Kingstone Companies, Inc. (KINS) Earnings

Management highlights

### Core New York Business Performance - Q2 delivered the most profitable quarter in Kingstone history, with an annualized return on equity of 50.8% driven by broad-based premium growth, strong underwriting profitability, operating efficiency, and higher investment income. - New business policy count grew 35% YoY, policy retention improved 2 percentage points YoY, and average renewal premium increased 8% YoY. - The Select underwriting product continues to outperform legacy business: Select homeowners claim frequency is 34% lower than legacy, and Select dwelling fire frequency is 19% lower. Select now represents 62% of in-force homeowner policies and 40% of in-force dwelling fire policies, driving ongoing mix improvement. - Attritional claim frequency remains low overall, and severity increases from inflation have been offset by rising average premiums. Favorable prior year reserve development contributed 2.7 points to the quarter's combined ratio. ### Market Environment and Underwriting Discipline - Management observes emerging signs of a softening property market and increasing competition, with the most visible pressure in the dwelling fire line. Broader demand remains healthy per new business and retention metrics. - Kingstone will not chase volume at the expense of underwriting discipline; long-standing producer relationships and strong risk selection have supported performance through past market cycles. ### Reinsurance Update - The July 1, 2026 catastrophe reinsurance placement was successful: total catastrophe protection increased 14% to $500 million, new wildfire coverage was added, and the risk-adjusted cost of core excess of loss coverage fell more than 15%. - Low first-event retention was maintained across all perils (including wildfire). The program protects the balance sheet against adverse catastrophe events, reduces earnings volatility, and supports continued profitable growth. ### Geographic Expansion Progress - Kingstone entered California in the final week of Q2 through a small group of agencies, starting with a limited scale to refine its approach amid faster-than-expected competition growth. - Unexpectedly, admitted carriers have begun selectively reopening new business writing in California in addition to expected new E&S market entrants. Kingstone's E&S platform allows it to adjust pricing and risk appetite nimbly, and it will only scale California business once it meets underwriting and return targets. - Entry into Connecticut on an admitted basis remains on track for late Q3 2026, with regulatory reviews progressing as expected. - Geographic expansion is a measured long-term strategy to reduce catastrophe concentration and reach the company's target of $500 million in DPW by the end of 2029, while New York remains the core growth and earnings engine. ### Capital Management - Kingstone has no holding company debt and maintains a strong capital position that supports both expansion and shareholder returns. - During Q2, Kingstone repurchased ~19,500 shares at an average price of $14.98 per share under its authorized repurchase program. After quarter end, the board increased the quarterly dividend by 20% to $0.06 per share, one year after reinstating the dividend.

Guidance

Management reaffirmed all elements of its full-year 2026 guidance, maintaining original ranges with no upward or downward revision: - Direct premiums written growth of 16% to 20% (the guidance already accounts for the expected impact of increased competition and moderating New York growth in the second half of the year) - GAAP net combined ratio of 81% to 86% - Underlying combined ratio (excluding catastrophes and prior year reserve development) of 74% to 76% - Catastrophe loss ratio of 7% to 10% (the range reflects elevated first quarter winter storm activity) - Diluted net income per share of $2.20 to $2.90 - Annual return on equity of 24% to 30% - Assumptions remain an effective tax rate of 21% and weighted average diluted shares outstanding of 14.8 million Management noted maintaining the current guidance range is appropriate given the upcoming peak hurricane season and evolving competitive conditions, and underlying operating performance is currently on track to meet expectations.

Segment performance

Kingstone operates as a single personal lines property insurance business focused primarily on New York, with early-stage expansion into California and upcoming entry into Connecticut. For Q2 2026: net income totaled $15.5 million (a company record), up from $11.3 million year-over-year (YoY); diluted EPS was $1.05, up 35% YoY from $0.78; operating net income increased 41% YoY to $15.3 million, with diluted operating EPS of $1.04 up from $0.75 YoY. Direct premiums written (DPW) grew 19% YoY to $72.5 million, led by New York personal lines; net premiums earned (NPE) grew 31% YoY to $60.5 million, driven by prior period growth and a lower 5% quota share retention (down from 16% in 2025) that allowed Kingstone to keep more premium. Net investment income increased 49% YoY to $3.4 million, with an average yield of 4.4% on total investments of $334.1 million. The GAAP net combined ratio improved 1.3 points YoY to 70.2%; underlying combined ratio (excluding catastrophes and prior year reserve development) was 73.7% (up 2.3 points YoY from a very strong prior year quarter); the net underwriting expense ratio improved 2.1 points YoY to 30.6%, driven by operating leverage as expense growth lagged premium growth. For the first half of 2026: DPW grew 19% to $142.1 million, NPE grew 30% to $116.3 million, net income totaled $19.7 million with diluted EPS of $0.66, and the net combined ratio was 90.2%. Policies in force grew 9.9% YoY to 84,570; diluted book value per share reached $8.69, up 35% YoY.

Risks & headwinds

- Increasing competition in a softening property market, with visible pressure on the dwelling fire line in New York, where new market entrants and existing competitors have loosened underwriting guidelines, including one competitor pricing at irrational levels. This is expected to moderate New York growth from first half levels, with the largest impact likely on new business writings. - Faster-than-anticipated increase in competition in California's property market, where admitted carriers have begun selectively reopening new business writing earlier than expected, in addition to expected new E&S market entrants, creating a more competitive landscape than management initially projected. - Exposure to catastrophe losses, particularly during the ongoing Atlantic hurricane season, which creates uncertainty for second half earnings. - Inflation-driven increases in claim severity for core perils, which could pressure underwriting profitability if not offset by average premium increases.

Analyst Q&A

• Q: What is Kingstone's long-term expense ratio target, what combined ratio profitability target guides new business underwriting, and what is the difference between New York and California competition? /

  A: Management set an interim expense ratio target of 29%, expecting to pull approximately 1 point of improvement from the current 30.6% level. New business is priced to target an 85 combined ratio over time as the minimum profitability requirement. In New York, most competitors are admitted carriers focused on catastrophe-exposed property, while in California competition now includes both E&S carriers (as expected) and large admitted carriers that have begun selectively reopening new business writing earlier than management anticipated.