KNSL Kinsale Capital Group Inc

Kinsale Capital Group, Inc. (NYSE: KNSL) reported net income of $92.6 million, $3.97 per diluted share, for the second quarter of 2024 compared to $72.8 million, $3.12 per diluted share, for the second quarter of 2023. Net income was $191.5 million, $8.21 per diluted share, for the first half of 2024 compared to $128.6 million, $5.52 per diluted share, for the first half of 2023.

Net operating earnings(1) were $87.4 million, $3.75 per diluted share, for the second quarter of 2024 compared to $67.2 million, $2.88 per diluted share, for the second quarter of 2023. Net operating earnings(1) were $169.1 million, $7.25 per diluted share, for the first half of 2024 compared to $123.9 million, $5.32 per diluted share, for the first half of 2023.

Highlights for the quarter included:

• Diluted earnings per share increased by 27.2% to $3.97 compared to the second quarter of 2023
• Diluted operating earnings(1) per share increased by 30.2% to $3.75 compared to the second quarter of 2023
• Gross written premiums increased by 20.9% to $529.8 million compared to the second quarter of 2023
• Net investment income increased by 48.3% to $35.8 million compared to the second quarter of 2023
• Underwriting income(2) was $76.1 million in the second quarter of 2024, resulting in a combined ratio(5) of 77.7%
• Annualized operating return on equity(7) was 28.8% for the six months ended June 30, 2024

“We are pleased with our second quarter results highlighted by continued growth and strong margins. Delivering long-term value for stockholders remains our focus as we leverage underwriting and technological competitive advantages and our low-cost model to profitably grow market share,” said Chairman and Chief Executive Officer, Michael P. Kehoe.

Results of Operations

Underwriting Results

Gross written premiums were $529.8 million for the second quarter of 2024 compared to $438.2 million for the second quarter of 2023, an increase of 20.9%. Gross written premiums were $978.4 million for the first half of 2024 compared to $795.8 million for the first half of 2023, an increase of 22.9%. The increase in gross written premiums during the second quarter and first half of 2024 over the same periods last year reflected strong submission flow from brokers and a favorable pricing environment.

Underwriting income(2) was $76.1 million, resulting in a combined ratio(5) of 77.7% for the second quarter of 2024, compared to $61.5 million and a combined ratio(5) of 76.7% for the same period last year. The increase in underwriting income(2) quarter over quarter was largely due to combination of premium growth and lower relative net commissions. Loss(3) and expense(4) ratios were 56.6% and 21.1%, respectively, for the second quarter of 2024 compared to 55.7% and 21.0% for the second quarter of 2023. Results for the second quarters of 2024 and 2023 included net favorable development of loss reserves from prior accident years of $9.5 million, or 2.8 points, and $10.4 million, or 3.9 points, respectively.

Underwriting income(2) was $141.1 million, resulting in a combined ratio(5) of 78.6% for the first half of 2024 compared to $113.1 million and a combined ratio(5) of 77.7% for the first half of 2023. The increase in underwriting income(2) was primarily due to a combination of premium growth and lower relative net commissions. Loss(3) and expense(4) ratios were 57.7% and 20.9%, respectively, for the first half of 2024 compared to 56.4% and 21.3% for the first half of 2023. Results for the first half of 2024 and 2023 included net favorable development of loss reserves from prior accident years of $17.9 million, or 2.7 points, and $19.5 million, or 3.8 points, respectively.

Summary of Operating Results

The Company’s operating results for the three and six months ended June 30, 2024 and 2023 are summarized as follows:

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

2024

 

 

 

2023

 

 

 

2024

 

 

 

2023

 

 

($ in thousands)

Gross written premiums

$

529,770

 

 

$

438,222

 

 

$

978,414

 

 

$

795,810

 

Ceded written premiums

 

(99,534

)

 

 

(73,181

)

 

 

(197,124

)

 

 

(131,739

)

Net written premiums

$

430,236

 

 

$

365,041

 

 

$

781,290

 

 

$

664,071

 

 

 

 

 

 

 

 

 

Net earned premiums

$

332,461

 

 

$

257,046

 

 

$

641,979

 

 

$

494,204

 

Fee income

 

8,991

 

 

 

6,986

 

 

 

17,083

 

 

 

13,187

 

Losses and loss adjustment expenses

 

193,325

 

 

 

147,042

 

 

 

380,111

 

 

 

286,076

 

Underwriting, acquisition and insurance expenses

 

72,068

 

 

 

55,473

 

 

 

137,821

 

 

 

108,219

 

Underwriting income(2)

$

76,059

 

 

$

61,517

 

 

$

141,130

 

 

$

113,096

 

 

 

 

 

 

 

 

 

Loss ratio(3)

 

56.6

%

 

 

55.7

%

 

 

57.7

%

 

 

56.4

%

Expense ratio(4)

 

21.1

%

 

 

21.0

%

 

 

20.9

%

 

 

21.3

%

Combined ratio(5)

 

77.7

%

 

 

76.7

%

 

 

78.6

%

 

 

77.7

%

 

 

 

 

 

 

 

 

Annualized return on equity(6)

 

30.5

%

 

 

34.5

%

 

 

32.7

%

 

 

31.8

%

Annualized operating return on equity(7)

 

28.8

%

 

 

31.8

%

 

 

28.8

%

 

 

30.6

%

(1)

Net operating earnings is a non-GAAP financial measure. See discussion of "Non-GAAP Financial Measures" below.

(2)

Underwriting income is a non-GAAP financial measure. See discussion of "Non-GAAP Financial Measures" below.

(3)

Loss ratio, expressed as a percentage, is the ratio of losses and loss adjustment expenses to the sum of net earned premiums and fee income.

(4)

Expense ratio, expressed as a percentage, is the ratio of underwriting, acquisition and insurance expenses to the sum of net earned premiums and fee income.

(5)

The combined ratio is the sum of the loss ratio and expense ratio as presented. Calculations of each component may not add due to rounding.

(6)

Annualized return on equity is net income expressed on an annualized basis as a percentage of average beginning and ending stockholders’ equity during the period.

(7)

Annualized operating return on equity is net operating earnings expressed on an annualized basis as a percentage of average beginning and ending stockholders’ equity during the period.

The following tables summarize losses incurred for the current accident year and the development of prior accident years for the three and six months ended June 30, 2024 and 2023:

 

Three Months Ended June 30, 2024

 

Three Months Ended June 30, 2023

 

Losses and Loss Adjustment Expenses

 

% of Sum of Earned Premiums and Fee Income

 

Losses and Loss Adjustment Expenses

 

% of Sum of Earned Premiums and Fee Income

Loss ratio:

($ in thousands)

Current accident year

$

199,406

 

 

58.4

%

 

$

156,008

 

 

59.1

%

Current accident year - catastrophe losses

 

3,420

 

 

1.0

%

 

 

1,451

 

 

0.5

%

Effect of prior accident year development

 

(9,501

)

 

(2.8

)%

 

 

(10,417

)

 

(3.9

)%

Total

$

193,325

 

 

56.6

%

 

$

147,042

 

 

55.7

%

 

Six Months Ended June 30, 2024

 

Six Months Ended June 30, 2023

 

Losses and Loss Adjustment Expenses

 

% of Sum of Earned Premiums and Fee Income

 

Losses and Loss Adjustment Expenses

 

% of Sum of Earned Premiums and Fee Income

Loss ratio:

($ in thousands)

Current accident year

$

394,060

 

 

59.8

%

 

$

302,511

 

 

59.6

%

Current accident year - catastrophe losses

 

3,998

 

 

0.6

%

 

 

3,025

 

 

0.6

%

Effect of prior accident year development

 

(17,947

)

 

(2.7

)%

 

 

(19,460

)

 

(3.8

)%

Total

$

380,111

 

 

57.7

%

 

$

286,076

 

 

56.4

%

Investment Results

Net investment income was $35.8 million in the second quarter of 2024 compared to $24.2 million in the second quarter of 2023, an increase of 48.3%. Net investment income was $68.8 million in the first half of 2024 compared to $44.9 million in the first half of 2023, an increase of 53.3%. These increases were driven by growth in the Company's investment portfolio generated largely from the investment of strong operating cash flows and higher interest rates relative to the prior year period. Net operating cash flows were $489.3 million in the first half of 2024 compared to $423.6 million in the first half of 2023, an increase of 15.5%. The Company’s investment portfolio had an annualized gross investment return(8) of 4.3% for the first half of 2024 compared to 3.8% for the same period last year. Funds are generally invested conservatively in high quality securities with an average credit quality of "AA-" and the weighted average duration of the fixed-maturity investment portfolio, including cash equivalents, was 3.0 years and 2.8 years at June 30, 2024 and December 31, 2023, respectively. Cash and invested assets totaled $3.6 billion at June 30, 2024 and $3.1 billion at December 31, 2023.

(8)

Gross investment return is investment income from fixed-maturity and equity securities (and short-term investments, if any), before any deductions for fees and expenses, expressed as a percentage of average beginning and ending book values of those investments during the period.

Other

The effective tax rates for the six months ended June 30, 2024 and 2023 were 17.3% and 18.9%, respectively. In the first half of 2024 and 2023, the effective tax rates were lower than the federal statutory rate of 21% primarily due to the tax benefits from stock-based compensation, including stock options exercised, and from tax-exempt investment income.

Stockholders' equity was $1.3 billion at June 30, 2024 compared to $1.1 billion at December 31, 2023. Book value per share was $53.99 at June 30, 2024 compared to $46.88 at December 31, 2023. Annualized operating return on equity(7) was 28.8% for the first half of 2024, a decrease from 30.6% for the first half of 2023. The decrease was due primarily to higher average stockholders' equity as a result of profitable growth offset in part by higher net operating earnings.

Non-GAAP Financial Measures

Net Operating Earnings

Net operating earnings is defined as net income excluding the effects of the change in the fair value of equity securities, after taxes, net realized investment gains and losses, after taxes, and change in allowance for credit losses on investments, after taxes. Management believes the exclusion of these items provides a useful comparison of the Company's underlying business performance from period to period. Net operating earnings and percentages or calculations using net operating earnings (e.g., diluted operating earnings per share and annualized operating return on equity) are non-GAAP financial measures. Net operating earnings should not be viewed as a substitute for net income calculated in accordance with GAAP, and other companies may define net operating earnings differently.

For the three and six months ended June 30, 2024 and 2023, net income and diluted earnings per share reconcile to net operating earnings and diluted operating earnings per share as follows:

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

 

2024

 

 

 

2023

 

 

 

2024

 

 

 

2023

 

 

 

($ in thousands, except per share data)

Net operating earnings:

 

 

 

 

 

 

 

 

Net income

 

$

92,579

 

 

$

72,791

 

 

$

191,520

 

 

$

128,591

 

Adjustments:

 

 

 

 

 

 

 

 

Change in the fair value of equity securities, before taxes

 

 

(3,159

)

 

 

(5,811

)

 

 

(21,212

)

 

 

(9,329

)

Income tax expense (1)

 

 

663

 

 

 

1,220

 

 

 

4,455

 

 

 

1,959

 

Change in fair value of equity securities, after taxes

 

 

(2,496

)

 

 

(4,591

)

 

 

(16,757

)

 

 

(7,370

)

 

 

 

 

 

 

 

 

 

Net realized investment (gains) losses, before taxes

 

 

(2,879

)

 

 

(1,291

)

 

 

(6,745

)

 

 

3,361

 

Income tax expense (benefit) (1)

 

 

605

 

 

 

271

 

 

 

1,416

 

 

 

(706

)

Net realized investment (gains) losses, after taxes

 

 

(2,274

)

 

 

(1,020

)

 

 

(5,329

)

 

 

2,655

 

 

 

 

 

 

 

 

 

 

Change in allowance for credit losses on investments, before taxes

 

 

(476

)

 

 

(25

)

 

 

(486

)

 

 

56

 

Income tax expense (benefit) (1)

 

 

100

 

 

 

5

 

 

 

102

 

 

 

(12

)

Change in allowance for credit losses on investments, after taxes

 

 

(376

)

 

 

(20

)

 

 

(384

)

 

 

44

 

Net operating earnings

 

$

87,433

 

 

$

67,160

 

 

$

169,050

 

 

$

123,920

 

 

 

 

 

 

 

 

 

 

Diluted operating earnings per share:

 

 

 

 

 

 

 

 

Diluted earnings per share

 

$

3.97

 

 

$

3.12

 

 

$

8.21

 

 

$

5.52

 

Change in the fair value of equity securities, after taxes, per share

 

 

(0.11

)

 

 

(0.20

)

 

 

(0.72

)

 

 

(0.32

)

Net realized investment (gains) losses, after taxes, per share

 

 

(0.10

)

 

 

(0.04

)

 

 

(0.23

)

 

 

0.11

 

Change in allowance for credit losses on investments, after taxes, per share

 

 

(0.02

)

 

 

—

 

 

 

(0.02

)

 

 

—

 

Diluted operating earnings per share(2)

 

$

3.75

 

 

$

2.88

 

 

$

7.25

 

 

$

5.32

 

 

 

 

 

 

 

 

 

 

Operating return on equity:

 

 

 

 

 

 

 

 

Average equity(3)

 

$

1,214,086

 

 

$

843,773

 

 

$

1,172,018

 

 

$

808,632

 

Annualized return on equity(4)

 

 

30.5

%

 

 

34.5

%

 

 

32.7

%

 

 

31.8

%

Annualized operating return on equity(5)

 

 

28.8

%

 

 

31.8

%

 

 

28.8

%

 

 

30.6

%

(1)

Income taxes on adjustments to reconcile net income to net operating earnings use a 21% effective tax rate.

(2)

Diluted operating earnings per share may not add due to rounding.

(3)

Average equity is computed by adding the total stockholders' equity as of the date indicated to the prior quarter-end or year-end total, as applicable, and dividing by two.

(4)

Annualized return on equity is net income expressed on an annualized basis as a percentage of average beginning and ending stockholders’ equity during the period.

(5)

Annualized operating return on equity is net operating earnings expressed on an annualized basis as a percentage of average beginning and ending stockholders’ equity during the period.

Underwriting Income

Underwriting income is defined as net income excluding net investment income, the change in the fair value of equity securities, net realized investment gains and losses, change in allowance for credit losses on investments, interest expense, other expenses, other income and income tax expense. The Company uses underwriting income as an internal performance measure in the management of its operations because the Company believes it gives management and users of the Company's financial information useful insight into the Company's results of operations and underlying business performance. Underwriting income should not be viewed as a substitute for net income calculated in accordance with GAAP, and other companies may define underwriting income differently.

For the three and six months ended June 30, 2024 and 2023, net income reconciles to underwriting income as follows:

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

 

2024

 

 

 

2023

 

 

 

2024

 

 

 

2023

 

 

 

(in thousands)

Net income

 

$

92,579

 

 

$

72,791

 

 

$

191,520

 

 

$

128,591

 

Income tax expense

 

 

23,221

 

 

 

17,319

 

 

 

40,147

 

 

 

29,912

 

Income before income taxes

 

 

115,800

 

 

 

90,110

 

 

 

231,667

 

 

 

158,503

 

Net investment income

 

 

(35,847

)

 

 

(24,172

)

 

 

(68,780

)

 

 

(44,867

)

Change in the fair value of equity securities

 

 

(3,159

)

 

 

(5,811

)

 

 

(21,212

)

 

 

(9,329

)

Net realized investment (gains) losses

 

 

(2,879

)

 

 

(1,291

)

 

 

(6,745

)

 

 

3,361

 

Change in allowance for credit losses on investments

 

 

(476

)

 

 

(25

)

 

 

(486

)

 

 

56

 

Interest expense

 

 

2,564

 

 

 

2,724

 

 

 

4,986

 

 

 

5,294

 

Other expenses (6)

 

 

796

 

 

 

417

 

 

 

2,759

 

 

 

819

 

Other income

 

 

(740

)

 

 

(435

)

 

 

(1,059

)

 

 

(741

)

Underwriting income

 

$

76,059

 

 

$

61,517

 

 

$

141,130

 

 

$

113,096

 

(6)

Other expenses includes primarily corporate expenses not allocated to the Company's insurance operations.

Conference Call

Kinsale Capital Group will hold a conference call to discuss this press release on Friday, July 26, 2024 at 9:00 a.m. (Eastern Time). Members of the public may access the conference call by dialing (800) 715-9871, conference ID# 7469751, or via the Internet by going to www.kinsalecapitalgroup.com and clicking on the "Investor Relations" link. A replay of the call will be available on the website until the close of business on August 23, 2024.

Forward-Looking Statements

This press release contains forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. In some cases, such forward-looking statements may be identified by terms such as "anticipates," "estimates," "expects," "intends," "plans," "predicts," "projects," "believes," "seeks," "outlook," "future," "will," "would," "should," "could," "may," "can have," "prospects" or similar words. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Although it is not possible to identify all of these risks and factors, they include, among others, the following: inadequate loss reserves to cover the Company's actual losses; inherent uncertainty of models resulting in actual losses that are materially different than the Company's estimates; adverse economic factors; a decline in the Company's financial strength rating; loss of one or more key executives; loss of a group of brokers that generate significant portions of the Company's business; failure of any of the loss limitations or exclusions the Company employs, or change in other claims or coverage issues; adverse performance of the Company's investment portfolio; adverse market conditions that affect its excess and surplus lines insurance operations; and other risks described in the Company's filings with the Securities and Exchange Commission. These forward-looking statements speak only as of the date of this release and the Company does not undertake any obligation to update or revise any forward-looking information to reflect changes in assumptions, the occurrence of unanticipated events, or otherwise.

About Kinsale Capital Group, Inc.

Kinsale Capital Group, Inc. is a specialty insurance group headquartered in Richmond, Virginia, focusing on the excess and surplus lines market.

KINSALE CAPITAL GROUP, INC. AND SUBSIDIARIES

Unaudited Consolidated Statements of Income and Comprehensive Income

 

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

 

2024

 

 

 

2023

 

 

 

2024

 

 

 

2023

 

Revenues

 

(in thousands, except per share data)

Gross written premiums

 

$

529,770

 

 

$

438,222

 

 

$

978,414

 

 

$

795,810

 

Ceded written premiums

 

 

(99,534

)

 

 

(73,181

)

 

 

(197,124

)

 

 

(131,739

)

Net written premiums

 

 

430,236

 

 

 

365,041

 

 

 

781,290

 

 

 

664,071

 

Change in unearned premiums

 

 

(97,775

)

 

 

(107,995

)

 

 

(139,311

)

 

 

(169,867

)

Net earned premiums

 

 

332,461

 

 

 

257,046

 

 

 

641,979

 

 

 

494,204

 

Fee income

 

 

8,991

 

 

 

6,986

 

 

 

17,083

 

 

 

13,187

 

Net investment income

 

 

35,847

 

 

 

24,172

 

 

 

68,780

 

 

 

44,867

 

Change in the fair value of equity securities

 

 

3,159

 

 

 

5,811

 

 

 

21,212

 

 

 

9,329

 

Net realized investment gains (losses)

 

 

2,879

 

 

 

1,291

 

 

 

6,745

 

 

 

(3,361

)

Change in allowance for credit losses on investments

 

 

476

 

 

 

25

 

 

 

486

 

 

 

(56

)

Other income

 

 

740

 

 

 

435

 

 

 

1,059

 

 

 

741

 

Total revenues

 

 

384,553

 

 

 

295,766

 

 

 

757,344

 

 

 

558,911

 

 

 

 

 

 

 

 

 

 

Expenses

 

 

 

 

 

 

 

 

Losses and loss adjustment expenses

 

 

193,325

 

 

 

147,042

 

 

 

380,111

 

 

 

286,076

 

Underwriting, acquisition and insurance expenses

 

 

72,068

 

 

 

55,473

 

 

 

137,821

 

 

 

108,219

 

Interest expense

 

 

2,564

 

 

 

2,724

 

 

 

4,986

 

 

 

5,294

 

Other expenses

 

 

796

 

 

 

417

 

 

 

2,759

 

 

 

819

 

Total expenses

 

 

268,753

 

 

 

205,656

 

 

 

525,677

 

 

 

400,408

 

Income before income taxes

 

 

115,800

 

 

 

90,110

 

 

 

231,667

 

 

 

158,503

 

Total income tax expense

 

 

23,221

 

 

 

17,319

 

 

 

40,147

 

 

 

29,912

 

Net income

 

 

92,579

 

 

 

72,791

 

 

 

191,520

 

 

 

128,591

 

 

 

 

 

 

 

 

 

 

Other comprehensive (loss) income

 

 

 

 

 

 

 

 

Change in net unrealized losses on available-for-sale investments, net of taxes

 

 

(5,658

)

 

 

(14,107

)

 

 

(15,598

)

 

 

3,402

 

Total comprehensive income

 

$

86,921

 

 

$

58,684

 

 

$

175,922

 

 

$

131,993

 

 

 

 

 

 

 

 

 

 

Earnings per share:

 

 

 

 

 

 

 

 

Basic

 

$

4.00

 

 

$

3.16

 

 

$

8.28

 

 

$

5.59

 

Diluted

 

$

3.97

 

 

$

3.12

 

 

$

8.21

 

 

$

5.52

 

 

 

 

 

 

 

 

 

 

Weighted-average shares outstanding:

 

 

 

 

 

 

 

 

Basic

 

 

23,165

 

 

 

23,040

 

 

 

23,137

 

 

 

23,024

 

Diluted

 

 

23,329

 

 

 

23,301

 

 

 

23,332

 

 

 

23,293

 

KINSALE CAPITAL GROUP, INC. AND SUBSIDIARIES

Unaudited Condensed Consolidated Balance Sheets

 

 

 

June 30, 2024

 

December 31, 2023

Assets

 

(in thousands)

Investments:

 

 

 

 

Fixed-maturity securities at fair value

 

$

3,072,718

 

$

2,711,759

Equity securities at fair value

 

 

317,482

 

 

234,813

Real estate investments, net

 

 

15,045

 

 

14,791

Short-term investments

 

 

6,908

 

 

5,589

Total investments

 

 

3,412,153

 

 

2,966,952

 

 

 

 

 

Cash and cash equivalents

 

 

171,021

 

 

126,694

Investment income due and accrued

 

 

25,112

 

 

21,689

Premiums receivable, net

 

 

171,815

 

 

143,212

Reinsurance recoverables, net

 

 

302,092

 

 

247,836

Ceded unearned premiums

 

 

58,492

 

 

52,516

Deferred policy acquisition costs, net of ceding commissions

 

 

109,358

 

 

88,395

Intangible assets

 

 

3,538

 

 

3,538

Deferred income tax asset, net

 

 

57,410

 

 

55,699

Other assets

 

 

84,300

 

 

66,443

Total assets

 

$

4,395,291

 

$

3,772,974

 

 

 

 

 

Liabilities & Stockholders' Equity

 

 

 

 

Liabilities:

 

 

 

 

Reserves for unpaid losses and loss adjustment expenses

 

$

2,013,055

 

$

1,692,875

Unearned premiums

 

 

846,638

 

 

701,351

Payable to reinsurers

 

 

48,397

 

 

47,582

Accounts payable and accrued expenses

 

 

27,188

 

 

44,922

Debt

 

 

183,984

 

 

183,846

Other liabilities

 

 

18,826

 

 

15,566

Total liabilities

 

 

3,138,088

 

 

2,686,142

 

 

 

 

 

Stockholders' equity

 

 

1,257,203

 

 

1,086,832

Total liabilities and stockholders' equity

 

$

4,395,291

 

$

3,772,974

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20240725559552/en/

Kinsale Capital Group, Inc. Bryan Petrucelli Executive Vice President, Chief Financial Officer and Treasurer 804-289-1272 ir@kinsalecapitalgroup.com