P&C insurance holding company Kingstone Companies has released its financial results for the third quarter of 2023, reporting a net loss of $3.5 million on a net combined ratio of 110.2%.
The net loss in the current quarter compares to the $4.0 million net loss reported in Q3 2022. According to Kingstone, the $0.5 million decrease in the latest three-month period is primarily attributable to a decrease in commissions and other underwriting expenses and an increase in ceding commissions.
This was partially offset by an increase in interest expense and a decrease in net premiums earned primarily resulting from an increase in catastrophe premiums.
Q3 2023’s net combined improved slightly, from 111.9% reported in the same period last year. The company’s net loss ratio was 78.5 %, 3.5 points higher that the 75% reported in Q3 2022; and net underwriting expense ratio was 31.7%, compared to the 36.9% reported in last year’s quarter.
Kingstone noted that, while the underlying loss ratio (i.e., net loss ratio excluding the impact of catastrophes and prior year loss development) was improved for the three months ended September 30, 2023 compared to the same period last year, the catastrophe loss had a bigger impact for the 2023 period.
There were six wind events classified as catastrophes for Q3 2023. The total net catastrophe losses for the calendar quarter were $2.2 million, which contributed 7.7 points to the net loss ratio. This compares to a 1.1point impact from catastrophe events for Q3 2022.
Underlying loss ratio was 70.8% for the quarter, a decrease from the 72.4% recorded for Q3 2022. The loss experience for the 2023 period was improved due to lower frequency, resulting from writing higher quality business in the new Select product as well as the reduction of the book in the non-Core states.
According to Kingstone, the improvement in frequency was offset by increased severity due to inflation and large losses, similar to what was observed in the first six months of 2023.
Prior year development was stable for Q3 2023. There was an overall unfavourable development of $3,000, which had a marginal impact on the net loss ratio, the company added.
Kingston also reported direct written premiums for the third quarter of 2023 were $52.0 million, 4.8% lower compared to the $54.6 million reported in the prior year period. Most of the decrease was in Personal Lines, which decreased $2.8 million from actions taken to aggressively reduce the business in non-Core states.
Net written premiums decreased 66.9%, to $3.7 million during the quarter, from $11.1 million in tQ3 2022. The decrease was primarily due to a decrease in direct written premiums and an increase in catastrophe premiums rates.
Net premiums earned for Q3 2023 decreased 4.8%, to $27.9 million, compared to $29.4 million for Q3 2022. The $1.4 million decrease was primarily attributable to a decrease in Personal Lines of $2.1 million offset by an increase in Livery Physical Damage of $0.6 million.
Meryl Golden, Kingstone Chief Executive Officer, commented: “Increasing rates and getting ahead of loss costs including inflation has been a key theme and our pricing team has responded marvellously. While there is more work to be done, we are again comfortable expanding our Core new business writings and look forward to growing our Core business in 2024 while continuing to reduce the non-Core business. We believe that the small remaining non-Core policies, after repeated rate increases and re-underwriting, will no longer have the negative impact they once had.
“Each of the changes called for in Kingstone 2.0 and Kingstone 3.0 have been made, are in place and at work. The financial effects are now flowing through to our income statement at an accelerating rate and that makes me confident that 2024 will be a great year for the Company and its shareholders.
“We are generating underwriting income in New York, and that will grow substantially in 2024 when the benefits of the increase in average premiums are earned. On an overall company basis, as we run off our non-Core business, the losses are shrinking and will be less and less of a factor in 2024. We are bullish about the future.”
Jennifer Gravelle, Kingstone’s Chief Financial Offer, added: “We are making great progress on the Kingstone 3.0 initiatives that will return Kingstone to profitability. Our non-Core business is down markedly and our average Core premiums have increased materially.
“Our expense ratio is down by more than 5 points this quarter. We are doing everything we can to return Kingstone to profitability. I feel confident that we’ll continue to see the progress we’ve made increasingly reflected in our financial results.”
