Kingstone Companies Inc (KINS) 2023 Q3 法說會逐字稿

Greetings and welcome to the Kingstone Company's third quarter 2023 Earnings Call. (Operator Instructions) It is now my pleasure to introduce your host, Jennifer Gravelle. Thank you. Ms. Gravelle, you may begin.

您好，歡迎參加 Kingstone 公司 2023 年第三季財報電話會議。 （操作員說明）現在我很高興向大家介紹您的主持人 Jennifer Gravelle。謝謝。格拉維爾女士，您可以開始了。

Thank you and good morning, everyone, Thursday afternoon, the company issued a press release detailing Kingstone's Third Quarter 2023 results. On this call, Kingstone may make forward-looking statements regarding itself and its business.

謝謝大家，大家早上好，週四下午，公司發布了一份新聞稿，詳細介紹了金士頓 2023 年第三季的業績。在這次電話會議中，金士頓可能會就其自身及其業務做出前瞻性聲明。

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 10K for the year ended December 31, 2022, along with commentary on the forward-looking statements at the end of the Company's earnings release issued on Thursday.

由於影響金石頓的已知和未知的風險因素和不確定性，本次電話會議中討論的前瞻性事件和情況可能不會發生，並且可能會出現重大差異。欲了解更多信息，請參閱公司截至2022年12月31日止年度的10K表格第1部分第1A項標題為“可能影響未來業績和財務狀況的因素”的部分，以及最後對前瞻性陳述的評論該公司週四發布的收益報告。

In addition, our remarks today include references to non-GAAP measures. For a reconciliation of our non-GAAP measures to GAAP figures, please see the tables in our earnings release. And with that, I'd like to turn the call over to Kingstone's CEO and President, Meryl Golden. Please go ahead, Maryl.

此外，我們今天的言論也提到了非公認會計準則措施。有關我們的非 GAAP 指標與 GAAP 數據的對照表，請參閱我們的收益報告中的表格。接下來，我想將電話轉給金士頓執行長兼總裁 Meryl Golden。請繼續，瑪麗爾。

Thanks, Jan, and thanks for joining us this morning. First, let me again thank the Board for giving me the opportunity to lead Kingstone as its CEO. I think it's important that we share more information with our investors and become more transparent to give you greater visibility as to the future.

謝謝，Jan，感謝您今天早上加入我們。首先，讓我再次感謝董事會給我機會擔任金士頓執行長。我認為重要的是，我們與投資者分享更多資訊並變得更加透明，以便讓您對未來有更大的了解。

Our business is complicated and I thought it could be explained better. So we've made further changes to our press release and 10Q this quarter. Your positive feedback on the changes so far is much appreciated. As you know, Kingstone is in the midst of a transformation.

我們的業務很複雜，我認為可以更好地解釋。因此，我們對本季的新聞稿和 10 季度進行了進一步的修改。非常感謝您迄今為止對這些變化的積極反饋。如您所知，金士頓正處於轉型之中。

Our strategy from the near term is to return to our roots as the premier writer of coastal property insurance in downstate New York, our core business, and we have been working hard to reduce our footprint outside of New York, our non-core business.

我們的近期策略是回歸我們的根源，成為紐約州南部沿海財產保險的主要承保人，這是我們的核心業務，我們一直在努力減少我們在紐約以外的業務，這是我們的非核心業務。

As such, we've broken down our results between core and non-core so that you can better understand the results of each segment. Please take your time going through the details contained in the press release and the 10Q, as you will see that the underlying core business is profitable with a combined ratio of 96.4 for the quarter.

因此，我們將結果分為核心和非核心，以便您可以更好地了解每個部分的結果。請花點時間仔細閱讀新聞稿和 10 季度中包含的詳細信息，因為您將看到基礎核心業務是盈利的，該季度的綜合比率為 96.4。

Core premiums are growing up just under 10% year to date, core margins are expanding as average premiums are increasing and cost savings and efficiencies are taking hold, non-core is shrinking. And by this time next year, the drag on our financials will be immaterial, if not gone.

今年迄今為止，核心保費增長了近 10%，隨著平均保費的增加以及成本節約和效率的鞏固，核心利潤率不斷擴大，非核心業務正在萎縮。到明年這個時候，對我們財務狀況的拖累即使沒有消失，也將是微不足道的。

Kingstone is poised for a profitable 2024. For four years, I have talked about Kingstone 2.0 and Kingstone 3.0. Our employees have worked tirelessly to implement these strategies. They are now in place and outlook.

金士頓準備在2024年獲利。四年來，我一直在談論金士頓2.0和金士頓3.0。我們的員工孜孜不倦地努力實施這些策略。他們現在已就位並展望未來。

While I'll never say we are done. We have accomplished an incredible amount, I believe, deeply in our strategy, the team that we've built and our progress so far, I am so proud of the company that we have become. We are smaller, highly efficient, nimble, and focused on expanding the benefits that Kingstone 2.0 and Kingstone 3.0 have enabled.

雖然我永遠不會說我們已經完成了。我相信，我們已經取得了令人難以置信的成就，無論是我們的策略、我們所建立的團隊還是我們迄今為止所取得的進展，我都為我們所成為的公司感到非常自豪。我們規模較小、有效率、靈活，並專注於擴大金士頓 2.0 和金士頓 3.0 所帶來的優勢。

These benefits are now flowing through our income statement at an accelerating rate. And as the non-core business declines further will become even more apparent in our overall results. That makes me confident that 2024 will be a great year for the Company and its shareholders.

這些好處現在正在加速流入我們的損益表。隨著非核心業務的進一步下滑，我們的整體業績將會更加明顯。這讓我相信 2024 年對公司及其股東來說將是偉大的一年。

Late last year, we also laid out a plan to return the company to profitability, and I'm going to highlight our progress on those key initiatives. In Q3, we were successful in reducing our non-core policies in force by 17% from the prior quarter, and non-core policies in force are now down 35% from year-end 2022.

去年年底，我們還制定了一項讓公司恢復盈利的計劃，我將重點放在我們在這些關鍵舉措上取得的進展。第三季度，我們成功地將有效的非核心政策比上一季減少了 17%，目前有效的非核心政策比 2022 年底減少了 35%。

Our estimate is that the non-core book will decline by close to 50% by the end of this year. And by more than 80% by the end of next year, combine that with the additional rate we've been able to take and I hope to be able to report this time next year that the stand-alone non-core business is running at or near breakeven.

我們預計，到今年年底，非核心圖書將下降近50%。到明年年底超過 80%，再加上我們能夠採取的額外費率，我希望明年這個時候能夠報告獨立非核心業務的運行速度或接近收支平衡。

The non-core business added 6.4 points to our combined ratio for the quarter and 7.9 points on a year-to-date basis. So you can see how important it is that we're accelerating this decline. Our pricing team has done a fantastic job with rate filings to manage our overall rate level in the face of loss trends that we and the industry have been seeing.

非核心業務使我們本季的綜合成本率增加了 6.4 個點，較年初至今增加了 7.9 點。所以你可以看到我們加速這種下降是多麼重要。面對我們和行業已經看到的損失趨勢，我們的定價團隊在費率備案方面做得非常出色，以管理我們的整體費率水準。

As mentioned previously, we are addressing loss trends, including inflation in two ways. The most significant for this year has been our effort to update replacement cost on every policy. This effort commenced in September of last year. So all policies have now been through this process once.

如前所述，我們正在透過兩種方式解決損失趨勢，包括通貨膨脹。今年最重要的是我們努力更新每份保單的重置成本。這項工作從去年九月開始。所以現在所有政策都已經經歷過這個過程一次。

We will continue to update replacement costs annually so that our customers are always insured to value. Don't forget that this update to replacement cost brings with it higher premium and those are in addition to those that come from our rate filing.

我們將繼續每年更新更換成本，以便我們的客戶始終獲得價值保障。不要忘記，重置成本的更新會帶來更高的保費，而這些保費不包括在我們的費率備案中。

Let me point out that for the trailing 12 months, we have realized a 25.5% increase in average premium for our legacy homeowner product in New York as a result of the combination of rate and replacement cost updates.

我要指出的是，在過去 12 個月中，由於費率和重置成本更新的結合，我們在紐約的傳統房主產品的平均保費增加了 25.5%。

Let me also remind you that most of the earned premiums have not yet been earned and will be reflected in future quarters. It takes about 18 months for rate increases to be fully reflected in earned premium, and it will be reflection on ever accelerating basis over time.

我還要提醒您，大部分已賺取的保費尚未賺取，並將反映在未來的季度中。費率上漲大約需要 18 個月的時間才能完全反映在所賺取的保費中，隨著時間的推移，這一反映將不斷加速。

This increase in earned premium will, by definition drive down the loss ratio and lead to further declines in our expense ratio. We did an excellent job managing our catastrophe reinsurance renewal, which resulted in a much lower increase than anticipated.

顧名思義，賺取保費的增加將降低損失率，並導致我們的費用率進一步下降。我們在管理巨災再保險續保方面做得非常出色，導致增幅遠低於預期。

We were fortunate that Jen joined us earlier in the year and brought with her the inch reinsurance experience. She's gained from her time in Florida. We have seen two years of dramatic pricing increases in catastrophe reinsurance costs and expected this year to be even worse. We needed to be prepared.

我們很幸運，Jen 在今年早些時候加入了我們，並帶來了再保險方面的經驗。她從佛羅裡達州的時光中獲益匪淺。我們已經看到巨災再保險成本的定價在兩年內大幅上漲，預計今年的情況會更糟。我們需要做好準備。

One strategy we deployed to reduce cost was just low core new business writings of the highest cost policies, those contributing the most to our P&L. This strategy was successful, and this allowed us to buy to a lower limit while maintaining the same risk tolerance. And as such, the increase to ceded premiums was minimized.

我們為降低成本而部署的一項策略是最高成本政策的低核心新業務著作，這些政策對我們的損益貢獻最大。這個策略是成功的，這使我們能夠在保持相同風險承受能力的情況下以較低的限額買入。因此，分出保費的增加被最小化。

I also want to mention our relentless focus on improving our cost structure. I am delighted that we have made such great progress in this area. We have achieved our goal for the year, a net expense ratio of 33, a 4.2%-point reduction from the prior year. But our focus will now wane. We will recognize the benefits of having we all recognize the benefits of having low expenses, and we will have a new stretch goal for 2024 to reduce expenses below 30%. With that, I'll now pass the call over to Jen to review our third quarter results. Jan?

我也想提及我們對改善成本結構的不懈關注。我很高興我們在這一領域取得瞭如此巨大的進展。我們實現了今年的目標，淨費用率為33，比上年下降4.2個百分點。但我們的注意力現在會減弱。我們將認識到讓我們所有人都認識到低費用的好處的好處，並且我們將在 2024 年制定新的延伸目標，將費用減少到 30% 以下。現在，我將把電話轉給 Jen，以審查我們第三季的業績。簡？

Thank you, Carl. For the third quarter of 2023, Kingstone recorded a net of $3.1 million or $0.33 per diluted share, improving from a net loss of $4 million or $0.38 per diluted share for the same period last year. Direct written premiums were down 4.8% to $52 million, a decrease of $2.6 million from $54.6 million in prior year period.

謝謝你，卡爾。 2023 年第三季度，金石頓錄得淨虧損 310 萬美元，即稀釋後每股收益 0.33 美元，優於去年同期的淨虧損 400 萬美元，即稀釋後每股虧損 0.38 美元。直接承保保費下降 4.8%，至 5,200 萬美元，比去年同期的 5,460 萬美元減少 260 萬美元。

Our core premiums were up 4.7% for the quarter, while non-core premiums declined by 43.9%. The net loss and LAE ratio was up 3.5 points from the prior year to 78.5%. The third quarter catastrophe losses added $2.2 million or 7.7 points to the net loss ratio for the quarter, an increase of 6.6 points on that detached on the catastrophe losses over the prior year.

本季我們的核心保費上漲 4.7%，而非核心保費下降 43.9%。淨虧損和LAE比率較前一年上升3.5個百分點，達78.5%。第三季的巨災損失使該季度的淨損失率增加了 220 萬美元，即 7.7 個百分點，比前一年的巨災損失增加了 6.6 個百分點。

Most of the catastrophe losses were from a rain event that hit downstate New York, particularly hard the last few days of September, the attritional or non-cat loss ratio was 70.8%, 1.6 points lower than the loss ratio in the third quarter last year.

大部分災難損失是由於紐約州北部的一場降雨造成的，特別是9月份的最後幾天，自然災害損失率為70.8%，比去年第三季的損失率低1.6個百分點。

But emphasize the importance of our separating the core from non-core results. Core attritional loss ratio was 64.7% for the quarter, while the non-core attritional loss ratio was 112.5%. The improvement in our attritional loss ratio was driven by lower frequency, which is believed to be the risk, the result of better risk selection and our select product.

但強調我們將核心結果與非核心結果分開的重要性。本季核心損耗率為 64.7%，而非核心損耗率為 112.5%。我們的損耗率的改善是由較低的頻率驅動的，這被認為是風險、更好的風險選擇和我們選擇的產品的結果。

In addition, we have been actively managing and reducing less profitable segments. These actions have been offset by a higher -- higher severity due to inflation as well as elevated number of large losses. For the third quarter, the net underwriting expense ratio decreased 5.2 points to 31.7%, the lowest in the Company's history.

此外，我們一直在積極管理和減少利潤較低的部門。這些行動已被通貨膨脹造成的更嚴重的後果以及巨額損失數量的增加所抵消。第三季淨承保費用率下降5.2個百分點至31.7%，為公司歷史最低水準。

This quarter's expense ratio reduction is due to decrease in most components of the Company's expenses, as Mel said, and we have been relentless in our efforts to reduce costs, renegotiating many contracts and reevaluating the necessity for all expenditures.

正如梅爾所說，本季度費用率的下降是由於公司大部分費用的減少，我們一直在不懈地努力降低成本，重新談判許多合約並重新評估所有支出的必要性。

Our investment income was slightly higher than the third quarter. We benefited from higher interest rates on cash balances. From the macroeconomic perspective, the increased interest rates continue to apply pressure on our bond portfolio, resulting in unrealized losses on those investments.

我們的投資收益略高於第三季。我們受益於現金餘額利率上升。從宏觀經濟角度來看，利率上升持續對我們的債券投資組合造成壓力，導致這些投資出現未實現損失。

The effective duration of our fixed maturity securities was 4.3 years with an average yield of 3.53%. And the cost of our 2022 notes included a five Hot bar higher interest rates. We initiated the sale leaseback in the fourth quarter of 2022. I think it's important to that we share the operating Ebitda , which removes the impacts of these two items, and we're doing this on an operating basis to also remove the impact of realized and unrealized gains on investments.

我們的固定期限證券的有效久期為4.3年，平均殖利率為3.53%。我們 2022 年票據的成本包括五個 Hot Bar 的高利率。我們在 2022 年第四季度啟動了售後回租。我認為，我們共享營運 Ebitda 非常重要，這消除了這兩項的影響，而且我們在營運基礎上這樣做也是為了消除已實現的 Ebitda 的影響。以及未實現的投資收益。

Our press release shows the operating Ebitda for the past five quarters. For the current quarter, our operating Ebitda was a loss of $1.8 million. We have done and continue to do everything we can to bring Kingstone to a consistent and sustainable level of profitability as the quarters progress and the benefits of what we've done are reflected. I'm confident that you'll continue to see the progress we've made reflected in our financial results. Thank you as always, for your support and with that, we'll open it up for questions. Operator

我們的新聞稿顯示了過去五個季度的營業稅息折舊攤提前利潤（EBITDA）。本季度，我們的營運 Ebitda 虧損 180 萬美元。隨著季度的進展以及我們所做工作的效益得到體現，我們已經並將繼續盡一切努力使金士頓達到一致且可持續的盈利水平。我相信您將繼續看到我們所取得的進展反映在我們的財務表現中。一如既往地感謝您的支持，我們將開放提問。操作員

(Operator Instructions)

（操作員說明）

Paul Newsome, Piper Sandlera

保羅‧紐瑟姆，派珀‧桑德拉

Good morning and thanks for the call. Was hoping you could give us a little bit more thoughts on the competitive environment in New York and whether or not it's some getting better again, we were spinoff.

早安，感謝您的來電。希望你能給我們更多關於紐約競爭環境的想法，以及是否會再次變得更好，我們是分拆出來的。

Sure. So I would say that we are definitely in a hard market in downstate New York for coastal business. And I think it's going to continue. Our two largest competitors historically are no longer writing business. One is insolvent and the other has a moratorium on new business for about two years.

當然。所以我想說，對於紐約州南部的沿海業務來說，我們絕對處於一個艱難的市場。我認為這種情況將會持續下去。我們史上最大的兩個競爭對手不再從事寫作業務。一家已資不抵債，另一家暫停新業務約兩年。

The large multi-line competitors have pulled back even further, due to reinsurance costs and other factors. So there definitely are a few companies writing coastal properties but many fewer than in the past. And the brokers will tell you that it's the hardest market they've ever seen.

由於再保險成本和其他因素，大型多險種競爭對手的業績進一步下滑。因此，肯定有一些公司在開發沿海地產，但比過去少了很多。經紀人會告訴你，這是他們見過的最艱難的市場。

So I view this as a huge opportunity for Kingstone we were very comfortable with our pricing right now. We know our reinsurance costs, so we are at and our market share in New York is less than 2%. So we have a huge opportunity to increase our growth in downstate New York, and we hope to do that going forward.

因此，我認為這對金士頓來說是一個巨大的機會，我們對目前的定價感到非常滿意。我們知道我們的再保險成本，所以我們在紐約的市佔率還不到 2%。因此，我們有巨大的機會來促進紐約州南部的成長，我們希望未來能做到這一點。

Great, and then maybe a different topic. Can we talk about Keystone capital position includes few losses along the way. And where do you stand from an RBC capital ratio perspective? Where do you stand from that from an overall capital plan perspective in European?

太好了，然後也許是一個不同的主題。我們可以談談 Keystone 的資本狀況，一路上幾乎沒有損失。從加拿大皇家銀行資本比率的角度來看，您的立場如何？從歐洲整體資本計畫的角度來看，您對此有何看法？

Sure. Joe, you want to jump into?

當然。喬，你想跳進去嗎？

Sure, Paul, are our statutory numbers will be coming out in the middle of this week. But again, we are and some of the amounts of debt that we have on our books at the holding company level are actually surplus in the insurance carrier, and we continue to expect to see our RBC ratios that above 300 for sure.

當然，保羅，我們的法定數字將在本周中旬公佈。但同樣，我們在控股公司層面的帳簿上的一些債務實際上是保險公司的盈餘，我們繼續預期我們的 RBC 比率肯定會高於 300。

And we are maintaining to that level. We do have a little bit of an underwriting loss for the quarter going into the statutory numbers as well but we do expect to start having that turnaround here (technical difficulty) fourth quarter and the beginning of next year.

我們正在維持這個水準。我們確實在該季度有一點承保損失進入法定數字，但我們確實預計將在第四季度和明年初開始出現這種轉變（技術困難）。

Okay. Thank you. Appreciate color.

好的。謝謝。欣賞色彩。

Gabriel Macquarie, Private Investor.

加布里埃爾·麥格理，私人投資者。

Hi Meryl, Hi, Jennifer. I want to congratulate you for hitting your expense ratio. It's very, very good. And I have one question for you, Meryl and one for Jennifer. Meryl, when you referred to increasing the premiums on the New York business, 25%. So you don't really break out how on average, how much that was and in rate and how much it was and replacement costs are kind of curious if we had that.

嗨，梅莉爾，嗨，珍妮佛。我要祝賀您達到了費用比率。這非常非常好。我有一個問題想問你，梅莉爾，還有一個問題想問珍妮佛。梅莉爾，當您提到將紐約業務的保費提高 25% 時。因此，你並沒有真正了解平均水平、費用是多少、費率是多少以及重置成本，如果我們有的話，那就有點好奇了。

But I guess my thing is I guess we've heard that before. I think we heard that last year. If you look at your press release at the nine months to date, core losses, excluding catastrophes on our underwriting were actually up and the losses of about 3.4 points over 2022. So how do we know, I guess it's going to be different this time as far as making a better combined ratio on the core business going forward?

但我想我的事情是我想我們以前聽說過。我想我們去年就聽說過。如果你看看迄今為止九個月的新聞稿，我們承保的核心損失（不包括災難）實際上有所增加，並且比2022 年損失約3.4 個百分點。所以我們怎麼知道，我想這次會有所不同於未來核心業務的綜合成本率會如何？

Sure. So let me answer your first question, which is the breakout between rates and replacement costs. So for that legacy homeowner book, about 16%, almost 17% of the increase had to do with the increase in replacement costs and the rest had to do with rate changes. So then your question about losses, so what I can tell you for the quarter is that our frequency is down, which is really the leading indicator for what loss will be. (technical difficulty)

當然。那麼讓我回答你的第一個問題，即費率和重置成本之間的突破。因此，對於傳統房主帳簿來說，大約 16%、幾乎 17% 的成長與重置成本的增加有關，其餘的則與利率變動有關。那麼你關於損失的問題，所以我可以告訴你這個季度我們的頻率下降了，這實際上是損失的領先指標。 （技術難度）

But so our frequency is down, we believe because we're writing a higher, a more responsible customer and our Select program. And our Select program currently is about 20% of our book and growing. And then also we're reducing non-core business, which has a much higher frequency.

但我們的頻率下降了，我們相信是因為我們正在編寫一個更高、更負責任的客戶和我們的精選計劃。目前，我們的 Select 計畫約占我們書籍的 20%，而且還在持續成長中。然後我們也在減少頻率較高的非核心業務。

But our severity is up double digit, just like the rest of the industry. And we are seeing claims inflation in our numbers. And in addition to that, as Jen mentioned, we have had an increase in the number of large losses this year.

但與行業其他公司一樣，我們的嚴重程度上升了兩位數。我們看到索賠數字不斷膨脹。除此之外，正如 Jen 所提到的，今年我們的巨額虧損數量有所增加。

It's something we saw in every one of the quarters, and we're trying to figure out what is driving that. We have relooked at everything. We've hired an outside firm to take a look and we really found nothing and I feel I've talked with others in the industry and I'm hearing that they are seeing the same thing as well. But at the end of the day. We have now priced for this increased severity in our product. And so that, along with the decline in frequency, will result in a better loss ratio next year.

這是我們在每個季度都看到的情況，我們正在努力找出推動這一現象的原因。我們已經重新審視了一切。我們聘請了一家外部公司來查看，但我們確實什麼也沒發現，我覺得我已經與業內其他人交談過，我聽說他們也看到了同樣的事情。但最終。我們現在已經為我們產品中這種日益嚴重的情況定價。因此，隨著頻率的下降，明年的損失率將會更好。

Okay, great. Thank you. And then, Jennifer, thanks for giving us the yield on the bond portfolio, what is the average maturity of our bond portfolio now

好的，太好了。謝謝。然後，詹妮弗，感謝您向我們提供債券投資組合的收益率，我們債券投資組合現在的平均期限是多少

At 4.3 years.

4.3歲時。

Okay. Okay. Great. Thanks, guys.

好的。好的。偉大的。多謝你們。

Thank you gab.

謝謝你嘎嘎。

That concludes our question-and-answer session. I would like to turn the floor back over to Meryl Golden for closing comments.

我們的問答環節到此結束。我想請梅莉爾·戈爾登 (Meryl Golden) 發表結束評論。

Great. Thanks, for joining us. Bright and early on Monday morning and have a fantastic day.

偉大的。謝謝您加入我們。週一清晨，陽光明媚，度過美好的一天。

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

今天的電話會議到此結束。此時您可以斷開線路。感謝您的參與。