We offer property and casualty insurance products to small businesses and
individuals in New York State through our wholly owned subsidiary, Kingstone
Insurance Company (“KICO”). KICO is a licensed property and casualty
insurance company in New York, New Jersey, Connecticut, Pennsylvania and Texas;
however, KICO writes substantially all of its business in New York. Payments,
Inc., our wholly owned subsidiary, is a licensed premium finance company in
the State of New York and through March 31, 2015, received fees for placing
contracts with a third party licensed premium finance company.
Generally, property and casualty insurance companies write insurance policies
in exchange for premiums paid by their customers (the “insureds”).
An insurance policy is a contract between the insurance company and its insureds
where the insurance company agrees to pay for losses suffered by the insured
that are covered under the contract. Such contracts often are subject to legal
interpretation by courts, often involving legislative actions and/or arbitration.
Property insurance generally covers the financial consequences of accidental
losses to the insured’s property, such as a home and the personal property
in it, or a business’ building, inventory and equipment. Casualty insurance
(often referred to as liability insurance) generally covers the financial consequences
related to the legal liability of an individual or an organization resulting
from negligent acts and omissions causing bodily injury and/or property damage
to a third party. Claims for property coverage generally are reported and settled
in a relatively short period of time, whereas those for casualty coverage can
take years and even decades to settle.
We generate revenues from earned premiums, ceding commissions from quota share
reinsurance, net investment income generated from our investment portfolio,
and net realized gains and losses on investment securities. We also receive
installment fee income, fees charged to reinstate a policy after it has been
cancelled for non-payment, and fees for placing premium finance contracts with
a third party licensed premium finance company. Earned premiums represent premiums
received from insureds, which are recognized as revenue over the period of time
that insurance coverage is provided (i.e., ratably over the life of the policy).
A significant period of time can elapse between the receipt of insurance premiums
and the payment of insurance claims. During this time, KICO invests the premiums,
earns investment income and generates net realized and unrealized investment
gains and losses on investments.
We are a property and casualty insurance holding company whose principal operating
subsidiary is Kingstone Insurance Company, referred to as KICO, domiciled in
the State of New York. We are a multi-line regional property and casualty insurance
company writing business exclusively through independent retail and wholesale
agents and brokers, referred to collectively as producers. We are licensed to
write insurance policies in New York, New Jersey, Connecticut, Pennsylvania
and Texas.
We seek to deliver an attractive return on capital and to provide consistent
earnings growth through underwriting profits and income from our investment
portfolio. Our goal is to allocate capital efficiently to those lines of business
that generate sustainable underwriting profits and exit any line for which an
underwriting profit is not likely to result. Our strategy is to be the preferred
multi-line property and casualty insurance company for selected producers in
the geographic markets in which we operate. We believe producers prefer to place
profitable business with us because we provide excellent, consistent service
to our producers, policyholders and claimants coupled with competitive rates
and commission levels and a consistent market presence. We offer a wide array
of personal and commercial lines policies, and we believe that this differentiates
us from other insurance companies that also distribute through our selected
producers.
Our principal objectives are to increase the volume of profitable business
that we write while limiting our risk of loss and preserving our capital. We
seek to generate underwriting income by writing profitable insurance policies
and by effectively managing our other underwriting and operating expenses. We
are pursuing profitable growth by expanding the geographic regions in which
we operate, increasing the volume of business that we write with existing producers,
developing new selected producer relationships, and introducing niche insurance
products that are attractive to our producers and policyholders.
History of Growing Our Profitable Operations
Our insurance company subsidiary, KICO, has been in operation in the State
of New York for 129 years. We have consistently increased the volume of profitable
business that we write by introducing new insurance products, increasing the
volume of business that we write with our selected producers and developing
new producer relationships. KICO has earned an underwriting profit in each of
the past ten years, including in 2012 when our financial results were adversely
impacted by Superstorm Sandy. The extensive heritage of our insurance company
subsidiary and our commitment to the New York market is a competitive advantage
with producers and policyholders.
Strong Producer Relationships
Within our selected producers’ offices, we compete with other property
and casualty insurance carriers available to those producers. We carefully select
the producers that distribute our insurance policies and continuously monitor
and evaluate their performance. We believe our insurance producers value their
relationships with us because we provide excellent, consistent personal service
coupled with competitive rates and commission levels. We have consistently been
rated by insurance producers as above average in the important areas of underwriting,
claims handling and service. In the last three performance surveys conducted
by the Professional Insurance Agents of New York and New Jersey (“PIA”)
of its membership (2010, 2012, and 2014), KICO was rated as the one of the top
performing insurance companies in New York, twice ranking as the top rated carrier
among all those surveyed.
We offer our selected producers the ability to write a wide array of personal
lines and commercial lines policies, including some which are unique to us.
Many of our producers write multiple lines of business with us, which provides
an advantage over those competitors who are focused on a single product line.
We now provide a multi-policy discount on homeowners policies in order to attract
and retain more of this multi-line business. We have had a consistent presence
in the New York market for over 100 years and we believe that producers value
the longevity of our relationship with them. We believe that the excellent service
we provide to our selected producers, our broad product offering, and our consistent
market presence provides a foundation for profitable growth.
Sophisticated Underwriting and Risk Management Practices
We believe that we have a significant underwriting advantage due to our local
market presence and expertise. Our underwriting process evaluates and screens
out certain risks based on property reports, individual insurance scoring, information
collected from physical property inspections, and driving records. We maintain
certain policy exclusions that reduce our exposure to risks that can create
severe losses. We target a more preferred risk profile in order to reduce adverse
selection from risks seeking the lowest premiums by selecting only minimal coverage
levels.
Our underwriting procedures, premium rates and policy terms support the underwriting
profitability of our personal lines policies. We apply premium surcharges for
certain coastal properties and maintain deductibles for hurricane-prone exposures
in order to provide an appropriate premium rate for the risk of loss. We limit
the business that we write in certain coastal counties and within close proximity
to coastlines, through the use of individual catastrophe risk scoring, in order
to manage our exposure to catastrophic weather events.
Our underwriting expertise and risk management practices enable us to profitably
write personal and commercial lines business in our markets without the need
for frequent rate adjustments. We believe that the consistency and the reliable
availability of our insurance products is important to our selected producer
relationships.
