34 |
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, and 2021, stock-based compensation under the 2021/2022 Offering was approximately $5,000 and $-0-,$16,000, respectively, which is included in other operating expenses on the accompanying condensed consolidated statements of operations and comprehensive income (loss). For the nine months ended September 30, 2022 and 2021, stock-based compensation under the 2021/2022 Offering was approximately $16,000 and $-0-, respectively, which is included in other operating expenses on the accompanying condensed consolidated statements of operations and comprehensive income (loss).loss.
At the end of the 2021/2022 offeringOffering period, 33,222 shares of common stockCommon Stock were issued at $1.82 per share to participating employees for a total purchase price of $60,464. See Note 13 - Subsequent Events.
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 ownedwholly-owned subsidiaries. State tax returns are filed on a consolidated or separate return basis depending on applicable laws. The Company records adjustments related to prior years’ taxes during the period when they are identified, generally when the tax returns are filed. The effect of these adjustments on the current and prior periods (during which the differences originated) is evaluated based upon quantitative and qualitative factors and are considered in relation to the consolidated financial statements taken as a whole for the respective periods.
Deferred tax assets and liabilities are determined using the enacted tax rates applicable to the period the temporary differences are expected to be recovered. Accordingly, the current period income tax provision can be affected by the enactment of new tax rates. The net deferred income taxes on the balance sheets reflect temporary differences between the carrying amounts of the assets and liabilities for financial reporting purposes and income tax purposes, tax effected at various rates depending on whether the temporary differences are subject to federal taxes, state taxes, or both.
35 |
Table of Contents |
Significant components of the Company’s deferred tax assets and liabilities are as follows:
|
| September 30, |
| December 31, |
|
| September 30, |
| December 31, |
| ||||||
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||||
Deferred tax asset: |
|
|
|
|
|
|
|
|
|
| ||||||
Net operating loss carryovers (1) |
| $ | 2,099,013 |
| $ | 1,112,318 |
|
| $ | 6,411,993 |
| $ | 3,828,947 |
| ||
Claims reserve discount |
| 1,164,002 |
| 1,186,789 |
|
| 1,220,674 |
| 1,238,544 |
| ||||||
Unearned premium |
| 3,607,880 |
| 3,246,364 |
|
| 2,395,542 |
| 3,574,840 |
| ||||||
Deferred ceding commission revenue |
| 2,167,278 |
| 2,047,187 |
|
| 1,972,541 |
| 2,230,109 |
| ||||||
Net unrealized losses on securities |
| 4,215,667 |
| - |
|
| 4,912,057 |
| 4,920,837 |
| ||||||
Other |
|
| 1,530,488 |
|
|
| 1,220,898 |
|
|
| 1,193,445 |
|
|
| 503,692 |
|
Total deferred tax assets |
|
| 14,784,328 |
|
|
| 8,813,556 |
|
|
| 18,106,252 |
|
|
| 16,296,969 |
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Deferred tax liability: |
|
|
|
|
|
|
|
|
|
| ||||||
Investment in KICO (2) |
| 759,543 |
| 759,543 |
|
| 759,543 |
| 759,543 |
| ||||||
Deferred acquisition costs |
| 4,873,194 |
| 4,670,187 |
|
| 4,311,788 |
| 5,002,085 |
| ||||||
Intangibles |
| 105,000 |
| 105,000 |
|
| 105,000 |
| 105,000 |
| ||||||
Depreciation and amortization |
| 189,643 |
| 1,046,817 |
|
|
| 140,761 |
|
|
| 99,183 |
| |||
Net unrealized gains on securities |
|
| - |
|
|
| 2,039,756 |
| ||||||||
Total deferred tax liabilities |
|
| 5,927,380 |
|
|
| 8,621,303 |
|
|
| 5,317,092 |
|
|
| 5,965,811 |
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net deferred income tax asset |
| $ | 8,856,948 |
|
| $ | 192,253 |
|
| $ | 12,789,160 |
|
| $ | 10,331,158 |
|
(1) The deferred tax assets from net operating loss carryovers (“NOL”) are as follows:
|
| September 30, |
| December 31, |
|
| September 30, |
| December 31, |
| ||||||||||||
Type of NOL |
| 2022 |
|
| 2021 |
|
| Expiration |
| 2023 |
|
| 2022 |
|
| Expiration | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Federal only, NOL from 2022 and 2021 |
| $ | 2,099,013 |
| $ | 1,112,318 |
|
| ||||||||||||||
NOL carried back |
|
| - |
|
|
| - |
|
|
| ||||||||||||
Federal only, NOL from 2022 and 2021 |
|
| 2,099,013 |
|
|
| 1,112,318 |
|
| None | ||||||||||||
Federal only, NOL from 2021 - 2023 |
| $ | 6,411,993 |
|
| $ | 3,828,947 |
|
| None | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
State only (A) |
| 2,227,702 |
| 2,099,239 |
| December 2027 - December 2042 |
| 2,555,609 |
| 2,276,595 |
| December 2027 - December 2043 | ||||||||||
Valuation allowance |
|
| (2,227,702 | ) |
|
| (2,099,239 | ) |
|
|
|
| (2,555,609 | ) |
|
| (2,276,595 | ) |
|
| ||
State only, net of valuation allowance |
|
| - |
|
|
| - |
|
|
|
|
| - |
|
|
| - |
|
|
| ||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Total deferred tax asset from net operating loss carryovers |
| $ | 2,099,013 |
|
| $ | 1,112,318 |
|
|
|
| $ | 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, 20222023 and December 31, 20212022 was approximately $34,272,000$39,317,000 and $32,296,000,$35,025,000, respectively. KICO, the Company’s insurance underwriting subsidiary, is not subject to state income taxes. KICO’s state tax obligations are paid through a gross premiums tax, which is included in the condensed consolidated statements of operations and comprehensive income (loss)loss within other underwriting expenses. Kingstone has recorded a valuation allowance due to the uncertainty of generating enough state taxable income to utilize 100% of the available state NOLs over their remaining lives, which expire between 2027 and 2042. 2043.
36 |
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 $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, 20222023 and 2021.2022. If any had been recognized these would have been reported in income tax expense.
Generally, taxing authorities may examine the Company’s tax returns for the three years from the date of filing. The Company’s tax returns for the years ended December 31, 2019 through December 31, 20212022 remain subject to examination.
Note 10 – (Loss) EarningsLoss Per Common Share
Basic net (loss) earningsloss per common share is computed by dividing net loss available to common shareholders by the weighted-average number of shares of Common Stock outstanding. Diluted loss per common share reflect,reflects, in periods in which they haveit has a dilutive effect, the impact of common shares issuable upon exercise of stock options and warrants as well as non-vested restricted stock awards. The computation of diluted loss per common share excludes those options and warrants with an exercise price in excess of the average market price of the Company’s Common Stock during the periods presented.
The computation of diluted loss per common share excludes outstanding options, warrants and non-vested restricted stock awards in periods where the exercise of such options and warrants or vesting of such restricted stock awards would be anti-dilutive. For the three months and nine months ended September 30, 20222023 and 2021,2022, no options, warrants or restricted stock awards were included in the computation of diluted loss per common share as they would have been anti-dilutive for the relevant periods and, as a result, the weighted average number of shares of Common Stock used in the calculation of diluted loss per common share has not been adjusted for the effect of such options.options, warrants and non-vested restricted stock awards.
37 |
Table of Contents |
The reconciliation of the weighted average number of shares of Common Stock used in the calculation of basic and diluted (loss) earningsloss per common share follows:
|
| Three months ended |
| Nine months ended |
|
| Three months ended |
| Nine months ended |
| ||||||||||||||||||||||
|
| September 30, |
| September 30, |
|
| September 30, |
| September 30, |
| ||||||||||||||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Weighted average number of shares outstanding |
| 10,645,675 |
| 10,523,515 |
| 10,640,290 |
| 10,622,988 |
|
| 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) earnings per share |
|
| 10,645,675 |
|
|
| 10,523,515 |
|
|
| 10,640,290 |
|
|
| 10,622,988 |
| ||||||||||||||||
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 primarily used for office space in the ordinary course of business. These leases are accounted for as operating leases, whereby lease expense is recognized on a straight-line basis over the term of the lease. See Note 2 - Accounting Policies for additional information regarding the accounting for leases.
The Company is a party to a non-cancellable operating lease, dated March 27, 2015, for its office facility for KICO located in Valley Stream, New York expiring March 31, 2024.
On July 8, 2019, the Company entered into a lease agreement for an additional office facility for Cosi located in Valley Stream, New York under a non-cancelable operating lease. The lease had a term of seven years and two months expiring December 31, 2026. During January 2022, pursuant to a mutual agreement with the landlord at a cost of $40,000, the Cosi lease was terminated effective as of January 31, 2022.
38 |
Table of Contents |
Additional information regarding the Company’s office operating leases is as follows:
|
| Three months ended |
|
| Nine months ended |
| ||
Lease cost |
| September 30, 2022 |
|
| September 30, 2022 |
| ||
Operating lease (1) (2) |
| $ | 41,342 |
|
| $ | 131,152 |
|
|
|
|
|
|
|
|
|
|
Other information on operating leases |
|
|
|
|
|
|
|
|
Cash payments included in the measurement of lease liability reported in operating cash flows |
| $ | 47,483 |
|
| $ | 147,969 |
|
Discount rate |
|
| 5.50 | % |
|
| 5.50 | % |
Remaing lease term in years |
|
|
|
|
|
|
|
|
KICO |
|
| 1.50 years |
|
| 1.50 years |
|
The following table presents the contractual maturities of the Company’s lease liabilities as of September 30,
The following table presents the contractual maturities of the Company’s lease liabilities as of September 30, 2023:
Rent expense for the three months ended September 30,
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 Second Amended Goldstein Employment Agreement became effective as of January 1, 2020 and
Pursuant to the Second Amended Goldstein Employment Agreement, Mr. Goldstein
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
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
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
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
Pursuant to the Golden Employment Agreement, Ms. Golden
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
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
Note 12 – Employee Benefit Plans
Employee Bonus Plan
For the nine months ended September 30,
The Company maintains a salary reduction plan under Section 401(k) of the Internal Revenue Code (the “401(k) Plan”) for its qualified employees. The Company matches 100% of each participant’s contribution up to 4% of the participant’s eligible contribution. The Company incurred approximately $90,000 and $71,000,
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 The deferred compensation liability as of September 30,
Note 13 – Subsequent Events
The Company has evaluated events that occurred subsequent to September 30,
On
ITEM
We offer property and casualty insurance products
In addition,
We derive substantially all of our revenue from KICO, which includes revenues from earned premiums, ceding commissions from quota share reinsurance, net investment income generated from its portfolio, and net realized gains and losses on investment securities. All of KICO’s insurance policies are written for a one-year term. Earned premiums represent premiums received from insureds, which are recognized as revenue over the period of time that insurance coverage is provided (i.e., ratably over the one-year life of the policy). A significant period of time can elapse from the receipt of insurance premiums to the payment of insurance claims. During this time, KICO invests the premiums, earns investment income and generates net realized and unrealized investment gains and losses on investments. Our holding company earns investment income from its cash
Our expenses include the insurance underwriting expenses of KICO and other operating expenses. Insurance companies incur a significant amount of their total expenses from losses incurred by policyholders, which are referred to as claims. In settling these claims, various loss adjustment expenses (“LAE”) are incurred such as insurance adjusters’ fees and legal expenses. In addition, insurance companies incur policy acquisition costs. Policy acquisition costs include commissions paid to producers, premium taxes, and other expenses related to the underwriting process, including employees’ compensation and benefits.
Other operating expenses include our corporate expenses as a holding
Product Lines
Our product lines include the following:
Personal lines: Our largest line of business is personal lines, consisting of homeowners, dwelling fire, cooperative/condominium, renters, and personal umbrella policies.
Commercial liability: Through July 2019, we offered businessowners policies, which consist primarily of small business retail, service, and office risks, with limited property exposures. We also wrote artisan’s liability policies for small independent contractors with smaller sized workforces. In addition, we wrote special multi-peril policies for larger and more specialized businessowners risks, including those with limited residential exposures. Further, we offered commercial umbrella policies written above our supporting commercial lines policies.
In May 2019, due to the poor performance of this line we placed a moratorium on new commercial lines and new commercial umbrella submissions while we further reviewed this business. In July 2019, due to the continuing poor performance of these lines, we made the decision to no longer underwrite commercial lines or commercial umbrella risks. In-force policies as of July 31, 2019 for these lines were non-renewed at the end of their annual terms. As of September 30,
Livery physical damage: We write for-hire vehicle physical damage only policies for livery and car service vehicles and taxicabs. These policies insure only the physical damage portion of insurance for such vehicles, with no liability coverage included.
Other: We write canine legal liability policies and have a small participation in mandatory state joint underwriting associations.
Key Measures
We utilize the following key measures in analyzing the results of our insurance underwriting business:
Net loss ratio: The net loss ratio is a measure of the underwriting profitability of an insurance company’s business. Expressed as a percentage, this is the ratio of net losses and LAE incurred to net premiums earned.
Net underwriting expense ratio: The net underwriting expense ratio is a measure of an insurance company’s operational efficiency in administering its business. Expressed as a percentage, this is the ratio of the sum of acquisition costs (the most significant being commissions paid to our producers) and other underwriting expenses less ceding commission revenue less other income to net premiums earned.
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 combined ratio). Underwriting income is a measure of an insurance company’s overall operating profitability before items such as investment income, depreciation and amortization, interest expense and income taxes.
Critical Accounting Policies and Estimates
Our condensed consolidated financial statements include the accounts of Kingstone Companies, Inc. and all majority-owned and controlled subsidiaries. The preparation of financial statements in conformity with GAAP requires our management to make estimates and assumptions in certain circumstances that affect amounts reported in our condensed consolidated financial statements and related notes. In preparing these condensed consolidated financial statements, our management has utilized information including our past history, industry standards, and the current economic environment, and other factors, in forming its estimates and judgments of certain amounts included in the condensed consolidated financial statements, giving due consideration to materiality. It is possible that the ultimate outcome as anticipated by our management in formulating its estimates in these financial statements may not materialize. Application of the critical accounting policies involves the exercise of judgment and use of assumptions as to future uncertainties and, as a result, actual results could differ from these estimates. In addition, other companies may utilize different estimates, which may impact comparability of our results of operations to those of similar companies. See the Critical Accounting Policies and Estimates section within Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended December 31,
We believe that the most critical accounting policies relate to the reporting of reserves for loss and LAE, including losses that have occurred but have not been reported prior to the reporting date, amounts recoverable from third party reinsurers, deferred income taxes,
Kingstone 2.0 (completed) and Beginning in the
We announced the substantive completion of
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
Consolidated Results of Operations
Nine Months Ended September 30,
The following table summarizes the changes in the results of our operations (in thousands) for the periods indicated:
Direct Written Premiums
Direct written premiums during the nine months ended September 30, Direct written premiums from our personal lines business for Nine Months Direct written premiums from our livery physical damage business for Nine Months
Beginning in 2017, we commenced our non-Core business and started writing
Net Written Premiums and Net Premiums Earned Net written premiums decreased $9,813,000, or 14.9%, to $56,228,000 in Nine Months 2023 from $66,041,000 in Nine Months 2022. Net written premiums include direct 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”).
Excess of loss reinsurance treaties
An increase in written premiums will increase the premiums ceded under our excess of loss treaties. In Nine Months
Catastrophe reinsurance treaties
Most of the premiums written under our personal lines policies are also subject to our catastrophe treaties. An increase in our personal lines business gives rise to more property exposure, which increases our exposure to catastrophe risk; therefore, our premiums ceded under catastrophe treaties will increase.
Net premiums earned
Net premiums earned
Ceding Commission Revenue
The following table summarizes the changes in the components of ceding commission revenue (in thousands) for the periods indicated:
Ceding commission revenue was $16,394,000 in Nine Months 2023 compared to $14,283,000 in Nine Months
Provisional Ceding Commissions Earned
In Nine Months 2023 we earned provisional ceding commissions of $15,733,000 from personal lines earned premiums ceded under the 2023/2024 Treaty, and in Nine Months 2022 we earned provisional ceding commissions of $14,116,000 from personal lines earned premiums ceded under the 2021/2023
Contingent Ceding Commissions Earned
The structure of the 2023/2024 Treaty and the 2021/2023 Treaty calls for a fixed provisional ceding commission with no opportunity to earn additional contingent ceding commissions. Under our prior years’ quota share treaties, we received a contingent ceding commission based on a sliding scale in relation to the losses incurred under our quota share treaties. The lower the ceded loss ratio, the more contingent commission we received.
Net Investment Income
Net investment income was $4,437,000 in Nine Months 2023 compared to $3,412,000 in Nine Months 2022,
Cash and invested assets were $172,095,000 as of September 30, 2023 compared to $192,229,000 as of September 30,
Net Gains
Net
Other Income
Other income was $454,000 in Nine Months 2023 compared to $750,000 in Nine Months 2022,
Net Loss and LAE
Net loss and LAE was $66,553,000 for Nine Months 2023 compared to $63,625,000 for Nine Months
The following graph summarizes the changes in the components of net loss ratio for the periods indicated, along with the comparable components excluding commercial lines business:
(
For Nine Months
The The underlying loss ratio (loss ratio excluding the impact of catastrophe and prior year development) was 69.2% for Nine Months 2023, a decrease of 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
Prior
See table below under “Additional Financial Information” summarizing net loss ratios by line of business.
Commission Expense
Commission expense was $25,221,000 in Nine Months 2023 or 16.6% of direct earned premiums. Commission expense was $25,534,000 in Nine Months 2022 or 18.1% of direct earned premiums.
Other Underwriting Expenses
Other underwriting expenses were $19,874,000, or 13.1% of direct earned premiums, in Nine Months 2023 compared to $20,717,000, or 14.7% of direct earned premiums, in Nine Months
Our largest single component of other underwriting expenses is salaries and employment costs, with costs of $8,692,000 in Nine Months 2023 compared to $8,027,000 in Nine Months
Our net underwriting expense ratio in Nine Months
Other Operating Expenses
Other operating expenses, related to the expenses of our holding company and Cosi, were $1,868,000 for Nine Months 2023 compared to $2,357,000 for Nine Months
The decrease in Nine Months
Depreciation and Amortization
Depreciation and amortization was $2,328,000 in Nine Months 2023 compared to $2,472,000 in Nine Months
Interest Expense
Interest expense in Nine Months 2023 was $3,005,000 compared to $1,370,000
Income Tax Benefit
Income tax benefit in Nine Months 2023 was $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 Net Loss Net loss was $9,114,000 in Nine Months 2023 compared to $18,575,000 in Nine Months 2022. The decrease in net loss of $9,461,000 was due to the circumstances described above.
Three Months Ended September 30,
The following table summarizes the changes in the results of our operations (in thousands) for the periods indicated:
Direct Written Premiums
Direct written premiums during the three months ended September 30, Direct written premiums from our personal lines business for Three Months Direct written premiums from our livery physical damage business for Three Months
Beginning in 2017, we commenced our non-Core business and started writing
Net Written Premiums and Net Premiums Earned Net written premiums decreased $7,422,000, or 66.9%, to $3,675,000 in Three Months 2023 from $11,097,000 in Three Months 2022. Net written premiums include direct 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”).
Excess of loss reinsurance treaties
An increase in written premiums will increase the premiums ceded under our excess of loss treaties. In Three Months
Catastrophe reinsurance treaties
Most of the premiums written under our personal lines policies are also subject to our catastrophe treaties. An increase in our personal lines business gives rise to more property exposure, which increases our exposure to catastrophe risk; therefore, our premiums ceded under catastrophe treaties will increase.
Net premiums earned
Net premiums earned decreased
Ceding Commission Revenue
The following table summarizes the changes in the components of ceding commission revenue (in thousands) for the periods indicated:
Ceding commission revenue was $5,536,000 in Three Months 2023 compared to $4,886,000 in Three Months
Provisional Ceding Commissions Earned
In Three Months 2023 we earned provisional ceding commissions of $4,992,000 from personal lines earned premiums ceded under the 2023/2024 Treaty, and in Three Months 2022 we earned provisional ceding commissions of $4,882,000 from personal lines earned premiums ceded under the 2021/2023 Treaty. The increase of $110,000 in provisional ceding commissions earned was due to the runoff of an 8.5% portion of the 30% 2021/2023 Treaty,
Contingent Ceding Commissions Earned
The structure of the 2023/2024 Treaty and the 2021/2023 Treaty calls for a fixed provisional ceding commission with no opportunity to earn additional contingent ceding commissions. Under our prior years’ quota share treaties, we received a contingent ceding commission based on a sliding scale in relation to the losses incurred under our quota share treaties. The lower the ceded loss ratio, the more contingent commission we received.
Net Investment Income
Net investment income was $1,444,000 in Three Months 2023 compared to $1,419,000 in Three Months 2022,
Cash and invested assets were $172,095,000 as of September 30, 2023 compared to $192,229,000 as of September 30,
Net Gains
Net
Other Income
Other income was $142,000 in Three Months 2023 compared to $270,000 in Three Months 2022,
Net Loss and LAE
Net loss and LAE was $21,932,000 for Three Months 2023 compared to $22,028,000 for Three Months
The following graph summarizes the changes in the components of net loss ratio for the periods indicated, along with the comparable components excluding commercial lines business:
(
For Three Months
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 ratio. By comparison, the catastrophe impact for Three Months 2022 The underlying loss ratio was 70.8% for Three Months 2023, a decrease of
Prior
See table below under “Additional Financial Information” summarizing net loss ratios by line of business.
Commission Expense
Commission expense
Other Underwriting Expenses
Other underwriting expenses were $6,319,000, or 12.5% of direct earned premiums in Three Months 2023 compared to $7,276,000, or 14.9% of direct earned premiums, in Three Months
Our largest single component of other underwriting expenses is salaries and employment costs, with costs of $2,817,000 in Three Months 2023 compared to $2,961,000 in Three Months
Our net underwriting expense ratio in Three Months
Other Operating Expenses
Other operating expenses, related to the expenses of our holding company and Cosi, were $442,000 for Three Months 2023 compared to $810,000 for Three Months
The decrease in Three Months
Depreciation and Amortization
Depreciation and amortization was $741,000 in Three Months 2023 compared to $825,000 in Three Months
Interest Expense
Interest expense in Three Months 2023 was $989,000 compared to $457,000
Income Tax Benefit
Income tax benefit in Three Months 2023 was $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
Net Loss
Net loss was $3,538,000 in Three Months 2023 compared to $3,998,000 in Three Months
Additional Financial Information
We operate our business as one segment, property and casualty insurance. Within this segment, we offer an array of property and casualty policies to our producers. The following table summarizes gross and net written premiums, net premiums earned, and net loss and loss adjustment expenses by major product type, which were determined based primarily on similar economic characteristics and risks of loss.
Insurance Underwriting Business on a Standalone Basis
Our insurance underwriting business reported on a standalone basis for the periods indicated is as follows:
An analysis of our direct, assumed and ceded earned premiums, loss and loss adjustment expenses, and loss ratios is shown below:
(Percent components may not sum to totals due to rounding)
The key measures for our insurance underwriting business for the periods indicated are as follows:
Investments
Portfolio Summary
Fixed-Maturity Securities
The following table presents a breakdown of the amortized cost, estimated fair value, and gross unrealized gains and losses of our investments in fixed-maturity securities classified as available-for-sale for which an allowance for credit loss has not been recorded, as of September 30,
(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. |
|
| December 31, 2021 |
| |||||||||||||||||||||
|
| Cost or |
|
| Gross |
|
| Gross Unrealized Losses |
|
| Estimated |
|
| % of |
| |||||||||
|
| Amortized |
|
| Unrealized |
|
| Less than 12 |
|
| More than 12 |
|
| Fair |
|
| Estimated |
| ||||||
Category |
| Cost |
|
| Gains |
|
| Months |
|
| Months |
|
| Value |
|
| Fair Value |
| ||||||
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|
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| ||||||
Political subdivisions of States, Territories and Possessions |
| $ | 17,236,750 |
|
| $ | 246,748 |
|
| $ | (197,984 | ) |
| $ | - |
|
| $ | 17,285,514 |
|
|
| 10.9 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate and other bonds |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Industrial and miscellaneous |
|
| 80,534,769 |
|
|
| 2,603,411 |
|
|
| (126,926 | ) |
|
| - |
|
|
| 83,011,254 |
|
|
| 52.5 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage and other asset backed securities |
|
| 58,036,959 |
|
|
| 355,985 |
|
|
| (489,258 | ) |
|
| (120,344 | ) |
|
| 57,783,342 |
|
|
| 36.6 | % |
Total fixed-maturity securities |
| $ | 155,808,478 |
|
| $ | 3,206,144 |
|
| $ | (814,168 | ) |
| $ | (120,344 | ) |
| $ | 158,080,110 |
|
|
| 100.0 | % |
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, 20222023 and December 31, 2021:2022:
|
| September 30, 2022 |
|
| September 30, 2023 |
| ||||||||||||||||||||||||||||||||||
|
|
|
|
|
| % of |
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|
|
|
|
| % of |
| ||||||||||||||||||||||||||
|
|
| Gross |
| Gross |
| Estimated |
| Estimated |
|
|
| Gross |
| Gross |
| Estimated |
| Estimated |
| ||||||||||||||||||||
Category |
| Cost |
|
| Gains |
|
| Losses |
|
| Fair Value |
|
| Fair Value |
|
| Cost |
|
| Gains |
|
| Losses |
|
| Fair Value |
|
| Fair Value |
| ||||||||||
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|
|
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| |||||||||||||||||||||||
Equity Securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||
Preferred stocks |
| $ | 16,047,207 |
| $ | - |
| $ | (3,488,481 | ) |
| $ | 12,558,726 |
| 58.5 | % |
| $ | 13,583,942 |
| $ | - |
| $ | (3,384,701 | ) |
| $ | 10,199,241 |
| 73.3 | % | ||||||||
Common stocks and exchange traded funds |
|
| 10,728,809 |
|
|
| 103,902 |
|
|
| (1,922,991 | ) |
|
| 8,909,720 |
|
|
| 41.5 | % |
|
| 4,402,841 |
|
|
| 225,001 |
|
|
| (919,432 | ) |
|
| 3,708,410 |
|
|
| 26.7 | % |
Total |
| $ | 26,776,016 |
|
| $ | 103,902 |
|
| $ | (5,411,472 | ) |
| $ | 21,468,446 |
|
|
| 100.0 | % |
| $ | 17,986,783 |
|
| $ | 225,001 |
|
| $ | (4,304,133 | ) |
| $ | 13,907,651 |
|
|
| 100.0 | % |
|
| December 31, 2021 |
|
| December 31, 2022 |
| ||||||||||||||||||||||||||||||||||
|
|
|
|
|
| % of |
|
|
|
|
|
| % of |
| ||||||||||||||||||||||||||
|
|
| Gross |
| Gross |
| Estimated |
| Estimated |
|
|
| Gross |
| Gross |
| Estimated |
| Estimated |
| ||||||||||||||||||||
Category |
| Cost |
|
| Gains |
|
| Losses |
|
| Fair Value |
|
| Fair Value |
|
| Cost |
|
| Gains |
|
| Losses |
|
| Fair Value |
|
| Fair Value |
| ||||||||||
|
|
|
|
|
|
|
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|
|
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|
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|
| |||||||||||||||||||||||
Equity Securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||
Preferred stocks |
| $ | 22,019,509 |
| $ | 1,007,009 |
| $ | (184,617 | ) |
| $ | 22,841,901 |
| 57.6 | % |
| $ | 13,583,942 |
| $ | - |
| $ | (3,589,313 | ) |
| $ | 9,994,629 |
| 72.2 | % | ||||||||
Common stocks and exchange traded funds |
|
| 15,451,160 |
|
|
| 1,573,653 |
|
|
| (179,712 | ) |
|
| 16,845,101 |
|
|
| 42.4 | % |
|
| 4,502,758 |
|
|
| 158,635 |
|
|
| (821,632 | ) |
|
| 3,839,761 |
|
|
| 27.8 | % |
Total |
| $ | 37,470,669 |
|
| $ | 2,580,662 |
|
| $ | (364,329 | ) |
| $ | 39,687,002 |
|
|
| 100.0 | % |
| $ | 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, 20222023 and December 31, 2021:2022:
|
| September 30, 2022 |
| December 31, 2021 |
|
| September 30, 2023 |
| December 31, 2022 |
| ||||||||||||||||||||||||||||||||||||||
|
|
| Gross |
| Estimated |
|
| Gross |
| Estimated |
|
|
| Gross |
| Estimated |
|
| Gross |
| Estimated |
| ||||||||||||||||||||||||||
Category |
| Cost |
|
| Gains |
|
| Fair Value |
|
| Cost |
|
| Gains |
|
| Fair Value |
|
| Cost |
|
| Gains |
|
| Fair Value |
|
| Cost |
|
| Gains |
|
| Fair Value |
| ||||||||||||
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|
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|
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| |||||||||||||||||||||||||||||
Other Investments: |
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|
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|
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| ||||||||||||||||||||||
Hedge fund |
| $ | 1,987,040 |
|
| $ | 589,232 |
|
| $ | 2,576,272 |
|
| $ | 3,999,381 |
|
| $ | 3,562,034 |
|
| $ | 7,561,415 |
|
| $ | 1,987,040 |
|
| $ | 1,226,278 |
|
| $ | 3,213,318 |
|
| $ | 1,987,040 |
|
| $ | 784,612 |
|
| $ | 2,771,652 |
|
Table of Contents |
After providing notice, we redeemed 50% of our investment in the hedge fund as of September 30, 2022 for a realized gain of $589,000, which is recorded in the accompanying condensed consolidated statements of operations and comprehensive income (loss).
Held-to-Maturity Securities
The following table presents a breakdown of the amortized cost and estimated fair value of, and gross unrealized gains and losses on, investments in held-to-maturity securities as of September 30, 20222023 and December 31, 2021:2022:
|
| September 30, 2023 |
| |||||||||||||||||||||||||||||||||||||||||||||
|
| September 30, 2022 |
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||||
|
| Cost or |
| Gross |
| Gross Unrealized Losses |
| Estimated |
| % of |
|
| Cost or |
| Gross |
| Gross Unrealized Losses |
| Estimated |
| % of |
| ||||||||||||||||||||||||||
|
| Amortized |
| Unrealized |
| Less than 12 |
| More than 12 |
| Fair |
| Estimated |
|
| Amortized |
| Unrealized |
| Less than 12 |
| More than 12 |
| Fair |
| Estimated |
| ||||||||||||||||||||||
Category |
| Cost |
|
| Gains |
|
| Months |
|
| Months |
|
| Value |
|
| Fair Value |
|
| Cost |
|
| Gains |
|
| Months |
|
| Months |
|
| Value |
|
| Fair Value |
| ||||||||||||
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|
|
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|
|
|
|
|
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| |||||||||||||||||||||||||||||
Held-to-Maturity Securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||
U.S. Treasury securities |
| $ | 1,228,485 |
| $ | 73,468 |
| $ | (36,802 | ) |
| $ | - |
| $ | 1,265,151 |
| 19.1 | % |
| $ | 1,228,783 |
| $ | - |
| $ | (49,795 | ) |
| $ | (31,495 | ) |
| $ | 1,147,493 |
| 20.1 | % | |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||
Political subdivisions of States, Territories and Possessions |
| 498,508 |
| - |
| (1,498 | ) |
| - |
| 497,010 |
| 7.5 | % |
| 499,036 |
| - |
| (9,046 | ) |
| - |
| 489,990 |
| 8.6 | % | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||
Exchange traded debt |
| 304,111 |
| - |
| (43,361 | ) |
| - |
| 260,750 |
| 3.9 | % |
| 304,111 |
| - |
| (51,611 | ) |
| - |
| 252,500 |
| 4.4 | % | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||
Corporate and other bonds |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||
Industrial and miscellaneous |
|
| 5,736,079 |
|
|
| 35,503 |
|
|
| (1,182,635 | ) |
|
| - |
|
|
| 4,588,947 |
|
|
| 69.4 | % |
|
| 5,021,895 |
|
|
| - |
|
|
| - |
|
|
| (1,212,380 | ) |
|
| 3,809,515 |
|
|
| 66.9 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||
Total |
| $ | 7,767,183 |
|
| $ | 108,971 |
|
| $ | (1,264,296 | ) |
| $ | - |
|
| $ | 6,611,858 |
|
|
| 100.0 | % |
| $ | 7,053,825 |
|
| $ | - |
|
| $ | (110,452 | ) |
| $ | (1,243,875 | ) |
| $ | 5,699,498 |
|
|
| 100.0 | % |
|
| December 31, 2022 |
| |||||||||||||||||||||||||||||||||||||||||||||
|
| December 31, 2021 |
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||||
|
| Cost or |
| Gross |
| Gross Unrealized Losses |
| Estimated |
| % of |
|
| Cost or |
| Gross |
| Gross Unrealized Losses |
| Estimated |
| % of |
| ||||||||||||||||||||||||||
|
| Amortized |
| Unrealized |
| Less than 12 |
| More than 12 |
| Fair |
| Estimated |
|
| Amortized |
| Unrealized |
| Less than 12 |
| More than 12 |
| Fair |
| Estimated |
| ||||||||||||||||||||||
Category |
| Cost |
|
| Gains |
|
| Months |
|
| Months |
|
| Value |
|
| Fair Value |
|
| Cost |
|
| Gains |
|
| Months |
|
| Months |
|
| Value |
|
| Fair Value |
| ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||
Held-to-Maturity Securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||
U.S. Treasury securities |
| $ | 729,642 |
| $ | 209,633 |
| $ | - |
| $ | - |
| $ | 939,275 |
| 10.7 | % |
| $ | 1,228,560 |
| $ | 28,400 |
| $ | (34,077 | ) |
| $ | - |
| $ | 1,222,883 |
| 18.5 | % | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||
Political subdivisions of States, Territories and Possessions |
| 998,239 |
| 22,856 |
| - |
| - |
| 1,021,095 |
| 11.7 | % |
| 498,638 |
| 2,092 |
| - |
| - |
| 500,730 |
| 7.6 | % | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||
Exchange traded debt |
| 304,111 |
| 85 |
| (13,921 | ) |
|
|
| 290,275 |
| 3.3 | % |
| 304,111 |
| - |
| (29,111 | ) |
| - |
| 275,000 |
| 4.2 | % | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||
Corporate and other bonds |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||
Industrial and miscellaneous |
|
| 6,234,342 |
|
|
| 280,951 |
|
|
| (12,779 | ) |
|
| - |
|
|
| 6,502,514 |
|
|
| 74.3 | % |
|
| 5,734,831 |
|
|
| 36,968 |
|
|
| (809,746 | ) |
|
| (360,278 | ) |
|
| 4,601,775 |
|
|
| 69.7 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||
Total |
| $ | 8,266,334 |
|
| $ | 513,525 |
|
| $ | (26,700 | ) |
| $ | - |
|
| $ | 8,753,159 |
|
|
| 100.0 | % |
| $ | 7,766,140 |
|
| $ | 67,460 |
|
| $ | (872,934 | ) |
| $ | (360,278 | ) |
| $ | 6,600,388 |
|
|
| 100.0 | % |
Held-to-maturity U.S. Treasury securities are held in trust pursuant to various states’ minimum fund requirements.
Table of Contents |
A summary of the amortized cost and fair value of our investments in held-to-maturity securities by contractual maturity as of September 30, 20222023 and December 31, 20212022 is shown below:
|
| September 30, 2022 |
| December 31, 2021 |
|
| September 30, 2023 |
| December 31, 2022 |
| ||||||||||||||||||||||
|
| Amortized |
| Estimated |
| Amortized |
| Estimated |
|
| Amortized |
| Estimated |
| Amortized |
| Estimated |
| ||||||||||||||
Remaining Time to Maturity |
| Cost |
|
| Fair Value |
|
| Cost |
|
| Fair Value |
|
| Cost |
|
| Fair Value |
|
| Cost |
|
| Fair Value |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Less than one year |
| $ | 708,325 |
| $ | 742,533 |
| $ | 994,712 |
| $ | 1,008,180 |
|
| $ | - |
| $ | - |
| $ | 708,535 |
| $ | 743,575 |
| ||||||
One to five years |
| 1,120,315 |
| 1,082,015 |
| 1,205,829 |
| 1,290,465 |
|
| 1,121,091 |
| 1,069,974 |
| 1,120,507 |
| 1,088,522 |
| ||||||||||||||
Five to ten years |
| 1,399,725 |
| 1,177,545 |
| 1,513,942 |
| 1,648,808 |
|
| 1,411,819 |
| 1,166,505 |
| 1,402,704 |
| 1,200,720 |
| ||||||||||||||
More than 10 years |
|
| 4,538,818 |
|
|
| 3,609,765 |
|
|
| 4,551,851 |
|
|
| 4,805,706 |
|
|
| 4,520,915 |
|
|
| 3,463,019 |
|
|
| 4,534,394 |
|
|
| 3,567,571 |
|
Total |
| $ | 7,767,183 |
|
| $ | 6,611,858 |
|
| $ | 8,266,334 |
|
| $ | 8,753,159 |
|
| $ | 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, 20222023 and December 31, 20212022 as rated by Standard & Poor’s (or, if unavailable from Standard & Poor’s, then Moody’s, Fitch, or Kroll):
|
| September 30, 2022 |
| December 31, 2021 |
|
| September 30, 2023 |
| December 31, 2022 |
| ||||||||||||||||||||||
|
| Estimated |
| Percentage of |
| Estimated |
| Percentage of |
|
| Estimated |
| Percentage of |
| Estimated |
| Percentage of |
| ||||||||||||||
|
| Fair |
| Estimated |
| Fair |
| Estimated |
|
| Fair |
| Estimated |
| Fair |
| Estimated |
| ||||||||||||||
|
| Value |
|
| Fair Value |
|
| Value |
|
| Fair Value |
|
| Value |
|
| Fair Value |
|
| Value |
|
| Fair Value |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Rating |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
U.S. Treasury securities |
| $ | 9,946,840 |
|
|
| 6.8 | % |
| $ | - |
|
|
| 0.0 | % |
| $ | 8,167,845 |
|
|
| 6.2 | % |
| $ | 23,869,096 |
|
|
| 15.4 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Corporate and municipal bonds |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
AAA |
| 990,819 |
| 0.7 | % |
| 1,321,809 |
| 0.8 | % |
| 1,716,858 |
| 1.3 | % |
| 1,824,478 |
| 1.2 | % | ||||||||||||
AA |
| 16,410,900 |
| 11.3 | % |
| 11,532,572 |
| 7.3 | % |
| 9,196,422 |
| 6.9 | % |
| 9,785,908 |
| 6.3 | % | ||||||||||||
A |
| 32,163,411 |
| 22.2 | % |
| 38,272,571 |
| 24.2 | % |
| 31,296,689 |
| 23.6 | % |
| 31,099,075 |
| 20.2 | % | ||||||||||||
BBB+ |
| 11,938,310 |
| 8.2 | % |
| 17,936,359 |
| 11.3 | % |
| 15,436,321 |
| 11.6 | % |
| 16,682,159 |
| 10.8 | % | ||||||||||||
BBB |
| 20,414,670 |
| 14.0 | % |
| 25,161,776 |
| 15.9 | % |
| 22,592,113 |
| 17.0 | % |
| 19,664,051 |
| 12.7 | % | ||||||||||||
BBB- |
|
| 4,461,056 |
|
|
| 3.1 | % |
|
| 4,193,401 |
|
|
| 2.7 | % |
|
| - |
|
|
| 0.0 | % |
|
| 4,516,713 |
|
|
| 2.9 | % |
Total corporate and municipal bonds |
|
| 86,379,166 |
|
|
| 59.4 | % |
|
| 98,418,488 |
|
|
| 62.2 | % |
|
| 80,238,403 |
|
|
| 60.4 | % |
|
| 83,572,384 |
|
|
| 54.1 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Residential mortgage backed, asset backed, and other collateralized obligations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
AAA |
| 16,860,463 |
| 11.6 | % |
| 17,350,192 |
| 11.0 | % |
| 12,028,321 |
| 9.1 | % |
| 16,497,621 |
| 10.7 | % | ||||||||||||
AA |
| 24,290,742 |
| 16.7 | % |
| 34,241,907 |
| 21.7 | % |
| 21,295,991 |
| 16.0 | % |
| 23,062,233 |
| 14.9 | % | ||||||||||||
A |
| 6,793,094 |
| 4.7 | % |
| 6,306,161 |
| 4.0 | % |
| 6,806,737 |
| 5.1 | % |
| 6,722,902 |
| 4.3 | % | ||||||||||||
BBB+ |
| 15,373 |
| 0.0 | % |
| - |
| 0.0 | % | ||||||||||||||||||||||
BBB |
| 20,763 |
| 0.0 | % |
| 24,254 |
| 0.0 | % |
| - |
| 0.0 | % |
| 20,067 |
| 0.0 | % | ||||||||||||
CCC |
| 495,227 |
| 0.3 | % |
| 664,628 |
| 0.4 | % |
| 411,851 |
| 0.3 | % |
| 457,683 |
| 0.3 | % | ||||||||||||
CC |
| 105,761 |
| 0.1 | % |
| 125,412 |
| 0.1 | % |
| 88,531 |
| 0.1 | % |
| 99,600 |
| 0.1 | % | ||||||||||||
D |
| 42,159 |
| 0.0 | % |
| 55,306 |
| 0.0 | % |
| - |
| 0.0 | % |
| 40,474 |
| 0.0 | % | ||||||||||||
Non rated |
|
| 371,492 |
|
|
| 0.3 | % |
|
| 893,762 |
|
|
| 0.6 | % |
|
| 3,733,847 |
|
|
| 2.8 | % |
|
| 373,103 |
|
|
| 0.2 | % |
Total residential mortgage backed, asset backed, and other collateralized obligations |
|
| 48,979,701 |
|
|
| 33.7 | % |
|
| 59,661,622 |
|
|
| 37.8 | % |
|
| 44,380,651 |
|
|
| 33.4 | % |
|
| 47,273,683 |
|
|
| 30.5 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Total |
| $ | 145,305,707 |
|
|
| 100.0 | % |
| $ | 158,080,110 |
|
|
| 100.0 | % |
| $ | 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, 20222023 and December 31, 2021:2022:
Category |
| September 30, 2022 |
|
| December 31, 2021 |
|
| September 30, 2023 |
|
| December 31, 2022 |
| ||||
|
|
|
|
| ||||||||||||
|
|
|
|
|
| |||||||||||
U.S. Treasury securities and obligations of U.S. government corporations and agencies |
| 2.40 | % |
| 3.06 | % |
| 4.53 | % |
| 2.58 | % | ||||
|
|
|
|
|
|
|
|
|
|
| ||||||
Political subdivisions of States, Territories and Possessions |
| 3.54 | % |
| 2.77 | % |
| 3.61 | % |
| 3.58 | % | ||||
|
|
|
|
|
|
|
|
|
|
| ||||||
Corporate and other bonds |
|
|
|
|
|
|
|
|
|
| ||||||
Industrial and miscellaneous |
| 3.64 | % |
| 3.23 | % |
| 3.72 | % |
| 3.68 | % | ||||
|
|
|
|
|
|
|
|
|
|
| ||||||
Residential mortgage backed securities |
| 2.43 | % |
| 2.77 | % |
| 2.97 | % |
| 2.70 | % | ||||
|
|
|
|
|
|
|
|
|
|
| ||||||
Total |
| 3.16 | % |
| 2.92 | % |
| 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, 20222023 and December 31, 2021:2022:
|
| September 30, 2022 |
|
| December 31, 2021 |
|
| September 30, 2023 |
|
| December 31, 2022 |
| ||||
Weighted average effective maturity |
| 6.2 |
| 8.0 |
|
| 8.4 |
| 5.8 |
| ||||||
|
|
|
|
|
|
|
|
|
|
| ||||||
Weighted average final maturity |
| 14.5 |
| 13.8 |
|
| 12.6 |
| 13.5 |
| ||||||
|
|
|
|
|
|
|
|
|
|
| ||||||
Effective duration |
| 4.8 |
| 5.1 |
|
| 4.3 |
| 4.5 |
|
Fair Value Consideration
Fair value is the price that would be received to sell an asset or paid to transfer a liability in a transaction involving identical or comparable assets or liabilities between market participants (an “exit price”). The fair value hierarchy distinguishes between inputs based on market data from independent sources (“observable inputs”) and a reporting entity’s internal assumptions based upon the best information available when external market data is limited or unavailable (“unobservable inputs”). The fair value hierarchy prioritizes fair value measurements into three levels based on the nature of the inputs. Quoted prices in active markets for identical assets have the highest priority (“Level 1”), followed by observable inputs other than quoted prices including prices for similar but not identical assets or liabilities (“Level 2”), and unobservable inputs, including the reporting entity’s estimates of the assumption that market participants would use, having the lowest priority (“Level 3”). As of September 30, 20222023 and December 31, 2021, 63%2022, 62% and 84%65%, respectively, of the investment portfolio recorded at fair value was priced based upon quoted market prices.
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, 20222023 and December 31, 2021:2022:
|
| September 30, 2022 |
|
| September 30, 2023 |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| Less than 12 months |
| 12 months or more |
| Total |
|
| Less than 12 months |
| 12 months or more |
| Total |
| ||||||||||||||||||||||||||||||||||||||||||||||||||
|
| Estimated |
|
| No. of |
| Estimated |
|
| No. of |
| Estimated |
|
|
| Estimated |
|
|
| No. of |
| Estimated |
|
|
| No. of |
| Estimated |
|
|
| |||||||||||||||||||||||||||||||||
|
| Fair |
| Unrealized |
| Positions |
| Fair |
| Unrealized |
| Positions |
| Fair |
| Unrealized |
|
| Fair |
| Unrealized |
| Positions |
| Fair |
| Unrealized |
| Positions |
| Fair |
| Unrealized |
| ||||||||||||||||||||||||||||||
Category |
| Value |
|
| Losses |
|
| Held |
|
| Value |
|
| Losses |
|
| Held |
|
| Value |
|
| Losses |
|
| Value |
|
| Losses |
|
| Held |
|
| Value |
|
| Losses |
|
| Held |
|
| Value |
|
| Losses |
| ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||
Fixed-Maturity Securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||
U.S. Treasury securities and obligations of U.S. government corporations and agencies |
| $ | 5,975,160 |
| $ | (123 | ) |
| 1 |
| $ | - |
| $ | - |
| - |
| $ | 5,975,160 |
| $ | (123 | ) |
| $ | 8,167,845 |
| $ | (56,835 | ) |
| 2 |
| $ | - |
| - |
| - |
| $ | 8,167,845 |
| $ | (56,835 | ) | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||
Political subdivisions of States, Territories and Possessions |
| 11,461,126 |
| (3,250,196 | ) |
| 12 |
| 1,815,216 |
| (590,936 | ) |
| 2 |
| 13,276,342 |
| (3,841,132 | ) |
| - |
| - |
| - |
| 12,414,354 |
| (4,201,015 | ) |
| 13 |
| 12,414,354 |
| (4,201,015 | ) | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||
Corporate and other bonds industrial and miscellaneous |
| 73,921,209 |
| (9,154,182 | ) |
| 93 |
| 817,970 |
| (269,694 | ) |
| 1 |
| 74,739,179 |
| (9,423,876 | ) |
| - |
| - |
| - |
| 69,465,238 |
| (8,651,516 | ) |
| 88 |
| 69,465,238 |
| (8,651,516 | ) | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||
Residential mortgage and other asset backed securities |
|
| 27,985,270 |
|
|
| (4,333,707 | ) |
|
| 31 |
|
|
| 18,593,599 |
|
|
| (2,699,011 | ) |
|
| 15 |
|
|
| 46,578,869 |
|
|
| (7,032,718 | ) |
|
| 204,418 |
|
|
| (5,987 | ) |
|
| 9 |
|
|
| 38,962,381 |
|
|
| (8,821,223 | ) |
|
| 38 |
|
|
| 39,166,799 |
|
|
| (8,827,210 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||
Total fixed-maturity securities |
| $ | 119,342,765 |
|
| $ | (16,738,208 | ) |
|
| 137 |
|
| $ | 21,226,785 |
|
| $ | (3,559,641 | ) |
|
| 18 |
|
| $ | 140,569,550 |
|
| $ | (20,297,849 | ) |
| $ | 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 |
|
| December 31, 2021 |
| |||||||||||||||||||||||||||||
|
| Less than 12 months |
|
| 12 months or more |
|
| Total |
| |||||||||||||||||||||||
|
| Estimated |
|
|
|
| No. of |
|
| Estimated |
|
|
|
| No. of |
|
| Estimated |
|
|
| |||||||||||
|
| Fair |
|
| Unrealized |
|
| Positions |
|
| Fair |
|
| Unrealized |
|
| Positions |
|
| Fair |
|
| Unrealized |
| ||||||||
Category |
| Value |
|
| Losses |
|
| Held |
|
| Value |
|
| Losses |
|
| Held |
|
| Value |
|
| Losses |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Fixed-Maturity Securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
U.S. Treasury securities and obligations of U.S. government corporations and agencies |
| $ | - |
|
| $ | - |
|
|
| - |
|
| $ | - |
|
| $ | - |
|
|
| - |
|
| $ | - |
|
| $ | - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Political subdivisions of States, Territories and Possessions |
|
| 6,768,123 |
|
|
| (197,984 | ) |
|
| 5 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 6,768,123 |
|
|
| (197,984 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate and other bonds industrial and miscellaneous |
|
| 17,593,707 |
|
|
| (126,926 | ) |
|
| 15 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 17,593,707 |
|
|
| (126,926 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage and other asset backed securities |
|
| 45,399,451 |
|
|
| (489,258 | ) |
|
| 26 |
|
|
| 2,923,182 |
|
|
| (120,344 | ) |
|
| 2 |
|
|
| 48,322,633 |
|
|
| (609,602 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total fixed-maturity securities |
| $ | 69,761,281 |
|
| $ | (814,168 | ) |
|
| 46 |
|
| $ | 2,923,182 |
|
| $ | (120,344 | ) |
|
| 2 |
|
| $ | 72,684,463 |
|
| $ | (934,512 | ) |
There were 150 securities at September 30, 2023 that accounted for the gross unrealized loss of our fixed-maturity securities available-for-sale, none of which were deemed to be credit losses by us. There were 155 securities at September 30,December 31, 2022 that accounted for the gross unrealized loss of our fixed-maturity securities available-for-sale, none of which were deemed by us to be other than temporarily impaired. There were 48 securities at December 31, 2021 that accounted for the gross unrealized loss, none of which were deemedcredit losses by us to be other than temporarily impaired.us. Significant factors influencing our determination that unrealized losses were temporary included credit quality considerations, the magnitude of the unrealized losses in relation to each security’s cost, the nature of the investment and interest rate environment factors, and 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.
For the nine months ended September 30, 2022, theThe primary source of cash flow for our holding company was theare dividends and distributions received from KICO, which are subject to statutory restrictions. For the nine months ended September 30, 2022, KICO paid dividends of $1,500,000 to us. On October 27, 2022, KICO entered a sale-leaseback transaction whereby KICO sold substantially all its fixed assets for approximately $8,100,000. Subsequent to the closing of the sale-leaseback transaction,2023, KICO paid a dividend of $3,000,000$1,250,000 to us. In addition, on October 17, 2022 we entered intoAs of September 30, 2023, KICO had a seven year loan agreement with KICO with regardnegative unassigned surplus and currently will not be able to a loan from KICOpay 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 the amount of $6,450,000.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 U.S. Treasury and agency securities. See Note 3 – Investments to 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 the end of the previous quarter, which is June 30, 2022,2023, and are due and payable within 90 days of borrowing. The maximum allowable advance as of September 30, 2022,2023, based on the net admitted assets as of June 30, 2022,2023, was approximately $12,414,000.$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, which was approximately $10,534,000 as of September 30, 2022.collateral. There were no borrowings under this facility during the nine months ended September 30, 2022.2023.
On December 19, 2017,15, 2022, we issued $30 million$19,950,000 of our 5.50% Senior Unsecured2022 Notes duepursuant to the Exchange Agreement. We are required to make a mandatory redemption payment with regard to the 2022 Notes on December 30, 2022. As2023 in an amount discussed in Note 7 – Debt of September 30, 2022, invested assets and cash in our holding company was approximately $2,416,000. See Notes 2 and 7 to ourthe condensed consolidated financial statements included in this Quarterly Report for a discussionReport. We are also required to make semi-annual interest payments in arrears on June 30 and December 30 of our plans with regard to the satisfactioneach year. The maturity date of the debt.
Our reconciliation of net income to net cash provided by operations2022 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 June 30, |
| 2022 |
|
| 2021 |
| ||||||||||
Nine Months ended September 30, |
| 2023 |
|
| 2022 |
| ||||||||||
|
|
|
|
|
|
|
|
|
|
| ||||||
Cash flows (used in) provided by: |
|
|
|
|
|
|
|
|
|
| ||||||
Operating activities |
| $ | (7,921,438 | ) |
| $ | 29,079,787 |
|
| $ | (15,754,344 | ) |
| $ | (7,921,438 | ) |
Investing activities |
| 398,911 |
| (9,297,954 | ) |
| 19,755,073 |
| 398,911 |
| ||||||
Financing activities |
|
| (1,656,865 | ) |
|
| (3,137,487 | ) |
|
| (825,988 | ) |
|
| (1,656,865 | ) |
Net (decrease) increase in cash and cash equivalents |
| (9,179,392 | ) |
| 16,644,346 |
| ||||||||||
Net increase (decrease) in cash and cash equivalents |
| 3,174,741 |
| (9,179,392 | ) | |||||||||||
Cash and cash equivalents, beginning of period |
|
| 24,290,598 |
|
|
| 19,463,742 |
|
|
| 11,958,228 |
|
|
| 24,290,598 |
|
Cash and cash equivalents, end of period |
| $ | 15,111,206 |
|
| $ | 36,108,088 |
|
| $ | 15,132,969 |
|
| $ | 15,111,206 |
|
Net cash used in operating activities was $7,921,000$15,754,000 in Nine Months 20222023 as compared to $29,080,000 provided by$7,921,000 used in operating activities in Nine Months 2021.2022. The $37,001,000 decrease$7,833,000 increase in cash flows provided byused in operating activities in Nine Months 20222023 as compared to Nine Months 20212022 was primarily the result of a decreasean increase in cash arising from net fluctuations in operating assets and liabilities, partially offset by a decrease in net loss (adjusted for non-cash items) of $4,927,000.$597,000. The increase in cash used in operating activities is also attributable topartially 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. In addition, the increase of reinsurance recoverables by $19,073,000 also contributed to the increase in cash used during Nine Months 2022. The net fluctuations in assets and liabilities are related to operating activities of KICO as affected by growth or declines in its operations, payments on claims and other changes, which are described above.
Net cash provided by investing activities was $399,000$19,755,000 in Nine Months 20222023 compared to $9,298,000 used in$399,000 provided by investing activities in Nine Months 2021. In Nine Months 2022 we had net investing activity provided by our investment portfolio of $3,741,000, compared to $6,375,000 used in Nine Months 2021 resulting in a $10,116,000$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 increaseddecreased our acquisition of fixed assets by $419,000$1,962,000 in Nine Months 20222023 compared to Nine Months 2021.2022.
Net cash used in financing activities was $1,657,000$826,000 in Nine Months 20222023 compared to $3,137,000$1,657,000 used in Nine Months 2021.2022. The $1,481,000$831,000 decrease in net cash used in financing activities was attributable to the purchase of treasury stock of $1,672,000no dividends being paid to shareholders in Nine Months 2021 partially offset by an increase2023 compared to $1,277,000 being paid in Nine Months 2022 and a $378,000 decrease in withholding taxes paid on the vesting of restricted stock awardsawards. The decreases in Nine Months 2022 compared to Nine Months 2021.cash used in financing activities were partially offset by $810,000 of principal payments on the equipment financing in connection with KICO’s sale-leaseback transaction.
Reinsurance
Effective December 31, 2021, we entered into a quota share reinsurance treaty for our personal lines business, which primarily consists of homeowners’ and dwelling fire policies, covering the period from December 31, 2021 through January 1, 2023 (“2021/2023 Treaty”). Upon the expiration of the 2021/2023 Treaty on January 1, 2023, we entered into a new quota share reinsurance treaty for our personal lines business, covering the period from January 1, 2023 through January 1, 2024 (“2023/2024 Treaty”).
Our excess of loss and catastrophe reinsurance treaties expired on June 30, 2022 and weWe entered into new excess of loss and catastrophe reinsurance treaties effective July 1, 2022. Effective October 20, 2021, we entered into a stub catastrophe reinsurance treaty covering the period from October 20, 2021 through December 31, 2021. The treaty provides reinsurance coverage for catastrophe losses of $5,000,000 in excess of $5,000,000.2023. 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 treatyUnderlying XOL Treaty provides 50% reinsurance coverage for losses of $400,000 in excess of $600,000. Losses from named storms are excluded from the treaty.Underlying XOL Treaty. Effective January 1, 2023, the Underlying XOL Treaty was renewed covering the period from January 1, 2023 through January 1, 2024. Material terms for our reinsurance treaties in effect for the treaty years shown below are as follows:
|
| Treaty Period |
| |||||||||||||||||
|
|
|
| (2021/2023 Treaty) |
|
|
|
|
| |||||||||||
|
| January 2, |
|
| July 1, |
|
| December 31, |
|
| July 1, |
|
| December 31, |
| |||||
|
| 2023 |
|
| 2022 |
|
| 2021 |
|
| 2021 |
|
| 2020 |
| |||||
|
| to |
|
| to |
|
| to |
|
| to |
|
| to |
| |||||
|
| June 30, |
|
| January 1, |
|
| June 30, |
|
| December 30, |
|
| June 30, |
| |||||
Line of Business |
| 2023 |
|
| 2023 |
|
| 2022 |
|
| 2021 |
|
| 2021 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Personal Lines: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Homeowners, dwelling fire and and canine legal liability |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Quota share treaty: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Percent ceded (9) |
| None (8) |
|
|
| 30 | % |
|
| 30 | % |
| None (5) |
|
| None (5) |
| |||
Risk retained on intial $1,000,000 of losses (5) (7) (8) (9) |
| $ | 1,000,000 |
|
| $ | 700,000 |
|
| $ | 700,000 |
|
| $ | 1,000,000 |
|
| $ | 1,000,000 |
|
Losses per occurrence subject to quota share reinsurance coverage |
| None (8) |
|
| $ | 1,000,000 |
|
| $ | 1,000,000 |
|
| None (5) |
|
| None (5) |
| |||
Expiration date |
|
| (8) |
| January 1, 2023 |
|
| January 1, 2023 |
|
| NA (5) |
|
| NA (5) |
| |||||
Excess of loss coverage and facultative facility coverage (1) (7) |
| $ | 8,000,000 |
|
| $ | 8,400,000 |
|
| $ | 8,400,000 |
|
| $ | 8,000,000 |
|
| $ | 8,000,000 |
|
|
| in excess of |
|
| in excess of |
|
| in excess of |
|
| in excess of |
|
| in excess of |
| |||||
|
| $ | 1,000,000 |
|
| $ | 600,000 |
|
| $ | 600,000 |
|
| $ | 1,000,000 |
|
| $ | 1,000,000 |
|
Total reinsurance coverage per occurrence (5) (7) (8) |
| $ | 8,000,000 |
|
| $ | 8,500,000 |
|
| $ | 8,500,000 |
|
| $ | 8,000,000 |
|
| $ | 8,000,000 |
|
Losses per occurrence subject to reinsurance coverage (5) (8) |
| $ | 8,000,000 |
|
| $ | 9,000,000 |
|
| $ | 9,000,000 |
|
| $ | 9,000,000 |
|
| $ | 9,000,000 |
|
Expiration date (8) |
| June 30, 2023 |
|
| June 30, 2023 |
|
| June 30, 2022 |
|
| June 30, 2022 |
|
| June 30, 2021 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Catastrophe Reinsurance: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Initial loss subject to personal lines quota share treaty |
|
| (8) |
|
| 10,000,000 |
|
|
| 10,000,000 |
|
| None (5) |
|
| None (5) |
| |||
Risk retained per catastrophe occurrence (5) (8) (9) (10) |
| $ | 10,000,000 |
|
| $ | 7,400,000 |
|
| $ | 7,400,000 |
|
| $ | 10,000,000 |
|
| $ | 10,000,000 |
|
Catastrophe loss coverage in excess of quota share coverage (2) (5) (8) |
| $ | 335,000,000 |
|
| $ | 335,000,000 |
|
| $ | 490,000,000 |
|
| $ | 490,000,000 |
|
| $ | 475,000,000 |
|
Catastrophe stub coverage for the period from October 18, 2021 through December 31, 2021 (6) |
| NA |
|
| NA |
|
| NA |
|
| $ | 5,000,000 |
|
| NA |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| in excess of |
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 5,000,000 |
|
|
|
|
|
Reinstatement premium protection (3) (4) |
| Yes |
|
| Yes |
|
| Yes |
|
| Yes |
|
| Yes |
|
75 |
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 |
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Catastrophe Reinsurance: |
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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 |
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in excess of quota share |
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coverage (2) (6) |
| $ | 315,000,000 |
|
| $ | 315,000,000 |
|
| $ | 335,000,000 |
|
| $ | 335,000,000 |
|
| $ | 490,000,000 |
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Reinstatement premium |
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protection (3) (4) |
| Yes |
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| Yes |
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| Yes |
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| Yes |
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| Yes |
|
(1) | For personal lines, includes the addition of an automatic facultative facility allowing KICO to obtain homeowners single risk coverage up to $9,000,000 in total insured value, which covers direct losses from $3,500,000 to $9,000,000 through | |
(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 | |
(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 |
76 |
Table of Contents |
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| |
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| |
| For the period January 1, 2022 through January 1, | |
| (6) | Personal lines quota share (homeowners, dwelling fire and canine liability) and underlying excess of loss reinsurance will expire on January 1, |
| (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 |
|
| Treaty Year |
|
| Treaty Year |
| ||||||||||||||||||
|
| July 1, 2022 |
| July 1, 2021 |
| July 1, 2020 |
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| July 1, 2023 |
| July 1, 2022 |
| July 1, 2021 |
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| to |
| to |
| to |
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| to |
| to |
| to |
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Line of Business |
| June 30, 2023 |
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| June 30, 2022 |
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| June 30, 2021 |
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| June 30, 2024 |
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| June 30, 2023 |
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| June 30, 2022 |
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Personal Lines: |
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Personal Umbrella |
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Quota share treaty: |
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Percent ceded - first $1,000,000 of coverage |
| 90 | % |
| 90 | % |
| 90 | % |
| 90 | % |
| 90 | % |
| 90 | % | ||||||
Percent ceded - excess of $1,000,000 dollars of coverage |
| 95 | % |
| 95 | % |
| 95 | % |
| 95 | % |
| 95 | % |
| 95 | % | ||||||
Risk retained |
| $ | 300,000 |
| $ | 300,000 |
| $ | 300,000 |
|
| $ | 3,00,000 |
| $ | 3,00,000 |
| $ | 3,00,000 |
| ||||
Total reinsurance coverage per occurrence |
| $ | 4,700,000 |
| $ | 4,700,000 |
| $ | 4,700,000 |
|
| $ | 47,00,000 |
| $ | 47,00,000 |
| $ | 47,00,000 |
| ||||
Losses per occurrence subject to quota share reinsurance coverage |
| $ | 5,000,000 |
| $ | 5,000,000 |
| $ | 5,000,000 |
|
| $ | 50,00,000 |
| $ | 50,00,000 |
| $ | 50,00,000 |
| ||||
Expiration date |
| June 30, 2023 |
| June 30, 2022 |
| June 30, 2021 |
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| June 30, 2024 |
| June 30, 2023 |
| June 30, 2022 |
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Commercial Lines (1): |
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General liability commercial policies |
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Quota share treaty |
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| None |
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Risk retained |
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| $ | 750,000 |
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Excess of loss coverage above risk retained |
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| $ | 3,750,000 |
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| in excess of |
| |||||||||||||||||
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| $ | 750,000 |
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Total reinsurance coverage per occurrence |
|
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| $ | 3,750,000 |
| ||||||||||||||||
Losses per occurrence subject to reinsurance coverage |
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| $ | 4,500,000 |
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Commercial Umbrella |
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Quota share treaty |
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| None |
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Commercial Lines (1) |
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(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 20222023 included elevatedcontinuing economic inflation, which resulted in a significantsustained 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 forin prior quarters. For Nine Months 2022. The higher2023, the continuing economic inflation impacted our loss and loss adjustment expenses as well; should these trends continue in the near-term, it would in all likelihood negatively impact our profitability.results of operations.
77 |
Table of Contents |
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
Outlook
The COVID-19 pandemic caused significant financial market volatility, economic uncertainty, and interruptions to normal business activities. As of the date of this report, we expect the effect of the COVID-19 pandemic on claims currently under our coverages to be manageable, based on the information presently available. However, the effects of the COVID-19 pandemic, including the emergence of variant strains, continue to evolve and we cannot predict the extent to which our business, results of operations, financial condition, liquidity, capital position, the value of investments we hold in our investment portfolio, premiums and the demand for our products and our ability to collect premiums or requirement to return premiums to our policyholders will ultimately be impacted. For additional information on the risks posed by COVID-19, see “The impact of COVID-19 and related risks could materially affect our results of operations, financial position and/or liquidity” included in Part I, Item 1A— “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC.
Our net premiums earned may be impacted by a number of factors. Net premiums earned are a function of net written premium volume. Net written premiums comprise both renewal business and new business and are recognized as earned premium over the term of the underlying policies. Net written premiums from both renewal and new business are impacted by competitive market conditions as well as general economic conditions. As a result of COVID-19, economic conditions in the United States rapidly deteriorated. The decreased levels of economic activity have negatively impacted, and may continue to negatively impact, premium volumes generated by new business. We began to experience this impact in March 2020 and it became more significant in the second and third quarters of 2020. While we are now seeing a reversal of this impact, it may resume in the future, but the degree of any new impact will depend on the extent and duration of any economic contraction and could be material. We have also made underwriting changes to emphasize profitability over growth and have culled out the type of risks that do not generate an acceptable level of return. This action has led, and may continue to lead, to a slowdown in premium growth, particularly in new business.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
This item is not applicable to smaller reporting companies.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
We maintain a system of disclosure controls and procedures as defined in Rule 13a-15(e) under the Exchange Act that are designed to assure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer and PrincipalChief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures. Based on this evaluation, our Chief Executive Officer and PrincipalChief Financial Officer have concluded that, as of September 30, 2022,2023, our disclosure controls and procedures were: (i) effective in recording, processing, summarizing, and reporting information on a timely basis that we are required to disclose in the reports that we file or submit under the Exchange Act, and (ii) effective in ensuring that information that we are required to disclose in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and PrincipalChief 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 PrincipalChief Financial Officer, we evaluated the effectiveness of our disclosure controls and procedures. Based on this evaluation, our Chief Executive Officer and PrincipalChief Financial Officer concluded that our disclosure controls and procedures were effective as of September 30, 2022.
s of the date of this report, there have been no misstatements identified. nd the g that were assessed as a material weakness2023.
Changes in Internal Control over Financial Reporting
There have not been any changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during our most recently completed fiscal quarter that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Inherent Limitation on Effectiveness of Controls
Internal control over financial reporting is a process designed by, or under the supervision of, our Chief Executive Officer and Principal Financial Officer, and effected by the board of directors, management, and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP including those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets, (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP and that receipts and expenditures are being made only in accordance with authorizations of our management and directors, and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with policies and procedures may deteriorate.
Table of Contents |
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 1A. Risk Factors.
For a discussion of the Company’s potential risks and uncertainties, see Part I, Item 1A— “Risk Factors” and Part II, Item 7— “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s 20212022 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. Except as discussed under Part I, Item 2 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Preliminary Non-binding Indication of Interest” herein, thereThere have been no material changes to the risk factors disclosed in Part I, Item 1A of the Company’s 20212022 Annual Report.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
(a) |
| |
(b) | Not applicable. | |
(c) | None. |
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
None.
Table of Contents |
Item 6. Exhibits.
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101.INS |
| XBRL Instance Document |
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101.SCH |
| 101.SCH XBRL Taxonomy Extension Schema. |
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101.CAL |
| 101.CAL XBRL Taxonomy Extension Calculation Linkbase. |
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101.DEF |
| 101.DEF XBRL Taxonomy Extension Definition Linkbase. |
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101.LAB |
| 101.LAB XBRL Taxonomy Extension Label Linkbase. |
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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 |
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. |
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Dated: November | By: | /s/ |
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| Chief Executive Officer |
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Dated: November | By: | /s/ |
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