A.M. Best Affirms Credit Ratings of Kingstone Insurance Company and Kingstone Companies, Inc.

A.M. Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” of Kingstone Insurance Company (KICO) (Kingston, NY). Concurrently, A.M. Best has affirmed the Long-Term ICR of “bbb-” of Kingstone Companies, Inc. (KINS) (Delaware) [NASDAQ: KINS], the insurance holding company of KICO.

A.M. Best also has affirmed the Long-Term Issue Credit Rating (Long-Term IR) of “bbb-” on Kingstone’s $30.0 million, 5.50% senior unsecured notes due 2022. Additionally, A.M. Best has affirmed the indicative Long-Term IRs of “bbb-” for senior unsecured notes and “bb+” for subordinated notes of the shelf registration of KINS. The outlook for all of these Credit Ratings (ratings) is stable.

The ratings of KICO reflect its balance sheet strength, which A.M. Best categorizes as very strong, as well as strong operating performance, limited business profile and appropriate enterprise risk management.

KICO’s risk-adjusted capitalization trended upward significantly during 2017, driven by $48 million of contributed capital from KINS and strong retained earnings. On March 1, 2017, KINS contributed $23 million of capital to KICO, following KINS raising $30.2 million from its public offering of common stock. On Dec. 20, 2017, KINS contributed an additional $25 million of capital to KICO, following KINS’ public issuance of $30 million of senior debt. Following the senior notes issuance, KINS’ financial leverage and coverage measures, including consideration of liquid assets at the holding company, are supportive of its current ratings.

KICO’s strong operating performance is reflected in the company’s 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. These five-year operating returns compare favorably with the industry composite average.

Partially offsetting KICO’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, KICO 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, KICO’s increased capital position and financial flexibility are sufficient to support management’s future growth plans. Furthermore, KICO historically reported adverse loss reserve development in most calendar and accident years, driven in part by historical lead paint claims and commercial auto business that has now run off. However, loss reserve development has been modestly favorable in recent calendar and accident years, driven by management’s strategic initiatives.

While KICO’s single-state concentration exposes it to weather-related events, catastrophe exposure is partially mitigated through catastrophe reinsurance, which it has 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, KICO has been expanding its operating territory to regions beyond the New York metropolitan area.

This press release relates to Credit Ratings 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. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and A.M. Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and A.M. Best Rating Action Press Releases.

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