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OLDWICK, N.J.--([ BUSINESS WIRE ])--A.M. Best Co. has affirmed the financial strength rating of B+ (Good) and issuer credit rating (ICR) of abbb-a of Kingstone Insurance Company (Kingstone) (Kingston, NY).Concurrently, A.M. Best has affirmed the ICR of abb-aof Kingstone Companies,Inc. (NASDAQ: KINS), the publicly traded holding company for Kingstone. The outlook for all ratings is stable.

"Risk Management and the Rating Process for Insurance Companies"

The ratings and outlook reflect Kingstoneas adequate capitalization, favorable operating performance, moderate investment leverage ratios and local market knowledge in New York. The companyas favorable operating performance is reflected in its five-year average double-digit pre-tax returns on revenue and surplus, generated by positive net underwriting income supplemented by net investment and other income. Surplus growth has been consistently solid over the last five years, increasing at a double-digit average annual rate.

The ICR for Kingstone Companies, Inc. reflects standard notching off the ICR of Kingstone, which reduced its debt leverage ratios in 2010 and 2011.

Partially offsetting Kingstoneas positive rating factors are its elevated net underwriting and ceded leverage ratios and its single-state concentration of risk, which exposes it to weather-related events as well as to market, regulatory and judicial issues. Although Kingstoneas ceded leverage ratio exceeds the ratio of the commercial automobile composite, it has been reduced in each of the last five years.

While Kingstoneas single-state concentration exposes it to weather-related events, catastrophe exposure is partially mitigated through catastrophe reinsurance, for which the company has purchased increased limits in recent years, the use of hurricane deductibles, visual risk inspections, distance-from-shore restrictions and surcharges. In addition, to address its geographic concentration of risk the company now includes upstate and western New York as well as Pennsylvania in its operating territory.

There could be pressure on Kingstone's ratings going forward if its favorable operating performance were to deteriorate or if risk-adjusted capital weakens. The potential for an upgrade exists if the company maintains the favorable operating performance that it has demonstrated in recent years while reducing its underwriting leverage ratios.

The methodology used in determining these ratings is Bestas Credit Rating Methodology, which provides a comprehensive explanation of A.M. Bestas rating process and contains the different rating criteria employed in the rating process. Key criteria utilized include: aRisk Management and the Rating Process for Insurance Companiesa; aUnderstanding BCAR for Property/Casualty Insurersa; aCatastrophe Analysis in A.M. Best Ratingsa; and aInsurance Holding Company and Debt Ratings.a Bestas Credit Rating Methodology can be found at [ www.ambest.com/ratings/methodology ].

Founded in 1899, A.M. Best Company is the worldas oldest and most authoritative insurance rating and information source. For more information, visit [ www.ambest.com ].

Copyright 2012 by A.M. Best Company, Inc.ALL RIGHTS RESERVED.