Greetings, and welcome to the Kingstone Company's Second Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce Karin Daly, Vice President, The Equity Group and Kingstone Investor Relations Representative. Thank you, Karin. You may now begin.

Thank you, Dana. Good morning, everyone. Joining us on the call today will be President and Chief Executive Officer, Meryl Golden. On behalf of the company, I would like to note that this conference call may include 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 Risk Factors in Part I, 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 today. Yesterday afternoon, we posted the most profitable quarter in Kingstone's history with $11.3 million in net income, an increase of 150% compared to the prior year quarter. We delivered a stellar combined ratio of 71.5% and with net premiums earned increasing 52% over last year, our underwriting profits were exceptional. Our quarterly net income translates to diluted earnings per share of $0.78 and an annualized return on equity for the quarter of 50.8%. With the exception of our incredible results in 2024, this quarter's net income was higher than any other full calendar year's profit in Kingstone's history. A remarkable achievement. Before covering our quarterly results in more detail, I want to recap some of the recent announcements we've made. First, I'm delighted that Randy Patten will be joining the company as CFO later this month. Randy comes from NEXT Insurance where he played a key role in facilitating the recent sale of the company to a subsidiary of Munich Re for $2.6 billion. Additionally, he has extensive prior experience as a public company finance leader, including a robust understanding of capital raising and M&A matters, and will play a critical role in providing strategic financial leadership for the company. Having a CEO -- CFO of his caliber will be a tremendous asset for Kingstone, and I look forward to introducing Randy to you next quarter. We've also had some changes on the Kingstone Board. 2 of our long-term board members, Tim McFadden and Carla D'Andre have completed their service after many years, and we are grateful for their numerous contributions. At the same time, Pranav Pasricha, an entrepreneurial leader with a strong track record of building insurance and technology companies join the Board. Pranav's perspective will be…

[Operator Instructions] Our first question today is coming from Bob Farnam of Janney Montgomery Scott.

I have a question on the reinsurance. So thank you for the details about kind of the $5 million net to you. I'm just curious, even if it's remote, what happens if it's a second event that occurs in your territory?

Sure. Our second event retention is $9 million. So after tax, roughly $7 million.

Okay. And you have a reinstatement premium for that as well?

Yes, we have a reinstatement premium for the first layer of our cat tower.

Okay. And the second question was, given that you're expanding into new states, I know you're doing a lot of research into -- how to do that appropriately. I'm just curious, what impact is that going to have on your expense ratio in the near term before premium really starts to roll in and rightsizes?

Yes. I don't think it's going to have much of -- it will not have much of an impact at all. So it's -- we have to modify the product. We've hired some staff to help lead the expansion effort, but the expenses relative to expansion will be very small relative to our earned premium growth. So I don't expect our expense ratio to tick up as a result of our expansion efforts.

Okay. So I mean a lot of times, companies say, well, we're spending a lot right now, but we haven't really generated the premium yet. So it's temporarily going to be a mismatch, but it sounds like it's not going to be much of an issue for Kingstone?

Yes. Look, we've built the foundation already. We already have the product. We need to modify it, obviously, for these various states, but we have the actuarial team. We have the team in place today that's doing the research and leading this. We have the claims team in place. So again, we might make a few hires and there's certainly systems cost, but it's immaterial on a relative basis, I don't think we'll see an uptick.

Great. Okay. And the last bit is with the AmGuard transaction, if I read it right, you're only looking for maybe $12 million of premium from that $70-some-odd million book. I'm just curious if that's something that you -- it's lower than I expected. So is that something you found in that book that maybe not all that conducive to getting into Kingstone?

No. Look, last quarter, I knew after announcing the transaction that everyone would want to know what the approximate premium benefit would be. And so we came up with an estimate, but we had very little data. And to be honest with you, we still have very little data because as I mentioned, we just put out the first batch of quotes effective September 1. So we don't have certainty around what our conversion rate will be. But what we do have certainty around now is our rate level difference. And so we knew that AmGuard was taking a rate increase, but we didn't know where our rates would compare to AmGuard. So originally, I still think we're going to write $25 million to $35 million, which was the estimate that I shared last quarter. But last quarter, I thought it would be more front loaded because I assumed since we're paying higher commission that producers would proactively move the book. But now that I see that our rates are higher, I think that the producers and consumers will wait until they're being nonrenewed in order to join Kingstone. So it's the same amount of total premium just spread more proportionately over 3 years rather than front-loaded as I had assumed last quarter. Does that make sense, Bob?

Yes. No, that's good color. That was one of the questions. I mean I just saw that it had come down from what you initially thought. So I just kind of wanted to ask about it. So good explanation.

Okay. Thanks, Bob.

Yes. That's it for me.

Our next question is coming from Gabriel McClure of Private Investor.

Congratulations on an amazing quarter.

Thank you.

Yes. So I guess you just answered my AmGuard question. Thank you for that and also the hurricane exposure. So I just have one question left for you.

Sure.

And so you announced the dividend reinstatement, and thank you for that. All the shareholders are grateful for that. But -- and as I kind of look at the company and the trajectory that you're on and basically a simplified way of saying that the money is starting to pile up, and I know we got a lot of growth ahead of us. But how does your capital allocation priorities look? How do you think about all that and share buybacks in the mix going forward?

Sure. So I've been asked the question in the past about share buybacks, and I'm going to be very consistent. We have the opportunity to use our capital, and we have no plans at this point to do a share buyback. So we -- in terms of our capital strategy, we may need more capital to execute on our plan. And if needed, we'll look caterfully at all alternatives. But the profitability we've achieved over the last 7 quarters has put us in this phenomenal place where we've paid off our debt. We've replenished our surplus. We bought more reinsurance. We've reduced our quota share and now we've restated the dividend to shareholders. So we feel like we have sufficient capital to fund our growth in the near and midterm. And we just think we're in a really good place. I hope that answered your question.

It does.

Thank you. There's no further questions at this time. I will turn the call back over to Meryl Golden for closing remarks.

Terrific. Well, thank you for joining the call today. The entire team at Kingstone is both proud and energized by the strong results we've delivered, and we look forward to building Kingstone into a multistate carrier poised for meaningful growth and profitability in the years ahead. Have a great day.

Ladies and gentlemen, this concludes today's event. You may disconnect your lines or log off the webcast at this time, and enjoy the rest of your day.