10-Q 1 king_10q.htm FORM 10-Q king_10q.htm

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

(Mark one)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2023

 

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from _________to _________

 

Commission File Number 0-1665

 

KINGSTONE COMPANIES, INC.

(Exact name of registrant as specified in its charter)

 

Delaware

 

36-2476480

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification Number)

 

15 Joys Lane

Kingston, NY 12401

(Address of principal executive offices)

 

(845802-7900

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.01 par value per share

KINS

Nasdaq Capital Market

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act. :

 

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

 

 

Emerging growth company     

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No ☒

 

As of November 20, 2023, there were 10,759,330 shares of the registrant’s common stock outstanding.

 

 

 

 

KINGSTONE COMPANIES, INC.

INDEX

 

 

 

 

PAGE

 

 

 

 

 

 

PART I — FINANCIAL INFORMATION

 

 

 

 

Item 1 —

Financial Statements

 

 

4

 

 

Condensed Consolidated Balance Sheets at September 30, 2023 (Unaudited) and December 31, 2022

 

 

4

 

 

Condensed Consolidated Statements of Operations and Comprehensive Loss for the three months and nine months ended September 30, 2023 (Unaudited) and 2022 (Unaudited)

 

 

5

 

 

Condensed Consolidated Statements of Stockholders’ Equity for the three months and nine months ended September 30, 2023 (Unaudited) and 2022 (Unaudited)

 

 

6-7

 

 

Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2023 (Unaudited) and 2022 (Unaudited)

 

 

8-9

 

 

Notes to Condensed Consolidated Financial Statements (Unaudited)

 

 

10

 

Item 2 —

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

 

44

 

Item 3 —

Quantitative and Qualitative Disclosures About Market Risk

 

 

78

 

Item 4 —

Controls and Procedures

 

 

78

 

 

 

 

 

 

 

PART II — OTHER INFORMATION

 

 

79

 

Item 1 —

Legal Proceedings

 

 

79

 

Item 1A —

Risk Factors

 

 

79

 

Item 2 —

Unregistered Sales of Equity Securities and Use of Proceeds

 

 

79

 

Item 3 —

Defaults Upon Senior Securities

 

 

79

 

Item 4 —

Mine Safety Disclosures

 

 

79

 

Item 5 —

Other Information

 

 

79

 

Item 6 —

Exhibits

 

 

80

 

Signatures

 

 

81

 

 

 
2

Table of Contents

 

Forward-Looking Statements

 

This Quarterly Report contains forward‑looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  The events described in forward‑looking statements contained in this Quarterly Report may not occur.  Generally, these statements relate to business plans or strategies, projected or anticipated results or other consequences of our plans or strategies, projected or anticipated results from acquisitions to be made by us, or projections involving anticipated revenues, earnings, costs or other aspects of our operating results.  The words “may,” “will,” “expect,” “believe,” “anticipate,” “project,” “plan,” “intend,” “estimate,” and “continue,” and their opposites and similar expressions are intended to identify forward‑looking statements.  We caution you that these statements are not guarantees of future performance or events and are subject to a number of uncertainties, risks and other influences, many of which are beyond our control, which may influence the accuracy of the statements and the projections upon which the statements are based.  Factors which may cause actual results and outcomes to differ materially from those contained in the forward-looking statements include, but are not limited to the risks and uncertainties discussed in Part I, Item 1A (“Risk Factors”) of our Annual Report on Form 10-K for the year ended December 31, 2022, Part I, Item 2 of this Quarterly Report and Part II, Item 1A of this Quarterly Report. 

 

Any one or more of these uncertainties, risks and other influences could materially affect our results of operations and whether forward‑looking statements made by us ultimately prove to be accurate.  Our actual results, performance and achievements could differ materially from those expressed or implied in these forward‑looking statements.  We undertake no obligation to publicly update or revise any forward‑looking statements, whether from new information, future events or otherwise except as required by law.

 

 
3

Table of Contents

 

PART I.  FINANCIAL INFORMATION

 

Item 1.   Financial Statements.

 

KINGSTONE COMPANIES, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

 

 

 

 

 

 

 

 

 September 30,

 

 

 December 31,

 

 

 

2023

 

 

2022

 

 

 

(unaudited)

 

 

 

 

Assets

 

 

 

 

 

 

Fixed-maturity securities, held-to-maturity, at amortized cost (fair value of $5,699,498 at September 30, 2023 and $6,600,388 at December 31, 2022)

 

$7,053,825

 

 

$7,766,140

 

Fixed-maturity securities, available-for-sale, at fair value (amortized cost of $154,459,849 at September 30, 2023 and $174,918,427 at December 31, 2022)

 

 

132,786,899

 

 

 

154,715,163

 

Equity securities, at fair value (cost of $17,986,783 at September 30, 2023 and $18,086,700 at December 31, 2022)

 

 

13,907,651

 

 

 

13,834,390

 

Other investments

 

 

3,213,318

 

 

 

2,771,652

 

Total investments

 

 

156,961,693

 

 

 

179,087,345

 

Cash and cash equivalents

 

 

15,132,969

 

 

 

11,958,228

 

Premiums receivable, net

 

 

13,326,369

 

 

 

13,880,504

 

Reinsurance receivables, net

 

 

84,257,926

 

 

 

66,465,061

 

Deferred policy acquisition costs

 

 

20,532,322

 

 

 

23,819,453

 

Intangible assets

 

 

500,000

 

 

 

500,000

 

Property and equipment, net

 

 

9,594,500

 

 

 

10,541,935

 

Deferred income taxes, net

 

 

12,789,160

 

 

 

10,331,158

 

Other assets

 

 

3,893,322

 

 

 

3,748,847

 

Total assets

 

$316,988,261

 

 

$320,332,531

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

Loss and loss adjustment expense reserves

 

$121,674,947

 

 

$118,339,513

 

Unearned premiums

 

 

103,161,550

 

 

 

107,492,777

 

Advance premiums

 

 

6,288,223

 

 

 

2,839,028

 

Reinsurance balances payable

 

 

20,263,484

 

 

 

13,061,966

 

Deferred ceding commission revenue

 

 

9,393,051

 

 

 

10,619,569

 

Accounts payable, accrued expenses and other liabilities

 

 

4,453,452

 

 

 

6,651,723

 

Debt, net

 

 

25,224,693

 

 

 

25,158,523

 

Total liabilities

 

 

290,459,400

 

 

 

284,163,099

 

 

 

 

 

 

 

 

 

 

Commitments and Contingencies (Note 11)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders' Equity

 

 

 

 

 

 

 

 

Preferred stock, $.01 par value; authorized 2,500,000 shares

 

 

-

 

 

 

-

 

Common stock, $.01 par value; authorized 20,000,000 shares; issued 12,227,562 shares at September 30, 2023 and 12,171,512 shares at December 31, 2022; outstanding 10,756,156 shares at September 30, 2023 and 10,700,106 shares at December 31, 2022

 

 

122,275

 

 

 

121,715

 

Capital in excess of par

 

 

75,153,808

 

 

 

74,519,590

 

Accumulated other comprehensive loss

 

 

(17,119,479)

 

 

(15,958,428)

Accumulated deficit

 

 

(26,060,262)

 

 

(16,945,964)

 

 

 

32,096,342

 

 

 

41,736,913

 

Treasury stock, at cost, 1,471,406 shares at September 30, 2023 and December 31, 2022

 

 

(5,567,481)

 

 

(5,567,481)

Total stockholders' equity

 

 

26,528,861

 

 

 

36,169,432

 

 

 

 

 

 

 

 

 

 

Total liabilities and stockholders' equity

 

$316,988,261

 

 

$320,332,531

 

 

See accompanying notes to condensed consolidated financial statements.

 

 
4

Table of Contents

 

KINGSTONE COMPANIES, INC. AND SUBSIDIARIES

 

 

 

 

 

 

 

 

 

Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited)

 

 

 

 

 

For the Three Months Ended

 

 

For the Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

Net premiums earned

 

$27,938,318

 

 

$29,360,976

 

 

$85,701,467

 

 

$83,936,424

 

Ceding commission revenue

 

 

5,536,327

 

 

 

4,886,094

 

 

 

16,393,944

 

 

 

14,283,077

 

Net investment income

 

 

1,444,360

 

 

 

1,418,521

 

 

 

4,437,208

 

 

 

3,411,946

 

Net (losses) gains on investments

 

 

(824,370)

 

 

(397,658)

 

 

597,643

 

 

 

(9,313,436)

Other income

 

 

142,036

 

 

 

269,702

 

 

 

454,160

 

 

 

750,169

 

Total revenues

 

 

34,236,671

 

 

 

35,537,635

 

 

 

107,584,422

 

 

 

93,068,180

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss and loss adjustment expenses

 

 

21,932,453

 

 

 

22,027,516

 

 

 

66,552,565

 

 

 

63,624,755

 

Commission expense

 

 

8,210,430

 

 

 

8,702,190

 

 

 

25,221,374

 

 

 

25,534,307

 

Other underwriting expenses

 

 

6,318,625

 

 

 

7,276,101

 

 

 

19,873,882

 

 

 

20,717,047

 

Other operating expenses

 

 

441,963

 

 

 

809,597

 

 

 

1,868,011

 

 

 

2,357,367

 

Depreciation and amortization

 

 

741,059

 

 

 

824,975

 

 

 

2,327,691

 

 

 

2,472,348

 

Interest expense

 

 

988,699

 

 

 

456,545

 

 

 

3,004,564

 

 

 

1,369,635

 

Total expenses

 

 

38,633,229

 

 

 

40,096,924

 

 

 

118,848,087

 

 

 

116,075,459

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss from operations before taxes

 

 

(4,396,558)

 

 

(4,559,289)

 

 

(11,263,665)

 

 

(23,007,279)

Income tax benefit

 

 

(858,987)

 

 

(561,668)

 

 

(2,149,367)

 

 

(4,432,507)

Net loss

 

 

(3,537,571)

 

 

(3,997,621)

 

 

(9,114,298)

 

 

(18,574,772)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive loss, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross change in unrealized losses on available-for-sale-securities

 

 

(2,821,785)

 

 

(5,047,679)

 

 

(1,486,887)

 

 

(22,556,319)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reclassification adjustment for losses included in net loss

 

 

4,181

 

 

 

4,247

 

 

 

17,201

 

 

 

55,927

 

Net change in unrealized losses, on available-for-sale-securities

 

 

(2,817,604)

 

 

(5,043,432)

 

 

(1,469,686)

 

 

(22,500,392)

Income tax benefit related to items of other comprehensive loss

 

 

591,697

 

 

 

1,059,120

 

 

 

308,635

 

 

 

4,725,083

 

Other comprehensive loss, net of tax

 

 

(2,225,907)

 

 

(3,984,312)

 

 

(1,161,051)

 

 

(17,775,309)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive loss

 

$(5,763,478)

 

$(7,981,933)

 

$(10,275,349)

 

$(36,350,081)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$(0.33)

 

$(0.38)

 

$(0.85)

 

$(1.75)

Diluted

 

$(0.33)

 

$(0.38)

 

$(0.85)

 

$(1.75)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

10,756,156

 

 

 

10,645,675

 

 

 

10,754,709

 

 

 

10,640,290

 

Diluted

 

 

10,756,156

 

 

 

10,645,675

 

 

 

10,754,709

 

 

 

10,640,290

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends declared and paid per common share

 

$-

 

 

$0.04

 

 

$-

 

 

$0.12

 

 

See accompanying notes to condensed consolidated financial statements.

 

 
5

Table of Contents

 

KINGSTONE COMPANIES, INC. AND SUBSIDIARIES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Condensed Consolidated Statements of Stockholders' Equity (Unaudited)

Three months ended September 30, 2023 and 2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital

 

 

Other

 

 

 

 

 

 

 

 

 

 

 

Preferred Stock

 

 

Common Stock

 

 

in Excess

 

 

Comprehensive

 

 

Accumulated

 

 

Treasury Stock

 

 

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

of Par

 

 

Loss

 

 

Deficit

 

 

Shares

 

 

Amount

 

 

Total

 

Balance, July 1, 2022

 

 

-

 

 

$-

 

 

 

12,117,081

 

 

$121,171

 

 

$73,102,513

 

 

$(11,994,258)

 

$(8,572,521)

 

 

1,471,406

 

 

$(5,567,481)

 

$47,089,424

 

Stock-based compensation

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

188,422

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

188,422

 

Dividends

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(425,800)

 

 

-

 

 

 

-

 

 

 

(425,800)

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(3,997,621)

 

 

-

 

 

 

-

 

 

 

(3,997,621)

Change in unrealized losses on available-for-sale securities, net of tax

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(3,984,312)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(3,984,312)

Balance, September 30, 2022

 

 

-

 

 

$-

 

 

 

12,117,081

 

 

$121,171

 

 

$73,290,935

 

 

$(15,978,570)

 

$(12,995,942)

 

 

1,471,406

 

 

$(5,567,481)

 

$38,870,113

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital

 

 

Other

 

 

 

 

 

 

 

 

 

 

 

Preferred Stock

 

 

Common Stock

 

 

in Excess

 

 

Comprehensive

 

 

Accumulated

 

 

Treasury Stock

 

 

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

of Par

 

 

Loss

 

 

Deficit

 

 

Shares

 

 

Amount

 

 

Total

 

Balance, July 1, 2023

 

 

-

 

 

$-

 

 

 

12,227,562

 

 

$122,275

 

 

$74,946,685

 

 

$(14,893,572)

 

$(22,522,691)

 

 

1,471,406

 

 

$(5,567,481)

 

$32,085,216

 

Stock-based compensation

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

207,123

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

207,123

 

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(3,537,571)

 

 

-

 

 

 

-

 

 

 

(3,537,571)

Change in unrealized losses on available-for-sale securities, net of tax

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(2,225,907)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(2,225,907)

Balance, September 30, 2023

 

 

-

 

 

$-

 

 

 

12,227,562

 

 

$122,275

 

 

$75,153,808

 

 

$(17,119,479)

 

$(26,060,262)

 

 

1,471,406

 

 

$(5,567,481)

 

$26,528,861

 

 

See accompanying notes to condensed consolidated financial statements.

 

 
6

Table of Contents

 

KINGSTONE COMPANIES, INC. AND SUBSIDIARIES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Condensed Consolidated Statements of Stockholders' Equity (Unaudited)

Nine months ended September 30, 2023 and 2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Accumulated

 

 

 Retained

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Capital

 

 

 Other

 

 

 Earnings

 

 

 

 

 

 

 

 

 

 Preferred Stock

 

 

 Common Stock

 

 

 in Excess

 

 

 Comprehensive

 

 

 (Accumulated

 

 

 Treasury Stock

 

 

 

 

 

 Shares

 

 

 Amount

 

 

 Shares

 

 

 Amount

 

 

 of Par

 

 

 Income (Loss)

 

 

 Deficit)

 

 

 Shares

 

 

 Amount

 

 

 Total

 

Balance, January 1, 2022

 

 

-

 

 

$-

 

 

 

11,955,660

 

 

$119,557

 

 

$72,467,483

 

 

$1,796,739

 

 

$6,855,896

 

 

 

1,471,406

 

 

$(5,567,481)

 

$75,672,194

 

Stock-based compensation

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,204,865

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,204,865

 

Vesting of restricted stock awards

 

 

-

 

 

 

-

 

 

 

234,219

 

 

 

2,342

 

 

 

(2,342)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares deducted from restricted stock awards for payment of withholding taxes

 

 

-

 

 

 

-

 

 

 

(72,798)

 

 

(728)

 

 

(379,071)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(379,799)

Dividends

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(1,277,066)

 

 

-

 

 

 

-

 

 

 

(1,277,066)

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(18,574,772)

 

 

-

 

 

 

-

 

 

 

(18,574,772)

Change in unrealized losses on available-for-sale securities, net of tax

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(17,775,309)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(17,775,309)

Balance, September 30, 2022

 

 

-

 

 

$-

 

 

 

12,117,081

 

 

$121,171

 

 

$73,290,935

 

 

$(15,978,570)

 

$(12,995,942)

 

 

1,471,406

 

 

$(5,567,481)

 

$38,870,113

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Capital

 

 

 Other

 

 

 

 

 

 

 

 

 

 

 

 Preferred Stock

 

 

 Common Stock

 

 

 in Excess

 

 

 Comprehensive

 

 

 Accumulated

 

 

 Treasury Stock

 

 

 

 

 

 Shares

 

 

 Amount

 

 

 Shares

 

 

 Amount

 

 

 of Par

 

 

 Loss

 

 

 Deficit

 

 

 Shares

 

 

 Amount

 

 

 Total

 

Balance, January 1, 2023

 

 

-

 

 

$-

 

 

 

12,171,512

 

 

$121,715

 

 

$74,519,590

 

 

$(15,958,428)

 

$(16,945,964)

 

 

1,471,406

 

 

$(5,567,481)

 

$36,169,432

 

Stock-based compensation

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

636,178

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

636,178

 

Vesting of restricted stock awards

 

 

-

 

 

 

-

 

 

 

56,977

 

 

 

569

 

 

 

(569)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Shares deducted from restricted stock awards for payment of withholding taxes

 

 

-

 

 

 

-

 

 

 

(927)

 

 

(9)

 

 

(1,391)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(1,400)

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(9,114,298)

 

 

-

 

 

 

-

 

 

 

(9,114,298)

Change in unrealized losses on available-for-sale securities, net of tax

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(1,161,051)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(1,161,051)

Balance, September 30, 2023

 

 

-

 

 

$-

 

 

 

12,227,562

 

 

$122,275

 

 

$75,153,808

 

 

$(17,119,479)

 

$(26,060,262)

 

 

1,471,406

 

 

$(5,567,481)

 

$26,528,861

 

 

See accompanying notes to condensed consolidated financial statements.

 

 
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KINGSTONE COMPANIES, INC. AND SUBSIDIARIES

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows (Unaudited)

 

 

 

 

Nine Months ended September 30,

 

2023

 

 

2022

 

 

 

 

 

 

 

 

Cash flows from operating activities:

 

 

 

 

 

 

Net loss

 

$(9,114,298)

 

$(18,574,772)

Adjustments to reconcile net loss to net cash flows used in operating activities:

 

 

 

 

 

 

 

 

Net losses (gains) on investments

 

 

17,201

 

 

 

(599,773)

Net unrealized (gains) losses on equity investments

 

 

(173,178)

 

 

7,549,640

 

Net unrealized (gains) losses on other investments

 

 

(441,666)

 

 

2,363,568

 

Depreciation and amortization

 

 

2,327,691

 

 

 

2,472,348

 

Bad debt expense

 

 

59,099

 

 

 

43,365

 

Amortization of bond premium, net

 

 

118,280

 

 

 

922,257

 

Amortization of discount and issuance costs on debt

 

 

890,758

 

 

 

132,135

 

Stock-based compensation

 

 

636,178

 

 

 

1,204,865

 

Deferred income tax benefit

 

 

(2,149,367)

 

 

(3,939,612)

Decrease (increase) in operating assets:

 

 

 

 

 

 

 

 

Premiums receivable, net

 

 

495,036

 

 

 

(616,493)

Reinsurance receivables, net

 

 

(17,792,865)

 

 

(19,073,499)

Deferred policy acquisition costs

 

 

3,287,131

 

 

 

(966,697)

Other assets

 

 

(144,475)

 

 

95,613

 

Increase (decrease) in operating liabilities:

 

 

 

 

 

 

 

 

Loss and loss adjustment expense reserves

 

 

3,335,434

 

 

 

11,980,153

 

Unearned premiums

 

 

(4,331,227)

 

 

6,029,773

 

Advance premiums

 

 

3,449,195

 

 

 

3,933,809

 

Reinsurance balances payable

 

 

7,201,518

 

 

 

(1,486,321

Deferred ceding commission revenue

 

 

(1,226,518)

 

 

571,862

 

Accounts payable, accrued expenses and other liabilities

 

 

(2,198,271)

 

 

36,341

 

Net cash flows used in operating activities

 

 

(15,754,344)

 

 

(7,921,438)

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchase - fixed-maturity securities held-to-maturity

 

 

-

 

 

 

(498,711)

Purchase - fixed-maturity securities available-for-sale

 

 

(13,167,937)

 

 

(24,874,443)

Purchase - equity securities

 

 

-

 

 

 

(637,897)

Redemption - fixed-maturity securities held-to-maturity

 

 

750,000

 

 

 

1,000,000

 

Sale and maturity - fixed-maturity securities available-for-sale

 

 

33,453,349

 

 

 

14,213,435

 

Sale - equity securities

 

 

99,917

 

 

 

11,962,513

 

Redemption - other investments

 

 

-

 

 

 

2,576,272

 

Acquisition of property and equipment

 

 

(1,380,256)

 

 

(3,342,258)

Net cash flows provided by investing activities

 

 

19,755,073

 

 

 

398,911

 

 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Principal payments on equipment financing

 

 

(810,289)

 

 

-

 

Issue costs on 2022 Notes

 

 

(14,299)

 

 

-

 

Withholding taxes paid on vested retricted stock awards

 

 

(1,400)

 

 

(379,799)

Dividends paid

 

 

-

 

 

 

(1,277,066)

Net cash flows used in financing activities

 

 

(825,988)

 

 

(1,656,865)

 

See accompanying notes to condensed consolidated financial statements.

 

 
8

Table of Contents

 

KINGSTONE COMPANIES, INC. AND SUBSIDIARIES

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows (Unaudited) (Continued)

 

 

 

 

Nine Months ended September 30,

 

2023

 

 

2022

 

 

 

 

 

 

 

 

Increase (decrease) in cash and cash equivalents

 

$3,174,741

 

 

$(9,179,392)

Cash and cash equivalents, beginning of period

 

 

11,958,228

 

 

 

24,290,598

 

Cash and cash equivalents, end of period

 

$15,132,969

 

 

$15,111,206

 

 

 

 

 

 

 

 

 

 

Supplemental disclosures of cash flow information:

 

 

 

 

 

 

 

 

Cash paid for income taxes

 

$-

 

 

$-

 

Cash paid for interest

 

$1,628,357

 

 

$825,000

 

 

 

 

 

 

 

 

 

 

Supplemental schedule of non-cash investing and financing activities:

 

 

 

 

 

 

 

 

Other comprehensive loss, net of tax

 

$(1,161,051)

 

$(17,775,309)

 

See accompanying notes to condensed consolidated financial statements.

 

 
9

Table of Contents

 

KINGSTONE COMPANIES, INC. AND SUBSIDIARIES

 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

Note 1 - Nature of Business and Basis of Presentation

 

Kingstone Companies, Inc. (referred to herein as "Kingstone" or the “Company” or, on a standalone basis for the parent company only, the “Holding Company”), through its wholly-owned subsidiary, Kingstone Insurance Company (“KICO”), underwrites property and casualty insurance exclusively through retail and wholesale agents and brokers. KICO is a licensed insurance company in the States of New York, New Jersey, Rhode Island, Massachusetts, Pennsylvania, Connecticut, Maine and New Hampshire. KICO is actively writing its property and casualty insurance products in New York. For the three months ended September 30, 2023 and 2022, 88.5% and 80.5%, respectively, of KICO’s direct written premiums came from the New York policies. For the nine months ended September 30, 2023 and 2022, 88.1% and 80.3%, respectively, of KICO’s direct written premiums came from the New York policies. Kingstone, through its wholly owned subsidiary, Cosi Agency, Inc. (“Cosi”), a multi-state licensed general agency, receives commission revenue from KICO for the policies it places with others and pays commissions to these agencies.

 

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”).  The principles for condensed interim financial information do not require the inclusion of all the information and footnotes required by GAAP for complete financial statements. Therefore, these condensed consolidated financial statements should be read in conjunction with the consolidated financial statements as of and for the year ended December 31, 2022 and notes thereto included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on March 31, 2023. The accompanying condensed consolidated financial statements have not been audited by an independent registered public accounting firm in accordance with standards of the Public Company Accounting Oversight Board (United States) but, in the opinion of management, such financial statements include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the Company’s financial position and results of operations. The results of operations for the nine months ended September 30, 2023 may not be indicative of the results that may be expected for the year ending December 31, 2023.

 

Components of ceded premiums within prior year net earned premiums in Note 6 were reclassified to conform with an elected change in the current year presentation by recording ceded written premiums for the 12 months of the contract term at inception, rather than monthly over the contract term, providing a full disclosure of the premium ceded. The reclassification had no effect on the Company’s previously reported financial condition, results of operations or cash flows.

 

Note 2 – Accounting Policies

 

Use of Estimates

 

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates and assumptions, which include the reserves for losses and loss adjustment expenses “(LAE)”, which are subject to estimation errors due to the inherent uncertainty in projecting ultimate claim amounts that will be reported and settled over a period of many years. In addition, estimates and assumptions associated with receivables under reinsurance contracts related to contingent ceding commission revenue require judgments by management. On an ongoing basis, management reevaluates its assumptions and the methods for calculating these estimates. Actual results may differ significantly from the estimates used in preparing the condensed consolidated financial statements.

 

 
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Table of Contents

 

Principles of Consolidation

 

The condensed consolidated financial statements include the accounts of Kingstone and its wholly-owned subsidiaries: (1) KICO and its wholly-owned subsidiaries, CMIC Properties, Inc. (“Properties”) and 15 Joys Lane, LLC (“15 Joys Lane”), which together own the land and building from which KICO operates, and (2) Cosi. All significant inter-company account balances and transactions have been eliminated in consolidation.

 

Recent Accounting Pronouncements

 

In June 2016, the Financial Accounting Standards Board issued Accounting Standards Update 2016-13 - Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). This new guidance applies to reinsurance and insurance receivables and other financing receivables. For available-for-sale fixed maturity securities carried at fair value, estimated credit losses will continue to be measured at the present value of expected cash flows; however, the other than temporary impairment (“OTTI”) concept has been eliminated. Under the previous guidance, estimated credit impairments resulted in a write-down of amortized cost. Under the new guidance, estimated credit losses are recognized through an allowance and reversals of the allowance are permitted if the estimate of credit losses declines. For available-for-sale fixed maturity securities where the Company has an intent to sell, impairment will continue to result in a write-down of amortized cost. ASU 2016-13 was effective for the Company on January 1, 2023. The Company determined as of the date of adoption that the updated guidance did not have an impact on its consolidated financial statements. Below is a summary of the significant accounting policies impacted by the adoption of ASU 2016-13.

 

The allowance for credit losses is a valuation account that is reported as a reduction of a financial asset’s cost basis and is measured on a pool basis when similar risk characteristics exist. Management estimates the allowance using relevant available information from both internal and external sources. Historical credit loss experience provides the basis for the estimation of expected credit losses and adjustments may be made to reflect current conditions and reasonable and supportable forecasts. Adjustments to historical loss information are made for any additional factors that come to the Company’s attention. This could include significant shifts in counterparty financial strength ratings, aging of past due receivables, amounts sent to collection agencies, or other underlying portfolio changes. Amounts are considered past due when payments have not been received according to contractual terms. The Company also considers current and forecasted economic conditions, using a variety of economic metrics and forecast indices. The sensitivity of expected credit losses relative to changes to these forecasted economic conditions can vary by financial asset class. The Company considers a reasonable and supportable forecast period to be up to 24 months from the balance sheet date. After the forecast period, the Company reverts to historical credit experience. The Company uses collateral arrangements such as letters of credit and amounts held in beneficiary trusts to mitigate credit risk, which are considered in the estimate of net amount expected to be collected.

 

The Company has made a policy election to present accrued interest balances separately from the amortized cost basis of assets and has elected the practical expedient to exclude the accrued interest from the tabular disclosures for available-for-sale and held-to-maturity securities. The Company has elected not to estimate an allowance for credit losses on accrued interest receivable. The accrual of interest income is discontinued and the asset is placed on nonaccrual status in the quarter that payment becomes delinquent. Interest accrued but not received for assets on nonaccrual status is reversed through investment income. Interest received for assets that are on nonaccrual status is recognized as payment is received. The asset is returned to accrual status when the principal and interest amounts contractually due are brought current and future payments are expected. Interest receivable is presented as a component of other assets on the condensed consolidated balance sheet.

 

 
11

Table of Contents

 

See Note 3 and Note 6 to the condensed consolidated financial statements for additional information regarding credit losses.

 

The Company has determined that all other recently issued accounting pronouncements will not have a material impact on its consolidated financial position, results of operations and cash flows, or do not apply to its operations.

 

Note 3 - Investments 

 

Fixed-Maturity Securities

 

The amortized cost, estimated fair value, and gross unrealized gains and losses on investments in fixed-maturity securities classified as available-for-sale for which an allowance for credit loss has not been recorded, as of September 30, 2023 and December 31, 2022 are summarized as follows:

 

 

 

September 30, 2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Cost or 

 

 

 Gross

 

 

 Gross Unrealized Losses

 

 

 Estimated

 

 

 Net

 

 

 

 Amortized

 

 

 Unrealized

 

 

 Less than 12

 

 

 More than 12

 

 

 Fair

 

 

 Unrealized 

 

Category 

 

 Cost

 

 

 Gains

 

 

 Months

 

 

 Months

 

 

 Value

 

 

 Losses

 

 

 

 

 

 

 

 

 

 

Fixed-Maturity Securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury securities and obligations of U.S. government corporations and agencies (1)

 

$8,224,680

 

 

$-

 

 

$(56,835)

 

$-

 

 

$8,167,845

 

 

$(56,835)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Political subdivisions of States,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Territories and Possessions

 

 

16,615,369

 

 

 

-

 

 

 

-

 

 

 

(4,201,015)

 

 

12,414,354

 

 

 

(4,201,015)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate and other bonds 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Industrial and miscellaneous

 

 

78,116,754

 

 

 

-

 

 

 

-

 

 

 

(8,651,516)

 

 

69,465,238

 

 

 

(8,651,516)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential mortgage and other asset backed securities (2)

 

 

51,503,046

 

 

 

63,626

 

 

 

(5,987)

 

 

(8,821,223)

 

 

42,739,462

 

 

 

(8,763,584)

Total fixed-maturity securities 

 

$154,459,849

 

 

$63,626

 

 

$(62,822)

 

$(21,673,754)

 

$132,786,899

 

 

$(21,672,950)

 

 

 

 
12

Table of Contents

 

 

 

December 31, 2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost or

 

 

Gross

 

 

Gross Unrealized Losses

 

 

Estimated

 

 

Net

 

 

 

Amortized

 

 

Unrealized

 

 

Less than 12

 

 

More than 12

 

 

Fair

 

 

Unrealized

 

Category

 

Cost

 

 

Gains

 

 

Months

 

 

Months

 

 

Value

 

 

Losses

 

 

 

 

 

 

 

 

 

 

Fixed-Maturity Securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury securities and obligations of U.S. government corporations and agencies (1)

 

$23,874,545

 

 

$1,479

 

 

$(6,928)

 

$-

 

 

$23,869,096

 

 

$(5,449)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Political subdivisions of States,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Territories and Possessions

 

 

17,108,154

 

 

 

-

 

 

 

(2,195,273)

 

 

(1,771,494)

 

 

13,141,387

 

 

 

(3,966,767)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate and other bonds

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Industrial and miscellaneous

 

 

80,338,464

 

 

 

-

 

 

 

(5,796,994)

 

 

(2,458,985)

 

 

72,082,485

 

 

 

(8,255,979)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential mortgage and other asset backed securities (2)

 

 

53,597,264

 

 

 

58,398

 

 

 

(882,664)

 

 

(7,150,803)

 

 

45,622,195

 

 

 

(7,975,069)

Total fixed-maturity securities

 

$174,918,427

 

 

$59,877

 

 

$(8,881,859)

 

$(11,381,282)

 

$154,715,163

 

 

$(20,203,264)

 

 

(1)

In October 2022, KICO placed certain U.S. Treasury securities to fulfill the required collateral for a sale leaseback transaction in a designated custodian account (see Note 7 – Debt - “Equipment Financing”). As of September 30, 2023 and December 31, 2022, the amount of required collateral was approximately $7,422,000 and $8,691,000, respectively. As of September 30, 2023 and December 31, 2022, the estimated fair value of the eligible collateral was approximately $8,168,000 and $8,691,000, respectively.

 

(2)

KICO has placed certain residential mortgage backed securities as eligible collateral in a designated custodian account related to its membership in the Federal Home Loan Bank of New York ("FHLBNY") (see Note 7 – Debt – “Federal Home Loan Bank”). The eligible collateral would be pledged to FHLBNY if KICO draws an advance from the FHLBNY credit line. As of September 30, 2023 and December 31, 2022, the estimated fair value of the eligible investments was approximately $10,911,000 and $12,228,000, respectively. KICO will retain all rights regarding all securities if pledged as collateral. As of September 30, 2023 and December 31, 2022 there was no outstanding balance on the FHLBNY credit line.

 

A summary of the amortized cost and estimated fair value of the Company’s investments in available-for-sale fixed-maturity securities by contractual maturity as of September 30, 2023 and December 31, 2022 is shown below:

 

 

 

September 30, 2023

 

 

December 31, 2022

 

 

 

Amortized

 

 

Estimated

 

 

Amortized

 

 

Estimated

 

Remaining Time to Maturity

 

Cost

 

 

Fair Value

 

 

Cost

 

 

Fair Value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Less than one year

 

$11,053,509

 

 

$10,894,062

 

 

$16,359,100

 

 

$16,307,991

 

One to five years

 

 

44,834,816

 

 

 

42,323,786

 

 

 

18,605,987

 

 

 

14,085,113

 

Five to ten years

 

 

30,124,267

 

 

 

24,401,458

 

 

 

54,559,158

 

 

 

52,230,283

 

More than 10 years

 

 

16,944,211

 

 

 

12,428,131

 

 

 

31,796,918

 

 

 

26,469,581

 

Residential mortgage and other asset backed securities

 

 

51,503,046

 

 

 

42,739,462

 

 

 

53,597,264

 

 

 

45,622,195

 

Total

 

$154,459,849

 

 

$132,786,899

 

 

$174,918,427

 

 

$154,715,163

 

 

The actual maturities may differ from contractual maturities because certain borrowers have the right to call or prepay obligations with or without penalties.

 

 
13

Table of Contents

 

Equity Securities

 

The cost and estimated fair value of, and gross unrealized gains and losses on, investments in equity securities as of September 30, 2023 and December 31, 2022 are as follows:

 

 

 

September 30, 2023

 

 

 

 

 

 Gross

 

 

 Gross

 

 

 Estimated

 

 Category 

 

Cost

 

 

Gains

 

 

Losses

 

 

Fair Value

 

 

 

 

 

 

 

 

Equity Securities:

 

 

 

 

 

 

 

 

 

 

 

 

Preferred stocks

 

$13,583,942

 

 

$-

 

 

$(3,384,701)

 

$10,199,241

 

Common stocks, mutual funds, and exchange traded funds

 

 

4,402,841

 

 

 

225,001

 

 

 

(919,432)

 

 

3,708,410

 

Total

 

$17,986,783

 

 

$225,001

 

 

$(4,304,133)

 

$13,907,651

 

 

 

 

December 31, 2022

 

 

 

 

 

 Gross

 

 

 Gross

 

 

 Estimated

 

 Category 

 

Cost

 

 

Gains

 

 

Losses

 

 

Fair Value

 

 

 

 

 

 

 

 

Equity Securities:

 

 

 

 

 

 

 

 

 

 

 

 

Preferred stocks

 

$13,583,942

 

 

$-

 

 

$(3,589,313)

 

$9,994,629

 

Common stocks, mutual funds, and exchange traded funds

 

 

4,502,758

 

 

 

158,635

 

 

 

(821,632

 

 

3,839,761

 

Total

 

$18,086,700

 

 

$158,635

 

 

$(4,410,945)

 

$13,834,390

 

 

Other Investments

 

The cost and estimated fair value of, and gross gains on, the Company’s other investments as of September 30, 2023 and December 31, 2022 are as follows:

 

 

 

September 30, 2023

 

 

December 31, 2022

 

 

 

 

 

Gross

 

 

Estimated

 

 

 

 

Gross

 

 

Estimated

 

Category

 

Cost

 

 

Gains

 

 

Fair Value

 

 

Cost

 

 

Gains

 

 

Fair Value

 

 

 

 

 

 

 

 

 

 

 

 

Other Investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Hedge fund

 

$1,987,040

 

 

$1,226,278

 

 

$3,213,318

 

 

$1,987,040

 

 

$784,612

 

 

$2,771,652

 

 

 
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Held-to-Maturity Securities

 

The cost or amortized cost and estimated fair value of, and unrealized gross gains and losses on, investments in held-to-maturity fixed-maturity securities as of September 30, 2023 and December 31, 2022 are summarized as follows:

 

 

 

September 30, 2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost or

 

 

Gross

 

 

Gross Unrealized Losses

 

 

Estimated

 

 

Net

 

 

 

Amortized

 

 

Unrealized

 

 

Less than 12

 

 

More than 12

 

 

Fair

 

 

Unrealized

 

Category

 

Cost

 

 

Gains

 

 

Months

 

 

Months

 

 

Value

 

 

Losses

 

 

 

 

 

 

 

 

 

 

Held-to-Maturity Securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury securities

 

$1,228,783

 

 

$-

 

 

$(49,795)

 

$(31,495)

 

$1,147,493

 

 

$(81,290)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Political subdivisions of States, Territories and Possessions

 

 

499,036

 

 

 

-

 

 

 

(9,046)

 

 

-

 

 

 

489,990

 

 

 

(9,046)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exchange traded debt

 

 

304,111

 

 

 

-

 

 

 

(51,611)

 

 

-

 

 

 

252,500

 

 

 

(51,611)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate and other bonds

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Industrial and miscellaneous

 

 

5,021,895

 

 

 

-

 

 

 

-

 

 

 

(1,212,380)

 

 

3,809,515

 

 

 

(1,212,380)

Total

 

$7,053,825

 

 

$-

 

 

$(110,452)

 

$(1,243,875)

 

$5,699,498

 

 

$(1,354,327)

 

 

 

December 31, 2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 Net

 

 

 

 Cost or 

 

 

 Gross

 

 

 Gross Unrealized Losses

 

 

 Estimated

 

 

 Unrealized 

 

 

 

Amortized

 

 

Unrealized

 

 

Less than 12

 

 

More than 12

 

 

Fair

 

 

Gains/

 

Category

 

Cost

 

 

Gains

 

 

Months

 

 

Months

 

 

Value

 

 

(Losses)

 

 

 

 

 

 

 

 

 

 

Held-to-Maturity Securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury securities

 

$1,228,560

 

 

$28,400

 

 

$(34,077)

 

$-

 

 

$1,222,883

 

 

$(5,677)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Political subdivisions of States, Territories and Possessions

 

 

498,638

 

 

 

2,092

 

 

 

-

 

 

 

-

 

 

 

500,730

 

 

 

2,092

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exchange traded debt

 

 

304,111

 

 

 

-

 

 

 

(29,111)

 

 

-

 

 

 

275,000

 

 

 

(29,111)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate and other bonds

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Industrial and miscellaneous

 

 

5,734,831

 

 

 

36,968

 

 

 

(809,746)

 

 

(360,278)

 

 

4,601,775

 

 

 

(1,133,056)

Total

 

$7,766,140

 

 

$67,460

 

 

$(872,934)

 

$(360,278)

 

$6,600,388

 

 

$(1,165,752)

 

Held-to-maturity U.S. Treasury securities are held in trust pursuant to various states’ minimum funds requirements.

 

 
15

Table of Contents

 

A summary of the amortized cost and estimated fair value of the Company’s investments in held-to-maturity securities by contractual maturity as of September 30, 2023 and December 31, 2022 is shown below:

 

 

 

September 30, 2023

 

 

December 31, 2022

 

 

 

Amortized

 

 

Estimated

 

 

Amortized

 

 

Estimated

 

Remaining Time to Maturity

 

Cost

 

 

Fair Value

 

 

Cost

 

 

Fair Value

 

 

 

 

 

 

 

 

 

 

Less than one year

 

$-

 

 

$-

 

 

$708,535

 

 

$743,575

 

One to five years

 

 

1,121,091

 

 

 

1,069,974

 

 

 

1,120,507

 

 

 

1,088,522

 

Five to ten years

 

 

1,411,819

 

 

 

1,166,505

 

 

 

1,402,704

 

 

 

1,200,720

 

More than 10 years

 

 

4,520,915

 

 

 

3,463,019

 

 

 

4,534,394

 

 

 

3,567,571

 

Total

 

$7,053,825

 

 

$5,699,498

 

 

$7,766,140

 

 

$6,600,388

 

 

The actual maturities may differ from contractual maturities because certain borrowers have the right to call or prepay obligations with or without penalties.

 

Investment Income

 

Major categories of the Company’s net investment income are summarized as follows:

 

 

 

 Three months ended

 

 

 Nine months ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income:

 

 

 

 

 

 

 

 

 

 

 

 

Fixed-maturity securities

 

$1,245,353

 

 

$1,234,427

 

 

$3,982,573

 

 

$2,832,557

 

Equity securities

 

 

187,018

 

 

 

247,275

 

 

 

540,788

 

 

 

872,005

 

Cash and cash equivalents

 

 

98,763

 

 

 

26,630

 

 

 

171,015

 

 

 

29,796

 

Total

 

 

1,531,134

 

 

 

1,508,332

 

 

 

4,694,376

 

 

 

3,734,358

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment expenses

 

 

86,774

 

 

 

89,811

 

 

 

257,168

 

 

 

322,412

 

Net investment income

 

$1,444,360

 

 

$1,418,521

 

 

$4,437,208

 

 

$3,411,946

 

 

Proceeds from the redemption of fixed-maturity securities held-to-maturity were $750,000 and $1,000,000 for the nine months ended September 30, 2023 and 2022, respectively.

 

Proceeds from the sale or maturity of fixed-maturity securities available-for-sale were $33,453,349 and $14,213,435 for the nine months ended September 30, 2023 and 2022, respectively.

 

Proceeds from the sale of equity securities were $99,917 and $11,962,513 for the nine months ended September 30, 2023 and 2022, respectively.

 

 
16

Table of Contents

 

The Company’s net (losses) gains on investments are summarized as follows:

 

 

 

 Three months ended

 

 

 Nine months ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2023

 

 

2022

 

 

2023

 

&#