Kingstone Companies Inc (KINS) 2014 Q4 法說會逐字稿

Greetings, and welcome to the Kingstone Companies' fourth-quarter and year-end 2014 financial results conference call. (Operator Instructions). As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Forrest Hunt of The Equity Group. Thank you, sir. You may begin.

Thank you very much, Christine, and good morning, everyone. Yesterday afternoon the Company issued the announcement of Kingstone's fiscal 2014 fourth-quarter and year-end results. We will be utilizing a slide show presentation as an accompaniment to this call. The presentation is available on Kingstone Companies' website at www.kingstonecompanies.com. While we will not be referring to the entire presentation slide by slide, the structure of the discussion will mirror that of the slideshow. We welcome each of you to review the presentation and follow along.

On this call, Kingstone may make forward-looking statements regarding the Company, its subsidiaries, and businesses. Such statements are based on the current expectations of the management of each entity. The words anticipate, expect, believe, may, should, estimate, project, outlook, and forecast, or similar words, are used to identify such forward-looking information. 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 the companies, including risks regarding the insurance industry, economic factors, and the equity markets generally. The risk factors discussed in the risk factors section of its Form 10-K for the year ended December 31, 2014.

No forward-statement can be guaranteed. Except as required by applicable securities laws, forward-looking statements speak only as to the date on which they are made, and the Company and its subsidiaries undertake no obligation to publicly update or revise any forward-looking statement whether as a result of new information, future events, or otherwise.

When discussing our business operations, we may use certain terms of art which are not defined under US GAAP. In the event of any unintentional difference between the presentation materials and our GAAP results, investors should rely on the financial information in our public filings.

With that, I'd like to turn the call over to Barry Goldstein, the Chairman and CEO of Kingstone. Please go ahead, Barry.

Thanks, Forrest, and welcome, everyone. Joining me today is Victor Brodsky, Kingstone's Chief Financial Officer; as well as Ben Walden, our Senior Vice President and Chief Actuary.

We're very pleased to have reported very strong results for the fourth quarter, completing what was an exceptional year for Kingstone. During the fourth quarter, Kingstone's policies in force increased; premiums grew; and we continued to benefit from the changes to our quota share treaties that went into effect in July of last year.

This is a very large opportunity that exists for us in our home market of downstate New York. According to metrics just recently published by SNL Financial, Kingstone was ranked the 71st largest property and casualty insurer in New York State in 2014, based upon direct premiums written. In 2013, we were ranked number 84.

When looking at homeowners, dwelling fire, and the like, our biggest product group, Kingstone is now number 25 in New York, with a market share of just 0.75%; that's three-quarters of 1%. What sounds like a very small amount changes when you consider that [now core] business of homeowners, we are now more than half the size of The Hartford in New York State, an icon in our industry. It's apparent that New York is an extremely large market, giving us plenty of room to continue to grow.

We're using our larger capital structure and deploying the added surplus gain from the 2013 follow-on offering to take advantage of this opportunity. Our strengthened financial position has enabled us to retain more of the profitable business that we originate while sticking to our conservative nature, and not stretching our net written premium to surplus ratio beyond 1.5 to 1. The financial benefits of the added retention are reflected in our earnings as posted for Q3 and for Q4.

During the fourth quarter, our direct written premiums totaled $19.5 million, an increase of 23.6% over the prior-year period. Please note that the growth rate in Q4, without considering commercial auto, was 27.4%. The reason I'm saying this now will become apparent to you in a couple of minutes.

For the year, direct written premiums grew 26.1% to just over $76 million. Personal lines grew at a rate of over 30% during 2014. We've reported consistent and significant premium growth over each of the five years following the demutualization in July 2009, making 2010 our first full year of ownership. In 2010, direct written premiums were $33.2 million. And since then, our direct written premiums have grown by 129%.

In Q4, our net combined ratio was an excellent 76.4%. The loss ratio was 49.7% for the quarter, and included the impact of an unusual and costly one-time loss. On Christmas Eve, we experienced the single-worst loss in the 128-year history of our Company. A Christmas tree fire was the cause. It resulted in a loss of over $1.4 million before reinsurance. This event had an impact of 6 points on our combined ratio for the quarter, and 1.9 points for the year.

Our very healthy underwriting results were diluted by unacceptably high losses from our commercial auto line of business. While commercial auto is a small portion of the overall book, only about 1.6% of our policies in force, changes are coming that I will go into in greater detail in a moment.

We generated net income for the quarter of $1.8 million, and earnings per share on a fully diluted basis of $0.24. The fire I mentioned took down earnings per share by $0.05. For the year, net income totaled $5.3 million or $0.72 per diluted share. Book value increased 13.4% to $5.54, up $0.63 after our payment of dividends totaling $0.18 per share.

I'd like to touch now on each of our individual lines of business.

First, personal lines, with direct written premiums of just under $57 million, continues to be our biggest line, contributing about three-quarters of our total premiums for 2014. It's important to note that we are not achieving this 30% growth rate in personal lines by raising our rates, which we haven't moved materially in nearly 5 years. I've told you in the past that our growth using the independent agent channel exclusively was not the result of adding new relationships. In fact, it's -- our relationship count is all but flat.

We're achieving growth in our home market of downstate New York for three basic reasons. First, through national carriers limiting their exposure to New York City and Long Island. This has been discussed with you many times, and we continue to take advantage of this cutback. Two, we are gaining market share because a number of our competitors have raised their rates, making Kingstone more rate competitive than in the past, simply by the actions of others. This gives us more opportunities to quote, more opportunities to sell our consistently priced coverage. Finally, I believe our message of consistency and quality resonates with our Selected Producers, who are growing Kingstone in their individual offices.

Based upon surveys taken by the Professional Insurance Agents of New York, the PIA, Kingstone has finished ahead of every national name-brand company in each of the past three surveys, which encompasses six years. This is reflective of the reputation we've built, the service and consistently fair approach to our Selected Producers, and to their insureds.

Effective July 1, 2014, the percentage of our personal lines premium ceded to insurers was reduced to 55% from the previous 75%. This was a very important change. The adjustment to the percentage ceded came as we continued to experience growth in overall direct written premiums. So these two factors together drove the 2014 overall growth in net written premiums to 133% for personal lines.

The existing treaty is set to expire on June 30. And with a July 1 renewal now being planned for, we have the ability to further reduce the quota share ceding percentage. Our current thinking is that we will reduce the ceding percentage at July 1 to between 40% and 45%. This will allow us to stay within our risk tolerance without needing any additional capital to do so. Our ultimate goal is the elimination of this quota share treaty entirely.

Commercial lines are no longer subject to a quota share treaty, which we eliminated beginning July 1 of 2014. Direct written premiums have grown to $11 million, and now make up 14% of our total. These are artisans and business owners and special multi-peril policies, which consist primarily of small business risks without a residential exposure.

Next let me address the commercial auto coverage, where we provide liability and physical damage coverage for light vehicles. As of year-end 2014, commercial auto represented 1.6% of our policies in force, or half of the contribution to policies in force count than it was the year before. Over the past few years we have experienced higher-than-anticipated losses in this line of business. We made many changes to pricing, limited distribution by reducing producer counts, and tightened our underwriting rules many times. We did what we felt was needed to generate an acceptable underwriting profit.

As a result, the business slowed considerably, just as expected. But unfortunately the losses continued. There's little upside in this very competitive line of business, and the required allocation of capital can no longer be justified.

As a result, we ceased accepting new requests for commercial auto coverage last October 1, 2014. And we recently completed and analysis and made the decision to not renew all existing commercial auto policies, beginning with those expiring on May 1, 2015. Our commercial auto business, once a mainstay of Kingstone, will be in the rearview mirror in Q2 2016.

Finally, we provide physical damage only coverage for livery, car service, and other for-hire vehicles and taxicabs. At about 7% of our total premiums for the year, this was our fastest-growing line of business. It's more than doubled in volume over the past year to $5 million, due largely to the expansion of added vehicles in New York City, particularly attributable to ride sharing apps such as Uber and Lyft.

Now I will turn the call over to Ben Walden, our Senior Vice President and Chief Actuary. Ben?

Thank you, Barry. Let me take a few moments to discuss the loss ratio for both the quarter and the year. The fourth-quarter 2014 overall loss and loss expense ratio was 49.7%, which was affected by a single loss of $1.4 million before reinsurance, arising from the Christmas Eve house fire that Barry mentioned earlier. This event alone had an impact of 3.5% on the quarterly loss ratio, and contributed to our GAAP combined ratio of 76.4%. Even with this loss, we achieved a strong underwriting profit for the quarter, and again reached our stated goal of a 20% underwriting margin.

For the year, our overall loss and loss expense ratio was 52.2%, which drove the GAAP combined ratio of 77.1%. This was an exceptional combined ratio when considering that the first quarter of the year was adversely impacted by severe winter weather. The year-end loss and loss expense ratio for personal lines, by far our largest line of business, was an outstanding 38%. Within personal lines, the homeowners loss and loss expense ratio was the best we've recorded in the last 10 years. The low loss ratio was driven by the absence of severe storm events, and below-average large loss activity over the course of the year.

The personal lines loss ratio includes both the impact of the house fire mentioned previously and the severe winter weather in the first quarter. Those two items affected the 2014 loss ratio for personal lines by 7.8 points.

The 2014 loss and loss expense ratio for commercial auto was 87.5%. As Barry discussed, last fall we made the decision to cease all new commercial auto production starting October 1. And in February of 2015, the Company decided it will not renew policies, starting with those effective May 1.

Finally, I would like to describe for you the impact we see weather having on the first quarter 2015. Kingstone's preliminary results for the first quarter of 2015 are affected by another unusually active winter season. Average temperatures this winter were far below average, and even colder than what was observed in 2014.

Several cold weather events in February have increased pipe freeze and ice dam claim frequency compared to the first quarter of 2014. And although overall snow totals in the New York Metro area were slightly lower this year, there were several larger storms in March, and associated losses will not be fully known until the end of this quarter. As such, we expect our results for the first quarter 2015 to be similar to what was reported in 2014 for the weather-sensitive lines, such as homeowners and dwelling fire.

At this point, I will turn it over to Victor Brodsky, our CFO, to go through the financials.

Thanks, Ben. I will briefly go through the highlights of both the fourth quarter and the year. I welcome each of you to review our press release and filings, should you have any further questions.

First, I'd like to talk about our combined ratio. Our net combined ratio for the quarter was 76%. The components of the combined ratio are the net loss ratio and net underwriting expense ratio. Ben has already discussed our losses for the fourth quarter and our healthy 49.7% loss ratio. Our net underwriting expense ratio was 26.7% in the fourth quarter. For the year, and our net combined ratio was 77%, an improvement of 12 percentage points from 2013. As Ben mentioned before, our loss ratio for the year was 52%. The net underwriting expense ratio was 24.9%.

Let me now take a moment to discuss the three components of our net underwriting expenses which contribute to the net underwriting expense ratio. These components are, first, commissions paid to our select producers; second, other underwriting expenses, which are the overhead required to run our business; and finally, the ceding commissions we receive from our quota share reinsurance partners.

Commission expense as a percentage of premiums written remains fairly constant, except for the additional commissions we paid to our Select Producers as a bonus. As the premiums written increase, commission expense increases at a similar rate. As Barry has noted in the past, we maintain a consistent and trusting relationship with agents, one of our core principles at Kingstone.

Our other underwriting expenses include the costs related to the writing of insurance policies, regulatory fees, and the overhead costs of running our business.

I'd like to point out that other underwriting expenses as a percentage of direct written premiums were 14% in 2014, a decrease from 14.9% in 2013. This has been the trend for the last three years, as other underwriting expenses as a percentage of direct written premiums has been consistently decreasing since its high point of 18.1% in 2011. We are truly benefiting by scaling up our writings, and utilizing the in-place infrastructure and our extremely efficient staff.

The final component is ceding commission revenue, which serves to reduce the underwriting expense ratio. We receive provisional ceding commissions based on a fixed percentage of earned premiums we cede under our quota share treaty. We also receive contingent ceding commissions, calculated on a sliding scale rate that is based on the losses that are ceded under our current and prior years' quota share treaties.

The lower the ceded loss ratios under these treaties, the more contingent ceding commissions that we earn. Since the amount of provisional ceding commissions we earn runs in tandem with the amounts of premiums that we cede, it was expected that provisional ceding commissions would decline following the cutback of our personal lines treaty and the termination of our commercial lines treaty.

The contingent ceding commissions that we earned offset the decline of provisional ceding commissions, resulting in a modest increase in ceding commissions during the fourth quarter.

Moving to investments, in the presentation and our 10-K we provide detailed information from our balance sheet. In short, our investment philosophy is simple: we seek stable after-tax income in our portfolio without putting our capital at risk.

Kingstone's cash and invested holdings at December 31, 2014, increased to $74.2 million as compared to $57.6 million at December 31, 2013. Net investment income increased 60% to $506,000 in the fourth quarter of 2014, and increased 54% to $1.8 million for the year ended December 31, 2014. This increase over last year resulted primarily from the deployment of $18.8 million in net proceeds we received from our December 2013 public offering, and increased operating cash flows.

The taxable equivalent investment yield, excluding cash, was 4.67% and 5.28% at December 31, 2014 and 2013. The reduction was due to the $1.7 million increase in the unrealized value of the portfolio, as reported in changes to other comprehensive income.

To summarize the highlights of net income, our direct written premium growth and increase in net written premiums due to new quota share agreements, increase in net investment income, along with the decrease in the combined ratio, led to a strong performance on the bottom line. This resulted in Kingstone's net income for the quarter of $1.8 million. For the year, net income increased 165% over 2013 to $5.3 million.

I'm also very pleased to report that our Board declared a dividend of $0.05 per share, which was distributed on March 13. This marked our 15th consecutive quarter of dividend distribution.

With that, I will turn things back over to Barry for closing remarks.

Thanks, Victor. As we discussed in the past, we keep a very simple set of goals here at Kingstone, which is what we call 20/20/20. That is, we point to a 20% growth rate or better, a 20% operating margin or wider, and hope for a 20% return on equity. During the fourth quarter, we achieved the first two of these three, with premium growth of just under 24%, and an operating margin of just under 24% as well. Our return on equity, unfortunately, did not make the 20%, but I think 17.7% was a heck of a number to put up.

Again, these are not our formal estimates. They are metrics I use to lead the Company, and to guide and gauge how we're doing. Our healthy growth rate continues. We're retaining more of the business we write. We're doing so without strain from the core conservative principles that we have practiced for so long.

Operator, let's open it up to questions.

(Operator Instructions). John Barnidge, Sandler O'Neill.

I have two questions. One, could you talk about the competitive environment in the quarter, as well as what you anticipate going forward? And two, could you discuss your expansion efforts outside of the state of New York? How are they progressing?

Two good questions. I'll take them in the order that you mentioned it. First with respect to competition, we have seen one or two new competitors entering the marketplace in a very small, not very deliberate manner. But to be fair, the volume of business that they are booking at this point is far less than what some of the incumbents have decided to give up. So on a competitive basis, I think we're probably better off at the end of Q4 than we were at the beginning. And we have not seen any real resurgence at all by the national carriers, and that continues until today.

With respect to expansion outside of New York, we're still waiting to finalize our admission to the four states. The applications are still in process, so I don't feel comfortable in releasing the names of the states that we're talking about. But I can say that they are four states that have a similar exposure to catastrophe, be it wind, or wind and water. And we feel comfortable in using the expertise that we've gained in New York and expand our core lines of business to those states as well. I hope that answers your question, John.

Let me just embellish on something. We're also in the midst of an [expansion] effort into really where our home is here in the Hudson Valley. There's four or five surrounding counties where we have a very low penetration. We've hired a marketing director for this area and have begun signing up agents. We hope to have updated rules and rates sometime in Q2, or maybe Q3 at the very latest. So I think you'll see more of a geographic expansion within New York State as well.

That about cover it, John?

Yes, it does. Thanks a lot.

(Operator Instructions). Ken Billingsley, Compass Point.

I just wanted to follow up on couple of things that you mentioned, just to clarify. The quota share plan, and to reduce the amount of quota share you are using, that will occur you said by the middle of this year, the 40% to 45%? Is that correct?

Yes, our treaty comes up for renewal as of July 1.

And based on the quota share dropping to 40%, 45%, what type of underwriting leverage does that target? I believe you are at 1.26 times on a stat basis now. Where do you see that moving you to?

Well, I think initially it may be somewhat above that. But on an overall basis, we feel comfortable that we'll be within our guidelines of -- we'll be staying less than 1.5 to 1.

I think if I were to look back, when we negotiated the treaty that governs us now -- which was really July 1, 2013 -- and we put in there the opportunity for us to reduce the quota share to 55% as of July 1, 2014, we anticipated growth in our writings. We anticipated the fact that we would be able to do it, had we raised the capital that we did. But I don't think -- we underestimated our growth, and that's why our leverage is probably a little bit less than I'd like it to be.

I think we could take on a little bit more risk than -- I think on a stat basis, was something like 1.2 to 1, or a little bit -- on a GAAP basis -- a little bit less than that now. So I feel comfortable in saying about 40% to 45%. But that could get refined a little bit better over the next month or two.

Okay. And just to clarify on the ceding commissions that you received, do the ceding commissions exceed your net expense to write the business? So essentially, when you transition to writing it on your own paper -- if you were to write everything on your own paper, how would your expense ratio look versus what you're getting with the ceding commission?

Well, in the answer to the first part of your question, our minimum ceding commission is about 5 or more points more than what our expense ratio is. It's a nominal profit that we would get, regardless of what the loss ratio we put up is. This was something we were able to negotiate into the agreement after Superstorm Sandy, when our actual ceding commission was in effect below what our expenses were.

On a going-forward basis -- let me let Victor try to answer that.

Well, as of now, our ceding commissions exceed the other underwriting expenses. So, of course, we're going to expect the underwriting expenses to go up somewhat as the premiums go up. And the ceding commissions will go down if we reduce the quota share. So at some point, there's going to be a tip where it's going to reverse itself. So what that percentage is, that is something we're going to have to analyze and take into consideration.

And so, as you bring -- if you were to bring all of the business onto your books and not use quota share, which I believe you stated is your ultimate goal, essentially how do you make up that 5% difference? I know some of it maybe would be with higher investment income. But is higher investment income enough to offset the gain that you're getting from the ceding commissions right now?

I think you maybe want to look at it from the other perspective. By eliminating the quota share -- the quota share partners, they are very nice people at all, but I think they're doing it to make a living, and not friends. So what we'd accomplish is to claw back, if you would, from them, that part of our profits that we're turning over in exchange for our use of their balance sheet.

By eliminating the need for surplus relief, as they call it, or our need to lean on someone else to handle the amount of growth we have, we'll be able to earn an additional amount which is essentially what they were earning. Plus, the amount of investment income will go up, because we'll no longer -- we'll be in control of 100% of our cash flow as opposed to where it is now, where we essentially cede over to them $0.55 of every dollar.

I think if you looked, and you'll find that maybe one of the key notions for 2014 is the fact that our EBITDA -- we did have the best year we ever had as a company, the single most profitable year we ever enjoyed -- but our EBITDA was $8.7 million. And a lot of that has to do with the change in the quota share.

So I think what you can look forward to -- I can't speak to what the incremental margins will be on the amount of reduced cede, but I can say we'll make more. I just can't say effectively how much at this point. And I think a lot of that is going to depend upon interest rates as well.

Moving on to the weather that you guys touched on, I believe you said that this is going to look a little bit like -- I believe you said, the first quarter of 2014. Is that correct?

Correct. Yes.

And looking at 2014, that looked like it was a little bit worse than 2011. And the reason I ask that is I've heard a few other insurers mention that this looks a lot like 2011. Was there some differences in maybe 2011 versus 2014? Because it looked like 2014 might have been a little bit worse.

I would prefer to compare 2014 to 2013. And quite frankly, I felt a little bit peculiar whining around about weather. This is the business that we're in. I can't take credit for good weather, and I sure don't like getting criticized for the bad weather. But the fact is that from what we've seen to this point in March, the claims frequency is about the same as it was last year. The severity really hasn't changed at all. And what you'll probably see is a growth in our losses during the first quarter that mirrors our exposure growth rate.

So, I guess all I'm trying to tell you is while I think Ben and Victor and myself sat down and tried to internally budget out what we thought the first quarter would look, like some months ago, we anticipated a bad winter, but we didn't think it would be quite as bad as last year. Needless to say, we were wrong. And this is two years in a row of bad winter weather.

On the 10-K, looking at your reserves, it looks like you released about $1.2 million from the 2013 accident year. Typically you guys haven't released a lot of reserves after one year of seasoning. Can you talk about what drove that?

Yes, actually most of that release was related to commercial auto. Commercial auto had initially been set at a fairly conservative number for 2013 itself. The years prior to that, however, did have some significant adverse developments. We think we have the reserves now to the point where they are adequate, and we will not have further development going forward. But that 2013 year for commercial auto did look a little bit favorable, relative to where it was initially projected.

Let me add, at this point, that while Ben joined us in December of 2013, he came in and made, as quick as he could, the changes he thought were necessary. And during the year, he basically helped us to -- year 2014 -- we build an entirely self-sufficient claims department to handle liability claims only.

So we've got a complete new staff, an additional staff to our regular staff. We've gone through and examined each of the open claim files. What you'll probably see, if you go through the detail of our annual statement on a statutory basis is our -- the number of open cases declining, coupled with a higher average reserve per open case.

So I think we've kind of caught up to where we -- and you could have said where we should have been before. But we've added skills, we've done it in a conservative way, and we're quite comfortable in where our reserves stand today.

Very good. And just to clarify what Ben was -- when you talked about 2011 and 2012, was that commercial auto increases?

That was, yes. It was during the year, as Barry said, we did a complete review of open claims. We took actions to strengthen our case reserves, as well as IBNR reserves, and that required us to strengthen the years prior to 2013. 2013 itself was already initially being set at more conservative levels, last year, so we were able to take down that year a little bit. But the prior years continued to need strengthening.

Okay.

(multiple speakers) sorry.

So, the livery business that you're doing, that's made a lot of -- that's been hitting the headlines a lot recently. Some new players have announced agreements, I believe, with Uber to be their provider. I believe you guys are targeting the individual that's driving the car, in the ride-sharing part of the process.

Can you talk about maybe how this -- what Uber and Lyft are doing? Is there a risk of them going direct to these drivers to offer insurance through someone that they have partnered up with? Or is that an opportunity for you to expand your business that way? Can you just talk about the exposure and opportunities there?

Okay. So first, again, we participate only on the physical damage side; comp and collision coverage is the vernacular. We've done this for many years, so we were really the beneficiary of the increase in volume that Uber and Lyft brought into the marketplace. Where New York is very strict, and I don't think -- I can't pretend to be familiar with what's going on in other states. But from a regulatory standpoint, Uber drivers, Lyft drivers are still regulated by the TLC in New York, as are the Yellow Cab and the Green Cab drivers and owners.

So there is a requirement for them to obtain commercial auto liability insurance. That's a line of business that we don't now write. And again, we provide just the physical damage. So while cars must be associated with a base in New York City, there are requirements as to the currency of the vehicle. People don't drive around in 10-year-old taxicabs. But what's happened is there are just many, many more vehicles being used.

I think there was an article in the paper within the last week that the number of Uber vehicles now exceeds the number of Yellow cars. It's an industry in a tremendous amount of flux right now. We've been the beneficiary of it, and we're happy to be the incumbent doing it.

As far as Uber itself becoming a competitor of ours, I've heard nothing of the like. I don't anticipate that at all. We do have four carriers writing the required liability insurance in New York. And I have heard nothing at all with respect to any new or pending applications by other carriers.

Okay. I was thinking more along -- like just an affinity relationship, where they're directed towards a particular insurer, as opposed to Uber actually writing it specifically.

Outside of New York, Uber handles things with another carrier differently. But I don't think the -- New York has its own rules that they must follow. I don't think Uber likes to follow anybody else's rules, mind you. But I think when they get to the -- they say the buildings get really tall when you cross the Hudson, and I think that's what they've had to deal with, and are learning to deal with now.

Well, I get appreciate you taking my questions. I just have one more, and I hope this will leave on a good note. It is regarding Sandy reviews. And you probably saw the 60 Minutes episode, and I know that's targeting more Wright Flood and other -- some of the broker and engineering firms.

But I know a long time ago you had a lot of claims that were Sandy issues that essentially ended up being closed without any real issue at the time. Has that been settled with New York DFS (technical difficulty) the initial review?

And the second part of that question is, with them looking at the brokers' side of the business, and their actions, does this just open the door where they're going to come knocking on the door just to look through your files again?

Well, let me handle that in two ways. First, I would refer you to the footnote disclosure we have in our Form 10-K. But I'll summarize it, in that Sandy occurred in October of 2012. Sometime after that in early February, we received a request from the DFS for information concerning the Sandy claims we encountered, which I think totaled somewhere between 3,400 and 3,500 individual claims.

Let me say that all of those claims, except those that are in suit, which is about, I think, 20 have been settled. Since the time that the claims were presented to us, and we reached out for and ultimately met with the DFS in May of 2013, presented them with a response to the query they had with regard to the complaints that were made against Kingstone.

There were a total, at that point, of 61 individual complaints that were made. And we provided them with documentation showing that 60 of the 61 complaints were invalid. And if I say invalid, I'm saying that Mrs. Jones who paid us her homeowners premiums 15 years without fail, suffered a major loss due to flood and she got nothing from Kingstone. And as you know, at our homeowners policy does not cover flood losses.

So while it was an unfortunate circumstance for Mrs. Jones, it's just -- that's not our job. But we met with the department in May of 2013. And at least today, at the end of March of 2015, we have not heard one word since.

So, with respect to the document request, we feel as though we have been responsive. I think we were prudent in now be handled it. We didn't go around swinging, like some of our competitors did. We handled it in a businesslike manner, and we'll always handle things like that.

With respect to the 60 Minutes piece, and how some of the write-your-own flood companies were targeted, and the engineers that were associated with some of those claims, thankfully that we have nothing to do with that. I have no knowledge of it. Certainly it is something that caught the department's attention, and they've asked for additional information of all carriers at this point. But again, since we don't cover flood, we have no issue there.

With respect to the use of engineers, we do use engineers. But we do not ever touch and engineer's report, or ask or even discuss with an engineer how to construct his report. To me, that's not so much of an insurance issue as it is a fraud issue. And that's obviously outside of the conduct of a company that's 128 years old and wanting to stay around for another 128 years.

I understand. Well, I know obviously the fire was a surprise for the quarter. But outside of that, congratulations on following through on your business plan for this year.

Great. Thank you, [John].

(Operator Instructions). Thank you. It appears we have no further questions at this time.

I would now like to turn the floor back over to management for closing comments.

Okay, great. Well, Ken, thank you for your kind words at the end. 2014 was an outstanding year. We did continue with the game plan we set out. We stay on that same path, and we're happy to do so.

We thank you for all your comments. And should anybody have any further questions or want to provide any further feedback, please get in touch with me. I'll be happy to take your calls.

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.