Kingstone's Record Quarter Comes With a Warning: The Soft Market Has Arrived

Profits soar, but management's cautious tone on competition and California signals a new phase.

KINS · Earnings Call · 2026-08-07

Record Quarter, Shifting Winds

Kingstone Companies delivered its "most profitable quarter in our history" — net income of $15.5 million, diluted EPS of $1.05, and a GAAP net combined ratio of 70.2%. Direct premiums written grew 19% to $72.5 million, with new business policy count up 35% and retention improving 2 points. The outperformance was broad-based: underwriting, expense ratio, and investment income all contributed. Yet the most telling part of the call was not the numbers but the tone. Management repeatedly flagged a soft market and the return of admitted carriers in California — a strategic inflection point that could moderate growth in the back half of the year. The CEO, Meryl Golden, was careful to distinguish between the current quarter's strength and the forward outlook: “We will not chase volume at the expense of underwriting discipline.” — Meryl Golden, President and Chief Executive Officer · 2026-08-07 That discipline is evident in the matching rate to risk discipline of the Select product, which now represents 62% of homeowners policies in force and delivers claim frequency 34% below legacy. The expense ratio improved 2.1 points to 30.6%, a direct result of operating leverage.

Competition Intensifies

The quarter's record earnings mask a changing competitive landscape. Golden noted that while growth remains healthy, "we are seeing signs of a softening market and an increasingly competitive environment." She pointed to July's tick down in new dwelling fire business and admitted that competitors have loosened guidelines. In a Q&A response, she described the situation bluntly:

There is one company that is priced in a really irrational way. So we hope they figure that out sooner rather than later.
Meryl Golden, President and Chief Executive Officer · 2026-08-07

That comment underscores the tension: Kingstone is riding a wave of profitability while bracing for a possible price war. The most surprising development is California. Golden had expected new E&S entrants as admitted carriers pulled back, but admitted carriers are now selectively reopening. She said, "We had not anticipated that admitted carriers, the largest writers of homeowners in California, would reopen for business." This has pushed Kingstone to reassess its own pace. The company entered California on an E&S basis in the last week of Q2 with only a handful of agencies, and it will scale only as returns warrant.

Expansion and Capital Discipline

Despite the competition, Kingstone is pressing forward with measured geographic expansion. Connecticut is on track for an admitted launch late in the third quarter, and the company is building a California book that remains less than 5% of total premiums for 2026. The wildfire exposure is managed through a low first-event retention of $3.5 million for wildfire claims, and the company raised its total catastrophe protection to $500 million while lowering risk-adjusted reinsurance costs by more than 15%. Capital allocation remains disciplined. The board raised the quarterly dividend by 20% to $0.06 per share, just one year after reinstating it. Randy Patten confirmed priorities: fund profitable growth first, then dividends, then opportunistic buybacks. The company repurchased ~19,500 shares in Q2 at an average of $14.98.

Run Rate and Guidance

Investors pushed on whether the record quarter signals a new run rate. Golden was cautious, noting that the underlying combined ratio of 74% to 76% (excluding catastrophe and prior-year development) is the more durable baseline. She reaffirmed full-year guidance of 16–20% direct premium growth and diluted EPS of $2.20–$2.90. "It is just the very beginning of the hurricane season," she reminded, and Q3 typically brings sizable catastrophe losses. The fundamentals support the story. Net income swung from a -$6 million loss in Q1 2026 to a record $15.5 million in Q2, a clear demonstration of the earnings power now embedded in the book. The company's path to a $500 million direct premium target by 2029 depends on maintaining underwriting discipline through a softening cycle. Prior calls had already signaled expansion ambitions, but the competitive tone has shifted. In May, Golden said "we are going to change our strategy in order to win in California." In May 2025, she promised "we are going to be slow and thoughtful and do it right this time." Now, the challenge is doing it while the market turns. The stock, up 31% over the past 90 days, has priced in the record quarter. The real question is whether Kingstone can navigate the soft market without sacrificing the very discipline that produced these numbers. The answer lies in how it balances growth, rate adequacy, and capital returns in the second half.