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Operator: Hello and welcome to the Kingstone Companies First Quarter 2023 Earnings Call and Webcast. [Operator Instructions]. A question-and-answer session will follow the formal presentation. At As a reminder, this conference is being recorded. It is now my pleasure to turn the call over to Jennifer Gravelle, Chief Financial Officer. Please go ahead.

Jennifer Gravelle: Thank you very much and good morning everyone. Yesterday afternoon, the company issued a press release detailing Kingstone’s first quarter 2023 results. On this call, Kingstone may make forward-looking statements regarding itself and its business. The forward-looking events and circumstances discussed on this call may not occur and could differ materially as a result of known and unknown risk factors and uncertainties affecting Kingstone. For more information, please refer to the section entitled Factors That May Affect Future Results and Financial Condition in Part 1, Item 1A of the company’s Form 10-K for the year ended December 31, 2022, along with commentary on forward-looking statements at the end of the company’s earnings release issued yesterday.

In addition, our remarks today include references to non-GAAP measures. For a reconciliation of our non-GAAP measures to the GAAP figures, please see the tables in our earnings release. With that, I’d like to turn the call over to Kingstone’s Chairman of the Board and CEO, Mr. Barry Goldstein. Please go ahead, Barry.

Barry B. Goldstein: Thank you and good morning everyone. Thanks for joining Kingstone’s first quarter earnings call. In addition to Jen, our Chief Financial Officer and Head of Investor Relations, also with me today is Meryl Golden, our Chief Operating Officer and the President of our Insurance Company. Let’s get straight to it. We’re not happy to be reporting an underwriting loss of course, and an underwriting loss in the first quarter is really not unexpected given the Northeast winter. Looking back this year’s results are in line with what we’ve experienced in three of the last five years and reflect a reality of operating in this region. Nevertheless, we remain committed to our focus on the Northeast, it’s proven to be a valuable and productive territory for us over the long-term, especially when compared to other parts of the country like Florida, California, the Southeast, the Gulf Coast.

So at a high level this winter we saw a few days of freezing temperatures that resulted in almost $4 million of catastrophe losses that we just announced the other day. We also experienced the number of large losses that were primarily water related and which increased our underwriting loss for the first quarter. I’ll let Jen and Meryl go over those in more detail. Our industry offers many opportunities for growth and innovation, particularly for those who understand this highly complex and regulated field. With that said, it’s also a difficult business for some with — difficult business, there’s so many exogenous factors out of our control to drive our results. We can take all the right steps and a few days of freezing temperatures set us way back.

And it’s not just adverse weather that we’re dealing with, we’re also navigating record high inflation, volatile interest rates, the hardest reinsurance market we’ve seen in decades just to name a few of these headwinds. So despite these challenges, I’m encouraged. I’m encouraged by the positive signs we are seeing in the market. There is light at the end of the tunnel. I believe that the macroeconomic factors will — that have been negatively impacting our results may have peaked and conditions will soon start to improve. Over the past eight or nine months, we’ve seen a consistent decline in annual inflation ratings, which is a promising trend. Additionally, the Federal Reserve recently indicated that is no longer just assuming that further rate hikes will be needed, which suggests to me that economic conditions are stabilizing.

And from what I’ve heard from our team and our intermediary, the reinsurers we’ve spoken with are indicating that capacity is available in the market this year and that rates may have in fact peaked. Taken together these developments give me confidence that we’re moving in the right direction. But what does that — what that means for our shareholders is that better times are ahead. We’ve been working diligently to strengthen and fortify our business, and as many of those headwinds we faced begin to slow, we expect results of our efforts to play out. And as we’ve progressed through the year, we expect to realize even more of the benefits from the strategic actions we’ve taken. Overall, we are bullish on our future, remain committed to our strategy, and are confident in our ability to position ourselves for success in the years ahead.

With that, I’ll pass the call over to Jen to review our first quarter results. Go ahead Jen.

Jennifer Gravelle: Thanks, Barry. For the first quarter of 2023, Kingston reported a net loss of 5.1 million and a 47% per diluted share compared to net loss of 9.2 million and $0.87 per diluted share for the same period last year. Direct written premiums were up 10.7% to 47.6 million, an increase of 4.6 million from 43 million in a prior year period while our policies in force declined by 1.1% from the previous year. We remain focused on increasing our average premium and expect to continue to grow premiums materially faster than exposures for the foreseeable future. The net loss in LAE ratio was 88.6%, up 2.6 points from the prior year. As expected, the largest driver of this increase was catastrophe losses. First quarter catastrophe losses added 3.7 million or 13.2 points to the net loss ratio for the quarter, an increase of 1.9 points over the prior year.

The attritional or non-cat loss ratio was 47 — 75.4%, slightly higher than the loss ratio in the first quarter last year. While frequency was in line with historical periods, the non-cat loss ratio was driven by severity likely due to inflation, along with a number of large water related losses. For the first quarter, the net underwriting expense rate — the net underwriting expense ratio decreased 3.7 points to 34.7%. We’ve spoken about our disciplined expense reduction efforts in the past and have made great progress on this front. The expense reduction is primarily due to decrease in IT expenses from the retirement of company’s legacy systems and changes to producer commissions. We’re reviewing all expenditures for necessity and potential savings as well as continuing to automate various processes in effort to reduce expenses even further.

While our underwriting loss is comparable to the same quarter last year, this quarter we had a $1.2 million unrealized gain from our investment portfolio versus an unrealized loss of 4.4 million in the prior year due to the stabilization of the capital markets. Additionally, the net investment income was up 13.4% from first quarter 2022 to 2023. I’ll now turn it over to Meryl. Meryl?

Meryl S. Golden: Thanks, Jen. Last quarter I shared our four pillar strategy for 2023 and 2024, coined Kingstone’s Trio to maximize Kingstone’s profitability, and this quarter I will provide an update on our early progress executing against those pillars. The first pillar is to aggressively reduce our non-New York Book of business. As we shared last quarter, the States in which we’ve operated other than New York, namely New Jersey, Connecticut, Rhode Island, and Massachusetts have historically had a disproportionate negative impact on our underwriting results. After much effort to return those States to profitability in late 2022 we made the decision to focus on our profitable State of New York where we have more than 80% of our business.

I’m happy to report that through Q1, we have already reduced our non-New York policies in force by 8.5%. We expect this reduction to accelerate in the second quarter when block non-renewals approved by our regulators and other actions continue to kick in. Our expectation is that our policies in force outside of New York will decline by more than 50% by year end 2023, and we are well on our way to achieving that goal. It’s worth noting that our policies in force in New York grew by 1.2% in the first quarter, meaning we are replacing unprofitable non-New York business with even more profitable New York business. Moving to our second pillar to adjust pricing to a state ahead of loss trends including inflation, we’ve adopted an annual rate change cadence for all states and products in order to achieve our targeted underwriting margin.

In the first quarter our 16.5% rate change for our New York legacy dwelling fire product and 20% rate change for our Connecticut Legacy homeowner products were effective. Our 9.8% New York select homeowners and 12.3% New York dwelling fire rate change were approved and we filed for rate in several other states and products as well. As mentioned previously, we are also updating the replacement cost of our entire book to keep up with inflation and to make sure that all of our policy holders are insured to value. Consistent with last quarter, our New York retention has declined much less than we anticipated, despite rate increases that were material. So this is a positive sign of our strong customer relationships, our exceptional producers, and the hard work of our talented team at Kingstone.

For the first quarter, our average New York Homeowner Renewal Premium increased by 21% from $2,498 to over 3000 due to a combination of our rate changes and the update to replacement costs. Note that more than 50% of the increase was due to the replacement cost update. We started this initiative in September of last year, so about half of the book has been updated through the first quarter, and premiums will accelerate over the year as this round of the book update is completed. Turning to our third pillar, which is to tightly manage reinsurance requirements and costs. We have implemented a host of initiatives to manage our probable maximum loss or PML, which is the amount of reinsurance we need to buy. This includes making changes to our underwriting to reduce or eliminate the most catastrophe exposed property, as well as requiring higher hurricane deductibles in certain counties.

In the first quarter, we successfully navigated UPCs Insolvency and the surge of business that came our way, without growing our PML by keeping our very tight underwriting criteria in place. We entered this reinsurance renewal looking for 5% less limit than last year due to the success of these initiatives. Jen and I visited reinsurers in both London and Bermuda recently, and we leveraged the impression that unlike last year capacity will not be an issue this year. We are hopeful that our reinsurance partners recognize the changes in our portfolio and reflect them in our rates online. Last but not least, our fourth quarter, excuse me, our fourth pillar is to continue our focus on expense reduction. Last year, we reduced our net expense ratio by four percentage points to 36 for calendar year 2022.

I’m delighted that our first quarter 2023 expense ratio is down further to 34.7% and it’s 3.7 points below the first quarter of last year. Much of the decline is due to our restructuring and reduction of producer commission rates, which will be recognized over the life of the policy, so we will see a further reduction in our expense ratio this year. I want to end by reiterating that our first quarter results reflect the unfortunate realities of the Northeast winter. That being said, Barry, Jen, myself, and the entire leadership team remain laser focused on executing our strategic plan that will lead us back to the high performing company we were for many years. We are optimistic for the future and confident that our plan will deliver long-term value to our shareholders.

Thank you as always for your support. With that, we’ll open it up for questions. Operator.

Operator: Thank you. [Operator Instructions]. Our first question today is coming from Paul Newsome from Piper Sandler. One moment please. Your line is now live.

Operator: Thank you. Next question today is coming from Gabriel McClure, a private investor. Your line is now live.

Operator: We do. Our next question is coming from Scott Preston from Maven Fund. Your line is now live.

Operator: Thank you. We reached the end of our question-and-answer session. I’ll turn the floor back over for any further or closing comment.

Barry B. Goldstein: Yeah, so thank you everybody for joining and thank — I mean, I could say thank you for your patience. I have none left, and I’m sure you don’t either. But my head is down, we’re pushing forward, and the math will work here. So bear with us and thank you for spending the time again today. Have a great day.

Operator: Thank you. That does conclude today’s teleconference and webcast. You may disconnect your line at this time and have a wonderful day. We thank you for your participation today.