Kingstone's Q3 2025: Contradictions Emerge on New States Expansion, AmGuard Premium, Capital Allocation, and Product Development

Date of Call: November 7, 2025

Financials Results

• EPS: $0.74 diluted earnings per share for Q3 2025
• Operating Margin: 72.7% GAAP combined ratio for Q3 2025

Guidance:

• Net earned premiums expected to be $187.0M for 2025.
• GAAP net combined ratio guidance 78%–82% for 2025.
• Basic EPS guidance $2.30–$2.70; diluted EPS $2.20–$2.60 for 2025.
• Return on equity guidance 35%–39% for 2025.
• Direct written premium growth reaffirmed at 12%–17% for all states.
• Fiscal 2026 baseline assumes normal seasonality/cat activity; guidance to be refined and multi-year roadmap provided in H1 2026.

Business Commentary:

* Strong Financial Performance:
- Kingstone Companies reported net income of $10.9 million and diluted earnings per share of $0.74 for Q3 2025, with a GAAP combined ratio of 72.7% and an annualized return on equity of 43%.
- This performance was driven by 14% growth in direct written premium, 52% increase in net investment income, and improved retention and rate changes.

• Expansion and Growth Initiatives:
• Kingstone's policies in force increased by 4.2% year-over-year and 1.4% sequentially, supported by a 13% average premium increase and expansion efforts.

• The growth was driven by a reduced quota share, allowing the company to retain a greater share of premiums and underwriting profits, as well as the continued earning-in of previous new business written.

• Underwriting and Claim Trends:

• The company's underlying loss ratio increased by 4.9 percentage points to 44.1% due to higher claim severity, though claim frequency declined for non-weather water and fire perils.

• This trend is attributed to a mix shift towards more preferred risk in the Select products, which now represent 54% of policies in force.

• Investment Income and Capital Position:

• Net investment income for the quarter jumped 52% to $2.5 million, with a year-to-date increase of 39%, reaching $6.8 million.

• The increase was due to robust cash generation from operations and the capitalization of attractive new money yields, strengthening the company's capital position.

• State Expansion and Market Opportunities:

• Kingstone is expanding into new states on an excess and surplus lines basis, with a new E&S carrier approved in Connecticut.
• This expansion is driven by market opportunities in catastrophe-exposed homeowners markets, where companies are not currently making money, allowing Kingstone to earn the same returns as in New York.
  

  Sentiment Analysis:

  Overall Tone: Positive

  • "one of the strongest quarters in our history with net income of $10.9 million, diluted earnings per share of $0.74, a GAAP combined ratio of 72.7% and an annualized return on equity of 43%." Management also stated they are raising 2025 guidance (improved combined ratio, higher EPS and ROE targets) reflecting strong underwriting and investment performance.

Q&A:

• Question from Robert Farnam (Janney Montgomery Scott LLC, Research Division): So on your New York admitted basis, the Select product now is 54% of the policies in force. Will all accounts eventually move to Select, or some just renew on the legacy product indefinitely?
  Response: Legacy policies will remain because they are profitable; conversion to Select may occur when the legacy book is small, but no near-term plan to migrate existing profitable legacy policies.

• Question from Robert Farnam (Janney Montgomery Scott LLC, Research Division): Okay. But all new business, is that put on the Select platform?
  Response: Yes — all new business has been written on the Select platform since the beginning of 2022.

• Question from Robert Farnam (Janney Montgomery Scott LLC, Research Division): Right. Okay. So when you're getting into the new states on an excess and surplus lines basis, I'm assuming this is going to be a new product. So -- because it's E&S rather than admitted. So how is this product going to differ from Select? And how are you developing it?
  Response: They will leverage Select experience but will adapt to state-specific perils and rating variables; product development is underway with the same external actuarial consultant and is well advanced.

• Question from Robert Farnam (Janney Montgomery Scott LLC, Research Division): And has the new E&S carrier been finally been approved yet?
  Response: They have filed for a new company in Connecticut which is not yet approved; they will write E&S business as well as in Kingstone Insurance Company in certain states.

• Question from Robert Farnam (Janney Montgomery Scott LLC, Research Division): A little change in direction. So I know it's only been 2 months, but the AmGUARD book, you started writing at the beginning of September. So how has that performed thus far relative to expectations? Not performed in terms of profitability, but in terms of having policies move over to Kingstone?
  Response: Early results are on track: writing just under $1M per month, aligning with a target of $25M–$35M over three years; mix resembles Select with more borough business adding geographic diversification.

• Question from Robert Farnam (Janney Montgomery Scott LLC, Research Division): Okay. And one of the bigger questions I always get is just the competition in downstate New York. Now you said that some companies are expanding their target areas. How -- can you give us any more color as to how competitors are going into that environment?
  Response: Competitors (mostly MGAs) have been broadening underwriting appetite following last year's market exits, but Kingstone continues to see healthy growth, sequential monthly increases in new business since June and high conversion rates.

• Question from Gabriel McClure (private investor): I think maybe a couple of months ago at the Sidoti conference or somewhere, you mentioned that these states you're looking at expanding into, you kind of described it as there being more demand for our policies that we'd offer on a homeowners policy that we'd offer on an E&S basis than there was supply. And so just my question is a couple of months ago, is the market still that way? Has it changed? Whatever you could offer up?
  Response: Market conditions remain constrained for catastrophe-exposed homeowners nationwide; management sees the opportunity persisting to expand geographically and earn returns comparable to New York, with no material change in the quarter.

Contradiction Point 1

New States Expansion Impact on Expense Ratio

It involves the expected impact of expanding into new states on the company's expense ratio, which is a key operational metric for evaluating efficiency and profitability.

How will expansion into new states impact your short-term expense ratio? - Robert Farnam(Janney Montgomery Scott LLC)

2025Q3: I don't think it's going to have much of an impact at all. We have built the foundation already. We need to modify the product but our actuarial and claims team is in place. The expenses are immaterial relative to our earned premium growth. - Meryl S. Golden(CEO)

How will expansion into new states affect your short-term expense ratio? - Robert Edward Farnam(Janney Montgomery Scott LLC)

2025Q2: I don't think it's going to have much of an impact at all. We have built the foundation already. We need to modify the product but our actuarial and claims team is in place. The expenses are immaterial relative to our earned premium growth. - Meryl S. Golden(CEO)

Contradiction Point 2

AmGuard Transaction Premium Benefit

It involves the expected premium benefit from the AmGuard transaction, which impacts the company's financial projections and the anticipated integration of the acquired book.

How has the AmGUARD book performed relative to expectations since its launch in early September, excluding profitability, but in terms of policy transfers to Kingstone? - Robert Farnam(Janney Montgomery Scott LLC)

2025Q3: Yes. So it's early on. We started writing business effective September 1st. But so far, it's right within our expectations. So I had indicated that we write between $25 million and $35 million of business over a 3-year period. And we're right on track. - Meryl Golden(CEO)

Why is the AmGuard transaction’s estimated premium benefit lower than expected? - Robert Edward Farnam(Janney Montgomery Scott LLC)

2025Q2: Last quarter, I assumed AmGuard's rate increase would mean producers would proactively move the book, but now I see our rates are higher. Producers and consumers will wait until nonrenewed to join Kingstone, spreading the premium benefit more evenly over 3 years. - Meryl S. Golden(CEO)

Contradiction Point 3

Capital Allocation and Share Buybacks

It involves the company's capital allocation priorities and the consideration of share buybacks, which impact the company's financial strategy and investor expectations.

How are your capital allocation priorities shaped by the dividend reinstatement and future growth? - Gabriel McClure(Private Investor)

2025Q3: We feel we have sufficient capital to fund our growth in the near and midterm. We are in a really good place with no plans for share buybacks. - Meryl Golden(CEO)

How are capital allocation priorities changing with the dividend reinstatement and future growth? - Gabriel McClure(Private Investor)

2025Q2: We feel we have sufficient capital to fund our growth in the near and midterm. We are in a really good place with no plans for share buybacks. - Meryl S. Golden(CEO)

Contradiction Point 4

Expansion into New States and Product Development

It involves plans for geographical expansion and new product development, which are crucial for Kingstone's growth strategy and investor expectations.

Has the new E&S carrier been approved yet? - Robert Farnam

2025Q3: We've received approvals in 11 states so far and expect to enter 3 more states by year-end. It's very likely we'll get approval in Connecticut for the new company, and we'll also start writing business on an E&S basis in Kingstone Insurance Company. - Meryl Golden(CEO)

Are you considering expansion into other jurisdictions? - Q - Unidentified Analyst

2025Q1: Our focus for 2025 is on downstate New York and the AmGUARD transaction. However, this is a good time for Kingstone to consider other geographies. - Meryl Golden(CEO)