A.M. Best Revises Issuer Credit Rating Outlook to Positive for Kingstone Insurance Company and Kingstone Companies, Inc.

A.M. Best has revised the outlook to positive from stable for the issuer credit rating (ICR) and affirmed the financial strength rating of B++ (Good) and the ICR of “bbb” of Kingstone Insurance Company (Kingstone). The outlook for the FSR remains stable. Concurrently, A.M. Best has revised the outlook to positive from stable and affirmed the ICR of “bb” of Kingstone’s publicly traded holding company, Kingstone Companies, Inc. [NASDAQ:KINS]. Both companies are headquartered in Kingston, NY.

The revised ICR outlook to positive reflects Kingstone’s continued solid risk-adjusted capitalization, strong retained earnings that have enabled consistent growth in policyholders’ surplus, and increased coverage on its catastrophe reinsurance program.

The ratings reflect Kingstone’s solid risk-adjusted capitalization, favorable five-year operating performance and local market knowledge in its predominant operating territory of New York state. Kingstone’s risk-adjusted capitalization has significantly improved in recent years, driven by a $15.0 million capital contribution from its parent, following an $18.8 million public offering on Dec. 13, 2013. The capital raised in this public offering also enabled management to repay outstanding debt at Kingstone Companies, Inc. During the second quarter of 2016, Kingstone’s parent successfully completed the private placement of an additional $5.0 million of common stock. The company’s favorable operating performance is reflected in its double-digit, five-year pre-tax returns on revenue and equity, generated by positive net underwriting income and supplemented by net investment and other income. Kingstone’s policyholders’ surplus growth has been solid over the past five years, increasing at a double-digit average annual rate. Additionally, the ICR for Kingstone Companies, Inc. acknowledges the standard notching off of the ICR for the operating company.

Partially offsetting Kingstone’s positive rating factors are its dependence on reinsurance and its concentration of risk, primarily in downstate New York, which exposes it to weather-related events, as well as to market, regulatory and judicial issues. Additionally, Kingstone reported substantial growth in net premiums written in recent years, driven by increased retention on its quota share reinsurance contracts and new policy growth. However, Kingstone’s increased capital position and financial flexibility are sufficient to support management’s future growth plans. Furthermore, Kingstone historically reported adverse loss reserve development in most calendar and accident years, driven in part by historical lead paint claims. However, loss reserve development has been modestly favorable in recent calendar and accident years, driven by management’s strategic initiatives.

While Kingstone’s single-state concentration exposes it to weather-related events, catastrophe exposure is partially mitigated through catastrophe reinsurance, which it purchased at increased limits in recent years, as well as the use of hurricane deductibles, visual risk inspections, distance-from-shore restrictions and surcharges. Additionally, the company has been expanding its operating territory to regions beyond the New York metropolitan area. While the company has significantly grown its policies in force, Kingstone has structured its remaining personal lines quota share and catastrophe reinsurance to reduce the volatility of its balance sheet to a major weather event.

This press release relates to rating(s) that have been published on A.M. Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see A.M. Best’s Recent Rating Activity web page.

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