Greetings. Welcome to Kingstone Companies Third Quarter 2024 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce Karin Daly, Vice President of The Equity Group and Kingstone’s Investor Relations representative. Karin, you may begin.

Thank you, Sherri. Good morning, everyone. Joining us on the call today will be Chief Executive Officer, Meryl Golden; and Chief Financial Officer, Jennifer Gravelle. On behalf of the company, I would like to note that this conference call may contain forward-looking statements, which involve known and unknown risks, uncertainties and other factors that may cause actual results to be materially different from projected results. Forward-looking statements speak only as of the date on which they are made, and Kingstone undertakes no obligation to update the information discussed. For more information, please refer to the section entitled factors that may affect future results and financial condition in Part 1 Item 1A of the company’s latest Form 10-K. Additionally, today’s remarks may include references to non-GAAP measures. For a reconciliation of these non-GAAP measures to GAAP figures, please see the tables in the latest earnings release. With that, it’s my pleasure to turn the call over to Meryl Golden. Meryl?

Thanks, Karin. Good morning, everyone, and thanks for joining our call. This quarter, we had the highest income we have ever had in any quarter since Kingstone Insurance Company was acquired by Kingstone Companies in 2009. We also achieved record-setting premiums written. It’s a huge feat to achieve the operating margins we realized this quarter. And it’s another significant accomplishment to attain a 40% growth rate as we’re experiencing in our core personal lines business, but to do them simultaneously is nothing short of remarkable. This is undisputably the best quarter that Kingstone has ever had. I want to thank my great team and all of our employees, who work so hard to make these results possible. I could not be prouder of what we’ve been able to accomplish. Let me start by talking about our growth. As discussed last quarter, our current growth is being driven by the exit of two competitors, who reached an agreement with the New York Department of Financial Services to non-renew or cancel their entire books by the end of this year. Their combined policies in force in downstate New York are roughly the size that Kingstone is today. There is also a third company that’s exiting the homeowners market nationally and has more than 20,000 policies in our New York footprint and is expected to be a growth opportunity in 2025. Our objective is profitable growth, not growth for growth’s sake. And we have been thoughtful about how we are taking advantage of this opportunity so as not to compromise our profitability. Let me remind you that carriers typically lose money on new business and only make a profit over the policies’ lifetime as margins expand when business renews. However, we feel confident that we’re making an underwriting profit on the new business…

Thank you, Meryl, and good morning, everyone. We could not be more pleased with our 2024 third quarter and year-to-date results. This now marks our fourth consecutive quarter of profitability with net income of $7 million or $0.61 per basic share for the quarter. For the year-to-date, our net income was $12.9 million compared to a net loss last year of $9.1 million and an earnings per basic share of $1.16 this year compared to a loss of $0.85 last year. On a consolidated basis, direct written premiums for the current third quarter increased 28.1%, inclusive of a 39.4% increase in core direct written premiums [indiscernible] a market dislocation that Meryl was just discussing, partially offset by our continued reduction of our non-core business, which decreased another 60% in both the written premium and policies in force compared to the same period last year. The increase in our core business reflects the strong pricing action with an average premium for personal lines up more than 23% in the quarter versus the prior year quarter. Our combined ratio improved by 38.2 points to a 72% for the quarter. Our current accident year loss ratio improved by 37.6 points with a 31.6-point improvement in non-cat losses and a 6-point reduction in catastrophe losses. We also had a $641,000 favorable prior year development, reducing loss ratio by 1.9 points. Our expense ratio was 33%, 1.2 points higher than our prior year quarter. Consistent with last quarter, our expense ratio was higher than target primarily due to increased employee bonus and contingent commission for our producers, both of which are triggered off our better-than-expected underwriting results. Our non-cat loss ratio improvement was driven primarily by homeowners, our main line of business. And we experienced a decrease of frequency and severity for personal lines as…

[Operator Instructions] Our first question is from Bob Farnam with Janney Montgomery Scott. Please proceed.

Hi there. Good morning. I have got a few quick questions and maybe some broader questions. So, on the guidance, are you still assuming maybe a 6% cat load in that combined ratio guidance? And do you have an expectation for an expense ratio target in that combined ratio?

Hi Bob. So, to answer your question, yes, we are assuming for next year a roughly 6% cat load because as I have said, 2024 was exceptionally light for catastrophes. And for next year, we have assumed the long-term average. In terms of our expense ratio, we are expecting a decrease in our expense ratio because our earned premium will be up quite substantially. And what we have assumed is roughly a 28% expense ratio for next year.

Okay. Great. And then I have – I will have questions on the growth, potentially you have ahead of you. I am sure I am going to have questions every quarter. But for right now, I want to know how have – how has the business gone, according to plan, short, more in advance of plan? Just kind of curious to the core combines, are they going as you expected? Is the pricing for the new customers, is it sticker shock? What type of pricing increases do you suspect you are getting over your competitors at that point when they renew with you?

So, it’s kind of hard to say that our growth is going according to plan because who has ever been through something like this before, honestly. So, I would say I am particularly proud of the way we have handled our growth while maintaining our service standards and our underwriting standards. And then relative to the price that customers are experiencing, I don’t really know because I don’t have visibility into what the customer was paying previously. But certainly, we are having a very high conversion rate on the business that is coming, these two companies that are out of business. So, I assume our pricing is competitive.

Okay. And the third-party that – the third company that’s pulling out of the market, you said there was a pretty good amount of policies. Do you know what size, premium size that is?

So, that company is AmGUARD. It’s a Berkshire Hathaway company, and they announced that they were withdrawing from the homeowners market nationally. So, they entered New York a couple of years ago and grew fast and furiously. And so we will have to see what the market delivers. We are confident in our pricing. And hopefully, the customer will find our pricing competitive.

Okay. And if I were – the last question for me. So, it sounds like the Select product is – obviously, the frequency is much better under Select than it is the legacy. What’s – what are the primary differences between the Select book and your legacy book?

Sure. So, just to reiterate how great Select is doing, for the quarter, our Select reported frequency for personal lines was 1.6%, and legacy was 2.2%. So – and we have seen this difference every quarter. So, the products are completely different. Select, if you recall, is a by-peril rated product. It’s using years of Kingstone data and industry data in order to price properly match rate to risk. So, I would say one of the primary differences besides the fact that it’s by-peril ratings from our legacy product is the use of insurance score in the pricing and underwriting.

Interesting. Okay. That’s it for me. I will let others ask questions, I may come back if I have more. Thanks.

Our next question is from Gabriel McClure, Private Investor. Please proceed.

Good morning and congratulations on a quarter that’s so good. I don’t really have a word for it.

Good morning Gabe.

I have a couple of questions. Good morning. I have a couple of questions. I think you answered the one about the opportunity in 2025 with the third company. But could you talk about pricing? If memory serves, this is the time of the year where we go up on pricing to do the rate changes. How much are we going up? And did Hurricane Helene and/or Milton factor into the decisions at all? And I have got another question after that.

Sure. Okay. So we, fortunately, had no impact at all from Hurricane Helene or Milton. However, it will probably impact us through reinsurance rates for next year because we had heard earlier in the year a lot of – maybe that the reinsurance market is softening. And now what we are hearing is not so much so. So, that’s the only impact from – potential impact from those storms. In terms of our pricing, we did, in the quarter, raise rates for our Select homeowners product, 5% and our dwelling fire product by 10%. Typically, around this time, we do a legacy rate change. And I don’t remember the exact effective date, and it was in the low-single digits. So, we are pretty confident that we are – well, actually very confident that we are priced adequately at this time. And don’t forget that in addition to the rate change, we now update replacement cost on every policy annually so that we are insured to value. So, while that’s an increase in coverage, it is also an increase in price for the policyholder.

Okay. Great. Got it. And then the capital allocation front, I know we talked about the debt and we got the announcement about the share sale. So, I understand what we are trying to do is get rid of the debt. Do you have any projections or a range because this is kind of a curveball for some of the shareholders that have been around about the share – the dilution to the shareholders, can you – do you have a range of like how much we could experience an increase in shares or how much dilution we could get by 2025?

So, unfortunately, I really don’t. I just want to say that we – I very much view this debt is like a news like having lived through ‘22, I just don’t want to deal with the debt. I want to pay it off as quickly as possible. So, we are really trying to find the right balance between the quota share, the stock issuance and the use of dividends to pay down the debt as expeditiously as possible and to maximize earnings. But I cannot give you an exact number of shares that we plan to sell at this time.

Okay. Got it. Thanks.

[Operator Instructions] Our next question is from Brad Nelson, Private Investor. Please proceed.

Hi guys. I appreciate the work that you have done and going through over the last few years, the phases that you mentioned and stabilization and now growth. I just have a quick question on – can you tell me what the reason is that you are pushing guidance from a diluted share count to a basic share count? I think it’s something that’s a little bit out of the ordinary. Maybe this has to do with the ATM, but what is the reason?

So, we don’t really have – like we changed it earlier in the year where there really wasn’t a difference between basic and diluted. So, it’s just what we have out there now. There is no rationale behind it, honestly. If it makes more sense to do diluted, we can certainly change our guidance to include diluted.

Okay. I just wanted to know if there was any particular reason, but it just sounds like you – yes, you have made a quick decision on this, and that’s fine. I mean right now, the share count difference is like about 10% or something like that. And obviously, if it’s only – if you are only going to use the ATM, then eventually, they may get a bit closer. But anyway, okay. Thank you for that information. Appreciate it.

No problem.

We have reached the end of our question-and-answer session. I would like to turn the conference back over to Meryl for closing remarks.

It’s an incredibly exciting time at Kingstone. And we could not be more optimistic about the trajectory for our business. Thank you to our shareholders for your continued trust and support as we work together – sorry, as we work towards delivering long-term value, and thank you for joining our call today.

Thank you. This will conclude today’s conference. You may disconnect your lines at this time and thank you for your participation.