Kingstone Companies, Inc 10-Q for FY2021 Q2

Kingstone Companies, Inc. (KINS)

10-Q 2021-08-16 For: 2021-06-30

Added on April 06, 2026

About this 10-Q

Kingstone Companies, Inc filed this 10-Q on August 16, 2021, covering the quarter ended June 30, 2021 (FY2021 Q2).

Headline figures

Quarter ended June 30, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $39.6M; up 14.2% from $34.69M a year earlier
Net income: $1.32M; down 71.3% from net income of $4.61M a year earlier
Diluted EPS: $0.12; down 72.1% from $0.43 a year earlier

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Delaware		36-2476480
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

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

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☐

		PAGE

PART I - FINANCIAL INFORMATION		4
Item 1 -	Financial Statements	4
	Condensed Consolidated Balance Sheets at June 30, 2021 (Unaudited) and December 31, 2020	4
	Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for the three months and six months ended June 30, 2021 (Unaudited) and 2020 (Unaudited)	5
	Condensed Consolidated Statements of Stockholders’ Equity for the three months and six months ended June 30, 2021 (Unaudited) and 2020 (Unaudited)	6-7
	Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2021 (Unaudited) and 2020 (Unaudited)	8
	Notes to Condensed Consolidated Financial Statements (Unaudited)	9
Item 2 -	Management’s Discussion and Analysis of Financial Condition and Results of Operations	40
Item 3 -	Quantitative and Qualitative Disclosures About Market Risk	72
Item 4 -	Controls and Procedures	72

PART II - OTHER INFORMATION		73
Item 1 -	Legal Proceedings	73
Item 1A -	Risk Factors	73
Item 2 -	Unregistered Sales of Equity Securities and Use of Proceeds	73
Item 3 -	Defaults Upon Senior Securities	73
Item 4 -	Mine Safety Disclosures	73
Item 5 -	Other Information	73
Item 6 -	Exhibits	74
Signatures		75

KINGSTONE COMPANIES, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets

	June 30,			December 31,
	2021			2020
	(unaudited)
Assets
Fixed-maturity securities, held-to-maturity, at amortized cost (fair value of $10,458,317 at June 30, 2021 and $8,194,824 at December 31, 2020)	$	9,822,799		$	7,368,815
Fixed-maturity securities, available-for-sale, at fair value (amortized cost of $128,897,850 at June 30, 2021 and $145,045,584 at December 31, 2020)		137,916,652			157,549,272
Equity securities, at fair value (cost of $32,679,724 at June 30, 2021 and $32,571,166 at December 31, 2020)		36,317,931			34,413,313
Other investments		6,983,057			3,518,626
Total investments		191,040,439			202,850,026
Cash and cash equivalents		43,059,747			19,463,742
Premiums receivable, net		10,719,732			11,819,639
Reinsurance receivables, net		28,192,924			45,460,729
Deferred policy acquisition costs		19,950,955			20,142,515
Intangible assets		500,000			500,000
Property and equipment, net		8,619,114			8,083,123
Other assets		10,617,258			9,262,493
Total assets	$	312,700,169		$	317,582,267

Liabilities
Loss and loss adjustment expense reserves	$	85,025,038		$	82,801,228
Unearned premiums		88,072,566			90,009,272
Advance premiums		5,242,684			2,660,354
Reinsurance balances payable		2,026,000			6,979,735
Deferred ceding commission revenue		84,588			93,519
Accounts payable, accrued expenses and other liabilities		8,535,418			8,433,233
Deferred income taxes, net		4,013,528			4,156,913
Long-term debt, net		29,735,701			29,647,611
Total liabilities		222,735,523			224,781,865

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 11,944,220 shares at June 30, 2021 and 11,871,307 shares at December 31, 2020; outstanding 10,561,143 shares at June 30, 2021 and 10,616,815 shares at December 31, 2020		119,442			118,713
Capital in excess of par		71,567,797			70,769,165
Accumulated other comprehensive income		7,127,003			9,880,062
Retained earnings		16,086,337			15,928,345
		94,900,579			96,696,285
Treasury stock, at cost, 1,383,077 shares at June 30, 2021 and 1,254,492 shares at December 31, 2020		(4,935,933	)		(3,895,883	)
Total stockholders’ equity		89,964,646			92,800,402

Total liabilities and stockholders’ equity	$	312,700,169		$	317,582,267

KINGSTONE COMPANIES, INC. AND SUBSIDIARIES

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

	For the Three Months Ended						For the Six Months Ended
	June 30,						June 30,
	2021			2020			2021			2020

Revenues
Net premiums earned	$	35,436,426		$	26,636,856		$	70,025,644		$	53,578,306
Ceding commission revenue		45,741			3,480,214			44,676			7,311,313
Net investment income		1,678,075			1,612,006			3,461,271			3,277,850
Net gains (losses) on investments		2,315,261			2,697,868			5,275,668			(3,746,550	)
Other income		124,946			262,388			296,392			522,018
Total revenues		39,600,449			34,689,332			79,103,651			60,942,937

Expenses
Loss and loss adjustment expenses		20,759,210			12,813,631			43,319,882			29,199,452
Commission expense		8,285,341			7,760,540			16,509,180			15,616,467
Other underwriting expenses		6,692,920			6,325,472			13,159,962			13,087,264
Other operating expenses		933,272			1,089,135			2,285,578			2,326,030
Depreciation and amortization		837,654			673,160			1,659,994			1,360,254
Interest expense		456,545			456,545			913,090			913,090
Total expenses		37,964,942			29,118,483			77,847,686			62,502,557

Income (loss) before taxes		1,635,507			5,570,849			1,255,965			(1,559,620	)
Income tax expense (benefit)		312,146			962,659			243,701			(723,607	)
Net income (loss)		1,323,361			4,608,190			1,012,264			(836,013	)

Other comprehensive income (loss), net of tax
Gross change in unrealized gains (losses) on available-for-sale-securities		1,074,164			10,887,611			(2,749,115	)		4,160,122

Reclassification adjustment for (gains) losses included in net income (loss)		(341,474	)		148,495			(735,771	)		46,273
Net change in unrealized gains (losses)		732,690			11,036,106			(3,484,886	)		4,206,395
Income tax benefit (expense) related to items of other comprehensive income (loss)		(153,865	)		(2,317,582	)		731,827			(883,342	)
Other comprehensive income (loss), net of tax		578,825			8,718,524			(2,753,059	)		3,323,053

Comprehensive income (loss)	$	1,902,186		$	13,326,714		$	(1,740,795	)	$	2,487,040

Earnings (loss) per common share:
Basic	$	0.12		$	0.43		$	0.09		$	(0.08	)
Diluted	$	0.12		$	0.43		$	0.09		$	(0.08	)

Weighted average common shares outstanding
Basic		10,670,831			10,733,354			10,673,550			10,770,598
Diluted		10,846,724			10,734,784			10,809,924			10,770,598

Dividends declared and paid per common share	$	0.0400		$	0.0400		$	0.0800		$	0.1025

KINGSTONE COMPANIES, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Stockholders’ Equity (Unaudited)
Three months ended June 30, 2021 and 2020

														Accumulated
											Capital			Other
	Preferred Stock				Common Stock						in Excess			Comprehensive			Retained			Treasury Stock
	Shares		Amount		Shares			Amount			of Par			Income (Loss)			Earnings			Shares		Amount			Total
Balance, April 1, 2020		-	$	-		11,851,266		$	118,512		$	69,533,150		$	(626,601	)	$	10,792,934			1,069,873	$	(2,955,276	)		76,862,719
Stock-based compensation		-		-		-			-			454,937			-			-			-		-			454,937
Vesting of restricted stock awards		-		-		22,030			220			(220	)		-			-			-		-			-
Shares deducted from restricted stock
awards for payment of withholding taxes		-		-		(7,042	)		(70	)		(36,318	)		-			-			-		-			(36,388	)
Acquisition of treasury stock		-		-		-			-			-			-			-			126,236		(559,064	)		(559,064	)
Dividends		-		-		-			-			-			-			(427,440	)		-		-			(427,440	)
Net income		-		-		-			-			-			-			4,608,190			-		-			4,608,190
Change in unrealized gains on available-
for-sale securities, net of tax		-		-		-			-			-			8,718,524			-			-		-			8,718,524
Balance, June 30, 2020		-	$	-		11,866,254		$	118,662		$	69,951,549		$	8,091,923		$	14,973,684			1,196,109	$	(3,514,340	)	$	89,621,478

KINGSTONE COMPANIES, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Stockholders’ Equity (Unaudited)
Six months ended June 30, 2021 and 2020

														Accumulated
											Capital			Other
	Preferred Stock				Common Stock						in Excess			Comprehensive		Retained			Treasury Stock
	Shares		Amount		Shares			Amount			of Par			Income		Earnings			Shares		Amount			Total
Balance, January 1, 2020		-	$	-		11,824,889		$	118,248		$	69,133,918		$	4,768,870	$	16,913,097			1,027,439	$	(2,712,552	)		88,221,581
Stock-based compensation		-		-		-			-			942,387			-		-			-		-			942,387
Vesting of restricted stock awards		-		-		60,896			607			(607	)		-		-			-		-			-
Shares deducted from restricted stock
awards for payment of withholding taxes		-		-		(19,531	)		(193	)		(124,149	)		-		-			-		-			(124,342	)
Acquisition of treasury stock		-		-		-			-			-			-		-			168,670		(801,788	)		(801,788	)
Dividends		-		-		-			-			-			-		(1,103,400	)		-		-			(1,103,400	)
Net loss		-		-		-			-			-			-		(836,013	)		-		-			(836,013	)
Change in unrealized gains on available-
for-sale securities, net of tax		-		-		-			-			-			3,323,053		-			-		-			3,323,053
Balance, June 30, 2020		-	$	-		11,866,254		$	118,662		$	69,951,549		$	8,091,923	$	14,973,684			1,196,109	$	(3,514,340	)	$	89,621,478

KINGSTONE COMPANIES, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows (Unaudited)
Six months ended June 30,	2021			2020

Cash flows from operating activities:
Net income (loss)	$	1,012,264		$	(836,013	)
Adjustments to reconcile net income (loss) to net cash flows provided by (used in) operating activities:
Net gains on sale of investments		(1,844,257	)		(275,158	)
Net unrealized (gains) losses on equity investments		(1,924,072	)		3,979,115
Net unrealized (gains) losses of other investments		(1,507,339	)		42,593
Depreciation and amortization		1,659,994			1,360,254
Bad debts		128,518			46,440
Amortization of bond premium, net		107,068			302,279
Amortization of discount and issuance costs on long-term debt		88,090			88,090
Stock-based compensation		981,067			942,387
Deferred income tax expense		588,442			1,017,179
(Increase) decrease in operating assets:
Premiums receivable, net		971,389			(679,568	)
Reinsurance receivables, net		17,267,805			(491,783	)
Deferred policy acquisition costs		191,560			1,112,036
Other assets		(1,365,167	)		(1,609,499	)
Increase (decrease) in operating liabilities:
Loss and loss adjustment expense reserves		2,223,810			(3,890,252	)
Unearned premiums		(1,936,706	)		(5,376,958	)
Advance premiums		2,582,330			1,408,269
Reinsurance balances payable		(4,953,735	)		(6,247,621	)
Deferred ceding commission revenue		(8,931	)		(756,824	)
Accounts payable, accrued expenses and other liabilities		102,185			(116,404	)
Net cash flows provided by (used in) operating activities		14,364,315			(9,981,438	)

Cash flows from investing activities:
Purchase - fixed-maturity securities held-to-maturity		(3,111,381	)		(4,041,750	)
Purchase - fixed-maturity securities available-for-sale		(5,424,374	)		(12,447,259	)
Purchase - equity securities		(8,431,047	)		(8,290,221	)
Purchase - other investments		(2,000,000	)		-
Sale or maturity - fixed-maturity securities held-to-maturity		625,000			-
Sale or maturity - fixed-maturity securities available-for-sale		22,276,142			19,174,048
Sale - equity securities		9,569,363			6,479,813
Acquisition of property and equipment		(2,195,985	)		(1,101,416	)
Net cash flows provided by (used in) investing activities		11,307,718			(226,785	)

Cash flows from financing activities:
Withholding taxes paid on vested retricted stock awards		(181,706	)		(124,342	)
Purchase of treasury stock		(1,040,050	)		(801,788	)
Dividends paid		(854,272	)		(1,103,400	)
Net cash flows used in financing activities		(2,076,028	)		(2,029,530	)

Increase (decrease) in cash and cash equivalents	$	23,596,005		$	(12,237,753	)
Cash and cash equivalents, beginning of period		19,463,742			32,391,485
Cash and cash equivalents, end of period	$	43,059,747		$	20,153,732

Supplemental disclosures of cash flow information:
Cash paid for income taxes	$	-		$	-
Cash paid for interest	$	825,000		$	825,000

	June 30, 2021

					Gross Unrealized Losses
	Cost or Amortized		Gross Unrealized		Less than 12			More than 12			Estimated Fair		Net Unrealized
Category	Cost		Gains		Months			Months			Value		Gains

Fixed-Maturity Securities:
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	2,008,936	$	11,844	$	-		$	-		$	2,020,780	$	11,844

Political subdivisions of States, Territories and Possessions		8,587,648		275,691		(32,208	)		-			8,831,131		243,483

Corporate and other bonds Industrial and miscellaneous		97,021,903		8,314,462		(16,838	)		-			105,319,527		8,297,624

Residential mortgage and other asset backed securities (1)		21,279,363		546,118		(2,560	)		(77,707	)		21,745,214		465,851
Total	$	128,897,850	$	9,148,115	$	(51,606	)	$	(77,707	)	$	137,916,652	$	9,018,802

	December 31, 2020

					Gross Unrealized Losses
	Cost or Amortized		Gross Unrealized		Less than 12			More than 12			Estimated Fair		Net Unrealized
Category	Cost		Gains		Months			Months			Value		Gains

Fixed-Maturity Securities:
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	3,020,710	$	29,190	$	-		$	-		$	3,049,900	$	29,190

Political subdivisions of States, Territories and Possessions		5,287,561		355,541		-			-		$	5,643,102		355,541

Corporate and other bonds Industrial and miscellaneous		108,573,422		11,634,123		(13,216	)		-		$	120,194,329		11,620,907

Residential mortgage and other asset backed securities (1)		28,163,891		617,368		(7,371	)		(111,947	)	$	28,661,941		498,050
Total	$	145,045,584	$	12,636,222	$	(20,587	)	$	(111,947	)	$	157,549,272	$	12,503,688

	June 30, 2021				December 31, 2020
	Amortized		Estimated		Amortized		Estimated
Remaining Time to Maturity	Cost		Fair Value		Cost		Fair Value

Less than one year	$	7,198,128	$	7,263,139	$	8,559,005	$	8,668,064
One to five years		43,761,291		47,227,835		44,137,567		47,745,430
Five to ten years		44,705,071		49,293,510		55,508,712		63,159,775
More than 10 years		11,953,997		12,386,954		8,676,409		9,314,062
Residential mortgage and other asset backed securities		21,279,363		21,745,214		28,163,891		28,661,941
Total	$	128,897,850	$	137,916,652	$	145,045,584	$	157,549,272

	June 30, 2021
			Gross		Gross			Estimated
Category	Cost		Gains		Losses			Fair Value

Equity Securities:
Preferred stocks	$	18,344,078	$	1,626,038	$	(87,248	)	$	19,882,868
Common stocks, mutual funds, and exchange traded funds		14,335,646		2,120,909		(21,492	)		16,435,063
Total	$	32,679,724	$	3,746,947	$	(108,740	)	$	36,317,931

	December 31, 2020

	Cost or		Gross		Gross Unrealized Losses				Estimated		Net
	Amortized		Unrealized		Less than 12		More than 12		Fair		Unrealized
Category	Cost		Gains		Months		Months		Value		Gains

Held-to-Maturity Securities:
U.S. Treasury securities	$	729,595	$	319,714	$	-	$	-	$	1,049,309	$	319,714

Political subdivisions of States, Territories and Possessions		998,428		50,917		-		-		1,049,345		50,917

Corporate and other bonds Industrial and miscellaneous		5,640,792		455,378		-		-		6,096,170		455,378

Total	$	7,368,815	$	826,009	$	-	$	-	$	8,194,824	$	826,009

	Three months ended					Six months ended
	June 30,					June 30,
	2021			2020		2021			2020

Income:
Fixed-maturity securities	$	1,459,342		$	1,394,284	$	2,950,469		$	2,841,771
Equity securities		351,100			243,344		708,411			496,868
Cash and cash equivalents		634			43,936		1,558			88,159
Other investments		(42,908	)		-		(42,908	)		-
Total		1,768,168			1,681,564		3,617,530			3,426,798
Expenses:
Investment expenses		90,093			69,558		156,259			148,948
Net investment income	$	1,678,075		$	1,612,006	$	3,461,271		$	3,277,850

	June 30, 2021
	Less than 12 months							12 months or more							Total
	Estimated					No. of		Estimated					No. of		Estimated
	Fair		Unrealized			Positions		Fair		Unrealized			Positions		Fair		Unrealized
Category	Value		Losses			Held		Value		Losses			Held		Value		Losses

Fixed-Maturity Securities:
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	-	$	-			-	$	-	$	-			-	$	-	$	-

Political subdivisions of States, Territories and Possessions		1,073,200		(32,208	)		1		-		-			-		1,073,200		(32,208	)

Corporate and other bonds industrial and miscellaneous		1,084,560		(16,838	)		1		-		-			-		1,084,560		(16,838	)

Residential mortgage and other asset backed securities		3,083,104		(2,560	)		3		3,237,151		(77,707	)		10		6,320,255		(80,267	)

Total fixed-maturity securities	$	5,240,864	$	(51,606	)		5	$	3,237,151	$	(77,707	)		10	$	8,478,015	$	(129,313	)

	June 30, 2021
	Level 1		Level 2		Level 3		Total

Fixed-maturity securities available-for-sale
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	2,020,780	$	-	$	-	$	2,020,780

Political subdivisions of States, Territories and Possessions		-		8,831,131		-		8,831,131

Corporate and other bonds industrial and miscellaneous		103,280,669		2,038,858		-		105,319,527

Residential mortgage backed securities		-		21,745,214		-		21,745,214
Total fixed maturities		105,301,449		32,615,203		-		137,916,652
Equity securities		36,317,931		-		-		36,317,931
Total investments	$	141,619,380	$	32,615,203	$	-	$	174,234,583

Category	June 30, 2021		December 31, 2020

Other Investments:
Hedge fund	$	6,875,965	$	3,368,626

Real estate limited partnership		107,092		150,000
Total	$	6,983,057	$	3,518,626

	June 30, 2021				December 31, 2020
	Carrying		Estimated		Carrying		Estimated
	Value		Fair Value		Value		Fair Value

Fixed-maturity securities-held-to maturity	$	9,822,799	$	10,458,317	$	7,368,815	$	8,194,824
Cash and cash equivalents	$	43,059,747	$	43,059,747	$	19,463,742	$	19,463,742
Premiums receivable, net	$	10,719,732	$	10,719,732	$	11,819,639	$	11,819,639
Reinsurance receivables, net	$	28,192,924	$	28,192,924	$	45,460,729	$	45,460,729
Real estate, net of accumulated depreciation	$	2,181,335	$	2,705,000	$	2,219,999	$	2,705,000
Reinsurance balances payable	$	2,026,000	$	2,026,000	$	6,979,735	$	6,979,735

	Direct			Assumed		Ceded			Net

Six months ended June 30, 2021
Premiums written	$	82,744,761		$	-	$	(14,630,872	)	$	68,113,889
Change in unearned premiums		1,936,706			-		(24,951	)		1,911,755
Premiums earned	$	84,681,467		$	-	$	(14,655,823	)	$	70,025,644

Six months ended June 30, 2020
Premiums written	$	79,347,406		$	-	$	(28,066,253	)	$	51,281,153
Change in unearned premiums		5,376,958			-		(3,079,805	)		2,297,153
Premiums earned	$	84,724,364		$	-	$	(31,146,058	)	$	53,578,306

Three months ended June 30, 2021
Premiums written	$	44,615,644		$	-	$	(7,301,365	)	$	37,314,279
Change in unearned premiums		(1,852,772	)		-		(25,081	)		(1,877,853	)
Premiums earned	$	42,762,872		$	-	$	(7,326,446	)	$	35,436,426

Three months ended June 30, 2020
Premiums written	$	42,650,477		$	-	$	(14,559,998	)	$	28,090,479
Change in unearned premiums		(527,742	)		-		(925,881	)		(1,453,623	)
Premiums earned	$	42,122,735		$	-	$	(15,485,879	)	$	26,636,856

All Lines of Business
*(in thousands, except reported claims data)*
																					As of
	Incurred Loss and Allocated Loss Adjustment Expenses, Net of Reinsurance																				June 30, 2021
Accident	For the Years Ended December 31,																		Six months ended				Cumulative Number of Reported Claims
Year	2012		2013		2014		2015		2016		2017		2018		2019		2020		June 30, 2021		IBNR		by Accident Year
	(Unaudited 2012 - 2020)																		(Unaudited)

2012	$	9,539	$	9,344	$	10,278	$	10,382	$	10,582	$	10,790	$	10,791	$	11,015	$	10,885	$	10,880	$	14		4,704	(1)
2013				10,728		9,745		9,424		9,621		10,061		10,089		10,607		10,495		10,512		4		1,564
2014						14,193		14,260		14,218		14,564		15,023		16,381		16,428		16,404		160		2,138
2015								22,340		21,994		22,148		22,491		23,386		23,291		23,459		132		2,558
2016										26,062		24,941		24,789		27,887		27,966		27,549		488		2,879
2017												31,605		32,169		35,304		36,160		36,213		496		3,393
2018														54,455		56,351		58,441		58,935		1,503		4,218
2019																75,092		72,368		72,322		7,872		4,460
2020																		63,083		62,835		7,510		5,809
2021																				41,012		12,085		1,646
																	Total		$	360,121
(1) Reported claims for accident year 2012 includes 3,406 claims from Superstorm Sandy.

All Lines of Business
*(in thousands)*

	Cumulative Paid Loss and Allocated Loss Adjustment Expenses, Net of Reinsurance
	For the Years Ended December 31,
Accident Year	2012		2013		2014		2015		2016		2017		2018		2019		2020		Six months ended June 30, 2021
	(Unaudited 2012 - 2020)																		(Unaudited)

2012	$	3,950	$	5,770	$	7,127	$	8,196	$	9,187	$	10,236	$	10,323	$	10,428	$	10,451	$	10,540
2013				3,405		5,303		6,633		7,591		8,407		9,056		9,717		10,016		10,136
2014						5,710		9,429		10,738		11,770		13,819		14,901		15,491		15,509
2015								12,295		16,181		18,266		19,984		21,067		22,104		22,229
2016										15,364		19,001		21,106		23,974		25,234		25,599
2017												16,704		24,820		28,693		31,393		32,036
2018														32,383		44,516		50,553		51,311
2019																40,933		54,897		57,396
2020																		39,045		48,313
2021																				18,475
																	Total		$	291,545


Net liability for unpaid loss and allocated loss adjustment expenses for the accident years presented	$	68,576
All outstanding liabilities before 2011, net of reinsurance		110
Liabilities for loss and allocated loss adjustment expenses, net of reinsurance	$	68,686

	Treaty Year
	December 15, 2019
	to
Line of Business	December 30, 2020

Personal Lines:
Homeowners, dwelling fire and and canine legal liability
Quota share treaty:
Percent ceded		25	%

	Treaty Year
	July 1, 2021		December 31, 2020		July 1, 2020		December 15, 2019
	to		to		to		to
Line of Business	June 30, 2022		June 30, 2021		December 30, 2020		June 30, 2020

Personal Lines:
Homeowners, dwelling fire and
and canine legal liability
Quota share treaty:
Risk retained on intial
$1,000,000 of losses (7)	$	1,000,000	$	1,000,000	$	750,000	$	750,000
Losses per occurrence subject
to quota share
reinsurance coverage	None (7)		None (7)		$	1,000,000	$	1,000,000
Expiration date	NA (7)		NA (7)		December 30, 2020		December 30, 2020
Excess of loss coverage and
facultative facility
coverage (1)	$	8,000,000	$	8,000,000	$	8,000,000	$	9,000,000
	in excess of		in excess of		in excess of		in excess of
	$	1,000,000	$	1,000,000	$	1,000,000	$	1,000,000
Total reinsurance coverage
per occurrence (7)	$	8,000,000	$	8,000,000	$	8,250,000	$	9,250,000
Losses per occurrence subject
to reinsurance coverage	$	9,000,000	$	9,000,000	$	9,000,000	$	10,000,000
Expiration date (7)	June 30, 2022		June 30, 2021		June 30, 2021		June 30, 2020

Catastrophe Reinsurance:
Initial loss subject to personal
lines quota share treaty	None (7)		None (7)		$	7,500,000	$	7,500,000
Risk retained per catastrophe
occurrence (2) (7)	$	10,000,000	$	10,000,000	$	8,125,000	$	5,625,000
Catastrophe loss coverage
in excess of
quota share coverage (3) (7)	$	490,000,000	$	475,000,000	$	475,000,000	$	602,500,000
Reinstatement premium
protection (4) (5) (6)	Yes		Yes		Yes		Yes

(1)	For personal lines, includes the addition of an automatic facultative facility allowing KICO to obtain homeowners single risk coverage up to $10,000,000 in total insured value, which covers direct losses from $3,500,000 to $10,000,000 through June 30, 2020. For the period July 1, 2020 through June 30, 2022, direct losses are covered up to $9,000,000.
(2)	Plus losses in excess of catastrophe coverage. For the period July 1, 2020 through December 30, 2020, there was no reinsurance coverage for the $2,500,000 gap between quota share limit of $7,500,000 and first $10,000,000 layer of catastrophe coverage (see note (7) below).
(3)	Catastrophe coverage is limited on an annual basis to two times the per occurrence amounts. Duration of 168 consecutive hours for a catastrophe occurrence from windstorm, hail, tornado, hurricane and cyclone.
(4)	For the period July 1, 2019 through June 30, 2020, reinstatement premium protection for $292,500,000 of catastrophe coverage in excess of $7,500,000.
(5)	For the period July 1, 2020 through June 30, 2021, reinstatement premium protection for $70,000,000 of catastrophe coverage in excess of $10,000,000.
(6)	For the period July 1, 2021 through June 30, 2022, reinstatement premium protection for $70,000,000 of catastrophe coverage in excess of $10,000,000.

Stock Options	Number of Shares			Weighted Average Exercise Price per Share		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value

Outstanding at January 1, 2021		119,966		$	8.26		3.55	$	-

Granted		-		$	-		-	$	-
Exercised		-		$	-		-	$	-
Expired		(12,000	)	$	7.85		-	$	-

Outstanding at June 30, 2021		107,966		$	8.31		3.43	$	-

Vested and Exercisable at June 30, 2021		27,500		$	8.64		2.94	$	-

Restricted Stock Awards	Shares			Weighted Average Grant Date Fair Value per Share		Aggregate Fair Value

Balance at January 1, 2021		370,964		$	9.96	$	3,990,999

Granted		321,335		$	6.95	$	2,233,366
Vested		(99,123	)	$	9.24	$	(916,198	)
Forfeited		(7,133	)	$	-	$	-

Balance at June 30, 2021		586,043		$	8.92	$	5,308,167


Type of NOL	June 30, 2021			December 31, 2020			Expiration

Federal only, current year (A)	$	-		$	1,200,056
NOL carried back		-			(1,200,056	)
Federal only, current year	$	-		$	-		None

State only (B)		1,993,964			1,815,546		December 31, 2040
Valuation allowance		(1,993,964	)		(1,815,546	)
State only, net of valuation allowance		-			-

Total deferred tax asset from net operating loss carryovers	$	-		$	-

(A)	On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law, allowing for a five year carryback of 2020 and 2019 NOLs. The Company elected on its 2019 federal income tax return to carry back the 2019 NOL to tax years 2014 and 2015. The Company will elect on its 2020 federal income tax return to carry back the 2020 NOL to tax year 2015. The corporate tax rate in 2014 and 2015 was 34%, compared to the corporate tax rate of 21% in 2020 and 2019.

(B)	Kingstone generates operating losses for state purposes and has prior year NOLs available. The state NOL as of June 30, 2021 and December 31, 2020 was approximately $30,676,000 and $27,931,000, respectively. KICO, the Company’s insurance underwriting subsidiary, is not subject to state income taxes. KICO’s state tax obligations are paid through a gross premiums tax, which is included in the consolidated statements of operations and comprehensive loss within other underwriting expenses. Kingstone has recorded a valuation allowance due to the uncertainty of generating enough state taxable income to utilize 100% of the available state NOLs over their remaining lives, which expire between 2027 and 2041.

(2)	Deferred tax liability - Investment in KICO

	On July 1, 2009, the Company completed the acquisition of 100% of the issued and outstanding common stock of KICO (formerly known as Commercial Mutual Insurance Company (“CMIC”)) pursuant to the conversion of CMIC from an advance premium cooperative to a stock property and casualty insurance company. Pursuant to the plan of conversion, the Company acquired a 100% equity interest in KICO, in consideration for the exchange of $3,750,000 principal amount of surplus notes of CMIC. In addition, the Company forgave all accrued and unpaid interest on the surplus notes as of the date of conversion. As of the date of acquisition, unpaid accrued interest on the surplus notes along with the accretion of the discount on the original purchase of the surplus notes totaled $2,921,319 (together “Untaxed Interest”). As of the date of acquisition, the deferred tax liability on the Untaxed Interest was $1,169,000. A temporary difference with an indefinite life exists when the parent has a lower carrying value of its subsidiary for income tax purposes. The deferred tax liability was reduced to $759,543 upon the reduction of federal income tax rates as of December 31, 2017. The Company is required to maintain its deferred tax liability of $759,543 related to this temporary difference until the stock of KICO is sold, or the assets of KICO are sold or KICO and the parent are merged.

	Three months ended			Six months ended
Lease cost	June 30, 2021			June 30, 2021
Operating leases	$	58,988		$	117,977
Short-term leases		-			-
Total lease cost (1)	$	58,988		$	117,977

Other information on operating leases
Cash payments included in the measurement of lease
liability reported in operating cash flows	$	66,531		$	131,510
Discount rate		5.50	%		5.50	%
Remaining lease term in years	6.25 years			6.25 years

For the Year Ending December 31,	Total
Remainder of 2021	$	133,061
2022		273,831
2023		283,415
2024		140,739
2025		94,799
Thereafter		98,117
Total undiscounted lease payments		1,023,962
Less: present value adjustment		152,191
Operating lease liability	$	871,771

	Six months ended June 30,
($ in thousands)	2021			2020			Change			Percent
Revenues
Direct written premiums	$	82,745		$	79,347		$	3,398			4.3	%
Assumed written premiums		-			-			-		na		%
		82,745			79,347			3,398			4.3	%
Ceded written premiums
Ceded to quota share treaties		236			15,600			(15,364	)		(98.5	)%
Ceded to excess of loss treaties		1,059			947			112			11.8	%
Ceded to catastrophe treaties		13,336			11,519			1,817			15.8	%
Total ceded written premiums		14,631			28,066			(13,435	)		(47.9	)%

Net written premiums		68,114			51,281			16,833			32.8	%

Change in unearned premiums
Direct and assumed		1,937			5,377			(3,440	)		(64.0	)%
Ceded to quota share treaties		(25	)		(3,080	)		3,055			99.2	%
Change in net unearned premiums		1,912			2,297			(385	)		(16.8	)%

Premiums earned
Direct and assumed		84,681			84,724			(43	)		(0.1	)%
Ceded to reinsurance treaties		(14,655	)		(31,146	)		16,491			52.9	%
Net premiums earned		70,026			53,578			16,448			30.7	%

Ceding commission revenue		45			7,311			(7,266	)		(99.4	)%
Net investment income		3,461			3,278			183			5.6	%
Net gains (losses) on investments		5,276			(3,746	)		9,022			na	%
Other income		296			522			(226	)		(43.3	)%
Total revenues		79,104			60,943			18,161			29.8	%
Expenses
Loss and loss adjustment expenses
Direct and assumed:
Loss and loss adjustment expenses excluding the effect of catastrophes		44,096			37,081			7,015			18.9	%
Losses from catastrophes (1)		106			2,338			(2,232	)		(95.5	)%
Total direct and assumed loss and loss adjustment expenses		44,202			39,419			4,783			12.1	%

Ceded loss and loss adjustment expenses:
Loss and loss adjustment expenses excluding the effect of catastrophes		882			9,592			(8,710	)		(90.8	)%
Losses from catastrophes (1)		-			628			(628	)		(100.0	)%
Total ceded loss and loss adjustment expenses		882			10,220			(9,338	)		(91.4	)%

Net loss and loss adjustment expenses:
Loss and loss adjustment expenses excluding the effect of catastrophes		43,214			27,489			15,725			57.2	%
Losses from catastrophes (1)		106			1,710			(1,604	)		(93.8	)%
Net loss and loss adjustment expenses		43,320			29,199			14,121			48.4	%

Commission expense		16,509			15,616			893			5.7	%
Other underwriting expenses		13,160			13,087			73			0.6	%
Other operating expenses		2,286			2,326			(40	)		(1.7	)%
Depreciation and amortization		1,660			1,360			300			22.1	%
Interest expense		913			913			-		-		%
Total expenses		77,849			62,503			15,347			24.6	%

Income (loss) before taxes		1,256			(1,560	)		2,816			na	%
Income tax expense (benefit)		244			(724	)		968			na	%
Net income (loss)	$	1,012		$	(836	)	$	1,848			na	%

(1)	The 2019/2020 Treaty was effective from December 15, 2019 through December 30, 2020 with a quota share reinsurance rate of 25%.

(2)	The 2018/2019 Treaty expired on a run-off basis from July 1, 2019 through June 30, 2020.

	Six months ended
	June 30,						Percentage
	2021			2020			Point Change

Other underwriting expenses
Employment costs		7.3	%		10.0	%		(2.7	)
Underwriting fees (inspections/data services)		1.4			3.0			(1.6	)
IT expenses		3.1			2.5			0.6
Other expenses		6.9			9.0			(2.1	)
Total other underwriting expenses		18.7			24.5			(5.8	)

Commission expense		23.6			29.1			(5.5	)

Ceding commission revenue
Provisional		(0.1	)		(13.4	)		13.3
Contingent		0.1			(0.3	)		0.4
Total ceding commission revenue		-			(13.7	)		13.7

Other income		(0.4	)		(0.9	)		0.5

Net underwriting expense ratio		41.9	%		39.0	%		2.9