KINGSTONE COMPANIES, INC. MANAGEMENT REPORT AND ANALYSIS OF FINANCIAL POSITION AND OPERATING RESULTS. (Form 10-Q)

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We offer property and casualty insurance products to individuals through our
wholly owned subsidiary, Kingstone Insurance Company ("KICO"). KICO's insureds
are located primarily in downstate New York, consisting of New York City, Long
Island and Westchester County, although we are actively writing business in New
Jersey, Rhode Island, Connecticut and Massachusetts. We are licensed in the
States of New York, New Jersey, Rhode Island, Connecticut, Massachusetts,
Pennsylvania, Maine, and New Hampshire. For the three months and nine months
ended September 30, 2022, respectively, 80.5% and 80.3% of KICO's direct written
premiums came from the New York policies.



In addition, through our subsidiary, Cosi Agency, Inc. ("Cosi"), a multi-state
licensed general agency, we access alternative distribution channels. Cosi
receives commission revenue from KICO for the policies it places with others and
pays commissions to these agencies. Cosi retains the profit between the
commission revenue received and the commission expense paid ("Net Cosi
Revenue"). Commission expense is reduced by Net Cosi Revenue and Cosi-related
operating expenses are included in other operating expenses. Cosi-related
operating expenses are not included in our stand-alone insurance underwriting
business and, accordingly, Cosi's expenses are not included in the calculation
of our combined ratio as described below.



We derive substantially all of our revenue from KICO, which includes revenues
from earned premiums, ceding commissions from quota share reinsurance, net
investment income generated from its portfolio, and net realized gains and
losses on investment securities.  All of KICO's insurance policies are written
for a one-year term. Earned premiums represent premiums received from insureds,
which are recognized as revenue over the period of time that insurance coverage
is provided (i.e., ratably over the one-year life of the policy). A significant
period of time can elapse from the receipt of insurance premiums to the payment
of insurance claims. During this time, KICO invests the premiums, earns
investment income and generates net realized and unrealized investment gains and
losses on investments. Our holding company earns investment income from its cash
holdings and may also generate net realized and unrealized investment gains and
losses on future investments.



Our expenses include the insurance underwriting expenses of KICO and other
operating expenses. Insurance companies incur a significant amount of their
total expenses from losses incurred by policyholders, which are referred to as
claims. In settling these claims, various loss adjustment expenses ("LAE") are
incurred such as insurance adjusters' fees and legal expenses. In addition,
insurance companies incur policy acquisition costs. Policy acquisition costs
include commissions paid to producers, premium taxes, and other expenses related
to the underwriting process, including employees' compensation and benefits.



Other operating expenses include our corporate expenses as a holding company and
operating expenses of Cosi. These corporate expenses include legal and auditing
fees, executive employment costs, and other costs directly associated with being
a public company. Cosi operating expenses primarily include employment,
occupancy and consulting costs.



Product Lines


Our product lines include the following:

Personal Lines: Our largest line of business is Personal Lines, consisting of homeowners, home fire insurance, co-op/condominium, renters, and personal umbrella policies.



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Commercial liability: Through July 2019, we offered businessowners policies,
which consist primarily of small business retail, service, and office risks,
with limited property exposures. We also wrote artisan's liability policies for
small independent contractors with smaller sized workforces.  In addition, we
wrote special multi-peril policies for larger and more specialized
businessowners risks, including those with limited residential exposures.
Further, we offered commercial umbrella policies written above our supporting
commercial lines policies.



In May 2019, due to the poor performance of this line we placed a moratorium on
new commercial lines and new commercial umbrella submissions while we further
reviewed this business.  In July 2019, due to the continuing poor performance of
these lines, we made the decision to no longer underwrite commercial lines or
commercial umbrella risks.  In-force policies as of July 31, 2019 for these
lines were non-renewed at the end of their annual terms.  As of September 30,
2022 and December 31, 2021, there were no commercial liability policies
in-force. As of September 30, 2022, these expired policies represent
approximately 18.0% of loss and LAE reserves net of reinsurance recoverables.
See discussion below under "Additional Financial Information".



Livery physical damage: We write for-hire vehicle physical damage only policies
for livery and car service vehicles and taxicabs. These policies insure only the
physical damage portion of insurance for such vehicles, with no liability
coverage included.



Other: We write canine liability insurance policies and have a small stake in state mandatory joint underwriting associations.


Key Measures


We use the following key metrics to analyze the results of our insurance underwriting activities:

Net loss ratio: The net loss ratio is a measure of the underwriting profitability of an insurance company’s business. Expressed as a percentage, it is the ratio of net losses and LAE incurred to net premiums earned.



Net underwriting expense ratio: The net underwriting expense ratio is a measure
of an insurance company's operational efficiency in administering its business.
Expressed as a percentage, this is the ratio of the sum of acquisition costs
(the most significant being commissions paid to our producers) and other
underwriting expenses less ceding commission revenue less other income to net
premiums earned.



Net combined ratio: The net combined ratio is a measure of an insurance
company's overall underwriting profit. This is the sum of the net loss and net
underwriting expense ratios. If the net combined ratio is at or above 100
percent, an insurance company cannot be profitable without investment income,
and may not be profitable if investment income is insufficient.



Underwriting income: Underwriting income is net pre-tax income attributable to
our insurance underwriting business before investment activity. It excludes net
investment income, net realized gains from investments, and depreciation and
amortization (net premiums earned less expenses included in combined ratio).
Underwriting income is a measure of an insurance company's overall operating
profitability before items such as investment income, depreciation and
amortization, interest expense and income taxes.




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Significant Accounting Policies and Estimates



Our condensed consolidated financial statements include the accounts of
Kingstone Companies, Inc. and all majority-owned and controlled subsidiaries.
The preparation of financial statements in conformity with GAAP requires our
management to make estimates and assumptions in certain circumstances that
affect amounts reported in our condensed consolidated financial statements and
related notes. In preparing these condensed consolidated financial statements,
our management has utilized information including our past history, industry
standards, and the current economic environment, and other factors, in forming
its estimates and judgments of certain amounts included in the condensed
consolidated financial statements, giving due consideration to materiality. It
is possible that the ultimate outcome as anticipated by our management in
formulating its estimates in these financial statements may not materialize.
Application of the critical accounting policies involves the exercise of
judgment and use of assumptions as to future uncertainties and, as a result,
actual results could differ from these estimates. In addition, other companies
may utilize different estimates, which may impact comparability of our results
of operations to those of similar companies.  See the Critical Accounting
Estimates section within Item 7 "Management's Discussion and Analysis of
Financial Condition and Results of Operations" of our Annual Report on Form 10-K
for the year ended December 31, 2021 for further information.



We believe that the most critical accounting policies relate to the reporting of
reserves for loss and LAE, including losses that have occurred but have not been
reported prior to the reporting date, amounts recoverable from third party
reinsurers, deferred income taxes, the impairment of investment securities, and
the valuation of stock-based compensation. See Note 2 to the consolidated
financial statements in our Annual Report on Form 10-K for the year ended
December 31, 2021.



Griffin Highline


Reference is made to Note 13 - Subsequent Events - Griffin Highline to our
condensed consolidated financial statements included in this Quarterly Report
with regard to discussions between our company and Griffin Highline as to a
potential strategic transaction.  TigerRisk Capital Markets & Advisory has been
engaged to advise our Board of Directors regarding strategic transactions.  Our
Board of Directors will carefully review any proposals received by our company
from Griffin Highline or others to determine the course of action that it
believes is in the best interest of our company and all of our stockholders. Due
to the uncertainty as to the consummation of a transaction with Griffin
Highline, nothing in this Quarterly Report, including the financial statements
comprising a portion hereof, include any adjustments to reflect the possible
effects of the consummation of such a transaction.




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Consolidated operating results

Nine month period ended September 30, 2022 Compared to the nine months ended September 30, 2021

The following table summarizes the evolution of the results of our operations (in thousands) for the periods indicated:


                                                   Nine months ended September 30,
($ in thousands)                           2022          2021         Change         Percent
Revenues
Direct written premiums                  $ 147,354     $ 131,610     $  15,744           12.0 %
Assumed written premiums                         -             -             -             na %
                                           147,354       131,610        15,744           12.0 %
Ceded written premiums
Ceded to quota share treaties (1)           34,868           374        34,494        9,223.0 %
Ceded to excess of loss treaties             2,937         2,057           880           42.8 %
Ceded to catastrophe treaties               20,939        19,423         1,516            7.8 %
Total ceded written premiums                58,744        21,854        36,890          168.8 %

Net written premiums                        88,610         .,756       (21,146 )        (19.3 )%

Change in unearned premiums
Direct and assumed                          (6,030 )      (2,911 )      (3,119 )       (107.1 )%
Ceded to quota share treaties (1)            1,356           (15 )       1,371             na %
Change in net unearned premiums             (4,674 )      (2,926 )      (1,748 )        (59.7 )%

Premiums earned
Direct and assumed                         141,324       128,698        12,626            9.8 %
Ceded to reinsurance treaties              (57,388 )     (21,869 )     (35,519 )       (162.4 )%
Net premiums earned                         83,936       106,829       (22,893 )        (21.4 )%

Ceding commission revenue (1)               14,283            37        14,246       38,502.7 %
Net investment income                        3,412         5,138        (1,726 )        (33.6 )%
Net (losses) gains on investments           (9,313 )       5,480       (14,793 )           na %
Other income                                   750           577           173           30.0 %
Total revenues                              93,068       118,062       (24,993 )        (21.2 )%
Expenses
Loss and loss adjustment expenses
Direct and assumed:
Loss and loss adjustment expenses
excluding the effect of catastrophes        83,346        67,634        15,712           23.2 %
Losses from catastrophes (2)                 7,510        12,647        (5,137 )        (40.6 )%
Total direct and assumed loss and loss
adjustment expenses                         90,856        80,281        10,575           13.2 %

Ceded loss and loss adjustment
expenses:
Loss and loss adjustment expenses
excluding the effect of catastrophes        23,187           860        22,327        2,596.2 %
Losses from catastrophes (2)                 4,044           360         3,684        1,023.3 %
Total ceded loss and loss adjustment
expenses                                    27,231         1,221        

26,011 2,130.2%

Net loss and loss adjustment expenses:
Loss and loss adjustment expenses
excluding the effect of catastrophes        60,159        66,773        (6,614 )         (9.9 )%
Losses from catastrophes (2)                 3,466        12,287        (8,821 )        (71.8 )%
Net loss and loss adjustment expenses       63,625        79,060       (15,435 )        (19.5 )%

Commission expense                          25,534        24,711           823            3.3 %
Other underwriting expenses                 20,717        19,723           994            5.0 %
Other operating expenses                     2,357         3,141          (784 )        (25.0 )%
Depreciation and amortization                2,472         2,480            (8 )         (0.3 )%
Interest expense                             1,370         1,370             -              - %
Total expenses                             116,075       130,485       (14,410 )        (11.0 )%

Loss before taxes                          (23,007 )     (12,423 )     (10,584 )        (85.2 )%
Income tax benefit                          (4,433 )      (2,817 )      (1,616 )        (57.4 )%
Net loss                                 $ (18,575 )   $  (9,606 )   $  (8,968 )        (93.4 )%




       (Columns in the table above may not sum to totals due to rounding)



(1) Workforce December 31, 2021we entered into a 30% copayment in personal lines insurance

treaty.

(2) The nine months ended September 30, 2022 and 2021 include catastrophe claims,

which are defined as losses resulting from an event for which a catastrophe bulletin

and the associated serial number was issued by Ownership Claims Services

(PCS) of the unit Insurance Services Office (ISO). PCS disaster bulletins

    are issued for events that cause more than $25 million in total insured
    losses and affect a significant number of policyholders and insurers.





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                                                Nine months ended September 30,
                                                                 Percentage         Percent
                                     2022          2021         Point Change        Change

Key ratios:
Net loss ratio                          75.8 %        74.0 %            (22.1 )         (22.8 )%
Net underwriting expense ratio          37.2 %        41.0 %             (2.4 )          (6.1 )%
Net combined ratio                     113.0 %       115.0 %            (24.5 )         (18.0 )%




Direct Written Premiums



Direct written premiums during the nine months ended September 30, 2022 ("Nine
Months 2022") were $147,354,000 compared to $131,610,000 during the nine months
ended September 30, 2021 ("Nine Months 2021"). The increase of $15,744,000, or
12.0%, was primarily due an increase in premiums from our personal lines
business. Direct written premiums from our personal lines business for Nine
Months 2022 were $138,198,000, an increase of $13,605,000, or 10.9%, from
$124,593,000 in Nine Months 2021.  The increase in premiums from our personal
lines business was primarily due to rate increases, and, to a lesser extent, an
increase in policies in force.  Direct written premiums from our livery physical
damage business for Nine Months 2022 were $9,037,000, an increase of $2,200,000,
or 32.2%, from $6,837,000 in Nine Months 2021. The increase in livery physical
damage direct written premiums was due to the declining effect of the COVID-19
pandemic in our geographic area.



         Beginning in 2017 we started writing homeowners policies in New Jersey.
Through 2019 we expanded to Rhode Island, Massachusetts and Connecticut. We
refer to our New York business as our "Core" business and the business outside
of New York as our "Expansion" business.  Direct written premiums from our Core
business were $118,332,000 in Nine Months 2022 compared to $101,990,000 in Nine
Months 2021.  Direct written premiums from our Expansion business were
$29,022,000 in Nine Months 2022 compared to $29,620,000 in Nine Months 2021.



Net premiums written and net premiums earned



Effective December 31, 2021, we entered into a quota share reinsurance treaty
for our personal lines business covering the period from December 31, 2021
through January 1, 2023 ("2021/2023 Treaty"). There was no quota share
reinsurance treaty in effect in Nine Months 2021. Net written premiums decreased
$21,146,000, or 19.3%, to $88,610,000 in Nine Months 2022 from $109,756,000 in
Nine Months 2021. Net written premiums include direct and assumed premiums, less
the amount of written premiums ceded under our reinsurance treaties (quota
share, excess of loss, and catastrophe). In Nine Months 2022, our premiums ceded
under quota share treaties increased by $34,494,000 in comparison to ceded
premiums in Nine Months 2021 (see table above). Our personal lines business was
subject to the 2021/2023 Treaty in Nine Months 2022, compared to no personal
lines quota share treaty in Nine Months 2021.




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Excess of loss reinsurance treaties

An increase in written premiums will increase the premiums ceded under our
excess of loss treaties. In Nine Months 2022, our ceded excess of loss
reinsurance premiums increased by $880,000 over the comparable ceded premiums
for Nine Months 2021. The increase was due to an increase in subject premiums
and additional coverage obtained. Effective January 1, 2022, we entered into an
underlying excess of loss reinsurance treaty covering the period from January 1,
2022 through January 1, 2023. The treaty provides 50% reinsurance coverage for
losses of $400,000 in excess of $600,000. Losses from named storms are excluded
from the treaty.


Catastrophe reinsurance treaties



Most of the premiums written under our personal lines policies are also subject
to our catastrophe treaties. An increase in our personal lines business gives
rise to more property exposure, which increases our exposure to catastrophe
risk; therefore, our premiums ceded under catastrophe treaties will increase.
This results in an increase in premiums ceded under our catastrophe treaties
provided that reinsurance rates are stable or are increasing. In Nine Months
2022, our premiums ceded under catastrophe treaties increased by $1,516,000 over
the comparable ceded premiums in Nine Months 2021. Effective July 1, 2020, and
continuing through June 30, 2021, our ceded catastrophe premiums were paid based
on the total insured value of our risks calculated as of August 31, 2020.
Effective July 1, 2021, and continuing through June 30, 2022, our ceded
catastrophe premiums were paid based on the total insured value of our risks as
of August 31, 2021. Effective July 1, 2022, and continuing through June 30,
2023, our ceded catastrophe premiums will be paid based on the total insured
value of our risks as of August 31, 2022.



Net premiums earned


Net premiums earned decreased $22,893,000, or 21.4%, to $83,936,000 in Nine
Months 2022 from $106,829,000 in Nine Months 2021. The decrease was due to the
inception of the 2021/2023 Treaty on December 31, 2021. The decrease resulting
from the 2021/2023 Treaty in Nine Months 2022 was partially offset by an
increase in direct written premium.



Ceding Commission Revenue


The following table summarizes the change in the components of cession fee income (in thousands) for the periods indicated:


                                               Nine months ended September 30,
($ in thousands)                          2022       2021       Change        Percent

Provisional disposal commissions earned $14,116 $136 $13,980

   10,279.4 %
Contingent ceding commissions earned         167       (99 )        266    

n / A %

Total sales commission revenue $14,283 $37 $14,246

  38,502.7 %




Ceding commission revenue was $14,283,000 in Nine Months 2022 compared to
$37,000 in Nine Months 2021. The increase of $14,246,000 was due to an increase
in both provisional ceding commissions earned and contingent ceding commissions
earned. See below for a discussion of provisional ceding commissions earned and
contingent ceding commissions earned.




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Provisional disposal commissions earned

In Nine Months 2022 we earned provisional ceding commissions from personal lines
earned premiums ceded under the 2021/2023 Treaty which was effective as of
December 31, 2021. There was no personal lines quota share in effect in Nine
Months 2021.


Contingent sales commissions earned

The structure of the 2021/2023 Treaty calls for a fixed provisional ceding
commission with no opportunity to earn additional contingent ceding commissions.
Under our prior years' quota share treaties, we received a contingent ceding
commission based on a sliding scale in relation to the losses incurred under our
quota share treaties. The lower the ceded loss ratio, the more contingent
commission we received.



Net Investment Income



Net investment income was $3,412,000 in Nine Months 2022 compared to $5,138,000
in Nine Months 2021, a decrease of $1,726,000, or 33.6%. The decrease in
investment income is attributable to a $766,000 reversal of prior years'
estimated accrued interest income stemming from an error in third party
investment reporting.  The decline of investment income is also attributable to
the disposal of income bearing equity securities.  The average yield on invested
assets was 3.48% as of September 30, 2022 compared to 3.42% as of September
30,
2021.



Cash and invested assets were $192,229,000 as of September 30, 2022 compared to
$246,004,000 as of September 30, 2021. The $53,775,000 decrease in cash and
invested assets was primarily attributable to cash paid to reinsurers at the
inception of the 2021/2023 Treaty, losses paid in connection with catastrophe
losses incurred in 2021 and 2022 and unrealized losses on our investment
portfolio.



Net gains and investment losses



Net losses on investments were $9,313,000 in Nine Months 2022 compared to net
gains of $5,480,000 in Nine Months 2021. Unrealized losses on our equity
securities and other investments in Nine Months 2022 were $10,502,000, compared
to net gains of $2,603,000 in Nine Months 2021. Realized gains on sales of
investments were $1,189,000 in Nine Months 2022 compared to $2,877,000 in Nine
Months 2021.



Other Income


Other income was $750,000 in nine months of 2022 compared to $577,000 in nine months of 2021, an increase of $173,000i.e. 30.0%.


Net Loss and LAE



Net loss and LAE was $63,625,000 for Nine Months 2022 compared to $79,060,000
for Nine Months 2021. The net loss ratio was 75.8% in Nine Months 2022 compared
to 74.0% in Nine Months 2021, an increase of 1.8 percentage points.




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The following graph summarizes the evolution of the components of the net loss ratio for the periods indicated, as well as the comparable components excluding commercial business:


                      [[Image Removed: king_10qimg49.jpg]]



               (Components may not sum to totals due to rounding)



For Nine Months 2022, the loss ratio was higher than Nine Months 2021 due to
water damage property claims which were primarily driven by winter-related water
damage claims resulting from freezing temperature earlier during the year and
the impact from climbing inflation leading to higher severity.



The estimated net catastrophe losses were $3,466,000 for Nine Months 2022, which
contributed 4.1 points to the loss ratio. This is mostly driven by two winter
events in the first quarter. There were also seven other minor wind catastrophe
events during Nine Months 2022, but the impact was not significant. As a
comparison, catastrophe events had a loss ratio impact of 11.5 points for Nine
Months 2021 due to a more active hurricane season, including the named storm
Ida.



Prior years in total have unfavorable development of $714,000 for Nine Months
2022, driven by large fire losses which occurred in 2021 and the volatility of
liability claim settlements from the discontinued Commercial lines.  This
contributed 0.9 point to the loss ratio.



See the table below under “Supplemental Financial Information” summarizing the net loss ratios by line of business.



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Commission Expense



Commission expense was $25,534,000 in Nine Months 2022 or 18.1% of direct earned
premiums. Commission expense was $24,711,000 in Nine Months 2021 or 19.2% of
direct earned premiums. The increase of $823,000 was primarily due to an
increase in direct earned premiums of $12,626,000 to $141,324,000 offset in part
by a reduction of commission rate on our Select Products and the reduction to
contingent commissions, which the producers now earn only if KICO has an
operating profit.



Other sales charges



Other underwriting expenses were $20,717,000, or 14.7% of direct earned
premiums, in Nine Months 2022 compared to $19,723,000, or 15.3% of direct earned
premiums, in Nine Months 2021. The increase of $994,000, or 5.0%, was primarily
due to increases in expenses related to our growth in direct earned premiums,
and the reduction as a percentage of direct earned premiums is due to our
continuing initiative to reduce expenses with the use of technology.



Our largest single component of other underwriting expenses is salaries and
employment costs, with costs of $8,027,000 in Nine Months 2022 compared to
$7,592,000 in Nine Months 2021. The increase of $435,000, or 5.7%, compares
favorably with the 12.0% increase in direct written premiums. In the periods
following Nine Months 2021, we invested in the hiring of higher-level managers
and staff to implement our goals of modernization and efficiency, which we
refer
to as Kingstone 2.0.



Our net underwriting expense ratio in Nine Months 2022 was 37.2% compared to
41.0% in Nine Months 2021. The following table shows the individual components
of our net underwriting expense ratio for the periods indicated:



                                             Nine months ended
                                               September 30,            Percentage
                                             2022           2021       Point Change
Other underwriting expenses
Employment costs                                 9.6 %        7.1 %              2.5

Subscription costs (inspections/visits) 1.7 1.4

     0.3
IT expenses                                      4.2          3.0                1.2
Profesional fees                                 1.4          1.3                0.1
Other expenses                                   7.7          5.7                2.0
Total other underwriting expenses               24.6         18.5          
     6.1

Commission expense                              30.4         23.1                7.3

Ceding commission revenue
Provisional                                    (16.8 )       (0.1 )            (16.7 )
Contingent                                      (0.2 )        0.1               (0.3 )
Total ceding commission revenue                (17.0 )          -          
   (17.0 )

Other income                                    (0.9 )       (0.6 )             (0.3 )
Net underwriting expense ratio                  37.2 %       41.0 %        
    (3.8 )




               (Components may not sum to totals due to rounding)



The overall 17.0 percentage point increase in the benefit from ceding
commissions in Nine Months 2022 was driven by the increase in provisional ceding
commission revenue due to the inception of the 2021/2023 Treaty on December 31,
2021. The components of our net underwriting expense ratio related to other
underwriting expenses and commissions increased due to a higher percentage of
our direct earned premiums in Nine Months 2022 being ceded due to the inception
of the 2021/2023 Treaty.




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Other Operating Expenses



Other operating expenses, related to the expenses of our holding company and
Cosi, were $2,357,000 for Nine Months 2022 compared to $3,141,000 for Nine
Months 2021. The following table shows a breakdown of the significant components
of other operating expenses for the periods indicated:



                                    Nine months ended
                                      September 30,
($ in thousands)                    2022           2021        Change        Percent

Other operating expenses
Employement costs                $     (101 )    $   647     $    (748 )           na %
Bonuses                                   -            -             -             na
Equity compensation                   1,205        1,448          (243 )        (16.8 )
Professional                            208          226           (18 )         (8.0 )
Griffin Highline fees                   316            -           316             na
Directors fees                          245          245             -              -
Insurance                               115          166           (51 )        (30.7 )
Other expenses                          369          409           (40 )         (9.8 )
Total other operating expenses   $    2,357      $ 3,141     $    (784 )   
    (25.0 )%




               (Components may not sum to totals due to rounding)


The decrease in Nine Months 2022 of $784,000, or 25.0%, as compared to Nine
Months 2021 was primarily due to a decrease in employment costs. The decrease in
employment costs was due to staff reductions and fluctuations in deferred
compensation liability related to changes in the underlying invested portfolio.
The decrease in employment costs was partially offset by an increase in
professional fees attributable to the non-binding indication of interest from
Griffin Highline, disclosed above as "Griffin Highline fees" incurred, related
to a then contemplated acquisition of all of the outstanding equity of our
company.



Depreciation and amortization



Depreciation and amortization was $2,472,000 in Nine Months 2022 compared to
$2,480,000 in Nine Months 2021. The decrease of $8,000, or 0.3%, in depreciation
and amortization was primarily due to assets previously put into service that
are currently being utilized and being fully depreciated. The decrease was
partially offset by the completion of customized policy management software, now
allowing us to consolidate multiple legacy systems into one efficient system.
In the last quarter of 2021, due to the extended useful life of assets related
to our system platforms, Management determined that such systems, currently put
into service, should be depreciated over five years reflecting their expected
useful lives as compared to the previous three years.



Interest Expense



Interest expense was $1,370,000 for both Nine Months 2022 and Nine Months 2021.
We incurred interest expense in connection with our $30.0 million issuance of
long-term debt in December 2017.



Income Tax Benefit


Income tax benefit in Nine Months 2022 was $4,433,000, which resulted in an
effective tax benefit rate of 19.3%. Income tax benefit in Nine Months 2021 was
$2,817,000, which resulted in an effective tax rate of 22.7%. Loss before taxes
was $23,007,000 in Nine Months 2022 compared to $12,423,000 in Nine Months 2021.
The difference in effective tax rate is due to the effect of permanent
differences in Nine Months 2022 compared to Nine Months 2021.




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Net Loss


The net loss was $18,575,000 in nine months of 2022 compared to $9,606,000 over nine months of 2021. The increase in the net loss of $8,969,000 was due to the circumstances described above.

Three months completed September 30, 2022 Compared to the three months ended September 30, 2021

The following table summarizes the evolution of the results of our operations (in thousands) for the periods indicated:


                                                   Three months ended September 30,
($ in thousands)                           2022          2021         Change         Percent
Revenues
Direct written premiums                  $  54,592     $  48,865     $   5,727           11.7 %
Assumed written premiums                         -             -             -             na %
                                            54,592        48,865         5,727           11.7 %
Ceded written premiums
Ceded to quota share treaties (1)           12,919           138        12,781        9,261.6 %
Ceded to excess of loss treaties             1,194           998           196           19.6 %
Ceded to catastrophe treaties                6,813         6,087           726           11.9 %
Total ceded written premiums                20,925         7,224        13,703          189.7 %

Net written premiums                        33,666        41,642        (7,976 )        (19.2 )%

Change in unearned premiums
Direct and assumed                          (5,636 )      (4,848 )        (788 )        (16.3 )%
Ceded to quota share treaties (1)            1,331            10         1,321       13,210.0 %
Change in net unearned premiums             (4,305 )      (4,838 )        
533           11.0 %

Premiums earned
Direct and assumed                          48,955        44,017         4,938           11.2 %
Ceded to reinsurance treaties              (19,594 )      (7,214 )     (12,380 )       (171.6 )%
Net premiums earned                         29,361        36,803        (7,442 )        (20.2 )%

Ceding commission revenue (1)                4,886            (7 )       4,893             na %
Net investment income                        1,419         1,677          (258 )        (15.4 )%
Net (losses) gains on investments             (397 )         205          (602 )           na %
Other income                                   270           281           (11 )         (3.9 )%
Total revenues                              35,538        38,958        (3,421 )         (8.8 )%
Expenses
Loss and loss adjustment expenses
Direct and assumed:
Loss and loss adjustment expenses
excluding the effect of catastrophes        30,514        23,538         6,976           29.6 %
Losses from catastrophes (2)                   477        12,542       (12,065 )        (96.2 )%
Total direct and assumed loss and loss
adjustment expenses                         30,991        36,079        

(5,089) (14.1)%

Ceded loss and loss adjustment
expenses:
Loss and loss adjustment expenses                                                          na
excluding the effect of catastrophes         8,820           (21 )       8,841                %
Losses from catastrophes (2)                   143           360          (217 )        (60.3 )%
Total ceded loss and loss adjustment
expenses                                     8,963           339         

8,624 2,544.0%

Net loss and loss adjustment expenses:
Loss and loss adjustment expenses
excluding the effect of catastrophes        21,694        23,559        (1,865 )         (7.9 )%
Losses from catastrophes (2)                   334        12,181       (11,847 )        (97.3 )%
Net loss and loss adjustment expenses       22,028        35,740       (13,712 )        (38.4 )%

Commission expense                           8,702         8,202           500            6.1 %
Other underwriting expenses                  7,276         6,563           713           10.9 %
Other operating expenses                       810           855           (45 )         (5.3 )%
Depreciation and amortization                  825           820             5            0.6 %
Interest expense                               457           457             -              - %
Total expenses                              40,097        52,637       (12,539 )        (23.8 )%

Loss before taxes                           (4,559 )     (13,679 )       9,118           66.7 %
Income tax benefit                            (562 )      (3,061 )       2,499           81.6 %
Net loss                                 $  (3,998 )   $ (10,618 )   $   6,619           62.3 %




       (Columns in the table above may not sum to totals due to rounding)



(1) Workforce December 31, 2021we entered into a 30% copayment in personal lines insurance

treaty.

(2) The three months ended September 30, 2022 and 2021 include disaster

losses, which are defined as losses resulting from an event for which a catastrophe

the bulletin and related serial number were issued by the Property Claims

Services Unit (PCS) of the Insurance Services Office (ISO). SPC disaster

bulletins are issued for events that cause more $25 million in total

    insured losses and affect a significant number of policyholders and insurers.





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                                            Three months ended September 30,
                                                            Percentage         Percent
                                   2022         2021       Point Change        Change

Key ratios:
Net loss ratio                        75.0 %      97.1 %           (22.1 )        (22.8 )%
Net underwriting expense ratio        36.9 %      39.3 %            (2.4 ) 
       (6.1 )%
Net combined ratio                   111.9 %     136.4 %           (24.5 )        (18.0 )%




Direct Written Premiums



Direct written premiums during the three months ended September 30, 2022 ("Three
Months 2022") were $54,592,000 compared to $48,865,000 during the three months
ended September 30, 2021 ("Three Months 2021"). The increase of $5,727,000, or
11.7%, was primarily due an increase in premiums from our personal lines
business. Direct written premiums from our personal lines business for Three
Months 2022 were $51,242,000, an increase of $5,258,000, or 11.4%, from
$45,984,000 in Three Months 2021.  The increase in premiums from our personal
lines business was primarily due to rate increases, and, to a lesser extent, an
increase in policies in force.  Direct written premiums from our livery physical
damage business for Three Months 2022 were $3,310,000, an increase of $496,000,
or 17.6%, from $2,814,000 in Three Months 2021. The increase in livery physical
damage direct written premiums was due to the declining effect of the COVID-19
pandemic in our geographic area.



         Beginning in 2017 we started writing homeowners policies in New Jersey.
Through 2019 we expanded to Rhode Island, Massachusetts and Connecticut. We
refer to our New York business as our "Core" business and the business outside
of New York as our "Expansion" business.  Direct written premiums from our Core
business were $43,949,000 in Three Months 2022 compared to $35,459,000 in Three
Months 2021.  Direct written premiums from our Expansion business were
$10,642,000 in Three Months 2022 compared to $13,406,000 in Three Months 2021.



Net premiums written and net premiums earned



Effective December 31, 2021, we entered into a quota share reinsurance treaty
for our personal lines business covering the period from December 31, 2021
through January 1, 2023 ("2021/2023 Treaty"). There was no quota share
reinsurance treaty in effect in Three Months 2021. Net written premiums
decreased $7,976,000, or 19.2%, to $33,666,000 in Three Months 2022 from
$41,642,000 in Three Months 2021. Net written premiums include direct and
assumed premiums, less the amount of written premiums ceded under our
reinsurance treaties (quota share, excess of loss, and catastrophe). In Three
Months 2022, our premiums ceded under quota share treaties increased by
$12,781,000 in comparison to ceded premiums in Three Months 2021 (see table
above). Our personal lines business was subject to the 2021/2023 Treaty in Three
Months 2022, compared to no personal lines quota share treaty in Three Months
2021.




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Excess of loss reinsurance treaties

An increase in written premiums will increase the premiums ceded under our
excess of loss treaties. In Three Months 2022, our ceded excess of loss
reinsurance premiums increased by $196,000 over the comparable ceded premiums
for Three Months 2021. The increase was due to an increase in subject premiums
and additional coverage obtained. Effective January 1, 2022, we entered into an
underlying excess of loss reinsurance treaty covering the period from January 1,
2022 through January 1, 2023. The treaty provides 50% reinsurance coverage for
losses of $400,000 in excess of $600,000. Losses from named storms are excluded
from the treaty.


Catastrophe reinsurance treaties



Most of the premiums written under our personal lines policies are also subject
to our catastrophe treaties. An increase in our personal lines business gives
rise to more property exposure, which increases our exposure to catastrophe
risk; therefore, our premiums ceded under catastrophe treaties will increase.
This results in an increase in premiums ceded under our catastrophe treaties
provided that reinsurance rates are stable or are increasing. In Three Months
2022, our premiums ceded under catastrophe treaties increased by $726,000 over
the comparable ceded premiums in Three Months 2021. Effective July 1, 2020, and
continuing through June 30, 2021, our ceded catastrophe premiums were paid based
on the total insured value of our risks calculated as of August 31, 2020.
Effective July 1, 2021, and continuing through June 30, 2022, our ceded
catastrophe premiums were paid based on the total insured value of our risks as
of August 31, 2021. Effective July 1, 2022, and continuing through June 30,
2023, our ceded catastrophe premiums will be paid based on the total insured
value of our risks as of August 31, 2022.



Net premiums earned


Net premiums earned decreased $7,442,000, or 20.2%, to $29,361,000 in Three
Months 2022 from $36,803,000 in Three Months 2021. The decrease was due to the
inception of the 2021/2023 Treaty on December 31, 2021. The decrease resulting
from the 2021/2023 Treaty in Three Months 2022 was partially offset by an
increase in direct written premium.



Ceding Commission Revenue


The following table summarizes the change in the components of cession fee income (in thousands) for the periods indicated:


                                              Three months ended September 30,
($ in thousands)                         2022       2021      Change        Percent

Provisional disposal commissions earned $4,882 $41 $4,841

  11,807.3 %
Contingent ceding commissions earned          4       (48 )        53      

n / A %

Total sales commission revenue $4,886 $ (7 ) $4,894 (61,175.0)%




Ceding commission revenue was $4,886,000 in Three Months 2022 compared to
$(7,000) in Three Months 2021. The increase of $4,893,000 was due to an increase
in provisional ceding commissions earned resulting from the 2021/2023 Treaty.
See below for a discussion of provisional ceding commissions earned and
contingent ceding commissions earned.




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Provisional disposal commissions earned

In Three Months 2022 we earned provisional ceding commissions from personal
lines earned premiums ceded under the 2021/2023 Treaty which was effective as of
December 31, 2021. There was no personal lines quota share in effect in Three
Months 2021.


Contingent sales commissions earned

The structure of the 2021/2023 Treaty calls for a fixed provisional ceding
commission with no opportunity to earn additional contingent ceding commissions.
Under our prior years' quota share treaties, we received a contingent ceding
commission based on a sliding scale in relation to the losses incurred under our
quota share treaties. The lower the ceded loss ratio, the more contingent
commission we received.



Net Investment Income



Net investment income was $1,419,000 in Three Months 2022 compared to $1,677,000
in Three Months 2021, a decrease of $258,000, or 15.4%.  The decrease in
investment income is attributable to the disposal of income bearing equity
securities.  The average yield on invested assets was 3.48% as of September 30,
2022 compared to 3.42% as of September 30, 2021.



Cash and invested assets were $192,229,000 as of September 30, 2022 compared to
$246,004,000 as of September 30, 2021 The $53,775,000 decrease in cash and
invested assets was primarily attributable to cash paid to reinsurers at the
inception of the 2021/2023 Treaty, losses paid in connection with catastrophe
losses incurred in 2021 and 2022, and unrealized losses on our investment
portfolio.



Net gains and investment losses



Net losses on investments were $398,000 in Three Months 2022 compared to net
gains of $205,000 in Three Months 2021. Unrealized losses on our equity
securities and other investments in Three Months 2022 were $1,798,000, compared
to $829,000 in Three Months 2021. Realized gains on sales of investments were
$1,400,000 in Three Months 2022 compared to $1,033,000 in Three Months 2021.



Other Income


Other income was $270,000 in three months 2022 compared to $281,000 in three months 2021, a decrease of $11,000i.e. 3.9%.


Net Loss and LAE


Net loss and LAE were $22,028,000 for three months 2022 compared to $35,740,000
for Three Months 2021. The net loss ratio was 75.0% for Three Months 2022 compared to 97.1% for Three Months 2021, a decrease of 22.1 percentage points.



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The following graph summarizes the evolution of the components of the net loss ratio for the periods indicated, as well as the comparable components excluding commercial business:


                      [[Image Removed: king_10qimg50.jpg]]



               (Components may not sum to totals due to rounding)



For Three Months 2022, the loss ratio was lower than Three Months 2021 mainly
due to a lower impact of catastrophe losses.  There were only two minor wind
events classified as catastrophe for Three Months 2022. The estimated total net
catastrophe losses for the calendar quarter were $334,000, which contributed 1.1
points to the loss ratio. This compares to a 33.1-point impact from catastrophe
events from the corresponding period from the prior year, which had more
significant named storms, including Ida.



 The underlying loss ratio (loss ratio excluding the impact of catastrophe and
prior year development) was 72.4% for Three Months 2022, an increase of 8.4
points from the 64.0% underlying loss ratio recorded for Three Months 2021. The
higher 2022 loss ratio was primarily due to a general increase in property
claims severity, which is likely a result of recent increased inflation.



Overall, previous years have seen an unfavorable trend in $443,000 for three months of 2022, due to the volatility of the civil liability claims settlements of the discontinued commercial lines.

See the table below under “Supplemental Financial Information” summarizing the net loss ratios by line of business.



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Commission Expense



Commission expense increased $500,000 to $8,702,000, or 17.8% of direct earned
premiums in Three Months 2022. Commission expense was $8,202,000 in Three Months
2021 or 18.6% of direct earned premiums. The increase was due to an increase in
direct earned premiums of $5,727,000 to $54,592,000, offset in part by a
reduction in the commission rate on our Select Products and the reduction in
contingent commissions, which producers now earn only if KICO has an
underwriting profit.



Other sales charges



Other underwriting expenses were $7,276,000, or 14.9% of direct earned premiums,
in Three Months 2022 compared to $6,563,000, or 14.9% of direct earned premiums,
in Three Months 2021. The increase of $713,000, or 10.9%, was primarily due to
increases in expenses related to our growth in direct earned premiums, salaries,
and our continuing initiative to reduce expenses with the use of technology,
partially offset by decreases in professional fees and state insurance
department fees.



 Our largest single component of other underwriting expenses is salaries and
employment costs, with costs of $2,961,000 in Three Months 2022 compared to
$2,513,000 in Three Months 2021. The increase of $448,000, or 17.8%, is greater
than the 11.7% increase in direct written premiums. In the periods following
Three Months 2021, we invested in the hiring of higher-level managers and staff
to implement our goals of modernization and efficiency, which we refer to as
Kingstone 2.0.


Our net underwriting expense ratio in Three Months 2022 was 36.9% compared to
39.3% in Three Months 2021. The following table shows the individual components
of our net underwriting expense ratio for the periods indicated:



                                       Three months ended September 30,       Percentage
                                         2022                  2021          Point Change
Other underwriting expenses
Employment costs                             10.1 %                  6.8 %             3.3
Underwriting fees
(inspections/surveys)                         1.6                    1.3               0.3
IT expenses                                   4.2                    2.9               1.3
Profesional fees                              1.1                    1.3              (0.2 )
Other expenses                                7.8                    5.6               2.2
Total other underwriting expenses            24.8                   17.9   
           6.9

Commission expense                           29.6                   22.3               7.3

Ceding commission revenue
Provisional                                 (16.6 )                 (0.1 )           (16.5 )
Contingent                                      -                    0.1              (0.1 )
Total ceding commission revenue             (16.6 )                    -   
         (16.6 )

Other income                                 (0.9 )                 (0.9 )               -
Net underwriting expense ratio               36.9 %                 39.3 % 
          (2.4 )





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The overall 16.6 percentage point increase in the benefit from ceding
commissions in Three Months 2022 was driven by the increase in provisional
ceding commission revenue due to the inception of the 2021/2023 Treaty on
December 31, 2021. The components of our net underwriting expense ratio related
to other underwriting expenses and commissions increased due to a higher
percentage of our direct earned premiums in Three Months 2022 being ceded due to
the inception of the 2021/2023 Treaty.



Other Operating Expenses



Other operating expenses, related to the expenses of our holding company and
Cosi, were $810,000 for Three Months 2022 compared to $855,000 for Three Months
2021. The following table shows a breakdown of the significant components of
other operating expenses for the periods indicated:



                                     Three months ended
                                       September 30,
($ in thousands)                    2022            2021         Change        Percent

Other operating expenses
Employement costs                $      (5 )     $      50     $     (55 )           na %
Bonuses                                  -               -             -             na
Equity compensation                    188             467          (279 )        (59.7 )
Professional                           110              69            41           59.4
Griffin Highline fees                  268               -           268             na
Directors fees                          82              82             -              -
Insurance                               38              46            (8 )        (17.4 )
Other expenses                         129             141           (12 )         (8.5 )
Total other operating expenses   $     810       $     855     $     (45 ) 
       (5.3 )%




               (Components may not sum to totals due to rounding)


The decrease in Three Months 2022 of $45,000, or 5.3%, as compared to Three
Months 2021 was primarily due to a decrease in employment costs. The decrease in
employment costs was due to staff reductions and fluctuations in deferred
compensation liability related to changes in the underlying invested portfolio.
The decrease in employment costs was partially offset by an increase in
professional fees attributable to the non-binding indication of interest from
Griffin Highline, disclosed above as "Griffin Highline fees" incurred, related
to a then contemplated acquisition of all of the outstanding equity of our
company.



Depreciation and amortization

Depreciation and amortization was $825,000 in Three Months 2022 compared to
$820,000 in Three Months 2021. The increase of $5,000, or 0.6%, in depreciation
and amortization was primarily due to the completion of customized policy
management software, now allowing us to consolidate multiple legacy systems into
one efficient system. The increase from the assets currently placed in service
in Three Months 2022 was partially offset by a decrease in depreciation and
amortization from assets previously put into service that are currently being
utilized and being fully depreciated. In the last quarter of 2021, due to the
extended useful life of assets related to our system platforms, Management
determined that such systems, currently put into service, should be depreciated
over five years reflecting their expected useful lives as compared to the
previous three years.




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Interest Expense



Interest expense was $457,000 for both Three Months 2022 and Three Months 2021.
We incurred interest expense in connection with our $30.0 million issuance of
long-term debt in December 2017.



Income Tax Benefit


Income tax benefit in Three Months 2022 was $562,000, which resulted in an
effective tax benefit rate of 20.7%. Income tax expense in Three Months 2021 was
$312,000, which resulted in an effective tax rate of 13.3%. Loss before taxes
was $4,559,000 in Three Months 2022 compared to $13,679,000 in Three Months
2021. The difference in effective tax rate is due to the effect of permanent
differences in Three Months 2022 compared to Three Months 2021.



Net Loss



Net loss was $3,998,000 in Three Months 2022 compared to $10,618,000 in Three
Months 2021. The decrease in net loss of $6,619,000 was due to the circumstances
described above.


Additional financial information



We operate our business as one segment, property and casualty insurance. Within
this segment, we offer an array of property and casualty policies to our
producers. The following table summarizes gross and net written premiums, net
premiums earned, and net loss and loss adjustment expenses by major product
type, which were determined based primarily on similar economic characteristics
and risks of loss.




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                                   Three Months Ended                 Nine Months Ended
                                     September 30,                      September 30,
                                 2022             2021              2022              2021
Gross premiums written:
Personal lines(3)            $ 51,242,544     $ 45,984,939     $ 138,197,960     $ 124,593,302
Livery physical damage          3,309,845        2,813,571         9,036,713         6,836,999
Other(1)                           39,162           66,659           119,238           180,485
Total without commercial
lines                          54,591,551       48,865,169       147,353,911       131,610,786
Commercial lines (in
run-off effective July
2019)(2)                                -                -                 -              (856 )
Total gross premiums
written                      $ 54,591,551     $ 48,865,169     $

147 353 911 $131,609,930

Net premiums written:
Personal lines(3)            $ 30,327,951     $ 38,762,235     $  79,487,201     $ 102,741,368
Livery physical damage          3,309,845        2,813,571         9,036,713         6,836,999
Other(1)                           28,374           65,837            86,224           178,021
Total without commercial
lines                          33,666,170       41,641,643        88,610,138       109,756,388
Commercial lines (in
run-off effective July
2019)(2)                                -                -                 -              (856 )

Total net written premiums $33,666,170 $41,641,643 $88,610,138 $109,755,532

Net premiums earned:
Personal lines(3)            $ 26,407,939     $ 34,715,708     $  75,747,009     $ 101,054,415
Livery physical damage          2,920,335        2,028,786         8,082,173         5,598,605
Other(1)                           32,702           58,757           107,242           176,731
Total without commercial
lines                          29,360,976       36,803,251        83,936,424       106,829,751
Commercial lines (in
run-off effective July
2019)(2)                                -                -                 -              (856 )

Total net premiums earned $29,360,976 $36,803,251 $83,936,424 $106,828,895

Net loss and loss
adjustment expenses(4):
Personal lines               $ 19,512,893     $ 32,958,728     $  56,296,473     $  72,353,668
Livery physical damage          1,716,383        1,766,989         3,727,175         3,469,465
Other(1)                            9,494          180,995           (14,873 )         434,816
Unallocated loss
adjustment expenses               126,560          867,675         2,870,115         2,783,547
Total without commercial
lines                          21,365,330       35,774,387        62,878,890        79,041,496
Commercial lines (in
run-off effective July
2019)(2)                          662,186          (34,152 )         745,865            18,621

Total net loss and claims adjustment expenses $22,027,516 $35,740,235 $63,624,755 $79,060,117

Net loss ratio(4):
Personal lines                       73.9 %           94.9 %            74.3 %            71.6 %
Livery physical damage               58.8 %           87.1 %            46.1 %            62.0 %
Other(1)                             29.0 %          308.0 %           -13.9 %           246.0 %
Total without commercial
lines                                72.8 %           97.2 %            74.9 %            74.0 %
Commercial lines (in
run-off effective July                 na               na                na                na
2019)(2)
Total                                75.0 %           97.1 %            75.8 %            74.0 %



(1) “Other” includes, among others, premiums and claims and claims adjustment

expenses related to our participation in a mandatory joint state underwriting

association and commercial auto claims and claims expenses. (2) In July 2019we have decided to no longer subscribe to Commercial

Liability risks. See discussions above regarding stopping this

activity area. (3) See discussion above with respect to “net premiums written and net premiums

Earned”, as to the evolution of the share transfer rate, in force the 31st of December,

2021.

(4) See the discussion above regarding “Net Loss and LAE”, as to the disaster

losses in the three and nine months ended September 30, 2022 and 2021.




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Insurance underwriting activity on a stand-alone basis

Our insurance underwriting activity reported on an individual basis for the periods indicated is as follows:


                                  Three Months ended                  Nine Months ended
                                     September 30,                      September 30,
                                2022             2021              2022              2021

Revenues
Net premiums earned         $ 29,360,976     $  36,803,251     $  83,936,424     $ 106,828,895
Ceding commission
revenue                        4,886,094            (7,276 )      14,283,077            37,400
Net investment income          1,418,521         1,676,596         3,411,946         5,137,867
Net (losses) gains on
investments                     (366,411 )         214,085        (9,098,008 )       5,380,909
Other income                     269,297           322,705           740,424           617,257
Total revenues                35,568,477        39,009,361        93,273,863       118,002,328

Expenses
Loss and loss adjustment
expenses                      22,027,516        35,740,235        63,624,755        79,060,117
Commission expense             8,702,190         8,201,935        25,534,307        24,711,115
Other underwriting
expenses                       7,276,101         6,562,743        20,717,047        19,722,705
Depreciation and
amortization                     803,568           780,906         2,430,769         2,374,203
Total expenses                38,809,375        51,285,819       112,306,878       125,868,140

(Loss) income from
operations                    (3,240,898 )     (12,276,458 )     (19,033,015 )      (7,865,812 )
Income tax (benefit)
expense                         (345,080 )      (2,633,026 )      (3,702,374 )      (1,812,195 )
Net (loss) income           $ (2,895,818 )   $  (9,643,432 )   $ (15,330,641 )   $  (6,053,617 )

Key Measures:
Net loss ratio                      75.0 %            97.1 %            75.8 %            74.0 %
Net underwriting expense
ratio                               36.9 %            39.3 %            37.2 %            41.0 %
Net combined ratio                 111.9 %           136.4 %           113.0 %           115.0 %

Reconciliation of net
underwriting expense
ratio:
Acquisition costs and
other underwriting
expenses                    $ 15,978,291     $  14,764,678     $  46,251,354     $  44,433,820
Less: Ceding commission
revenue                       (4,886,094 )           7,276       (14,283,077 )         (37,400 )
Less: Other income              (269,297 )        (322,705 )        

(740,424 ) (617,257 ) Net technical charges $10,822,900 $14,449,249 $31,227,853 $43,779,163

Net earned premiums $29,360,976 $36,803,251 $83,936,424 $106,828,895

Net Underwriting Expense
Ratio                               36.9 %            39.3 %            37.2 %            41.0 %





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An analysis of our direct earned, assumed and ceded premiums, claims and claims adjustment expenses and loss ratios is set out below:


                                  Direct          Assumed          Ceded              Net
Nine months ended September
30, 2022
Written premiums              $ 147,353,911     $        -     $ (58,743,773 )   $  88,610,138
Change in unearned premiums      (6,029,774 )            -         1,356,060        (4,673,714 )
Earned premiums               $ 141,324,137     $        -     $ 

(57,387,713) $83,936,424

Loss and loss adjustment
expenses excluding the
effect of catastrophes        $  83,345,972     $        -     $ (23,186,898 )   $  60,159,074
Catastrophe loss                  7,509,597              -        (4,043,916 )       3,465,681
Loss and loss adjustment
expenses                      $  90,855,569     $        -     $ 

(27,230,814) $63,624,755

Loss ratio excluding the
effect of catastrophes                 59.0 %          0.0 %            40.4 %            71.7 %
Catastrophe loss                        5.3 %          0.0 %             7.0 %             4.1 %
Loss ratio                             64.3 %          0.0 %            47.4 %            75.8 %

Nine months ended September
30, 2021
Written premiums              $ 131,609,930     $        -     $ (21,854,398 )   $ 109,755,532
Change in unearned premiums      (2,911,439 )            -           (15,198 )      (2,926,637 )
Earned premiums               $ 128,698,491     $        -     $ 

(21,869,596) $106,828,895

Loss and loss adjustment
expenses excluding the
effect of catastrophes        $  67,633,915     $        -     $    (860,490 )   $  66,773,425
Catastrophe loss                 12,647,172              -          (360,480 )      12,286,692
Loss and loss adjustment
expenses                      $  80,281,087     $        -     $ 

(1,220,970) $79,060,117

Loss ratio excluding the
effect of catastrophes                 52.6 %          0.0 %             3.9 %            62.5 %
Catastrophe loss                        9.8 %          0.0 %             1.6 %            11.5 %
Loss ratio                             62.4 %          0.0 %             5.5 %            74.0 %

Three months ended
September 30, 2022
Written premiums              $  54,591,551     $        -     $ (20,925,381 )   $  33,666,170
Change in unearned premiums      (5,636,421 )            -         1,331,227        (4,305,194 )
Earned premiums               $  48,955,130     $        -     $ 

(19,594,154) $29,360,976

Loss and loss adjustment
expenses excluding the
effect of catastrophes        $  30,513,819     $        -     $  (8,820,270 )   $  21,693,549
Catastrophe loss                    477,127              -          (143,160 )         333,967
Loss and loss adjustment
expenses                      $  30,990,946     $        -     $  

(8,963,430) $22,027,516

Loss ratio excluding the
effect of catastrophes                 62.3 %          0.0 %            45.0 %            73.9 %
Catastrophe loss                        1.0 %          0.0 %             0.7 %             1.1 %
Loss ratio                             63.3 %          0.0 %            45.7 %            75.0 %

Three months ended
September 30, 2021
Written premiums              $  48,865,169     $        -     $  (7,223,526 )   $  41,641,643
Change in unearned premiums      (4,848,145 )            -             9,753        (4,838,392 )
Earned premiums               $  44,017,024     $        -     $  

(7,213,773) $36,803,251

Loss and loss adjustment
expenses excluding the
effect of catastrophes        $  23,537,875     $        -     $      21,239     $  23,559,114
Catastrophe loss                 12,541,601              -          (360,480 )      12,181,121
Loss and loss adjustment
expenses                      $  36,079,476     $        -     $    (339,241 )   $  35,740,235

Loss ratio excluding the
effect of catastrophes                 53.5 %          0.0 %            -0.3 %            64.0 %
Catastrophe loss                       28.5 %          0.0 %             5.0 %            33.1 %
Loss ratio                             82.0 %          0.0 %             4.7 %            97.1 %




           (Percent components may not sum to totals due to rounding)




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The key measures for our insurance underwriting business for the periods
indicated are as follows:



                                  Three Months ended                  Nine Months ended
                                     September 30,                      September 30,
                                2022              2021              2022              2021

Net earned premiums $29,360,976 $36,803,251 $83,936,424 $106,828,895
Disposal of commission income 4,886,094

            (7,276 )      14,283,077            37,400
Other income                     269,297           322,705           740,424           617,257

Loss and loss adjustment
expenses (1)                  22,027,516        35,740,235       

63,624,755 79,060,117

Acquisition costs and
other underwriting
expenses:
Commission expense             8,702,190         8,201,935        25,534,307        24,711,115
Other underwriting
expenses                       7,276,101         6,562,743        20,717,047        19,722,705
Total acquisition costs
and other underwriting
expenses                      15,978,291        14,764,678        

46,251,354 44,433,820

Underwriting loss           $ (3,489,440 )   $ (13,386,233 )   $ 

(10,916,184) $(16,010,385)

Key Measures:
Net loss ratio excluding
the effect of
catastrophes                        73.9 %            64.0 %            71.7 %            62.5 %
Effect of catastrophe
loss on net loss ratio
(1)                                  1.1 %            33.1 %             4.1 %            11.5 %
Net loss ratio                      75.0 %            97.1 %            75.8 %            74.0 %

Net underwriting expense
ratio excluding the
effect of catastrophes              36.9 %            39.3 %            37.2 %            41.0 %
Effect of catastrophe
loss on net underwriting
expense ratio                        0.0 %             0.0 %             0.0 %             0.0 %
Net underwriting expense
ratio                               36.9 %            39.3 %            37.2 %            41.0 %
Net combined ratio
excluding the effect of
catastrophes                       110.8 %           103.3 %           108.9 %           103.5 %
Effect of catastrophe
loss on net combined
ratio (1)                            1.1 %            33.1 %             4.1 %            11.5 %
Net combined ratio                 111.9 %           136.4 %           113.0 %           115.0 %

Reconciliation of net
underwriting expense
ratio:
Acquisition costs and
other underwriting
expenses                    $ 15,978,291     $  14,764,678     $  46,251,354     $  44,433,820
Less: Ceding commission
revenue                       (4,886,094 )           7,276       (14,283,077 )         (37,400 )
Less: Other income              (269,297 )        (322,705 )        

(740,424) (617,257)

                            $ 10,822,900     $  14,449,249     $  

31,227,853 $43,779,163

Net Earned Premium $29,360,976 $36,803,251 $83,936,424 $106,828,895

Net Underwriting Expense
Ratio                               36.9 %            39.3 %            37.2 %            41.0 %



(1) For the three months ended September 30, 2022 and 2021, includes the sum of

net catastrophe losses and loss adjustment expenses $333,967 and

$12,181,121, respectively. For the nine months ended September 30, 2022 and

2021, includes the sum of net catastrophe losses and claims adjustment expenses

    of $3,465,681 and $12,286,692, respectively.





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Investments



Portfolio Summary



Fixed-Maturity Securities



The following table presents a breakdown of the amortized cost, estimated fair
value, and unrealized gains and losses of our investments in fixed-maturity
securities classified as available-for-sale as of September 30, 2022 and
December 31, 2021:



                                                          September 30, 2022
                    Cost or            Gross             Gross Unrealized Losses           Estimated          % of
                   Amortized        Unrealized       Less than 12      More than 12          Fair           Estimated
Category             Cost              Gains            Months            Months             Value         Fair Value

U.S. Treasury
securities and
obligations of
U.S.
government
corporations
and agencies     $   9,946,032     $         930     $        (123 )   $           -     $   9,946,839             6.8 %

Political
subdivisions
of States,
Territories
and
Possessions         17,117,473                 -        (3,250,196 )       
(590,936 )      13,276,341             9.1 %

Corporate and
other bonds
Industrial and
miscellaneous       84,163,055                 -        (9,154,182 )        (269,694 )      74,739,179            51.4 %

Residential
mortgage and
other asset
backed
securities (1)      54,307,907            68,159        (4,333,707 )      (2,699,011 )      47,343,348            32.7 %

Total

fixed term

securities $165,534,467 $69,089 ($16,738,208) ($3,559,641) $145,305,707

           100.0 %




(1) KICO has placed certain residential mortgage-backed securities as eligible

guarantee in a designated deposit account linked to its membership in

the Federal Home Loan Bank of New York (“FHLBNY”) (see Note 7 of the

condensed consolidated financial statements). The eligible guarantee

would be pledged to FHLBNY if KICO draws an advance from the FHLBNY credit

line. From September 30, 2022the estimated fair value of eligible assets

        investments was approximately $12,393,000. KICO will retain all rights
        regarding all securities if pledged as collateral. As of September 30,
        2022, there was no outstanding balance on the FHLBNY credit line.




                                                           December 31, 2021
                    Cost or            Gross             Gross Unrealized Losses            Estimated          % of
                   Amortized       Unrealized       Less than 12       
More than 12          Fair           Estimated
Category             Cost              Gains            Months             Months             Value         Fair Value

Political
subdivisions
of States,
Territories
and
Possessions      $  17,236,750     $    246,748     $    (197,984 )    $   
        -     $  17,285,514            10.9 %

Corporate and
other bonds
Industrial and
miscellaneous       80,534,769        2,603,411          (126,926 )                 -        83,011,254            52.5 %

Residential
mortgage and
other asset
backed
securities          58,036,959          355,985          (489,258 )          (120,344 )      57,783,342            36.6 %

Total

fixed term

securities       $ 155,808,478     $  3,206,144     $    (814,168 )    $     (120,344 )   $ 158,080,110           100.0 %





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Equity Securities


The following table provides a breakdown of the cost and estimated fair value, as well as gross gains and losses, of investments in equity securities at
September 30, 2022 and December 31, 2021:


                                                   September 30, 2022
                                                                                          % of
                                         Gross           Gross          Estimated       Estimated
Category                  Cost           Gains          Losses         Fair

Value Fair value

Equity Securities:
Preferred stocks      $ 16,047,207     $       -     $ (3,488,481 )   $ 12,558,726            58.5 %
Common stocks and
exchange traded
funds                   10,728,809       103,902       (1,922,991 )      8,909,720            41.5 %
Total                 $ 26,776,016     $ 103,902     $ (5,411,472 )   $ 21,468,446           100.0 %




                                                   December 31, 2021
                                                                                          % of
                                          Gross           Gross         Estimated       Estimated
Category                  Cost            Gains          Losses        Fair

Value Fair value

Equity securities: Preferred shares $22,019,509 $1,007,009 ($184,617) $22,841,901

            57.6 %
Common stocks and
exchange traded
funds                   15,451,160       1,573,653       (179,712 )     16,845,101            42.4 %
Total                 $ 37,470,669     $ 2,580,662     $ (364,329 )   $ 39,687,002           100.0 %




Other Investments



The following table presents a breakdown of the cost and estimated fair value
of, and gross gains on, our other investments as of September 30, 2022 and
December 31, 2021:



                           September 30, 2022                              December 31, 2021
                                 Gross         Estimated                         Gross          Estimated
Category           Cost          Gains        Fair Value          Cost           Gains         Fair Value

Other
Investments:
Hedge fund     $ 1,987,040     $ 589,232     $  2,576,272     $ 3,999,381     $ 3,562,034     $  7,561,415





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After providing notice, we redeemed 50% of our investment in the hedge fund as
of September 30, 2022 for a realized gain of $589,000, which is recorded in the
accompanying condensed consolidated statements of operations and comprehensive
income (loss).


Securities held to maturity

The following table provides a breakdown of the amortized cost and estimated fair value of investments in held-to-maturity securities, as well as the gross unrealized gains and losses thereon as at September 30, 2022 and December 31, 2021:


                                                           September 30, 2022
                     Cost or          Gross               Gross Unrealized Losses           Estimated         % of
                    Amortized       Unrealized      Less than 12         More than 12         Fair          Estimated
Category               Cost            Gains            Months              Months            Value        Fair Value

Held-to-Maturity
Securities:
U.S. Treasury
securities         $ 1,228,485     $     73,468     $     (36,802 )     $            -     $ 1,265,151            19.1 %

Political
subdivisions of
States,
Territories and
Possessions            498,508                -            (1,498 )                  -         497,010             7.5 %

Exchange traded
debt                   304,111                -           (43,361 )                  -         260,750             3.9 %

Corporate and
other bonds
Industrial and
miscellaneous        5,736,079           35,503        (1,182,635 )        
         -       4,588,947            69.4 %

Total              $ 7,767,183     $    108,971     $  (1,264,296 )     $            -     $ 6,611,858           100.0 %




                                                          December 31, 2021
                     Cost or          Gross             Gross Unrealized Losses         Estimated         % of
                                                    Less than
                    Amortized       Unrealized          12           More than 12         Fair          Estimated
Category               Cost            Gains          Months             Months           Value        Fair Value

Held-to-Maturity
Securities:
U.S. Treasury
securities         $   729,642     $    209,633     $        -       $           -     $   939,275            10.7 %

Political
subdivisions of
States,
Territories and
Possessions            998,239           22,856              -                   -       1,021,095            11.7 %

Exchange traded
debt                   304,111               85        (13,921 )           
               290,275             3.3 %

Corporate and
other bonds
Industrial and
miscellaneous        6,234,342          280,951        (12,779 )           
     -       6,502,514            74.3 %

Total              $ 8,266,334     $    513,525     $  (26,700 )     $           -     $ 8,753,159           100.0 %



Held to maturity WE Treasury the securities are held in trust in accordance with the minimum funds requirements of various states.



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A summary of the amortized cost and fair value of our investments in held-to-maturity securities by contractual maturity at September 30, 2022 and
December 31, 2021 is shown below:


                                  September 30, 2022               December 31, 2021
                               Amortized       Estimated       Amortized       Estimated
Remaining Time to Maturity       Cost         Fair Value         Cost         Fair Value

Less than one year            $   708,325     $   742,533     $   994,712     $ 1,008,180
One to five years               1,120,315       1,082,015       1,205,829       1,290,465
Five to ten years               1,399,725       1,177,545       1,513,942       1,648,808
More than 10 years              4,538,818       3,609,765       4,551,851       4,805,706
Total                         $ 7,767,183     $ 6,611,858     $ 8,266,334     $ 8,753,159



Credit rating of Fixed maturity securities

The table below summarizes the credit quality of our available-for-sale fixed-maturity securities at September 30, 2022 and December 31, 2021 as assessed by Standard & Poor’s (or, in case of unavailability of Standard & Poor’sthen Moody’s, Fitch or Kroll):



                             September 30, 2022                     

December 31, 2021

                       Estimated         Percentage of        Estimated         Percentage of
                          Fair             Estimated             Fair             Estimated
                         Value            Fair Value            Value            Fair Value

Rating
U.S. Treasury
securities           $   9,946,840                  6.8 %   $           -                  0.0 %

Corporate and
municipal bonds
AAA                        990,819                  0.7 %       1,321,809                  0.8 %
AA                      16,410,900                 11.3 %      11,532,572                  7.3 %
A                       32,163,411                 22.2 %      38,272,571                 24.2 %
BBB+                    11,938,310                  8.2 %      17,936,359                 11.3 %
BBB                     20,414,670                 14.0 %      25,161,776                 15.9 %
BBB-                     4,461,056                  3.1 %       4,193,401                  2.7 %
Total corporate
and municipal
bonds                   86,379,166                 59.4 %      98,418,488                 62.2 %

Residential
mortgage backed,
asset backed, and
other
collateralized
obligations
AAA                     16,860,463                 11.6 %      17,350,192                 11.0 %
AA                      24,290,742                 16.7 %      34,241,907                 21.7 %
A                        6,793,094                  4.7 %       6,306,161                  4.0 %
BBB                         20,763                  0.0 %          24,254                  0.0 %
CCC                        495,227                  0.3 %         664,628                  0.4 %
CC                         105,761                  0.1 %         125,412                  0.1 %
D                           42,159                  0.0 %          55,306                  0.0 %
Non rated                  371,492                  0.3 %         893,762                  0.6 %
Total residential
mortgage backed,
asset backed, and
other
collateralized
obligations             48,979,701                 33.7 %      59,661,622                 37.8 %

Total                $ 145,305,707                100.0 %   $ 158,080,110                100.0 %





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The table below summarizes the average return by type of fixed-maturity securities at September 30, 2022 and December 31, 2021:


                                                       September 30,     December 31,
Category                                                   2022              2021
U.S. Treasury securities and obligations of U.S.
government corporations and agencies                            2.40 %     

3.06%

Political subdivisions of States, Territories and
Possessions                                                     3.54 %            2.77 %

Corporate and other bonds
Industrial and miscellaneous                                    3.64 %            3.23 %
Residential mortgage backed securities                          2.43 %     
      2.77 %

Total                                                           3.16 %            2.92 %



The table below lists the weighted average maturity and effective duration in
years on our fixed-maturity securities as of September 30, 2022 and December 31,
2021:



                                       September 30, 2022       December 31, 2021
Weighted average effective maturity                    6.2                 

8.0

Weighted average final maturity                       14.5                 
  13.8

Effective duration                                     4.8                     5.1




Fair Value Consideration


Fair value is the price that would be received to sell an asset or paid to
transfer a liability in a transaction involving identical or comparable assets
or liabilities between market participants (an "exit price"). The fair value
hierarchy distinguishes between inputs based on market data from independent
sources ("observable inputs") and a reporting entity's internal assumptions
based upon the best information available when external market data is limited
or unavailable ("unobservable inputs"). The fair value hierarchy prioritizes
fair value measurements into three levels based on the nature of the inputs.
Quoted prices in active markets for identical assets have the highest priority
("Level 1"), followed by observable inputs other than quoted prices including
prices for similar but not identical assets or liabilities ("Level 2"), and
unobservable inputs, including the reporting entity's estimates of the
assumption that market participants would use, having the lowest priority
("Level 3"). As of September 30, 2022 and December 31, 2021, 63% and 84%,
respectively, of the investment portfolio recorded at fair value was priced
based upon quoted market prices.




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The table below summarizes the gross unrealized losses of our fixed-maturity
securities available-for-sale and equity securities by length of time the
security has continuously been in an unrealized loss position as of September
30, 2022 and December 31, 2021:



                                                                            September 30, 2022
                               Less than 12 months                                   12 months or more                                 Total
                   Estimated                            No. of          Estimated                           No. of          Estimated
                      Fair           Unrealized        Positions          Fair          Unrealized        Positions            Fair           Unrealized
Category             Value             Losses            Held             Value           Losses             Held             Value             Losses

Fixed-Maturity
Securities:
U.S. Treasury
securities and
obligations of
U.S.
government
corporations
and agencies     $   5,975,160     $        (123 )              1     $    
     -     $          -                 -     $   5,975,160     $        (123 )

Political
subdivisions
of States,
Territories
and
Possessions         11,461,126        (3,250,196 )             12        1,815,216         (590,936 )               2        13,276,342        (3,841,132 )

Corporate and
other bonds
industrial and
miscellaneous       73,921,209        (9,154,182 )             93          817,970         (269,694 )               1        74,739,179        (9,423,876 )

Residential
mortgage and
other asset
backed
securities          27,985,270        (4,333,707 )             31       18,593,599       (2,699,011 )              15        46,578,869        

(7,032,718)

Total

fixed term

securities       $ 119,342,765     $ (16,738,208 )            137     $ 21,226,785     $ (3,559,641 )              18     $ 140,569,550     $ (20,297,849 )





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                                                                            December 31, 2021
                               Less than 12 months                                   12 months or more                                Total
                   Estimated                            No. of         Estimated                            No. of          Estimated
                     Fair           Unrealized        Positions           Fair          Unrealized        Positions           Fair           Unrealized
Category             Value            Losses             Held            Value            Losses             Held             Value            Losses

Fixed-Maturity
Securities:
U.S. Treasury
securities and
obligations of
U.S.
government
corporations
and agencies     $          -     $           -                 -     $         -     $           -                 -     $          -     $           -

Political
subdivisions
of States,
Territories
and
Possessions         6,768,123          (197,984 )               5               -                 -                 -        6,768,123          (197,984 )

Corporate and
other bonds
industrial and
miscellaneous      17,593,707          (126,926 )              15               -                 -                 -       17,593,707          (126,926 )

Residential
mortgage and
other asset
backed
securities         45,399,451          (489,258 )              26       2,923,182          (120,344 )               2       48,322,633          (609,602 )

Total
fixed-maturity
securities       $ 69,761,281     $    (814,168 )              46     $ 2,923,182     $    (120,344 )               2     $ 72,684,463     $    (934,512 )




There were 155 securities at September 30, 2022 that accounted for the gross
unrealized loss of our fixed-maturity securities available-for-sale, none of
which were deemed by us to be other than temporarily impaired. There were 48
securities at December 31, 2021 that accounted for the gross unrealized loss,
none of which were deemed by us to be other than temporarily impaired.
Significant factors influencing our determination that unrealized losses were
temporary included credit quality considerations, the magnitude of the
unrealized losses in relation to each security's cost, the nature of the
investment and interest rate environment factors, and management's intent not to
sell these securities and it being not more likely than not that we will be
required to sell these investments before anticipated recovery of fair value to
our cost basis.




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Cash and capital resources


Cash Flows



The primary sources of cash flow are from our insurance underwriting subsidiary,
KICO, and include direct premiums written, ceding commissions from our quota
share reinsurers, loss recovery payments from our reinsurers, investment income
and proceeds from the sale or maturity of investments. Funds are used by KICO
for ceded premium payments to reinsurers, which are paid on a net basis after
subtracting losses paid on reinsured claims and reinsurance commissions. KICO
also uses funds for loss payments and loss adjustment expenses on our net
business, commissions to producers, salaries and other underwriting expenses as
well as to purchase investments and fixed assets.



For the nine months ended September 30, 2022, the primary source of cash flow
for our holding company was the dividends received from KICO, subject to
statutory restrictions.  For the nine months ended September 30, 2022, KICO paid
dividends of $1,500,000 to us.  On October 27, 2022, KICO entered a
sale-leaseback transaction whereby KICO sold substantially all its fixed assets
for approximately $8,100,000. Subsequent to the closing of the sale-leaseback
transaction, KICO paid a dividend of $3,000,000 to us.  In addition, on October
17, 2022 we entered into a seven year loan agreement with KICO with regard to a
loan from KICO to us in the amount of $6,450,000.



KICO is a member of the Federal Home Loan Bank of New York ("FHLBNY"), which
provides additional access to liquidity. Members have access to a variety of
flexible, low cost funding through FHLBNY's credit products, enabling members to
customize advances. Advances are to be fully collateralized; eligible collateral
to pledge to FHLBNY includes residential and commercial mortgage backed
securities, along with U.S. Treasury and agency securities. See Note 3 to our
condensed consolidated financial statements - Investments, for eligible
collateral held in a designated custodian account available for future advances.
Advances are limited to 5% of KICO's net admitted assets as of the end of the
previous quarter, which is June 30, 2022, and are due and payable within 90 days
of borrowing. The maximum allowable advance as of September 30, 2022, based on
the net admitted assets as of June 30, 2022, was approximately $12,414,000.
Advances are limited to 85% of the amount of available collateral, which was
approximately $10,534,000 as of September 30, 2022. There were no borrowings
under this facility during the nine months ended September 30, 2022.



On December 19, 2017, we issued $30 million of our 5.50% Senior Unsecured Notes
due December 30, 2022. As of September 30, 2022, invested assets and cash in our
holding company was approximately $2,416,000. See Notes 2 and 7 to our condensed
consolidated financial statements included in this Quarterly Report for a
discussion of our plans with regard to the satisfaction of the debt.



Our reconciliation of net income to net cash provided by operations is generally
influenced by the collection of premiums in advance of paid losses, the timing
of reinsurance, issuing company settlements and loss payments.




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Cash flow and liquidity are classified into three sources: (1) operating activities; (2) investment activities; and (3) fundraising activities, which are presented in the following table:

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