Kingstone Companies, Inc. (NASDAQ:KINS) Q4 2022 Earnings Conference Call March 31, 2023 8:30 AM ET

Company Participants

Jennifer Gravelle - Chief Financial Officer and Head of Investor Relations
Barry Goldstein - Chairman and Chief Executive Officer
Meryl Golden - Chief Operating Officer

Conference Call Participants

Paul Newsome - Piper Sandler

Operator

Greetings [Technical Difficulty] Stone Companies 2022 Fourth Quarter and Full-Year Earnings Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Jennifer Gravelle, Chief Financial Officer and Head of Investor Relations. Thank you. Please go ahead.

Jennifer Gravelle

Thank you, and good morning, everyone. Yesterday afternoon, the company issued a press release detailing Kingstone's 2022 fourth quarter results. On this call, Kingstone may make forward-looking statements regarding itself and its business. The forward-looking events and circumstances discussed on this call may not occur and could differ materially as a result of known and unknown risk factors and uncertainties affecting Kingstone. For more information, please refer to the section entitled Factors That May Affect Future Results and Financial Condition in Part 1, Item 1A of the company's Form 10-K for the year ended December 31, 2021, along with commentary on forward-looking statements at the end of the company's earnings release issued yesterday.

In addition, our remarks today include references to non-GAAP measures. For a reconciliation of our non-GAAP measures to the GAAP figures, please see the tables in our earnings release.

With that, I'd like to turn the call over to Kingstone's Chairman of the Board and CEO, Mr. Barry Goldstein. Please go ahead, Barry.

Barry Goldstein

Great, and thank you, and good morning, everyone. In addition to Jenn Gravelle, our new CFO and Head of Investor Relations. Also with me today is Meryl Golden, our Chief Operating Officer and President of the insurance company. So welcome to the fourth quarter earnings call and goodbye to a highly challenging 2022.

Despite the many hurdles we got through it, this was in no small part due to the multi-year transformation that we methodically and deliberately undertook. Most importantly, this transformational journey has laid the foundation needed to support our success and profitability in the years ahead.

Indeed, we believe that 2023 will be a year that will prove out our hard work return us to profitability and set the stage for double-digit returns on equity in the future. We're moving forward as a company more focused than ever before, more efficient in its processes with a lower cost structure and most importantly with a product that will get us back to what we had been known for in the past. We will review with you the regular financial and operational metrics, business updates, and market trends, but our comments are primarily focused on our strategic priorities, the actions that have already been implemented and how they will result in profitability.

Today, we will share with you some early indications that those actions have taken hold and are already delivering clear results. Even as we in our industry continue to navigate a challenging environment. The environment includes a number of macro factors, we have no influence or control over, though which we have already taken significant steps to fortify our business against.

As we have shared, results in 2022 were impacted by a surge in inflation. We were advised by the Fed that this spike would be what they called transitory, but it didn't work out that way, did it? This surge resulted in rapidly increasing market interest rates and a near shutdown of the credit markets. Our reinsurance partners felt the same thing. Higher rates meant that their bond portfolio valuation would be declining just as [Indiscernible] did. Questions about property cat insurance were more dramatic as bad weather resulted in more catastrophe claims in the failure of many Florida companies.

Our reinsurance placement last July was a bit more than just difficult. Our rates forced higher as long time reinsurers cut back or were far less interested in taking on catastrophe risk. These macro factors are continuing to impact the entire industry, including Kingstone in 2023. How are we responding to these challenges? That's what I'm going to talk about today, specifically, inflation, interest rates and reinsurance.

Relative to inflation, we've taken a two-pronged approach. First, we include an estimate for future inflation in all of our premium rates. We like others were unprepared for the sudden spike in inflation during late ‘21 and early 2022, while our rates anticipated a far lower rate than we actually experienced, and while I hope that we have seen peak inflation and are on a declining path, know this that our rate levels are reflective of this difficult environment and we will continue to appropriately adjust them to address ongoing inflation.

Second, as we've discussed previously, we're updating the replacement cost of every property we insure, so that each of our policyholders are properly covered and their homes are ensured to [Indiscernible] current replacement cost, including inflation that had already been experienced. We permanently adopted this process, we followed this practice on every renewal. Meryl will discuss this in more detail, but at a high level, we're confident in our approach to keeping up with and managing the ongoing impact of inflation.

As we've all seen with the rapid onset of inflation came higher interest rates, since Kingstone's investment portfolio comprises fixed income securities, the rising rate environment has had a material impact on their valuation. Our bond portfolio, which is externally managed by Conning has an average credit rating from the three major rating agencies of AA minus and a relatively short 4.4-year duration. As such, our portfolio is hard hit as short-term rates spiked higher along with inflation. It's important to state that we do not trade our portfolio, it’s designed to provide us with additional income, avoiding credit risk by investing in obligations from the strongest of borrowers.

We hold most securities until they're scheduled maturity. And at which time we expect to receive [par] (ph) value. We expect that the current level of unrealized losses will shrink as time passes and hopefully more quickly as interest rates retreat. Our portfolio is closely aligned with the five-year treasury rate. So following that, you can see how values are changing. We have seen a significant decline in the five-year rate recently and keep in mind that at year end 2022, the five-year rate was at 4% it moved up to 4.17% at the end of February and I think it closed yesterday 50 basis points lower at 3.67%.

I believe we will report in Q1 an improvement in AOCI and a quarterly increase in unrealized gains on our equity securities, which are primarily preferred shares and fixed income ETFs. Relative to reinsurance costs many say it is as hard of a reinsurance market as they've ever seen. As those who follow the industry know the growing frequency and severity of natural disasters and a host of other factors are driving up the cost of reinsurance and it's become more difficult for primary carriers like Kingstone to obtain reinsurance coverage at reasonable rates. Reinsurance companies are becoming more selective in the risks they are willing to cover, leading to ever higher premiums for insurers and that poses challenges for all of us who need reinsurance.

But know this over the last 10-years, Kingstone's loss ratio on its catastrophe coverage has been just over 7%. We have been a cash cow for the reinsurers. With us receiving back to $0.07 of every dollar of premium that we paid in. Yet we're continuing to expect a tough market this July. We've anticipated and adapted to these changes by proactively taking actions to better manage our risk and to slow the growth in the amount of reinsurance we need to buy, which we refer to as our probable maximum loss or PML. We manage this by utilizing a real time upfront underwriting tool, which we call CAT score. At the time of quote, this helps us to determine if the policy to be underwritten will pass our self-imposed thresholds. We have materially tightened criteria to better manage PML growth and while the current competitive environment has far fewer active competitors, we remain active, but are highly selective as the only writings we are undertaking now are those that are far less catastrophe exposed.

In the same range, we've tightened our underwriting and reduced the maximum coverage that we're willing to insure and have non-renewed policies that are outside of our new tighter guidelines. Working closely with the New Jersey and Rhode Island regulators, we were granted approval for block non-renewals of many policies that are contributing the most to Kingstone's PML. We are now modeling our entire portfolio every month in measuring the impact of these and other underwriting strategies.

Looking ahead, we'll continue to use all the tools available to us to keep our reinsurance needs as low as possible in such a challenging marketplace. I'm delighted to share with you that these efforts are already bearing fruit and we will be able to further reduce our 2023 reinsurance requirements by 7%, as compared to last year. With Kingstone 2.0 behind us, the foundation is in place. Kingstone 3.0 is underway with changes having been made to address these macro factors as best we can. While laser focused on the strategic plan that will lead us back to the high performing company we were for so many years.

Meryl will speak in greater detail about our strategic plan to do just that. Before this, however, I'm going to turn the call over to Jen Gravelle. As I mentioned, Jen joined us early this year as our CFO and Head of Investor Relations and is already a valuable part of our team. She brings to Kingstone a 20-plus year successful track record in Executive Financial Management, including most recently as CFO of Slide Insurance and previously CFO of both Allied Trust Insurance Company and Olympus Insurance Company. Jen is an expert when it comes to reinsurance and particularly matters involving homeowners insurance companies, who are exposed to wind-related risks, as well as coastal focused property insurance. Her deep knowledge in these areas are instrumental to Kingstone as we move forward in this next phase.

With that, I'll pass the call over to Jen to review our fourth quarter and full-year financial results. Please go ahead, Jen.

Jennifer Gravelle

Thank you, Barry. It's great to be here today and thank you for that wonderful introduction. In the fourth quarter of 2022, Kingstone reported a net loss of $3.95 million and $0.37 per diluted share, compared to net income of $2.2 million and $0.21 per diluted share for the same period last year.

Direct written premiums were up 7.7% to $53.9 million, an increase of $3.8 million from $50.1 million in the prior year period. However, our policies in force have declined 1.8% from the previous quarter. We remain laser focused on increasing our average premium and expect to continue to grow premiums materially faster than exposures for the foreseeable future.

The net loss in LAE ratio was 81.3%, up 19.5 points from the prior year. The largest driver of this increase was catastrophe losses. Fourth quarter catastrophe losses, principally Winter Storm Elliott added $4.2 million or 13.7 points to the net loss ratio for the quarter. During the quarter, we also recorded a $2 million reserve development or 6.5 points from our commercial liability line of business. The company exited that line in 2019. We feel good about our overall reserves position and our reserves at year-end have been strengthened relative to our independent actuarial central point estimate.

The attritional or non-cat loss ratio was 61.1%, the lowest of any quarter in 2022. If not for the cat losses in prior year development, we would have made underwriting profit in the fourth quarter of 2022. For the fourth quarter, the net underwriting expense ratio decreased 6.9 points to 32.6%. Our expense reduction is driven by multiple expense reduction initiatives, most notably of our IT expense from the retirement of legacy systems, changes to commission and profit sharing structure that will continue to be recognized over time. We made great progress on expenses, but are engaged in other efforts, which we will reduce the expenses even further.

Before turning it over to Meryl, I’d like to add a few [Technical Difficulty] months that I've been with Kingstone, I've come to appreciate the talent of our team, the compelling value of our product, services and platforms for our producers and customers. And although there's still work to be done, I've been really impressed with how much has already been completed. I can confidently say that the hard decisions have been made and most important initiatives to turn around the business are already in process. Look forward to meeting more members of the financial community in the months to come and continue to work to ensure a new path of value creation.

Now, I'll turn it over to Meryl. Meryl?

Meryl Golden

Thanks, Jen. While our financial results for the fourth quarter were nowhere near what we want them to be. The quarter is the first sign that the business has begun to turn and we are seeing green shoots. This progress overall is a direct reflection of the transformation initiatives that we have diligently executed on since 2019, including throughout 2022, a year that was a challenge for the entire insurance industry.

As a result of these efforts, we are now a more efficient company with strengthened fundamentals. I want to spend a few minutes walking through some of the actions we've already taken and that are already in place to proactively address market challenges and operational inefficiencies before turning to our strategic plan for 2023 and beyond.

Barry spoke to inflation, but I'd like to go into more detail given its major impact on our book of business us. Apart from annual rate changes, we initiated a new practice in the third quarter to update the replacement cost of our entire book to keep up with inflation and make sure that our policyholders are ensured to value. Our previous practices didn't keep up with rising building costs especially with the inflation that we've all been experiencing of late.

As Barry mentioned, we adopted a process to update replacement cost of each policy with every renewal using the most recent data available. And we're pleased to share that this is producing positive results for New York homeowners, as an example, we've seen a 25% increase in average premium since this new practice was implemented. Let me repeat that, the average renewal premium is up 25% over the expiring term. This increase reflects both the rate change that's flowing through the book, as well as this update in replacement cost.

Remember though we're rolling onto the book these two items and that takes a full-year to work through the book and we earn the new higher premium over the 12 months of the renewal term. Thus, while much of the benefit will be seen in 2023, and increasing an amount as the year goes on, the real effect will be in 2024. Looking forward, ahead to 2024, we anticipate a continued rise in replacement cost as we believe inflation unfortunately will continue for the foreseeable future and expect premiums to increase accordingly. It's one thing for us to raise our premiums, but it's also worth noting that our retention has declined only slightly despite the significant increase in rate.

For instance, the New York -- in New York homeowners, we've experienced less than a 1% drop in retention, despite rates increasing so materially. We're in the midst of a hard market with fewer competitors than in recent years and we expect these conditions will continue. That said, our continued strong retention is a positive indicator of the loyalty of our customer base and the talent of our producers and team members, who are working directly with customers every day.

Beyond the macro factors discussed, the primary driver of our fourth quarter and calendar year 2022 underwriting loss has been the results of our businesses in States other than New York, namely New Jersey, Connecticut, Rhode Island and Massachusetts. We entered these states to diversify Kingstone's footprint starting in 2017 and may have had a disproportionate negative impact on our underwriting results, especially in 2022. We'd attempted to address these challenges to achieve profitability in the past we made a series of rate changes and tightened underwriting, but they were not enough and did not deliver the expected results. The impact we worked towards was not there and what benefit we did see was nullified by inflation.

So in late 2022, after considering this continued unprofitable trend, we made the difficult decision to focus on our profitable State of New York where we have more than 80% of our business and to aggressively reduce our non-New York book of business subject to regulatory constraints. We are confident that the decision to limit our operations outside of New York is the fastest way to improve profitability for Kingstone. The actions we have put in place will reduce our policies in force outside of New York by more than 50% by year-end 2023 and another 40% will be reduced in 2024. By eliminating these unprofitable policies, we anticipate this to significantly improve the bottom line for Kingstone.

Last, our net expense ratio for calendar year 2022 was 36%, down over 4 points from 2021 and is continuing to decline. We're pleased with the progress so far and by 2024, we expect our net expense ratio to reach 33%, a significant improvement in a short period and one we're committed to furthering. Much of the ratio decline is attendant to our restructuring and reduction of producer commission rates. Select policies are at a 15% commission rate and our legacy policies are being renewed at lower rates as well.

Due to GAAP accounting, we paid the lower commission at the policy renewal, but recognize the benefit over the life of the policy. Just like the increased premiums being felt more profoundly in 2024, the same is true for commission reductions from lower commission rates. Needless to say 2023 is a pivotal year for Kingstone as we look to build on the key actions we've undertaken and are currently undertaken.

Our four pillar strategy for ‘23 and ‘24, which we've creatively coined Kingstone 3.0 is focused on four things: one, aggressively reducing the non-New York book of business; two, adjusting pricing to stay ahead of loss trends including inflation; three, tightly managing reinsurance requirements and costs; and last, continuing our focus on expense reduction. By executing on these initiatives, Kingstone will be positioned to achieve our goal of returning to profitability in 2023 and beyond.

Barry, Jen, myself and the entire leadership team are optimistic for the future. We have a solid foundation from which to build with a clear plan in place to capitalize on our strengths and deliver long-term value creation for shareholders. Thank you as always for your support.

And with that, we'll open it up to questions. Operator?

Question-and-Answer Session

Operator

Thank you. The floor is now open for questions. [Operator Instructions] First question is coming from Paul Newsome of Piper Sandler. Please go ahead.

Paul Newsome

Good morning. Thanks for the call. Maybe we could start with expense management. As you're [Indiscernible] the book, I would imagine that there's some negative expense leverage just with fixed costs. Is the reduction in the expense ratio in your view purely a function of the lower commissions? Or is there some leverage you are pulling to reduce expenses from a pure operating expense perspective?

Meryl Golden

Sure. I'll answer the question, Paul. So thank you for pointing out our lower expenses. We have worked really hard to reduce our expenses and so happy that we've been able to see a 4 point reduction in 2022. So, yes, commissions play a very significant role, because we reduced the commission in select. We reduced the commission on our legacy book. We reduced the commission for the non-New York States to encourage agents to move the book. And we've also restructured our profit sharing plans.

But beyond that, we have made major efforts in all areas of the company to review and reduce our expenses. I've talked repeatedly about the retirement of our legacy systems that saved us a $1.5 million. We have reviewed every contract, I mean, we're really relentless in managing our expenses and that's what will be driving our expense reduction going forward.

Paul Newsome

Could you give us a little bit more color on the reserve development in the quarter, the sources and of that reserve development frequency varying where it's coming from in your view?

Barry Goldstein

Yes, I think that's -- thanks for the question, Paul. There was a $2 million additional reserve put up all of it relating to commercial multi-parallel policies, a line of business that we exited in 2019. And the statute of limitations is just about run on all of those old policies. But an abundance of caution. This is the first additional strengthening we've taken on that. You may recall that we put up a lot of strengthening in 2019, but it's directly related to a line of business that we exited and the total amount on a pretax basis was $2 million.

Paul Newsome

Great. Could you guys talk -- maybe walk us through the debt refinancing and the impact that we should think about on the model prospectively?

Barry Goldstein

Sure. I'll start that and Jen or Meryl want to chime in, please do. So we had as you recall $30 million loan coming due in this December of last year. And it was -- we were paying an interest rate that was set five years earlier at 5.5%. When we finally got through the debt exchange, we thanks in large part to the great team at, I guess, across the world from you, Paul at Piper Sandler. The total amount of debt is now reduced to just under $20 million, but the interest rate that we're paying on that reduced amount is now 12%. So what you're seeing is about a three quarters of million year increase in our interest expense. And you'll also see that the costs of the financing will be amortized over the life of that loan. And further, we issued warrants to the noteholders and those costs will also be reflected as time goes forward.

We'll be -- I think a lot of this will be clear to you, Paul. We should file our 10-K by end of business today and there's quite a detailed discussion included in the 10-K. Hope that answers your question.

Paul Newsome

Yes, I guess the more challenging piece is to figure out the impact of the warrants on the shares outstanding?

Barry Goldstein

Yes, I think which you will see is, they're accounted for as equity warrants and they go through the entire BlackScholes discussion. And I think it will be clear to you exactly what it will be when you can read the 10-K.

Paul Newsome

Great. And then I guess one last question and I'll let anybody else want to ask questions. Any early read on the July renewals for this year?

Barry Goldstein

Well, I'm going to let Meryl and Jen talk. They just got back from London. So ladies, why don't you go ahead.

Jennifer Gravelle

Yes. So we're just coming back from London earlier this month. Somewhat interesting conversations over there with our reinsurance partners and new markets that we were talking to. So what we're hearing is that they actually have -- we're going to have some additional capacity in the Northeast in this upcoming renewal for us. But the question is at what cost, right? So that is the biggest challenge is how much it is going to be to place the reinsurance in the forecast that Meryl has created, there is absolutely expectations of increased reinsurance costs going through. And it's just whether or not we can come in underneath those reinsurance costs that are expected.

One of the things that I love telling these reinsurers is that scale up, you need to go to a flight to a higher quality book and the fact that Kingstone has only produced a 7.27% catastrophe loss ratio for these reinsurers on this program. They really need to start paying attention to this company versus others who are providing a higher rate on -- sorry, loss ratio on the cat business.

Barry Goldstein

Yes, I don't know, whether Meryl want to add anything to that?

Paul Newsome

Barry Goldstein

Yes, I think the important point, Paul, is while we're not prepared to guess what's going to happen and we will have our own personal hope for us. What drove last year's increased pricing, which was almost 20% was a lack of interest by the reinsurers. They were confronted by the same issues that we were and they were stung repeatedly in Florida. To the point, our renewal is in July, the Florida renewals are primarily in June. And to say that we got the after effect of the pounding that the Florida carriers took, I think would be fair. We've all gone through this, the times are challenging, but the combination of an expectation that capacity is freeing up, that new capital is entering the reinsurance market. And at least as early as I guess yesterday, there's an expectation that the projected number of storms to affect the Atlantic Seaboard is going to be less than it was in prior years. So a lot of hope positive signs to hope for, but the proof will be in the pudding. Hope that get to [Technical Difficulty] where you need it to be.

Paul Newsome

Always appreciate the help. Thank you very much.

Barry Goldstein

Thank you, Paul.

Operator

[Operator Instructions] The next question is coming from [Gabriel McClure] (ph), a Private Investor. Please go ahead.

Unidentified Analyst

Hello, Barry and Meryl and welcome to [Technical Difficulty].

Meryl Golden

Hi. Yes.

Unidentified Analyst

Hi. Yes, so my first question is kind of just more follow-up with Paul's question on the reserve development on the commercial lines. That was kind of a surprise seeing as how we discontinued that in 2019, for me that was a surprise. So my question is, when are these reserve developments going to be done? Or are we going to see anymore? Or what's your best guess on all that?

Barry Goldstein

I mean, let me start by saying, and first, thank you for the question, Gabe. This was the first additional reserve development we've taken since the third quarter of 2019. It was a painful exit from a problem that the -- I'll just say, the prior administration refused to acknowledge. And I think we did a pretty damn good job in sizing it up. But inflation got in the way and COVID got in the way. Inflation obviously everything costs more and COVID slowed the ability to resolve these claims. The courts were closed, attorneys weren't working, so I think $2 million while it might be a surprise is not something that I would consider unusual in size at all and hopefully that just shuts the door on everything going forward.

Jennifer Gravelle

But additionally, Barry, if I may add that, that we are -- we as a company have a little bit more conservative reserving policies than what was in place back in 2019. We are now -- we have our Chief Actuary in-house Sarah, and we have an independent actuarial firm who reviews our reserves on an annual basis and tells us where we are within their range. And we are $2 million above their central point estimates. So we are also being more conservative to ensure that our reserves are adequate and reasonable going forward.

That being said, you never know commercial multi [Indiscernible] is a commercial liability is a very volatile line. So there is some exposure there still, but we don't expect additional claims to be coming in as statute of limitations that turns out. So it's just a matter of handling what's currently open.

Unidentified Analyst

Okay. Got it. Thanks, Meryl. I have a question about the bond portfolio. Your duration has stated at 4.5% or 4.4%. And I guess my question is, where do you all see the duration going? It's really nice that we all think that the Federal Reserve is going to lower rates later this year or next year. But what if they don't, what if rates go up and what if they do lower rates for a year or two and then rates go up again? So just -- how are we thinking about that?

Barry Goldstein

Yes. I mean, it's a good question. And I think maybe I should have added before that I think it's just about the entire last year whatever proceeds we've received from principal paydowns and the mortgage bonds we own or maturity of bonds, proceeds that we get, even the interest that we earn on the portfolio. The only new securities we've purchased have been short-term treasuries. So the duration is going down, not just as the existing portfolio marches towards their scheduled maturities, but the incremental amount of new securities we add is at a much lower duration, bringing it down. So I think in general if bonds are basically mirroring a treasury rate plus a credit spread, right?

So if there were no changes and there have been quite a lot of changes recently in credit spreads with everything going on in the world. But in general 100 basis point reduction or increase by that matter in the five-year treasury rate will result in a $6 million change to our carrying value of our portfolio. It's a very rough measurement. But in answer to your question, we see the duration going down over time, while the quality of the portfolio by adding just treasuries is going up. So we feel real good about the portfolio. Yes, we'd be very happy to see rates come down. I'd love to see rates come down not because of a recession, but I'd like to just see rates come down.

But you're right, I mean, rates could go up. And I think we've taken a conservative approach to this and have limited further exposure to the valuation of the portfolio. By relying on AAA rated or short-term treasuries. I hope that answers your question.

Unidentified Analyst

No, that's great, that does. Thank you very much. And I just have one last question for you all. Maybe something to think about on the reporting, we were -- and I know it's customary for a lot of these other property [Indiscernible] companies to provide reports, excluding catastrophe losses and this and that. But I'd like as to think about maybe taken those -- taken that out in this report and the numbers straight up, you know, you guys were in New York, so we're going to Winter Storms and Hurricanes and just kind of, in my opinion, it's part of doing business, I'm from South Alabama. And if I reported a catastrophe every time it got hot out in the middle of the summer, people would laugh [Technical Difficulty]

Barry Goldstein

No, and I think you know and look you've been a participant in these calls for many years. And you know that's never been my go to find an excuse by blaming it on catastrophes. But Kingstone always has been compared and has a peer group to compare itself against and that's how they report. So it’s also important to note that we got to the -- almost the end of December was sitting on what looked to be a really good quarter from an underwriting perspective and then got upended by this Winter Storm Elliott. We've never had a freeze event in December like that. I mean, I've lived in New York, it’s now -- look, I'm living here 70-years. We've never had something like that before.

And you're right, it is what it is whether you want to call it a cat loss or an attritional loss well like some of the Florida carriers call it bad weather that doesn't reach the level of a catastrophe. At the end of the day, money is money, losses or losses. And I appreciate your sentiment and but I hope that you can parse out the extra information if you don't want to look at it. But like I said, since we are being compared to others and others do that, I thought it appropriate to leave that in. So I hope that…

Unidentified Analyst

Okay. Got it. Thanks, Barry.

Barry Goldstein

Great.

Operator

Thank you. We're showing no additional questions in queue at this time. I'd like to turn the floor back over to management for any additional or closing comments.

Barry Goldstein

Great. Thank you, operator, and thanks everybody for listening. We've all put up with a horrible 2022. Company has been materially impacted by things that were outside of our control. And our plan for ‘23 and going forward is to turn the tables, take control over the things that we can. And if it results in having to raise consumer premiums, by these material amounts of 20%, 25% like Meryl is talking about, we have to do that. And if we're going to be confronted with a higher cost of doing business through increased reinsurance costs, our obligation is to pay claims as they come due. And if there's left and we must purchase reinsurance in order to stay in business.

So if there is less money left over after paying those reinsurance premiums and higher claims cost due to inflation, then we had to share the burden of this and not just dump it all on the policyholders. So we had to cut commissions. We changed the overall dynamic of the company in response to these changing macro factors. This will prove through in ‘23, and like Meryl said, because of GAAP accounting and the need to earn through the heightened premiums and get the benefit of the lower commissions more of it will be seen in ‘24 and ‘23. But I think you'll see as we report going forward, these actions are purely math. They will be represented in each of the quarterly statements as we discuss.

And I think our next call is going to be in mid-May and I look forward to sharing more data with you then. So thank you all for listening in. Thanks for hanging in there with Kingstone. And I hope that you remain as good and loyal shareholders. So thank you again. Have a great day.

Operator

Ladies and gentlemen, thank you for your participation. This concludes today's event. You may disconnect your lines or log off the webcast at this time and enjoy the rest of your day.