KINGSTONE COMPANIES, INC. [KINS] Filings

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 June 30, 2024

☐	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)

(845) 802-7900

(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 o

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 August 14, 2024, there were 11,064,723 shares of the registrant’s common stock outstanding.

KINGSTONE COMPANIES, INC.

INDEX

		PAGE

PART I — FINANCIAL INFORMATION		4
Item 1 —	Financial Statements	4
	Condensed Consolidated Balance Sheets at June 30, 2024 (Unaudited) and December 31, 2023	4
	Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for the three months and six months ended June 30, 2024 (Unaudited) and 2023 (Unaudited)	5
	Condensed Consolidated Statements of Stockholders’ Equity for the three months and six months ended June 30, 2024 (Unaudited) and 2023 (Unaudited)	6-7
	Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2024 (Unaudited) and 2023 (Unaudited)	8
	Notes to Condensed Consolidated Financial Statements (Unaudited)	9
Item 2 —	Management’s Discussion and Analysis of Financial Condition and Results of Operations	46
Item 3 —	Quantitative and Qualitative Disclosures About Market Risk	85
Item 4 —	Controls and Procedures	85

PART II — OTHER INFORMATION		87
Item 1 —	Legal Proceedings	87
Item 1A —	Risk Factors	87
Item 2 —	Unregistered Sales of Equity Securities and Use of Proceeds	87
Item 3 —	Defaults Upon Senior Securities	87
Item 4 —	Mine Safety Disclosures	87
Item 5 —	Other Information	87
Item 6 —	Exhibits	88
	Signatures	89

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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, 2023, 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.

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

KINGSTONE COMPANIES, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
	June 30,			December 31,
	2024			2023
	(unaudited)
Assets
Fixed-maturity securities, held-to-maturity, at amortized cost (fair value of $5,965,254 at June 30, 2024 and $6,106,148 at December 31, 2023)	$	7,049,978		$	7,052,541
Fixed-maturity securities, available-for-sale, at fair value (amortized cost of $176,930,446 at June 30, 2024 and $164,460,942 at December 31, 2023)		160,947,267			148,920,797
Equity securities, at fair value (cost of $14,029,806 at June 30, 2024 and $17,986,783 at December 31, 2023)		11,428,238			14,762,340
Other investments		4,192,837			3,897,150
Total investments		183,618,320			174,632,828
Cash and cash equivalents		12,170,993			8,976,998
Premiums receivable, net		15,176,140			13,604,808
Reinsurance receivables, net		66,315,422			75,593,912
Deferred policy acquisition costs		19,574,764			19,802,564
Intangible assets		500,000			500,000
Property and equipment, net		9,217,729			9,395,697
Deferred income taxes, net		9,061,591			10,551,819
Other assets		4,142,798			4,574,584
Total assets	$	319,777,757		$	317,633,210

Liabilities
Loss and loss adjustment expense reserves	$	116,577,490		$	121,817,862
Unearned premiums		107,434,679			105,621,538
Advance premiums		4,955,431			3,797,590
Reinsurance balances payable		10,481,596			12,837,140
Deferred ceding commission revenue		9,277,082			9,460,865
Accounts payable, accrued expenses and other liabilities		4,979,841			4,350,546
Debt, net		25,268,864			25,243,530
Total liabilities		278,974,983			283,129,071

Commitments and Contingencies (Note 11)

Stockholders' Equity
Preferred stock, $0.01 par value; authorized 2,500,000 shares		-			-
Common stock, $0.01 par value; authorized 20,000,000 shares; issued 12,536,129 shares at June 30, 2024 and 12,248,313 shares at December 31, 2023; outstanding 11,064,723 shares at June 30, 2024 and 10,776,907 shares at December 31, 2023		125,361			122,483
Capital in excess of par		76,042,147			75,338,010
Accumulated other comprehensive loss		(12,624,559	)		(12,274,563	)
Accumulated deficit		(17,172,694	)		(23,114,310	)
Stockholders' Equity before treasury stock		46,370,255			40,071,620
Treasury stock, at cost, 1,471,406 shares at June 30, 2024 and December 31, 2023		(5,567,481	)		(5,567,481	)
Total stockholders' equity		40,802,774			34,504,139

Total liabilities and stockholders' equity	$	319,777,757		$	317,633,210

See accompanying notes to condensed consolidated financial statements.

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KINGSTONE COMPANIES, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (Unaudited)

	For the Three Months Ended						For the Six Months Ended
	June 30,						June 30,
	2024			2023			2024			2023
Revenues
Net premiums earned	$	30,303,612		$	29,508,196		$	59,123,514		$	57,763,149
Ceding commission revenue		4,561,961			5,412,210			9,129,072			10,857,617
Net investment income		1,764,596			1,451,356			3,267,456			2,992,848
Net (losses) gains on investments		(233,606	)		197,142			492,785			1,422,013
Other income		105,552			151,084			254,465			312,124
Total revenues		36,502,115			36,719,988			72,267,292			73,347,751

Expenses
Loss and loss adjustment expenses		14,238,308			19,580,702			32,097,895			44,620,112
Commission expense		8,232,480			8,471,182			16,084,292			17,010,944
Other underwriting expenses		5,900,525			6,683,638			11,781,130			13,555,257
Other operating expenses		800,966			763,414			1,579,048			1,426,048
Depreciation and amortization		619,934			778,502			1,216,447			1,586,632
Interest expense		989,723			1,005,974			1,983,598			2,015,865
Total expenses		30,781,936			37,283,412			64,742,410			80,214,858

Income (loss) from operations before taxes		5,720,179			(563,424	)		7,524,882			(6,867,107	)
Income tax expense (benefit)		1,205,242			(41,407	)		1,583,266			(1,290,380	)
Net income (loss)		4,514,937			(522,017	)		5,941,616			(5,576,727	)

Other comprehensive income (loss), net of tax
Gross change in unrealized gains (losses) on available-for-sale-securities		109,784			(1,132,528	)		(450,563	)		1,334,898

Reclassification adjustment for net realized losses included in net income (loss)		4,662			10,381			7,529			13,020
Net change in unrealized gains (losses), on available-for-sale-securities		114,446			(1,122,147	)		(443,034	)		1,347,918
Income tax (expense) benefit related to items of other comprehensive income (loss)		(24,034	)		235,651			93,038			(283,062	)
Other comprehensive income (loss), net of tax		90,412			(886,496	)		(349,996	)		1,064,856

Comprehensive income (loss)	$	4,605,349		$	(1,408,513	)	$	5,591,620		$	(4,511,871	)

Earnings (loss) per common share:
Basic	$	0.41		$	(0.05	)	$	0.54		$	(0.52	)
Diluted	$	0.37		$	(0.05	)	$	0.50		$	(0.52	)

Weighted average common shares outstanding
Basic		11,019,347			10,755,848			11,009,442			10,753,974
Diluted		12,110,946			10,755,848			11,987,976			10,753,974

See accompanying notes to condensed consolidated financial statements.

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KINGSTONE COMPANIES, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Stockholders' Equity (Unaudited)
Three months ended June 30, 2024 and 2023

														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, April 1, 2023		-	$	-		12,231,965		$	122,320		$	74,734,915		$	(14,007,076	)	$	(22,000,674	)		1,471,406	$	(5,567,481	)	$	33,282,004
Stock-based compensation		-		-		-			-			212,288			-			-			-		-			212,288
Vesting of restricted stock awards		-		-		(3,974	)		(41	)		41			-			-			-		-			-
Shares deducted from restricted stock awards for payment of withholding taxes		-		-		(429	)		(4	)		(559	)		-			-			-		-			(563	)
Net loss		-		-		-			-			-			-			(522,017	)		-		-			(522,017	)
Change in unrealized losses on available-for-sale securities, net of tax		-		-		-			-			-			(886,496	)		-			-		-			(886,496	)
Balance, June 30, 2023		-	$	-		12,227,562		$	122,275		$	74,946,685		$	(14,893,572	)	$	(22,522,691	)		1,471,406	$	(5,567,481	)	$	32,085,216

														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, April 1, 2024		-	$	-		12,479,422		$	124,794		$	75,595,096		$	(12,714,971	)	$	(21,687,631	)		1,471,406	$	(5,567,481	)	$	35,749,807
Stock-based compensation		-		-		-			-			281,416			-			-			-		-			281,416
Vesting of restricted stock awards		-		-		1,026			10			(10	)		-			-			-		-			-
Shares deducted from restricted stock awards for payment of withholding taxes		-		-		(428	)		(4	)		(1,984	)		-			-			-		-			(1,988	)
Issuance of common stock, net of offering costs of $103,385						56,109			561			167,629														168,190
Net income		-		-		-			-			-			-			4,514,937			-		-			4,514,937
Change in unrealized gains on available-for-sale securities, net of tax		-		-		-			-			-			90,412			-			-		-			90,412
Balance, June 30, 2024		-	$	-		12,536,129		$	125,361		$	76,042,147		$	(12,624,559	)	$	(17,172,694	)		1,471,406	$	(5,567,481	)	$	40,802,774

See accompanying notes to condensed consolidated financial statements.

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KINGSTONE COMPANIES, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Stockholders' Equity (Unaudited)
Six months ended June 30, 2024 and 2023

														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		-		-		-			-			429,055			-			-			-		-			429,055
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		-		-		-			-			-			-			(5,576,727	)		-		-			(5,576,727	)
Change in unrealized gains on available-for-sale securities, net of tax		-		-		-			-			-			1,064,856			-			-		-			1,064,856
Balance, June 30, 2023		-	$	-		12,227,562		$	122,275		$	74,946,685		$	(14,893,572	)	$	(22,522,691	)		1,471,406	$	(5,567,481	)	$	32,085,216

														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, 2024		-	$	-		12,248,313		$	122,483		$	75,338,010		$	(12,274,563	)	$	(23,114,310	)		1,471,406	$	(5,567,481	)	$	34,504,139
Stock-based compensation		-		-		-			-			547,205			-			-			-		-			547,205
Vesting of restricted stock awards		-		-		234,653			2,346			(2,346	)		-			-			-		-			-
Shares deducted from restricted stock
awards for payment of withholding taxes		-		-		(2,946	)		(29	)		(8,351	)		-			-			-		-			(8,380	)
Issuance of common stock, net of offering costs of $103,385						56,109			561			167,629														168,190
Net income		-		-		-			-			-			-			5,941,616			-		-			5,941,616
Change in unrealized losses on available-for-sale securities, net of tax		-		-		-			-			-			(349,996	)		-			-		-			(349,996	)
Balance, June 30, 2024		-	$	-		12,536,129		$	125,361		$	76,042,147		$	(12,624,559	)	$	(17,172,694	)		1,471,406	$	(5,567,481	)	$	40,802,774

See accompanying notes to condensed consolidated financial statements.

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KINGSTONE COMPANIES, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows (Unaudited)
Six Months ended June 30,	2024			2023

Cash flows from operating activities:
Net income (loss)	$	5,941,616		$	(5,576,727	)
Adjustments to reconcile net income (loss) to net cash flows provided by (used in) operating activities:
Net realized losses on investments		425,776			13,020
Net unrealized gains on equity investments		(622,874	)		(657,145	)
Net unrealized gains on other investments		(295,687	)		(777,888	)
Depreciation and amortization		1,216,447			1,586,632
Credit losses		53,865			38,400
Accretion of bond discount, net		(362,020	)		(51,548	)
Amortization of discount and issuance costs on debt		593,838			593,839
Stock-based compensation		547,205			429,055
Deferred income tax expense (benefit)		1,583,266			(1,283,823	)
Decrease (increase) in operating assets:
Premiums receivable, net		(1,625,197	)		1,269,270
Reinsurance receivables, net		9,278,490			(10,114,427	)
Deferred policy acquisition costs		227,800			2,379,295
Other assets		431,785			91,182
Increase (decrease) in operating liabilities:
Loss and loss adjustment expense reserves		(5,240,372	)		(777,903	)
Unearned premiums		1,813,141			(5,577,882	)
Advance premiums		1,157,841			3,672,153
Reinsurance balances payable		(2,355,544	)		622,629
Deferred ceding commission revenue		(183,783	)		(929,409	)
Accounts payable, accrued expenses and other liabilities		629,295			(1,958,718	)
Net cash flows provided by (used in) operating activities		13,214,888			(17,009,995	)

Cash flows from investing activities:
Purchase - fixed-maturity securities available-for-sale		(80,234,996	)		(13,167,937	)
Redemption - fixed-maturity securities held-to-maturity		-			500,000
Sale and maturity - fixed-maturity securities available-for-sale		68,122,546			31,375,538
Sale - equity securities		3,538,730			81,054
Acquisition of property and equipment		(1,038,479	)		(898,528	)
Net cash flows (used in) provided by investing activities		(9,612,199	)		17,890,127

Cash flows from financing activities:
Principal payments on equipment financing		(568,504	)		(536,237	)
Issue costs on 2022 Notes		-			(14,299	)
Net proceeds from issuance of common stock		168,190			-
Withholding taxes paid on vested restricted stock awards		(8,380	)		(1,400	)
Net cash flows used in financing activities		(408,694	)		(551,936	)

Increase in cash and cash equivalents	$	3,193,995		$	328,196
Cash and cash equivalents, beginning of period		8,976,998			11,958,228
Cash and cash equivalents, end of period	$	12,170,993		$	12,286,424

Supplemental disclosures of cash flow information:
Cash paid for income taxes	$	-		$	-
Cash paid for interest	$	1,389,759		$	1,730,905

Supplemental schedule of non-cash investing and financing activities:
Other comprehensive (loss) income, net of tax	$	(349,996	)	$	1,064,856

See accompanying notes to condensed consolidated financial statements.

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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. KICO is a New York domiciled carrier writing business through retail and wholesale agents and brokers. KICO is actively writing personal lines and commercial auto insurance in New York, and in 2023 was the 15th largest writer of homeowners insurance in New York. KICO is also licensed in the states of New Jersey, Rhode Island, Massachusetts, Connecticut, Pennsylvania, New Hampshire, and Maine. For the three months ended June 30, 2024 and 2023, 95.9% and 88.6%, respectively, of KICO’s direct written premiums came from the New York policies. For the six months ended June 30, 2024 and 2023, 95.2% and 87.8%, 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, 2023 and notes thereto included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on April 1, 2024. 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 three months and six months ended June 30, 2024 may not be indicative of the results that may be expected for the year ending December 31, 2024.

Components of ceded premiums written within prior year net earned premiums in Note 6 were reclassified to conform with an elected change in the prior year presentation during the quarter ended September 30, 2023, 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 premiums ceded. The reclassification had no effect on the Company’s previously reported financial condition, results of operations or cash flows.

Note 2 – Accounting Policies

Basis of Presentation; Going Concern

See Note 2 to the Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 for further information.

The Company’s $19,950,000 Notes Payable (the “2022 Notes”) are due on December 30, 2024. The Company’s continuation as a going concern is dependent on its ability to obtain financing and/or other funds to satisfy such obligation. Management believes that KICO’s insurance operations would be able to continue in the unlikely event that financing is not obtained.

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In accordance with Accounting Standards Update (“ASU”) 2014-15, Presentation of Financial Statements—Going Concern (Subtopic 205-40), the Company has the responsibility to evaluate whether conditions and/or events raise substantial doubt about its ability to meet its future financial obligations as they become due within one year after the date that the financial statements are issued. This evaluation requires management to perform two steps. First, management must evaluate whether there are conditions and events that raise substantial doubt about the entity’s ability to continue as a going concern. Second, if management concludes that substantial doubt is raised, management is required to consider whether it has plans in place to alleviate that doubt. Disclosures in the notes to the condensed consolidated financial statements are required if management concludes that substantial doubt exists or that its plans alleviate the substantial doubt that was raised.

The accompanying condensed consolidated financial statements have been prepared in accordance with GAAP assuming that the Company will continue as a going concern. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result should the Company be unable to continue as a going concern.

Management’s Plan Related to Going Concern

In order to continue as a going concern, the Company will need to obtain financing and/or other funds to satisfy its debt obligation on December 30, 2024. Management plans to refinance the 2022 Notes with a new issue of equity securities and/or debt securities that would result in net proceeds in an amount sufficient to satisfy the amounts due under the 2022 Notes. In connection therewith, the Company may utilize investment bankers to serve as underwriters or placement agents for proposed offerings by the Company of its securities (including debt, common and/or preferred securities). The Company, subject to regulatory approval, may receive distributions paid to it by KICO, its insurance subsidiary, that could be utilized to repay a portion of the 2022 Notes. Further, the Company may also use available invested assets and cash to repay a portion of the 2022 Notes. As of June 30, 2024, invested assets and cash of the Holding Company available for such purpose was approximately $2,716,000.

The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plan described above. The Company believes that its plan is probable of being implemented and that such plan would alleviate any adverse conditions.

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 condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates and assumptions, and includes the reserves for losses and loss adjustment expense (“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 loss and LAE recoverable under reinsurance contracts and other receivables or payable 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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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 December 2023, the Financial Accounting Standards Board (the “FASB”) issued ASU No. 2023-09, Improvements to Income Tax Disclosures (“ASU 2023-09”), which requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid. The standard is intended to benefit investors by providing more detailed income tax disclosures that would be useful in making capital allocation decisions. ASU-2023-09 is effective for public companies with annual periods beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact of ASU 2023-09 on its disclosures.

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 losses has not been recorded, as of June 30, 2024 and December 31, 2023 are summarized as follows:

	June 30, 2024
	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)	$	40,731,889	$	561	$	-		$	(17,340	)	$	40,715,110	$	(16,779	)

Political subdivisions of States, Territories and Possessions		16,592,419		-		-			(3,337,986	)		13,254,433		(3,337,986	)

Corporate and other bonds Industrial and miscellaneous		72,098,163		-		-			(5,850,585	)		66,247,578		(5,850,585	)

Residential mortgage and other asset backed securities (2)		47,507,975		104,759		(1,377	)		(6,881,211	)		40,730,146		(6,777,829	)
Total fixed-maturity securities	$	176,930,446	$	105,320	$	(1,377	)	$	(16,087,122	)	$	160,947,267	$	(15,983,179	)

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	December 31, 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)	$	20,954,764	$	1,799	$	(17,373	)	$	-		$	20,939,190	$	(15,574	)

Political subdivisions of States, Territories and Possessions		16,607,713		-		-			(3,209,161	)		13,398,552		(3,209,161	)

Corporate and other bonds Industrial and miscellaneous		75,993,042		-		-			(5,885,296	)		70,107,746		(5,885,296	)

Residential mortgage and other asset backed securities (2)		50,905,423		113,761		(2,144	)		(6,541,731	)		44,475,309		(6,430,114	)
Total fixed-maturity securities	$	164,460,942	$	115,560	$	(19,517	)	$	(15,636,188	)	$	148,920,797	$	(15,540,145	)

	(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 June 30, 2024 and December 31, 2023, the amount of required collateral was approximately $6,153,000 and $6,999,000, respectively. As of June 30, 2024 and December 31, 2023, the estimated fair value of the U.S. Treasury securities used as eligible collateral was approximately $11,934,000 and $11,960,000, 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 June 30, 2024 and December 31, 2023, the estimated fair value of the eligible investments was approximately $10,626,000 and $11,412,000, respectively. KICO will retain all rights regarding all securities if pledged as collateral. As of June 30, 2024 and December 31, 2023 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 June 30, 2024 and December 31, 2023 is shown below:

	June 30, 2024				December 31, 2023
	Cost or				Cost or
	Amortized		Estimated		Amortized		Estimated
Remaining Time to Maturity	Cost		Fair Value		Cost		Fair Value

Less than one year	$	57,752,939	$	57,539,787	$	34,729,120	$	34,461,172
One to five years		29,943,749		28,178,864		31,803,338		30,416,618
Five to ten years		28,878,164		24,529,918		31,596,410		27,330,377
More than 10 years		12,847,619		9,968,552		15,426,651		12,237,321
Residential mortgage and other asset backed securities		47,507,975		40,730,146		50,905,423		44,475,309
Total	$	176,930,446	$	160,947,267	$	164,460,942	$	148,920,797

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

There was no allowance for credit losses on fixed-maturity securities as of June 30, 2024 and December 31, 2023, respectively.

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Equity Securities

The cost and estimated fair value of, and gross unrealized gains and losses on, investments in equity securities as of June 30, 2024 and December 31, 2023 are as follows:

	June 30, 2024
			Gross		Gross
			Unrealized		Unrealized			Estimated
Category	Cost		Gains		Losses			Fair Value

Equity Securities:
Preferred stocks	$	9,750,322	$	-	$	(2,225,270	)	$	7,525,052
Fixed income exchange traded funds		3,711,232		-		(775,432	)		2,935,800
Mutual funds		502,252		399,134		-			901,386
FHLBNY common stock		66,000		-		-			66,000
Total	$	14,029,806	$	399,134	$	(3,000,702	)	$	11,428,238

	December 31, 2023
			Gross		Gross
			Unrealized		Unrealized			Estimated
Category	Cost		Gains		Losses			Fair Value

Equity Securities:
Preferred stocks	$	13,583,942	$	-	$	(2,870,027	)	$	10,713,915
Fixed income exchange traded funds		3,711,232				(669,232	)		3,042,000
Mutual funds		622,209		314,816		-			937,025
FHLBNY common stock		69,400		-		-			69,400
Total	$	17,986,783	$	314,816	$	(3,539,259	)	$	14,762,340

Other Investments

The cost and estimated fair value of, and gross gains on, the Company’s other investments as of June 30, 2024 and December 31, 2023 are as follows:

	June 30, 2024						December 31, 2023
			Gross		Estimated				Gross		Estimated
Category	Cost		Gains		Fair Value		Cost		Gains		Fair Value

Other Investments:
Hedge fund	$	1,987,040	$	2,205,797	$	4,192,837	$	1,987,040	$	1,910,110	$	3,897,150

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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 June 30, 2024 and December 31, 2023 are summarized as follows:

	June 30, 2024

	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	$	1,229,013	$	-	$	(23,884	)	$	(22,880	)	$	1,182,249	$	(46,764	)

Political subdivisions of States,
Territories and Possessions		499,443		-		(2,788	)		-			496,655		(2,788	)

Exchange traded debt		304,111		-		-			(66,361	)		237,750		(66,361	)

Corporate and other bonds
Industrial and miscellaneous		5,017,411		-		-			(968,811	)		4,048,600		(968,811	)
Total	$	7,049,978	$	-	$	(26,672	)	$	(1,058,052	)	$	5,965,254	$	(1,084,724	)

	December 31, 2023
													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	$	1,228,860	$	15,045	$	(6,914	)	$	(18,163	)	$	1,218,828	$	(10,032	)

Political subdivisions of States,
Territories and Possessions		499,170		890		-			-			500,060		890

Exchange traded debt		304,111		-		-			(70,111	)		234,000		(70,111	)

Corporate and other bonds
Industrial and miscellaneous		5,020,400		-		-			(867,140	)		4,153,260		(867,140	)
Total	$	7,052,541	$	15,935	$	(6,914	)	$	(955,414	)	$	6,106,148	$	(946,393	)

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

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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 June 30, 2024 and December 31, 2023 is shown below:

	June 30, 2024				December 31, 2023
	Cost or				Cost or
	Amortized		Estimated		Amortized		Estimated
Remaining Time to Maturity	Cost		Fair Value		Cost		Fair Value

Less than one year	$	-	$	-	$	-	$	-
One to five years		1,121,688		1,087,962		1,121,288		1,097,101
Five to ten years		1,421,173		1,287,630		1,414,911		1,270,770
More than 10 years		4,507,117		3,589,662		4,516,342		3,738,277
Total	$	7,049,978	$	5,965,254	$	7,052,541	$	6,106,148

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

There was no allowance for credit losses on held-to-maturity fixed-maturity securities as of June 30, 2024 and December 31, 2023, respectively.

Investment Income

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

	Three months ended				Six months ended
	June 30,				June 30,
	2024		2023		2024		2023
Income:
Fixed-maturity securities	$	1,156,591	$	1,319,511	$	2,339,220	$	2,737,220
Equity securities		145,469		176,893		322,638		353,770
Cash and cash equivalents		492,054		39,394		688,191		72,252
Other		39,227		-		39,227		-
Total		1,833,341		1,535,798		3,389,276		3,163,242
Expenses:
Investment expenses		68,745		84,442		121,820		170,394
Net investment income	$	1,764,596	$	1,451,356	$	3,267,456	$	2,992,848

There were no redemptions of fixed-maturity securities held-to-maturity for the six months ended June 30, 2024 and 2023.

Proceeds from the sale or maturity of fixed-maturity securities available-for-sale were $68,122,546 and $31,375,538 for the six months ended June 30, 2024 and 2023, respectively.

Proceeds from the sale of equity securities were $3,538,730 and $81,054 for the six months ended June 30, 2024 and 2023, respectively.

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

Three months ended

Six months ended

KINGSTONE COMPANIES, INC. [KINS] Filings
10-Q	[2024-08-14]
10-Q	[2024-05-15]
10-K	[2024-04-01]
10-Q	[2023-11-20]
10-Q	[2023-08-14]
10-Q	[2023-05-15]
10-K	[2023-03-31]
10-Q	[2022-11-14]
10-Q	[2022-08-15]
10-Q	[2022-05-16]
10-K	[2022-04-04]
10-Q	[2021-11-15]
10-Q	[2021-08-16]
10-Q	[2021-05-17]
10-K	[2021-03-31]
10-Q	[2020-11-09]
10-Q	[2020-08-11]
10-Q	[2020-05-11]
10-K	[2020-03-16]
10-Q	[2019-11-12]
10-Q	[2019-08-09]
10-Q	[2019-05-10]
10-K	[2019-03-18]
10-Q	[2018-11-08]
10-Q	[2018-08-09]
10-Q	[2018-05-10]
10-K	[2018-03-15]
10-Q	[2017-11-09]
10-Q	[2017-08-10]
10-Q	[2017-05-11]
10-K	[2017-03-16]
10-Q	[2016-11-10]
10-Q	[2016-08-11]
10-Q	[2016-05-12]
10-K	[2016-03-24]
10-Q	[2015-11-12]
10-Q	[2015-08-12]
10-Q	[2015-05-13]
10-K	[2015-03-25]
10-Q	[2014-11-13]
10-Q	[2014-08-12]
10-Q	[2014-05-15]
10-K	[2014-03-31]
10-Q	[2013-11-14]
S-1	[2013-10-15]
10-Q	[2013-08-14]
10-Q	[2013-05-15]
10-K	[2013-04-01]
10-Q	[2012-11-14]
10-Q	[2012-08-14]
10-Q	[2012-05-15]
10-K	[2012-03-30]