APRIL 12, 2017 12:24 PM (EDT)
A.M. Best Upgrades Credit Ratings of Kingstone Insurance Company and Kingstone Companies, Inc.
FOR IMMEDIATE RELEASE
OLDWICK - APRIL 12, 2017 12:24 PM (EDT)
The rating upgrades are based on the improved risk-adjusted capitalization of KICO, following a $23.0 million capital contribution from KINS on March 1, 2017; improved underwriting results and operating returns in recent years; and increased catastrophe reinsurance coverage.
The ratings and outlooks reflect KICO’s solid risk-adjusted capitalization, favorable five-year operating performance and local market knowledge in New York. KICO’s risk-adjusted capitalization has significantly improved in recent years, driven by a $15.0 million capital contribution from its parent, following an $18.8 million public offering on Dec. 13, 2013. The capital raised in this public offering also enabled management to repay all of its outstanding debt at KINS. Additionally, KINS completed a private placement of $5.0 million of its common stock on April 15, 2016, and following the approval of the New York State Department of Financial Services, $3.0 million was contributed to the surplus of KICO. Furthermore, following a $30.2 million public offering by KINS in February 2017, $23.0 million of capital was contributed to KICO’s surplus on March 1, 2017, to improve capitalization and support future growth plans.
KICO’s favorable operating performance is reflected in the company’s double-digit five-year pre-tax returns on revenue and equity, generated by positive net underwriting income and supplemented by net investment and other income. These five-year operating returns compare favorably with the industry composite average.
Partially offsetting KICO’s positive rating factors are its dependence on reinsurance and its concentration of risk, primarily in downstate New York, which exposes it to weather-related events as well as to market, regulatory and judicial issues. Additionally, KICO reported substantial growth in net premiums written in recent years, driven by increased retention on its quota share reinsurance contracts and new policy growth. However, KICO’s increased capital position and financial flexibility are sufficient to support management’s future growth plans. Furthermore, KICO historically reported adverse loss reserve development in most calendar and accident years, driven in part by historical lead paint claims. However, loss reserve development has been modestly favorable in recent calendar and accident years, driven by management’s strategic initiatives.
While KICO’s single-state concentration exposes it to weather-related events, catastrophe exposure is partially mitigated through catastrophe reinsurance, which it has purchased at increased limits in recent years, as well as the use of hurricane deductibles, visual risk inspections, distance-from-shore restrictions and surcharges. Additionally, KICO has been expanding its operating territory to regions beyond the New York metropolitan area.
This press release relates to Credit Ratings that have been published on A.M. Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see A.M. Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings.
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