Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jun. 30, 2019 | Aug. 07, 2019 | |
Document And Entity Information | ||
Entity Registrant Name | KINGSTONE COMPANIES, INC. | |
Entity Central Index Key | 0000033992 | |
Document Type | 10-Q | |
Document Period End Date | Jun. 30, 2019 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Is Entity's Reporting Status Current? | Yes | |
Entity Filer Category | Accelerated Filer | |
Entity Emerging Growth Company | false | |
Entity Small Business | true | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 10,775,550 | |
Document Fiscal Period Focus | Q2 | |
Document Fiscal Year Focus | 2019 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) | Jun. 30, 2019 | Dec. 31, 2018 |
Assets | ||
Fixed-maturity securities, held-to-maturity, at amortized cost (fair value of $4,114,072 at June 30, 2019 and $4,426,416 at December 31, 2018) | $ 3,824,620 | $ 4,222,855 |
Fixed-maturity securities, available-for-sale, at fair value (amortized cost of $160,085,628 at June 30, 2019 and $155,431,261 at December 31, 2018) | 164,334,869 | 151,777,516 |
Equity securities, at fair value (cost of $22,254,788 at June 30, 2019 and $18,305,986 at December 31, 2018) | 22,738,950 | 16,572,616 |
Other investments | 2,335,874 | 1,855,225 |
Total investments | 193,234,313 | 174,428,212 |
Cash and cash equivalents | 18,895,805 | 21,138,403 |
Premiums receivable, net | 14,958,200 | 13,961,599 |
Reinsurance receivables, net | 28,643,360 | 26,367,115 |
Deferred policy acquisition costs | 19,413,809 | 17,907,737 |
Intangible assets, net | 500,000 | 670,000 |
Property and equipment, net | 7,350,068 | 6,056,929 |
Deferred income taxes, net | 216,474 | 354,233 |
Other assets | 6,256,815 | 5,867,850 |
Total assets | 289,468,844 | 266,752,078 |
Liabilities | ||
Loss and loss adjustment expense reserves | 69,675,120 | 56,197,106 |
Unearned premiums | 85,488,146 | 79,032,131 |
Advance premiums | 3,468,225 | 2,107,629 |
Reinsurance balances payable | 2,806,903 | 1,933,376 |
Deferred ceding commission revenue | 3,100,156 | 2,686,677 |
Accounts payable, accrued expenses and other liabilities | 7,877,191 | 6,819,231 |
Income taxes payable | 0 | 15,035 |
Long-term debt, net | 29,383,341 | 29,295,251 |
Total liabilities | 201,799,082 | 178,086,436 |
Commitments and Contingencies (note 11) | ||
Stockholders' Equity | ||
Preferred stock, $.01 par value; authorized 2,500,000 shares | 0 | 0 |
Common stock, $.01 par value; authorized 20,000,000 shares; issued 11,802,087 shares at June 30, 2019 and 11,775,148 shares at December 31, 2018; outstanding 10,774,648 shares at June 30, 2019 and 10,747,709 shares at December 31, 2018 | 118,020 | 117,751 |
Capital in excess of par | 68,373,590 | 67,763,940 |
Accumulated other comprehensive income (loss) | 3,359,047 | (2,884,313) |
Retained earnings | 18,531,657 | 26,380,816 |
Total | 90,382,314 | 91,378,194 |
Treasury stock, at cost, 1,027,439 shares at June 30, 2019 and at December 31, 2018 | (2,712,552) | (2,712,552) |
Total stockholders' equity | 87,669,762 | 88,665,642 |
Total liabilities and stockholders' equity | $ 289,468,844 | $ 266,752,078 |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) | Jun. 30, 2019 | Dec. 31, 2018 |
Statement of Financial Position [Abstract] | ||
Fixed-maturity securities, held-to-maturity, fair value | $ 4,114,072 | $ 4,426,416 |
Fixed-maturity securities, available-for-sale, amortized cost | 160,085,628 | 155,431,261 |
Equity securities, available-for-sale, cost | $ 22,254,788 | $ 18,305,986 |
Stockholders' Equity | ||
Preferred stock, par value | $ 0.01 | $ 0.01 |
Preferred stock, authorized shares | 2,500,000 | 2,500,000 |
Common stock, par value | $ 0.01 | $ 0.01 |
Common stock, authorized shares | 20,000,000 | 20,000,000 |
Common stock, issued shares | 11,802,087 | 11,775,148 |
Common stock, outstanding shares | 10,774,648 | 10,747,709 |
Treasury stock, shares | 1,027,439 | 1,027,439 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Income and Comprehensive Income (Loss) (Unaudited) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Revenues | ||||
Net premiums earned | $ 31,201,279 | $ 24,104,614 | $ 60,797,168 | $ 46,942,231 |
Ceding commission revenue | 675,695 | 1,691,168 | 1,953,378 | 3,386,326 |
Net investment income | 1,719,769 | 1,556,866 | 3,343,481 | 2,940,855 |
Net gains (losses) on investments | 678,655 | (106,733) | 2,714,018 | (629,860) |
Other income | 329,972 | 300,271 | 695,873 | 608,504 |
Total revenues | 34,605,370 | 27,546,186 | 69,503,918 | 53,248,056 |
Expenses | ||||
Loss and loss adjustment expenses | 17,672,308 | 11,176,085 | 46,806,532 | 28,442,415 |
Commission expense | 7,299,173 | 6,017,189 | 14,152,589 | 11,817,137 |
Other underwriting expenses | 5,416,449 | 5,075,986 | 11,552,440 | 10,107,489 |
Other operating expenses | 1,097,468 | 843,816 | 2,068,640 | 1,090,674 |
Depreciation and amortization | 627,669 | 424,161 | 1,230,001 | 833,592 |
Interest expense | 456,545 | 451,962 | 913,090 | 908,507 |
Total expenses | 32,569,612 | 23,989,199 | 76,723,292 | 53,199,814 |
Income (loss) before taxes | 2,035,758 | 3,556,987 | (7,219,374) | 48,242 |
Income tax expense (benefit) | 396,378 | 799,690 | (1,523,564) | 8,879 |
Net income (loss) | 1,639,380 | 2,757,297 | (5,695,810) | 39,363 |
Other comprehensive income (loss), net of tax | ||||
Gross change in unrealized gains (losses) on available-for-sale-securities | 3,679,475 | (1,475,767) | 7,868,191 | (4,349,246) |
Reclassification adjustment for losses included in net income | 12,364 | 76,126 | 34,795 | 319,899 |
Net change in unrealized gains (losses) | 3,691,839 | (1,399,641) | 7,902,986 | (4,029,347) |
Income tax benefit (expense) related to items of other comprehensive income (loss) | (775,285) | 293,723 | (1,659,626) | 845,961 |
Other comprehensive income (loss), net of tax | 2,916,554 | (1,105,918) | 6,243,360 | (3,183,386) |
Comprehensive income (loss) | $ 4,555,934 | $ 1,651,379 | $ 547,550 | $ (3,144,023) |
Earnings (loss) per common share: | ||||
Basic | $ 0.15 | $ 0.26 | $ (0.53) | $ 0 |
Diluted | $ 0.15 | $ 0.25 | $ (0.53) | $ 0 |
Weighted average common shares outstanding | ||||
Basic | 10,771,717 | 10,664,806 | 10,764,824 | 10,667,385 |
Diluted | 10,785,064 | 10,820,322 | 10,764,824 | 10,828,020 |
Dividends declared and paid per common share | $ 0.1 | $ 0.1 | $ 0.2 | $ 0.2 |
Condensed Consolidated Statem_2
Condensed Consolidated Statements of Stockholders' Equity (Unaudited) - USD ($) | Preferred Stock | Common Stock | Capital in Excess of Par | Accumulated Other Comprehensive Income (Loss) | Retained Earnings | Treasury Stock | Total |
Beginning Balance, Shares at Dec. 31, 2017 | 0 | 11,618,646 | 986,809 | ||||
Beginning Balance, Amount at Dec. 31, 2017 | $ 0 | $ 116,186 | $ 68,380,390 | $ 1,100,647 | $ 27,152,822 | $ (2,172,299) | $ 94,577,746 |
Cumulative effect of adoption of updated accounting guidance for equity financial instruments at January 1, 2018 | (414,242) | 414,242 | 0 | ||||
Beginning Balance, Shares, as adjusted | 0 | 11,618,646 | 986,809 | ||||
Beginning Balance, Amount, as adjusted | $ 0 | $ 116,186 | 68,380,390 | 686,405 | 27,567,064 | $ (2,172,299) | 94,577,746 |
Stock-based compensation | 284,477 | 284,477 | |||||
Shares deducted from exercise of stock options for payment of withholding taxes, Shares | (15,750) | ||||||
Shares deducted from exercise of stock options for payment of withholding taxes, Amount | $ (158) | (341,612) | (341,770) | ||||
Vesting of restricted stock awards, Shares | 10,886 | ||||||
Vesting of restricted stock awards, Amount | $ 109 | (109) | 0 | ||||
Shares deducted from restricted stock awards for payment of withholding taxes, Shares | (1,154) | ||||||
Shares deducted from restricted stock awards for payment of withholding taxes, Amount | $ (14) | (21,509) | (21,523) | ||||
Exercise of stock options, Shares | 73,276 | ||||||
Exercise of stock options, Amount | $ 736 | 46,147 | 46,883 | ||||
Acquisition of treasury stock, Shares | 37,635 | ||||||
Acquisition of treasury stock, Amount | $ (540,223) | (540,223) | |||||
Dividends | (2,134,759) | (2,134,759) | |||||
Net loss | 39,363 | 39,363 | |||||
Change in unrealized losses on available-for-sale securities, net of tax | (3,183,386) | (3,183,386) | |||||
Ending Balance, Shares at Jun. 30, 2018 | 0 | 11,685,904 | 1,024,444 | ||||
Ending Balance, Amount at Jun. 30, 2018 | $ 0 | $ 116,859 | 68,347,784 | (2,496,981) | 25,471,668 | $ (2,712,522) | 88,726,808 |
Beginning Balance, Shares at Mar. 31, 2018 | 0 | 11,679,334 | 1,012,669 | ||||
Beginning Balance, Amount at Mar. 31, 2018 | $ 0 | $ 116,793 | 68,163,744 | (1,391,063) | 23,780,755 | $ (2,509,193) | 88,161,036 |
Stock-based compensation | 176,109 | 176,109 | |||||
Vesting of restricted stock awards, Shares | 3,706 | ||||||
Vesting of restricted stock awards, Amount | $ 37 | (37) | 0 | ||||
Shares deducted from restricted stock awards for payment of withholding taxes, Shares | (536) | ||||||
Shares deducted from restricted stock awards for payment of withholding taxes, Amount | $ (5) | (9,304) | (9,309) | ||||
Exercise of stock options, Shares | 3,400 | ||||||
Exercise of stock options, Amount | $ 34 | 17,272 | 17,306 | ||||
Acquisition of treasury stock, Shares | 11,775 | ||||||
Acquisition of treasury stock, Amount | $ (203,329) | (203,329) | |||||
Dividends | (1,066,384) | (1,066,384) | |||||
Net loss | 2,757,297 | 2,757,297 | |||||
Change in unrealized losses on available-for-sale securities, net of tax | (1,105,918) | (1,105,918) | |||||
Ending Balance, Shares at Jun. 30, 2018 | 0 | 11,685,904 | 1,024,444 | ||||
Ending Balance, Amount at Jun. 30, 2018 | $ 0 | $ 116,859 | 68,347,784 | (2,496,981) | 25,471,668 | $ (2,712,522) | 88,726,808 |
Beginning Balance, Shares at Dec. 31, 2018 | 0 | 11,775,148 | 1,027,439 | ||||
Beginning Balance, Amount at Dec. 31, 2018 | $ 0 | $ 117,751 | 67,763,940 | (2,884,313) | 26,380,816 | $ (2,712,552) | 88,665,642 |
Stock-based compensation | 709,207 | 709,207 | |||||
Vesting of restricted stock awards, Shares | 31,546 | ||||||
Vesting of restricted stock awards, Amount | $ 314 | (314) | 0 | ||||
Shares deducted from restricted stock awards for payment of withholding taxes, Shares | (7,607) | ||||||
Shares deducted from restricted stock awards for payment of withholding taxes, Amount | $ (75) | (122,763) | (122,838) | ||||
Exercise of stock options, Shares | 3,000 | ||||||
Exercise of stock options, Amount | $ 30 | 23,520 | 23,550 | ||||
Dividends | (2,153,349) | (2,153,349) | |||||
Net loss | (5,695,810) | (5,695,810) | |||||
Change in unrealized losses on available-for-sale securities, net of tax | 6,243,360 | 6,243,360 | |||||
Ending Balance, Shares at Jun. 30, 2019 | 0 | 11,802,087 | 1,027,439 | ||||
Ending Balance, Amount at Jun. 30, 2019 | $ 0 | $ 118,020 | 68,373,320 | 3,359,047 | 18,531,657 | $ (2,712,552) | 87,669,762 |
Beginning Balance, Shares at Mar. 31, 2019 | 0 | 11,796,188 | 1,027,439 | ||||
Beginning Balance, Amount at Mar. 31, 2019 | $ 0 | $ 117,962 | 67,957,604 | 442,493 | 17,969,664 | $ (2,712,552) | 83,775,171 |
Stock-based compensation | 399,325 | 399,325 | |||||
Vesting of restricted stock awards, Shares | 3,553 | ||||||
Vesting of restricted stock awards, Amount | $ 34 | (34) | 0 | ||||
Shares deducted from restricted stock awards for payment of withholding taxes, Shares | (654) | ||||||
Shares deducted from restricted stock awards for payment of withholding taxes, Amount | $ (6) | (6,825) | (6,831) | ||||
Exercise of stock options, Shares | 3,000 | ||||||
Exercise of stock options, Amount | $ 30 | 23,550 | 23,280 | ||||
Dividends | (1,077,387) | (1,077,387) | |||||
Net loss | 1,639,380 | 1,639,380 | |||||
Change in unrealized losses on available-for-sale securities, net of tax | 2,916,554 | 2,916,554 | |||||
Ending Balance, Shares at Jun. 30, 2019 | 0 | 11,802,087 | 1,027,439 | ||||
Ending Balance, Amount at Jun. 30, 2019 | $ 0 | $ 118,020 | $ 68,373,320 | $ 3,359,047 | $ 18,531,657 | $ (2,712,552) | $ 87,669,762 |
Condensed Consolidated Statem_3
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) | 6 Months Ended | |
Jun. 30, 2019 | Jun. 30, 2018 | |
Cash flows from operating activities: | ||
Net (loss) income | $ (5,695,810) | $ 39,363 |
Adjustments to reconcile net (loss) income to net cash flows provided by operating activities: | ||
Net (gains) losses on sale of investments | (931) | 320,149 |
Net unrealized (gains) losses of equity investments | (2,232,438) | 430,411 |
Net unrealized gains of other investments | (480,649) | (120,700) |
Depreciation and amortization | 1,230,001 | 833,592 |
Amortization of bond premium, net | 188,778 | 174,110 |
Amortization of discount and issuance costs on long-term debt | 88,090 | 80,196 |
Stock-based compensation | 709,207 | 284,477 |
Deferred income tax expense | (1,521,867) | (183,840) |
(Increase) decrease in operating assets: | ||
Premiums receivable, net | (996,601) | (1,119,494) |
Reinsurance receivables, net | (2,276,245) | 626,726 |
Deferred policy acquisition costs | (1,506,072) | (1,224,520) |
Other assets | (329,335) | (1,400,192) |
Increase (decrease) in operating liabilities: | ||
Loss and loss adjustment expense reserves | 13,478,014 | 458,234 |
Unearned premiums | 6,456,015 | 5,492,266 |
Advance premiums | 1,360,596 | 1,354,136 |
Reinsurance balances payable | 873,527 | 1,621,658 |
Deferred ceding commission revenue | 413,479 | 492,722 |
Accounts payable, accrued expenses and other liabilities | 1,042,925 | (2,206,196) |
Net cash flows provided by operating activities | 10,800,684 | 5,953,098 |
Cash flows from investing activities: | ||
Purchase - fixed-maturity securities available-for-sale | (11,867,613) | (42,305,529) |
Purchase - equity securities | (4,461,684) | (8,221,931) |
Sale and redemption - fixed-maturity securities held-to-maturity | 400,000 | 0 |
Sale or maturity - fixed-maturity securities available-for-sale | 6,987,908 | 15,172,845 |
Sale - equity securities | 503,884 | 4,746,825 |
Acquisition of property and equipment | (2,353,140) | (1,347,578) |
Net cash flows used in investing activities | (10,790,645) | (31,955,368) |
Cash flows from financing activities: | ||
Proceeds from exercise of stock options | 23,550 | 46,883 |
Withholding taxes paid on net exercise of stock options | 0 | (341,770) |
Withholding taxes paid on vested retricted stock awards | (122,838) | (21,523) |
Purchase of treasury stock | 0 | (540,223) |
Dividends paid | (2,153,349) | (2,134,759) |
Net cash flows used in financing activities | (2,252,637) | (2,991,392) |
Decrease in cash and cash equivalents | (2,242,598) | (28,993,662) |
Cash and cash equivalents, beginning of period | 21,138,403 | 48,381,633 |
Cash and cash equivalents, end of period | 18,895,805 | 19,387,971 |
Supplemental disclosures of cash flow information: | ||
Cash paid for income taxes | 388,000 | 801,000 |
Cash paid for interest | $ 825,000 | $ 875,417 |
1. Nature of Business and Basis
1. Nature of Business and Basis of Presentation | 6 Months Ended |
Jun. 30, 2019 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
1. Nature of Business and Basis of Presentation | Kingstone Companies, Inc. (referred to herein as "Kingstone" or the “Company”), through its wholly owned subsidiary, Kingstone Insurance Company (“KICO”), underwrites property and casualty insurance to small businesses and individuals exclusively through 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 offering its property and casualty insurance products in New York, New Jersey, Rhode Island, Massachusetts, Connecticut and Pennsylvania. Although New Jersey, Rhode Island, Massachusetts and Connecticut are now growing expansion markets for the Company, 86.0% and 88.4% of KICO’s direct written premiums for the three months and six months ended June 30, 2019, respectively, came from the New York policies. Kingstone, through its subsidiary, Cosi Agency, Inc. (“Cosi”), a multi-state licensed general agency, accesses alternate forms of distribution outside of the independent agent and broker network, through which KICO currently distributes its various products. Kingstone (through Cosi) now has the opportunity to partner with name-brand carriers and access nationwide insurance 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, 2018 and notes thereto included in the Company’s Annual Report on Form 10-K filed with the SEC on March 18, 2019. The accompanying condensed consolidated financial statements have not been audited by an independent registered public accounting firm in accordance with standards of the Public Company Accounting Oversight Board (United States) but, in the opinion of management, such financial statements include all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the Company’s financial position and results of operations. The results of operations for the six months ended June 30, 2019 may not be indicative of the results that may be expected for the year ending December 31, 2019. |
2. Accounting Policies
2. Accounting Policies | 6 Months Ended |
Jun. 30, 2019 | |
Accounting Policies [Abstract] | |
2. Accounting Policies | Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates and assumptions, which include the reserves for losses and loss adjustment expenses, and are subject to estimation errors due to the inherent uncertainty in projecting ultimate claim amounts that will be reported and settled over a period of many years. In addition, estimates and assumptions associated with receivables under reinsurance contracts related to contingent ceding commission revenue require judgments by management. On an on-going basis, management reevaluates its assumptions and the methods for calculating these estimates. Actual results may differ significantly from the estimates and assumptions used in preparing the consolidated financial statements. Principles of Consolidation The condensed consolidated financial statements consist of Kingstone and its wholly owned subsidiaries, as well as KICO and its wholly owned subsidiaries, CMIC Properties, Inc. (“Properties”) and 15 Joys Lane, LLC (“15 Joys Lane”), which together own the land and building from which KICO operates. All significant inter-company account balances and transactions have been eliminated in consolidation. Accounting Changes In August 2018, the SEC adopted the final rule under SEC Release No. 33-10532, “Disclosure Update and Simplification,” amending certain disclosure requirements that were redundant, duplicative, overlapping, outdated or superseded. In addition, the amendments expanded the disclosure requirements on the analysis of stockholders' equity for interim financial statements. Under the amendments, an analysis of changes in each caption of stockholders' equity presented in the balance sheet must be provided in a note or separate statement. The analysis should present a reconciliation of the beginning balance to the ending balance of each period for which a statement of comprehensive income is required to be filed. This final rule was effective on November 5, 2018. The Company adopted the provisions of this Release effective January 1, 2019, and included the required presentation of changes in stockholders’ equity for the six months ended June 30, 2019 and 2018. In February 2016, the FASB issued ASU 2016-02 – Leases (Topic 842) (“ASU 2016-02”). Under this ASU, the Company recognized a right-of-use-asset and corresponding liability on the balance sheet for all leases, except for leases covering a period of fewer than 12 months. The liability has been measured at the present value of the future minimum lease payments taking into account renewal options if applicable plus initial incremental direct costs such as commissions. The minimum payments are discounted using the Company’s incremental borrowing rate. The Company adopted ASU 2016-02 effective January 1, 2019 using the cumulative effect adjustment transition method, which applies the provision of the standard at the effective date without adjusting the comparative periods presented. The adoption of the updated guidance resulted in the Company recognizing a right-of-use asset of $855,000 as part of other assets and a lease liability of $855,000 as part of accounts payable, accrued expenses and other liabilities in the condensed consolidated balance sheet. The right-of use-asset is amortized as rent expense on a straight line basis. The adoption of this ASU did not have a material effect on the Company's results of operations or liquidity. Accounting Pronouncements In June 2016, FASB issued ASU 2016-13 - Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). The revised accounting guidance requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts and requires enhanced disclosures related to the significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an organization’s portfolio. In addition, ASU 2016-13 amends the accounting for credit losses of available-for-sale debt securities and purchased financial assets with credit deterioration. ASU 2016-13 will be effective for the Company on January 1, 2020. The Company is currently evaluating the effect the updated guidance will have on its consolidated financial statements. In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement The Company has determined that all other recently issued accounting pronouncements will not have a material impact on its consolidated financial position, results of operations and cash flows, or do not apply to its operations. |
3. Investments
3. Investments | 6 Months Ended |
Jun. 30, 2019 | |
Investments [Abstract] | |
3. Investments | Fixed-Maturity Securities The amortized cost, estimated fair value, and unrealized gains and losses of investments in fixed-maturity securities classified as available-for-sale as of June 30, 2019 and December 31, 2018 are summarized as follows: June 30, 2019 Net Cost or Gross Gross Unrealized Losses Estimated Unrealized Amortized Unrealized Less than 12 More than 12 Fair Gains/ Categor Cost Gains Months Months Value (Losses Fixed-Maturity Securities: U.S. Treasury securities and obligations of U.S. government corporations and agencies $ 8,236,255 $ 142,388 $ - $ (1,557 ) $ 8,377,086 $ 140,831 Political subdivisions of States, Territories and Possessions 5,675,418 167,952 - (309 ) 5,843,061 167,643 Corporate and other bonds Industrial and miscellaneous 126,095,235 4,106,946 (14,450 ) (84,187 ) 130,103,544 4,008,309 Residential mortgage and other asset backed securities (1) 20,078,720 317,871 (8,750 ) (376,663 ) 20,011,178 (67,542 ) Total $ 160,085,628 $ 4,735,157 $ (23,200 ) $ (462,716 ) $ 164,334,869 $ 4,249,241 (1) In 2017, KICO 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). The eligible collateral would be pledged to FHLBNY if KICO draws an advance from the FHBLNY credit line. As of June 30, 2019, the estimated fair value of the eligible investments was approximately $5,354,000. KICO will retain all rights regarding all securities if pledged as collateral. As of June 30, 2019, there was no outstanding balance on the FHLBNY credit line. December 31, 2018 Net Cost or Gross Gross Unrealized Losses Estimated Unrealized Amortized Unrealized Less than 12 More than 12 Fair Gains/ Category Cost Gains Months Months Value (Losses) Fixed-Maturity Securities: U.S. Treasury securities and obligations of U.S. government corporations and agencies $ 8,222,050 $ 26,331 $ (28,000 ) $ - $ 8,220,381 $ (1,669 ) Political subdivisions of States, Territories and Possessions 6,339,540 50,903 (12,327 ) (36,508 ) 6,341,608 2,068 Corporate and other bonds Industrial and miscellaneous 119,078,698 123,740 (2,775,540 ) (676,605 ) 115,750,293 (3,328,405 ) Residential mortgage and other asset backed securities (1) 21,790,973 236,502 (231,229 ) (331,012 ) 21,465,234 (325,739 ) Total $ 155,431,261 $ 437,476 $ (3,047,096 ) $ (1,044,125 ) $ 151,777,516 $ (3,653,745 ) (1) In 2017, KICO placed certain residential mortgage backed securities as eligible collateral in a designated custodian account related to its membership in the FHLBNY (see Note 7). The eligible collateral would be pledged to FHLBNY if KICO draws an advance from the FHBLNY credit line. As of December 31, 2018, the estimated fair value of the eligible investments was approximately $5,116,000. KICO will retain all rights regarding all securities if pledged as collateral. As of December 31, 2018, there was no outstanding balance on the FHLBNY credit line. A summary of the amortized cost and estimated fair value of the Company’s investments in available-for-sale fixed-maturity securities by contractual maturity as of June 30, 2019 and December 31, 2018 is shown below: June 30, 2019 December 31, 2018 Amortized Estimated Amortized Estimated Remaining Time to Maturit Cost Fair Value Cost Fair Value Less than one year $ 11,167,387 $ 11,188,535 $ 6,742,519 $ 6,738,014 One to five years 47,828,173 48,719,017 47,038,838 46,640,012 Five to ten years 79,000,901 82,414,899 76,884,505 74,290,076 More than 10 years 2,010,447 2,001,240 2,974,426 2,644,180 Residential mortgage and other asset backed securities 20,078,720 20,011,178 21,790,973 21,465,234 Total $ 160,085,628 $ 164,334,869 $ 155,431,261 $ 151,777,516 The actual maturities may differ from contractual maturities because certain borrowers have the right to call or prepay obligations with or without penalties. Equity Securities The cost, estimated fair value, and gross gains and losses of investments in equity securities as of June 30, 2019 and December 31, 2018 are as follows: June 30, 2019 Gross Gross Estimated Categor Cost Gains Losses Fair Value Equity Securities: Preferred stocks $ 9,445,572 $ 175,517 $ (58,389 ) $ 9,562,700 Common stocks and exchange traded mutual funds 12,809,216 1,045,871 (678,837 ) 13,176,250 Total $ 22,254,788 $ 1,221,388 $ (737,226 ) $ 22,738,950 December 31, 2018 Gross Gross Estimated Categor Cost Gains Losses Fair Value Equity Securities: Preferred stocks $ 6,694,754 $ - $ (541,798 ) $ 6,152,956 Common stocks and exchange traded mutual funds 11,611,232 99,817 (1,291,389 ) 10,419,660 Total $ 18,305,986 $ 99,817 $ (1,833,187 ) $ 16,572,616 Other Investments The cost, estimated fair value, and gross unrealized gain and losses of the Company’s other investments as of June 30, 2019 and December 31, 2018 are as follows: June 30, 2019 December 31, 2018 Gross Estimated Gross Estimated Categor Cost Gains Fair Value Cost Losses Fair Value Other Investments: Hedge fund $ 1,999,381 $ 336,493 $ 2,335,874 $ 1,999,381 $ (144,156 ) $ 1,855,225 Total $ 1,999,381 $ 336,493 $ 2,335,874 $ 1,999,381 $ (144,156 ) $ 1,855,225 Held-to-Maturity Securities The amortized cost, estimated fair value, and unrealized gains and losses of investments in held-to-maturity fixed-maturity securities as of June 30, 2019 and December 31, 2018 are summarized as follows: June 30, 2019 Cost or Gross Gross Unrealized Losses Estimated Net Amortized Unrealized Less than 12 More than 12 Fair Unrealized Categor Cost Gains Months Months Value Gains Held-to-Maturity Securities: U.S. Treasury securities $ 729,528 $ 150,495 $ - $ - $ 880,023 $ 150,495 Political subdivisions of States, Territories and Possessions 998,715 51,025 - - 1,049,740 51,025 Corporate and other bonds Industrial and miscellaneous 2,096,377 90,357 - (2,425 ) 2,184,309 87,932 Total $ 3,824,620 $ 291,877 $ - $ (2,425 ) $ 4,114,072 $ 289,452 December 31, 2018 Cost or Gross Gross Unrealized Losses Estimated Net Amortized Unrealized Less than 12 More than 12 Fair Unrealized Categor Cost Gains Months Months Value Gains Held-to-Maturity Securities: U.S. Treasury securities $ 729,507 $ 147,532 $ (3,964 ) $ - $ 873,075 $ 143,568 Political subdivisions of States, Territories and Possessions 998,803 33,862 - - 1,032,665 33,862 Corporate and other bonds Industrial and miscellaneous 2,494,545 38,461 (1,425 ) (10,905 ) 2,520,676 26,131 Total $ 4,222,855 $ 219,855 $ (5,389 ) $ (10,905 ) $ 4,426,416 $ 203,561 Held-to-maturity U.S. Treasury securities are held in trust pursuant to various states’ minimum funds requirements. 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 June 30, 2019 and December 31, 2018 is shown below: June 30, 2019 December 31, 2018 Amortized Estimated Amortized Estimated Remaining Time to Maturit Cost Fair Value Cost Fair Value Less than one year $ - $ - $ - $ - One to five years $ 2,598,323 $ 2,705,549 2,996,685 3,036,531 Five to ten years $ 619,780 $ 654,484 619,663 635,846 More than 10 years $ 606,517 $ 754,039 606,507 754,039 Total $ 3,824,620 $ 4,114,072 $ 4,222,855 $ 4,426,416 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 Six months ended June 30, June 30, 2019 2018 2019 2018 Income: Fixed-maturity securities $ 1,474,341 $ 1,361,506 $ 3,001,211 $ 2,511,799 Equity securities 205,509 194,091 412,653 394,588 Cash and cash equivalents 172,680 42,582 213,081 115,841 Total 1,852,530 1,598,179 3,626,945 3,022,228 Expenses: Investment expenses 132,761 41,313 283,464 81,373 Net investment income $ 1,719,769 $ 1,556,866 $ 3,343,481 $ 2,940,855 Proceeds from the sale and redemption of fixed-maturity securities held-to-maturity were $400,000 and $-0- for the six months ended June 30, 2019 and 2018, respectively. Proceeds from the sale or maturity of fixed-maturity securities available-for-sale were $6,987,908 and $15,172,845 for the six months ended June 30, 2019 and 2018, respectively. Proceeds from the sale of equity securities were $503,884 and $4,746,825 for the six months ended June 30, 2019 and 2018, respectively. The Company’s net gains (losses) on investments are summarized as follows: Three months ended Six months ended June 30, June 30, 2019 2018 2019 2018 Realized (Losses) Gains Fixed-maturity securities: Gross realized gains $ 4,942 $ (5,257 ) $ 10,944 $ 112,212 Gross realized losses (17,306 ) (148,258 ) (45,739 ) (483,227 ) (12,364 ) (153,515 ) (34,795 ) (371,015 ) Equity securities: Gross realized gains 90,427 104,692 41,688 315,250 Gross realized losses (27,638 ) (27,553 ) (5,962 ) (264,384 ) 62,789 77,139 35,726 50,866 Net realized gains (losses) 50,425 (76,376 ) 931 (320,149 ) Unrealized Gains (Losses) Equity securities: Gross gains 440,301 - 2,232,438 - Gross losses - (123,197 ) - (430,411 ) 440,301 (123,197 ) 2,232,438 (430,411 ) Other investments: Gross gains 187,929 92,840 480,649 120,700 Gross losses - - - - 187,929 92,840 480,649 120,700 Net unrealized gains (losses) 628,230 (30,357 ) 2,713,087 (309,711 ) Net gains (losses) on investments $ 678,655 $ (106,733 ) $ 2,714,018 $ (629,860 ) Impairment Review Impairment of investment securities results in a charge to operations when a market decline below cost is deemed to be other-than-temporary. The Company regularly reviews its fixed-maturity securities to evaluate the necessity of recording impairment losses for other-than-temporary declines in the estimated fair value of investments. In evaluating potential impairment, GAAP specifies (i) if the Company does not have the intent to sell a debt security prior to recovery and (ii) it is more likely than not that it will not have to sell the debt security prior to recovery, the security would not be considered other-than-temporarily impaired unless there is a credit loss. When the Company does not intend to sell the security and it is more likely than not that the Company will not have to sell the security before recovery of its cost basis, it will recognize the credit component of an other-than-temporary impairment (“OTTI”) of a debt security in earnings and the remaining portion in comprehensive loss. The credit loss component recognized in earnings is identified as the amount of principal cash flows not expected to be received over the remaining term of the security as projected based on cash flow projections. For held-to-maturity debt securities, the amount of OTTI recorded in comprehensive loss for the noncredit portion of a previous OTTI is amortized prospectively over the remaining life of the security on the basis of timing of future estimated cash flows of the security. OTTI losses are recorded in the 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. At June 30, 2019 and December 31, 2018, there were 49 and 156 fixed-maturity securities, respectively, that accounted for the gross unrealized loss. The Company determined that none of the other unrealized losses were deemed to be OTTI for its portfolio of investments for the six months ended June 30, 2019 and 2018. Significant factors influencing the Company’s determination that unrealized losses were temporary included the magnitude of the unrealized losses in relation to each security’s cost, the nature of the investment and management’s intent and ability to retain the investment for a period of time sufficient to allow for an anticipated recovery of 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 June 30, 2019 as follows: June 30, 2019 Less than 12 months 12 months or more Total Estimated No. of Estimated No. of Estimated Fair Unrealized Positions Fair Unrealized Positions Fair Unrealized Categor Value Losses Held Value Losses Held Value Losses Fixed-Maturity Securities: U.S. Treasury securities and obligations of U.S. government corporations and agencies $ - $ - - $ 1,992,340 $ (1,557 ) 1 $ 1,992,340 $ (1,557 ) Political subdivisions of States, Territories and Possessions - - - 302,880 (309 ) 1 302,880 (309 ) Corporate and other bonds industrial and miscellaneous 1,959,040 (14,450 ) 4 11,608,094 (84,187 ) 18 13,567,134 (98,637 ) Residential mortgage and other asset backed securities 591,845 (8,750 ) 1 15,983,171 (376,663 ) 24 16,575,016 (385,413 ) Total fixed-maturity securities $ 2,550,885 $ (23,200 ) 5 $ 29,886,485 $ (462,716 ) 44 $ 32,437,370 $ (485,916 ) The Company held available-for-sale securities with unrealized losses representing declines that were considered temporary at December 31, 2018 as follows: December 31, 2018 Less than 12 months 12 months or more Total Estimated No. of Estimated No. of Estimated Fair Unrealized Positions Fair Unrealized Positions Fair Unrealized Categor Value Losses Held Value Losses Held Value Losses Fixed-Maturity Securities: U.S. Treasury securities and obligations of U.S. government corporations and agencies $ 4,948,530 $ (28,000 ) 3 $ - $ - - $ 4,948,530 $ (28,000 ) Political subdivisions of States, Territories and Possessions 555,375 (12,327 ) 1 1,436,242 (36,508 ) 3 1,991,617 (48,835 ) Corporate and other bonds industrial and miscellaneous 81,004,459 (2,775,540 ) 97 13,424,888 (676,605 ) 24 94,429,347 (3,452,145 ) Residential mortgage and other asset backed securities 7,002,713 (231,229 ) 9 11,928,425 (331,012 ) 19 18,931,138 (562,241 ) Total fixed-maturity securities $ 93,511,077 $ (3,047,096 ) 110 $ 26,789,555 $ (1,044,125 ) 46 $ 120,300,632 $ (4,091,221 ) |
4. Fair Value Measurements
4. Fair Value Measurements | 6 Months Ended |
Jun. 30, 2019 | |
Fair Value Disclosures [Abstract] | |
4. Fair Value Measurements | Fair value is the price that would be received upon sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The valuation technique used by the Company to fair value its financial instruments is the market approach, which uses prices and other relevant information generated by market transactions involving identical or comparable assets. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used to measure the assets or liabilities fall within different levels of the hierarchy, the classification is based on the lowest level input that is significant to the fair value measurement of the asset or liability. Classification of assets and liabilities within the hierarchy considers the markets in which the assets and liabilities are traded, including during period of market disruption, and the reliability and transparency of the assumptions used to determine fair value. The hierarchy requires the use of observable market data when available. The levels of the hierarchy and those investments included in each are as follows: Level 1 Level 2 Level 3 The availability of observable inputs varies and is affected by a wide variety of factors. When the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires significantly more judgment. The degree of judgment exercised by management in determining fair value is greatest for investments categorized as Level 3. For investments in this category, the Company considers prices and inputs that are current as of the measurement date. In periods of market dislocation, as characterized by current market conditions, the ability to observe prices and inputs may be reduced for many instruments. This condition could cause a security to be reclassified between levels. The following table presents information about the Company’s investments that are measured at fair value on a recurring basis at June 30, 2019 and December 31, 2018 indicating the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value: June 30, 2019 Level 1 Level 2 Level 3 Total Fixed-maturity securities available-for-sale U.S. Treasury securities and obligations of U.S. government corporations and agencies $ 8,377,086 $ - $ - $ 8,377,086 Political subdivisions of States, Territories and Possessions - 5,843,061 - 5,843,061 Corporate and other bonds industrial and miscellaneous 126,359,225 3,744,319 - 130,103,544 Residential mortgage backed securities - 20,011,178 - 20,011,178 Total fixed maturities 134,736,311 29,598,558 - 164,334,869 Equity securities 22,738,950 - - 22,738,950 Total investments $ 157,475,261 $ 29,598,558 $ - $ 187,073,819 December 31, 2018 Level 1 Level 2 Level 3 Total Fixed-maturity securities available-for-sale U.S. Treasury securities and obligations of U.S. government corporations and agencies $ 8,220,381 $ - $ - $ 8,220,381 Political subdivisions of States, Territories and Possessions - 6,341,608 - 6,341,608 Corporate and other bonds industrial and miscellaneous 112,076,270 3,674,023 - 115,750,293 Residential mortgage backed securities - 21,465,234 - 21,465,234 Total fixed maturities 120,296,651 31,480,865 - 151,777,516 Equity securities 16,572,616 - - 16,572,616 Total investments $ 136,869,267 $ 31,480,865 $ - $ 168,350,132 Pursuant to ASC 820 “Fair Value Measurement,” an entity is permitted, as a practical expedient, to estimate the fair value of an investment within the scope of ASC 820 using the net asset value (“NAV”) per share of the investment. The following table sets forth the Company’s investment in a hedge fund measured at NAV per share as of June 30, 2019 and December 31, 2018. 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: Categor June 30, 2019 December 31, 2018 Other Investments: Hedge fund $ 2,335,874 $ 1,855,225 Total $ 2,335,874 $ 1,855,225 The 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 loss within net gains (losses) on investments. The estimated fair value and the level of the fair value hierarchy of the Company’s long-term debt as of June 30, 2019 and December 31, 2018 not measured at fair value is as follows: June 30, 2019 Level 1 Level 2 Level 3 Total Long-term debt Senior Notes due 2022 $ - $ 27,326,918 $ - $ 27,326,918 December 31, 2018 Level 1 Level 2 Level 3 Total Long-term debt Senior Notes due 2022 $ - $ 28,521,734 $ - $ 28,521,734 |
5. Fair Value of Financial Inst
5. Fair Value of Financial Instruments and Real Estate | 6 Months Ended |
Jun. 30, 2019 | |
Fair Value Disclosures [Abstract] | |
5. Fair Value of Financial Instruments and Real Estate | The Company uses the following methods and assumptions in estimating the fair value of financial instruments and real estate: Equity securities, available-for-sale fixed income securities, held-to-maturity fixed income securities, and other investments: Cash and cash equivalents: Premiums receivable and reinsurance receivables: Real estate: Reinsurance balances payable: Long-term debt: The estimated fair values of the Company’s financial instruments and real estate as of June 30, 2019 and December 31, 2018 are as follows: June 30, 2019 December 31, 2018 Carrying Estimated Carrying Estimated Value Fair Value Value Fair Value Fixed-maturity securities-held-to maturity $ 3,824,620 $ 4,114,072 $ 4,222,855 $ 4,426,416 Cash and cash equivalents $ 18,895,805 $ 18,895,805 $ 21,138,403 $ 21,138,403 Premiums receivable, net $ 14,958,200 $ 14,958,200 $ 13,961,599 $ 13,961,599 Reinsurance receivables, net $ 28,643,360 $ 28,643,360 $ 26,367,115 $ 26,367,115 Real estate, net of accumulated depreciation $ 2,307,072 $ 2,705,000 $ 2,300,827 $ 2,705,000 Reinsurance balances payable $ 2,806,903 $ 2,806,903 $ 1,933,376 $ 1,933,376 Long-term debt, net $ 29,383,341 $ 27,326,918 $ 29,295,251 $ 28,521,734 |
6. Property and Casualty Insura
6. Property and Casualty Insurance Activity | 6 Months Ended |
Jun. 30, 2019 | |
Insurance [Abstract] | |
6. Property and Casualty Insurance Activity | Premiums Earned Premiums written, ceded and earned are as follows: Direct Assumed Ceded Net Six months ended June 30, 2019 Premiums written $ 82,309,827 $ 77 $ (15,327,796 ) $ 66,982,108 Change in unearned premiums (6,456,216 ) 202 271,074 (6,184,940 ) Premiums earned $ 75,853,611 $ 279 $ (15,056,722 ) $ 60,797,168 Six months ended June 30, 2018 Premiums written $ 68,389,960 $ 824 $ (16,725,724 ) $ 51,665,060 Change in unearned premiums (5,495,329 ) 3,064 769,436 $ (4,722,829 ) Premiums earned $ 62,894,631 $ 3,888 $ (15,956,288 ) $ 46,942,231 Three months ended June 30, 2019 Premiums written $ 44,821,279 $ 111 $ (8,199,887 ) $ 36,621,503 Change in unearned premiums (5,828,149 ) 7 407,918 (5,420,224 ) Premiums earned $ 38,993,130 $ 118 $ (7,791,969 ) $ 31,201,279 Three months ended June 30, 2018 Premiums written $ 36,863,677 $ 488 $ (8,899,489 ) $ 27,964,676 Change in unearned premiums (4,486,460 ) 1,163 625,235 (3,860,062 ) Premiums earned $ 32,377,217 $ 1,651 $ (8,274,254 ) $ 24,104,614 Premium receipts in advance of the policy effective date are recorded as advance premiums. The balance of advance premiums as of June 30, 2019 and December 31, 2018 was $3,468,225 and $2,107,629, respectively. Loss and Loss Adjustment Expense Reserves The following table provides a reconciliation of the beginning and ending balances for unpaid losses and loss adjustment expense (“LAE”) reserves: Six months ended June 30, 2019 2018 Balance at beginning of period $ 56,197,106 $ 48,799,622 Less reinsurance recoverables (15,671,247 ) (16,748,908 ) Net balance, beginning of period 40,525,859 32,050,714 Incurred related to: Current year 40,689,147 28,215,069 Prior years 6,117,385 227,346 Total incurred 46,806,532 28,442,415 Paid related to: Current year 19,692,437 14,656,892 Prior years 13,999,258 10,977,023 Total paid 33,691,695 25,633,915 Net balance at end of period 53,640,696 34,859,214 Add reinsurance recoverables 16,034,424 14,398,642 Balance at end of period $ 69,675,120 $ 49,257,856 Incurred losses and LAE are net of reinsurance recoveries under reinsurance contracts of $6,621,688 and $8,017,022 for the six months ended June 30, 2019 and 2018, 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 six months ended June 30, 2019 and 2018 was $6,117,385 unfavorable and $227,346 unfavorable, respectively. During the six months ended June 30, 2019, the Company increased case reserves for certain older open liability claims, which primarily affected the ultimate loss projections for commercial lines business. The Company’s management continually monitors claims activity to assess the appropriateness of carried case and incurred but not reported (“IBNR”) reserves, giving consideration to Company and industry trends. 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 includes a review of coverage applicability, comparative liability on the part of the insured, injury severity, property damage, replacement cost estimates, and any other information considered pertinent to estimating the exposure presented by the claim. The amounts of loss and LAE reserves for unreported claims and development on known claims (IBNR reserves) are determined using historical information aggregated by line of insurance as adjusted to current conditions. Since this process produces loss reserves set by management based upon the actuaries’ best estimate, there is no explicit or implicit provision for uncertainty in the carried loss reserves. Due to the inherent uncertainty associated with the reserving process, the ultimate liability may differ, perhaps substantially, from the original estimate. Such estimates are regularly reviewed and updated and any resulting adjustments are included in the current 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 Incurred Loss Development Paid Bornhuetter-Ferguson (“BF”) Incurred Bornhuetter-Ferguson (“BF”) Incremental Claim-Based Methods Management’s best estimate of required reserves is generally based on an average of the methods above, with appropriate weighting of the various methods based on the line of business and accident year being projected. In some cases, additional methods or historical data from industry sources are employed to supplement the projections derived from the methods listed above. Two key assumptions that materially affect the estimate of loss reserves are the loss ratio estimate for the current accident year used in the BF methods described above, and the loss development factor selections used in the loss development methods described above. The loss ratio estimates used in the BF methods are selected after reviewing historical accident year loss ratios adjusted for rate changes, trend, and mix of business. The Company is not aware of any claim trends that have emerged or that would cause future adverse development that have not already been considered in existing case reserves and in its current loss development factors. In New York State, lawsuits for negligence are subject to certain limitations and must be commenced within three years from the date of the accident or are otherwise barred. Accordingly, the Company’s exposure to unreported claims (“pure” IBNR) for accident dates of June 30, 2016 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 June 30, 2019, net of reinsurance, as well as the cumulative reported claims by accident year and total IBNR reserves as of June 30, 2019 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, 2010 to December 31, 2018 is presented as supplementary unaudited information. All Lines of Business (in thousands, except reported claims data) Incurred Loss and Allocated Loss Adjustment Expenses, Net of Reinsurance As of June 30, 2019 Six Months Ended Cumulative Number of Reported Claims by Accident For the Years Ended December 31, June 30, Accident Year 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 IBNR Year (Unaudited 2010 - 2018) (Unaudited) 2010 $ 5,598 $ 5,707 $ 6,429 $ 6,623 $ 6,912 $ 6,853 $ 6,838 $ 6,840 $ 6,787 $ 6,787 $ - 1,617 2011 7,603 7,678 8,618 9,440 9,198 9,066 9,144 9,171 9,181 37 1,914 2012 9,539 9,344 10,278 10,382 10,582 10,790 10,791 11,030 42 4,704 (1) 2013 10,728 9,745 9,424 9,621 10,061 10,089 10,464 67 1,561 2014 14,193 14,260 14,218 14,564 15,023 16,294 176 2,133 2015 22,340 21,994 22,148 22,491 23,133 123 2,555 2016 26,062 24,941 24,789 27,112 68 2,868 2017 31,605 32,169 33,895 895 3,364 2018 54,455 54,067 3,944 4,137 2019 38,622 13,451 1,865 Total $ 230,585 (1) Reported claims for accident year 2012 includes 3,406 claims from Superstorm Sandy. All Lines of Business (in thousands) Cumulative Paid Loss and Allocated Loss Adjustment Expenses, Net of Reinsurance Accident For the Years Ended December 31, Six Months Ended June 30, Year 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 (Unaudited 2010 - 2018) (Unaudited) 2010 $ 2,566 $ 3,947 $ 4,972 $ 5,602 $ 6,323 $ 6,576 $ 6,720 $ 6,772 $ 6,780 $ 6,780 2011 3,740 5,117 6,228 7,170 8,139 8,540 8,702 8,727 8,773 2012 3,950 5,770 7,127 8,196 9,187 10,236 10,323 10,420 2013 3,405 5,303 6,633 7,591 8,407 9,056 9,212 2014 5,710 9,429 10,738 11,770 13,819 14,031 2015 12,295 16,181 18,266 19,984 20,326 2016 15,364 19,001 21,106 21,910 2017 16,704 24,820 27,024 2018 32,383 41,894 2019 18,803 Total $ 179,173 Net liability for unpaid loss and allocated loss adjustment expenses for the accident years presented $ 51,412 All outstanding liabilities before 2010, net of reinsurance 107 Liabilities for loss and allocated loss adjustment expenses, net of reinsurance $ 51,519 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 consolidated balance sheet is as follows: As of (in thousands) June 30, 2019 Liabilities for loss and loss adjustment expenses, net of reinsurance $ 51,519 Total reinsurance recoverable on unpaid losses 16,034 Unallocated loss adjustment expenses 2,122 Total gross liability for loss and LAE reserves $ 69,675 Reinsurance The Company’s quota share reinsurance treaties are on a July 1 through June 30 fiscal year basis. The Company’s quota share reinsurance treaties in effect for the six months ended June 30, 2019 and 2018 for its personal lines business, which primarily consists of homeowners’ policies, were covered under a treaty covering a two-year period from July 1, 2017 through June 30, 2019 (“2017/2019 Treaty”). The treaty in effect for the six months ended June 30, 2019 was covered under the July 1, 2018 through June 30, 2019 treaty year (“2018/2019 Treaty Year”) and the treaty in effect for the six months ended June 30, 2018 was covered under the July 1, 2017 through June 30, 2018 treaty year (“2017/2018 Treaty Year”). In August 2018, the Company terminated its contract with one of the reinsurers that was a party to the 2017/2019 Treaty. This termination was retroactive to July 1, 2018 and had the effect of reducing the quota share ceding rate to 10% under the 2018/2019 Treaty Year from 20% under the 2017/2018 Treaty Year. Effective July 1, 2019, the 2017/2019 Treaty and commercial umbrella treaty expired on a run-off basis; these treaties were not renewed. The Company entered into new excess of loss and catastrophe reinsurance treaties effective July 1, 2019. Material terms for reinsurance treaties in effect for the treaty years shown below are as follows: Treaty Year July 1, 2019 July 1, 2018 July 1, 2017 to to to Line of Business June 30, 2020 June 30, 2019 June 30, 2018 Personal Lines: Homeowners, dwelling fire and canine legal liability Quota share treaty: Percent ceded None 10% 20% Risk retained $ 1,000,000 $ 900,000 $ 800,000 Losses per occurrence subject to quota share reinsurance coverage None $ 1,000,000 $ 1,000,000 Excess of loss coverage and facultative facility above quota share coverage (1) $ 10,000,000 $ 9,000,000 $ 9,000,000 in excess of in excess of $ 1,000,000 $ 1,000,000 Total reinsurance coverage per occurrence $ 9,000,000 $ 9,100,000 $ 9,200,000 Losses per occurrence subject to reinsurance coverage $ 10,000,000 $ 10,000,000 $ 10,000,000 Expiration date June 30, 2020 June 30, 2019 June 30, 2019 Personal Umbrella Quota share treaty: Percent ceded - first $1,000,000 of coverage 90% 90% 90% Percent ceded - excess of $1,000,000 dollars of coverage 100% 100% 100% Risk retained $ 100,000 $ 100,000 $ 100,000 Total reinsurance coverage per occurrence $ 4,900,000 $ 4,900,000 $ 4,900,000 Losses per occurrence subject to quota share reinsurance coverage $ 5,000,000 $ 5,000,000 $ 5,000,000 Expiration date June 30, 2020 June 30, 2019 June 30, 2018 Commercial Lines: General liability commercial policies Quota share treaty None None None Risk retained $ 750,000 $ 750,000 $ 750,000 Excess of loss coverage above risk retained $ 3,750,000 $ 3,750,000 $ 3,750,000 in excess of in excess of in excess of $ 750,000 $ 750,000 $ 750,000 Total reinsurance coverage per occurrence $ 3,750,000 $ 3,750,000 $ 3,750,000 Losses per occurrence subject to reinsurance coverage $ 4,500,000 $ 4,500,000 $ 4,500,000 Commercial Umbrella Quota share treaty: None Percent ceded - first $1,000,000 of coverage 90% 90% Percent ceded - excess of $1,000,000 of coverage 100% 100% Risk retained $ 100,000 $ 100,000 Total reinsurance coverage per occurrence $ 4,900,000 $ 4,900,000 Losses per occurrence subject to quota share reinsurance coverage $ 5,000,000 $ 5,000,000 Expiration date June 30, 2019 June 30, 2018 Catastrophe Reinsurance: Initial loss subject to personal lines quota share treaty None $ 5,000,000 $ 5,000,000 Risk retained per catastrophe occurrence (2) $ 7,500,000 $ 4,500,000 $ 4,000,000 Catastrophe loss coverage in excess of quota share coverage (3) $ 602,500,000 $ 445,000,000 $ 315,000,000 Reinstatement premium protection (4) (5) (6) 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 $10,000,000 in total insured value, which covers direct losses from $3,500,000 to $10,000,000. (2) Plus losses in excess of catastrophe coverage. (3) Catastrophe coverage is limited on an annual basis to two times the per occurrence amounts. Duration of 168 consecutive hours for a catastrophe occurrence from windstorm, hail, tornado, hurricane and cyclone. (4) Effective July 1, 2017, reinstatement premium protection for $145,000,000 of catastrophe coverage in excess of $5,000,000. (5) Effective July 1, 2018, reinstatement premium protection for $210,000,000 of catastrophe coverage in excess of $5,000,000. (6) Effective July 1, 2019, reinstatement premium protection for $292,500,000 of catastrophe coverage in excess of $7,500,000. The single maximum risks per occurrence to which the Company is subject under the treaties effective July 1, 2018 and 2017 are as follows: July 1, 2018 - June 30, 2019 July 1, 2017 - June 30, 2018 Treaty Range of Loss Risk Retained Range of Loss Risk Retained Personal Lines (1) Initial $1,000,000 $900,000 Initial $1,000,000 $800,000 $1,000,000 - $10,000,000 None(2) $1,000,000 - $10,000,000 None(2) Over $10,000,000 100% Over $10,000,000 100% Personal Umbrella Initial $1,000,000 $100,000 Initial $1,000,000 $100,000 $1,000,000 - $5,000,000 None $1,000,000 - $5,000,000 None Over $5,000,000 100% Over $5,000,000 100% Commercial Lines Initial $750,000 $750,000 Initial $750,000 $750,000 $750,000 - $4,500,000 None(3) $750,000 - $4,500,000 None(3) Over $4,500,000 100% Over $4,500,000 100% Commercial Umbrella Initial $1,000,000 $100,000 Initial $1,000,000 $100,000 $1,000,000 - $5,000,000 None $1,000,000 - $5,000,000 None Over $5,000,000 100% Over $5,000,000 100% Catastrophe (4) Initial $5,000,000 $4,500,000 Initial $5,000,000 $4,000,000 $5,000,000 - $450,000,000 None $5,000,000 - $320,000,000 None Over $450,000,000 100% Over $320,000,000 100% (1) Treaty for July 1, 2017 – June 30, 2018 and July 1, 2018 – June 30, 2019 is a two-year treaty with expiration date of June 30, 2019. (2) Covered by excess of loss treaties up to $3,500,000 and by facultative facility from $3,500,000 to $10,000,000. (3) Covered by excess of loss treaties. (4) Catastrophe coverage is limited on an annual basis to two times the per occurrence amounts. The single maximum risks per occurrence to which the Company is subject under the treaty year shown below are as follows: July 1, 2019 - June 30, 2020 Treaty Range of Loss Risk Retained Personal Lines (1) Initial $1,000,000 $1,000,000 $1,000,000 - $10,000,000 None(2) Over $10,000,000 100% Personal Umbrella Initial $1,000,000 $100,000 $1,000,000 - $5,000,000 None Over $5,000,000 100% Commercial Lines Initial $750,000 $750,000 $750,000 - $4,500,000 None(3) Over $4,500,000 100% Commercial Umbrella Initial $1,000,000 $100,000 $1,000,000 - $5,000,000 None Over $5,000,000 100% Catastrophe (4) Initial $7,500,000 $7,500,000 $7,500,000 - $610,000,000 None Over $610,000,000 100% (1) Personal lines quota share treaty was eliminated effective July 1, 2019. The 2017/2019 Treaty expired on a run-off basis. (2) Covered by excess of loss treaties up to $3,500,000 and by facultative facility from $3,500,000 to $10,000,000. (3) Covered by excess of loss treaties. (4) Catastrophe coverage is limited on an annual basis to two times the per occurrence amounts. The Company’s reinsurance program is structured to enable the Company to significantly grow its premium volume while maintaining regulatory capital and other financial ratios generally within or below the expected ranges used for regulatory oversight purposes. The reinsurance program also provides income as a result of ceding commissions earned pursuant to the quota share reinsurance contracts. The Company’s participation in reinsurance arrangements does not relieve the Company of its obligations to policyholders. Ceding Commission Revenue The Company earns ceding commission revenue under its quota share reinsurance agreements based on: (i) a fixed provisional commission rate at which provisional ceding commissions are earned, and (ii) a sliding scale of commission rates and ultimate treaty year loss ratios on the policies reinsured under each of these agreements based upon which contingent ceding commissions are earned. The sliding scale includes minimum and maximum commission rates in relation to specified ultimate loss ratios. The commission rate and contingent ceding commissions earned increases when the estimated ultimate loss ratio decreases and, conversely, the commission rate and contingent ceding commissions earned decreases when the estimated ultimate loss ratio increases. The Company’s estimated ultimate treaty year loss ratios (the “Loss Ratio(s)”) for treaties in effect for the three months and six months ended June 30, 2019 are attributable to contracts under the 2017/2019 Treaty for the 2018/2019 Treaty Year. The Loss Ratios for treaties in effect for the three months and six months ended June 30, 2018 are attributable to contracts under the 2017/2019 Treaty for the 2017/2018 Treaty Year. Treaty in effect for the three months and six months ended June 30, 2019 Under the 2017/2019 Treaty, the Company received an upfront fixed provisional rate that was only subject to a sliding scale contingent adjustment based upon Loss Ratio for the 2017/2018 Treaty Year (“Loss Period”). Under this arrangement, the Company earned provisional ceding commissions that are subject to later adjustment dependent on changes to the estimated Loss Period Loss Ratio for the 2017/2019 Treaty. The Company’s Loss Period Loss Ratios attributable to the 2017/2019 Treaty reached the maximum contractual level during the six months ended June 30, 2018, and therefore no contingent commission adjustment was recorded for the three months and six months ended June 30, 2019. Treaty in effect for the three months and six months ended June 30, 2018 The Loss Ratios for the period July 1, 2017 through June 30, 2018 attributable to the 2017/2019 Treaty were higher than the contractual Loss Ratio at which provisional ceding commissions were earned. Accordingly, for the three months and six months ended June 30, 2018, the Company incurred negative contingent ceding commissions as a result of the estimated Loss Ratio for the 2017/2019 Treaty, which reduced contingent ceding commissions earned. In addition to the treaties that were in effect for the three months and six months ended June 30, 2019 and 2018, the Loss Ratios from prior years’ treaties are subject to change as incurred losses from those periods increase or decrease, resulting in an increase or decrease in the commission rate and contingent ceding commissions earned. Ceding commission revenue consists of the following: Three months ended Six months ended June 30, June 30, 2019 2018 2019 2018 Provisional ceding commissions earned $ 1,363,474 $ 2,145,775 $ 2,681,225 $ 4,213,280 Contingent ceding commissions earned (687,779 ) (454,607 ) (727,847 ) (826,954 ) $ 675,695 $ 1,691,168 $ 1,953,378 $ 3,386,326 Provisional ceding commissions are settled monthly. Balances due from reinsurers for contingent ceding commissions on quota share treaties are settled annually based on the Loss Ratio of each treaty year that ends on June 30. As discussed above, the Loss Ratios from prior years’ treaties are subject to change as incurred losses from those periods develop, resulting in an increase or decrease in the commission rate and contingent ceding commissions earned. As of June 30, 2019 and December 31, 2018, net contingent ceding commissions payable to reinsurers under all treaties was approximately $2,333,000 and $1,581,000, respectively, which is recorded in reinsurance balances payable on the accompanying condensed consolidated balance sheets. Commercial Lines of Business In July 2019, the Company made the decision that it will no longer underwrite Commercial Lines risks. These include Business Owners, Artisans (“CraftPak”), Special Multi-Peril, and Commercial Umbrella policies. The Company had 7,770 commercial lines policies in force as of June 30, 2019. For the six months ended June 30, 2019, these policies represented approximately 12% of net premiums earned. As of June 30, 2019, claims from these commercial lines represent 43% of loss and loss adjustment expense reserves net of reinsurance recoverables. Inforce policies for these lines will be non-renewed at the end of their current annual terms. It is expected that all existing inforce Commercial Lines policies will expire by September 30, 2020. |
7. Debt
7. Debt | 6 Months Ended |
Jun. 30, 2019 | |
Debt Disclosure [Abstract] | |
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”). The aggregate investment in dividend bearing common stock was $15,180 as of June 30, 2019. FHLBNY members have access to a variety of flexible, low 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. The maximum allowable advance as of March 31, 2019 was approximately $4,819,000. Advances are limited to 90% of the amount of available collateral, which was approximately $5,354,000 as of June 30, 2019. There were no borrowings under this facility during the six months ended June 30, 2019. Long-term Debt On December 19, 2017, the Company issued $30 million of its 5.50% Senior Unsecured Notes due December 30, 2022 (the “Notes”) in an underwritten public offering. Interest is payable semi-annually in arrears on June 30 and December 30 of each year, which began on June 30, 2018 at the rate of 5.50%. The net proceeds of the issuance were $29,121,630, net of discount of $163,200 and transaction costs of $715,170, for an effective yield of 5.67%. The balance of long-term debt as of June 30, 2019 and December 31, 2018 is as follows: June 30, December 31, 2019 2018 5.50% Senior Unsecured Notes $ 30,000,000 $ 30,000,000 Discount (113,575 ) (129,796 ) Issuance costs (503,084 ) (574,953 ) Long-term debt, net $ 29,383,341 $ 29,295,251 The Notes are unsecured obligations of the Company and are not the obligations of or guaranteed by any of the Company's subsidiaries. The Notes rank senior in right of payment to any of the Company's existing and future indebtedness that is by its terms expressly subordinated or junior in right of payment to the Notes. The Notes rank equally in right of payment to all of the Company's existing and future senior indebtedness, but will be effectively subordinated to any secured indebtedness to the extent of the value of the collateral securing such secured indebtedness. In addition, the Notes will be structurally subordinated to the indebtedness and other obligations of the Company's subsidiaries. The Company may redeem the Notes, at any time in whole or from time to time in part, at the redemption price equal to the greater of: (i) 100% of the principal amount of the Notes to be redeemed; and (ii) the sum of the present values of the remaining scheduled payments of principal and interest on the Notes to be redeemed that would be due if the Notes matured on the applicable redemption date (exclusive of interest accrued to the applicable redemption date) discounted to the redemption date on a semi-annual basis at the Treasury Rate, plus 50 basis points. On December 20, 2017, the Company used $25,000,000 of the net proceeds from the offering to contribute capital to KICO, to support additional growth. The remainder of the net proceeds are being used for general corporate purposes. A registration statement relating to the debt issued in the offering was filed with the SEC, which became effective on November 28, 2017. |
8. Stockholders' Equity
8. Stockholders' Equity | 6 Months Ended |
Jun. 30, 2019 | |
Stockholders' Equity | |
8. Stockholders' Equity | Dividends Declared and Paid Dividends declared and paid on common stock were $2,153,349 and $2,134,759 for the six months ended June 30, 2019 and 2018, respectively. The Company’s Board of Directors approved a quarterly dividend on August 7, 2019 of $0.0625 per share payable in cash on September 13, 2019 to stockholders of record as of August 30, 2019 (see Note 13). Stock Options Pursuant to the Company’s 2005 Equity Participation Plan (the “2005 Plan”), which provides for the issuance of incentive stock options, non-statutory stock options and restricted stock, a maximum of 700,000 shares of the Company’s Common Stock are permitted to be issued pursuant to options granted and restricted stock issued. Effective August 12, 2014, the Company adopted the 2014 Equity Participation Plan (the “2014 Plan”) pursuant to which, a maximum of 700,000 shares of Common Stock of the Company are authorized to be issued pursuant to the grant of incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock and stock bonuses. Incentive stock options granted under the 2014 Plan and 2005 Plan expire no later than ten years from the date of grant (except no later than five years for a grant to a 10% stockholder). The Board of Directors or the Compensation Committee determines the expiration date with respect to non-statutory stock options and the vesting provisions for restricted stock granted under the 2014 Plan and 2005 Plan. The results of operations for the three months ended June 30, 2019 and 2018 include stock-based compensation expense related to these plans totaling approximately $0 and $1,000, respectively. The results of operations for the six months ended June 30, 2019 and 2018 include stock-based compensation expense related to stock options totaling approximately $1,000 and $4,000, respectively. Stock-based compensation expense related to stock options is net of estimated forfeitures of approximately 17% for the three months and six months ended June 30, 2019 and 2018. Such amounts have been included in the consolidated statements of operations and comprehensive income (loss) within other operating expenses. Stock-based compensation expense for the six months ended June 30, 2019 and 2018 is the estimated fair value of options granted, amortized on a straight-line basis over the requisite service period, for the entire portion of the award less an estimate for anticipated forfeitures. The Company uses the “simplified” method to estimate the expected term of the options because the Company’s historical share option exercise experience does not provide a reasonable basis upon which to estimate expected term. No options were granted during the six months ended June 30, 2019 and 2018. The Black-Scholes Option Valuation Model was developed for use in estimating the fair value of traded options, which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility. Because our stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management's opinion, the existing models do not necessarily provide a reliable single measure of the fair value of our stock options. A summary of stock option activity under the Company’s 2014 Plan and 2005 Plan for the six months ended June 30, 2019 is as follows: Stock Options Number of Shares Weighted Average Exercise Price per Share Weighted Average Remaining Contractual Term Aggregate Intrinsic Value Outstanding at January 1, 2019 37,500 $ 8.36 2.24 $ 349,950 Granted - $ - - $ - Exercised (3,000 ) $ 7.85 - $ 6,270 Forfeited (2,500 ) $ 7.85 2.04 $ 13,588 Outstanding at June 30, 2019 32,000 $ 8.45 1.76 $ 13,600 Vested and Exercisable at June 30, 2019 32,000 $ 8.45 1.76 $ 13,600 The aggregate intrinsic value of options outstanding and options exercisable at June 30, 2019 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 $8.65 closing price of the Company’s Common Stock on June 30, 2019. The total intrinsic value of options exercised during the six months ended June 30, 2019 was $6,270, determined as of the date of exercise. The total intrinsic value of options forfeited during the six months ended June 30, 2019 was $13,588, determined as of the date of forfeiture. Participants in the 2005 and 2014 Plans may exercise their outstanding vested options, in whole or in part, by having the Company reduce the number of shares otherwise issuable by a number of shares having a fair market value equal to the exercise price of the option being exercised (“Net Exercise”), 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”). The Company received cash proceeds of $23,550 from the exercise of options for the purchase of 3,000 shares of Common Stock during the six months ended June 30, 2019. The Company received cash proceeds of $46,883 from the exercise of options for the purchase of 7,400 shares of Common Stock during the six months ended June 30, 2018. The Company received 4,860 shares from the exercise of options under a Share Exchange for the purchase of 20,000 shares of Common Stock during the six months ended June 30, 2018. The remaining 66,500 options exercised during the six months ended June 30, 2018 were Net Exercises, resulting in the issuance of 30,126 shares of Common Stock. As of June 30, 2019, there were no unamortized compensation costs related to unvested stock option awards. As of June 30, 2019, there were 427,476 shares reserved for grants under the 2014 Plan. Restricted Stock Awards A summary of the restricted common stock activity under the Company’s 2014 Plan for the six months ended June 30, 2019 is as follows: Restricted Stock Awards Shares Weighted Average Grant Date Fair Value per Share Aggregate Fair Value Balance at January 1, 2019 120,499 $ 17.66 $ 2,129,175 Granted 120,586 $ 15.51 $ 1,870,487 Vested (28,168 ) $ 18.23 $ (513,446 ) Forfeited (5,962 ) $ 15.18 $ (90,510 ) Balance at June 30, 2019 206,955 $ 16.39 $ 3,395,706 Fair value was calculated using the closing price of the Company’s Common Stock on the grant date. For the three months ended June 30, 2019 and 2018, stock-based compensation for these grants was approximately $399,000 and $175,000, respectively, which is included in other operating expenses on the accompanying consolidated statements of operations and comprehensive loss. For the six months ended June 30, 2019 and 2018, stock-based compensation for these grants of approximately $708,000 and $281,000, respectively, for these grants is included in other operating expenses in the condensed consolidated statements of income and comprehensive income (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. |
9. Income Taxes
9. Income Taxes | 6 Months Ended |
Jun. 30, 2019 | |
Income Tax Disclosure [Abstract] | |
9. Income Taxes | The Company files a consolidated U.S. federal income tax return that includes all wholly owned subsidiaries. State tax returns are filed on a consolidated or separate return basis depending on applicable laws. The Company records adjustments related to prior years’ taxes during the period when they are identified, generally when the tax returns are filed. The effect of these adjustments on the current and prior periods (during which the differences originated) is evaluated based upon quantitative and qualitative factors and are considered in relation to the consolidated financial statements taken as a whole for the respective periods. 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. Significant components of the Company’s deferred tax assets and liabilities are as follows: June 30, December 31, 2019 2018 Deferred tax asset: Net operating loss carryovers (1) $ 2,029,412 $ 90,438 Claims reserve discount 455,200 343,905 Unearned premium 3,445,635 3,145,682 Deferred ceding commission revenue 651,033 564,202 Other 141,163 383,733 Total deferred tax assets 6,722,443 4,527,960 Deferred tax liability: Investment in KICO (2) 759,543 759,543 Deferred acquisition costs 4,076,900 3,760,625 Intangibles 105,000 140,700 Depreciation and amortization 557,084 664,194 Net unrealized gains (losses) of securities - available for sale 1,007,442 (1,151,335 ) Total deferred tax liabilities 6,505,969 4,173,727 Net deferred income tax asset $ 216,474 $ 354,233 (1) The deferred tax assets from net operating loss carryovers (“NOL”) are as follows: June 30, December 31, Type of NOL 2019 2018 Expiration Federal only, current year $ 1,959,030 $ - None Amount subject to Annual Limitation, federal only - 2,100 December 31, 2019 Total federal only 1,959,030 2,100 State only (A) 1,504,514 1,305,365 December 31, 2039 Valuation allowance (1,434,132 ) (1,217,027 ) State only, net of valuation allowance 70,382 88,338 Total deferred tax asset from net operating loss carryovers $ 2,029,412 $ 90,438 (A) Kingstone generates operating losses for state purposes and has prior year NOLs available. The state NOL as of June 30, 2019 and December 31, 2018 was approximately $23,146,000 and $20,083,000, respectively. KICO 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) within other underwriting expenses. A valuation allowance has been recorded due to the uncertainty of generating enough state taxable income to utilize 100% of the available state NOLs over their remaining lives, which expire between 2027 and 2039. (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 six months ended June 30, 2019 and 2018. 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, 2015 through December 31, 2018 remain subject to examination. The Company’s federal income tax return for the year ended December 31, 2016 has been examined by the Internal Revenue Service and was accepted as filed. |
10. Earnings_(Loss) Per Common
10. Earnings/(Loss) Per Common Share | 6 Months Ended |
Jun. 30, 2019 | |
Earnings (loss) per common share: | |
10. Earnings/(Loss) Per Common Share | Basic net earnings/(loss) per common share is computed by dividing income/(loss) available to common shareholders by the weighted-average number of common shares outstanding. Diluted earnings/(loss) per common share reflect, in periods in which they have a dilutive effect, the impact of common shares issuable upon exercise of stock options as well as non-vested restricted stock awards. The computation of diluted earnings/(loss) per common share excludes those options with an exercise price in excess of the average market price of the Company’s common shares during the periods presented. The computation of diluted earnings/(loss) per common share excludes outstanding options in periods where the exercise of such options would be anti-dilutive. For the six months ended June 30, 2019 and 2018, no options were included in the computation of diluted earnings/(loss) per common share would have been anti-dilutive for the relevant periods and, as a result, the weighted average number of common shares used in the calculation of diluted earnings per common share has not been adjusted for the effect of such options. The reconciliation of the weighted average number of common shares used in the calculation of basic and diluted earnings/(loss) per common share follows: Three months ended Six months ended June 30, June 30, 2019 2018 2019 2018 Weighted average number of shares outstanding 10,771,717 10,664,806 10,764,824 10,667,385 Effect of dilutive securities, common share equivalents Stock options 4,188 148,885 - 154,322 Restricted stock awards 9,159 6,631 - 6,313 Weighted average number of shares outstanding, used for computing diluted earnings per share 10,785,064 10,820,322 10,764,824 10,828,020 |
11. Commitments and Contingenci
11. Commitments and Contingencies | 6 Months Ended |
Jun. 30, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
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. On June 12, 2019, Phillip Woolgar filed a suit naming the Company and certain present or former officers and directors as defendants in a putative class action captioned Woolgar v. Kingstone Companies et al. 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. In addition to the base rental costs, occupancy lease agreements generally provide for rent escalations resulting from increased assessments from real estate taxes and other charges. This lease is accounted for as an operating lease, whereby lease expense is recognized on a straight-line basis over the term of the lease. Additional information regarding the Company’s office operating lease is as follows: Three months ended Six months ended Lease cost June 30, 2019 June 30, 2019 Operating lease $ 41,342 $ 82,684 Short-term leases - - Total lease cost (1) $ 41,342 $ 82,684 Other information on operating lease Cash payments included in the measurement of lease liability reported in operating cash flows $ 42,827 $ 84,206 Discount rate 5.50 % 5.50 % Remaining lease term in years 5 years 5 years (1) Included in the condensed consolidated statements of operations and comprehensive income (loss) within other underwriting expenses. The following table presents the contractual maturities of the Company’s lease liabilities as of June 30, 2019: For the Year Ending December 31, Total Remainder of 2019 $ 85,655 2020 175,806 2021 181,959 2022 188,328 2023 194,919 Thereafter 49,145 Total undiscounted lease payments 875,812 Less: present value adjustment 116,947 Operating lease liability $ 758,865 Rent expense for the three months ended June 30, 2019 and 2018 amounted to $41,342 for each period. Rent expense for the six months ended June 30, 2019 and 2018 amounted to $82,684 for each period. Rent expense is included in the condensed consolidated statements of operations and comprehensive income (loss) within other underwriting expenses. See Note 13 Subsequent Events for additional office lease. Employment Agreements See Note 13 Subsequent Events for change in executive employment agreement. |
12. Deferred Compensation Plan
12. Deferred Compensation Plan | 6 Months Ended |
Jun. 30, 2019 | |
Deferred Compensation Plan | |
12. Deferred Compensation Plan | On June 18, 2018, the Company adopted the Kingstone Companies, Inc. Deferred Compensation Plan (the "Deferred Compensation Plan"). The Deferred Compensation Plan is offered to a select group (“Participants”), consisting of management and highly compensated employees as a method of recognizing and retaining such Participants. The Deferred Compensation Plan provides for eligible Participants to elect to defer up to 75% of their base compensation and up to 100% of bonuses and other compensation and to have such deferred amounts deemed to be invested in specified investment options. In addition to the Participant deferrals, the Company may choose to make matching contributions to some or all of the Participants in the Deferred Compensation Plan to the extent the Participant did not receive the maximum matching or non-elective contributions permissible under the Company’s 401(k) Plan due to limitations under the Internal Revenue Code or the 401(k) Plan. Participants may elect to receive payment of their account balances in a single cash payment or in annual installments for a period of up to ten years. The first payroll subject to the Deferred Compensation Plan was in July 2018. The deferred compensation liability as of June 30, 2019 and December 31, 2018 amounted to $486,961 and $298,638, respectively and is recorded in accounts payable, accrued expenses and other liabilities in the consolidated balance sheets. The Company did not make any voluntary contributions for the six months ended June 30, 2019. |
13. Subsequent Events
13. Subsequent Events | 6 Months Ended |
Jun. 30, 2019 | |
Subsequent Events [Abstract] | |
13. Subsequent Events | The Company has evaluated events that occurred subsequent to June 30, 2019 through the date these condensed consolidated financial statements were issued for matters that required disclosure or adjustment in these condensed consolidated financial statements. Reinsurance KICO eliminated its personal lines and commercial umbrella quota share treaties, and entered into new annual excess of loss and catastrophe reinsurance treaties effective July 1, 2019 (see Note 6, Property and Casualty Insurance Activity – Reinsurance). Office Lease On July 8, 2019, the Company entered into a lease agreement for an additional office facility for Cosi located in Valley Stream, NY under a non-cancelable operating lease. In addition to the base rental costs, occupancy lease agreements generally provide for rent escalations resulting from increased assessments from real estate taxes and other charges. The lease commencement date will be determined upon the completion of landlord provided construction, which the Company expects to be on or about October 1, 2019. The lease has a term of seven years and two months. This lease will be accounted for as an operating lease, 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 following table presents the contractual maturities of the Company’s lease liabilities under this lease: For the Year Ending December 31, Total Remainder of 2019 $ 6,652 2020 80,517 2021 83,335 2022 86,252 2023 89,270 Thereafter 261,610 Total undiscounted lease payments 607,636 Less: present value adjustment 104,112 Operating lease liability $ 503,524 Employment Agreements Dale A. Thatcher, Chief Executive Officer and President of the Company and KICO, retired and resigned his positions effective July 19, 2019 (the “Separation Date”). At such time, he also resigned his positions on the Board of Directors of each of the Company and KICO. Effective upon Mr. Thatcher’s separation from employment, the Board appointed Barry B. Goldstein, Former Chief Executive Officer and Executive Chairman of the Board of Directors to the position of Chief Executive Officer and President of each of the Company and KICO. Mr. Goldstein previously served as Chief Executive Officer and President of the Company from March 2001 through December 31, 2018, and as Chief Executive Officer and President of KICO from January 2012 through December 31, 2018. In connection with his separation from employment, each of the Company and KICO entered into an Agreement and General Release (the “Separation Agreement”) with Mr. Thatcher. Pursuant to the Separation Agreement, the Company and KICO shall collectively provide the following payments and benefits to Mr. Thatcher in full satisfaction of all payments and benefits and other amounts due to him under the terms of the existing employment agreements upon his separation from employment: (i) an amount equal to $381,111 (representing the amount of base salary he would have received had he remained employed through March 31, 2020), (ii) an amount equal to $5,000 in full satisfaction for any bonus payments payable under the existing employment agreements, (iii) continuing group health coverage commencing on the Separation Date and ending on March 31, 2020, and (iv) continued vesting of all previously granted but unvested stock awards as of the Separation Date (Mr. Thatcher shall not be entitled to any further grants of stock awards after the Separation Date). In addition, the Company and KICO agreed to provide Mr. Thatcher with a severance payment of $20,000 in consideration for a release. As required by the employment agreements, Mr. Thatcher covenanted that, for a period of three years following the Separation Date, he shall not accept any operating executive role with another property and casualty insurance company. Commercial Lines of Business On July 23, 2019, the Company made the decision that it will no longer underwrite Commercial Lines risks (see Note 6 Property and Casualty Insurance Activity – Commercial Lines of Business). Dividends Declared On August 7, 2019, the Company’s Board of Directors approved a quarterly dividend of $0.0625 per share payable in cash on September 13, 2019 to stockholders of record as of the close of business on August 30, 2019 (see Note 8). |
2. Accounting Policies (Policie
2. Accounting Policies (Policies) | 6 Months Ended |
Jun. 30, 2019 | |
Accounting Policies [Abstract] | |
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 loss adjustment expenses, and are subject to estimation errors due to the inherent uncertainty in projecting ultimate claim amounts that will be reported and settled over a period of many years. In addition, estimates and assumptions associated with receivables under reinsurance contracts related to contingent ceding commission revenue require judgments by management. On an on-going basis, management reevaluates its assumptions and the methods for calculating these estimates. Actual results may differ significantly from the estimates and assumptions used in preparing the consolidated financial statements. |
Principles of Consolidation | The condensed consolidated financial statements consist of Kingstone and its wholly owned subsidiaries, as well as KICO and its wholly owned subsidiaries, CMIC Properties, Inc. (“Properties”) and 15 Joys Lane, LLC (“15 Joys Lane”), which together own the land and building from which KICO operates. All significant inter-company account balances and transactions have been eliminated in consolidation. |
Accounting Changes | In August 2018, the SEC adopted the final rule under SEC Release No. 33-10532, “Disclosure Update and Simplification,” amending certain disclosure requirements that were redundant, duplicative, overlapping, outdated or superseded. In addition, the amendments expanded the disclosure requirements on the analysis of stockholders' equity for interim financial statements. Under the amendments, an analysis of changes in each caption of stockholders' equity presented in the balance sheet must be provided in a note or separate statement. The analysis should present a reconciliation of the beginning balance to the ending balance of each period for which a statement of comprehensive income is required to be filed. This final rule was effective on November 5, 2018. The Company adopted the provisions of this Release effective January 1, 2019, and included the required presentation of changes in stockholders’ equity for the six months ended June 30, 2019 and 2018. In February 2016, the FASB issued ASU 2016-02 – Leases (Topic 842) (“ASU 2016-02”). Under this ASU, the Company recognized a right-of-use-asset and corresponding liability on the balance sheet for all leases, except for leases covering a period of fewer than 12 months. The liability has been measured at the present value of the future minimum lease payments taking into account renewal options if applicable plus initial incremental direct costs such as commissions. The minimum payments are discounted using the Company’s incremental borrowing rate. The Company adopted ASU 2016-02 effective January 1, 2019 using the cumulative effect adjustment transition method, which applies the provision of the standard at the effective date without adjusting the comparative periods presented. The adoption of the updated guidance resulted in the Company recognizing a right-of-use asset of $855,000 as part of other assets and a lease liability of $855,000 as part of accounts payable, accrued expenses and other liabilities in the condensed consolidated balance sheet. The right-of use-asset is amortized as rent expense on a straight line basis. The adoption of this ASU did not have a material effect on the Company's results of operations or liquidity. |
Accounting Pronouncements | In June 2016, FASB issued ASU 2016-13 - Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). The revised accounting guidance requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts and requires enhanced disclosures related to the significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an organization’s portfolio. In addition, ASU 2016-13 amends the accounting for credit losses of available-for-sale debt securities and purchased financial assets with credit deterioration. ASU 2016-13 will be effective for the Company on January 1, 2020. The Company is currently evaluating the effect the updated guidance will have on its consolidated financial statements. In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement The Company has determined that all other recently issued accounting pronouncements will not have a material impact on its consolidated financial position, results of operations and cash flows, or do not apply to its operations. |
3. Investments (Tables)
3. Investments (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Investments [Abstract] | |
Schedule of available for sale securities | June 30, 2019 Net Cost or Gross Gross Unrealized Losses Estimated Unrealized Amortized Unrealized Less than 12 More than 12 Fair Gains/ Categor Cost Gains Months Months Value (Losses Fixed-Maturity Securities: U.S. Treasury securities and obligations of U.S. government corporations and agencies $ 8,236,255 $ 142,388 $ - $ (1,557 ) $ 8,377,086 $ 140,831 Political subdivisions of States, Territories and Possessions 5,675,418 167,952 - (309 ) 5,843,061 167,643 Corporate and other bonds Industrial and miscellaneous 126,095,235 4,106,946 (14,450 ) (84,187 ) 130,103,544 4,008,309 Residential mortgage and other asset backed securities (1) 20,078,720 317,871 (8,750 ) (376,663 ) 20,011,178 (67,542 ) Total $ 160,085,628 $ 4,735,157 $ (23,200 ) $ (462,716 ) $ 164,334,869 $ 4,249,241 (1) In 2017, KICO 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). The eligible collateral would be pledged to FHLBNY if KICO draws an advance from the FHBLNY credit line. As of June 30, 2019, the estimated fair value of the eligible investments was approximately $5,354,000. KICO will retain all rights regarding all securities if pledged as collateral. As of June 30, 2019, there was no outstanding balance on the FHLBNY credit line. December 31, 2018 Net Cost or Gross Gross Unrealized Losses Estimated Unrealized Amortized Unrealized Less than 12 More than 12 Fair Gains/ Category Cost Gains Months Months Value (Losses) Fixed-Maturity Securities: U.S. Treasury securities and obligations of U.S. government corporations and agencies $ 8,222,050 $ 26,331 $ (28,000 ) $ - $ 8,220,381 $ (1,669 ) Political subdivisions of States, Territories and Possessions 6,339,540 50,903 (12,327 ) (36,508 ) 6,341,608 2,068 Corporate and other bonds Industrial and miscellaneous 119,078,698 123,740 (2,775,540 ) (676,605 ) 115,750,293 (3,328,405 ) Residential mortgage and other asset backed securities (1) 21,790,973 236,502 (231,229 ) (331,012 ) 21,465,234 (325,739 ) Total $ 155,431,261 $ 437,476 $ (3,047,096 ) $ (1,044,125 ) $ 151,777,516 $ (3,653,745 ) (1) In 2017, KICO placed certain residential mortgage backed securities as eligible collateral in a designated custodian account related to its membership in the FHLBNY (see Note 7). The eligible collateral would be pledged to FHLBNY if KICO draws an advance from the FHBLNY credit line. As of December 31, 2018, the estimated fair value of the eligible investments was approximately $5,116,000. KICO will retain all rights regarding all securities if pledged as collateral. As of December 31, 2018, there was no outstanding balance on the FHLBNY credit line. |
Schedule of equity securities | June 30, 2019 Gross Gross Estimated Categor Cost Gains Losses Fair Value Equity Securities: Preferred stocks $ 9,445,572 $ 175,517 $ (58,389 ) $ 9,562,700 Common stocks and exchange traded mutual funds 12,809,216 1,045,871 (678,837 ) 13,176,250 Total $ 22,254,788 $ 1,221,388 $ (737,226 ) $ 22,738,950 December 31, 2018 Gross Gross Estimated Categor Cost Gains Losses Fair Value Equity Securities: Preferred stocks $ 6,694,754 $ - $ (541,798 ) $ 6,152,956 Common stocks and exchange traded mutual funds 11,611,232 99,817 (1,291,389 ) 10,419,660 Total $ 18,305,986 $ 99,817 $ (1,833,187 ) $ 16,572,616 |
Schedule of available for sale securities by contractual maturity | June 30, 2019 December 31, 2018 Amortized Estimated Amortized Estimated Remaining Time to Maturit Cost Fair Value Cost Fair Value Less than one year $ 11,167,387 $ 11,188,535 $ 6,742,519 $ 6,738,014 One to five years 47,828,173 48,719,017 47,038,838 46,640,012 Five to ten years 79,000,901 82,414,899 76,884,505 74,290,076 More than 10 years 2,010,447 2,001,240 2,974,426 2,644,180 Residential mortgage and other asset backed securities 20,078,720 20,011,178 21,790,973 21,465,234 Total $ 160,085,628 $ 164,334,869 $ 155,431,261 $ 151,777,516 |
Schedule of other investments | June 30, 2019 December 31, 2018 Gross Estimated Gross Estimated Categor Cost Gains Fair Value Cost Losses Fair Value Other Investments: Hedge fund $ 1,999,381 $ 336,493 $ 2,335,874 $ 1,999,381 $ (144,156 ) $ 1,855,225 Total $ 1,999,381 $ 336,493 $ 2,335,874 $ 1,999,381 $ (144,156 ) $ 1,855,225 |
Schedule of held to maturity securities | June 30, 2019 Cost or Gross Gross Unrealized Losses Estimated Net Amortized Unrealized Less than 12 More than 12 Fair Unrealized Categor Cost Gains Months Months Value Gains Held-to-Maturity Securities: U.S. Treasury securities $ 729,528 $ 150,495 $ - $ - $ 880,023 $ 150,495 Political subdivisions of States, Territories and Possessions 998,715 51,025 - - 1,049,740 51,025 Corporate and other bonds Industrial and miscellaneous 2,096,377 90,357 - (2,425 ) 2,184,309 87,932 Total $ 3,824,620 $ 291,877 $ - $ (2,425 ) $ 4,114,072 $ 289,452 December 31, 2018 Cost or Gross Gross Unrealized Losses Estimated Net Amortized Unrealized Less than 12 More than 12 Fair Unrealized Categor Cost Gains Months Months Value Gains Held-to-Maturity Securities: U.S. Treasury securities $ 729,507 $ 147,532 $ (3,964 ) $ - $ 873,075 $ 143,568 Political subdivisions of States, Territories and Possessions 998,803 33,862 - - 1,032,665 33,862 Corporate and other bonds Industrial and miscellaneous 2,494,545 38,461 (1,425 ) (10,905 ) 2,520,676 26,131 Total $ 4,222,855 $ 219,855 $ (5,389 ) $ (10,905 ) $ 4,426,416 $ 203,561 |
Schedule of held to maturity securities by contractual maturity | June 30, 2019 December 31, 2018 Amortized Estimated Amortized Estimated Remaining Time to Maturit Cost Fair Value Cost Fair Value Less than one year $ - $ - $ - $ - One to five years $ 2,598,323 $ 2,705,549 2,996,685 3,036,531 Five to ten years $ 619,780 $ 654,484 619,663 635,846 More than 10 years $ 606,517 $ 754,039 606,507 754,039 Total $ 3,824,620 $ 4,114,072 $ 4,222,855 $ 4,426,416 |
Schedule of investment income | Three months ended Six months ended June 30, June 30, 2019 2018 2019 2018 Income: Fixed-maturity securities $ 1,474,341 $ 1,361,506 $ 3,001,211 $ 2,511,799 Equity securities 205,509 194,091 412,653 394,588 Cash and cash equivalents 172,680 42,582 213,081 115,841 Total 1,852,530 1,598,179 3,626,945 3,022,228 Expenses: Investment expenses 132,761 41,313 283,464 81,373 Net investment income $ 1,719,769 $ 1,556,866 $ 3,343,481 $ 2,940,855 |
Schedule of securities with realized gains and losses on investments | Three months ended Six months ended June 30, June 30, 2019 2018 2019 2018 Realized (Losses) Gains Fixed-maturity securities: Gross realized gains $ 4,942 $ (5,257 ) $ 10,944 $ 112,212 Gross realized losses (17,306 ) (148,258 ) (45,739 ) (483,227 ) (12,364 ) (153,515 ) (34,795 ) (371,015 ) Equity securities: Gross realized gains 90,427 104,692 41,688 315,250 Gross realized losses (27,638 ) (27,553 ) (5,962 ) (264,384 ) 62,789 77,139 35,726 50,866 Net realized gains (losses) 50,425 (76,376 ) 931 (320,149 ) Unrealized Gains (Losses) Equity securities: Gross gains 440,301 - 2,232,438 - Gross losses - (123,197 ) - (430,411 ) 440,301 (123,197 ) 2,232,438 (430,411 ) Other investments: Gross gains 187,929 92,840 480,649 120,700 Gross losses - - - - 187,929 92,840 480,649 120,700 Net unrealized gains (losses) 628,230 (30,357 ) 2,713,087 (309,711 ) Net gains (losses) on investments $ 678,655 $ (106,733 ) $ 2,714,018 $ (629,860 ) |
Schedule of securities with unrealized losses | June 30, 2019 Less than 12 months 12 months or more Total Estimated No. of Estimated No. of Estimated Fair Unrealized Positions Fair Unrealized Positions Fair Unrealized Categor Value Losses Held Value Losses Held Value Losses Fixed-Maturity Securities: U.S. Treasury securities and obligations of U.S. government corporations and agencies $ - $ - - $ 1,992,340 $ (1,557 ) 1 $ 1,992,340 $ (1,557 ) Political subdivisions of States, Territories and Possessions - - - 302,880 (309 ) 1 302,880 (309 ) Corporate and other bonds industrial and miscellaneous 1,959,040 (14,450 ) 4 11,608,094 (84,187 ) 18 13,567,134 (98,637 ) Residential mortgage and other asset backed securities 591,845 (8,750 ) 1 15,983,171 (376,663 ) 24 16,575,016 (385,413 ) Total fixed-maturity securities $ 2,550,885 $ (23,200 ) 5 $ 29,886,485 $ (462,716 ) 44 $ 32,437,370 $ (485,916 ) December 31, 2018 Less than 12 months 12 months or more Total Estimated No. of Estimated No. of Estimated Fair Unrealized Positions Fair Unrealized Positions Fair Unrealized Categor Value Losses Held Value Losses Held Value Losses Fixed-Maturity Securities: U.S. Treasury securities and obligations of U.S. government corporations and agencies $ 4,948,530 $ (28,000 ) 3 $ - $ - - $ 4,948,530 $ (28,000 ) Political subdivisions of States, Territories and Possessions 555,375 (12,327 ) 1 1,436,242 (36,508 ) 3 1,991,617 (48,835 ) Corporate and other bonds industrial and miscellaneous 81,004,459 (2,775,540 ) 97 13,424,888 (676,605 ) 24 94,429,347 (3,452,145 ) Residential mortgage and other asset backed securities 7,002,713 (231,229 ) 9 11,928,425 (331,012 ) 19 18,931,138 (562,241 ) Total fixed-maturity securities $ 93,511,077 $ (3,047,096 ) 110 $ 26,789,555 $ (1,044,125 ) 46 $ 120,300,632 $ (4,091,221 ) |
4. Fair Value Measurements (Tab
4. Fair Value Measurements (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Fair Value Disclosures [Abstract] | |
Schedule of fair value measurements | June 30, 2019 Level 1 Level 2 Level 3 Total Fixed-maturity securities available-for-sale U.S. Treasury securities and obligations of U.S. government corporations and agencies $ 8,377,086 $ - $ - $ 8,377,086 Political subdivisions of States, Territories and Possessions - 5,843,061 - 5,843,061 Corporate and other bonds industrial and miscellaneous 126,359,225 3,744,319 - 130,103,544 Residential mortgage backed securities - 20,011,178 - 20,011,178 Total fixed maturities 134,736,311 29,598,558 - 164,334,869 Equity securities 22,738,950 - - 22,738,950 Total investments $ 157,475,261 $ 29,598,558 $ - $ 187,073,819 December 31, 2018 Level 1 Level 2 Level 3 Total Fixed-maturity securities available-for-sale U.S. Treasury securities and obligations of U.S. government corporations and agencies $ 8,220,381 $ - $ - $ 8,220,381 Political subdivisions of States, Territories and Possessions - 6,341,608 - 6,341,608 Corporate and other bonds industrial and miscellaneous 112,076,270 3,674,023 - 115,750,293 Residential mortgage backed securities - 21,465,234 - 21,465,234 Total fixed maturities 120,296,651 31,480,865 - 151,777,516 Equity securities 16,572,616 - - 16,572,616 Total investments $ 136,869,267 $ 31,480,865 $ - $ 168,350,132 |
Schedule of hedge fund investments | Categor June 30, 2019 December 31, 2018 Other Investments: Hedge fund $ 2,335,874 $ 1,855,225 Total $ 2,335,874 $ 1,855,225 |
Fair value hierarchy of long-term debt | June 30, 2019 Level 1 Level 2 Level 3 Total Long-term debt Senior Notes due 2022 $ - $ 27,326,918 $ - $ 27,326,918 December 31, 2018 Level 1 Level 2 Level 3 Total Long-term debt Senior Notes due 2022 $ - $ 28,521,734 $ - $ 28,521,734 |
5. Fair Value of Financial In_2
5. Fair Value of Financial Instruments and Real Estate (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Fair Value Disclosures [Abstract] | |
Schedule of fair value of financial instruments | June 30, 2019 December 31, 2018 Carrying Estimated Carrying Estimated Value Fair Value Value Fair Value Fixed-maturity securities-held-to maturity $ 3,824,620 $ 4,114,072 $ 4,222,855 $ 4,426,416 Cash and cash equivalents $ 18,895,805 $ 18,895,805 $ 21,138,403 $ 21,138,403 Premiums receivable, net $ 14,958,200 $ 14,958,200 $ 13,961,599 $ 13,961,599 Reinsurance receivables, net $ 28,643,360 $ 28,643,360 $ 26,367,115 $ 26,367,115 Real estate, net of accumulated depreciation $ 2,307,072 $ 2,705,000 $ 2,300,827 $ 2,705,000 Reinsurance balances payable $ 2,806,903 $ 2,806,903 $ 1,933,376 $ 1,933,376 Long-term debt, net $ 29,383,341 $ 27,326,918 $ 29,295,251 $ 28,521,734 |
6. Property and Casualty Insu_2
6. Property and Casualty Insurance Activity (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Insurance [Abstract] | |
Schedule of earned premiums | Direct Assumed Ceded Net Six months ended June 30, 2019 Premiums written $ 82,309,827 $ 77 $ (15,327,796 ) $ 66,982,108 Change in unearned premiums (6,456,216 ) 202 271,074 (6,184,940 ) Premiums earned $ 75,853,611 $ 279 $ (15,056,722 ) $ 60,797,168 Six months ended June 30, 2018 Premiums written $ 68,389,960 $ 824 $ (16,725,724 ) $ 51,665,060 Change in unearned premiums (5,495,329 ) 3,064 769,436 $ (4,722,829 ) Premiums earned $ 62,894,631 $ 3,888 $ (15,956,288 ) $ 46,942,231 Three months ended June 30, 2019 Premiums written $ 44,821,279 $ 111 $ (8,199,887 ) $ 36,621,503 Change in unearned premiums (5,828,149 ) 7 407,918 (5,420,224 ) Premiums earned $ 38,993,130 $ 118 $ (7,791,969 ) $ 31,201,279 Three months ended June 30, 2018 Premiums written $ 36,863,677 $ 488 $ (8,899,489 ) $ 27,964,676 Change in unearned premiums (4,486,460 ) 1,163 625,235 (3,860,062 ) Premiums earned $ 32,377,217 $ 1,651 $ (8,274,254 ) $ 24,104,614 |
Schedule of loss and loss adjustment expenses | Six months ended June 30, 2019 2018 Balance at beginning of period $ 56,197,106 $ 48,799,622 Less reinsurance recoverables (15,671,247 ) (16,748,908 ) Net balance, beginning of period 40,525,859 32,050,714 Incurred related to: Current year 40,689,147 28,215,069 Prior years 6,117,385 227,346 Total incurred 46,806,532 28,442,415 Paid related to: Current year 19,692,437 14,656,892 Prior years 13,999,258 10,977,023 Total paid 33,691,695 25,633,915 Net balance at end of period 53,640,696 34,859,214 Add reinsurance recoverables 16,034,424 14,398,642 Balance at end of period $ 69,675,120 $ 49,257,856 |
Allocated claim adjustment expenses | All Lines of Business (in thousands, except reported claims data) Incurred Loss and Allocated Loss Adjustment Expenses, Net of Reinsurance As of June 30, 2019 Six Months Ended Cumulative Number of Reported Claims by Accident For the Years Ended December 31, June 30, Accident Year 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 IBNR Year (Unaudited 2010 - 2018) (Unaudited) 2010 $ 5,598 $ 5,707 $ 6,429 $ 6,623 $ 6,912 $ 6,853 $ 6,838 $ 6,840 $ 6,787 $ 6,787 $ - 1,617 2011 7,603 7,678 8,618 9,440 9,198 9,066 9,144 9,171 9,181 37 1,914 2012 9,539 9,344 10,278 10,382 10,582 10,790 10,791 11,030 42 4,704 (1) 2013 10,728 9,745 9,424 9,621 10,061 10,089 10,464 67 1,561 2014 14,193 14,260 14,218 14,564 15,023 16,294 176 2,133 2015 22,340 21,994 22,148 22,491 23,133 123 2,555 2016 26,062 24,941 24,789 27,112 68 2,868 2017 31,605 32,169 33,895 895 3,364 2018 54,455 54,067 3,944 4,137 2019 38,622 13,451 1,865 Total $ 230,585 (1) Reported claims for accident year 2012 includes 3,406 claims from Superstorm Sandy. All Lines of Business (in thousands) Cumulative Paid Loss and Allocated Loss Adjustment Expenses, Net of Reinsurance Accident For the Years Ended December 31, Six Months Ended June 30, Year 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 (Unaudited 2010 - 2018) (Unaudited) 2010 $ 2,566 $ 3,947 $ 4,972 $ 5,602 $ 6,323 $ 6,576 $ 6,720 $ 6,772 $ 6,780 $ 6,780 2011 3,740 5,117 6,228 7,170 8,139 8,540 8,702 8,727 8,773 2012 3,950 5,770 7,127 8,196 9,187 10,236 10,323 10,420 2013 3,405 5,303 6,633 7,591 8,407 9,056 9,212 2014 5,710 9,429 10,738 11,770 13,819 14,031 2015 12,295 16,181 18,266 19,984 20,326 2016 15,364 19,001 21,106 21,910 2017 16,704 24,820 27,024 2018 32,383 41,894 2019 18,803 Total $ 179,173 Net liability for unpaid loss and allocated loss adjustment expenses for the accident years presented $ 51,412 All outstanding liabilities before 2010, net of reinsurance 107 Liabilities for loss and allocated loss adjustment expenses, net of reinsurance $ 51,519 |
Reconciliation of the net incurred and paid claims | As of (in thousands) June 30, 2019 Liabilities for loss and loss adjustment expenses, net of reinsurance $ 51,519 Total reinsurance recoverable on unpaid losses 16,034 Unallocated loss adjustment expenses 2,122 Total gross liability for loss and LAE reserves $ 69,675 |
Schedule of line of business | Treaty Year July 1, 2019 July 1, 2018 July 1, 2017 to to to Line of Business June 30, 2020 June 30, 2019 June 30, 2018 Personal Lines: Homeowners, dwelling fire and canine legal liability Quota share treaty: Percent ceded None 10% 20% Risk retained $ 1,000,000 $ 900,000 $ 800,000 Losses per occurrence subject to quota share reinsurance coverage None $ 1,000,000 $ 1,000,000 Excess of loss coverage and facultative facility above quota share coverage (1) $ 10,000,000 $ 9,000,000 $ 9,000,000 in excess of in excess of $ 1,000,000 $ 1,000,000 Total reinsurance coverage per occurrence $ 9,000,000 $ 9,100,000 $ 9,200,000 Losses per occurrence subject to reinsurance coverage $ 10,000,000 $ 10,000,000 $ 10,000,000 Expiration date June 30, 2020 June 30, 2019 June 30, 2019 Personal Umbrella Quota share treaty: Percent ceded - first $1,000,000 of coverage 90% 90% 90% Percent ceded - excess of $1,000,000 dollars of coverage 100% 100% 100% Risk retained $ 100,000 $ 100,000 $ 100,000 Total reinsurance coverage per occurrence $ 4,900,000 $ 4,900,000 $ 4,900,000 Losses per occurrence subject to quota share reinsurance coverage $ 5,000,000 $ 5,000,000 $ 5,000,000 Expiration date June 30, 2020 June 30, 2019 June 30, 2018 Commercial Lines: General liability commercial policies Quota share treaty None None None Risk retained $ 750,000 $ 750,000 $ 750,000 Excess of loss coverage above risk retained $ 3,750,000 $ 3,750,000 $ 3,750,000 in excess of in excess of in excess of $ 750,000 $ 750,000 $ 750,000 Total reinsurance coverage per occurrence $ 3,750,000 $ 3,750,000 $ 3,750,000 Losses per occurrence subject to reinsurance coverage $ 4,500,000 $ 4,500,000 $ 4,500,000 Commercial Umbrella Quota share treaty: None Percent ceded - first $1,000,000 of coverage 90% 90% Percent ceded - excess of $1,000,000 of coverage 100% 100% Risk retained $ 100,000 $ 100,000 Total reinsurance coverage per occurrence $ 4,900,000 $ 4,900,000 Losses per occurrence subject to quota share reinsurance coverage $ 5,000,000 $ 5,000,000 Expiration date June 30, 2019 June 30, 2018 Catastrophe Reinsurance: Initial loss subject to personal lines quota share treaty None $ 5,000,000 $ 5,000,000 Risk retained per catastrophe occurrence (2) $ 7,500,000 $ 4,500,000 $ 4,000,000 Catastrophe loss coverage in excess of quota share coverage (3) $ 602,500,000 $ 445,000,000 $ 315,000,000 Reinstatement premium protection (4) (5) (6) 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 $10,000,000 in total insured value, which covers direct losses from $3,500,000 to $10,000,000. (2) Plus losses in excess of catastrophe coverage. (3) Catastrophe coverage is limited on an annual basis to two times the per occurrence amounts. Duration of 168 consecutive hours for a catastrophe occurrence from windstorm, hail, tornado, hurricane and cyclone. (4) Effective July 1, 2017, reinstatement premium protection for $145,000,000 of catastrophe coverage in excess of $5,000,000. (5) Effective July 1, 2018, reinstatement premium protection for $210,000,000 of catastrophe coverage in excess of $5,000,000. (6) Effective July 1, 2019, reinstatement premium protection for $292,500,000 of catastrophe coverage in excess of $7,500,000. |
Schedule of single maximum risks under treaties | The single maximum risks per occurrence to which the Company is subject under the treaties effective July 1, 2018 and 2017 are as follows: July 1, 2018 - June 30, 2019 July 1, 2017 - June 30, 2018 Treaty Range of Loss Risk Retained Range of Loss Risk Retained Personal Lines (1) Initial $1,000,000 $900,000 Initial $1,000,000 $800,000 $1,000,000 - $10,000,000 None(2) $1,000,000 - $10,000,000 None(2) Over $10,000,000 100% Over $10,000,000 100% Personal Umbrella Initial $1,000,000 $100,000 Initial $1,000,000 $100,000 $1,000,000 - $5,000,000 None $1,000,000 - $5,000,000 None Over $5,000,000 100% Over $5,000,000 100% Commercial Lines Initial $750,000 $750,000 Initial $750,000 $750,000 $750,000 - $4,500,000 None(3) $750,000 - $4,500,000 None(3) Over $4,500,000 100% Over $4,500,000 100% Commercial Umbrella Initial $1,000,000 $100,000 Initial $1,000,000 $100,000 $1,000,000 - $5,000,000 None $1,000,000 - $5,000,000 None Over $5,000,000 100% Over $5,000,000 100% Catastrophe (4) Initial $5,000,000 $4,500,000 Initial $5,000,000 $4,000,000 $5,000,000 - $450,000,000 None $5,000,000 - $320,000,000 None Over $450,000,000 100% Over $320,000,000 100% (1) Treaty for July 1, 2017 – June 30, 2018 and July 1, 2018 – June 30, 2019 is a two-year treaty with expiration date of June 30, 2019. (2) Covered by excess of loss treaties up to $3,500,000 and by facultative facility from $3,500,000 to $10,000,000. (3) Covered by excess of loss treaties. (4) Catastrophe coverage is limited on an annual basis to two times the per occurrence amounts. The single maximum risks per occurrence to which the Company is subject under the treaty year shown below are as follows: July 1, 2019 - June 30, 2020 Treaty Range of Loss Risk Retained Personal Lines (1) Initial $1,000,000 $1,000,000 $1,000,000 - $10,000,000 None(2) Over $10,000,000 100% Personal Umbrella Initial $1,000,000 $100,000 $1,000,000 - $5,000,000 None Over $5,000,000 100% Commercial Lines Initial $750,000 $750,000 $750,000 - $4,500,000 None(3) Over $4,500,000 100% Commercial Umbrella Initial $1,000,000 $100,000 $1,000,000 - $5,000,000 None Over $5,000,000 100% Catastrophe (4) Initial $7,500,000 $7,500,000 $7,500,000 - $610,000,000 None Over $610,000,000 100% (1) Personal lines quota share treaty was eliminated effective July 1, 2019. The 2017/2019 Treaty expired on a run-off basis. (2) Covered by excess of loss treaties up to $3,500,000 and by facultative facility from $3,500,000 to $10,000,000. (3) Covered by excess of loss treaties. (4) Catastrophe coverage is limited on an annual basis to two times the per occurrence amounts. |
Schedule of ceding commission revenue | Three months ended Six months ended June 30, June 30, 2019 2018 2019 2018 Provisional ceding commissions earned $ 1,363,474 $ 2,145,775 $ 2,681,225 $ 4,213,280 Contingent ceding commissions earned (687,779 ) (454,607 ) (727,847 ) (826,954 ) $ 675,695 $ 1,691,168 $ 1,953,378 $ 3,386,326 |
7. Debt (Tables)
7. Debt (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Debt Disclosure [Abstract] | |
Schedule of debt | June 30, December 31, 2019 2018 5.50% Senior Unsecured Notes $ 30,000,000 $ 30,000,000 Discount (113,575 ) (129,796 ) Issuance costs (503,084 ) (574,953 ) Long-term debt, net $ 29,383,341 $ 29,295,251 |
8. Stockholders' Equity (Tables
8. Stockholders' Equity (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Stockholders' Equity | |
Schedule of stock options activity | Stock Options Number of Shares Weighted Average Exercise Price per Share Weighted Average Remaining Contractual Term Aggregate Intrinsic Value Outstanding at January 1, 2019 37,500 $ 8.36 2.24 $ 349,950 Granted - $ - - $ - Exercised (3,000 ) $ 7.85 - $ 6,270 Forfeited (2,500 ) $ 7.85 2.04 $ 13,588 Outstanding at June 30, 2019 32,000 $ 8.45 1.76 $ 13,600 Vested and Exercisable at June 30, 2019 32,000 $ 8.45 1.76 $ 13,600 |
Schedule of restricted stock awards activity | Restricted Stock Awards Shares Weighted Average Grant Date Fair Value per Share Aggregate Fair Value Balance at January 1, 2019 120,499 $ 17.66 $ 2,129,175 Granted 120,586 $ 15.51 $ 1,870,487 Vested (28,168 ) $ 18.23 $ (513,446 ) Forfeited (5,962 ) $ 15.18 $ (90,510 ) Balance at June 30, 2019 206,955 $ 16.39 $ 3,395,706 |
9. Income Taxes (Tables)
9. Income Taxes (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Income Tax Disclosure [Abstract] | |
Schedule of deferrred tax assets and liabilities | June 30, December 31, 2019 2018 Deferred tax asset: Net operating loss carryovers (1) $ 2,029,412 $ 90,438 Claims reserve discount 455,200 343,905 Unearned premium 3,445,635 3,145,682 Deferred ceding commission revenue 651,033 564,202 Other 141,163 383,733 Total deferred tax assets 6,722,443 4,527,960 Deferred tax liability: Investment in KICO (2) 759,543 759,543 Deferred acquisition costs 4,076,900 3,760,625 Intangibles 105,000 140,700 Depreciation and amortization 557,084 664,194 Net unrealized gains (losses) of securities - available for sale 1,007,442 (1,151,335 ) Total deferred tax liabilities 6,505,969 4,173,727 Net deferred income tax asset $ 216,474 $ 354,233 (1) The deferred tax assets from net operating loss carryovers (“NOL”) are as follows: |
Losses subject to annual limitation | June 30, December 31, Type of NOL 2019 2018 Expiration Federal only, current year $ 1,959,030 $ - None Amount subject to Annual Limitation, federal only - 2,100 December 31, 2019 Total federal only 1,959,030 2,100 State only (A) 1,504,514 1,305,365 December 31, 2039 Valuation allowance (1,434,132 ) (1,217,027 ) State only, net of valuation allowance 70,382 88,338 Total deferred tax asset from net operating loss carryovers $ 2,029,412 $ 90,438 (A) Kingstone generates operating losses for state purposes and has prior year NOLs available. The state NOL as of June 30, 2019 and December 31, 2018 was approximately $23,146,000 and $20,083,000, respectively. KICO 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) within other underwriting expenses. A valuation allowance has been recorded due to the uncertainty of generating enough state taxable income to utilize 100% of the available state NOLs over their remaining lives, which expire between 2027 and 2039. |
10. Earnings_(Loss) Per Commo_2
10. Earnings/(Loss) Per Common Share (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Earnings (loss) per common share: | |
Schedule of net earnings/(loss) per common share | Three months ended Six months ended June 30, June 30, 2019 2018 2019 2018 Weighted average number of shares outstanding 10,771,717 10,664,806 10,764,824 10,667,385 Effect of dilutive securities, common share equivalents Stock options 4,188 148,885 - 154,322 Restricted stock awards 9,159 6,631 - 6,313 Weighted average number of shares outstanding, used for computing diluted earnings per share 10,785,064 10,820,322 10,764,824 10,828,020 |
11. Commitments and Contingen_2
11. Commitments and Contingencies (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
Lease cost | Three months ended Six months ended Lease cost June 30, 2019 June 30, 2019 Operating lease $ 41,342 $ 82,684 Short-term leases - - Total lease cost (1) $ 41,342 $ 82,684 Other information on operating lease Cash payments included in the measurement of lease liability reported in operating cash flows $ 42,827 $ 84,206 Discount rate 5.50 % 5.50 % Remaining lease term in years 5 years 5 years (1) Included in the condensed consolidated statements of operations and comprehensive income (loss) within other underwriting expenses. |
Schedule of lease liability maturities | For the Year Ending December 31, Total Remainder of 2019 $ 85,655 2020 175,806 2021 181,959 2022 188,328 2023 194,919 Thereafter 49,145 Total undiscounted lease payments 875,812 Less: present value adjustment 116,947 Operating lease liability $ 758,865 |
13. Subsequent Events (Tables)
13. Subsequent Events (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Subsequent Events [Abstract] | |
Schedule of lease liability maturities | For the Year Ending December 31, Total Remainder of 2019 $ 6,652 2020 80,517 2021 83,335 2022 86,252 2023 89,270 Thereafter 261,610 Total undiscounted lease payments 607,636 Less: present value adjustment 104,112 Operating lease liability $ 503,524 |
3. Investments (Details)
3. Investments (Details) - USD ($) | 6 Months Ended | 12 Months Ended |
Jun. 30, 2019 | Dec. 31, 2018 | |
U.S. Treasury Securities and Obligations of U.S. Government [Member] | ||
Cost or amortized cost | $ 8,236,255 | $ 8,222,050 |
Gross unrealized gains | 142,388 | 26,331 |
Gross unrealized losses - less than 12 months | 0 | (28,000) |
Gross unrealized loss - more than 12 months | (1,557) | 0 |
Estimated fair value | 8,377,086 | 8,220,381 |
Net unrealized gains/(losses) | 140,831 | (1,669) |
Fixed Maturity Securities Political Subdivisions Of States Territories And Possessions [Member] | ||
Cost or amortized cost | 5,675,418 | 6,339,540 |
Gross unrealized gains | 167,952 | 50,903 |
Gross unrealized losses - less than 12 months | 0 | (12,327) |
Gross unrealized loss - more than 12 months | (309) | (36,508) |
Estimated fair value | 5,843,061 | 6,341,608 |
Net unrealized gains/(losses) | 167,643 | 2,068 |
Fixed Maturity Securities Corporate And Other Bonds Industrial And Miscellaneous [Member] | ||
Cost or amortized cost | 126,095,235 | 119,078,698 |
Gross unrealized gains | 4,106,946 | 123,740 |
Gross unrealized losses - less than 12 months | (14,450) | (2,775,540) |
Gross unrealized loss - more than 12 months | (84,187) | (676,605) |
Estimated fair value | 130,103,544 | 115,750,293 |
Net unrealized gains/(losses) | 4,008,309 | (3,328,405) |
Fixed Maturity Securities Residential Mortgage and other asset backed securities [Member] | ||
Cost or amortized cost | 20,078,720 | 21,790,973 |
Gross unrealized gains | 317,871 | 236,502 |
Gross unrealized losses - less than 12 months | (8,750) | (231,229) |
Gross unrealized loss - more than 12 months | (376,663) | (331,012) |
Estimated fair value | 20,011,178 | 21,465,234 |
Net unrealized gains/(losses) | (67,542) | (325,739) |
Fixed Maturity Securities Total Fixed Maturity Securities [Member] | ||
Cost or amortized cost | 160,085,628 | 155,431,261 |
Gross unrealized gains | 4,735,157 | 437,476 |
Gross unrealized losses - less than 12 months | (23,200) | (3,047,096) |
Gross unrealized loss - more than 12 months | (462,716) | (1,044,125) |
Estimated fair value | 164,334,869 | 151,777,516 |
Net unrealized gains/(losses) | 4,249,241 | (3,653,745) |
Equity Securities Preferred Stocks [Member] | ||
Cost or amortized cost | 9,445,572 | 6,694,754 |
Gross unrealized gains | 175,517 | 0 |
Gross unrealized losses | (58,389) | (541,798) |
Estimated fair value | 9,562,700 | 6,152,956 |
Equity Securities Common Stocks [Member] | ||
Cost or amortized cost | 12,809,216 | 11,611,232 |
Gross unrealized gains | 1,045,871 | 99,817 |
Gross unrealized losses | (678,837) | (1,291,389) |
Estimated fair value | 13,176,250 | 10,419,660 |
Equity Securities Total Equity Securities [Member] | ||
Cost or amortized cost | 22,254,788 | 18,305,986 |
Gross unrealized gains | 1,221,388 | 99,817 |
Gross unrealized losses | (737,226) | (1,833,187) |
Estimated fair value | $ 22,738,950 | $ 16,572,616 |
3. Investments (Details 1)
3. Investments (Details 1) - USD ($) | Jun. 30, 2019 | Dec. 31, 2018 |
Amortized cost | $ 160,085,628 | $ 155,431,261 |
Estimated fair value | 164,334,869 | 151,777,516 |
Less Than One Year [Member] | ||
Amortized cost | 11,167,387 | 6,742,519 |
Estimated fair value | 11,188,535 | 6,738,014 |
One To Five Years [Member] | ||
Amortized cost | 47,828,173 | 47,038,838 |
Estimated fair value | 48,719,017 | 46,640,012 |
Five To Ten Years [Member] | ||
Amortized cost | 79,000,901 | 76,884,505 |
Estimated fair value | 82,414,899 | 74,290,076 |
More Than 10 Years [Member] | ||
Amortized cost | 2,010,447 | 2,974,426 |
Estimated fair value | 2,001,240 | 2,644,180 |
Residential mortgage-backed securities [Member] | ||
Amortized cost | 20,078,720 | 21,790,973 |
Estimated fair value | $ 20,011,178 | $ 21,465,234 |
3. Investments (Details 2)
3. Investments (Details 2) - USD ($) | 6 Months Ended | 12 Months Ended |
Jun. 30, 2019 | Dec. 31, 2018 | |
Cost | $ 1,999,381 | $ 1,999,381 |
Unrealized gain | 336,493 | (144,156) |
Estimated fair value | 2,335,874 | 1,855,225 |
Hedge Fund | ||
Cost | 1,999,381 | 1,999,381 |
Unrealized gain | 336,493 | (144,156) |
Estimated fair value | $ 2,335,874 | $ 1,855,225 |
3. Investments (Details 3)
3. Investments (Details 3) - USD ($) | Jun. 30, 2019 | Dec. 31, 2018 |
Cost or amortized cost | $ 3,824,620 | $ 4,222,855 |
Gross unrealized gains | 291,877 | 219,855 |
Gross unrealized losses - less than 12 months | 0 | (5,389) |
Gross unrealized loss - more than 12 months | (2,425) | (10,905) |
Estimated fair value | 4,114,072 | 4,426,416 |
Net unrealized gains | 289,452 | 203,561 |
US Treasury Securities [Member] | ||
Cost or amortized cost | 729,528 | 729,507 |
Gross unrealized gains | 150,495 | 147,532 |
Gross unrealized losses - less than 12 months | 0 | (3,964) |
Gross unrealized loss - more than 12 months | 0 | 0 |
Estimated fair value | 880,023 | 873,075 |
Net unrealized gains | 150,495 | 143,568 |
Fixed Maturity Securities Political Subdivisions Of States Territories And Possessions [Member] | ||
Cost or amortized cost | 998,715 | 998,803 |
Gross unrealized gains | 51,025 | 33,862 |
Gross unrealized losses - less than 12 months | 0 | 0 |
Gross unrealized loss - more than 12 months | 0 | 0 |
Estimated fair value | 1,049,740 | 1,032,665 |
Net unrealized gains | 51,025 | 33,862 |
Fixed Maturity Securities Corporate And Other Bonds Industrial And Miscellaneous [Member] | ||
Cost or amortized cost | 2,096,377 | 2,494,545 |
Gross unrealized gains | 90,357 | 38,461 |
Gross unrealized losses - less than 12 months | 0 | (1,425) |
Gross unrealized loss - more than 12 months | (2,425) | (10,905) |
Estimated fair value | 2,184,309 | 2,520,676 |
Net unrealized gains | $ 87,932 | $ 26,131 |
3. Investments (Details 4)
3. Investments (Details 4) - USD ($) | Jun. 30, 2019 | Dec. 31, 2018 |
Amortized cost | $ 3,824,620 | $ 4,222,855 |
Estimated fair value | 4,114,072 | 4,426,416 |
Less Than One Year [Member] | ||
Amortized cost | 0 | 0 |
Estimated fair value | 0 | 0 |
One To Five Years [Member] | ||
Amortized cost | 2,598,323 | 2,996,685 |
Estimated fair value | 2,705,549 | 3,036,531 |
Five To Ten Years [Member] | ||
Amortized cost | 619,780 | 619,663 |
Estimated fair value | 654,484 | 635,846 |
More Than 10 Years [Member] | ||
Amortized cost | 606,517 | 606,507 |
Estimated fair value | $ 754,039 | $ 754,039 |
3. Investments (Details 5)
3. Investments (Details 5) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Income: | ||||
Fixed-maturity securities | $ 1,474,341 | $ 1,361,506 | $ 3,001,211 | $ 2,511,799 |
Equity securities | 205,509 | 194,091 | 412,653 | 394,588 |
Cash and cash equivalents | 172,680 | 42,582 | 213,081 | 115,841 |
Total | 1,852,530 | 1,598,179 | 3,626,945 | 3,022,228 |
Expenses: | ||||
Investment expenses | 132,761 | 41,313 | 283,464 | 81,373 |
Net investment income | $ 1,719,769 | $ 1,556,866 | $ 3,343,481 | $ 2,940,855 |
3. Investments (Details 6)
3. Investments (Details 6) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Fixed-maturity securities: | ||||
Gross realized gains | $ 4,942 | $ (5,257) | $ 10,944 | $ 112,212 |
Gross realized losses | (17,306) | (148,258) | (45,739) | (483,227) |
Total fixed-maturity securities | (12,364) | (153,515) | (34,795) | (371,015) |
Equity securities: | ||||
Gross realized gains | 90,427 | 104,692 | 41,688 | 315,250 |
Gross realized losses | (27,638) | (27,553) | (5,962) | (264,384) |
Total equity securities | 62,789 | 77,139 | 35,726 | 50,866 |
Net realized gains (losses) | 50,425 | (76,376) | 931 | (320,149) |
Equity securities: | ||||
Gross gains | 440,301 | 0 | 2,232,438 | 0 |
Gross losses | 0 | (123,197) | 0 | (430,411) |
Total equity securities | 440,301 | (123,197) | 2,232,438 | (430,411) |
Other investments: | ||||
Gross gains | 187,929 | 92,840 | 480,649 | 120,700 |
Gross losses | 0 | 0 | 0 | 0 |
Total other investments | 187,929 | 92,840 | 480,649 | 120,700 |
Net unrealized gains (losses) | 628,230 | (30,357) | 2,713,087 | (309,711) |
Net gains (losses) on investments | $ 678,655 | $ (106,733) | $ 2,714,018 | $ (629,860) |
3. Investments (Details 7)
3. Investments (Details 7) - USD ($) | 6 Months Ended | 12 Months Ended |
Jun. 30, 2019 | Dec. 31, 2018 | |
U.S. Treasury Securities and Obligations of U.S. Government [Member] | ||
Estimated fair value - less than 12 months | $ 0 | $ 4,948,530 |
Unrealized losses - less than 12 months | 0 | (28,000) |
Number of positions held - less than 12 months | 0 | 3 |
Estimated fair value - 12 months or more | 1,992,340 | 0 |
Unrealized losses - 12 months or more | (1,557) | 0 |
Number of positions held - 12 months or more | 1 | 0 |
Estimated fair value - total | 1,992,340 | 4,948,530 |
Unrealized losses - total | (1,557) | (28,000) |
Fixed Maturity Securities Political Subdivisions Of States Territories And Possessions [Member] | ||
Estimated fair value - less than 12 months | 0 | 555,375 |
Unrealized losses - less than 12 months | 0 | (12,327) |
Number of positions held - less than 12 months | 0 | 1 |
Estimated fair value - 12 months or more | 302,880 | 1,436,242 |
Unrealized losses - 12 months or more | (309) | (36,508) |
Number of positions held - 12 months or more | 1 | 3 |
Estimated fair value - total | 302,880 | 1,991,617 |
Unrealized losses - total | (309) | (48,835) |
Fixed Maturity Securities Corporate And Other Bonds Industrial And Miscellaneous [Member] | ||
Estimated fair value - less than 12 months | 1,959,040 | 81,004,459 |
Unrealized losses - less than 12 months | (14,450) | (2,775,540) |
Number of positions held - less than 12 months | 4 | 97 |
Estimated fair value - 12 months or more | 11,608,094 | 13,424,888 |
Unrealized losses - 12 months or more | (84,187) | (676,605) |
Number of positions held - 12 months or more | 18 | 24 |
Estimated fair value - total | 13,567,134 | 94,429,347 |
Unrealized losses - total | (98,637) | (3,452,145) |
Fixed Maturity Securities Residential Mortgage and other asset backed securities [Member] | ||
Estimated fair value - less than 12 months | 591,845 | 7,002,713 |
Unrealized losses - less than 12 months | (8,750) | (231,229) |
Number of positions held - less than 12 months | 1 | 9 |
Estimated fair value - 12 months or more | 15,983,171 | 11,928,425 |
Unrealized losses - 12 months or more | (376,663) | (331,012) |
Number of positions held - 12 months or more | 24 | 19 |
Estimated fair value - total | 16,575,016 | 18,931,138 |
Unrealized losses - total | (385,413) | (562,241) |
Fixed Maturity Securities Total Fixed Maturity Securities [Member] | ||
Estimated fair value - less than 12 months | 2,550,885 | 93,511,077 |
Unrealized losses - less than 12 months | (23,200) | (3,047,096) |
Number of positions held - less than 12 months | 5 | 110 |
Estimated fair value - 12 months or more | 29,886,485 | 26,789,555 |
Unrealized losses - 12 months or more | (462,716) | (1,044,125) |
Number of positions held - 12 months or more | 44 | 46 |
Estimated fair value - total | 32,437,370 | 120,300,632 |
Unrealized losses - total | $ (485,916) | $ (4,091,221) |
3. Investments (Details Narrati
3. Investments (Details Narrative) - USD ($) | 6 Months Ended | |
Jun. 30, 2019 | Jun. 30, 2018 | |
Investments [Abstract] | ||
Proceeds from the sale and redemption of fixed-maturity securities held-to-maturity | $ 400,000 | $ 0 |
Proceeds from the sale or maturity of fixed-maturity securities available-for-sale | 6,987,908 | 15,172,845 |
Proceeds from the sale of equity securities | $ 503,884 | $ 4,746,825 |
4. Fair Value Measurements (Det
4. Fair Value Measurements (Details) - USD ($) | Jun. 30, 2019 | Dec. 31, 2018 |
U.S. Treasury securities and obligations of U.S. government corporations and agencies | $ 8,377,086 | $ 8,220,381 |
Political subdivisions of states, territories and possessions | 5,843,061 | 6,341,608 |
Corporate and other bonds industrial and miscellaneous | 130,103,544 | 115,750,293 |
Residential mortgage and other asset backed securities | 20,011,178 | 21,465,234 |
Total fixed maturities | 164,334,869 | 151,777,516 |
Equity securities | 22,738,950 | 16,572,616 |
Total investments | 187,073,819 | 168,350,132 |
Level 1 | ||
U.S. Treasury securities and obligations of U.S. government corporations and agencies | 8,377,086 | 8,220,381 |
Political subdivisions of states, territories and possessions | 0 | 0 |
Corporate and other bonds industrial and miscellaneous | 126,359,225 | 112,076,270 |
Residential mortgage and other asset backed securities | 0 | 0 |
Total fixed maturities | 134,736,311 | 120,296,651 |
Equity securities | 22,738,950 | 16,572,616 |
Total investments | 157,475,261 | 136,869,267 |
Level 2 | ||
U.S. Treasury securities and obligations of U.S. government corporations and agencies | 0 | 0 |
Political subdivisions of states, territories and possessions | 5,843,061 | 6,341,608 |
Corporate and other bonds industrial and miscellaneous | 3,744,319 | 3,674,023 |
Residential mortgage and other asset backed securities | 20,011,178 | 21,465,234 |
Total fixed maturities | 29,598,558 | 31,480,865 |
Equity securities | 0 | 0 |
Total investments | 29,598,558 | 31,480,865 |
Level 3 | ||
U.S. Treasury securities and obligations of U.S. government corporations and agencies | 0 | 0 |
Political subdivisions of states, territories and possessions | 0 | 0 |
Corporate and other bonds industrial and miscellaneous | 0 | 0 |
Residential mortgage and other asset backed securities | 0 | 0 |
Total fixed maturities | 0 | 0 |
Equity securities | 0 | 0 |
Total investments | $ 0 | $ 0 |
4. Fair Value Measurements (D_2
4. Fair Value Measurements (Details 1) - USD ($) | Jun. 30, 2019 | Dec. 31, 2018 |
Hedge fund investments | $ 2,335,874 | $ 1,855,225 |
Hedge Fund | ||
Hedge fund investments | $ 2,335,874 | $ 1,855,225 |
4. Fair Value Measurements (D_3
4. Fair Value Measurements (Details 2) - USD ($) | Jun. 30, 2019 | Dec. 31, 2018 |
Senior Notes due 2022 | $ 27,326,918 | $ 28,521,734 |
Level 1 | ||
Senior Notes due 2022 | 0 | 0 |
Level 2 | ||
Senior Notes due 2022 | 27,326,918 | 28,521,734 |
Level 3 | ||
Senior Notes due 2022 | $ 0 | $ 0 |
5. Fair Value of Financial In_3
5. Fair Value of Financial Instruments and Real Estate (Details) - USD ($) | Jun. 30, 2019 | Dec. 31, 2018 |
Reinsurance balances payable | $ 2,806,903 | $ 1,933,376 |
Long-term debt, net | 29,383,341 | 29,295,251 |
Carrying Value [Member] | ||
Fixed-maturity securities held-to-maturity | 3,824,620 | 4,222,855 |
Cash and cash equivalents | 18,895,805 | 21,138,403 |
Premiums receivable | 14,958,200 | 13,961,599 |
Reinsurance receivables | 28,643,360 | 26,367,115 |
Real estate, net of accumulated depreciation | 2,307,072 | 2,300,827 |
Reinsurance balances payable | 2,806,903 | 1,933,376 |
Long-term debt, net | 29,383,341 | 29,295,251 |
Fair Value [Member] | ||
Fixed-maturity securities held-to-maturity | 4,114,072 | 4,426,416 |
Cash and cash equivalents | 18,895,805 | 21,138,403 |
Premiums receivable | 14,958,200 | 13,961,599 |
Reinsurance receivables | 28,643,360 | 26,367,115 |
Real estate, net of accumulated depreciation | 2,705,000 | 2,705,000 |
Reinsurance balances payable | 2,806,903 | 1,933,376 |
Long-term debt, net | $ 27,326,918 | $ 28,521,734 |
6. Property and Casualty Insu_3
6. Property and Casualty Insurance Activity (Details) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Premiums Written [Member] | ||||
Direct | $ 44,821,279 | $ 36,863,677 | $ 82,309,827 | $ 68,389,960 |
Assumed | 111 | 488 | 77 | 824 |
Ceded | (8,199,887) | (8,899,489) | (15,327,796) | (16,725,724) |
Net | 36,621,503 | 27,964,676 | 66,982,108 | 51,665,060 |
Changes In Unearned Premiums [Member] | ||||
Direct | (5,828,149) | (4,486,460) | (6,456,216) | (5,495,329) |
Assumed | 7 | 1,163 | 202 | 3,064 |
Ceded | 407,918 | 625,235 | 271,074 | 769,436 |
Net | (5,420,224) | (3,860,062) | (6,184,940) | (4,722,829) |
Premiums Earned [Member] | ||||
Direct | 38,993,130 | 32,377,217 | 75,853,611 | 62,894,631 |
Assumed | 118 | 1,651 | 279 | 3,888 |
Ceded | (7,791,969) | (8,274,254) | (15,056,722) | (15,956,288) |
Net | $ 31,201,279 | $ 24,104,614 | $ 60,797,168 | $ 46,942,231 |
6. Property and Casualty Insu_4
6. Property and Casualty Insurance Activity (Details 1) - USD ($) | 6 Months Ended | |
Jun. 30, 2019 | Jun. 30, 2018 | |
Insurance [Abstract] | ||
Balance at beginning of period | $ 56,197,106 | $ 48,799,622 |
Less reinsurance recoverables | (15,671,247) | (16,748,908) |
Net balance, beginning of period | 40,525,859 | 32,050,714 |
Incurred related to: | ||
Current year | 40,689,147 | 28,215,069 |
Prior years | 6,117,385 | 227,346 |
Total incurred | 46,806,532 | 28,442,415 |
Paid related to: | ||
Current year | 19,692,437 | 14,656,892 |
Prior years | 13,999,258 | 10,977,023 |
Total paid | 33,691,695 | 25,633,915 |
Net balance at end of period | 53,640,696 | 34,859,214 |
Add reinsurance recoverables | 16,034,424 | 14,398,642 |
Balance at end of period | $ 69,675,120 | $ 49,257,856 |
6. Property and Casualty Insu_5
6. Property and Casualty Insurance Activity (Details 2) | 6 Months Ended |
Jun. 30, 2019USD ($)Number | |
2010 | |
2010 | $ 5,598 |
IBNR | $ 0 |
Cumulative number of reported claims | Number | 1,617 |
2011 | |
2010 | $ 5,707 |
2011 | 7,603 |
IBNR | $ 37 |
Cumulative number of reported claims | Number | 1,914 |
2012 | |
2010 | $ 6,429 |
2011 | 7,678 |
2012 | 9,539 |
IBNR | $ 42 |
Cumulative number of reported claims | Number | 4,704 |
2013 | |
2010 | $ 6,623 |
2011 | 8,618 |
2012 | 9,344 |
2013 | 10,728 |
IBNR | $ 67 |
Cumulative number of reported claims | Number | 1,561 |
2014 | |
2010 | $ 6,912 |
2011 | 9,440 |
2012 | 10,278 |
2013 | 9,745 |
2014 | 14,193 |
IBNR | $ 176 |
Cumulative number of reported claims | Number | 2,133 |
2015 | |
2010 | $ 6,853 |
2011 | 9,198 |
2012 | 10,382 |
2013 | 9,424 |
2014 | 14,260 |
2015 | 22,340 |
IBNR | $ 123 |
Cumulative number of reported claims | Number | 2,555 |
2016 | |
2010 | $ 6,838 |
2011 | 9,066 |
2012 | 10,582 |
2013 | 9,621 |
2014 | 14,218 |
2015 | 21,994 |
2016 | 26,062 |
IBNR | $ 68 |
Cumulative number of reported claims | Number | 2,868 |
2017 | |
2010 | $ 6,840 |
2011 | 9,144 |
2012 | 10,790 |
2013 | 10,061 |
2014 | 14,564 |
2015 | 22,148 |
2016 | 24,941 |
2017 | 31,605 |
IBNR | $ 895 |
Cumulative number of reported claims | Number | 3,364 |
2018 | |
2010 | $ 6,787 |
2011 | 9,171 |
2012 | 10,791 |
2013 | 10,089 |
2014 | 15,023 |
2015 | 22,491 |
2016 | 24,789 |
2017 | 32,169 |
2018 | 54,455 |
IBNR | $ 3,944 |
Cumulative number of reported claims | Number | 4,137 |
2019 | |
2010 | $ 6,787 |
2011 | 9,181 |
2012 | 11,030 |
2013 | 10,464 |
2014 | 16,294 |
2015 | 23,133 |
2016 | 27,112 |
2017 | 33,895 |
2018 | 54,067 |
2019 | 38,622 |
Total | 230,585 |
IBNR | $ 13,451 |
Cumulative number of reported claims | Number | 1,865 |
6. Property and Casualty Insu_6
6. Property and Casualty Insurance Activity (Details 3) | Jun. 30, 2019USD ($) |
Net liability for unpaid claim and allocated claim adjustment expenses for the accident years presented | $ 51,412 |
All outstanding liabilities before 2009, net of reinsurance | 107 |
Liabilities for claims and claim adjustment expenses, net of reinsurance | 51,519 |
2010 | |
2010 | 2,566 |
2011 | |
2010 | 3,947 |
2011 | 3,740 |
2012 | |
2010 | 4,972 |
2011 | 5,117 |
2012 | 3,950 |
2013 | |
2010 | 5,602 |
2011 | 6,228 |
2012 | 5,770 |
2013 | 3,405 |
2014 | |
2010 | 6,323 |
2011 | 7,170 |
2012 | 7,127 |
2013 | 5,303 |
2014 | 5,710 |
2015 | |
2010 | 6,576 |
2011 | 8,139 |
2012 | 8,196 |
2013 | 6,633 |
2014 | 9,429 |
2015 | 12,295 |
2016 | |
2010 | 6,720 |
2011 | 8,540 |
2012 | 9,187 |
2013 | 7,591 |
2014 | 10,738 |
2015 | 16,181 |
2016 | 15,364 |
2017 | |
2010 | 6,772 |
2011 | 8,702 |
2012 | 10,236 |
2013 | 8,407 |
2014 | 11,770 |
2015 | 18,266 |
2016 | 19,001 |
2017 | 16,704 |
2018 | |
2010 | 6,780 |
2011 | 8,727 |
2012 | 10,323 |
2013 | 9,056 |
2014 | 13,819 |
2015 | 19,984 |
2016 | 21,106 |
2017 | 24,820 |
2018 | 32,383 |
2019 | |
2010 | 6,780 |
2011 | 8,773 |
2012 | 10,420 |
2013 | 9,212 |
2014 | 14,031 |
2015 | 20,326 |
2016 | 21,910 |
2017 | 27,024 |
2018 | 41,894 |
2019 | 18,803 |
Total | $ 179,173 |
6. Property and Casualty Insu_7
6. Property and Casualty Insurance Activity (Details 4) $ in Thousands | Jun. 30, 2019USD ($) |
Insurance [Abstract] | |
Liabilities for allocated loss and loss adjustment expenses, net of reinsurance | $ 51,519 |
Total reinsurance recoverable on unpaid losses | 16,034 |
Unallocated loss adjustment expenses | 2,122 |
Total gross liability for loss and LAE reserves | $ 69,675 |
6. Property and Casualty Insu_8
6. Property and Casualty Insurance Activity (Details 5) - USD ($) | 12 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2018 | |
Personal Lines [Member] | |||
Percent ceded | 0.00% | 10.00% | 20.00% |
Risk retained | $ 1,000,000 | $ 900,000 | $ 800,000 |
Losses per occurrence subject to quota share reinsurance coverage | 0 | 1,000,000 | 1,000,000 |
Excess of loss coverage above quota share coverage | 10,000,000 | 9,000,000 | 9,000,000 |
In excess of | 0 | 1,000,000 | 1,000,000 |
Total reinsurance coverage per occurrence | 9,000,000 | 9,100,000 | 9,200,000 |
Losses per occurrence subject to reinsurance coverage | $ 10,000,000 | $ 10,000,000 | $ 10,000,000 |
Expiration date | Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2019 |
Personal Umbrella [Member] | |||
Percent ceded - first million dollars of coverage | 90.00% | 90.00% | 90.00% |
Percent ceded - excess of one million dollars of coverage | 100.00% | 100.00% | 100.00% |
Risk retained | $ 100,000 | $ 100,000 | $ 100,000 |
Total reinsurance coverage per occurrence | 4,900,000 | 4,900,000 | 4,900,000 |
Losses per occurrence subject to reinsurance coverage | $ 5,000,000 | $ 5,000,000 | $ 5,000,000 |
Expiration date | Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2018 |
Commercial Lines [Member] | |||
Risk retained | $ 750,000 | $ 750,000 | $ 750,000 |
Excess of loss coverage above quota share coverage | 3,750,000 | 3,750,000 | 3,750,000 |
In excess of | 750,000 | 750,000 | 750,000 |
Total reinsurance coverage per occurrence | 3,750,000 | 3,750,000 | 3,750,000 |
Losses per occurrence subject to reinsurance coverage | $ 4,500,000 | $ 4,500,000 | $ 4,500,000 |
Commercial Umbrella [Member] | |||
Percent ceded - first million dollars of coverage | 0.00% | 90.00% | 90.00% |
Percent ceded - excess of one million dollars of coverage | 0.00% | 100.00% | 100.00% |
Risk retained | $ 0 | $ 100,000 | $ 100,000 |
Total reinsurance coverage per occurrence | 0 | 4,900,000 | 4,900,000 |
Losses per occurrence subject to reinsurance coverage | 0 | $ 5,000,000 | $ 5,000,000 |
Expiration date | Jun. 30, 2019 | Jun. 30, 2018 | |
Catastrophe [Member] | |||
Initial loss subject to personal lines quota share treaty | 0 | $ 5,000,000 | $ 5,000,000 |
Risk retained per catastrophe occurrence | 7,500,000 | 4,500,000 | 4,000,000 |
Catastrophe loss coverage in excess of quota share coverage | $ 602,500,000 | $ 445,000,000 | $ 315,000,000 |
Reinstatement premium protection | Yes | Yes | Yes |
6. Property and Casualty Insu_9
6. Property and Casualty Insurance Activity (Details 6) | 12 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2018 | |
Personal Lines [Member] | Initial $1,000,000 [Member] | |||
Risk retained | $1,000,000 | $900,000 | $800,000 |
Personal Lines [Member] | $1,000,000 - $10,000,000 [Member] | |||
Risk retained | None | None | None |
Personal Lines [Member] | Over $10,000,000 [Member] | |||
Risk retained | 100% | 100% | 100% |
Personal Umbrella [Member] | Initial $1,000,000 [Member] | |||
Risk retained | $100,000 | $100,000 | $100,000 |
Personal Umbrella [Member] | $1,000,000 - $5,000,000 [Member] | |||
Risk retained | None | None | None |
Personal Umbrella [Member] | Over $5,000,000 [Member] | |||
Risk retained | 100% | 100% | 100% |
Commercial Lines [Member] | Initial $750,000 [Member] | |||
Risk retained | $750,000 | $750,000 | $750,000 |
Commercial Lines [Member] | $750,000 - $4,500,000 [Member] | |||
Risk retained | None | None | None |
Commercial Lines [Member] | Over $4,500,000 [Member] | |||
Risk retained | 100% | 100% | 100% |
Commercial Umbrella [Member] | Initial $1,000,000 [Member] | |||
Risk retained | $100,000 | $100,000 | $100,000 |
Commercial Umbrella [Member] | $1,000,000 - $5,000,000 [Member] | |||
Risk retained | None | None | None |
Commercial Umbrella [Member] | Over $5,000,000 [Member] | |||
Risk retained | 100% | 100% | 100% |
Catastrophe [Member] | Initial $7,500,000 [Member] | |||
Risk retained | $7,500,000 | ||
Catastrophe [Member] | $7,500,000 - $610,000,000 [Member] | |||
Risk retained | None | ||
Catastrophe [Member] | Over $610,000,000 [Member] | |||
Risk retained | 100% | ||
Catastrophe [Member] | Initial $5,000,000 [Member] | |||
Risk retained | $4,500,000 | $4,000,000 | |
Catastrophe [Member] | $5,000,000 - $450,000,000 [Member] | |||
Risk retained | None | ||
Catastrophe [Member] | Over $450,000,000 [Member] | |||
Risk retained | 100% | ||
Catastrophe [Member] | $5,000,000 - $320,000,000 [Member] | |||
Risk retained | None | ||
Catastrophe [Member] | Over $320,000,000 [Member] | |||
Risk retained | 100% |
6. Property and Casualty Ins_10
6. Property and Casualty Insurance Activity (Details 7) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Insurance [Abstract] | ||||
Provisional ceding commissions earned | $ 1,363,474 | $ 2,145,775 | $ 2,681,225 | $ 4,213,280 |
Contingent ceding commissions earned | (687,779) | (454,607) | (727,847) | (826,954) |
Total commissions earned | $ 675,695 | $ 1,691,168 | $ 1,953,378 | $ 3,386,326 |
6. Property and Casualty Ins_11
6. Property and Casualty Insurance Activity (Details Narrative) | 6 Months Ended | ||
Jun. 30, 2019USD ($)Number | Jun. 30, 2018USD ($) | Dec. 31, 2018USD ($)Number | |
Insurance [Abstract] | |||
Advance premiums | $ 3,468,225 | $ 2,107,629 | |
Incurred losses and loss adjustment expenses are net of reinsurance recoveries under reinsurance contracts | 6,621,688 | $ 8,017,022 | |
Prior year loss development | $ 6,117,385 | $ 227,346 | |
Net contingent ceding commissions payable | Number | 2,333,000 | 1,581,000 |
7. Debt (Details)
7. Debt (Details) - USD ($) | Jun. 30, 2019 | Dec. 31, 2018 |
Long-term debt, net | $ 29,383,341 | $ 29,295,251 |
Issuance costs | ||
Long-term debt, net | (503,084) | (574,953) |
5.50% Senior Unsecured Notes | ||
Long-term debt, net | 30,000,000 | 30,000,000 |
Discount | ||
Long-term debt, net | $ (113,575) | $ (129,796) |
8. Stockholders' Equity (Detail
8. Stockholders' Equity (Details) | 6 Months Ended |
Jun. 30, 2019USD ($)$ / sharesshares | |
Number of options outstanding, beginning | shares | 37,500 |
Number of options granted | shares | 0 |
Number of options exercised | shares | (3,000) |
Number of options forfeited | shares | (2,500) |
Number of options outstanding, ending | shares | 32,000 |
Number of options vested and exercisable | shares | 32,000 |
Weighted average exercise price outstanding, beginning | $ 8.36 |
Weighted average exercise price granted | .00 |
Weighted average exercise price exercised | 7.85 |
Weighted average exercise price forfeited | 7.85 |
Weighted average exercise price outstanding, ending | 8.45 |
Weighted average exercise price vested and exercisable | $ 8.45 |
Weighted average remaining contractual life (in years) outstanding, beginning | 2 years 2 months 26 days |
Weighted average remaining contractual life (in years) forfeited | 2 years 14 days |
Weighted average remaining contractual life (in years) outstanding, ending | 1 year 9 months 4 days |
Weighted average remaining contractual life (in years) vested and exercisable | 1 year 9 months 4 days |
Aggregate intrinsic value outstanding, beginning | $ | $ 349,950 |
Aggregate intrinsic value granted | $ 0 |
Aggregate intrinsic value exercised | $ | $ 6,270 |
Aggregate intrinsic value forfeited | $ 13,588 |
Aggregate intrinsic value outstanding, ending | $ | $ 13,600 |
Aggregate intrinsic value vested and exercisable | $ | $ 13,600 |
Restricted Stock | |
Number of options outstanding, beginning | shares | 120,499 |
Number of options granted | shares | 120,586 |
Number of options exercised | shares | (28,168) |
Number of options forfeited | shares | (5,962) |
Number of options outstanding, ending | shares | 206,955 |
Weighted average exercise price outstanding, beginning | $ 17.66 |
Weighted average exercise price granted | 15.51 |
Weighted average exercise price exercised | 18.23 |
Weighted average exercise price forfeited | 15.18 |
Weighted average exercise price outstanding, ending | $ 16.39 |
Aggregate intrinsic value outstanding, beginning | $ | $ 2,129,175 |
Aggregate intrinsic value granted | $ 1,870,487 |
Aggregate intrinsic value exercised | $ | $ (513,446) |
Aggregate intrinsic value forfeited | $ (90,510) |
Aggregate intrinsic value outstanding, ending | $ | $ 3,395,706 |
8. Stockholders' Equity (Deta_2
8. Stockholders' Equity (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Dividends declared | $ 2,153,349 | $ 2,134,759 | ||
Stock-based compensation expense related to stock options is net of estimated forfeitures | $ 0 | $ 1,000 | $ 1,000 | 4,000 |
Closing price of common stock | $ 8.65 | $ 8.65 | ||
Total intrinsic value of options exercised | $ (6,270) | |||
Total intrinsic value of options forfeited | $ 13,588 | 13,588 | ||
Stock-based compensation, restricted stock awards | $ 399,000 | $ 175,000 | $ 708,000 | $ 281,000 |
2014 Plan [Member] | ||||
Shares reserved | 427,476 | 427,476 |
9. Income Taxes (Details)
9. Income Taxes (Details) - USD ($) | Jun. 30, 2019 | Dec. 31, 2018 |
Deferred tax asset: | ||
Net operating loss carryovers | $ 2,029,412 | $ 90,438 |
Claims reserve discount | 455,200 | 343,905 |
Unearned premium | 3,445,635 | 3,145,682 |
Deferred ceding commission revenue | 651,033 | 564,202 |
Other | 141,163 | 383,733 |
Total deferred tax assets | 6,722,443 | 4,527,960 |
Deferred tax liability: | ||
Investment in KICO | 759,543 | 759,543 |
Deferred acquisition costs | 4,076,900 | 3,760,625 |
Intangibles | 105,000 | 140,700 |
Depreciation and amortization | 557,084 | 664,194 |
Net unrealized gains (losses) of securities - available for sale | 1,007,442 | (1,151,335) |
Total deferred tax liabilities | 6,505,969 | 4,173,727 |
Net deferred income tax asset | $ 216,474 | $ 354,233 |
9. Income Taxes (Details 1)
9. Income Taxes (Details 1) - USD ($) | 6 Months Ended | |
Jun. 30, 2019 | Dec. 31, 2018 | |
Income Tax Disclosure [Abstract] | ||
Federal only, current year | $ 1,959,030 | $ 0 |
Amount subject to annual limitation, federal only | 0 | 2,100 |
Total federal only | 1,959,030 | 2,100 |
State only | 1,504,514 | 1,305,365 |
Valuation allowance | (1,434,132) | (1,217,027) |
State only, net of valuation allowance | 70,382 | 88,338 |
Total deferred tax asset from net operating loss carryovers | $ 2,029,412 | $ 90,438 |
Federal only, current year expiration date | None | |
Amount subject to annual limitation, federal only expiration date | December 31, 2019 | |
State only expiration date | December 31, 2039 |
9. Income Taxes (Details Narrat
9. Income Taxes (Details Narrative) - USD ($) | Jun. 30, 2019 | Dec. 31, 2018 |
Income Tax Disclosure [Abstract] | ||
Net operating loss carryover | $ 23,146,000 | $ 20,083,000 |
10. Earnings_(Loss) Per Commo_3
10. Earnings/(Loss) Per Common Share (Details) - shares | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Earnings (loss) per common share: | ||||
Weighted average number of shares outstanding | 10,771,717 | 10,664,806 | 10,764,824 | 10,667,385 |
Effect of dilutive securities, common share equivalents, stock options | 4,188 | 148,885 | 0 | 154,322 |
Effect of dilutive securities, common share equivalents, restricted stock awards | 9,159 | 6,631 | 0 | 6,313 |
Weighted average number of shares outstanding, used for computing diluted earnings per share | 10,785,064 | 10,820,322 | 10,764,824 | 10,828,020 |
11. Commitments and Contingen_3
11. Commitments and Contingencies (Details) | 3 Months Ended | 6 Months Ended |
Jun. 30, 2019USD ($) | Jun. 30, 2019USD ($) | |
Commitments And Contingencies | ||
Operating lease | $ 41,342 | $ 82,684 |
Short-term leases | 0 | 0 |
Total lease cost | 41,342 | 82,684 |
Cash payments included in the measurement of lease liability in operating cash flows | $ 42,827 | $ 84,206 |
Discount rate | 5.50% | 5.50% |
Remaining lease term in years | 5 years | 5 years |
11. Commitments and Contingen_4
11. Commitments and Contingencies (Details 1) | Jun. 30, 2019USD ($) |
Commitments and Contingencies Disclosure [Abstract] | |
Remainder of 2019 | $ 85,655 |
2020 | 175,806 |
2021 | 181,959 |
2022 | 188,328 |
2023 | 194,919 |
Thereafter | 49,145 |
Total undiscounted lease payments | 875,812 |
Less: present value adjustment | 116,947 |
Operating lease liability | $ 758,865 |
11. Commitments and Contingen_5
11. Commitments and Contingencies (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | ||||
Rent expenses | $ 41,342 | $ 41,342 | $ 82,684 | $ 82,684 |
13. Subsequent Events (Details)
13. Subsequent Events (Details) | Jun. 30, 2019USD ($) |
Remainder of 2019 | $ 85,655 |
2020 | 175,806 |
2021 | 181,959 |
2022 | 188,328 |
2023 | 194,919 |
Thereafter | 49,145 |
Total undiscounted lease payments | 875,812 |
Less: present value adjustment | 116,947 |
Operating lease liability | 758,865 |
Office Lease [Member] | |
Remainder of 2019 | 6,652 |
2020 | 80,517 |
2021 | 83,335 |
2022 | 86,252 |
2023 | 89,270 |
Thereafter | 261,610 |
Total undiscounted lease payments | 607,636 |
Less: present value adjustment | 104,112 |
Operating lease liability | $ 503,524 |