Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2019 | Nov. 12, 2019 | |
Document And Entity Information | ||
Entity Registrant Name | KINGSTONE COMPANIES, INC. | |
Entity Central Index Key | 0000033992 | |
Document Type | 10-Q | |
Document Period End Date | Sep. 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 | 10,785,069 | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2019 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) | Sep. 30, 2019 | Dec. 31, 2018 |
Assets | ||
Fixed-maturity securities, held-to-maturity, at amortized cost (fair value of $4,127,384 at September 30, 2019 and $4,426,416 at December 31, 2018) | $ 3,825,505 | $ 4,222,855 |
Fixed-maturity securities, available-for-sale, at fair value (amortized cost of $160,601,004 at September 30, 2019 and $155,431,261 at December 31, 2018) | 166,220,711 | 151,777,516 |
Equity securities, at fair value (cost of $22,070,565 at September 30, 2019 and $18,305,986 at December 31, 2018) | 23,499,199 | 16,572,616 |
Other investments | 2,425,904 | 1,855,225 |
Total investments | 195,971,319 | 174,428,212 |
Cash and cash equivalents | 25,639,050 | 21,138,403 |
Premiums receivable, net | 14,352,521 | 13,961,599 |
Reinsurance receivables, net | 26,580,449 | 26,367,115 |
Deferred policy acquisition costs | 20,491,568 | 17,907,737 |
Intangible assets, net | 500,000 | 670,000 |
Property and equipment, net | 7,582,210 | 6,056,929 |
Deferred income taxes, net | 540,295 | 354,233 |
Other assets | 6,762,909 | 5,867,850 |
Total assets | 298,420,321 | 266,752,078 |
Liabilities | ||
Loss and loss adjustment expense reserves | 77,409,423 | 56,197,106 |
Unearned premiums | 90,068,683 | 79,032,131 |
Advance premiums | 3,737,491 | 2,107,629 |
Reinsurance balances payable | 809,836 | 1,933,376 |
Deferred ceding commission revenue | 1,828,872 | 2,686,677 |
Accounts payable, accrued expenses and other liabilities | 8,403,012 | 6,819,231 |
Income taxes payable | 0 | 15,035 |
Long-term debt, net | 29,427,386 | 29,295,251 |
Total liabilities | 211,684,703 | 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 11,811,011 shares at September 30, 2019 and 11,775,148 shares at December 31, 2018; outstanding 10,783,572 shares at September 30, 2019 and 10,747,709 shares at December 31, 2018 | 118,110 | 117,751 |
Capital in excess of par | 68,755,776 | 67,763,940 |
Accumulated other comprehensive income (loss) | 4,441,716 | (2,884,313) |
Retained earnings | 16,132,568 | 26,380,816 |
Total | 89,448,170 | 91,378,194 |
Treasury stock, at cost, 1,027,439 shares at September 30, 2019 and at December 31, 2018 | (2,712,552) | (2,712,552) |
Total stockholders' equity | 86,735,618 | 88,665,642 |
Total liabilities and stockholders' equity | $ 298,420,321 | $ 266,752,078 |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) | Sep. 30, 2019 | Dec. 31, 2018 |
Statement of Financial Position [Abstract] | ||
Fixed-maturity securities, held-to-maturity, fair value | $ 4,127,384 | $ 4,426,416 |
Fixed-maturity securities, available-for-sale, amortized cost | 160,601,004 | 155,431,261 |
Equity securities, available-for-sale, cost | $ 22,070,565 | $ 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 | 11,811,011 | 11,775,148 |
Common stock, outstanding shares | 10,783,572 | 10,747,709 |
Treasury stock, shares | 1,027,439 | 1,027,439 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (Unaudited) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Revenues | ||||
Net premiums earned | $ 34,220,010 | $ 27,533,907 | $ 95,017,178 | $ 74,476,138 |
Ceding commission revenue | 1,029,582 | 1,044,529 | 2,982,960 | 4,430,855 |
Net investment income | 1,856,553 | 1,602,371 | 5,200,034 | 4,543,226 |
Net gains (losses) on investments | 998,162 | 352,025 | 3,712,180 | (277,835) |
Other income | 495,696 | 353,077 | 1,191,569 | 961,581 |
Total revenues | 38,600,003 | 30,885,909 | 108,103,921 | 84,133,965 |
Expenses | ||||
Loss and loss adjustment expenses | 24,781,318 | 13,296,708 | 71,587,850 | 41,739,123 |
Commission expense | 7,779,344 | 6,594,323 | 21,931,933 | 18,411,460 |
Other underwriting expenses | 6,430,734 | 5,193,679 | 17,983,174 | 15,301,168 |
Other operating expenses | 705,710 | 683,309 | 2,774,350 | 1,773,983 |
Depreciation and amortization | 646,201 | 440,383 | 1,876,202 | 1,273,975 |
Interest expense | 456,545 | 456,545 | 1,369,635 | 1,365,052 |
Total expenses | 40,799,852 | 26,664,947 | 117,523,144 | 79,864,761 |
Loss (income) before taxes | (2,199,849) | 4,220,962 | (9,419,223) | 4,269,204 |
Income tax (benefit) expense | (474,687) | 287,232 | (1,998,251) | 296,111 |
Net (loss) income | (1,725,162) | 3,933,730 | (7,420,972) | 3,973,093 |
Other comprehensive income (loss), net of tax | ||||
Gross change in unrealized gains (losses) on available-for-sale-securities | 1,323,626 | (242,453) | 9,191,817 | (4,591,699) |
Reclassification adjustment for losses included in net income | 46,841 | 131,978 | 81,636 | 451,877 |
Net change in unrealized gains (losses) | 1,370,467 | (110,475) | 9,273,453 | (4,139,822) |
Income tax (expense) benefit related to items of other comprehensive income (loss) | (287,798) | 12,416 | (1,947,424) | 858,377 |
Other comprehensive income (loss), net of tax | 1,082,669 | (98,059) | 7,326,029 | (3,281,445) |
Comprehensive income (loss) | $ (642,493) | $ 3,835,671 | $ (94,943) | $ 691,648 |
(Loss) Earnings per common share: | ||||
Basic | $ (0.16) | $ 0.37 | $ (0.69) | $ 0.37 |
Diluted | $ (0.16) | $ 0.36 | $ (0.69) | $ 0.37 |
Weighted average common shares outstanding | ||||
Basic | 10,779,641 | 10,681,329 | 10,769,817 | 10,672,084 |
Diluted | 10,779,641 | 10,791,123 | 10,769,817 | 10,780,590 |
Dividends declared and paid per common share | $ 0.0625 | $ 0.1000 | $ 0.2625 | $ 0.3000 |
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 | 481,812 | 481,812 | |||||
Shares deducted from exercise of stock options for payment of withholding taxes, Shares | 0 | (33,891) | |||||
Shares deducted from exercise of stock options for payment of withholding taxes, Amount | $ 0 | $ (337) | (674,314) | (674,651) | |||
Vesting of restricted stock awards, Shares | 0 | 15,752 | |||||
Vesting of restricted stock awards, Amount | $ 0 | $ 155 | (155) | 0 | |||
Shares deducted from restricted stock awards for payment of withholding taxes, Shares | 0 | 2,213 | |||||
Shares deducted from restricted stock awards for payment of withholding taxes, Amount | $ 0 | $ (24) | (39,847) | (39,847) | |||
Exercise of stock options, Shares | 0 | 130,872 | |||||
Exercise of stock options, Amount | $ 0 | $ 1,311 | 72,828 | 74,139 | |||
Acquisition of treasury stock, Shares | 0 | 0 | 40,630 | ||||
Acquisition of treasury stock, Amount | $ 0 | $ 0 | $ (540,253) | (540,253) | |||
Dividends | (3,204,813) | (3,204,813) | |||||
Net income/(loss) | 3,973,093 | 3,973,093 | |||||
Change in unrealized gains/(losses) on available-for-sale securities, net of tax | (3,281,445) | (3,281,445) | |||||
Ending Balance, Shares at Sep. 30, 2018 | 0 | 11,729,166 | 1,027,439 | ||||
Ending Balance, Amount at Sep. 30, 2018 | $ 0 | $ 117,291 | 68,220,714 | (2,595,040) | 28,335,344 | $ (2,712,552) | 91,365,757 |
Beginning Balance, Shares at Jun. 30, 2018 | 0 | 11,685,904 | 1,024,444 | ||||
Beginning 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, as adjusted | 0 | 11,685,904 | 1,024,444 | ||||
Beginning Balance, Amount, as adjusted | $ 0 | $ 116,859 | 68,347,784 | (2,496,981) | 25,471,668 | $ (2,712,522) | 88,726,808 |
Stock-based compensation | 197,335 | 197,335 | |||||
Shares deducted from exercise of stock options for payment of withholding taxes, Shares | 0 | (18,141) | |||||
Shares deducted from exercise of stock options for payment of withholding taxes, Amount | $ 0 | $ (181) | (332,702) | (332,883) | |||
Vesting of restricted stock awards, Shares | 4,866 | ||||||
Vesting of restricted stock awards, Amount | $ 48 | (48) | 0 | ||||
Shares deducted from restricted stock awards for payment of withholding taxes, Shares | 0 | (1,059) | |||||
Shares deducted from restricted stock awards for payment of withholding taxes, Amount | $ 0 | $ (11) | (18,339) | (18,350) | |||
Exercise of stock options, Shares | 0 | 57,596 | |||||
Exercise of stock options, Amount | $ 0 | $ 576 | 26,684 | 27,260 | |||
Acquisition of treasury stock, Shares | 2,995 | ||||||
Acquisition of treasury stock, Amount | $ (30) | (30) | |||||
Dividends | (1,070,054) | (1,070,054) | |||||
Net income/(loss) | 3,933,730 | 3,933,730 | |||||
Change in unrealized gains/(losses) on available-for-sale securities, net of tax | (98,059) | (98,059) | |||||
Ending Balance, Shares at Sep. 30, 2018 | 0 | 11,729,166 | 1,027,439 | ||||
Ending Balance, Amount at Sep. 30, 2018 | $ 0 | $ 117,291 | 68,220,714 | (2,595,040) | 28,335,344 | $ (2,712,552) | 91,365,757 |
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 |
Beginning Balance, Shares, as adjusted | 0 | 11,775,148 | 1,027,439 | ||||
Beginning Balance, Amount, as adjusted | $ 0 | $ 117,751 | 67,763,940 | (2,884,313) | 26,380,816 | $ (2,712,552) | 88,665,642 |
Stock-based compensation | 1,116,921 | 1,116,921 | |||||
Vesting of restricted stock awards, Shares | 0 | 43,596 | |||||
Vesting of restricted stock awards, Amount | $ 0 | $ 434 | (434) | 0 | |||
Shares deducted from restricted stock awards for payment of withholding taxes, Shares | 0 | (10,733) | |||||
Shares deducted from restricted stock awards for payment of withholding taxes, Amount | $ 0 | $ (105) | (148,173) | (148,278) | |||
Exercise of stock options, Shares | 0 | 3,000 | |||||
Exercise of stock options, Amount | $ 0 | $ 30 | 23,522 | 23,522 | |||
Dividends | (2,827,276) | (2,827,276) | |||||
Net income/(loss) | (7,420,972) | (7,420,972) | |||||
Change in unrealized gains/(losses) on available-for-sale securities, net of tax | 7,326,029 | 7,326,029 | |||||
Ending Balance, Shares at Sep. 30, 2019 | 0 | 11,811,011 | 1,027,439 | ||||
Ending Balance, Amount at Sep. 30, 2019 | $ 0 | $ 118,110 | 68,755,776 | 4,441,716 | 16,132,568 | $ (2,712,552) | 86,735,618 |
Beginning Balance, Shares at Jun. 30, 2019 | 0 | 11,802,087 | 1,027,439 | ||||
Beginning Balance, Amount at Jun. 30, 2019 | $ 0 | $ 118,020 | 68,373,590 | 3,359,047 | 18,531,657 | $ (2,712,552) | 87,669,762 |
Beginning Balance, Shares, as adjusted | 0 | 11,802,087 | 1,027,439 | ||||
Beginning Balance, Amount, as adjusted | $ 0 | $ 118,020 | 68,373,590 | 3,359,047 | 18,531,657 | $ (2,712,552) | 87,669,762 |
Stock-based compensation | 407,714 | 407,714 | |||||
Vesting of restricted stock awards, Shares | 0 | 12,050 | |||||
Vesting of restricted stock awards, Amount | $ 0 | $ 120 | (120) | 0 | |||
Shares deducted from restricted stock awards for payment of withholding taxes, Shares | 0 | (3,126) | |||||
Shares deducted from restricted stock awards for payment of withholding taxes, Amount | $ 0 | $ (30) | (25,408) | (25,438) | |||
Dividends | (673,927) | (637,927) | |||||
Net income/(loss) | (1,725,162) | (1,725,162) | |||||
Change in unrealized gains/(losses) on available-for-sale securities, net of tax | 1,082,669 | 1,082,669 | |||||
Ending Balance, Shares at Sep. 30, 2019 | 0 | 11,811,011 | 1,027,439 | ||||
Ending Balance, Amount at Sep. 30, 2019 | $ 0 | $ 118,110 | $ 68,755,776 | $ 4,441,716 | $ 16,132,568 | $ (2,712,552) | $ 86,735,618 |
Condensed Consolidated Statem_3
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) | 9 Months Ended | |
Sep. 30, 2019 | Sep. 30, 2018 | |
Cash flows from operating activities: | ||
Net (loss) income | $ (7,420,972) | $ 3,973,093 |
Adjustments to reconcile net (loss) income to net cash flows provided by operating activities: | ||
Net losses on sale of investments | 54,759 | 377,303 |
Net unrealized (gains) losses of equity investments | (3,196,260) | 141,976 |
Net unrealized gains of other investments | (570,679) | (241,444) |
Depreciation and amortization | 1,876,202 | 1,273,975 |
Amortization of bond premium, net | 283,620 | 284,204 |
Amortization of discount and issuance costs on long-term debt | 132,135 | 124,241 |
Stock-based compensation | 1,116,921 | 481,812 |
Deferred income tax expense | (2,133,486) | 136,032 |
(Increase) decrease in operating assets: | ||
Premiums receivable, net | (390,922) | (266,849) |
Reinsurance receivables, net | (213,334) | 3,500,669 |
Deferred policy acquisition costs | (2,583,831) | (2,276,012) |
Other assets | (882,320) | (1,824,401) |
Increase (decrease) in operating liabilities: | ||
Loss and loss adjustment expense reserves | 21,212,317 | 5,143,335 |
Unearned premiums | 11,036,552 | 9,926,741 |
Advance premiums | 1,629,862 | 1,411,027 |
Reinsurance balances payable | (1,123,540) | (840,122) |
Deferred ceding commission revenue | (857,805) | (1,748,944) |
Accounts payable, accrued expenses and other liabilities | 1,568,746 | (1,379,309) |
Net cash flows provided by operating activities | 19,537,965 | 18,197,327 |
Cash flows from investing activities: | ||
Purchase - fixed-maturity securities available-for-sale | (15,373,113) | (43,957,529) |
Purchase - equity securities | (6,657,676) | (10,357,210) |
Sale and redemption - fixed-maturity securities held-to-maturity | 400,000 | 624,963 |
Sale or maturity - fixed-maturity securities available-for-sale | 9,835,464 | 17,740,260 |
Sale - equity securities | 2,941,492 | 5,694,121 |
Acquisition of property and equipment | (3,231,483) | (2,044,440) |
Net cash flows used in investing activities | (12,085,316) | (32,299,835) |
Cash flows from financing activities: | ||
Proceeds from exercise of stock options | 23,552 | 74,139 |
Withholding taxes paid on net exercise of stock options | 0 | (674,651) |
Withholding taxes paid on vested retricted stock awards | (148,278) | (39,871) |
Purchase of treasury stock | 0 | (540,253) |
Dividends paid | (2,827,276) | (3,204,813) |
Net cash flows used in financing activities | (2,952,002) | (4,385,449) |
Increase (decrease) in cash and cash equivalents | 4,500,647 | (18,487,957) |
Cash and cash equivalents, beginning of period | 21,138,403 | 48,381,633 |
Cash and cash equivalents, end of period | 25,639,050 | 29,893,676 |
Supplemental disclosures of cash flow information: | ||
Cash paid for income taxes | 388,000 | 1,250,000 |
Cash paid for interest | $ 825,000 | $ 875,417 |
1. Nature of Business and Basis
1. Nature of Business and Basis of Presentation | 9 Months Ended |
Sep. 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, and Connecticut. Although New Jersey, Rhode Island, Massachusetts and Connecticut continue to be growing markets for the Company, 84.0% and 86.8% of KICO’s direct written premiums for the three months and nine months ended September 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 nine months ended September 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 | 9 Months Ended |
Sep. 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 accompanying condensed consolidated financial statements consist of Kingstone and its wholly owned subsidiaries, including 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 nine months ended September 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, the 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 | 9 Months Ended |
Sep. 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 September 30, 2019 and December 31, 2018 are summarized as follows: September 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 $ 8,243,486 $ 156,066 $ - $ - $ 8,399,552 $ 156,066 Political subdivisions of States, Territories and Possessions 5,662,999 187,006 - - 5,850,005 187,006 Corporate and other bonds Industrial and miscellaneous 124,956,806 5,365,954 (33,073 ) (20,893 ) 130,268,794 5,311,988 Residential mortgage and other asset backed securities (1) 21,737,713 297,257 (19,924 ) (312,685 ) 21,702,361 (35,352 ) Total $ 160,601,004 $ 6,006,283 $ (52,997 ) $ (333,578 ) $ 166,220,712 $ 5,619,708 (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 FHLBNY credit line. As of September 30, 2019, the estimated fair value of the eligible investments was approximately $5,144,000. KICO will retain all rights regarding all securities if pledged as collateral. As of September 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/ Categor 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 FHLBNY 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 September 30, 2019 and December 31, 2018 is shown below: September 30, 2019 December 31, 2018 Amortized Estimated Amortized Estimated Remaining Time to Maturit Cost Fair Value Cost Fair Value Less than one year $ 12,273,128 $ 12,322,490 $ 6,742,519 $ 6,738,014 One to five years 50,106,836 51,297,620 47,038,838 46,640,012 Five to ten years 74,473,145 78,850,661 76,884,505 74,290,076 More than 10 years 2,010,182 2,047,580 2,974,426 2,644,180 Residential mortgage and other asset backed securities 21,737,713 21,702,361 21,790,973 21,465,234 Total $ 160,601,004 $ 166,220,712 $ 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 September 30, 2019 and December 31, 2018 are as follows: September 30, 2019 Gross Gross Estimated Categor Cost Gains Losses Fair Value Equity Securities: Preferred stocks $ 8,415,227 $ 394,815 $ (16,042 ) $ 8,794,000 Common stocks and exchange traded mutual funds 13,655,339 1,537,211 (487,351 ) 14,705,199 Total $ 22,070,566 $ 1,932,026 $ (503,393 ) $ 23,499,199 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 gains and losses of the Company’s other investments as of September 30, 2019 and December 31, 2018 are as follows: September 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 $ 426,523 $ 2,425,904 $ 1,999,381 $ (144,156 ) $ 1,855,225 Total $ 1,999,381 $ 426,523 $ 2,425,904 $ 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 September 30, 2019 and December 31, 2018 are summarized as follows: September 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 $ 729,539 $ 153,088 $ - $ - $ 882,627 $ 153,088 Political subdivisions of States, Territories and Possessions 998,668 50,357 - - 1,049,025 50,357 Corporate and other bonds Industrial and miscellaneous 2,097,298 98,434 - - 2,195,732 98,434 Total $ 3,825,505 $ 301,879 $ - $ - $ 4,127,384 $ 301,879 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 September 30, 2019 and December 31, 2018 is shown below: September 30, 2019 December 31, 2018 Amortized Estimated Amortized Estimated Remaining Time to Maturity Cost Fair Value Cost Fair Value Less than one year $ 623,000 $ 629,143 $ - $ - One to five years $2,098,950 $2,214,947 2,996,685 3,036,531 Five to ten years $497,016 $529,255 619,663 635,846 More than 10 years $606,539 $754,039 606,507 754,039 Total $ 3,825,505 $ 4,127,384 $ 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 Nine months ended September 30, September 30, 2019 2018 2019 2018 Income: Fixed-maturity securities $ 1,499,135 $ 1,386,931 $ 4,500,346 $ 3,898,730 Equity securities 253,594 214,498 666,247 609,086 Cash and cash equivalents 75,253 44,024 288,334 159,865 Total 1,827,982 1,645,453 5,454,927 4,667,681 Expenses: Investment expenses (28,571 ) 43,082 254,893 124,455 Net investment income $ 1,856,553 $ 1,602,371 $ 5,200,034 $ 4,543,226 Proceeds from the sale and redemption of fixed-maturity securities held-to-maturity were $400,000 and $624,963 for the nine months ended September 30, 2019 and 2018, respectively. Proceeds from the sale or maturity of fixed-maturity securities available-for-sale were $9,835,464 and $17,740,260 for the nine months ended September 30, 2019 and 2018, respectively. Proceeds from the sale of equity securities were $2,941,492 and $5,694,121 for the nine months ended September 30, 2019 and 2018, respectively. The Company’s net gains (losses) on investments are summarized as follows: Three months ended Nine months ended September 30, September 30, 2019 2018 2019 2018 Realized Gains (Losses) Fixed-maturity securities: Gross realized gains $ 10 $ 4,749 $ 10,954 $ 116,961 Gross realized losses (46,851 ) (77,191 ) (92,591 ) (560,418 ) (46,841 ) (72,442 ) (81,637 ) (443,457 ) Equity securities: Gross realized gains 38,477 121,609 83,737 436,859 Gross realized losses - (106,321 ) (56,859 ) (370,705 ) 38,477 15,288 26,878 66,154 Net realized losses (8,364 ) (57,154 ) (54,759 ) (377,303 ) Unrealized Gains (Losses) Equity securities: Gross gains 916,496 - 3,196,260 - Gross losses - 288,435 - (141,976 ) 916,496 288,435 3,196,260 (141,976 ) Other investments: Gross gains 90,030 120,744 570,679 241,444 Gross losses - - - - 90,030 120,744 570,679 241,444 Net unrealized gains 1,006,526 409,179 3,766,939 99,468 Net gains (losses) on investments $ 998,162 $ 352,025 $ 3,712,180 $ (277,835 ) 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 income (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 September 30, 2019 and December 31, 2018, there were 38 and 156 fixed-maturity securities, respectively, that accounted for the gross unrealized loss. The Company determined that none of the unrealized losses were deemed to be OTTI for its portfolio of investments for the nine months ended September 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 September 30, 2019 as follows: September 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: and obligations of U.S. government corporations and agencies $ - $ - - $ - $ - - $ - $ - Political subdivisions of States, Territories and Possessions - - - - - - - - Corporate and other bonds industrial and miscellaneous 3,258,185 (33,073 ) 6 3,170,889 (20,893 ) 6 6,429,074 (53,966 ) Residential mortgage and other asset backed securities 3,008,874 (19,924 ) 3 15,596,316 (312,685 ) 23 18,605,190 (332,609 ) Total fixed-maturity securities $ 6,267,059 $ (52,997 ) 9 $ 18,767,205 $ (333,578 ) 29 $ 25,034,264 $ (386,575 ) 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 | 9 Months Ended |
Sep. 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 September 30, 2019 and December 31, 2018 indicating the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value: September 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 $ 8,399,552 $ - $ - $ 8,399,552 Political subdivisions of States, Territories and Possessions - 5,850,005 - 5,850,005 Corporate and other bonds industrial and miscellaneous 127,148,873 3,119,921 - 130,268,794 Residential mortgage backed securities - 21,702,361 - 21,702,361 Total fixed maturities 135,548,425 30,672,287 - 166,220,712 Equity securities 23,499,199 - - 23,499,199 Total investments $ 159,047,624 $ 30,672,287 $ - $ 189,719,911 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 September 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 September 30, 2019 December 31, 2018 Other Investments: Hedge fund $ 2,425,904 $ 1,855,225 Total $ 2,425,904 $ 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 income (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 September 30, 2019 and December 31, 2018 not measured at fair value is as follows: September 30, 2019 Level 1 Level 2 Level 3 Total Long-term debt Senior Notes due 2022 $ - $ 27,310,623 $ - $ 27,310,623 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 | 9 Months Ended |
Sep. 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 September 30, 2019 and December 31, 2018 are as follows: September 30, 2019 December 31, 2018 Carrying Estimated Carrying Estimated Value Fair Value Value Fair Value Fixed-maturity securities-held-to maturity $ 3,825,505 $ 4,127,384 $ 4,222,855 $ 4,426,416 Cash and cash equivalents $ 25,639,050 $ 25,639,050 $ 21,138,403 $ 21,138,403 Premiums receivable, net $ 14,352,521 $ 14,352,521 $ 13,961,599 $ 13,961,599 Reinsurance receivables, net $ 26,580,449 $ 26,580,449 $ 26,367,115 $ 26,367,115 Real estate, net of accumulated depreciation $ 2,288,851 $ 2,705,000 $ 2,300,827 $ 2,705,000 Reinsurance balances payable $ 809,836 $ 809,836 $ 1,933,376 $ 1,933,376 Long-term debt, net $ 29,427,386 $ 27,310,623 $ 29,295,251 $ 28,521,734 |
6. Property and Casualty Insura
6. Property and Casualty Insurance Activity | 9 Months Ended |
Sep. 30, 2019 | |
Insurance [Abstract] | |
6. Property and Casualty Insurance Activity | Premiums Earned Premiums written, ceded and earned are as follows: Direct Assumed Ceded Net Nine months ended September 30, 2019 Premiums written $ 128,333,117 $ 938 $ (20,914,074 ) $ 107,419,981 Change in unearned premiums (11,035,993 ) (559 ) (1,366,251 ) (12,402,803 ) Premiums earned $ 117,297,124 $ 379 $ (22,280,325 ) $ 95,017,178 Nine months ended September 30, 2018 Premiums written $ 107,175,413 $ 842 $ (19,409,423 ) $ 87,766,832 Change in unearned premiums (9,930,503 ) 3,762 (3,363,953 ) $ (13,290,694 ) Premiums earned $ 97,244,910 $ 4,604 $ (22,773,376 ) $ 74,476,138 Three months ended September 30, 2019 Premiums written $ 46,023,290 $ 861 $ (5,586,278 ) $ 40,437,873 Change in unearned premiums (4,579,777 ) (761 ) (1,637,325 ) (6,217,863 ) Premiums earned $ 41,443,513 $ 100 $ (7,223,603 ) $ 34,220,010 Three months ended September 30, 2018 Premiums written $ 38,785,453 $ 18 $ (2,683,699 ) $ 36,101,772 Change in unearned premiums (4,435,174 ) 698 (4,133,389 ) (8,567,865 ) Premiums earned $ 34,350,279 $ 716 $ (6,817,088 ) $ 27,533,907 Premium receipts in advance of the policy effective date are recorded as advance premiums. The balance of advance premiums as of September 30, 2019 and December 31, 2018 was $3,737,491 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: Nine months ended September 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 60,401,821 41,611,658 Prior years 11,186,029 127,465 Total incurred 71,587,850 41,739,123 Paid related to: Current year 31,515,656 23,404,909 Prior years 18,600,946 12,160,419 Total paid 50,116,602 35,565,328 Net balance at end of period 61,997,107 38,224,509 Add reinsurance recoverables 15,412,316 15,718,448 Balance at end of period $ 77,409,423 $ 53,942,957 Incurred losses and LAE are net of reinsurance recoveries under reinsurance contracts of $8,849,440 and $11,668,527 for the nine months ended September 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 nine months ended September 30, 2019 and 2018 was $11,186,029 unfavorable and $127,465 unfavorable, respectively. During the nine months ended September 30, 2019, the Company increased case reserves for a significant number of older liability claims, which primarily affected the ultimate loss projections for commercial lines business. These adjustments were in line with management’s continued process of monitoring claims activity to assess the appropriateness of carried case and incurred but not reported (“IBNR”) reserves, giving consideration to both 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 is critical to the review of appropriate IBNR reserves and includes a review of coverage applicability, comparative liability on the part of the insured, injury severity, property damage, replacement cost estimates, and any other information considered pertinent to estimating the exposure presented by the claim. The amounts of loss and LAE reserves for unreported claims and development on known claims (IBNR reserves) are determined using historical information aggregated by line of insurance as adjusted to current conditions. Since this process produces loss reserves set by management based upon the actuaries’ best estimate, there is no explicit or implicit provision for uncertainty in the carried loss reserves. 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 Frequency / Severity Based Methods Management’s best estimate of required reserves is generally based on an average of the methods above, with appropriate weighting of methods based on the line of business and accident year being projected. In some cases, additional methods or historical data from industry sources are employed to supplement the projections derived from the methods listed above. 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 contemplated in setting current carried reserves levels. In New York State, lawsuits for negligence are subject to certain limitations and must be commenced within three years from the date of the accident or are otherwise barred. Accordingly, the Company’s exposure to unreported claims (“pure” IBNR) for accident dates of September 30, 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 September 30, 2019, net of reinsurance, as well as the cumulative reported claims by accident year and total IBNR reserves as of September 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) As of Incurred Loss and Allocated Loss Adjustment Expenses, Net of Reinsurance September 30, 2019 For the Years Ended December 31, Nine IBNR Cumulative Number of Reported Claims by Accident Year Accident Year 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 (Unaudited 2010 - 2018) (Unaudited) 2010 $5,598 $5,707 $6,429 $6,623 $6,912 $6,853 $6,838 $6,840 $6,787 $ 6,793 $ - 1,617 2011 7,603 7,678 8,618 9,440 9,198 9,066 9,144 9,171 9,161 14 1,914 2012 9,539 9,344 10,278 10,382 10,582 10,790 10,791 11,016 79 4,704 (1) 2013 10,728 9,745 9,424 9,621 10,061 10,089 10,571 95 1,561 2014 14,193 14,260 14,218 14,564 15,023 16,576 454 2,134 2015 22,340 21,994 22,148 22,491 23,408 311 2,555 2016 26,062 24,941 24,789 28,209 883 2,873 2017 31,605 32,169 34,848 879 3,368 2018 54,455 56,320 3,091 4,162 2019 57,364 16,404 3,118 Total $ 254,266 (1) Reported claims for accident year 2012 includes 3,406 claims from Superstorm Sandy. All Lines of Business (in thousands) Cumulative Paid Loss and Allocated Loss Adjustment Expenses, Net of Reinsurance For the Years Ended December 31, Nine Accident 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 8,778 2012 3,950 5,770 7,127 8,196 9,187 10,236 10,323 10,422 2013 3,405 5,303 6,633 7,591 8,407 9,056 9,235 2014 5,710 9,429 10,738 11,770 13,819 14,692 2015 12,295 16,181 18,266 19,984 20,982 2016 15,364 19,001 21,106 22,988 2017 16,704 24,820 27,470 2018 32,383 43,383 2019 30,115 Total $ 194,845 Net liability for unpaid loss and allocated loss adjustment expenses for the accident years presented $ 59,421 All outstanding liabilities before 2010, net of reinsurance 143 Liabilities for loss and allocated loss adjustment expenses, net of reinsurance $ 59,564 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) September 30, 2019 Liabilities for loss and loss adjustment expenses, net of reinsurance $ 59,564 Total reinsurance recoverable on unpaid losses 15,412 Unallocated loss adjustment expenses 2,433 Total gross liability for loss and LAE reserves $ 77,409 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 during the nine months ended September 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 during the nine months ended September 30, 2019 was covered under the July 1, 2018 through June 30, 2019 treaty year (“2018/2019 Treaty Year”). The treaties in effect during the nine months ended September 30, 2018 were covered under the July 1, 2017 through June 30, 2018 treaty year (“2017/2018 Treaty Year”) and the 2018/2019 Treaty Year that began on July 1, 2018. 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 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% 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 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 Company’s reinsurance program has been structured to enable the Company to grow its premium volume while maintaining regulatory capital and other financial ratios generally within or below the expected ranges used for regulatory oversight purposes. The reinsurance program also provides income as a result of ceding commissions earned pursuant to the quota share reinsurance contracts. The Company’s participation in reinsurance arrangements does not relieve the Company of its obligations to policyholders. Ceding Commission Revenue The Company 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 during the nine months ended September 30, 2019 are attributable to contracts under the 2017/2019 Treaty for the 2018/2019 Treaty Year, which expired on June 30, 2019 and was not renewed. The Loss Ratios for treaties in effect for the three months ended September 30, 2018 are attributable to contracts under the 2017/2019 Treaty for the 2018/2019 Treaty Year. The Loss Ratios for treaties in effect for the nine months ended September 30, 2018 are attributable to contracts under the 2017/2019 Treaty for both the 2017/2018 Treaty Year and the 2018/2019 Treaty Year. Treaty in effect during the three months and nine months ended September 30, 2019 There was no current quota share treaty in effect during the three months ended September 30, 2019, and therefore no current contingent commission adjustment was recorded for the three months ended September 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 nine months ended September 30, 2019. Treaties in effect for the three months and nine months ended September 30, 2018 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”). 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 ended September 30, 2018. For the nine months ended September 30, 2018, the Company incurred negative contingent ceding commissions as a result of the Loss Period Loss Ratio for the 2017/2019 Treaty, which reduced contingent ceding commissions earned. In addition to the treaties that were in effect during the three months and nine months ended September 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 Nine months ended September 30, September 30, 2019 2018 2019 2018 Provisional ceding commissions earned $ 1,320,069 $ 1,255,034 $ 4,001,294 $ 5,468,314 Contingent ceding commissions earned (290,487 ) (210,505 ) (1,018,334 ) (1,037,459 ) $ 1,029,582 $ 1,044,529 $ 2,982,960 $ 4,430,855 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 September 30, 2019 and December 31, 2018, net contingent ceding commissions payable to reinsurers under all treaties was approximately $3,060,000 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 6,793 commercial lines policies in force as of September 30, 2019 and approximately $12,179,000 in earned premiums for the nine months ended September 30, 2019. As of June 30, 2019 the Company had 7,770 commercial lines policies in force. For the nine months ended September 30, 2019, these policies represented approximately 12% of net premiums earned. As of September 30, 2019, claims from these commercial lines represent 46% of loss and loss adjustment expense reserves net of reinsurance recoverables. In force policies for these lines will be non-renewed at the end of their current annual terms. All existing inforce Commercial Lines policies will expire by September 30, 2020. |
7. Debt
7. Debt | 9 Months Ended |
Sep. 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 September 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 September 30, 2019 was approximately $11,502,000. Advances are limited to 90% of the amount of available collateral, which was approximately $4,630,000 as of September 30, 2019. There were no borrowings under this facility during the nine months ended September 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 September 30, 2019 and December 31, 2018 is as follows: September 30, December 31, 2019 2018 5.50% Senior Unsecured Notes $ 30,000,000 $ 30,000,000 Discount (105,465 ) (129,796 ) Issuance costs (467,149 ) (574,953 ) Long-term debt, net $ 29,427,386 $ 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 in order 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 | 9 Months Ended |
Sep. 30, 2019 | |
Stockholders' Equity | |
8. Stockholders' Equity | Dividends Declared and Paid Dividends declared and paid on common stock were $2,827,276 and $3,204,813 for the nine months ended September 30, 2019 and 2018, respectively. The Company’s Board of Directors approved a quarterly dividend on November 11, 2019 of $0.0625 per share payable in cash on December 13, 2019 to stockholders of record as of November 29, 2019 (see Note 13). Stock Options 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 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. The results of operations for the three months ended September 30, 2019 and 2018 include stock-based compensation expense related to the 2014 Plan totaling approximately $19,800 and $1,000, respectively. The results of operations for the nine months ended September 30, 2019 and 2018 include stock-based compensation expense related to stock options totaling approximately $20,800 and $5,000, respectively. Stock-based compensation expense related to stock options is net of estimated forfeitures of approximately 17% for the three months and nine months ended September 30, 2019 and 2018. Such amounts have been included in the condensed consolidated statements of operations and comprehensive income (loss) within other operating expenses. Stock-based compensation expense for the nine months ended September 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. The weighted average estimated fair value of stock options granted during the nine months ended September 30, 2019 was $1.91 per share. No options were granted during the nine months September 30, 2018. The fair value of stock options at the grant date was estimated using the Black-Scholes option-pricing model. The following weighted average assumptions were used for grants during the following periods: Nine months ended September 30, 2019 2018 Dividend Yield 2.87 % n/a Volatility 36.11 % n/a Risk-Free Interest Rate 1.61 % n/a Expected Life 3.25 years n/a 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 the Company’s stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management's opinion, the existing models do not necessarily provide a reliable single measure of the fair value of our stock options. A summary of stock option activity under the Company’s 2014 Plan for the nine months ended September 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 50,000 $ 8.72 $ - Exercised (3,000 ) $ 7.85 $ 6,270 Forfeited (2,500 ) $ 7.85 2.04 $ 13,588 Outstanding at September 30, 2019 82,000 $ 8.61 3.63 $ 11,390 Vested and Exercisable at September 30, 2019 50,000 $ 8.45 2.41 $ 15,075 The aggregate intrinsic value of options outstanding and options exercisable at September 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 $8.52 closing price of the Company’s Common Stock on September 30, 2019. The total intrinsic value of options exercised during the nine months ended September 30, 2019 was $6,270, determined as of the date of exercise. The total intrinsic value of options forfeited during the nine months ended September 30, 2019 was $13,588, determined as of the date of forfeiture. Participants in the 2014 Plan may exercise their outstanding vested options, in whole or in part, by having the Company reduce the number of shares otherwise issuable by a number of shares having a fair market value equal to the exercise price of the option being exercised (“Net Exercise”), or by exchanging a number of shares owned for a period of greater than one year having a fair market value equal to the exercise price of the option being exercised (“Share Exchange”). The Company received cash proceeds of $23,552 from the exercise of options for the purchase of 3,000 shares of Common Stock during the nine months ended September 30, 2019. The Company received cash proceeds of $74,139 from the exercise of options for the purchase of 12,750 shares of Common Stock during the nine months ended September 30, 2018. The Company received 7,855 shares from the exercise of options under a Share Exchange for the purchase of 30,000 shares of Common Stock during the nine months ended September 30, 2018. The remaining 132,500 options exercised during the nine months ended September 30, 2018 were Net Exercises, resulting in the issuance of 54,231 shares of Common Stock. As of September 30, 2019, the fair value of unamortized compensation cost related to unvested stock option awards was approximately $59,000. Unamortized compensation cost as of September 30, 2019 is expected to be recognized over a remaining weighted-average vesting period of 1.99 years. As of September 30, 2019, there were 390,338 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 nine months ended September 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 (44,410 ) $ 17.18 $ (763,103 ) Forfeited (10,459 ) $ 15.79 $ (165,171 ) Balance at September 30, 2019 186,216 $ 16.47 $ 3,071,388 Fair value was calculated using the closing price of the Company’s Common Stock on the grant date. For the three months ended September 30, 2019 and 2018, stock-based compensation for these grants was approximately $388,000 and $196,000, respectively, which is included in other operating expenses on the accompanying condensed consolidated statements of operations and comprehensive income (loss). For the nine months ended September 30, 2019 and 2018, stock-based compensation for these grants of approximately $1,096,000 and $477,000, respectively, for these grants is included in other operating expenses in the condensed consolidated statements of operations 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 | 9 Months Ended |
Sep. 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: September 30, December 31, 2019 2018 Deferred tax asset: Net operating loss carryovers (1) $ 2,418,344 $ 90,438 Claims reserve discount 526,114 343,905 Unearned premium 3,735,054 3,145,682 Deferred ceding commission revenue 384,063 564,202 Other 680,204 383,733 Total deferred tax assets 7,743,779 4,527,960 Deferred tax liability: Investment in KICO (2) 759,543 759,543 Deferred acquisition costs 4,303,229 3,760,625 Intangibles 105,000 140,700 Depreciation and amortization 515,487 664,194 Net unrealized gains (losses) of securities - available for sale 1,520,225 (1,151,335 ) Total deferred tax liabilities 7,203,484 4,173,727 Net deferred income tax asset $ 540,295 $ 354,233 (1) The deferred tax assets from net operating loss carryovers (“NOL”) are as follows: September 30, December 31, Type of NOL 2019 2018 Expiration Federal only, current year $ 2,347,962 $ - None Amount subject to Annual Limitation, federal only - 2,100 December 31, 2019 Total federal only 2,347,962 2,100 State only (A) 1,454,929 1,305,365 December 31, 2039 Valuation allowance (1,384,547 ) (1,217,027 ) State only, net of valuation allowance 70,382 88,338 Total deferred tax asset from net operating loss carryovers $ 2,418,344 $ 90,438 (A) Kingstone generates operating losses for state purposes and has prior year NOLs available. The state NOL as of September 30, 2019 and December 31, 2018 was approximately $22,384,000 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 nine months ended September 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 | 9 Months Ended |
Sep. 30, 2019 | |
(Loss) Earnings 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 three months and nine months ended September 30, 2019, no options were included in the computation of diluted earnings/(loss) per common share as they would have been anti-dilutive for the relevant periods and, as a result, the weighted average number of common shares 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 Nine months ended September 30, September 30, 2019 2018 2019 2018 Weighted average number of shares outstanding 10,779,641 10,681,329 10,769,817 10,672,084 Effect of dilutive securities, common share equivalents Stock options - 98,749 - 100,628 Restricted stock awards - 11,045 - 7,878 Weighted average number of shares outstanding, used for computing diluted earnings per share 10,779,641 10,791,123 10,769,817 10,780,590 |
11. Commitments and Contingenci
11. Commitments and Contingencies | 9 Months Ended |
Sep. 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. On July 8, 2019, the Company entered into a lease agreement for an additional office facility for Cosi located in Valley Stream, New York under a non-cancelable operating lease. 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 November 15, 2019. The lease has a term of seven years and two months expiring December 31, 2026. 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 (exclusive of the Cosi lease facility discussed above, which has not yet commenced) is as follows: Three months ended Nine months ended Lease cost September 30, 2019 September 30, 2019 Operating lease $ 41,342 $ 124,026 Short-term leases - - Total lease cost (1) $ 41,342 $ 124,026 Other information on operating lease Cash payments included in the measurement of lease liability reported in operating cash flows $ 42,827 $ 127,034 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 September 30, 2019: For the Year Ending December 31, Total Remainder of 2019 $ 42,827 2020 255,624 2021 264,571 2022 273,831 2023 283,415 Thereafter 333,654 Total undiscounted lease payments 1,453,922 Less: present value adjustment 230,834 Operating lease liability $ 1,223,088 Rent expense for the three months ended September 30, 2019 and 2018 amounted to $41,342 for each period. Rent expense for the nine months ended September 30, 2019 and 2018 amounted to $124,026 for each period. Rent expense is included in the accompanying condensed consolidated statements of operations and comprehensive income (loss) within other underwriting expenses. Employment Agreements Dale A. Thatcher Effective July 19, 2019 (the “Separation Date”), Dale A. Thatcher retired and resigned his positions as Chief Executive Officer and President of the Company and KICO. 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. Barry Goldstein, President, Chief Executive Officer and Executive Chairman of the Board On October 14, 2019, the Company and Barry B. Goldstein, the Company’s President, Chief Executive Officer and Executive Chairman of the Board, entered into a Second Amended and Restated Employment Agreement (the “Amended Employment Agreement”). The Amended Employment Agreement is effective as of January 1, 2020 and expires on December 31, 2022. The Amended Employment Agreement extends the expiration date of the employment agreement in effect for Mr. Goldstein from December 31, 2021 to December 31, 2022. Pursuant to the Amended Employment Agreement, Mr. Goldstein is entitled to receive an annual base salary of $500,000 and an annual bonus equal to 6% of the Company’s consolidated income from operations before taxes, exclusive of the Company’s consolidated net investment income (loss), net unrealized gains (losses) on equity securities and net realized gains (losses) on investments, up to a maximum of 2.5 times his base salary. In addition, pursuant to the Amended Employment Agreement, Mr. Goldstein is entitled to receive a long-term compensation award (“LTC”) of between $945,000 and $2,835,000 based on a specified minimum increase in the Company’s adjusted book value per share (as defined in the Amended Employment Agreement) as of December 31, 2022 as compared to December 31, 2019 (with the maximum LTC payment being due if the average per annum increase is at least 14%). Further, pursuant to the Amended Employment Agreement, in the event that Mr. Goldstein’s employment is terminated by the Company without cause or he resigns for good reason (each as defined in the Amended Employment Agreement), Mr. Goldstein would be entitled to receive his base salary, the 6% bonus and the LTC payment for the remainder of the term. Mr. Goldstein would be entitled, under certain circumstances, to a payment equal to 3.82 times his then annual salary, the target LTC payment of $1,890,000 and his accrued 6% bonus in the event of the termination of his employment following a change of control of the Company. Pursuant to the Amended Employment Agreement, Mr. Goldstein will be entitled to receive a grant, under the terms of the Company’s 2014 Plan, during January 2020, of a number of shares of restricted stock determined by dividing $1,250,000 by the fair market value of the Company’s common stock on the date of grant. The January 2020 grant will become vested with respect to one-third of the award on each of the first and second anniversaries of the grant date and on December 31, 2022 based on continued provision of services on each vesting date. Also pursuant to the Amended Employment Agreement, Mr. Goldstein will be entitled to receive a grant, under the terms of the 2014 Plan, during January 2021, of a number of shares of restricted stock determined by dividing $1,500,000 by the fair market value of the Company’s common stock on the date of grant. The January 2021 grant will become vested with respect to one-half of the award on each of the first anniversary of the grant date and on December 31, 2022 based on continued provision of services on each vesting date. Further, pursuant to the Amended Employment Agreement, Mr. Goldstein will be entitled to receive a grant, under the terms of the 2014 Plan, during each of 2020, 2021 and 2022, of a number of shares of restricted stock determined by dividing $136,500 by the fair market value of the Company’s common stock on the date of grant. The 2020 grant will become vested with respect to one-third of the award on each of the first and second anniversaries of the grant date and on December 31, 2022. The 2021 grant will become vested with respect to one-half of the award on each of the first anniversary of the grant date and on December 31, 2022. The 2022 grant will become vested on December 31, 2022. Meryl Golden, Chief Operating Officer On September 16, 2019, the Company and Meryl Golden entered into an employment agreement (the “Golden Employment Agreement”) pursuant to which Ms. Golden serves as the Company’s Chief Operating Officer. Ms. Golden also serves KICO’s Chief Operating Officer. The Golden Employment Agreement became effective as of September 25, 2019 and expires on December 31, 2021. Pursuant to the Golden Employment Agreement, Ms. Golden is entitled to receive an annual salary of $500,000. The Golden Employment also provides for the grant on the effective date of a five year option for the purchase of 50,000 shares of the Company’s common stock pursuant to the 2014 Plan. The options granted will vest in three equal installments, with the first installment vesting on the grant date, and the remaining installments vesting on the first and second anniversaries following the grant date, subject to the terms of the option grant agreement between the Company and Ms. Golden. |
12. Deferred Compensation Plan
12. Deferred Compensation Plan | 9 Months Ended |
Sep. 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 September 30, 2019 and December 31, 2018 amounted to $530,744 and $298,638, respectively, and is recorded in accounts payable, accrued expenses and other liabilities in the accompanying condensed consolidated balance sheets. The Company did not make any voluntary contributions for the nine months ended September 30, 2019. |
13. Subsequent Events
13. Subsequent Events | 9 Months Ended |
Sep. 30, 2019 | |
Subsequent Events [Abstract] | |
13. Subsequent Events | The Company has evaluated events that occurred subsequent to September 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. Employment Agreements See Note 11 - Commitments and Contingencies. Dividends Declared On November 11, 2019, the Company’s Board of Directors approved a quarterly dividend of $0.0625 per share payable in cash on December 13, 2019 to stockholders of record as of the close of business on November 29, 2019 (see Note 8). Capital Contribution to KICO On November 11, 2019, the Company’s Board of Directors approved a $3,000,000 capital contribution to KICO, which is subject to approval from the New York State Department of Financial Services. |
2. Accounting Policies (Policie
2. Accounting Policies (Policies) | 9 Months Ended |
Sep. 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 accompanying condensed consolidated financial statements consist of Kingstone and its wholly owned subsidiaries, including 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 nine months ended September 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, the 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) | 9 Months Ended |
Sep. 30, 2019 | |
Investments [Abstract] | |
Schedule of available for sale securities | September 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 $ 8,243,486 $ 156,066 $ - $ - $ 8,399,552 $ 156,066 Political subdivisions of States, Territories and Possessions 5,662,999 187,006 - - 5,850,005 187,006 Corporate and other bonds Industrial and miscellaneous 124,956,806 5,365,954 (33,073 ) (20,893 ) 130,268,794 5,311,988 Residential mortgage and other asset backed securities (1) 21,737,713 297,257 (19,924 ) (312,685 ) 21,702,361 (35,352 ) Total $ 160,601,004 $ 6,006,283 $ (52,997 ) $ (333,578 ) $ 166,220,712 $ 5,619,708 December 31, 2018 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 $ 8,222,050 $ 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 ) |
Schedule of equity securities | September 30, 2019 Gross Gross Estimated Categor Cost Gains Losses Fair Value Equity Securities: Preferred stocks $ 8,415,227 $ 394,815 $ (16,042 ) $ 8,794,000 Common stocks and exchange traded mutual funds 13,655,339 1,537,211 (487,351 ) 14,705,199 Total $ 22,070,566 $ 1,932,026 $ (503,393 ) $ 23,499,199 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 | September 30, 2019 December 31, 2018 Amortized Estimated Amortized Estimated Remaining Time to Maturit Cost Fair Value Cost Fair Value Less than one year $ 12,273,128 $ 12,322,490 $ 6,742,519 $ 6,738,014 One to five years 50,106,836 51,297,620 47,038,838 46,640,012 Five to ten years 74,473,145 78,850,661 76,884,505 74,290,076 More than 10 years 2,010,182 2,047,580 2,974,426 2,644,180 Residential mortgage and other asset backed securities 21,737,713 21,702,361 21,790,973 21,465,234 Total $ 160,601,004 $ 166,220,712 $ 155,431,261 $ 151,777,516 |
Schedule of other investments | September 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 $ 426,523 $ 2,425,904 $ 1,999,381 $ (144,156 ) $ 1,855,225 Total $ 1,999,381 $ 426,523 $ 2,425,904 $ 1,999,381 $ (144,156 ) $ 1,855,225 |
Schedule of held to maturity securities | September 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 $ 729,539 $ 153,088 $ - $ - $ 882,627 $ 153,088 Political subdivisions of States, Territories and Possessions 998,668 50,357 - - 1,049,025 50,357 Corporate and other bonds Industrial and miscellaneous 2,097,298 98,434 - - 2,195,732 98,434 Total $ 3,825,505 $ 301,879 $ - $ - $ 4,127,384 $ 301,879 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 | September 30, 2019 December 31, 2018 Amortized Estimated Amortized Estimated Remaining Time to Maturity Cost Fair Value Cost Fair Value Less than one year $ 623,000 $ 629,143 $ - $ - One to five years $2,098,950 $2,214,947 2,996,685 3,036,531 Five to ten years $497,016 $529,255 619,663 635,846 More than 10 years $606,539 $754,039 606,507 754,039 Total $ 3,825,505 $ 4,127,384 $ 4,222,855 $ 4,426,416 |
Schedule of investment income | Three months ended Nine months ended September 30, September 30, 2019 2018 2019 2018 Income: Fixed-maturity securities $ 1,499,135 $ 1,386,931 $ 4,500,346 $ 3,898,730 Equity securities 253,594 214,498 666,247 609,086 Cash and cash equivalents 75,253 44,024 288,334 159,865 Total 1,827,982 1,645,453 5,454,927 4,667,681 Expenses: Investment expenses (28,571 ) 43,082 254,893 124,455 Net investment income $ 1,856,553 $ 1,602,371 $ 5,200,034 $ 4,543,226 |
Schedule of securities with realized gains and losses on investments | Three months ended Nine months ended September 30, September 30, 2019 2018 2019 2018 Realized Gains (Losses) Fixed-maturity securities: Gross realized gains $ 10 $ 4,749 $ 10,954 $ 116,961 Gross realized losses (46,851 ) (77,191 ) (92,591 ) (560,418 ) (46,841 ) (72,442 ) (81,637 ) (443,457 ) Equity securities: Gross realized gains 38,477 121,609 83,737 436,859 Gross realized losses - (106,321 ) (56,859 ) (370,705 ) 38,477 15,288 26,878 66,154 Net realized losses (8,364 ) (57,154 ) (54,759 ) (377,303 ) Unrealized Gains (Losses) Equity securities: Gross gains 916,496 - 3,196,260 - Gross losses - 288,435 - (141,976 ) 916,496 288,435 3,196,260 (141,976 ) Other investments: Gross gains 90,030 120,744 570,679 241,444 Gross losses - - - - 90,030 120,744 570,679 241,444 Net unrealized gains 1,006,526 409,179 3,766,939 99,468 Net gains (losses) on investments $ 998,162 $ 352,025 $ 3,712,180 $ (277,835 ) |
Schedule of securities with unrealized losses | September 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: and obligations of U.S. government corporations and agencies $ - $ - - $ - $ - - $ - $ - Political subdivisions of States, Territories and Possessions - - - - - - - - Corporate and other bonds industrial and miscellaneous 3,258,185 (33,073 ) 6 3,170,889 (20,893 ) 6 6,429,074 (53,966 ) Residential mortgage and other asset backed securities 3,008,874 (19,924 ) 3 15,596,316 (312,685 ) 23 18,605,190 (332,609 ) Total fixed-maturity securities $ 6,267,059 $ (52,997 ) 9 $ 18,767,205 $ (333,578 ) 29 $ 25,034,264 $ (386,575 ) 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) | 9 Months Ended |
Sep. 30, 2019 | |
Fair Value Disclosures [Abstract] | |
Schedule of fair value measurements | September 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 $ 8,399,552 $ - $ - $ 8,399,552 Political subdivisions of States, Territories and Possessions - 5,850,005 - 5,850,005 Corporate and other bonds industrial and miscellaneous 127,148,873 3,119,921 - 130,268,794 Residential mortgage backed securities - 21,702,361 - 21,702,361 Total fixed maturities 135,548,425 30,672,287 - 166,220,712 Equity securities 23,499,199 - - 23,499,199 Total investments $ 159,047,624 $ 30,672,287 $ - $ 189,719,911 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 September 30, 2019 December 31, 2018 Other Investments: Hedge fund $ 2,425,904 $ 1,855,225 Total $ 2,425,904 $ 1,855,225 |
Fair value hierarchy of long-term debt | September 30, 2019 Level 1 Level 2 Level 3 Total Long-term debt Senior Notes due 2022 $ - $ 27,310,623 $ - $ 27,310,623 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) | 9 Months Ended |
Sep. 30, 2019 | |
Fair Value Disclosures [Abstract] | |
Schedule of fair value of financial instruments | September 30, 2019 December 31, 2018 Carrying Estimated Carrying Estimated Value Fair Value Value Fair Value Fixed-maturity securities-held-to maturity $ 3,825,505 $ 4,127,384 $ 4,222,855 $ 4,426,416 Cash and cash equivalents $ 25,639,050 $ 25,639,050 $ 21,138,403 $ 21,138,403 Premiums receivable, net $ 14,352,521 $ 14,352,521 $ 13,961,599 $ 13,961,599 Reinsurance receivables, net $ 26,580,449 $ 26,580,449 $ 26,367,115 $ 26,367,115 Real estate, net of accumulated depreciation $ 2,288,851 $ 2,705,000 $ 2,300,827 $ 2,705,000 Reinsurance balances payable $ 809,836 $ 809,836 $ 1,933,376 $ 1,933,376 Long-term debt, net $ 29,427,386 $ 27,310,623 $ 29,295,251 $ 28,521,734 |
6. Property and Casualty Insu_2
6. Property and Casualty Insurance Activity (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Insurance [Abstract] | |
Schedule of earned premiums | Direct Assumed Ceded Net Nine months ended September 30, 2019 Premiums written $ 128,333,117 $ 938 $ (20,914,074 ) $ 107,419,981 Change in unearned premiums (11,035,993 ) (559 ) (1,366,251 ) (12,402,803 ) Premiums earned $ 117,297,124 $ 379 $ (22,280,325 ) $ 95,017,178 Nine months ended September 30, 2018 Premiums written $ 107,175,413 $ 842 $ (19,409,423 ) $ 87,766,832 Change in unearned premiums (9,930,503 ) 3,762 (3,363,953 ) $ (13,290,694 ) Premiums earned $ 97,244,910 $ 4,604 $ (22,773,376 ) $ 74,476,138 Three months ended September 30, 2019 Premiums written $ 46,023,290 $ 861 $ (5,586,278 ) $ 40,437,873 Change in unearned premiums (4,579,777 ) (761 ) (1,637,325 ) (6,217,863 ) Premiums earned $ 41,443,513 $ 100 $ (7,223,603 ) $ 34,220,010 Three months ended September 30, 2018 Premiums written $ 38,785,453 $ 18 $ (2,683,699 ) $ 36,101,772 Change in unearned premiums (4,435,174 ) 698 (4,133,389 ) (8,567,865 ) Premiums earned $ 34,350,279 $ 716 $ (6,817,088 ) $ 27,533,907 |
Schedule of loss and loss adjustment expenses | Nine months ended September 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 60,401,821 41,611,658 Prior years 11,186,029 127,465 Total incurred 71,587,850 41,739,123 Paid related to: Current year 31,515,656 23,404,909 Prior years 18,600,946 12,160,419 Total paid 50,116,602 35,565,328 Net balance at end of period 61,997,107 38,224,509 Add reinsurance recoverables 15,412,316 15,718,448 Balance at end of period $ 77,409,423 $ 53,942,957 |
Allocated claim adjustment expenses | (in thousands, except reported claims data) Incurred Loss and Allocated Loss Adjustment Expenses, Net of Reinsurance As Of September 30, 2019 For the Years Ended December 31, Accident Year 2010 2011 2012 2013 2014 2015 2016 2017 2018 Nine Months Ended September 30, 2019 IBNR Cumulative Number of Reported Claims by Accident Year (Unaudited 2010 - 2018) (Unaudited) 2010 $ 5,598 $ 5,707 $ 6,429 $ 6,623 $ 6,912 $ 6,853 $ 6,838 $ 6,840 $ 6,787 $ 6,793 $ - 1,617 2011 7,603 7,678 8,618 9,440 9,198 9,066 9,144 9,171 9,161 14 1,914 2012 9,539 9,344 10,278 10,382 10,582 10,790 10,791 11,016 79 4,704 (1) 2013 10,728 9,745 9,424 9,621 10,061 10,089 10,571 95 1,561 2014 14,193 14,260 14,218 14,564 15,023 16,576 454 2,134 2015 22,340 21,994 22,148 22,491 23,408 311 2,555 2016 26,062 24,941 24,789 28,209 883 2,873 2017 31,605 32,169 34,848 879 3,368 2018 54,455 56,320 3,091 4,162 2019 57,364 16,404 3,118 Total $ 254,266 (1) Reported claims for accident year 2012 includes 3,406 claims from Superstorm Sandy. All Lines of Business (in thousands) Cumulative Paid Loss and Allocated Loss Adjustment Expenses, Net of Reinsurance For the Years Ended December 31, Nine Months Ended September 30, Accident Year 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 8,778 2012 3,950 5,770 7,127 8,196 9,187 10,236 10,323 10,422 2013 3,405 5,303 6,633 7,591 8,407 9,056 9,235 2014 5,710 9,429 10,738 11,770 13,819 14,692 2015 12,295 16,181 18,266 19,984 20,982 2016 15,364 19,001 21,106 22,988 2017 16,704 24,820 27,470 2018 32,383 43,383 2019 30,115 Total $ 194,845 |
Reconciliation of the net incurred and paid claims | As of (in thousands) September 30, 2019 Liabilities for loss and loss adjustment expenses, net of reinsurance $ 59,564 Total reinsurance recoverable on unpaid losses 15,412 Unallocated loss adjustment expenses 2,433 Total gross liability for loss and LAE reserves $ 77,409 |
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 |
Schedule of single maximum risks under treaties | 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% Catastrophe (4) Initial $7,500,000 $7,500,000 $7,500,000 - $610,000,000 None Over $610,000,000 100% 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% |
Schedule of ceding commission revenue | Three months ended Nine months ended September 30, September 30, 2019 2018 2019 2018 Provisional ceding commissions earned $ 1,320,069 $ 1,255,034 $ 4,001,294 $ 5,468,314 Contingent ceding commissions earned (290,487 ) (210,505 ) (1,018,334 ) (1,037,459 ) $ 1,029,582 $ 1,044,529 $ 2,982,960 $ 4,430,855 |
7. Debt (Tables)
7. Debt (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Debt Disclosure [Abstract] | |
Schedule of debt | September 30, December 31, 2019 2018 5.50% Senior Unsecured Notes $ 30,000,000 $ 30,000,000 Discount (105,465 ) (129,796 ) Issuance costs (467,149 ) (574,953 ) Long-term debt, net $ 29,427,386 $ 29,295,251 |
8. Stockholders' Equity (Tables
8. Stockholders' Equity (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Stockholders' Equity | |
Schedule of stock options activity | Nine months ended September 30, 2019 2018 Dividend Yield 2.87 % n/a Volatility 36.11 % n/a Risk-Free Interest Rate 1.61 % n/a Expected Life 3.25 years n/a 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 50,000 $ 8.72 $ - Exercised (3,000 ) $ 7.85 $ 6,270 Forfeited (2,500 ) $ 7.85 2.04 $ 13,588 Outstanding at September 30, 2019 82,000 $ 8.61 3.63 $ 11,390 Vested and Exercisable at September 30, 2019 50,000 $ 8.45 2.41 $ 15,075 |
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 (44,410 ) $ 17.18 $ (763,103 ) Forfeited (10,459 ) $ 15.79 $ (165,171 ) Balance at September 30, 2019 186,216 $ 16.47 $ 3,071,388 |
9. Income Taxes (Tables)
9. Income Taxes (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Income Tax Disclosure [Abstract] | |
Schedule of deferrred tax assets and liabilities | September 30, December 31, 2019 2018 Deferred tax asset: Net operating loss carryovers (1) $ 2,418,344 $ 90,438 Claims reserve discount 526,114 343,905 Unearned premium 3,735,054 3,145,682 Deferred ceding commission revenue 384,063 564,202 Other 680,204 383,733 Total deferred tax assets 7,743,779 4,527,960 Deferred tax liability: Investment in KICO (2) 759,543 759,543 Deferred acquisition costs 4,303,229 3,760,625 Intangibles 105,000 140,700 Depreciation and amortization 515,487 664,194 Net unrealized gains (losses) of securities - available for sale 1,520,225 (1,151,335 ) Total deferred tax liabilities 7,203,484 4,173,727 Net deferred income tax asset $ 540,295 $ 354,233 |
Losses subject to annual limitation | September 30, December 31, Type of NOL 2019 2018 Expiration Federal only, current year $ 2,347,962 $ - None Amount subject to Annual Limitation, federal only - 2,100 December 31, 2019 Total federal only 2,347,962 2,100 State only (A) 1,454,929 1,305,365 December 31, 2039 Valuation allowance (1,384,547 ) (1,217,027 ) State only, net of valuation allowance 70,382 88,338 Total deferred tax asset from net operating loss carryovers $ 2,418,344 $ 90,438 |
10. Earnings_(Loss) Per Commo_2
10. Earnings/(Loss) Per Common Share (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
(Loss) Earnings per common share: | |
Schedule of net earnings/(loss) per common share | Three months ended Nine months ended September 30, September 30, 2019 2018 2019 2018 Weighted average number of shares outstanding 10,779,641 10,681,329 10,769,817 10,672,084 Effect of dilutive securities, common share equivalents Stock options - 98,749 - 100,628 Restricted stock awards - 11,045 - 7,878 Weighted average number of shares outstanding, used for computing diluted earnings per share 10,779,641 10,791,123 10,769,817 10,780,590 |
11. Commitments and Contingen_2
11. Commitments and Contingencies (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
Lease cost | Three months ended Nine months ended Lease cost September 30, 2019 September 30, 2019 Operating lease $ 41,342 $ 124,026 Short-term leases - - Total lease cost (1) $ 41,342 $ 124,026 Other information on operating lease Cash payments included in the measurement of lease liability reported in operating cash flows $ 42,827 $ 127,034 Discount rate 5.50 % 5.50 % Remaining lease term in years 5 years 5 years |
Schedule of lease liability maturities | For the Year Ending December 31, Total Remainder of 2019 $ 42,827 2020 255,624 2021 264,571 2022 273,831 2023 283,415 Thereafter 333,654 Total undiscounted lease payments 1,453,922 Less: present value adjustment 230,834 Operating lease liability $ 1,223,088 |
3. Investments (Details)
3. Investments (Details) - USD ($) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2019 | Dec. 31, 2018 | |
U.S. Treasury Securities and Obligations of U.S. Government [Member] | ||
Cost or amortized cost | $ 8,243,486 | $ 8,222,050 |
Gross unrealized gains | 156,066 | 26,331 |
Gross unrealized losses - less than 12 months | 0 | (28,000) |
Gross unrealized loss - more than 12 months | 0 | 0 |
Estimated fair value | 8,399,552 | 8,220,381 |
Net unrealized gains/(losses) | 156,066 | (1,669) |
Fixed Maturity Securities Political Subdivisions Of States Territories And Possessions [Member] | ||
Cost or amortized cost | 5,662,999 | 6,339,540 |
Gross unrealized gains | 187,006 | 50,903 |
Gross unrealized losses - less than 12 months | 0 | (12,327) |
Gross unrealized loss - more than 12 months | 0 | (36,508) |
Estimated fair value | 5,850,005 | 6,341,608 |
Net unrealized gains/(losses) | 187,006 | 2,068 |
Fixed Maturity Securities Corporate And Other Bonds Industrial And Miscellaneous [Member] | ||
Cost or amortized cost | 124,956,806 | 119,078,698 |
Gross unrealized gains | 5,365,954 | 123,740 |
Gross unrealized losses - less than 12 months | (33,073) | (2,775,540) |
Gross unrealized loss - more than 12 months | (20,893) | (676,605) |
Estimated fair value | 130,268,794 | 115,750,293 |
Net unrealized gains/(losses) | 5,311,988 | (3,328,405) |
Fixed Maturity Securities Residential Mortgage and other asset backed securities [Member] | ||
Cost or amortized cost | 21,737,713 | 21,790,973 |
Gross unrealized gains | 297,257 | 236,502 |
Gross unrealized losses - less than 12 months | (19,924) | (231,229) |
Gross unrealized loss - more than 12 months | (312,685) | (331,012) |
Estimated fair value | 21,702,361 | 21,465,234 |
Net unrealized gains/(losses) | (35,352) | (325,739) |
Fixed Maturity Securities Total Fixed Maturity Securities [Member] | ||
Cost or amortized cost | 160,601,004 | 155,431,261 |
Gross unrealized gains | 6,006,283 | 437,476 |
Gross unrealized losses - less than 12 months | (52,997) | (3,047,096) |
Gross unrealized loss - more than 12 months | (333,578) | (1,044,125) |
Estimated fair value | 166,220,712 | 151,777,516 |
Net unrealized gains/(losses) | 5,619,708 | (3,653,745) |
Equity Securities Preferred Stocks [Member] | ||
Cost or amortized cost | 8,415,227 | 6,694,754 |
Gross unrealized gains | 394,815 | 0 |
Gross unrealized losses | (16,042) | (541,798) |
Estimated fair value | 8,794,000 | 6,152,956 |
Equity Securities Common Stocks [Member] | ||
Cost or amortized cost | 13,655,339 | 11,611,232 |
Gross unrealized gains | 1,537,211 | 99,817 |
Gross unrealized losses | (487,351) | (1,291,389) |
Estimated fair value | 14,705,199 | 10,419,660 |
Equity Securities Total Equity Securities [Member] | ||
Cost or amortized cost | 22,070,566 | 18,305,986 |
Gross unrealized gains | 1,932,026 | 99,817 |
Gross unrealized losses | (503,393) | (1,833,187) |
Estimated fair value | $ 23,499,199 | $ 16,572,616 |
3. Investments (Details 1)
3. Investments (Details 1) - USD ($) | Sep. 30, 2019 | Dec. 31, 2018 |
Amortized cost | $ 160,601,004 | $ 155,431,261 |
Estimated fair value | 166,220,712 | 151,777,516 |
Less Than One Year [Member] | ||
Amortized cost | 12,273,128 | 6,742,519 |
Estimated fair value | 12,322,490 | 6,738,014 |
One To Five Years [Member] | ||
Amortized cost | 50,106,836 | 47,038,838 |
Estimated fair value | 51,297,620 | 46,640,012 |
Five To Ten Years [Member] | ||
Amortized cost | 74,473,145 | 76,884,505 |
Estimated fair value | 78,850,661 | 74,290,076 |
More Than 10 Years [Member] | ||
Amortized cost | 2,010,182 | 2,974,426 |
Estimated fair value | 2,047,580 | 2,644,180 |
Residential mortgage-backed securities [Member] | ||
Amortized cost | 21,737,713 | 21,790,973 |
Estimated fair value | $ 21,702,361 | $ 21,465,234 |
3. Investments (Details 2)
3. Investments (Details 2) - USD ($) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2019 | Dec. 31, 2018 | |
Cost | $ 1,999,381 | $ 1,999,381 |
Unrealized gain (loss) | 426,523 | (144,156) |
Estimated fair value | 2,425,904 | 1,855,225 |
Hedge Fund | ||
Cost | 1,999,381 | 1,999,381 |
Unrealized gain (loss) | 426,523 | (144,156) |
Estimated fair value | $ 2,425,904 | $ 1,855,225 |
3. Investments (Details 3)
3. Investments (Details 3) - USD ($) | Sep. 30, 2019 | Dec. 31, 2018 |
Cost or amortized cost | $ 3,825,505 | $ 4,222,855 |
Gross unrealized gains | 301,879 | 219,855 |
Gross unrealized losses - less than 12 months | 0 | (5,389) |
Gross unrealized loss - more than 12 months | 0 | (10,905) |
Estimated fair value | 4,127,384 | 4,426,416 |
Net unrealized gains | 301,879 | 203,561 |
US Treasury Securities [Member] | ||
Cost or amortized cost | 729,539 | 729,507 |
Gross unrealized gains | 153,088 | 147,532 |
Gross unrealized losses - less than 12 months | 0 | (3,964) |
Gross unrealized loss - more than 12 months | 0 | 0 |
Estimated fair value | 882,627 | 873,075 |
Net unrealized gains | 153,088 | 143,568 |
Fixed Maturity Securities Political Subdivisions Of States Territories And Possessions [Member] | ||
Cost or amortized cost | 998,668 | 998,803 |
Gross unrealized gains | 50,357 | 33,862 |
Gross unrealized losses - less than 12 months | 0 | 0 |
Gross unrealized loss - more than 12 months | 0 | 0 |
Estimated fair value | 1,049,025 | 1,032,665 |
Net unrealized gains | 50,357 | 33,862 |
Fixed Maturity Securities Corporate And Other Bonds Industrial And Miscellaneous [Member] | ||
Cost or amortized cost | 2,097,298 | 2,494,545 |
Gross unrealized gains | 988,434 | 38,461 |
Gross unrealized losses - less than 12 months | 0 | (1,425) |
Gross unrealized loss - more than 12 months | 0 | (10,905) |
Estimated fair value | 2,195,732 | 2,520,676 |
Net unrealized gains | $ 98,434 | $ 26,131 |
3. Investments (Details 4)
3. Investments (Details 4) - USD ($) | Sep. 30, 2019 | Dec. 31, 2018 |
Amortized cost | $ 3,825,505 | $ 4,222,855 |
Estimated fair value | 4,127,384 | 4,426,416 |
Less Than One Year [Member] | ||
Amortized cost | 623,000 | 0 |
Estimated fair value | 629,143 | 0 |
One To Five Years [Member] | ||
Amortized cost | 2,098,950 | 2,996,685 |
Estimated fair value | 2,214,947 | 3,036,531 |
Five To Ten Years [Member] | ||
Amortized cost | 497,016 | 619,663 |
Estimated fair value | 529,255 | 635,846 |
More Than 10 Years [Member] | ||
Amortized cost | 606,539 | 606,507 |
Estimated fair value | $ 754,039 | $ 754,039 |
3. Investments (Details 5)
3. Investments (Details 5) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Income: | ||||
Fixed-maturity securities | $ 1,499,135 | $ 1,386,931 | $ 4,500,346 | $ 3,898,730 |
Equity securities | 253,594 | 214,498 | 666,247 | 609,086 |
Cash and cash equivalents | 75,253 | 44,024 | 288,334 | 159,865 |
Total | 1,827,982 | 1,645,453 | 5,454,927 | 4,667,681 |
Expenses: | ||||
Investment expenses | (28,571) | 43,082 | 254,893 | 124,455 |
Net investment income | $ 1,856,553 | $ 1,602,371 | $ 5,200,034 | $ 4,543,226 |
3. Investments (Details 6)
3. Investments (Details 6) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Fixed-maturity securities: | ||||
Gross realized gains | $ 10 | $ 4,749 | $ 10,954 | $ 116,961 |
Gross realized losses | (46,851) | (77,191) | (92,591) | (560,418) |
Total fixed-maturity securities | (46,841) | (72,442) | (81,637) | (443,457) |
Equity securities: | ||||
Gross realized gains | 38,477 | 121,609 | 83,737 | 436,859 |
Gross realized losses | 0 | (106,321) | (56,859) | (370,705) |
Total equity securities | 38,477 | 15,288 | 26,878 | 66,154 |
Net realized gains (losses) | (8,364) | (57,154) | (54,759) | (377,303) |
Equity securities: | ||||
Gross gains | 916,496 | 0 | 3,196,260 | 0 |
Gross losses | 0 | 288,435 | 0 | (141,976) |
Total equity securities | 916,496 | 288,435 | 3,196,260 | (141,976) |
Other investments: | ||||
Gross gains | 90,030 | 120,744 | 570,679 | 241,444 |
Gross losses | 0 | 0 | 0 | 0 |
Total other investments | 90,030 | 120,744 | 570,679 | 241,444 |
Net unrealized gains (losses) | 1,006,526 | 409,179 | 3,766,939 | 99,468 |
Net gains (losses) on investments | $ 998,162 | $ 352,025 | $ 3,712,180 | $ (277,835) |
3. Investments (Details 7)
3. Investments (Details 7) - USD ($) | 9 Months Ended | 12 Months Ended |
Sep. 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 | 0 | 0 |
Unrealized losses - 12 months or more | 0 | 0 |
Number of positions held - 12 months or more | 0 | 0 |
Estimated fair value - total | 0 | 4,948,530 |
Unrealized losses - total | 0 | (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 | 0 | 1,436,242 |
Unrealized losses - 12 months or more | 0 | (36,508) |
Number of positions held - 12 months or more | 0 | 3 |
Estimated fair value - total | 0 | 1,991,617 |
Unrealized losses - total | 0 | (48,835) |
Fixed Maturity Securities Corporate And Other Bonds Industrial And Miscellaneous [Member] | ||
Estimated fair value - less than 12 months | 3,258,185 | 81,004,459 |
Unrealized losses - less than 12 months | (33,073) | (2,775,540) |
Number of positions held - less than 12 months | 6 | 97 |
Estimated fair value - 12 months or more | 3,170,889 | 13,424,888 |
Unrealized losses - 12 months or more | (20,893) | (676,605) |
Number of positions held - 12 months or more | 6 | 24 |
Estimated fair value - total | 6,429,074 | 94,429,347 |
Unrealized losses - total | (53,966) | (3,452,145) |
Fixed Maturity Securities Residential Mortgage and other asset backed securities [Member] | ||
Estimated fair value - less than 12 months | 3,008,874 | 7,002,713 |
Unrealized losses - less than 12 months | (19,924) | (231,229) |
Number of positions held - less than 12 months | 3 | 9 |
Estimated fair value - 12 months or more | 15,596,316 | 11,928,425 |
Unrealized losses - 12 months or more | (312,685) | (331,012) |
Number of positions held - 12 months or more | 23 | 19 |
Estimated fair value - total | 18,605,190 | 18,931,138 |
Unrealized losses - total | (332,609) | (562,241) |
Fixed Maturity Securities Total Fixed Maturity Securities [Member] | ||
Estimated fair value - less than 12 months | 6,267,059 | 93,511,077 |
Unrealized losses - less than 12 months | 52,997 | (3,047,096) |
Number of positions held - less than 12 months | 9 | 110 |
Estimated fair value - 12 months or more | 18,767,205 | 26,789,555 |
Unrealized losses - 12 months or more | (333,578) | (1,044,125) |
Number of positions held - 12 months or more | 29 | 46 |
Estimated fair value - total | 25,034,264 | 120,300,632 |
Unrealized losses - total | $ (386,575) | $ (4,091,221) |
3. Investments (Details Narrati
3. Investments (Details Narrative) - USD ($) | 9 Months Ended | |
Sep. 30, 2019 | Sep. 30, 2018 | |
Investments [Abstract] | ||
Proceeds from the sale and redemption of fixed-maturity securities held-to-maturity | $ 400,000 | $ 624,963 |
Proceeds from the sale or maturity of fixed-maturity securities available-for-sale | 9,835,464 | 17,740,260 |
Proceeds from the sale of equity securities | $ 2,941,492 | $ 5,694,121 |
4. Fair Value Measurements (Det
4. Fair Value Measurements (Details) - USD ($) | Sep. 30, 2019 | Dec. 31, 2018 |
U.S. Treasury securities and obligations of U.S. government corporations and agencies | $ 8,399,552 | $ 8,220,381 |
Political subdivisions of states, territories and possessions | 5,850,005 | 6,341,608 |
Corporate and other bonds industrial and miscellaneous | 130,268,794 | 115,750,293 |
Residential mortgage and other asset backed securities | 21,702,361 | 21,465,234 |
Total fixed maturities | 166,220,712 | 151,777,516 |
Equity securities | 23,499,199 | 16,572,616 |
Total investments | 189,719,911 | 168,350,132 |
Level 1 | ||
U.S. Treasury securities and obligations of U.S. government corporations and agencies | 8,399,552 | 8,220,381 |
Political subdivisions of states, territories and possessions | 0 | 0 |
Corporate and other bonds industrial and miscellaneous | 127,148,873 | 112,076,270 |
Residential mortgage and other asset backed securities | 0 | 0 |
Total fixed maturities | 135,548,425 | 120,296,651 |
Equity securities | 23,499,199 | 16,572,616 |
Total investments | 159,047,624 | 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 | 5,850,005 | 6,341,608 |
Corporate and other bonds industrial and miscellaneous | 3,119,921 | 3,674,023 |
Residential mortgage and other asset backed securities | 21,702,361 | 21,465,234 |
Total fixed maturities | 30,672,287 | 31,480,865 |
Equity securities | 0 | 0 |
Total investments | 30,672,287 | 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 ($) | Sep. 30, 2019 | Dec. 31, 2018 |
Hedge fund investments | $ 2,425,904 | $ 1,855,225 |
Hedge Fund | ||
Hedge fund investments | $ 2,425,904 | $ 1,855,225 |
4. Fair Value Measurements (D_3
4. Fair Value Measurements (Details 2) - USD ($) | Sep. 30, 2019 | Dec. 31, 2018 |
Senior Notes due 2022 | $ 27,310,623 | $ 28,521,734 |
Level 1 | ||
Senior Notes due 2022 | 0 | 0 |
Level 2 | ||
Senior Notes due 2022 | 27,310,623 | 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 ($) | Sep. 30, 2019 | Dec. 31, 2018 |
Reinsurance balances payable | $ 809,836 | $ 1,933,376 |
Long-term debt, net | 29,427,386 | 29,295,251 |
Carrying Value [Member] | ||
Fixed-maturity securities held-to-maturity | 3,825,505 | 4,222,855 |
Cash and cash equivalents | 25,639,050 | 21,138,403 |
Premiums receivable | 14,352,521 | 13,961,599 |
Reinsurance receivables | 26,580,449 | 26,367,115 |
Real estate, net of accumulated depreciation | 2,288,851 | 2,300,827 |
Reinsurance balances payable | 809,836 | 1,933,376 |
Long-term debt, net | 29,427,386 | 29,295,251 |
Fair Value [Member] | ||
Fixed-maturity securities held-to-maturity | 4,127,384 | 4,426,416 |
Cash and cash equivalents | 25,639,050 | 21,138,403 |
Premiums receivable | 14,352,521 | 13,961,599 |
Reinsurance receivables | 26,580,449 | 26,367,115 |
Real estate, net of accumulated depreciation | 2,705,000 | 2,705,000 |
Reinsurance balances payable | 809,836 | 1,933,376 |
Long-term debt, net | $ 27,310,623 | $ 28,521,734 |
6. Property and Casualty Insu_3
6. Property and Casualty Insurance Activity (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Premiums Written [Member] | ||||
Direct | $ 46,023,290 | $ 38,785,453 | $ 128,333,117 | $ 107,175,413 |
Assumed | 861 | 18 | 938 | 842 |
Ceded | (5,586,278) | (2,683,699) | (20,914,074) | (19,409,423) |
Net | 40,437,873 | 36,101,772 | 107,419,981 | 87,766,832 |
Changes In Unearned Premiums [Member] | ||||
Direct | (4,579,777) | (4,435,174) | (11,035,993) | (9,930,503) |
Assumed | (761) | 698 | (559) | 3,762 |
Ceded | (1,637,325) | (4,133,389) | (1,366,251) | (3,363,953) |
Net | (6,217,863) | (8,567,865) | (12,402,803) | (13,290,694) |
Premiums Earned [Member] | ||||
Direct | 41,443,513 | 34,350,279 | 117,297,124 | 97,244,910 |
Assumed | 100 | 716 | 379 | 4,604 |
Ceded | (7,223,603) | (6,817,088) | (22,280,325) | (22,773,376) |
Net | $ 34,220,010 | $ 27,533,907 | $ 95,017,178 | $ 74,476,138 |
6. Property and Casualty Insu_4
6. Property and Casualty Insurance Activity (Details 1) - USD ($) | 9 Months Ended | |
Sep. 30, 2019 | Sep. 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 | 60,401,821 | 41,611,658 |
Prior years | 11,186,029 | 127,465 |
Total incurred | 71,587,850 | 41,739,123 |
Paid related to: | ||
Current year | 31,515,656 | 23,404,909 |
Prior years | 18,600,946 | 12,160,419 |
Total paid | 50,116,602 | 35,565,328 |
Net balance at end of period | 61,997,107 | 38,224,509 |
Add reinsurance recoverables | 15,412,316 | 15,718,448 |
Balance at end of period | $ 77,409,423 | $ 53,942,957 |
6. Property and Casualty Insu_5
6. Property and Casualty Insurance Activity (Details 2) | 9 Months Ended |
Sep. 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 | $ 14 |
Cumulative number of reported claims | Number | 1,914 |
2012 | |
2010 | $ 6,429 |
2011 | 7,678 |
2012 | 9,539 |
IBNR | $ 79 |
Cumulative number of reported claims | Number | 4,704 |
2013 | |
2010 | $ 6,623 |
2011 | 8,618 |
2012 | 9,344 |
2013 | 10,728 |
IBNR | $ 95 |
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 | $ 454 |
Cumulative number of reported claims | Number | 2,134 |
2015 | |
2010 | $ 6,853 |
2011 | 9,198 |
2012 | 10,382 |
2013 | 9,424 |
2014 | 14,260 |
2015 | 22,340 |
IBNR | $ 311 |
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 | $ 883 |
Cumulative number of reported claims | Number | 2,873 |
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 | $ 879 |
Cumulative number of reported claims | Number | 3,368 |
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 | $ 3,091 |
Cumulative number of reported claims | Number | 4,162 |
2019 | |
2010 | $ 6,793 |
2011 | 9,161 |
2012 | 11,016 |
2013 | 10,571 |
2014 | 16,576 |
2015 | 23,408 |
2016 | 28,209 |
2017 | 34,848 |
2018 | 56,320 |
2019 | 57,364 |
Total | 254,266 |
IBNR | $ 16,404 |
Cumulative number of reported claims | Number | 3,118 |
6. Property and Casualty Insu_6
6. Property and Casualty Insurance Activity (Details 3) | Sep. 30, 2019USD ($) |
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 | 8,778 |
2012 | 10,422 |
2013 | 9,235 |
2014 | 14,692 |
2015 | 20,982 |
2016 | 22,988 |
2017 | 27,470 |
2018 | 43,383 |
2019 | 30,115 |
Total | 194,845 |
Net liability for unpaid claim and allocated claim adjustment expenses for the accident years presented | 59,421 |
All outstanding liabilities before 2009, net of reinsurance | 143 |
Liabilities for claims and claim adjustment expenses, net of reinsurance | $ 59,564 |
6. Property and Casualty Insu_7
6. Property and Casualty Insurance Activity (Details 4) $ in Thousands | Sep. 30, 2019USD ($) |
Insurance [Abstract] | |
Liabilities for allocated loss and loss adjustment expenses, net of reinsurance | $ 59,564 |
Total reinsurance recoverable on unpaid losses | 15,412 |
Unallocated loss adjustment expenses | 2,433 |
Total gross liability for loss and LAE reserves | $ 77,409 |
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 |
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 |
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 | 5,000,000 | $ 5,000,000 | $ 0 |
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 | |
Personal Lines [Member] | Initial $1,000,000 [Member] | ||
Risk retained | 1000000 | 800000 |
Personal Lines [Member] | $1,000,000 - $10,000,000 [Member] | ||
Risk retained | None | None |
Personal Lines [Member] | Over $10,000,000 [Member] | ||
Risk retained | 1.00 | 1.00 |
Personal Umbrella [Member] | Initial $1,000,000 [Member] | ||
Risk retained | 100000 | 100000 |
Personal Umbrella [Member] | $1,000,000 - $5,000,000 [Member] | ||
Risk retained | None | None |
Personal Umbrella [Member] | Over $5,000,000 [Member] | ||
Risk retained | 1.00 | 1.00 |
Commercial Lines [Member] | Initial $750,000 [Member] | ||
Risk retained | 100000 | 750000 |
Commercial Lines [Member] | $750,000 - $4,500,000 [Member] | ||
Risk retained | None | None |
Commercial Lines [Member] | Over $4,500,000 [Member] | ||
Risk retained | 1.00 | 1.00 |
Commercial Umbrella [Member] | Initial $1,000,000 [Member] | ||
Risk retained | 100000 | |
Commercial Umbrella [Member] | $1,000,000 - $5,000,000 [Member] | ||
Risk retained | None | |
Commercial Umbrella [Member] | Over $5,000,000 [Member] | ||
Risk retained | 1.00 | |
Catastrophe [Member] | Initial $7,500,000 [Member] | ||
Risk retained | 7500000 | |
Catastrophe [Member] | $7,500,000 - $610,000,000 [Member] | ||
Risk retained | None | |
Catastrophe [Member] | Over $610,000,000 [Member] | ||
Risk retained | 1.00 | |
Catastrophe [Member] | Initial $5,000,000 [Member] | ||
Risk retained | 400000 | |
Catastrophe [Member] | $5,000,000 - $450,000,000 [Member] | ||
Risk retained | None | |
Catastrophe [Member] | Over $450,000,000 [Member] | ||
Risk retained | 1.00 |
6. Property and Casualty Ins_10
6. Property and Casualty Insurance Activity (Details 7) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Insurance [Abstract] | ||||
Provisional ceding commissions earned | $ 1,320,069 | $ 1,255,034 | $ 4,001,294 | $ 5,468,314 |
Contingent ceding commissions earned | (290,487) | (210,505) | (1,018,334) | (1,037,459) |
Total commissions earned | $ 1,029,582 | $ 1,044,529 | $ 2,982,960 | $ 4,430,855 |
6. Property and Casualty Ins_11
6. Property and Casualty Insurance Activity (Details Narrative) | 9 Months Ended | ||
Sep. 30, 2019USD ($)Number | Sep. 30, 2018USD ($) | Dec. 31, 2018USD ($)Number | |
Insurance [Abstract] | |||
Advance premiums | $ 3,737,491 | $ 2,107,629 | |
Incurred losses and loss adjustment expenses are net of reinsurance recoveries under reinsurance contracts | 8,849,440 | $ 11,668,527 | |
Prior year loss development | $ 11,186,029 | $ 127,465 | |
Net contingent ceding commissions payable | Number | 3,060,000 | 1,581,000 |
7. Debt (Details)
7. Debt (Details) - USD ($) | Sep. 30, 2019 | Dec. 31, 2018 |
Long-term debt, net | $ 29,427,386 | $ 29,295,251 |
Issuance costs | ||
Long-term debt, net | (467,149) | (574,953) |
5.50% Senior Unsecured Notes | ||
Long-term debt, net | 30,000,000 | 30,000,000 |
Discount | ||
Long-term debt, net | $ (105,465) | $ (129,796) |
8. Stockholders' Equity (Detail
8. Stockholders' Equity (Details) | 9 Months Ended |
Sep. 30, 2019 | |
Stockholders' Equity | |
Dividend Yield | 2.87% |
Volatility | 36.11% |
Risk-Free Interest Rate | 1.61% |
Expected Life | 3 years 3 months |
8. Stockholders' Equity (Deta_2
8. Stockholders' Equity (Details 1) | 9 Months Ended |
Sep. 30, 2019USD ($)$ / sharesshares | |
Number of options outstanding, beginning | shares | 37,500 |
Number of options granted | shares | 50,000 |
Number of options exercised | shares | (3,000) |
Number of options forfeited | shares | (2,500) |
Number of options outstanding, ending | shares | 82,000 |
Number of options vested and exercisable | shares | 50,000 |
Weighted average exercise price outstanding, beginning | $ 8.36 |
Weighted average exercise price granted | 8.72 |
Weighted average exercise price exercised | 7.85 |
Weighted average exercise price forfeited | 7.85 |
Weighted average exercise price outstanding, ending | 8.61 |
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 | 3 years 7 months 17 days |
Weighted average remaining contractual life (in years) vested and exercisable | 2 years 4 months 28 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 | $ | $ 11,390 |
Aggregate intrinsic value vested and exercisable | $ | $ 15,075 |
Restricted Stock | |
Number of options outstanding, beginning | shares | 120,499 |
Number of options granted | shares | 120,586 |
Number of options exercised | shares | (44,410) |
Number of options forfeited | shares | (10,459) |
Number of options outstanding, ending | shares | 186,216 |
Weighted average exercise price outstanding, beginning | $ 17.66 |
Weighted average exercise price granted | 15.51 |
Weighted average exercise price exercised | 17.18 |
Weighted average exercise price forfeited | 15.79 |
Weighted average exercise price outstanding, ending | $ 16.47 |
Aggregate intrinsic value outstanding, beginning | $ | $ 2,129,175 |
Aggregate intrinsic value granted | $ 1,870,487 |
Aggregate intrinsic value exercised | $ | $ (763,103) |
Aggregate intrinsic value forfeited | $ (165,171) |
Aggregate intrinsic value outstanding, ending | $ | $ 3,071,388 |
8. Stockholders' Equity (Deta_3
8. Stockholders' Equity (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Dividends declared | $ 2,827,276 | $ 3,204,813 | ||
Stock-based compensation expense related to stock options is net of estimated forfeitures | $ 19,800 | $ 1,000 | $ 20,800 | 5,000 |
Closing price of common stock | $ 8.52 | $ 8.52 | ||
Total intrinsic value of options exercised | $ 6,270 | |||
Total intrinsic value of options forfeited | $ 59,000 | 59,000 | ||
Stock-based compensation, restricted stock awards | $ 388,000 | $ 196,000 | $ 1,096,000 | $ 477,000 |
2014 Plan [Member] | ||||
Shares reserved | 390,338 | 390,338 |
9. Income Taxes (Details)
9. Income Taxes (Details) - USD ($) | Sep. 30, 2019 | Dec. 31, 2018 |
Deferred tax asset: | ||
Net operating loss carryovers | $ 2,418,344 | $ 90,438 |
Claims reserve discount | 526,114 | 343,905 |
Unearned premium | 3,735,054 | 3,145,682 |
Deferred ceding commission revenue | 384,063 | 564,202 |
Other | 680,204 | 383,733 |
Total deferred tax assets | 7,743,779 | 4,527,960 |
Deferred tax liability: | ||
Investment in KICO | 759,543 | 759,543 |
Deferred acquisition costs | 4,303,229 | 3,760,625 |
Intangibles | 105,000 | 140,700 |
Depreciation and amortization | 515,487 | 664,194 |
Net unrealized gains (losses) of securities - available for sale | 1,520,225 | (1,151,335) |
Total deferred tax liabilities | 7,203,484 | 4,173,727 |
Net deferred income tax asset | $ 540,295 | $ 354,233 |
9. Income Taxes (Details 1)
9. Income Taxes (Details 1) - USD ($) | 9 Months Ended | |
Sep. 30, 2019 | Dec. 31, 2018 | |
Income Tax Disclosure [Abstract] | ||
Federal only, current year | $ 2,347,962 | $ 0 |
Amount subject to annual limitation, federal only | 0 | 2,100 |
Total federal only | 2,347,962 | 2,100 |
State only | 1,454,929 | 1,305,365 |
Valuation allowance | (1,384,547) | (1,217,027) |
State only, net of valuation allowance | 70,382 | 88,338 |
Total deferred tax asset from net operating loss carryovers | $ 2,418,344 | $ 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 ($) | Sep. 30, 2019 | Dec. 31, 2018 |
Income Tax Disclosure [Abstract] | ||
Net operating loss carryover | $ 22,384,000 | $ 20,083,000 |
10. Earnings_(Loss) Per Commo_3
10. Earnings/(Loss) Per Common Share (Details) - shares | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
(Loss) Earnings per common share: | ||||
Weighted average number of shares outstanding | 10,779,641 | 10,681,329 | 10,769,817 | 10,672,084 |
Effect of dilutive securities, common share equivalents, stock options | 0 | 98,749 | 0 | 100,628 |
Effect of dilutive securities, common share equivalents, restricted stock awards | 0 | 11,045 | 0 | 7,878 |
Weighted average number of shares outstanding, used for computing diluted earnings per share | 10,779,641 | 10,791,123 | 10,769,817 | 10,780,590 |
11. Commitments and Contingen_3
11. Commitments and Contingencies (Details) | 3 Months Ended | 9 Months Ended |
Sep. 30, 2019USD ($) | Sep. 30, 2019USD ($) | |
Commitments And Contingencies | ||
Operating lease | $ 41,342 | $ 124,026 |
Short-term leases | 0 | 0 |
Total lease cost | 41,342 | 124,026 |
Cash payments included in the measurement of lease liability in operating cash flows | $ 42,827 | $ 127,034 |
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) | Sep. 30, 2019USD ($) |
Commitments and Contingencies Disclosure [Abstract] | |
Remainder of 2019 | $ 42,827 |
2020 | 255,624 |
2021 | 264,571 |
2022 | 273,831 |
2023 | 283,415 |
Thereafter | 333,654 |
Total undiscounted lease payments | 1,453,922 |
Less: present value adjustment | 230,834 |
Operating lease liability | $ 1,223,088 |
11. Commitments and Contingen_5
11. Commitments and Contingencies (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | ||||
Rent expenses | $ 41,342 | $ 41,342 | $ 124,026 | $ 124,026 |