UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
☒Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended SeptemberJune 30, 20212022
☐Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from _______ to _______

Commission File Number: 001-37848
KINSALE CAPITAL GROUP, INC.
(Exact name of registrant as specified in its charter)

Delaware98-0664337
(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer
Identification Number)
2035 Maywill Street
Suite 100
Richmond, Virginia 23230
(Address of principal executive offices, including zip code)
(804) 289-1300
(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.01 per shareKNSLNasdaq Global Select MarketNew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒   No  ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer☒
Accelerated filer ☐
Non-accelerated filer ☐
Smaller reporting company☐Emerging growth company☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  ☐     No  ☒
Number of shares of the registrant's common stock outstanding at OctoberJuly 22, 2021: 22,818,8452022: 22,903,808

Table of Contents
KINSALE CAPITAL GROUP, INC.
TABLE OF CONTENTS
Page
PART I. FINANCIAL INFORMATION
Item 1.
4
Consolidated Balance Sheets at SeptemberJune 30, 20212022 (Unaudited) and December 31, 20202021
4
5
6
87
Notes to Condensed Consolidated Financial Statements (Unaudited)
98
Item 2.
24
Item 3.
44
Item 4.
44
PART II. OTHER INFORMATION
Item 1.
46
Item 1A.
46
Item 2.
46
Item 6.
46
47
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Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include any statement that does not directly relate to historical or current fact. These statements may discuss, among others, our future financial performance, our business prospects and strategy, our anticipated financial position, liquidity and capital, dividends and general market and industry conditions. You can identify forward-looking statements by words such as "anticipates," "estimates," "expects," "intends," "plans," "predicts," "projects," "believes," "seeks," "outlook," "future," "will," "would," "should," "could," "may," "can have," "prospects" or similar terms. Forward-looking statements are based on management’s current expectations and assumptions about future events, which are subject to uncertainties, risks and changes in circumstances that are difficult to predict. These statements are only predictions and are not guarantees of future performance. Actual results may differ materially from those contemplated by a forward-looking statement. Factors that may cause such differences include, without limitation:
•the possibility that our loss reserves may be inadequate to cover our actual losses, which could have a material adverse effect on our financial condition, results of operations and cash flows;
•the inherent uncertainty of models resulting in actual losses that are materially different than our estimates;
•the failure of any of the loss limitations or exclusions we employ, or change in other claims or coverage issues, having a material adverse effect on our financial condition or results of operations;
•the inability to obtain reinsurance coverage at reasonable prices and on terms that adequately protect us;
•the possibility that severe weather conditions and other catastrophes, may result in an increase in the numberincluding due to climate change, pandemics and amountsimilar events adversely affecting our business, results of claims filed against us;operations and financial condition;
•adverse economic factors, including recession, inflation, periods of high unemployment or lower economic activity resulting in the sale of fewer policies than expected or an increase in frequency or severity of claims and premium defaults or both, affecting our growth and profitability;
•a decline in our financial strength rating adversely affecting the amount of business we write;
•the potential loss of one or more key executives or an inability to attract and retain qualified personnel adversely affecting our results of operations;
•our reliance on a select group of brokers;
•the changing market conditions of our excess and surplus lines ("E&S") insurance operations, as well as the cyclical nature of our business, affecting our financial performance;
•our employees taking excessive risks;
•the intense competition for business in our industry;
•the effects of litigation having an adverse effect on our business;
•the performance of our investment portfolio adversely affecting our financial results;
•the ability to pay dividends being dependent on our ability to obtain cash dividends or other permitted payments from our insurance subsidiary;
•being forced to sell investments to meet our liquidity requirements;
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•extensive regulation adversely affecting our ability to achieve our business objectives or the failure to comply with these regulations adversely affecting our financial condition and results of operations;
•the other risks and uncertainties discussed in Part I, Item 1A of the Annual Report on Form 10-K for the year ended December 31, 2020.2021.
Forward-looking statements speak only as of the date on which they are made. Except as expressly required under federal securities laws or the rules and regulations of the Securities and Exchange Commission ("SEC"), we do not assume any obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. You should not place undue reliance on forward-looking statements. All forward-looking statements attributable to us are expressly qualified by these cautionary statements.

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Table of Contents
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
KINSALE CAPITAL GROUP, INC. AND SUBSIDIARIES
Consolidated Balance Sheets (Unaudited)
September 30,
2021		December 31,
2020		June 30,
2022		December 31,
2021
(in thousands, except share and per share data)(in thousands, except share and per share data)
AssetsAssetsAssets
Investments:Investments:Investments:
Fixed-maturity securities, available for sale, at fair value (amortized cost: $1,313,284 – 2021; $1,031,817 – 2020)
$1,342,873 $1,081,800 
Equity securities, at fair value (cost: $107,244 – 2021; $98,758 – 2020)
151,792 129,662 
Fixed-maturity securities, available for sale, at fair value (amortized cost: $1,622,899 – 2022; $1,371,519 – 2021)
Fixed-maturity securities, available for sale, at fair value (amortized cost: $1,622,899 – 2022; $1,371,519 – 2021)
$1,493,074 $1,392,066 
Equity securities, at fair value (cost: $116,927 – 2022; $118,895 – 2021)
Equity securities, at fair value (cost: $116,927 – 2022; $118,895 – 2021)
139,539 172,611 
Short-term investmentsShort-term investments10,770 — 
Total investmentsTotal investments1,494,665 1,211,462 Total investments1,643,383 1,564,677 
Cash and cash equivalentsCash and cash equivalents90,012 77,093 Cash and cash equivalents120,890 121,040 
Investment income due and accruedInvestment income due and accrued7,276 6,637 Investment income due and accrued9,539 7,658 
Premiums receivable, netPremiums receivable, net63,709 48,641 Premiums receivable, net97,308 71,004 
Reinsurance recoverables112,026 93,215 
Reinsurance recoverables, netReinsurance recoverables, net135,037 122,970 
Ceded unearned premiumsCeded unearned premiums32,783 24,265 Ceded unearned premiums38,307 33,679 
Deferred policy acquisition costs, net of ceding commissionsDeferred policy acquisition costs, net of ceding commissions40,273 31,912 Deferred policy acquisition costs, net of ceding commissions54,806 41,968 
Intangible assetsIntangible assets3,538 3,538 Intangible assets3,538 3,538 
Deferred income tax asset, netDeferred income tax asset, net392 — Deferred income tax asset, net43,167 2,109 
Other assetsOther assets54,221 50,133 Other assets52,144 57,012 
Total assetsTotal assets$1,898,895 $1,546,896 Total assets$2,198,119 $2,025,655 
Liabilities and Stockholders' EquityLiabilities and Stockholders' EquityLiabilities and Stockholders' Equity
Liabilities:Liabilities:Liabilities:
Reserves for unpaid losses and loss adjustment expensesReserves for unpaid losses and loss adjustment expenses$814,856 $636,013 Reserves for unpaid losses and loss adjustment expenses$1,036,741 $881,344 
Unearned premiumsUnearned premiums334,620 260,986 Unearned premiums442,479 347,730 
Payable to reinsurersPayable to reinsurers15,097 12,672 Payable to reinsurers18,870 16,112 
Accounts payable and accrued expensesAccounts payable and accrued expenses16,725 13,651 Accounts payable and accrued expenses15,557 23,250 
Credit facilityCredit facility42,664 42,570 Credit facility42,759 42,696 
Deferred income tax liability, net— 4,648 
Other liabilitiesOther liabilities15,768 118 Other liabilities7,647 15,188 
Total liabilitiesTotal liabilities1,239,730 970,658 Total liabilities1,564,053 1,326,320 
Stockholders’ equity:Stockholders’ equity:Stockholders’ equity:
Common stock, $0.01 par value, 400,000,000 shares authorized, 22,818,527 and 22,757,251 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively228 228 
Common stock, $0.01 par value, 400,000,000 shares authorized, 22,903,758 and 22,834,377 shares issued and outstanding at June 30, 2022 and December 31, 2021 respectivelyCommon stock, $0.01 par value, 400,000,000 shares authorized, 22,903,758 and 22,834,377 shares issued and outstanding at June 30, 2022 and December 31, 2021 respectively229 228 
Additional paid-in capitalAdditional paid-in capital293,535 291,315 Additional paid-in capital295,656 295,040 
Retained earningsRetained earnings340,133 243,315 Retained earnings438,868 385,942 
Accumulated other comprehensive income25,269 41,380 
Accumulated other comprehensive (loss) incomeAccumulated other comprehensive (loss) income(100,687)18,125 
Total stockholders’ equityTotal stockholders’ equity659,165 576,238 Total stockholders’ equity634,066 699,335 
Total liabilities and stockholders’ equityTotal liabilities and stockholders’ equity$1,898,895 $1,546,896 Total liabilities and stockholders’ equity$2,198,119 $2,025,655 
See accompanying notes to condensed consolidated financial statements.
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KINSALE CAPITAL GROUP, INC. AND SUBSIDIARIES
Consolidated Statements of Income and Comprehensive Income (Unaudited)
Three Months Ended September 30,Nine Months Ended September 30,Three Months Ended June 30,Six Months Ended June 30,
20212020202120202022202120222021
(in thousands, except per share data)(in thousands, except per share data)
Revenues:Revenues:Revenues:
Gross written premiumsGross written premiums$197,616 $144,777 $560,553 $402,904 Gross written premiums$277,001 $194,061 $522,514 $362,937 
Ceded written premiumsCeded written premiums(26,939)(22,529)(77,825)(54,996)Ceded written premiums(34,658)(26,308)(63,673)(50,886)
Net written premiumsNet written premiums170,677 122,248 482,728 347,908 Net written premiums242,343 167,753 458,841 312,051 
Change in unearned premiumsChange in unearned premiums(13,806)(14,004)(65,116)(52,946)Change in unearned premiums(52,185)(30,053)(90,121)(51,310)
Net earned premiumsNet earned premiums156,871 108,244 417,612 294,962 Net earned premiums190,158 137,700 368,720 260,741 
Net investment incomeNet investment income8,095 7,008 22,466 19,613 Net investment income10,594 7,429 19,682 14,371 
Change in the fair value of equity securitiesChange in the fair value of equity securities(1,012)6,031 13,644 3,709 Change in the fair value of equity securities(23,353)7,565 (31,104)14,656 
Net realized investment gainsNet realized investment gains895 647 2,397 1,676 Net realized investment gains1,413 304 1,708 1,502 
Other incomeOther income35 571 58 594 Other income145 12 269 23 
Total revenuesTotal revenues164,884 122,501 456,177 320,554 Total revenues178,957 153,010 359,275 291,293 
Expenses:Expenses:Expenses:
Losses and loss adjustment expensesLosses and loss adjustment expenses87,352 82,431 236,727 194,468 Losses and loss adjustment expenses107,040 79,115 209,545 149,375 
Underwriting, acquisition and insurance expensesUnderwriting, acquisition and insurance expenses31,465 22,927 89,490 67,471 Underwriting, acquisition and insurance expenses38,972 29,889 77,517 58,025 
Other expensesOther expenses388 1,022 1,234 1,022 Other expenses503 398 899 846 
Total expensesTotal expenses119,205 106,380 327,451 262,961 Total expenses146,515 109,402 287,961 208,246 
Income before income taxesIncome before income taxes45,679 16,121 128,726 57,593 Income before income taxes32,442 43,608 71,314 83,047 
Total income tax expenseTotal income tax expense9,054 1,231 24,387 7,355 Total income tax expense5,352 7,973 12,433 15,333 
Net incomeNet income36,625 14,890 104,339 50,238 Net income27,090 35,635 58,881 67,714 
Other comprehensive (loss) income:Other comprehensive (loss) income:Other comprehensive (loss) income:
Change in net unrealized gains on available-for-sale investments, net of taxes(6,072)6,554 (16,111)24,339 
Total comprehensive income$30,553 $21,444 $88,228 $74,577 
Change in net unrealized (losses) gains on available-for-sale investments, net of taxesChange in net unrealized (losses) gains on available-for-sale investments, net of taxes(54,882)9,583 (118,812)(10,039)
Total comprehensive (loss) incomeTotal comprehensive (loss) income$(27,792)$45,218 $(59,931)$57,675 
Earnings per share:Earnings per share:Earnings per share:
BasicBasic$1.61 $0.66 $4.60 $2.26 Basic$1.19 $1.57 $2.59 $2.99 
DilutedDiluted$1.59 $0.65 $4.53 $2.21 Diluted$1.17 $1.55 $2.55 $2.94 
Weighted-average shares outstanding:Weighted-average shares outstanding:Weighted-average shares outstanding:
BasicBasic22,714 22,398 22,681 22,220 Basic22,781 22,678 22,767 22,665 
DilutedDiluted23,064 22,928 23,057 22,775 Diluted23,103 23,054 23,095 23,055 

See accompanying notes to condensed consolidated financial statements.
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KINSALE CAPITAL GROUP, INC. AND SUBSIDIARIES
Consolidated Statements of Changes in Stockholders' Equity (Unaudited)
Shares of Common StockCommon StockAdditional Paid-in CapitalRetained EarningsAccumu-
lated
 Other
Compre-
hensive
Income		Total
Stock-
holders' Equity		Shares of Common StockCommon StockAdditional Paid-in CapitalRetained EarningsAccumu-
lated
 Other
Compre-
hensive (Loss)
Income		Total
Stock-
holders' Equity
(in thousands, except per share data)(in thousands, except per share data)
Balance at December 31, 202022,757 $228 $291,315 $243,315 $41,380 $576,238 
Issuance of common stock under stock-based compensation plan55 — 339 — — 339 
Stock-based compensation expense— — 1,036 — — 1,036 
Dividends declared ($0.11 per share)— — — (2,504)— (2,504)
Other comprehensive loss, net of tax— — — — (19,622)(19,622)
Net income— — — 32,079 — 32,079 
Balance at March 31, 202122,812 228 292,690 272,890 21,758 587,566 
Balance at December 31, 2021Balance at December 31, 202122,834 $228 $295,040 $385,942 $18,125 $699,335 
Issuance of common stock under stock-based compensation planIssuance of common stock under stock-based compensation plan7 — 163 — — 163 Issuance of common stock under stock-based compensation plan76 1 377 — — 378 
Stock-based compensation expenseStock-based compensation expense— — 1,279 — — 1,279 Stock-based compensation expense— — 1,489 — — 1,489 
Restricted shares withheld for taxesRestricted shares withheld for taxes(13)— (2,082)— — (2,082)Restricted shares withheld for taxes(2)— (516)— — (516)
Dividends declared ($0.11 per share)— — — (2,508)— (2,508)
Other comprehensive income, net of tax— — — — 9,583 9,583 
Dividends declared ($0.13 per share)Dividends declared ($0.13 per share)— — — (2,977)— (2,977)
Other comprehensive loss, net of taxOther comprehensive loss, net of tax— — — — (63,930)(63,930)
Net incomeNet income— — — 35,635 — 35,635 Net income— — — 31,791 — 31,791 
Balance at June 30, 202122,806 228 292,050 306,017 31,341 629,636 
Balance at March 31, 2022Balance at March 31, 202222,908 229 296,390 414,756 (45,805)665,570 
Issuance of common stock under stock-based compensation planIssuance of common stock under stock-based compensation plan13 — 220 — — 220 Issuance of common stock under stock-based compensation plan8 — 150 — — 150 
Stock-based compensation expenseStock-based compensation expense— — 1,265 — — 1,265 Stock-based compensation expense— — 1,857 — — 1,857 
Dividends declared ($0.11 per share)— — — (2,509)— (2,509)
Restricted shares withheld for taxesRestricted shares withheld for taxes(12)— (2,741)— — (2,741)
Dividends declared ($0.13 per share)Dividends declared ($0.13 per share)— — — (2,978)— (2,978)
Other comprehensive loss, net of taxOther comprehensive loss, net of tax— — — — (6,072)(6,072)Other comprehensive loss, net of tax— — — — (54,882)(54,882)
Net incomeNet income— — — 36,625 — 36,625 Net income— — — 27,090 — 27,090 
Balance at September 30, 202122,819 $228 $293,535 $340,133 $25,269 $659,165 
Balance at June 30, 2022Balance at June 30, 202222,904 $229 $295,656 $438,868 $(100,687)$634,066 















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KINSALE CAPITAL GROUP, INC. AND SUBSIDIARIES
Consolidated Statements of Changes in Stockholders' Equity (Unaudited) - Continued
Shares of Common StockCommon StockAdditional Paid-in CapitalRetained EarningsAccumu-
lated
 Other
Compre-
hensive
Income		Total
Stock-
holders' Equity
(in thousands, except per share data)
Balance at December 31, 201922,206 $222 $229,229 $162,911 $13,518 $405,880 
Adoption of new accounting standard for credit losses, net— — — 78 — 78 
Balance at December 31, 2020Balance at December 31, 202022,757 $228 $291,315 $243,315 $41,380 $576,238 
Issuance of common stock under stock-based compensation planIssuance of common stock under stock-based compensation plan48 1 701 — — 702 Issuance of common stock under stock-based compensation plan55 — 339 — — 339 
Stock-based compensation expenseStock-based compensation expense— — 812 — — 812 Stock-based compensation expense— — 1,036 — — 1,036 
Dividends declared ($0.09 per share)— — — (2,001)— (2,001)
Dividends declared ($0.11 per share)Dividends declared ($0.11 per share)— — — (2,504)— (2,504)
Other comprehensive loss, net of taxOther comprehensive loss, net of tax— — — — (9,223)(9,223)Other comprehensive loss, net of tax— — — — (19,622)(19,622)
Net incomeNet income— — — 5,086 — 5,086 Net income— — — 32,079 — 32,079 
Balance at March 31, 202022,254 223 230,742 166,074 4,295 401,334 
Balance at March 31, 2021Balance at March 31, 202122,812 228 292,690 272,890 21,758 587,566 
Issuance of common stock under stock-based compensation planIssuance of common stock under stock-based compensation plan61 — 395 — — 395 Issuance of common stock under stock-based compensation plan7 — 163 — — 163 
Stock-based compensation expenseStock-based compensation expense— — 931 — — 931 Stock-based compensation expense— — 1,279 — — 1,279 
Restricted shares withheld for taxesRestricted shares withheld for taxes(12)— (1,803)— — (1,803)Restricted shares withheld for taxes(13)— (2,082)— — (2,082)
Dividends declared ($0.09 per share)— — — (2,013)— (2,013)
Dividends declared ($0.11 per share)Dividends declared ($0.11 per share)— — — (2,508)— (2,508)
Other comprehensive income, net of taxOther comprehensive income, net of tax— — — — 27,008 27,008 Other comprehensive income, net of tax— — — — 9,583 9,583 
Net incomeNet income— — — 30,262 — 30,262 Net income— — — 35,635 — 35,635 
Balance at June 30, 202022,303 223 230,265 194,323 31,303 456,114 
Issuance of common stock, net of issuance costs311 3 56,698 — — 56,701 
Issuance of common stock under stock-based compensation plan48 1 953 — — 954 
Stock-based compensation expense— — 952 — — 952 
Dividends declared ($0.09 per share)— — — (2,034)— (2,034)
Other comprehensive income, net of tax— — — — 6,554 6,554 
Net income— — — 14,890 — 14,890 
Balance at September 30, 202022,662 $227 $288,868 $207,179 $37,857 $534,131 
Balance at June 30, 2021Balance at June 30, 202122,806 $228 $292,050 $306,017 $31,341 $629,636 

See accompanying notes to condensed consolidated financial statements.

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KINSALE CAPITAL GROUP, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (Unaudited)
Nine Months Ended September 30,Six Months Ended June 30,
2021202020222021
(in thousands)(in thousands)
Operating activities:Operating activities:Operating activities:
Net cash provided by operating activitiesNet cash provided by operating activities$301,881 $206,461 Net cash provided by operating activities$278,654 $194,948 
Investing activities:Investing activities:Investing activities:
Purchase of property and equipmentPurchase of property and equipment(4,770)(29,088)Purchase of property and equipment(2,023)(2,946)
Sale of property and equipment— 4,999 
Change in short-term investments, netChange in short-term investments, net(10,793)— 
Purchases – fixed-maturity securitiesPurchases – fixed-maturity securities(509,000)(389,713)Purchases – fixed-maturity securities(398,033)(315,152)
Purchases – equity securitiesPurchases – equity securities(11,717)(33,830)Purchases – equity securities(806)(8,283)
Sales – fixed-maturity securitiesSales – fixed-maturity securities102,552 79,042 Sales – fixed-maturity securities72,384 87,681 
Sales – equity securitiesSales – equity securities3,185 — Sales – equity securities3,990 1,583 
Maturities and calls – fixed-maturity securitiesMaturities and calls – fixed-maturity securities139,669 66,204 Maturities and calls – fixed-maturity securities65,177 99,683 
Net cash used in investing activitiesNet cash used in investing activities(280,081)(302,386)Net cash used in investing activities(270,104)(137,434)
Financing activities:Financing activities:Financing activities:
Proceeds from issuance of common stock, net of issuance costs— 56,701 
Proceeds from credit facility— 23,300 
Payroll taxes withheld and remitted on share-based paymentsPayroll taxes withheld and remitted on share-based payments(2,082)(1,803)Payroll taxes withheld and remitted on share-based payments(3,257)(2,082)
Proceeds from stock options exercisedProceeds from stock options exercised722 2,051 Proceeds from stock options exercised528 502 
Dividends paidDividends paid(7,521)(6,036)Dividends paid(5,971)(5,022)
Net cash (used in) provided by financing activities(8,881)74,213 
Net cash used in financing activitiesNet cash used in financing activities(8,700)(6,602)
Net change in cash and cash equivalentsNet change in cash and cash equivalents12,919 (21,712)Net change in cash and cash equivalents(150)50,912 
Cash and cash equivalents at beginning of yearCash and cash equivalents at beginning of year77,093 100,408 Cash and cash equivalents at beginning of year121,040 77,093 
Cash and cash equivalents at end of periodCash and cash equivalents at end of period$90,012 $78,696 Cash and cash equivalents at end of period$120,890 $128,005 
See accompanying notes to condensed consolidated financial statements.

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KINSALE CAPITAL GROUP, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)

1.    Summary of significant accounting policiesSignificant Accounting Policies
Basis of presentation
The unaudited condensed consolidated financial statements and notes have been prepared in accordance with U.S. generally accepted accounting principles ("U.S. GAAP") for interim financial information and do not contain all of the information and footnotes required by U.S. GAAP for complete financial statements. As such, these unaudited condensed consolidated interim financial statements should be read in conjunction with the audited consolidated financial statements of Kinsale Capital Group, Inc. and its subsidiaries ("the Company") included in the Annual Report on Form 10-K for the year ended December 31, 2020.2021. In the opinion of management, all adjustments necessary for a fair presentation of the condensed consolidated financial statements have been included. Such adjustments consist only of normal recurring items. All significant intercompany balances and transactions have been eliminated in consolidation. Interim results are not necessarily indicative of results of operations for the full year.
Use of estimates
The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, if any, at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Recently adoptedProspective accounting pronouncements
Accounting Standard Update ("ASU") 2019-12, Income Taxes - Simplifying the Accounting for Income Taxes
In December 2019, the Financial Accounting Standards Board ("FASB") issued updated guidance for the accounting for income taxes. The updated guidance is intended to simplify the accounting for income taxes by removing several exceptions contained in existing guidance and amending other existing guidance to simplify several other income tax accounting matters. Effective January 1, 2021, the Company adopted ASU 2019-12, which did not have a material impact on the Company's condensed consolidated financial statements.
There are no prospective accounting standards which, upon their effective date, would have a material impact on the Company's condensed consolidated financial statements.
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2.     Investments
Available-for-sale investments
The following tables summarize the available-for-sale investments at SeptemberJune 30, 20212022 and December 31, 2020:2021:
September 30, 2021June 30, 2022
Amortized CostGross Unrealized GainsGross Unrealized LossesEstimated Fair ValueAmortized CostGross Unrealized GainsGross Unrealized LossesEstimated Fair Value
(in thousands)(in thousands)
Fixed maturities:Fixed maturities:Fixed maturities:
U.S. Treasury securities and obligations of U.S. government agenciesU.S. Treasury securities and obligations of U.S. government agencies$6,932 $— $(10)$6,922 U.S. Treasury securities and obligations of U.S. government agencies$22,933 $— $(832)$22,101 
Obligations of states, municipalities and political subdivisionsObligations of states, municipalities and political subdivisions214,776 11,739 (454)226,061 Obligations of states, municipalities and political subdivisions231,631 849 (17,666)214,814 
Corporate and other securitiesCorporate and other securities434,489 14,101 (2,100)446,490 Corporate and other securities621,828 554 (61,827)560,555 
Asset-backed securitiesAsset-backed securities298,492 3,255 (79)301,668 Asset-backed securities312,885 424 (6,987)306,322 
Residential mortgage-backed securitiesResidential mortgage-backed securities367,855 92 (40,064)327,883 
Commercial mortgage-backed securitiesCommercial mortgage-backed securities58,579 2,942 (81)61,440 Commercial mortgage-backed securities65,767 — (4,368)61,399 
Residential mortgage-backed securities300,016 2,817 (2,541)300,292 
Total fixed-maturity investmentsTotal fixed-maturity investments$1,313,284 $34,854 $(5,265)$1,342,873 Total fixed-maturity investments$1,622,899 $1,919 $(131,744)$1,493,074 

December 31, 2020December 31, 2021
Amortized CostGross Unrealized GainsGross Unrealized LossesEstimated Fair ValueAmortized CostGross Unrealized GainsGross Unrealized LossesEstimated Fair Value
(in thousands)(in thousands)
Fixed maturities:Fixed maturities:Fixed maturities:
U.S. Treasury securities and obligations of U.S. government agenciesU.S. Treasury securities and obligations of U.S. government agencies$6,936 $— $(89)$6,847 
Obligations of states, municipalities and political subdivisionsObligations of states, municipalities and political subdivisions$216,181 $14,792 $(67)$230,906 Obligations of states, municipalities and political subdivisions216,375 12,139 (469)228,045 
Corporate and other securitiesCorporate and other securities294,854 21,840 (86)316,608 Corporate and other securities450,594 11,714 (3,821)458,487 
Asset-backed securitiesAsset-backed securities236,813 4,230 (382)240,661 Asset-backed securities299,810 2,217 (252)301,775 
Residential mortgage-backed securitiesResidential mortgage-backed securities340,804 1,804 (4,923)337,685 
Commercial mortgage-backed securitiesCommercial mortgage-backed securities66,110 4,886 (27)70,969 Commercial mortgage-backed securities57,000 2,433 (206)59,227 
Residential mortgage-backed securities217,859 4,938 (141)222,656 
Total fixed-maturity investmentsTotal fixed-maturity investments$1,031,817 $50,686 $(703)$1,081,800 Total fixed-maturity investments$1,371,519 $30,307 $(9,760)$1,392,066 
Available-for-sale securities in a loss position
The Company regularly reviews all its available-for-sale investments with unrealized losses to assess whether the decline in the fair value is deemed to be a credit loss. The Company considers a number of factors in completing its review of credit losses, including the extent to which a security's fair value has been below cost and the financial condition of an issuer. In addition to specific issuer information, the Company also evaluates the current market and interest rate environment. Generally, a changedecline in a security’s value caused by a change in the market or interest rate environment does not constitute a credit loss.
For fixed-maturity securities, the Company also considers whether it intends to sell the security or, if it is more likely than not that it will be required to sell the security before recovery, and its ability to recover all amounts outstanding when contractually due. When assessing whether it intends to sell a fixed-maturity security or, if it is
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likely to be required to sell a fixed-maturity security before recovery of its amortized cost, the Company evaluates
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facts and circumstances including, but not limited to, decisions to reposition the investment portfolio, potential sales of investments to meet cash flow needs and potential sales of investments to capitalize on favorable pricing.
For fixed-maturity securities where a decline in fair value is below the amortized cost basis and the Company intends to sell the security, or it is more likely than not that the Company will be required to sell the security before recovery of its amortized cost, an impairment is recognized in net income based on the fair value of the security at the time of assessment. For fixed-maturity securities that the Company does not intend to sell or for which it is more likely than not that the Company would not be required to sell before recovery of its amortized cost, the Company compares the estimated present value of the cash flows expected to be collected to the amortized cost of the security. The extent to which the estimated present value of the cash flows expected to be collected is less than the amortized cost of the security represents the credit-related portion of the impairment, which is recognized in net income through an allowance for credit losses. Any remaining decline in fair value represents the noncredit portion of the impairment, which is recognized in other comprehensive income.
The Company reports investment income due and accrued separately from available-for-sale investments and has elected not to measure an allowance for credit losses for investment income due and accrued. Investment income due and accrued is written off through net realized gains (losses) on investmentsearnings at the time the issuer of the bond defaults or is expected to default on payments.
The following tables summarize gross unrealized losses and estimated fair value for available-for-sale investments by length of time that the securities have continuously been in an unrealized loss position:
September 30, 2021June 30, 2022
Less than 12 Months12 Months or LongerTotalLess than 12 Months12 Months or LongerTotal
Estimated Fair ValueGross Unrealized LossesEstimated Fair ValueGross Unrealized LossesEstimated Fair ValueGross Unrealized LossesEstimated Fair ValueGross Unrealized LossesEstimated Fair ValueGross Unrealized LossesEstimated Fair ValueGross Unrealized Losses
(in thousands)(in thousands)
Fixed maturities:Fixed maturities:Fixed maturities:
U.S. Treasury securities and obligations of the U.S. government agenciesU.S. Treasury securities and obligations of the U.S. government agencies$6,922 $(10)$— $— $6,922 $(10)U.S. Treasury securities and obligations of the U.S. government agencies$22,101 $(832)$— $— $22,101 $(832)
Obligations of states, municipalities and political subdivisionsObligations of states, municipalities and political subdivisions24,496 (454)— — 24,496 (454)Obligations of states, municipalities and political subdivisions146,902 (17,173)1,847 (493)148,749 (17,666)
Corporate and other securitiesCorporate and other securities127,870 (1,984)1,080 (116)128,950 (2,100)Corporate and other securities476,406 (57,794)16,821 (4,033)493,227 (61,827)
Asset-backed securitiesAsset-backed securities63,318 (58)7,771 (21)71,089 (79)Asset-backed securities260,951 (6,434)16,272 (553)277,223 (6,987)
Residential mortgage-backed securitiesResidential mortgage-backed securities271,487 (30,972)53,817 (9,092)325,304 (40,064)
Commercial mortgage-backed securitiesCommercial mortgage-backed securities8,500 (81)— — 8,500 (81)Commercial mortgage-backed securities59,470 (4,032)1,929 (336)61,399 (4,368)
Residential mortgage-backed securities188,418 (2,505)1,249 (36)189,667 (2,541)
Total fixed-maturity investmentsTotal fixed-maturity investments$419,524 $(5,092)$10,100 $(173)$429,624 $(5,265)Total fixed-maturity investments$1,237,317 $(117,237)$90,686 $(14,507)$1,328,003 $(131,744)

At SeptemberJune 30, 2021,2022, the Company held 165789 fixed-maturity securities in an unrealized loss position with a total estimated fair value of $429.6 million$1.3 billion and gross unrealized losses of $5.3$131.7 million. Of these securities, 844 were in a continuous unrealized loss position for greater than one year. As discussed above, the Company regularly reviews all fixed-maturity securities within its investment portfolio to determine whether a credit loss has occurred. Based on the Company's review as of SeptemberJune 30, 2021,2022, unrealized losses were caused by interest rate changes or other market factors and were not credit-specific issues. At SeptemberJune 30, 2021, 80.3%2022, 79.8% of the Company’s fixed-maturity securities were
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rated "A-" or better and all of the Company’s fixed-maturity securities made expected coupon
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payments under the contractual terms of the securities. For the ninesix months ended SeptemberJune 30, 2021,2022, the Company concluded that there were no credit losses from fixed-maturity securities with unrealized losses.
December 31, 2020December 31, 2021
Less than 12 Months12 Months or LongerTotalLess than 12 Months12 Months or LongerTotal
Estimated Fair ValueGross Unrealized LossesEstimated Fair ValueGross Unrealized LossesEstimated Fair ValueGross Unrealized LossesEstimated Fair ValueGross Unrealized LossesEstimated Fair ValueGross Unrealized LossesEstimated Fair ValueGross Unrealized Losses
(in thousands)(in thousands)
Fixed maturities:Fixed maturities:Fixed maturities:
U.S. Treasury securities and obligations of U.S. government agenciesU.S. Treasury securities and obligations of U.S. government agencies$6,847 $(89)$— $— $6,847 $(89)
Obligations of states, municipalities and political subdivisionsObligations of states, municipalities and political subdivisions$6,412 $(67)$— $— $6,412 $(67)Obligations of states, municipalities and political subdivisions23,870 (469)— — 23,870 (469)
Corporate and other securitiesCorporate and other securities3,829 (86)— — 3,829 (86)Corporate and other securities188,522 (3,718)1,092 (103)189,614 (3,821)
Asset-backed securitiesAsset-backed securities57,750 (149)23,825 (233)81,575 (382)Asset-backed securities136,669 (204)4,452 (48)141,121 (252)
Residential mortgage-backed securitiesResidential mortgage-backed securities260,251 (4,329)17,968 (594)278,219 (4,923)
Commercial mortgage-backed securitiesCommercial mortgage-backed securities4,971 (27)— — 4,971 (27)Commercial mortgage-backed securities10,773 (206)— — 10,773 (206)
Residential mortgage-backed securities46,869 (129)266 (12)47,135 (141)
Total fixed-maturity investmentsTotal fixed-maturity investments$119,831 $(458)$24,091 $(245)$143,922 $(703)Total fixed-maturity investments$626,932 $(9,015)$23,512 $(745)$650,444 $(9,760)

Contractual maturities of available-for-sale fixed-maturity securities
The amortized cost and estimated fair value of available-for-sale fixed-maturity securities at SeptemberJune 30, 20212022 are summarized, by contractual maturity, as follows:
September 30, 2021June 30, 2022
AmortizedEstimatedAmortizedEstimated
CostFair ValueCostFair Value
(in thousands)(in thousands)
Due in one year or lessDue in one year or less$8,471 $8,601 Due in one year or less$14,710 $14,643 
Due after one year through five yearsDue after one year through five years172,248 178,438 Due after one year through five years351,224 338,212 
Due after five years through ten yearsDue after five years through ten years211,736 219,098 Due after five years through ten years242,954 215,383 
Due after ten yearsDue after ten years263,742 273,336 Due after ten years267,504 229,232 
Asset-backed securitiesAsset-backed securities298,492 301,668 Asset-backed securities312,885 306,322 
Residential mortgage-backed securitiesResidential mortgage-backed securities367,855 327,883 
Commercial mortgage-backed securitiesCommercial mortgage-backed securities58,579 61,440 Commercial mortgage-backed securities65,767 61,399 
Residential mortgage-backed securities300,016 300,292 
Total fixed-maturity securitiesTotal fixed-maturity securities$1,313,284 $1,342,873 Total fixed-maturity securities$1,622,899 $1,493,074 

Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties, and the lenders may have the right to put the securities back to the borrower.
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Net investment income
The following table presents the components of net investment income for the three and ninesix months ended SeptemberJune 30, 20212022 and 2020:2021:
Three Months Ended September 30,Nine Months Ended September 30,Three Months Ended June 30,Six Months Ended June 30,
20212020202120202022202120222021
(in thousands)(in thousands)
Interest:Interest:Interest:
Taxable bondsTaxable bonds$6,471 $5,383 $18,356 $15,253 Taxable bonds$9,179 $6,156 $16,974 $11,885 
Tax exempt municipal bondsTax exempt municipal bonds874 918 2,636 2,741 Tax exempt municipal bonds852 877 1,709 1,762 
Cash equivalents and short-term investmentsCash equivalents and short-term investments1 — 11 261 Cash equivalents and short-term investments104 9 123 10 
Dividends on equity securitiesDividends on equity securities979 1,100 2,801 2,554 Dividends on equity securities1,093 953 2,123 1,822 
Gross investment incomeGross investment income8,325 7,401 23,804 20,809 Gross investment income11,228 7,995 20,929 15,479 
Investment expensesInvestment expenses(230)(393)(1,338)(1,196)Investment expenses(634)(566)(1,247)(1,108)
Net investment incomeNet investment income$8,095 $7,008 $22,466 $19,613 Net investment income$10,594 $7,429 $19,682 $14,371 

Realized investment gains and losses
The following table presents realized investment gains and losses for the three and ninesix months ended SeptemberJune 30, 20212022 and 2020:2021:
Three Months Ended September 30,Nine Months Ended September 30,Three Months Ended June 30,Six Months Ended June 30,
20212020202120202022202120222021
(in thousands)(in thousands)
Fixed-maturity securities:Fixed-maturity securities:Fixed-maturity securities:
Realized gainsRealized gains$804 $719 $2,445 $1,826 Realized gains$234 $442 $1,076 $1,641 
Realized lossesRealized losses— (72)(2)(162)Realized losses(178)(1)(543)(2)
Net realized gains from fixed-maturity securitiesNet realized gains from fixed-maturity securities804 647 2,443 1,664 Net realized gains from fixed-maturity securities56 441 533 1,639 
Equity securities:Equity securities:Equity securities:
Realized gainsRealized gains97 — 97 — Realized gains1,363 — 1,363 — 
Realized lossesRealized losses(6)— (143)— Realized losses— (137)(148)(137)
Net realized gains (losses) from equity securitiesNet realized gains (losses) from equity securities91 — (46)— Net realized gains (losses) from equity securities1,363 (137)1,215 (137)
Realized gains from the sales of short-term investments— — — 12 
Realized losses from the sales of short-term investmentsRealized losses from the sales of short-term investments(6)— (40)— 
Net realized investment gainsNet realized investment gains$895 $647 $2,397 $1,676 Net realized investment gains$1,413 $304 $1,708 $1,502 

Change in net unrealized (losses) gains (losses) on fixed-maturity securities
For the three and ninesix months ended SeptemberJune 30, 2022, the changes in net unrealized losses for fixed-maturity securities were $(69.5) million and $(150.4) million, respectively. For the three and six months ended June 30, 2021, the changes in net unrealized gains (losses) for fixed-maturity securities were $(7.7)$12.1 million and $(20.4) million, respectively. For the three and nine months ended September 30, 2020, the changes in net unrealized gains for fixed-maturity securities were $8.3 million and $30.8$(12.7) million, respectively.
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Insurance – statutory deposits
The Company had invested assets with a fair value of $6.7$6.4 million and $6.9$6.7 million on deposit with state regulatory authorities at SeptemberJune 30, 20212022 and December 31, 2020,2021, respectively.
Payable for investments purchased
The Company recorded a payable for investments purchased, not yet settled, of $15.6$7.5 million and $15.0 million at SeptemberJune 30, 2021.2022 and December 31, 2021, respectively. The payable balance was included in the "other liabilities" line item of the consolidated balance sheet.
3.     Fair value measurementsValue Measurements
Fair value is estimated for each class of financial instrument based on the framework established in the fair value accounting guidance. Fair value is defined as the price in the principal market that would be received for an asset or paid to transfer a liability to facilitate an orderly transaction between market participants on the measurement date. Market participants are assumed to be independent, knowledgeable, able and willing to transact an exchange and not acting under duress. Fair value hierarchy disclosures are based on the quality of inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Adjustments to transaction prices or quoted market prices may be required in illiquid or disorderly markets in order to estimate fair value.
The three levels of the fair value hierarchy are defined as follows:
Level 1 - Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities traded in active markets.
Level 2 - Inputs to the valuation methodology include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability and market-corroborated inputs.
Level 3 - Inputs to the valuation methodology are unobservable for the asset or liability and are significant to the fair value measurement.
Fair values of the Company's investment portfolio are estimated using unadjusted prices obtained by its investment accounting vendor from nationally recognized third-party pricing services, where available. Values for U.S. Treasuries and exchange traded funds are generally based on Level 1 inputs, which use quoted prices in active markets for identical assets. For other fixed-maturity securities and non-redeemable preferred stock, the pricing vendors use a pricing methodology involving the market approach, including pricing models which use prices and relevant market information regarding a particular security or securities with similar characteristics to establish a valuation. The estimates of fair value of these investments are included in the amounts disclosed as Level 2. For those investments where significant inputs are unobservable, the Company's investment accounting vendor obtains valuations from pricing vendors or brokers using the market approach and income approach valuation techniques and are disclosed as Level 3.
Management performs several procedures to ascertain the reasonableness of investment values included in the condensed consolidated financial statements, including 1) obtaining and reviewing internal control reports from the Company's investment accounting vendor that assess fair values from third party pricing services, 2) discussing with the Company's investment accounting vendor its process for reviewing and validating pricing obtained from third party pricing services and 3) reviewing the security pricing received from the Company's investment accounting vendor and monitoring changes in unrealized gains and losses at the individual security level. The Company has
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evaluated the various types of securities in its investment portfolio to determine an appropriate fair value hierarchy level based upon trading activity and the observability of market inputs.
The following tables present the balances of assets measured at fair value on a recurring basis as of SeptemberJune 30, 20212022 and December 31, 2020,2021, by level within the fair value hierarchy:
September 30, 2021June 30, 2022
Level 1Level 2Level 3TotalLevel 1Level 2Level 3Total
(in thousands)(in thousands)
AssetsAssetsAssets
Fixed maturities:Fixed maturities:Fixed maturities:
U.S. Treasury securities and obligations of U.S. government agenciesU.S. Treasury securities and obligations of U.S. government agencies$6,922 $— $— $6,922 U.S. Treasury securities and obligations of U.S. government agencies$22,101 $— $— $22,101 
Obligations of states, municipalities and political subdivisionsObligations of states, municipalities and political subdivisions— 226,061 — 226,061 Obligations of states, municipalities and political subdivisions— 214,814 — 214,814 
Corporate and other securitiesCorporate and other securities— 446,490 — 446,490 Corporate and other securities— 560,555 — 560,555 
Asset-backed securitiesAsset-backed securities— 301,668 — 301,668 Asset-backed securities— 306,322 — 306,322 
Residential mortgage-backed securitiesResidential mortgage-backed securities— 327,883 — 327,883 
Commercial mortgage-backed securitiesCommercial mortgage-backed securities— 61,440 — 61,440 Commercial mortgage-backed securities— 61,399 — 61,399 
Residential mortgage-backed securities— 300,292 — 300,292 
Total fixed-maturity securitiesTotal fixed-maturity securities6,922 1,335,951 — 1,342,873 Total fixed-maturity securities22,101 1,470,973 — 1,493,074 
Equity securities:Equity securities:Equity securities:
Exchange traded fundsExchange traded funds112,984 — — 112,984 Exchange traded funds100,200 — — 100,200 
Non-redeemable preferred stockNon-redeemable preferred stock— 38,808 — 38,808 Non-redeemable preferred stock— 39,339 — 39,339 
Total equity securitiesTotal equity securities112,984 38,808 — 151,792 Total equity securities100,200 39,339 — 139,539 
Short-term investmentsShort-term investments9,948 822 — 10,770 
TotalTotal$119,906 $1,374,759 $— $1,494,665 Total$132,249 $1,511,134 $— $1,643,383 

December 31, 2020
Level 1Level 2Level 3Total
(in thousands)
Assets
Fixed maturities:
Obligations of states, municipalities and political subdivisions$— $230,906 $— $230,906 
Corporate and other securities— 316,608 — 316,608 
Asset-backed securities— 240,661 — 240,661 
Commercial mortgage-backed securities— 70,969 — 70,969 
Residential mortgage-backed securities— 222,656 — 222,656 
Total fixed-maturity securities— 1,081,800 — 1,081,800 
Equity securities:
Exchange traded funds98,050 — — 98,050 
Non-redeemable preferred stock— 31,612 — 31,612 
Total equity securities98,050 31,612 — 129,662 
Total$98,050 $1,113,412 $— $1,211,462 
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December 31, 2021
Level 1Level 2Level 3Total
(in thousands)
Assets
Fixed maturities:
U.S. Treasury securities and obligations of U.S. government agencies$6,847 $— $— $6,847 
Obligations of states, municipalities and political subdivisions— 228,045 — 228,045 
Corporate and other securities— 458,487 — 458,487 
Asset-backed securities— 301,775 — 301,775 
Residential mortgage-backed securities— 337,685 — 337,685 
Commercial mortgage-backed securities— 59,227 — 59,227 
Total fixed-maturity securities6,847 1,385,219 — 1,392,066 
Equity securities:
Exchange traded funds123,389 — — 123,389 
Non-redeemable preferred stock— 49,222 — 49,222 
Total equity securities123,389 49,222 — 172,611 
Total$130,236 $1,434,441 $— $1,564,677 
There were no assets or liabilities measured at fair value on a nonrecurring basis as of SeptemberJune 30, 20212022 or December 31, 2020.

2021.
The carrying value ofCompany holds cash equivalents approximatesthat are managed as part of its fair value at September 30, 2021investment portfolio and, December 31, 2020, due to the short-term maturities of these assets.assets, the carrying value of these investments approximates fair value. The Company held cash equivalents of $33.7 million and $44.7 million at June 30, 2022 and December 31, 2021, respectively. In addition, the estimated fair value of the Credit Facility approximated its carrying value as of SeptemberJune 30, 20212022 and December 31, 2020.2021. See Note 12 for further information regarding the Credit Facility.

4.     Deferred policy acquisition costsPolicy Acquisition Costs
The following table presents the amounts of policy acquisition costs deferred and amortized for the three and ninesix months ended September June��30, 20212022 and 2020:2021:
Three Months Ended September 30,Nine Months Ended September 30,Three Months Ended June 30,Six Months Ended June 30,
20212020202120202022202120222021
(in thousands)(in thousands)
Balance, beginning of periodBalance, beginning of period$38,801 $28,942 $31,912 $23,564 Balance, beginning of period$47,483 $34,741 $41,968 $31,912 
Policy acquisition costs deferred:Policy acquisition costs deferred:Policy acquisition costs deferred:
Direct commissionsDirect commissions28,837 21,214 81,740 58,788 Direct commissions40,236 28,253 76,096 52,903 
Ceding commissionsCeding commissions(8,089)(5,746)(21,283)(13,509)Ceding commissions(10,247)(6,990)(18,792)(13,194)
Other underwriting and policy acquisition costsOther underwriting and policy acquisition costs1,600 916 4,540 3,385 Other underwriting and policy acquisition costs2,244 1,572 4,232 2,940 
Policy acquisition costs deferredPolicy acquisition costs deferred22,348 16,384 64,997 48,664 Policy acquisition costs deferred32,233 22,835 61,536 42,649 
Amortization of net policy acquisition costsAmortization of net policy acquisition costs(20,876)(15,033)(56,636)(41,935)Amortization of net policy acquisition costs(24,910)(18,775)(48,698)(35,760)
Balance, end of periodBalance, end of period$40,273 $30,293 $40,273 $30,293 Balance, end of period$54,806 $38,801 $54,806 $38,801 

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Amortization of net policy acquisition costs is included in the line item "Underwriting, acquisition and insurance expenses" in the accompanying consolidated statements of income and comprehensive income.
5.     Property and equipment, netEquipment, Net
Property and equipment are included in "other assets" in the accompanying consolidated balance sheets and consistsconsist of the following:
September 30, 2021December 31, 2020
(in thousands)
Building$32,973 $31,675 
Parking deck5,072 5,072 
Land3,068 3,068 
Equipment3,054 2,770 
Software6,991 4,815 
Furniture and fixtures2,194 1,731 
Land improvements472 317 
53,824 49,448 
Accumulated depreciation(4,941)(3,262)
Total property and equipment, net$48,883 $46,186 
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During the first quarter of 2020, the Company sold a portion of both its land and parking deck for approximately $6.5 million to a real estate developer for the development of an apartment building. As of September 30, 2021, the Company had received $5.0 million of the proceeds from the sale and is expected to receive the remaining $1.5 million upon completion of the apartment building. This receivable is included in "other assets" on the accompanying consolidated balance sheet.
June 30, 2022December 31, 2021
(in thousands)
Building$33,065 $33,101 
Parking deck5,072 5,072 
Land3,068 3,068 
Equipment3,289 3,143 
Software9,579 7,849 
Furniture and fixtures2,161 2,158 
Land improvements474 474 
Construction in progress - building180 — 
56,888 54,865 
Accumulated depreciation(6,885)(5,570)
Total property and equipment, net$50,003 $49,295 

6.     Underwriting, acquisitionAcquisition and insurance expensesInsurance Expenses
Underwriting, acquisition and insurance expenses for the three and ninesix months ended SeptemberJune 30, 20212022 and 20202021 consist of the following:
Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
(in thousands)
Underwriting, acquisition and insurance expenses incurred:
Direct commissions$26,317 $18,585 $71,036 $50,068 
Ceding commissions(6,902)(4,588)(18,344)(11,234)
Other operating expenses12,050 8,930 36,798 28,637 
Total$31,465 $22,927 $89,490 $67,471 

Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
(in thousands)
Underwriting, acquisition and insurance expenses incurred:
Direct commissions$32,412 $23,554 $62,363 $44,719 
Ceding commissions(9,301)(6,087)(17,130)(11,442)
Other operating expenses15,861 12,422 32,284 24,748 
Total$38,972 $29,889 $77,517 $58,025 
Other operating expenses within underwriting, acquisition and insurance expenses include salaries, bonus and employee benefits expenses of $11.6$15.7 million and $6.6$12.0 million for the three months ended SeptemberJune 30, 2022 and 2021, respectively. Other operating expenses within underwriting, acquisition and 2020, respectively. Salaries, bonuses,insurance expenses include salaries, bonus and employee benefitbenefits expenses were $34.9of $30.7 million and $24.6$23.3 million for the ninesix months ended SeptemberJune 30, 20212022 and 2020,2021, respectively.

7.    Stock-based compensationCompensation
On July 27, 2016, the Kinsale Capital Group, Inc. 2016 Omnibus Incentive Plan (the "2016 Incentive Plan") became effective. The 2016 Incentive Plan, which is administered by the Compensation, Nominating and Corporate Governance Committee of the Company’s Board of Directors, provides for grants of stock options, restricted stock,
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restricted stock units and other stock-based awards to officers, employees, directors, independent contractors and consultants. The number of shares of common stock available for issuance under the 2016 Incentive Plan may not exceed 2,073,832.
The total compensation cost that has been charged against income for share-based compensation arrangements was $3.6$3.3 million and $2.7$2.3 million for the ninesix months ended SeptemberJune 30, 20212022 and 2020,2021, respectively.
Restricted Stock Awards
During the ninesix months ended SeptemberJune 30, 2021,2022, the Company granted restricted stock awards under the 2016 Incentive Plan. The restricted stock awards were valued on the date of grant and will vest over a period of 1 to 4 years.years corresponding to the anniversary date of the grants. The fair value of restricted stock awards was determined based on the closing trading price of the Company’s shares on the grant date or, if no shares were traded on the grant date, the last preceding date for which there was a sale of shares. Except for restrictions placed on the transferability of restricted stock, holders of unvested restricted stock have full stockholder’s rights, including voting rights and the right to receive dividends. Unvested shares of restricted stock awards and accrued dividends, if any, are forfeited upon the termination of service to or employment with the Company.
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A summary of restricted stock activity under the 2016 Incentive Plan for the ninesix months ended SeptemberJune 30, 20212022 is as follows:
For the Nine Months Ended
September 30, 2021
Number of SharesWeighted Average Grant Date Fair Value per Share
Non-vested outstanding at the beginning of the period108,392 $97.40 
Granted35,870 $185.00 
Vested(40,752)$86.77 
Forfeited(6,940)$128.40 
Non-vested outstanding at the end of the period96,570 $132.19 

For the Six Months Ended
June 30, 2022
Number of SharesWeighted Average Grant Date Fair Value per Share
Non-vested outstanding at the beginning of the period95,984 $131.94 
Granted52,863 $211.86 
Vested(44,992)$109.76 
Forfeited(1,577)$176.03 
Non-vested outstanding at the end of the period102,278 $182.33 
Employees surrender shares to pay for withholding tax obligations resulting from any vesting of restricted stock awards. During the ninesix months ended SeptemberJune 30, 2021,2022, shares withheld for taxes in connection with the vesting of restricted stock awards totaled 12,846.14,879.
The weighted average grant-date fair value per share of the Company's restricted stock awards granted during the ninesix months ended SeptemberJune 30, 2022 and 2021 was $211.86 and 2020 was $185.00, and $145.46, respectively. The fair value of restricted stock awards that vested during the ninesix months ended SeptemberJune 30, 2022 and 2021 and 2020 was $6.8$9.9 million and $5.8$6.8 million, respectively. As of SeptemberJune 30, 2021,2022, the Company had $10.4$16.7 million of total unrecognized stock-based compensation expense expected to be charged to earnings over a weighted-average period of 2.73.0 years.
Stock Options
On July 27, 2016, the Board of Directors approved, and the Company granted, 1,036,916 stock options with an exercise price equal to the initial public offering price of $16.00 per share and a weighted-average grant-date fair value of $2.71 per share. The options have a maximum contractual term of 10 years and vested in 4 equal annual installments following the date of the grant.
The value of the options granted was estimated at the date of grant using the Black-Scholes pricing model using the following assumptions:
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Risk-free rate of return1.26 %
Dividend yield1.25 %
Expected share price volatility(1)
18.50 %
Expected life in years(2)
6.3 years
(1)     Expected volatility was based on the Company’s competitors within the industry.
(2)     Expected life was calculated using the simplified method, which was an average of the contractual term of the option and its ordinary vesting period, as the Company did not have sufficient historical data for determining the expected term of our stock option awards.
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A summary of option activity as of SeptemberJune 30, 2021,2022, and changes during the period then ended is presented below:
Number of SharesWeighted-Average Exercise PriceWeighted-Average Remaining Years of Contractual TermAggregate Intrinsic Value (in thousands)
Outstanding at January 1, 2021387,738 $16.00 
Granted— — 
Forfeited(934)16.00 
Exercised(45,192)16.00 
Outstanding at September 30, 2021341,612 $16.00 4.8$49,773 
Exercisable at September 30, 2021341,612 $16.00 4.8$49,773 

Number of SharesWeighted-Average Exercise PriceWeighted-Average Remaining Years of Contractual TermAggregate Intrinsic Value (in thousands)
Outstanding at January 1, 2022325,433 $16.00 
Granted— — 
Forfeited(934)16.00 
Exercised(32,975)16.00 
Outstanding at June 30, 2022291,524 $16.00 4.1$62,281 
Exercisable at June 30, 2022291,524 $16.00 4.1$62,281 
The total intrinsic value of options exercised was $7.3$6.4 million and $17.9$5.1 million during the ninesix months ended SeptemberJune 30, 20212022 and 2020,2021, respectively. 
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8.    Earnings per sharePer Share
The following represents a reconciliation of the numerator and denominator of the basic and diluted earnings per share computations contained in the condensed consolidated financial statements:
Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
(in thousands, except per share data)
Net income$36,625 $14,890 $104,339 $50,238 
Weighted average common shares outstanding - basic22,714 22,398 22,681 22,220 
Effect of potential dilutive securities:
Conversion of stock options317 465 329 491 
Conversion of restricted stock33 65 47 64 
Weighted average common shares outstanding - diluted23,064 22,928 23,057 22,775 
Earnings per common share:
Basic$1.61 $0.66 $4.60 $2.26 
Diluted$1.59 $0.65 $4.53 $2.21 

Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
(in thousands, except per share data)
Net income$27,090 $35,635 $58,881 $67,714 
Weighted average common shares outstanding - basic22,781 22,678 22,767 22,665 
Effect of potential dilutive securities:
Conversion of stock options276 327 283 335 
Conversion of restricted stock46 49 45 55 
Weighted average common shares outstanding - diluted23,103 23,054 23,095 23,055 
Earnings per common share:
Basic$1.19 $1.57 $2.59 $2.99 
Diluted$1.17 $1.55 $2.55 $2.94 
There were no anti-dilutive stock awards for the three months ended SeptemberJune 30, 2021 and 2020.2022. There were 30 thousand and 3548 thousand anti-dilutive stock awards for the ninesix months ended SeptemberJune 30, 2022. For both the three and six months ended June 30, 2021, and 2020, respectively.there were 32 thousand anti-dilutive stock awards.

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9. Income taxesTaxes
The Company uses the estimated annual effective tax rate method for calculating its tax provision in interim periods, which represents the Company's best estimate of the effective tax rate expected for the full year. The estimated annual effective tax rate typically differs from the U.S. statutory tax rate, primarily as a result of tax-exempt investment income and any discrete items recognized during the period. The Company's effective tax rates were 18.9%17.4% and 12.8%18.5% for the ninesix months ended SeptemberJune 30, 20212022 and 2020,2021, respectively. The effective tax rates were lower than the federal statutory rate of 21% due primarily to the tax benefits from stock-based compensation and from income generated by certain tax-exempt investments. During the nine months ended September 30, 2021, the level
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Table of stock options exercised was lower than the nine months ended September 30, 2020, which resulted in a higher effective tax rate.Contents
10.     Reserves for unpaid lossesFor Unpaid Losses and loss adjustment expensesLoss Adjustment Expenses
The following table presents a reconciliation of consolidated beginning and ending reserves for unpaid losses and loss adjustment expenses:
September 30,
20212020
(in thousands)
Gross reserves for unpaid losses and loss adjustment expenses, beginning of year$636,013 $460,058 
Less: reinsurance recoverable on unpaid losses83,730 69,792 
Adoption of accounting standard for credit losses— (282)
Net reserves for unpaid losses and loss adjustment expenses, beginning of year552,283 390,548 
Incurred losses and loss adjustment expenses:
Current year262,140 204,096 
Prior years(25,413)(9,628)
Total net losses and loss adjustment expenses incurred236,727 194,468 
Payments:
Current year12,110 10,256 
Prior years68,546 57,253 
Total payments80,656 67,509 
Net reserves for unpaid losses and loss adjustment expenses, end of period708,354 517,507 
Reinsurance recoverable on unpaid losses106,502 85,693 
Gross reserves for unpaid losses and loss adjustment expenses, end of period$814,856 $603,200 

June 30,
20222021
(in thousands)
Gross reserves for unpaid losses and loss adjustment expenses, beginning of year$881,344 $636,013 
Less: reinsurance recoverable on unpaid losses117,561 83,730 
Net reserves for unpaid losses and loss adjustment expenses, beginning of year763,783 552,283 
Incurred losses and loss adjustment expenses:
Current year227,403 165,583 
Prior years(17,858)(16,208)
Total net losses and loss adjustment expenses incurred209,545 149,375 
Payments:
Current year6,785 4,398 
Prior years61,317 48,199 
Total payments68,102 52,597 
Net reserves for unpaid losses and loss adjustment expenses, end of period905,226 649,061 
Reinsurance recoverable on unpaid losses131,515 104,263 
Gross reserves for unpaid losses and loss adjustment expenses, end of period$1,036,741 $753,324 
During the ninesix months ended SeptemberJune 30, 2022, the reserves for unpaid losses and loss adjustment expenses held at December 31, 2021 developed favorably by $17.9 million, of which $21.0 million was attributable to the 2020 and 2021 accident years due to lower emergence of reported losses than expected across most lines of business. This favorable development was offset in part by adverse development largely from the 2018 accident year due to routine variability in reported losses and modest adjustments in actuarial assumptions.
During the six months ended June 30, 2021, the reserves for unpaid losses and loss adjustment expenses held at December 31, 2020 developed favorably by $25.4$16.2 million, of which $28.9$21.8 million was attributable to the 2020 accident year. Actuarial assumptions for the 2020 accident year and reflected additional uncertainty to account for potential COVID-19 related claims. However, the Company's current outlook is more favorable than in the prior year as no significant claims have been reported to date and, as a result, the Company adjusted certain assumptions in the 2021 period. In addition,lower emergence of reported losses have been emerging at lower levels than expected across most lines of business. This favorable development was offset in part by adverse development mostly attributable to the
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2015-2018 2018 accident yearsyear as a result of modest adjustments in actuarial assumptions based on observable trends. Current accident year incurred losses and loss adjustment expenses for the nine months ended September 30, 2021 included $8.8 millionassumptions.
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Table of catastrophe losses primarily related to Hurricane Ida and winter storms Uri and Viola in Texas.Contents
During the nine months ended September 30, 2020, the reserves for unpaid losses and loss adjustment expenses held at December 31, 2019 developed favorably by $9.6 million, of which $7.8 million was attributable to the 2019 accident year. The favorable development resulted from reported losses emerging at lower levels than expected across most lines of business. Current accident year incurred losses and loss adjustment expenses for the nine months ended September 30, 2020 included $17.1 million of catastrophe losses primarily related to Hurricanes Laura and Sally and the California wildfires.
11.     Reinsurance
The following table summarizes the effect of reinsurance on premiums written and earned for the three and ninesix months ended SeptemberJune 30, 20212022 and 2020:2021:
Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
(in thousands)
Premiums written:
Direct$197,616 $144,777 $560,553 $402,904 
Assumed— — — — 
Ceded(26,939)(22,529)(77,825)(54,996)
Net written$170,677 $122,248 $482,728 $347,908 
Premiums earned:
Direct$180,458 $127,301 $486,920 $343,184 
Assumed— — — 21 
Ceded(23,587)(19,057)(69,308)(48,243)
Net earned$156,871 $108,244 $417,612 $294,962 

Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
(in thousands)
Premiums written:
Direct$277,001 $194,061 $522,514 $362,937 
Ceded(34,658)(26,308)(63,673)(50,886)
Net written$242,343 $167,753 $458,841 $312,051 
Premiums earned:
Direct$222,136 $161,431 $427,764 $306,462 
Ceded(31,978)(23,731)(59,044)(45,721)
Net earned$190,158 $137,700 $368,720 $260,741 
The following table summarizes ceded losses and loss adjustment expenses for the three and ninesix months ended SeptemberJune 30, 20212022 and 2020:2021:
Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
(in thousands)
Ceded incurred losses and loss adjustment expenses$10,640 $19,297 $34,053 $30,202 

Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
(in thousands)
Ceded incurred losses and loss adjustment expenses$13,380 $10,912 $23,016 $23,413 
The following table presents reinsurance recoverables on paid and unpaid losses as of SeptemberJune 30, 20212022 and December 31, 2020:2021:
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September 30, 2021December 31, 2020
(in thousands)
Reinsurance recoverables on paid losses$5,524 $9,485 
Reinsurance recoverables on unpaid losses106,502 83,730 
Reinsurance recoverables$112,026 $93,215 
June 30, 2022December 31, 2021
(in thousands)
Reinsurance recoverables on paid losses$3,522 $5,409 
Reinsurance recoverables on unpaid losses, net131,515 117,561 
Reinsurance recoverables, net$135,037 $122,970 

12.     Credit Agreement
On May 28, 2019, the Company entered into a Credit Agreement (the “Credit Agreement”) that provided the Company with a $50.0 million senior unsecured revolving credit facility (the “Credit Facility”) and an uncommitted accordion feature that permits the Company to increase the commitments by an additional $30.0 million. The Credit Facility has a maturity of May 28, 2024. Borrowings under the Credit Facility were used to fund construction of the Company’s new headquarters but may also be used for working capital and general corporate purposes.
Loans under the Credit Facility may be subject to varying rates of interest depending on whether the loan is a Eurodollar loan or an alternate base rate ("ABR") loan, at the Company's election. Eurodollar loans bear an interest rate per annum equal to adjusted LIBOR for the applicable interest period plus a margin of 1.75%. ABR loans bear an interest rate per annum equal to (a) the higher of the prime rate, the New York Federal Reserve Board Rate plus
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0.50% or the one-month adjusted LIBOR plus 1%, plus (b) the applicable margin of 0.75%. As of SeptemberJune 30, 2021,2022, there was $42.7$42.8 million outstanding under the Credit Facility, net of debt issuance cost of $0.3$0.2 million, with a weighted average interest rate of 1.88%3.15%.
The Credit Agreement also contains representations and warranties and affirmative and negative covenants customary for financings of this type, as well as customary events of default provisions. As of SeptemberJune 30, 2021,2022, the Company was in compliance with all of its financial covenants under the Credit Facility.

13.     Other comprehensive (loss) incomeComprehensive (Loss) Income
The following table summarizes the components of other comprehensive (loss) income for the three and ninesix months ended SeptemberJune 30, 20212022 and 2020:2021:
Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
(in thousands)
Unrealized (losses) gains on fixed-maturity securities arising during the period, before income taxes$(6,994)$8,701 $(18,162)$32,113 
Income tax benefit (expense)1,469 (1,827)3,814 (6,744)
Unrealized (losses) gains arising during the period, net of income taxes(5,525)6,874 (14,348)25,369 
Less reclassification adjustment:
Net realized gains on fixed-maturity securities, before income taxes693 405 2,232 1,304 
Income tax expense(146)(85)(469)(274)
Reclassification adjustment included in net income, net of income taxes547 320 1,763 1,030 
Other comprehensive (loss) income$(6,072)$6,554 $(16,111)$24,339 

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Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
(in thousands)
Unrealized (losses) gains on fixed-maturity securities arising during the period, before income taxes$(69,483)$12,482 $(149,968)$(11,168)
Income tax benefit (expense)14,591 (2,621)31,493 2,345 
Unrealized (losses) gains arising during the period, net of income taxes(54,892)9,861 (118,475)(8,823)
Less reclassification adjustment:
Net realized (losses) gains on fixed-maturity securities, before income taxes(12)351 427 1,539 
Income tax benefit (expense)2 (73)(90)(323)
Reclassification adjustment included in net income, net of income taxes(10)278 337 1,216 
Other comprehensive (loss) income$(54,882)$9,583 $(118,812)$(10,039)
The sale of an available-for-sale fixed-maturity security results in amounts being reclassified from accumulated other comprehensive (loss) income (loss) to realized gains or losses in current period earnings. The related tax effect of the reclassification adjustment is recorded in income tax expense in current period earnings. See Note 2 for additional information.

14.     Subsequent Events
Note Purchase and Private Shelf Agreement
On July 22, 2022, the Company entered into a Note Purchase and Private Shelf Agreement (the “Note Purchase Agreement”) with PGIM, Inc. (“Prudential”) and the purchasers of the Notes (as defined below), named in the Purchaser Schedule attached thereto (collectively, the “Note Purchasers”). Pursuant to the Note Purchase Agreement, on July 22, 2022, the Company issued to the Note Purchasers $125.0 million aggregate principal amount (collectively, the "Series A Notes”). The Note Purchase Agreement also provides for the issuance of additional shelf notes from time to time issued thereunder (the “Shelf Notes” and, together with the Series A Notes, the “Notes”) not to exceed $150.0 million of Notes outstanding thereunder. The proceeds of the Notes may be used, among other things, to fund surplus at Kinsale Insurance Company, or any other insurance subsidiary of the Company, refinance indebtedness and for general corporate purposes. The Series A Notes are senior unsecured obligations of the Company and rank pari passu with the Company’s Amended and Restated Credit Agreement. The Note Purchase
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Agreement contains representations and affirmative and negative covenants, including financial covenants customary for agreements of this type, as well as customary events of default provisions.
The Series A Notes bear interest at 5.15% per annum and mature on July 22, 2034, unless paid earlier by the Company. Should the Company elect to prepay the Senior Notes, such aggregate prepayment will include the applicable make-whole amount(s), as defined within the applicable Note Purchase Agreement. Principal payments are required annually beginning on July 22, 2030 in equal installments of $25.0 million through July 22, 2034.
Credit Agreement
On July 22, 2022, the Company entered into an Amended and Restated Credit Agreement, with JPMorgan Chase Bank, N.A., as administrative agent and as issuing bank, Truist Bank, as syndication agent, and the lenders party thereto (collectively, the “Lenders”). The Amended and Restated Credit Agreement extended the maturity date to July 22, 2027, and increased the aggregate commitment to $100.0 million, with the option to increase the aggregate commitment by $30.0 million, subject to the Company obtaining commitments from existing or new lenders and satisfying other conditions specified in the Amended and Restated Credit Agreement. The Company is required to pay a Commitment Fee Rate (as defined therein) of 0.25% on the average daily amount of the Available Revolving Commitment (as defined therein). Borrowings under the Amended and Restated Credit Agreement may be used for general corporate purposes (which may include, without limitation, to fund future growth, to finance working capital needs, to fund capital expenditures, and to refinance, redeem or repay indebtedness). The Amended and Restated Credit Agreement also contains representations and affirmative and negative covenants, including financial covenants customary for agreements of this type, as well as customary events of default provisions.
The loans under the Amended and Restated Credit Agreement bear interest, at the Company's option, at a rate equal to the Adjusted Term SOFR Rate (as defined therein) plus 1.625% or the Alternate Base Rate (as defined therein) plus 0.625%.
The proceeds from the Series A Notes were used to repay the outstanding revolving loans under the Company's Amended and Restated Credit Agreement.
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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
The discussion and analysis below includesinclude certain forward-looking statements that are subject to risks, uncertainties and other factors described in "Risk Factors" in this Quarterly Report on Form 10-Q and in the Annual Report on Form 10-K for the year ended December 31, 2020.2021. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of many factors.
The results of operations for the three and ninesix months ended SeptemberJune 30, 20212022 are not necessarily indicative of the results that may be expected for the full year ended December 31, 2021,2022, or for any other future period. The following discussion should be read in conjunction with the unaudited condensed consolidated financial statements and the notes thereto included in Part I, Item 1 of this Quarterly Report, and in conjunction with our audited consolidated financial statements and the notes thereto included in the Annual Report on Form 10-K for the year ended December 31, 2020.2021.
References to the "Company," "Kinsale," "we," "us," and "our" are to Kinsale Capital Group, Inc. and its subsidiaries, unless the context otherwise requires.

Overview
Founded in 2009, Kinsale is a specialty insurance company. Kinsale focuses exclusively on the excess and surplus lines ("E&S") market in the U.S., where we use our underwriting expertise to write coverages for hard-to-place small business risks and personal lines risks. We market these insurance products in all 50 states, the District of Columbia, the Commonwealth of Puerto Rico and the U.S. Virgin Islands, primarily through a network of independent insurance brokers.
We have one reportable segment, our Excess and Surplus Lines Insurance segment, which offers property and casualty ("P&C") insurance products through the E&S market. For the first ninesix months of 2021,2022, the percentage breakdown of our gross written premiums was 86%79% casualty and 14%21% property. Our commercial underwriting divisions include commercial property, small business, excess casualty, construction, commercial property,general casualty, allied health, productproducts liability, general casualty, life sciences, professional liability, management liability, energy, environmental,entertainment, health care, environmental, inland marine, public entity inland marine and commercial insurance.small property. We also write a small amount of homeowners insurance in the personal lines market, which in aggregate represented 4%3% of our gross written premiums in the first ninesix months of 2021,2022 and is included within our personal insurance division.
COVID-19
We have been closely monitoringConsistent with 2021, the impactCompany's results of theoperations, financial position and cash flows were not materially impacted by COVID-19 pandemic and the related economic effects on all aspectsduring the first six months of 2022. For further discussion, see Part II, Item 7. "Management’s Discussion and Analysis of Financial Condition and Results of Operations" of our business, including how it will impact premium volume, losses andAnnual Report on Form 10-K for the fair value of our investment portfolio.
To date, management has not seen a significant decrease in the growth rate of its gross written premiums since the beginning of the COVID-19 pandemic and the related pressure in certain sectors of the U.S. economy. Over the past few years, including the time period preceding COVID-19, the E&S segment of the P&C market has been experiencing rapid growth due to dislocation in the overall property and casualty market and management expects premium growth to continue throughout the remainder ofyear ended December 31, 2021.
With respect to reported claims, Kinsale does not write lines of business with heightened exposure to COVID-19 related claims. Specifically, Kinsale does not write event cancellation, mortgage insurance, trade credit or surety, workers' compensation or reinsurance business. Lines of business written by Kinsale that could be subject to COVID-19 related claims include general liability, management liability, healthcare-related professional liability and commercial property. In each case, policy terms and conditions would be expected to preclude coverage for
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virus-related claims. Although management cannot definitively determine the ultimate impact of COVID-19 and related economic conditions at this time, management has not experienced any material adverse effect on Kinsale’s loss ratios due to COVID-19 related claims.
With respect to our investment portfolio, we seek to hold a high-quality, diversified portfolio of investments. During the first quarter of 2020, we experienced a significant decline in the fair value of our investment portfolio due to disruption in the global financial markets associated with COVID-19. Subsequent to the first quarter of 2020, the fair value of our investment portfolio rebounded sharply, gaining back all of the decline in fair value. However, during economic downturns, certain investments may default or become impaired due to deterioration in the financial condition or due to deterioration in the financial condition of an insurer that guarantees an issuer’s payments on such investments. Given the conservative nature of our investment portfolio, we do not expect a material adverse impact on the value of our investment portfolio or a long-term negative impact on our financial condition, results of operations or cash flows as it relates to COVID-19.
Components of our resultsOur Results of operationsOperations
Gross written premiums
Gross written premiums are the amounts received or to be received for insurance policies written or assumed by us during a specific period of time without reduction for policy acquisition costs, reinsurance costs or other deductions. The volume of our gross written premiums in any given period is generally influenced by:
•New business submissions;
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•Conversion of new business submissions into policies;
•Renewals of existing policies; and
•Average size and premium rate of bound policies.
We earn insurance premiums on a pro rata basis over the term of the policy. Our insurance policies generally have a term of one year. Net earned premiums represent the earned portion of our gross written premiums, less that portion of our gross written premiums that is ceded to third-party reinsurers under our reinsurance agreements.
Ceded written premiums
Ceded written premiums are the amount of gross written premiums ceded to reinsurers. We enter into reinsurance contracts to limit our exposure to potential large losses. Ceded written premiums are earned over the reinsurance contract period in proportion to the period of risk covered. The volume of our ceded written premiums is impacted by the level of our gross written premiums, and any decision we make to increase or decrease retention levels.levels and reinstatement premiums, if any.
Losses and loss adjustment expenses
Losses and loss adjustment expenses are a function of the amount and type of insurance contracts we write and the loss experience associated with the underlying coverage. In general, our losses and loss adjustment expenses are affected by:
•Frequency of claims associated with the particular types of insurance contracts that we write;
•Trends in the average size of losses incurred on a particular type of business;
•Mix of business written by us;
•Changes in the legal or regulatory environment related to the business we write;
•Trends in legal defense costs;
•Wage inflation; and
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•Inflation in medical costs.
Losses and loss adjustment expenses are based on an actuarial analysis of the estimated losses, including losses incurred during the period and changes in estimates from prior periods. Losses and loss adjustment expenses may be paid out over a period of years.
Underwriting, acquisition and insurance expenses
Underwriting, acquisition and insurance expenses include policy acquisition costs and other underwriting expenses. Policy acquisition costs are principally comprised of the commissions we pay our brokers, net of ceding commissions we receive on business ceded under certain reinsurance contracts. Policy acquisition costs also include underwriting expenses that are directly related to the successful acquisition of those policies which are deferred. The amortization of policy acquisition costs is charged to expense in proportion to premium earned over the policy life.
Other underwriting expenses represent the general and administrative expenses of our insurance business such as employment costs, telecommunication and technology costs, and legal and auditing fees.
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Net investment income
Net investment income is an important component of our results of operations. We earn investment income on our portfolio of cash and invested assets. Our cash and invested assets are primarily comprised of fixed-maturity securities, and may also include cash equivalents, equity securities and short-term investments. The principal factors that influence net investment income are the size of our investment portfolio and the yield on that portfolio. As measured by amortized cost (which excludes changes in fair value), the size of our investment portfolio is mainly a function of our invested equity capital combined with premiums we receive from our insureds less payments on policyholder claims.
Change in fair value of equity securities
Change in fair value of equity securities represents the increase or decrease in the fair value of equity securities held during the period.
Net realized investment gains (losses)
Net realized investment gains (losses) are a function of the difference between the amount received by us on the sale of a security and the security's amortized cost, as well as any credit impairments recognized in earnings.cost.
Income tax expense
Currently, substantially all of our income tax expense relates to federal income taxes. Our insurance subsidiary, Kinsale Insurance Company, is not subject to income taxes in the states in which it operates; however, our non-insurance subsidiaries are subject to state income taxes, but have not generated any material taxable income to date. The amount of income tax expense or benefit recorded in future periods will depend on the jurisdictions in which we operate and the tax laws and regulations in effect.
Key metrics
We discuss certain key metrics, described below, which we believe provide useful information about our business and the operational factors underlying our financial performance.
Underwriting income is a non-GAAP financial measure. We define underwriting income as net income, excluding net investment income, net change in the fair value of equity securities, net realized gains and losses on investments, other income, other expenses and income tax expense. See "—Reconciliation of non-GAAP financial measures"Non-GAAP Financial Measures" for a reconciliation of net income in accordance with GAAP to underwriting income.
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Net operating earnings is a non-GAAP financial measure. We define net operating earnings as net income excluding the net change in the fair value of equity securities, after taxes, and net realized gains and losses on investments, after taxes. See "—Reconciliation of non-GAAP financial measures"Non-GAAP Financial Measures" for a reconciliation of net income in accordance with GAAP to net operating earnings.
Loss ratio, expressed as a percentage, is the ratio of losses and loss adjustment expenses to net earned premiums.
Expense ratio, expressed as a percentage, is the ratio of underwriting, acquisition and insurance expenses to net earned premiums.
Combined ratio is the sum of the loss ratio and the expense ratio. A combined ratio under 100% indicates an underwriting profit. A combined ratio over 100% indicates an underwriting loss.
Return on equity is net income expressed on an annualized basis as a percentage of average beginning and ending total stockholders’ equity during the period.
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Operating return on equity is a non-GAAP financial measure. We define operating return on equity as net operating earnings expressed on an annualized basis as a percentage of average beginning and ending total stockholders’ equity during the period. See "—Reconciliation of non-GAAP financial measures"Non-GAAP Financial Measures" for a reconciliation of net income in accordance with GAAP to net operating earnings.
Net retention ratio is the ratio of net written premiums to gross written premiums.
Gross investment return is investment income from fixed-maturity and equity securities, before any deductions for fees and expenses, expressed as a percentage of the average beginning and ending book value of those investments during the period.
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TableResults of ContentsOperations
Three months ended SeptemberJune 30, 20212022 compared to three months ended SeptemberJune 30, 20202021
The following table summarizes our results of operations for the three months ended SeptemberJune 30, 20212022 and 2020:2021:
Three Months Ended September 30,Three Months Ended June 30,
($ in thousands)($ in thousands)20212020Change% Change($ in thousands)20222021Change% Change
Gross written premiumsGross written premiums$197,616 $144,777 $52,839 36.5 %Gross written premiums$277,001 $194,061 $82,940 42.7 %
Ceded written premiumsCeded written premiums(26,939)(22,529)(4,410)19.6 %Ceded written premiums(34,658)(26,308)(8,350)31.7 %
Net written premiumsNet written premiums$170,677 $122,248 $48,429 39.6 %Net written premiums$242,343 $167,753 $74,590 44.5 %
Net earned premiumsNet earned premiums$156,871 $108,244 $48,627 44.9 %Net earned premiums$190,158 $137,700 $52,458 38.1 %
Losses and loss adjustment expensesLosses and loss adjustment expenses87,352 82,431 4,921 6.0 %Losses and loss adjustment expenses107,040 79,115 27,925 35.3 %
Underwriting, acquisition and insurance expensesUnderwriting, acquisition and insurance expenses31,465 22,927 8,538 37.2 %Underwriting, acquisition and insurance expenses38,972 29,889 9,083 30.4 %
Underwriting income (1)
Underwriting income (1)
38,054 2,886 35,168 1,218.6 %
Underwriting income (1)
44,146 28,696 15,450 53.8 %
Net investment incomeNet investment income8,095 7,008 1,087 15.5 %Net investment income10,594 7,429 3,165 42.6 %
Change in the fair value of equity securitiesChange in the fair value of equity securities(1,012)6,031 (7,043)(116.8)%Change in the fair value of equity securities(23,353)7,565 (30,918)(408.7)%
Net realized gains on investmentsNet realized gains on investments895 647 248 38.3 %Net realized gains on investments1,413 304 1,109 364.8 %
Other expense, netOther expense, net(353)(451)98 (21.7)%Other expense, net(358)(386)28 (7.3)%
Income before taxesIncome before taxes45,679 16,121 29,558 183.4 %Income before taxes32,442 43,608 (11,166)(25.6)%
Income tax expenseIncome tax expense9,054 1,231 7,823 635.5 %Income tax expense5,352 7,973 (2,621)(32.9)%
Net incomeNet income$36,625 $14,890 $21,735 146.0 %Net income$27,090 $35,635 $(8,545)(24.0)%
Net operating earnings (2)
Net operating earnings (2)
$36,717 $9,615 $27,102 281.9 %
Net operating earnings (2)
$44,423 $29,419 $15,004 51.0 %
Loss ratioLoss ratio55.7 %76.1 %Loss ratio56.3 %57.5 %
Expense ratioExpense ratio20.0 %21.2 %Expense ratio20.5 %21.7 %
Combined ratioCombined ratio75.7 %97.3 %Combined ratio76.8 %79.2 %
Annualized return on equityAnnualized return on equity22.7 %12.0 %Annualized return on equity16.7 %23.4 %
Annualized operating return on equity (2)
Annualized operating return on equity (2)
22.8 %7.8 %
Annualized operating return on equity (2)
27.3 %19.3 %
(1) Underwriting income is a non-GAAP financial measure. See "—Reconciliation of Non-GAAP Financial Measures" for a reconciliation of net income in accordance with GAAP to underwriting income.
(2)Net operating earnings and annualized operating return on equity are non-GAAP financial measures"measures. Net operating earnings is defined as net income excluding the net change in the fair value of equity securities, after taxes, and net
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realized investment gains and losses, after taxes. Annualized operating return on equity is defined as net operating earnings expressed on an annualized basis as a percentage of average beginning and ending total stockholders’ equity during the period. See "—Reconciliation of Non-GAAP Financial Measures" for a reconciliation of net income in accordance with GAAP to net operating earnings.
Net income was $27.1 million for the three months ended June 30, 2022 compared to $35.6 million for the three months ended June 30, 2021, a decrease of 24.0%. The decrease in net income for the second quarter of 2022 from the same period last year was primarily due to a decline in the fair value of our equity investment portfolio driven by adverse movements in the capital markets during the quarter. This decrease was offset in part by strong growth in the business from favorable E&S market conditions and continued rate increases, an increase in investment income quarter over quarter driven by higher investment balances and lower catastrophe activity.
Underwriting income was $44.1 million for the three months ended June 30, 2022 compared to $28.7 million for the three months ended June 30, 2021, an increase of 53.8%. The corresponding combined ratios were 76.8% for the three months ended June 30, 2022 compared to 79.2% for the three months ended June 30, 2021. The increase in our underwriting income in the second quarter of 2022 compared to the second quarter of 2021 was due to a combination of premium growth and favorable rate increases from a strong underwriting environment and lower levels of relative reported losses and operating expenses.
Premiums
Our gross written premiums were $277.0 million for the three months ended June 30, 2022 compared to $194.1 million for the three months ended June 30, 2021, an increase of $82.9 million, or 42.7%. The increase in gross written premiums for the second quarter of 2022 over the same period last year was due to higher submission activity from brokers and higher rates across most lines of business, resulting from continued favorable conditions in the E&S market. The average premium on a policy written was approximately $11,700 in the second quarter of 2022 compared to approximately $9,900 in the second quarter of 2021. Excluding our personal lines insurance, which has a relatively low premium per policy written, the average premium on a policy written was approximately $14,500 in the second quarter of 2022 compared to $12,800 in the second quarter of 2021.
Net written premiums increased by $74.6 million, or 44.5%, to $242.3 million for the three months ended June 30, 2022 from $167.8 million for the three months ended June 30, 2021. The increase in net written premiums for the second quarter of 2022 compared to the same period last year was primarily due to higher gross written premiums. The net retention ratio was 87.5% for the three months ended June 30, 2022 compared to 86.4% for the three months ended June 30, 2021. The increase in the net retention ratio was largely due to higher reinstatement premiums on certain property reinsurance treaties in the second quarter of 2021 and the change in the mix of business quarter over quarter.
Net earned premiums increased by $52.5 million, or 38.1%, to $190.2 million for the three months ended June 30, 2022 from $137.7 million for the three months ended June 30, 2021 and was directly related to growth in gross written premiums.
Loss ratio
The loss ratio was 56.3% for the three months ended June 30, 2022 compared to 57.5% for the three months ended June 30, 2021. The decrease in the loss ratio in the second quarter of 2022 compared to the second quarter of 2021 was due primarily to lower catastrophe activity and lower loss selections for the current accident year, offset in part by lower favorable net development of reserves from prior accident years as a percentage of earned premiums. The loss selections in the current accident year were lower relative to the prior year due to favorable market conditions and continued rate increases.
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During the three months ended June 30, 2022, prior accident years developed favorably by $9.5 million, of which $10.9 million was attributable to the 2020 and 2021 accident years due to lower than expected reported losses across most lines of business. This favorable development was offset in part by adverse development largely from the 2018 accident year due to routine variability in reported losses and modest adjustments in actuarial assumptions.
During the three months ended June 30, 2021, prior accident years developed favorably by $9.1 million, of which $12.3 million was attributable to the 2020 accident year. The 2020 accident year reflected lower emergence of reported losses than expected. This favorable development was offset in part by adverse development mostly attributable to accident years 2016 and 2017 as a result of modest adjustments in actuarial assumptions.
The following table summarizes the loss ratios for the three months ended June 30, 2022 and 2021:
Three Months Ended June 30,
20222021
($ in thousands)Losses and Loss Adjustment Expenses% of Earned PremiumsLosses and Loss Adjustment Expenses% of Earned Premiums
Loss ratio:
Current accident year before catastrophe losses$116,531 61.3 %$85,416 62.0 %
Current year catastrophe losses21 — %2,834 2.1 %
Effect of prior year development(9,512)(5.0)%(9,135)(6.6)%
Total$107,040 56.3 %$79,115 57.5 %

Expense ratio
The following table summarizes the components of the expense ratio for the three months ended June 30, 2022 and 2021:
Three Months Ended June 30,
20222021
($ in thousands)Underwriting Expenses% of Earned PremiumsUnderwriting Expenses% of Earned Premiums
Commissions incurred:
Direct$32,412 17.1 %$23,554 17.1 %
Ceding(9,301)(4.9)%(6,087)(4.4)%
Net commissions incurred23,111 12.2 %17,467 12.7 %
Other underwriting expenses15,861 8.3 %12,422 9.0 %
Underwriting, acquisition and insurance expenses$38,972 20.5 %$29,889 21.7 %
The expense ratio was 20.5% for the three months ended June 30, 2022 compared to 21.7% for the three months ended June 30, 2021. The decrease in the expense ratio was due to lower other underwriting expenses and lower net commissions incurred as a percentage of earned premiums. The decrease in the other underwriting expense ratio was primarily due to higher net earned premiums, without a proportional increase in the amount of other underwriting expenses, as a result of management's focus on controlling costs. The decrease in the net commissions incurred ratio was mostly due to higher ceding commissions resulting from the new commercial property quota share treaty, effective June 1, 2022. Direct commissions paid as a percent of gross written premiums was 14.5% and 14.6% for the three months ended June 30, 2022 and 2021, respectively.
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Investing results

The following table summarizes net investment income, change in the fair value of equity securities and net realized investment gains for the three months ended June 30, 2022 and 2021:
Three Months Ended June 30,
($ in thousands)20222021Change
Interest from fixed-maturity securities$10,031 $7,033 $2,998 
Dividends from equity securities1,093 953 140 
Other104 9 95 
Gross investment income11,228 7,995 3,233 
Investment expenses(634)(566)(68)
Net investment income10,594 7,429 3,165 
Change in the fair value of equity securities(23,353)7,565 (30,918)
Net realized investment gains1,413 304 1,109 
Total$(11,346)$15,298 $(26,644)
Our net investment income increased by 42.6% to $10.6 million for the three months ended June 30, 2022 from $7.4 million for the three months ended June 30, 2021. This increase was primarily due to growth in our investment portfolio generated from the investment of strong operating cash flows since June 30, 2021. Our investment portfolio, excluding cash equivalents and unrealized gains and losses, had an annualized gross investment return of 2.6% for both the three months ended June 30, 2022 and 2021.
During the second quarter of 2022, the change in fair value of equity securities was comprised of unrealized losses related to exchange traded funds ("ETFs") of $18.4 million and unrealized losses related to non-redeemable preferred stock of $5.0 million. The change in unrealized losses during the second quarter of 2022 attributable to ETFs was largely reflective of the broader U.S. stock market, which fell sharply at the end of the quarter. The change in unrealized losses during the first three months of 2022 attributable to non-redeemable preferred stock was reflective of a higher interest rate environment.
During the second quarter of 2021, the change in fair value of equity securities was comprised of unrealized gains related to ETFs of $6.8 million and unrealized gains related to preferred stock of $0.8 million. Unrealized gains during the first quarter of 2021 were largely reflective of the gains in the broader U.S. stock market.
Income tax expense
Our effective tax rate was 16.5% for the three months ended June 30, 2022 compared to 18.3% for the three months ended June 30, 2021. The effective tax rates were lower than the federal statutory rate of 21% due to the tax benefits from stock-based compensation and tax-exempt investment income.
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Six months ended June 30, 2022 compared to six months ended June 30, 2021
The following table summarizes our results of operations for the six months ended June 30, 2022 and 2021:
Six Months Ended June 30,
($ in thousands)20222021Change% Change
Gross written premiums$522,514 $362,937 $159,577 44.0 %
Ceded written premiums(63,673)(50,886)(12,787)25.1 %
Net written premiums$458,841 $312,051 $146,790 47.0 %
Net earned premiums$368,720 $260,741 $107,979 41.4 %
Losses and loss adjustment expenses209,545 149,375 60,170 40.3 %
Underwriting, acquisition and insurance expenses77,517 58,025 19,492 33.6 %
Underwriting income (1)
81,658 53,341 28,317 53.1 %
Net investment income19,682 14,371 5,311 37.0 %
Change in fair value of equity securities(31,104)14,656 (45,760)(312.2)%
Net realized investment gains1,708 1,502 206 13.7 %
Other expense, net(630)(823)193 (23.5)%
Income before taxes71,314 83,047 (11,733)(14.1)%
Income tax expense12,433 15,333 (2,900)(18.9)%
Net income$58,881 $67,714 $(8,833)(13.0)%
Net operating earnings (2)
$82,104 $54,949 $27,155 49.4 %
Loss ratio56.8 %57.3 %
Expense ratio21.0 %22.2 %
Combined ratio77.8 %79.5 %
Annualized return on equity17.7 %22.5 %
Annualized operating return on equity(2)
24.6 %18.2 %
(1)Underwriting income is a non-GAAP financial measure. See "—Reconciliation of Non-GAAP Financial Measures" for a reconciliation of net income in accordance with GAAP to underwriting income.
(2) Net operating earnings and annualized operating return on equity are non-GAAP financial measures. Net operating earnings is defined as net income excluding the net change in the fair value of equity securities, after taxes, and net realized investment gains and losses, after taxes. Annualized operating return on equity is defined as net operating earnings expressed on an annualized basis as a percentage of average beginning and ending total stockholders’ equity during the period. See "—Reconciliation of non-GAAP financial measures"Non-GAAP Financial Measures" for a reconciliation of net income in accordance with GAAP to net operating earnings.
Overview
Net income was $36.6$58.9 million for the threesix months ended SeptemberJune 30, 20212022 compared to $14.9$67.7 million for the threesix months ended SeptemberJune 30, 2020, an increase2021, a decrease of 146.0%13.0%. The increasedecrease in net income for the third quarterfirst six months of 2021 over2022 from the third quarter of 2020same period last year was primarily due to higher underwriting income reflecting favorable E&S market conditions, which resulteda decline in higher rates on bound accounts andthe fair value of our equity investment portfolio driven by adverse movements in the capital markets during the period. This decrease was offset in part by strong growth in broker submissions. In addition, net income for the third quarter of 2021 over the third quarter of 2020 reflected lower catastrophe activity and higher net favorable development of loss reserves from prior accident years. These increases were offset in part
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business from favorable E&S market conditions and continued rate increases and an increase in investment income period over period driven by a decline in the fair value of equity securities during the third quarter of 2021 relative to the same period last year.higher investment balances.
Underwriting income was $38.1$81.7 million for the threesix months ended SeptemberJune 30, 20212022 compared to $2.9$53.3 million for the threesix months ended SeptemberJune 30, 2020,2021, an increase of 1,218.6%53.1%. The corresponding combined ratios were 75.7%77.8% for the threesix months ended SeptemberJune 30, 20212022 compared to 97.3%79.5% for the threesix months ended SeptemberJune 30, 2020.2021. The increase in our underwriting income infor the third quarterfirst six months of 20212022 compared to the third quarter of 2020,same period last year was largely due to a combination of premium growth and continuedfavorable rate increases from a strong underwriting environment and lower catastrophe activitylevels of relative reported losses and higher net favorable development of loss reserves from prior accident years. Net catastrophe losses incurred during the third quarter of 2021 were $5.9 million compared to $16.7 million during the third quarter of 2020.operating expenses.
Premiums
Our gross written premiums were $197.6$522.5 million for the threesix months ended SeptemberJune 30, 20212022 compared to $144.8$362.9 million for the threesix months ended SeptemberJune 30, 2020,2021, an increase of $52.8$159.6 million, or 36.5%44.0%. The increase in gross written premiums for the third quarterfirst six months of 20212022 over the same period last year was due to higher submission activity from brokers and higher rates on bound accounts,across most lines of business, resulting from continued favorable market conditions.conditions in the E&S market. The average premium on a policy written was approximately $10,700$11,800 in the third quarterfirst six months of 20212022 compared to approximately $9,100$9,900 in the third quarterfirst six months of 2020.2021. Excluding our personal lines insurance, which has a relatively low premium per policy written, the average premium on a policy written was approximately $13,000 in$14,300 for the third quarterfirst six months of 2021 compared to $11,700 in2022 and $12,600 for the third quarterfirst six months of 2020.2021.
Net written premiums increased by $48.4$146.8 million, or 39.6%47.0%, to $170.7$458.8 million for the threesix months ended SeptemberJune 30, 20212022 from $122.2$312.1 million for the threesix months ended SeptemberJune 30, 2020.2021. The increase in net written premiums for the third quarterfirst six months of 20212022 compared to the same period last year was primarily due to higher gross written premiums. The net retention ratio was 86.4%87.8% for the threesix months ended SeptemberJune 30, 20212022 compared to 84.4%86.0% for the three months ended September 30, 2020.same period last year. The increase in the net retention ratio was largelyprimarily due to higher reinstatement premiums on certain property reinsurance treaties in the first six months of 2021 and a change in the mix of business quarter over quarter and higher reinstatement premiums in the third quarter of 2020.business.
Net earned premiums increased by $48.6$108.0 million, or 44.9%41.4%, to $156.9$368.7 million for the threesix months ended SeptemberJune 30, 20212022 from $108.2$260.7 million for the threesix months ended SeptemberJune 30, 2020 and was directly related2021 due to growth in gross written premiums.
Loss ratio
The loss ratio was 55.7%56.8% for the threesix months ended SeptemberJune 30, 20212022 compared to 76.1%57.3% for the threesix months ended SeptemberJune 30, 2020.2021. The decrease in the loss ratio in the third quarterfirst six months of 20212022 compared to the third quarterfirst six months of 20202022 was due primarily to lower catastrophe activity and lower loss selections for the current accident year, and higheroffset in part by lower favorable net development on lossof reserves from prior accident years. The loss selections in the current accident year were lower relative to the prior year due to favorable market conditions and continued rate increases. years as a percentage of earned premiums.
During the threesix months ended SeptemberJune 30, 2021, net catastrophe losses incurred in the current accident year were primarily attributable to Hurricane Ida. During the three months ended September 30, 2020, net catastrophe losses incurred were primarily due to Hurricanes Laura and Sally and the California wildfires.
Loss reserves for2022, prior accident years developed favorably by $9.2$17.9 million, forof which $21.0 million was attributable to the three2020 and 2021 accident years due to lower than expected reported losses across most lines of business. This favorable development was offset in part by adverse development largely from the 2018 accident year due to routine variability in reported losses and modest adjustments in actuarial assumptions. On an inception-to-date basis, all prior accident years have developed favorably with the exception of the 2011 accident year.
During the six months ended SeptemberJune 30, 2021, prior accident years developed favorably by $16.2 million, of which $7.1$21.8 million was attributable to the 2020 accident year. Actuarial assumptions foryear and reflected lower emergence of reported losses than expected. This favorable development was offset in part by adverse development mostly attributable to the 20202018 accident year reflected additional uncertainty to account for potential COVID-19 related claims. However, our current outlook is more favorable than in the prior year as no significant claims have been reported to date and, as a result we have adjusted certain assumptionsof modest adjustments in the 2021 period. In addition, reported losses have been emerging at lower levels than expected across most lines of business. Loss reserves for prior accident years developed favorably byactuarial assumptions.

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$3.0 million, for the three months ended September 30, 2020, which was primarily attributable to the 2019 accident year.
The following table summarizes the loss ratios for the threesix months ended SeptemberJune 30, 20212022 and 2020:2021:
Three Months Ended September 30,Six Months Ended June 30,
2021202020222021
($ in thousands)($ in thousands)Losses and Loss Adjustment Expenses% of Earned PremiumsLosses and Loss Adjustment Expenses% of Earned Premiums($ in thousands)Losses and Loss Adjustment Expenses% of Earned PremiumsLosses and Loss Adjustment Expenses% of Earned Premiums
Loss ratio:Loss ratio:Loss ratio:
Current accident year before catastrophe lossesCurrent accident year before catastrophe losses$90,675 57.8 %$68,764 63.5 %Current accident year before catastrophe losses$227,320 61.6 %$162,673 62.4 %
Current year catastrophe lossesCurrent year catastrophe losses5,882 3.8 %16,670 15.4 %Current year catastrophe losses83 — %2,910 1.1 %
Effect of prior year developmentEffect of prior year development(9,205)(5.9)%(3,003)(2.8)%Effect of prior year development(17,858)(4.8)%(16,208)(6.2)%
TotalTotal$87,352 55.7 %$82,431 76.1 %Total$209,545 56.8 %$149,375 57.3 %

Expense ratio
The following table summarizes the components of the expense ratio for the threesix months ended SeptemberJune 30, 20212022 and 2020:2021:
Three Months Ended September 30,
20212020
($ in thousands)Underwriting Expenses% of Earned PremiumsUnderwriting Expenses% of Earned Premiums
Commissions incurred:
Direct$26,317 16.8 %$18,585 17.2 %
Ceding(6,902)(4.5)%(4,588)(4.2)%
Net commissions incurred19,415 12.3 %13,997 13.0 %
Other underwriting expenses12,050 7.7 %8,930 8.2 %
Underwriting, acquisition and insurance expenses$31,465 20.0 %$22,927 21.2 %

Six Months Ended June 30,
20222021
($ in thousands)Underwriting Expenses% of Earned PremiumsUnderwriting Expenses% of Earned Premiums
Commissions incurred:
Direct$62,363 16.9 %$44,719 17.1 %
Ceding(17,130)(4.6)%(11,442)(4.4)%
Net commissions incurred45,233 12.3 %33,277 12.7 %
Other underwriting expenses32,284 8.7 %24,748 9.5 %
Underwriting, acquisition and insurance expenses$77,517 21.0 %$58,025 22.2 %
The expense ratio was 20.0%21.0% for the threesix months ended SeptemberJune 30, 20212022 compared to 21.2%22.2% for the threesix months ended SeptemberJune 30, 2020.2021. The decrease in the expense ratio was due to lower other underwriting expenses and lower net commissions incurred as a percentage of earned premiums. The decrease in the other underwriting expense ratio was primarily due to higher net earned premiums, without a proportional increase in the amount of other underwriting expenses, as a result of management's focus on controlling costs. The decrease in the net commissions incurred ratio was mostlylargely due to higherlower reinstatement premiums on certain property reinsurance treaties that do not have ceding commissions, resulting from growth in the excess casualty and personal insurance lines of business and a change in the mix of business. Direct commissions paid as a percentpercentage of gross written premiums was 14.6% for both the threesix months ended SeptemberJune 30, 20212022 and 2020.


2021.
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Investing results
The following table summarizes net investment income, change in the fair value of equity securities and net realized investment gains for the threesix months ended SeptemberJune 30, 20212022 and 2020:2021:
Three Months Ended September 30,
($ in thousands)20212020Change% Change
Interest from fixed-maturity securities$7,345 $6,301 $1,044 16.6 %
Dividends from equity securities979 1,100 (121)(11.0)%
Other1 — 1 NM
Gross investment income8,325 7,401 924 12.5 %
Investment expenses(230)(393)163 (41.5)%
Net investment income8,095 7,008 1,087 15.5 %
Change in the fair value of equity securities(1,012)6,031 (7,043)(116.8)%
Net realized investment gains895 647 248 38.3 %
Total$7,978 $13,686 $(5,708)(41.7)%
NM - Percentage change not meaningful.
Six Months Ended June 30,
($ in thousands)20222021Change
Interest from fixed-maturity securities$18,683 $13,647 $5,036 
Dividends from equity securities2,123 1,822 301 
Other123 10 113 
Gross investment income20,929 15,479 5,450 
Investment expenses(1,247)(1,108)(139)
Net investment income19,682 14,371 5,311 
Change in fair value of equity securities(31,104)14,656 (45,760)
Net realized investment gains1,708 1,502 206 
Total$(9,714)$30,529 $(40,243)
Our net investment income increased by 15.5%37.0% to $8.1$19.7 million for the threesix months ended SeptemberJune 30, 20212022 from $7.0$14.4 million for the threesix months ended SeptemberJune 30, 2020. This increase was primarily due to growth in our investment portfolio generated from the investment of positive cash flow since September 30, 2020. Our investment portfolio, excluding cash equivalents and unrealized gains and losses, had an annualized gross investment return of 2.5% for the three months ended September 30, 2021, compared to 2.9% for the three months ended September 30, 2020.
The fair value of our equity investment portfolio decreased $1.0 million for the three months ended September 30, 2021 compared to an increase of $6.0 million for the three months ended September 30, 2020. During the third quarter of 2021, the change in fair value was mostly attributable to our exchange-traded fund ("ETF") securities, whose valuations are largely reflective of the broader U.S. stock markets. During the third quarter of 2020, the fair value of our ETF securities continued to rebound from a significant decline in fair value driven by the disruption in the financial markets in March 2020 associated with the COVID-19 pandemic.

Income tax expense
Our effective tax rate was 19.8% for the three months ended September 30, 2021 compared to 7.6% for the three months ended September 30, 2020. The effective tax rates were lower than the federal statutory rate of 21% due to the tax benefits from stock-based compensation and tax-exempt investment income. During the three months ended September 30, 2021, the level of stock options exercised was significantly lower than the comparable prior year period, which resulted in a higher effective tax rate quarter over quarter.
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Nine months ended September 30, 2021 compared to nine months ended September 30, 2020
The following table summarizes our results of operations for the nine months ended September 30, 2021 and 2020:
Nine Months Ended September 30,
($ in thousands)20212020Change% Change
Gross written premiums$560,553 $402,904 $157,649 39.1 %
Ceded written premiums(77,825)(54,996)(22,829)41.5 %
Net written premiums$482,728 $347,908 $134,820 38.8 %
Net earned premiums$417,612 $294,962 $122,650 41.6 %
Losses and loss adjustment expenses236,727 194,468 42,259 21.7 %
Underwriting, acquisition and insurance expenses89,490 67,471 22,019 32.6 %
Underwriting income (1)
91,395 33,023 58,372 176.8 %
Net investment income22,466 19,613 2,853 14.5 %
Change in fair value of equity securities13,644 3,709 9,935 267.9 %
Net realized investment gains2,397 1,676 721 43.0 %
Other expense, net(1,176)(428)(748)174.8 %
Income before taxes128,726 57,593 71,133 123.5 %
Income tax expense24,387 7,355 17,032 231.6 %
Net income$104,339 $50,238 $54,101 107.7 %
Net operating earnings (2)
$91,666 $45,984 $45,682 99.3 %
Loss ratio56.7 %65.9 %
Expense ratio21.4 %22.9 %
Combined ratio78.1 %88.8 %
Annualized return on equity22.5 %14.3 %
Annualized operating return on equity(2)
19.8 %13.0 %
(1)Underwriting income is a non-GAAP financial measure. See "—Reconciliation of non-GAAP financial measures" for a reconciliation of net income in accordance with GAAP to underwriting income.
(2)Net operating earnings and annualized operating return on equity are non-GAAP financial measures. Net operating earnings is defined as net income excluding the net change in the fair value of equity securities, after taxes, and net realized investment gains and losses, after taxes. Annualized operating return on equity is defined as net operating earnings expressed on an annualized basis as a percentage of average beginning and ending total stockholders’ equity during the period. See "—Reconciliation of non-GAAP financial measures" for a reconciliation of net income in accordance with GAAP to net operating earnings.
Net income was $104.3 million for the nine months ended September 30, 2021 compared to $50.2 million for the nine months ended September 30, 2020, an increase of 107.7%. The increase in net income for the first nine months of 2021 over the same period last year was due to a number of factors including growth in the business from favorable market conditions and continued rate increases, higher net favorable development of loss reserves from prior accident years and higher returns on equity investments as a result of a rebound in the financial markets. In addition, net income for the nine months ended September 30, 2021 reflected lower catastrophe activity compared to the same period last year.
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Underwriting income was $91.4 million for the nine months ended September 30, 2021 compared to $33.0 million for the nine months ended September 30, 2020, an increase of 176.8%. The corresponding combined ratios were 78.1% for the nine months ended September 30, 2021 compared to 88.8% for the nine months ended September 30, 2020. The increase in underwriting income for the first nine months of 2021 compared to the same period last year was due to higher premium growth and continued rate increases from a favorable market environment, higher net favorable development of loss reserves from prior accident years and lower catastrophe activity.
Premiums
Our gross written premiums were $560.6 million for the nine months ended September 30, 2021 compared to $402.9 million for the nine months ended September 30, 2020, an increase of $157.6 million, or 39.1%. The increase in gross written premiums for the first nine months of 2021 over the same period last year was due to higher submission activity from brokers and higher rates across most lines of business, resulting from continued favorable conditions in the E&S market. The average premium on a policy written was approximately $10,100 in the first nine months of 2021 compared to approximately $8,900 in the first nine months of 2020. Excluding our personal lines insurance, which has a relatively low premium per policy written, the average premium on a policy written was approximately $12,700 for the first nine months of 2021 and approximately $11,600 for the first nine months of 2020.
Net written premiums increased by $134.8 million, or 38.8%, to $482.7 million for the nine months ended September 30, 2021 from $347.9 million for the nine months ended September 30, 2020. The increase in net written premiums for the first nine months of 2021 compared to the same period last year was primarily due to higher gross written premiums. The net retention ratio was 86.1% for the nine months ended September 30, 2021 compared to 86.4% for the same period last year. The decrease in the net retention ratio was primarily due to a change in the mix of business.
Net earned premiums increased by $122.7 million, or 41.6%, to $417.6 million for the nine months ended September 30, 2021 from $295.0 million for the nine months ended September 30, 2020 due to growth in gross written premiums.
Loss ratio
The loss ratio was 56.7% for the nine months ended September 30, 2021 compared to 65.9% for the nine months ended September 30, 2020. The decrease in the loss ratio in the first nine months of 2021 compared to the first nine months of 2020 was due primarily to lower catastrophe activity, higher favorable net development of reserves from prior accident years and lower loss selections for the current accident year. The loss selections in the current accident year were lower relative to the prior year due to favorable market conditions and continued rate increases. During the nine months ended September 30, 2021, net catastrophe losses incurred in the current accident year were primarily attributable to Hurricane Ida and the winter storms Uri and Viola in Texas. During the nine months ended September 30, 2020, net catastrophe losses incurred were primarily due to Hurricanes Laura and Sally and the California wildfires.
During the nine months ended September 30, 2021, prior accident years developed favorably by $25.4 million, of which $28.9 million was attributable to the 2020 accident year. Actuarial assumptions for the 2020 accident year reflected additional uncertainty to account for potential COVID-19 related claims. However, our current outlook is more favorable than in the prior year as no significant claims have been reported to date and, as a result, we have adjusted certain assumptions in the 2021 period. In addition, reported losses have been emerging at lower levels than expected across most lines of business. This favorable development was offset in part by adverse development, mostly attributable to the 2015-2018 accident years as a result of modest adjustments in actuarial assumptions based on observable trends.

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During the nine months ended September 30, 2020, loss reserves from prior accident years developed favorably by $9.6 million, of which $7.8 million was attributable to the 2019 accident year. The favorable development resulted from reported losses emerging at lower levels than expected across most lines of business.

The following table summarizes the loss ratios for the nine months ended September 30, 2021 and 2020:
Nine Months Ended September 30,
20212020
($ in thousands)Losses and Loss Adjustment Expenses% of Earned PremiumsLosses and Loss Adjustment Expenses% of Earned Premiums
Loss ratio:
Current accident year before catastrophe losses$253,348 60.7 %$186,965 63.4 %
Current year catastrophe losses8,792 2.1 %17,131 5.8 %
Effect of prior year development(25,413)(6.1)%(9,628)(3.3)%
Total$236,727 56.7 %$194,468 65.9 %

Expense ratio
The following table summarizes the components of the expense ratio for the nine months ended September 30, 2021 and 2020:
Nine Months Ended September 30,
20212020
($ in thousands)Underwriting Expenses% of Earned PremiumsUnderwriting Expenses% of Earned Premiums
Commissions incurred:
Direct$71,036 17.0 %$50,068 17.0 %
Ceding(18,344)(4.4)%(11,234)(3.8)%
Net commissions incurred52,692 12.6 %38,834 13.2 %
Other underwriting expenses36,798 8.8 %28,637 9.7 %
Underwriting, acquisition and insurance expenses$89,490 21.4 %$67,471 22.9 %

The expense ratio was 21.4% for the nine months ended September 30, 2021 compared to 22.9% for the nine months ended September 30, 2020. The decrease in the expense ratio was due to lower other underwriting expenses and lower net commissions incurred as a percentage of earned premiums. The decrease in the other underwriting expense ratio was primarily due to higher net earned premiums, without a proportional increase in the amount of other underwriting expenses, as a result of management's focus on controlling costs. The decrease in the net commissions incurred ratio was due to higher ceding commissions resulting from growth in the excess casualty and personal insurance lines of business and a change in the mix of business. Direct commissions paid as a percent of gross written premiums was 14.6% for both the nine months ended September 30, 2021 and 2020.
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Investing results
The following table summarizes net investment income, change in the fair value of equity securities and net realized investment gains for the nine months ended September 30, 2021 and 2020:
Nine Months Ended September 30,
($ in thousands)20212020Change% Change
Interest from fixed-maturity securities$20,992 $17,994 $2,998 16.7 %
Dividends from equity securities2,801 2,554 247 9.7 %
Other11 261 (250)(95.8)%
Gross investment income23,804 20,809 2,995 14.4 %
Investment expenses(1,338)(1,196)(142)11.9 %
Net investment income22,466 19,613 2,853 14.5 %
Change in fair value of equity securities13,644 3,709 9,935 267.9 %
Net realized investment gains2,397 1,676 721 43.0 %
Total$38,507 $24,998 $13,509 54.0 %

Our net investment income increased by 14.5% to $22.5 million for the nine months ended September 30, 2021 from $19.6 million for the nine months ended September 30, 2020.2021. This increase in the first ninesix months of 20212022 compared to the same period last year was primarily due to growth in our investment portfolio largely generated from the investment of positivestrong operating cash flowflows since SeptemberJune 30, 2020 and proceeds from our equity offering in the third quarter of 2020.2021. Our fixed-maturity investment portfolio, excluding cash equivalents and unrealized gains and losses, had an annualized gross investment return of 2.5%2.6% for both the nine months and ended September 30, 2021 and 3.0% for the ninesix months ended SeptemberJune 30, 2020.2022 and June 30, 2021.
During the first ninesix months of 2022, the change in fair value of equity securities was comprised of unrealized losses related to exchange traded funds ("ETFs") of $23.0 million and unrealized losses related to non-redeemable preferred stock of $8.1 million. The change in unrealized losses during the first six months of 2022 attributable to ETFs was largely reflective of the broader U.S. stock market, which moved lower overall during the first half of 2022 and declined sharply toward the end of the period. The change in unrealized losses during the first six months of 2022 attributable to non-redeemable preferred stock reflected a higher interest rate environment.
During the first six months of 2021, the change in fair value of equity securities was comprised of unrealized gains related to ETF securities of $13.4$14.3 million and unrealized gains related to non-redeemable preferred stock of $0.2$0.4 million. The change in unrealized gains during the first nine monthshalf of 2021 attributable to ETF securities was largely reflective of the gains in the broader U.S. stock market.
During the first nine months of 2020, the change in fair value of equity securities was comprised of unrealized gains related to ETF securities of $4.5 million and unrealized losses related to preferred stock of $0.8 million. Fair values of ETF's declined by $13.1 million during the first quarter of 2020, driven by the disruption in the financial markets associated with the COVID-19 pandemic and, subsequently, the fair value of those securities rebounded sharply during the second quarter of 2020. Consistent with the trend experienced in the second quarter of 2020, the fair values of these securities continued to increase during the third quarter of 2020, although to a lesser degree.
We perform quarterly reviews of all available-for-sale securities within our investment portfolio to determine whether the decline in a security's fair value is deemed to be a credit loss. Management concluded that there were no credit losses from available-for-sale investments for the ninesix months ended SeptemberJune 30, 20212022 or 2020.2021.
Income tax expense
Our effective tax rate was 18.9%17.4% for the ninesix months ended SeptemberJune 30, 20212022 compared to 12.8%18.5% for the ninesix months ended SeptemberJune 30, 2020.2021. The effective tax rate was lower than the federal statutory rate of 21% primarily due to the tax benefits from stock-based compensation and tax-exempt investment income. During the nine months ended September 30, 2021, the level of stock options exercised was lower than the comparable prior year period, which resulted in a higher effective tax rate.
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Return on equity
Our annualized return on equity was 17.7% for the six months ended June 30, 2022 compared to 22.5% for the ninesix months ended SeptemberJune 30, 2021 compared to 14.3% for the nine months ended September 30, 2020.2021. Our annualized operating return on equity was 19.8%24.6% for the ninesix months ended September
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June 30, 20212022 compared to 13.0%18.2% for the ninesix months ended SeptemberJune 30, 2020.2021. The increase in annualized operating return on equity for the ninesix months ended SeptemberJune 30, 20212022 compared to the prior period was attributable primarilylargely to growth in the business from continuing favorable market conditions and rate increases, lower catastrophe activity and higher net favorable development of loss reserves from prior accident years.increases.
Liquidity and capital resourcesCapital Resources
Sources and uses of funds
We are organized as a Delaware holding company with our operations primarily conducted by our wholly-owned insurance subsidiary, Kinsale Insurance Company, which is domiciled in Arkansas. Accordingly, we may receive cash through (1) loans from banks and other third parties, (2) issuance of equity and debt securities, (3) corporate service fees from our insurance subsidiary, (4) payments from our subsidiaries pursuant to our consolidated tax allocation agreement and other transactions, and (5) dividends from our insurance subsidiary. We may use the proceeds from these sources to contribute funds to Kinsale Insurance Company in order to support premium growth, reduce our reliance on reinsurance, pay dividends and taxes and for other business purposes.
We receive corporate service fees from Kinsale Insurance Company to reimburse us for most of the operating expenses that we incur. Reimbursement of expenses through corporate service fees is based on the actual costs that we expect to incur with no mark-up above our expected costs.
In August 2019, we filed a universal shelf registration statement with the SEC that expires in 2022. We can use this shelf registration to issue an unspecified amount of debt securities, common stock, preferred stock, depositary shares and warrants. The specific terms of any securities we issue under this registration statement will be provided in the applicable prospectus supplements.
On July 22, 2022, we entered into a Note Purchase and Private Shelf Agreement (the “Note Purchase Agreement”), which provides for the issuance of senior promissory notes with an aggregate principal amount of up to $150.0 million. Pursuant to the Note Purchase Agreement, on July 22, 2022 we issued $125.0 million aggregate principal amount of 5.15% senior promissory notes (the “Series A Notes”), the proceeds of which will be available to fund surplus at Kinsale Insurance Company, refinance indebtedness and for general corporate purposes. See Note 14 for further information regarding the Note Purchase Agreement.
On July 22, 2022, we entered into an Amended and Restated Credit Agreement, which extended the maturity date to July 22, 2027, and increased the aggregate commitment to $100.0 million, with the option to increase the aggregate commitment by $30.0 million, subject to certain conditions. Borrowings under the Amended and Restated Credit Agreement may be used for general corporate purposes (which may include, without limitation, to fund future growth, to finance working capital needs, to fund capital expenditures, and to refinance, redeem or repay indebtedness). See Note 14 for further information regarding the Amended and Restated Credit Agreement.
On July 25, 2022, proceeds from the Series A Notes were used to pay off the outstanding loans of $43.0 million, plus accrued interest, under our Amended and Restated Credit Agreement.
Management believes that the Company has sufficient liquidity available both in Kinsale and in its insurance subsidiary, Kinsale Insurance Company, as well as in its other operating subsidiaries, to meet its operating cash needs and obligations and committed capital expenditures for the next 12 months.
Cash flows
Our most significant source of cash is from premiums received from our insureds, which, for most policies, we receive at the beginning of the coverage period. Our most significant cash outflow is for claims that arise when a policyholder incurs an insured loss. Because the payment of claims occurs after the receipt of the premium, often years later, we invest the cash in various investment securities that earn interest and dividends. We also use cash to
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pay commissions to insurance brokers, as well as to pay for ongoing operating expenses such as salaries, consulting services and taxes. As described under "—Reinsurance" below, we use reinsurance to manage the risk that we take related to the issuance of our policies. We cede, or pay out, part of the premiums we receive to our reinsurers and collect cash back when losses subject to our reinsurance coverage are paid.
The timing of our cash flows from operating activities can vary among periods due to the timing by which payments are made or received. Some of our payments and receipts, including loss settlements and subsequent reinsurance receipts, can be significant, so their timing can influence cash flows from operating activities in any given period. Management believes that cash receipts from premiums, proceeds from investment sales and redemptions and investment income are sufficient to cover cash outflows in the foreseeable future.
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On August 7, 2020, we completed an underwritten public offering and sold and issued 310,500 shares of our common stock at a price of $190 per share. After deducting underwriting discounts and commissions, we received net proceeds of $56.7 million, which were used for general corporate purposes, including to fund organic growth.
Our cash flows for the ninesix months ended SeptemberJune 30, 20212022 and 20202021 were:
Nine Months Ended September 30,
20212020
(in thousands)
Cash and cash equivalents provided by (used in):
Operating activities$301,881 $206,461 
Investing activities(280,081)(302,386)
Financing activities(8,881)74,213 
Change in cash and cash equivalents$12,919 $(21,712)

Six Months Ended June 30,
20222021
(in thousands)
Cash and cash equivalents provided by (used in):
Operating activities$278,654 $194,948 
Investing activities(270,104)(137,434)
Financing activities(8,700)(6,602)
Change in cash and cash equivalents$(150)$50,912 
Net cash provided by operating activities was approximately $301.9$278.7 million for the ninesix months ended SeptemberJune 30, 2021,2022, compared to $206.5$194.9 million for the same period in 2020.2021. This increase was largely driven by higher premium volume, the timing of claim payments and reinsurance recoveries, offset in part by changes in operating assets and liabilities.
Net cash used in investing activities was $280.1$270.1 million for the ninesix months ended SeptemberJune 30, 2021,2022, compared to $302.4$137.4 million for the ninesix months ended SeptemberJune 30, 2020.2021. Net cash used in investing activities during the first ninesix months of 20212022 included purchases of fixed-maturity securities of $509.0$398.0 million, andwhich were comprised primarilylargely of corporate bonds, mortgage- and asset-backed securities, municipal securities and to a lesser extent, U.S. Treasuries.municipal securities and sovereigns. During the first ninesix months of 2021,2022, we received proceeds of $102.6$72.4 million from sales of fixed-maturity securities, largely corporate bonds and $139.7mortgage- and asset-backed securities, and $65.2 million from redemptions of asset-mortgage- and mortgage-backedasset-backed securities and corporate bonds. For the ninesix months ended SeptemberJune 30, 20212022, purchaseswe received proceeds of ETF$4.0 million from sales of equity securities, which were comprised of $2.4 million from sales of ETFs and $1.6 million from calls of non-redeemable preferred stock were $1.5stock. In addition, we purchased $10.8 million of short-term investments consisting of U.S. Treasuries and $10.2 million, respectively.corporate bonds.
Net cash used in investing activities of $302.4$137.4 million during the first ninesix months of 20202021 included purchases of fixed-maturity securities of $389.7$315.2 million, which in part reflected the investment of proceeds from the equity offering during the third quarter of 2020 and the deployment of cash equivalents held at December 31, 2019. Purchases of fixed-maturity securities were comprised primarily of corporate bonds, asset- and mortgage-backed securities, and municipal securities. During the first ninesix months of 2020,2021, we received proceeds of $79.0$87.7 million from sales of fixed-maturity securities, largely corporate bonds, and $66.2$99.7 million from redemptions of asset- and mortgage-backed securities and corporate bonds. For the ninesix months ended SeptemberJune 30, 2020,2021, purchases of ETF securities and non-redeemable preferred stock were $26.6$1.0 million and $7.2$7.3 million, respectively. Net cash used in investing activities included net purchases of property and equipment of $24.1 million, primarily related to the development of our new corporate headquarters.
During the first ninesix months of 2022, cash used in financing activities reflected dividends paid of $0.26 per common share, or $6.0 million in aggregate. In addition, payroll taxes withheld and remitted on restricted stock awards was $3.3 million, offset in part by proceeds received from our equity compensation plans of $0.5 million, for the six months ended June 30, 2022.
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During the first six months of 2021, cash used in financing activities reflected dividends paid of $0.33$0.22 per common share, or $7.5 million in aggregate. In addition, payroll taxes withheld and remitted on restricted stock awards was $2.1 million, offset in part by proceeds received from our equity compensation plans of $0.7 million, for the nine months ended September 30, 2021.
During the first nine months of September 30, 2020, cash provided by financing activities reflected net proceeds from the equity offering of $56.7 million, which was used for general corporate purposes, including to fund organic growth. In addition, we drew down $23.3 million on our Credit Facility, which was used to fund construction of our new headquarter facilities. During the first nine months of 2020, cash used in financing activities reflected dividends
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paid of $0.27 per common share, or $6.0$5.0 million in aggregate. Proceeds received from our equity compensation plans were $2.1$0.5 million, offset by payroll taxes withheld and remitted on restricted stock awards of $1.8$2.1 million for the ninesix months ended SeptemberJune 30, 2020.2021.
Credit agreement
In May 2019, we entered into a Credit Agreement that provided us with a $50$50.0 million Credit Facility and an uncommitted accordion feature that permits us to increase the commitments by an additional $30$30.0 million. The Credit Facility has a maturity of May 28, 2024. Borrowings under the Credit Facility waswere used to fund construction of our new headquarters but may also be used for working capital and general corporate purposes. Interest rates on borrowings are based on prevailing interest rates and the applicable margin, as described in the Credit Agreement. As of SeptemberJune 30, 20212022, there was $42.7$42.8 million outstanding under the Credit Facility, net of debt issuance costs.
Reinsurance
We enter into reinsurance contracts primarily to limit our exposure to potential large losses. Reinsurance involves an insurance company transferring ("ceding") a portion of its exposure on a risk to another insurer, the reinsurer. The reinsurer assumes the exposure in return for a portion of the premium. Our reinsurance is primarily contracted under quota-share reinsurance contractstreaties and excess of loss contracts.treaties. In quota-share reinsurance, the reinsurer agrees to assume a specified percentage of the ceding company's losses arising out of a defined class of business in exchange for a corresponding percentage of premiums, net of a ceding commission. In excess of loss reinsurance, the reinsurer agrees to assume all or a portion of the ceding company's losses, in excess of a specified amount. Under excess of loss reinsurance, the premium payable to the reinsurer is negotiated by the parties based on their assessment of the amount of risk being ceded to the reinsurer because the reinsurer does not share proportionately in the ceding company's losses.
We renew our reinsurance treaties annually. During each renewal cycle, there are a number of factors we consider when determining our reinsurance coverage, including (1) plans to change the underlying insurance coverage we offer, (2) trends in loss activity, (3) the level of our capital and surplus, (4) changes in our risk appetite and (5) the cost and availability of reinsurance coverage.Effective with the June 1, 2022 renewal, we entered into a new commercial property insurance quota share treaty in place of our previous property per-risk reinsurance treaty.
To manage our natural catastrophe exposure, we use computer models to analyze the risk of severe losses. We measure exposure to these losses in terms of probable maximum loss ("PML"), which is an estimate of the amount of loss we would expect to meet or exceed once in a given number of years (referred to as the return period). When managing our catastrophe exposure, we focus on the 100 year100-year and the 250 year250-year return periods.
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The following is a summary of our significant reinsurance programs as of SeptemberJune 30, 2021:2022:
Line of Business CoveredCompany Policy LimitReinsurance CoverageCompany Retention
Property - per riskcommercial insurance (1)UpN/A42.5% up to $10.0$93.3 million per riskcatastrophe$5.75 million excess57.5% of $3.0 million$3.0 million per occurrenceall commercial property losses
Property - personal insurance (2)N/A50% up to $30.4$35.5 million per catastrophe50% of all personal property losses
Property - catastrophe (3)N/A$60.075.0 million excess of $15.0$25.0 million$15.025.0 million per catastrophe
Primary casualty (4)Up to $10.0 million per occurrence$8.0 million excess of $2.0 million$2.0 million per occurrence
Excess casualty (5)Up to $10.0 million per occurrence
Variable quota share$2.0 million per occurrence except as described in note (5) below
(1)    Our commercial property per-riskinsurance quota share reinsurance reduces the financial impact of property losses on our commercial insurance policies. Reinsurance is not applicable to any individual policy with a large loss on a single commercial propertyper-occurrence limit of $2.0 million or inland marine policy. In addition to the Company's retention, this treaty includes a deductible of the first $4.0 million of losses covered under this reinsurance treaty. This treaty also includes a reinstatement provision which requires us to pay reinstatement premiums after a loss in excess of $5 million has occurred in order to preserve coverage.less.
(2)    Our personal insurance quota share reinsurance reduces the financial impact of property losses on our personal insurance policies.
(3)    Our property catastrophe reinsurance reduces the financial impact of a catastrophe event involving multiple claims and policyholders. Our property catastrophe reinsurance includes a reinstatement provision which requires us to pay reinstatement premiums after a loss has occurred in order to preserve coverage. Including the reinstatement provision, the maximum aggregate loss recovery limit is $120$150 million and is in addition to the per-occurrence coverage provided by our treaty coverages.
(4)    Reinsurance is not applicable to any individual policy with a per-occurrence limit of $2.0 million or less.
(5)    For casualty policies with a per-occurrence limit higher than $2.0 million, the ceding percentage varies such that the retention is always $2.0 million or less. For example, for a $4.0 million limit excess policy, our retention would be 50%, whereas for a $10.0 million limit excess policy, our retention would be 20%. For policies for which we also write an underlying primary limit, the retention on the primary and excess policy combined would not exceed $2.0 million.
Reinsurance contracts do not relieve us from our obligations to policyholders. Failure of the reinsurer to honor its obligation could result in losses to us, and therefore, we established an allowance for credit risk based on historical analysis of credit losses for highly rated companies in the insurance industry. In formulating our reinsurance programs, we are selective in our choice of reinsurers and we consider numerous factors, the most important of which are the financial stability of the reinsurer, its history of responding to claims and its overall reputation. In an effort to minimize our exposure to the insolvency of our reinsurers, we review the financial condition of each reinsurer annually. In addition, we continually monitor for rating downgrades involving any of our reinsurers. At SeptemberJune 30, 2021,2022, all reinsurance contracts that our insurance subsidiary was a party to were with companies with A.M. Best ratings of "A""A-" (Excellent) or better. As of SeptemberJune 30, 2021,2022, we recorded an allowance for doubtful accountsaccounts of $0.3$0.4 million relatedrelated to our reinsurance balances.
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Ratings
Kinsale Insurance Company has a financial strength rating of "A" (Excellent) with a stable outlook from A.M. Best. A.M. Best assigns ratings to insurance companies, which currently range from "A++" (Superior) to "F" (In Liquidation). "A" (Excellent) is the third highest rating issued by A.M. Best. The "A" (Excellent) rating is assigned to insurers that have, in A.M. Best's opinion, an excellent ability to meet their ongoing obligations to policyholders. This rating is intended to provide an independent opinion of an insurer's ability to meet its obligation to policyholders and is not an evaluation directed at investors.
The financial strength ratings assigned by A.M. Best have an impact on the ability of the insurance companies to attract and retain agents and brokers and on the risk profiles of the submissions for insurance that the insurance companies receive. The "A" (Excellent) rating obtained by Kinsale Insurance Company is consistent with our business plan and allows us to actively pursue relationships with the agents and brokers identified in our marketing plan.
Financial conditionCondition
Stockholders' equity
At SeptemberJune 30, 2021,2022, total stockholders' equity was $659.2$634.1 million and tangible stockholders' equity was $656.4$631.3 million, compared to total stockholders' equity of $576.2$699.3 million and tangible stockholders' equity $573.4$696.5 million at December 31, 2020.2021. The increasesdecreases in both total and tangible stockholders' equity over the prior year-end balances were due to profits generated during the period and activity related to stock-based compensation plans, offset in part by an increase in unrealized losses on available-for-sale investments, net of taxes, and payment of dividends.dividends, offset in part by profits generated during the period and activity related to stock-based compensation plans. Tangible stockholders’ equity is a non-GAAP financial measure. See "—Reconciliation of non-GAAP financial measures" for a reconciliation of stockholders' equity in accordance with GAAP to tangible stockholders' equity.
Investment portfolio
At SeptemberJune 30, 2021,2022, our cash and invested assets of $1.6$1.8 billion consisted of fixed-maturity securities, equity securities, and cash and cash equivalents.equivalents and short-term investments. At SeptemberJune 30, 2021,2022, the majority of the investment portfolio was comprised of fixed-maturity securities of $1.3$1.5 billion that were classified as available-for-sale. Available-for-sale investments are carried at fair value with unrealized gains and losses on these securities, net of applicable taxes, reported as a separate component of accumulated other comprehensive income. At SeptemberJune 30, 2021,2022, we also held $151.8$139.5 million of equity securities, which were comprised of ETF securities and non-redeemable preferred stock, and $90.0$120.9 million of cash and cash equivalents.equivalents and $10.8 million of short-term investments.
Our fixed-maturity securities, including cash equivalents, had a weighted average duration of 4.44.2 years and 4.3 years at SeptemberJune 30, 20212022 and December 31, 2020,2021, respectively, and an average rating of "AA-" at Septemberboth June 30, 20212022 and December 31, 2020.2021.
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At SeptemberJune 30, 20212022 and December 31, 2020,2021, the amortized cost and estimated fair value on fixed-maturity securities were as follows:
September 30, 2021December 31, 2020June 30, 2022December 31, 2021
Amortized CostEstimated Fair Value% of Total Fair ValueAmortized CostEstimated Fair Value% of Total Fair ValueAmortized CostEstimated Fair Value% of Total Fair ValueAmortized CostEstimated Fair Value% of Total Fair Value
($ in thousands)($ in thousands)
Fixed-maturity securities:Fixed-maturity securities:Fixed-maturity securities:
U.S. Treasury securities and obligations of U.S. government agenciesU.S. Treasury securities and obligations of U.S. government agencies$6,932 $6,922 0.5 %$— $— — %U.S. Treasury securities and obligations of U.S. government agencies$22,933 $22,101 1.5 %$6,936 $6,847 0.5 %
Obligations of states, municipalities and political subdivisionsObligations of states, municipalities and political subdivisions214,776 226,061 16.8 %216,181 230,906 21.3 %Obligations of states, municipalities and political subdivisions231,631 214,814 14.4 %216,375 228,045 16.4 %
Corporate and other securitiesCorporate and other securities434,489 446,490 33.2 %294,854 316,608 29.3 %Corporate and other securities621,828 560,555 37.5 %450,594 458,487 32.9 %
Asset-backed securitiesAsset-backed securities298,492 301,668 22.5 %236,813 240,661 22.2 %Asset-backed securities312,885 306,322 20.5 %299,810 301,775 21.7 %
Residential mortgage-backed securitiesResidential mortgage-backed securities367,855 327,883 22.0 %340,804 337,685 24.3 %
Commercial mortgage-backed securitiesCommercial mortgage-backed securities58,579 61,440 4.6 %66,110 70,969 6.6 %Commercial mortgage-backed securities65,767 61,399 4.1 %57,000 59,227 4.2 %
Residential mortgage-backed securities300,016 300,292 22.4 %217,859 222,656 20.6 %
Total fixed-maturity securitiesTotal fixed-maturity securities$1,313,284 $1,342,873 100.0 %$1,031,817 $1,081,800 100.0 %Total fixed-maturity securities$1,622,899 $1,493,074 100.0 %$1,371,519 $1,392,066 100.0 %

The table below summarizes the credit quality of our fixed-maturity securities at SeptemberJune 30, 20212022 and December 31, 2020,2021, as rated by Standard & Poor’s Financial Services, LLC ("Standard & Poor's"):
September 30, 2021December 31, 2020June 30, 2022December 31, 2021
Standard & Poor’s or Equivalent DesignationStandard & Poor’s or Equivalent DesignationEstimated Fair Value% of TotalEstimated Fair Value% of TotalStandard & Poor’s or Equivalent DesignationEstimated Fair Value% of TotalEstimated Fair Value% of Total
($ in thousands)($ in thousands)
AAAAAA$365,705 27.2 %$312,721 28.9 %AAA$412,437 27.6 %$375,579 27.0 %
AAAA483,381 36.0 %382,174 35.3 %AA496,174 33.2 %523,739 37.6 %
AA229,741 17.1 %187,970 17.4 %A283,273 19.0 %234,547 16.9 %
BBBBBB183,545 13.7 %157,777 14.6 %BBB237,643 15.9 %196,740 14.1 %
Below BBB and unratedBelow BBB and unrated80,501 6.0 %41,158 3.8 %Below BBB and unrated63,547 4.3 %61,461 4.4 %
TotalTotal$1,342,873 100.0 %$1,081,800 100.0 %Total$1,493,074 100.0 %$1,392,066 100.0 %

The amortized cost and estimated fair value of our fixed-maturity securities summarized by contractual maturity as of SeptemberJune 30, 20212022 and December 31, 2020,2021, were as follows:
September 30, 2021December 31, 2020June 30, 2022December 31, 2021
Amortized
Cost		Estimated Fair Value% of Total Fair ValueAmortized
Cost		Estimated Fair Value% of Total Fair ValueAmortized
Cost		Estimated Fair Value% of Total Fair ValueAmortized
Cost		Estimated Fair Value% of Total Fair Value
($ in thousands)($ in thousands)
Due in one year or lessDue in one year or less$8,471 $8,601 0.6 %$15,545 $15,782 1.5 %Due in one year or less$14,710 $14,643 1.0 %$6,742 $6,822 0.5 %
Due after one year through five yearsDue after one year through five years172,248 178,438 13.3 %107,150 115,390 10.7 %Due after one year through five years351,224 338,212 22.7 %185,273 189,497 13.6 %
Due after five years through ten yearsDue after five years through ten years211,736 219,098 16.3 %156,958 169,711 15.7 %Due after five years through ten years242,954 215,383 14.4 %226,707 232,197 16.7 %
Due after ten yearsDue after ten years263,742 273,336 20.3 %231,382 246,631 22.8 %Due after ten years267,504 229,232 15.3 %255,183 264,863 19.0 %
Asset-backed securitiesAsset-backed securities298,492 301,668 22.5 %236,813 240,661 22.2 %Asset-backed securities312,885 306,322 20.5 %299,810 301,775 21.7 %
Residential mortgage-backed securitiesResidential mortgage-backed securities367,855 327,883 22.0 %340,804 337,685 24.3 %
Commercial mortgage-backed securitiesCommercial mortgage-backed securities58,579 61,440 4.6 %66,110 70,969 6.5 %Commercial mortgage-backed securities65,767 61,399 4.1 %57,000 59,227 4.2 %
Residential mortgage-backed securities300,016 300,292 22.4 %217,859 222,656 20.6 %
Total fixed-maturity securitiesTotal fixed-maturity securities$1,313,284 $1,342,873 100.0 %$1,031,817 $1,081,800 100.0 %Total fixed-maturity securities$1,622,899 $1,493,074 100.0 %$1,371,519 $1,392,066 100.0 %
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Actual maturities may differ from contractual maturities because some borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
As of SeptemberJune 30, 2021, 7.1%2022, 5.7% of our total cash and investments was invested in ETF securities.ETFs. At SeptemberJune 30, 20212022 and December 31, 2020,2021, our ETF balances were comprised of the following funds:
September 30, 2021December 31, 2020June 30, 2022December 31, 2021
FundFundFair Value% of TotalFair Value% of TotalFundFair Value% of TotalFair Value% of Total
($ in thousands)($ in thousands)
Domestic stock market fundDomestic stock market fund$74,588 66.0 %$64,760 66.0 %Domestic stock market fund$61,549 61.4 %$81,384 66.0 %
Dividend yield equity fundDividend yield equity fund38,396 34.0 %33,290 34.0 %Dividend yield equity fund38,651 38.6 %42,005 34.0 %
TotalTotal$112,984 100.0 %$98,050 100.0 %Total$100,200 100.0 %$123,389 100.0 %

As of SeptemberJune 30, 2021, 2.4%2022, 2.2% of our total cash and investments was invested in non-redeemable preferred stock. A summary of these securities by industry segment is shown below as of SeptemberJune 30, 20212022 and December 31, 20202021:
September 30, 2021December 31, 2020June 30, 2022December 31, 2021
IndustryIndustryFair Value% of TotalFair Value% of TotalIndustryFair Value% of TotalFair Value% of Total
($ in thousands)($ in thousands)
FinancialFinancial$34,845 89.8 %$27,744 87.8 %Financial$35,991 91.5 %$45,331 92.1 %
UtilitiesUtilities3,053 7.9 %3,034 9.6 %Utilities2,646 6.7 %2,993 6.1 %
Industrials and otherIndustrials and other910 2.3 %834 2.6 %Industrials and other702 1.8 %898 1.8 %
TotalTotal$38,808 100.0 %$31,612 100.0 %Total$39,339 100.0 %$49,222 100.0 %

Restricted investments
In order to conduct business in certain states, we are required to maintain letters of credit or assets on deposit to support state-mandated insurance regulatory requirements and to comply with certain third-party agreements. Assets held on deposit or in trust accounts are primarily in the form of high-grade securities. The fair value of our restricted assets was $6.7$6.4 million and $6.9$6.7 million at SeptemberJune 30, 20212022 and December 31, 2020,2021, respectively.
Off-balance sheet arrangements
We do not have any material off-balance sheet arrangements at September 30, 2021.
Reconciliation of non-GAAP financial measuresNon-GAAP Financial Measures
Reconciliation of underwriting income
Underwriting income is defined as net income excluding net investment income, the net change in the fair value of equity securities, net realized investment gains, other income,expenses, other expensesincome and income tax expense. The Company uses underwriting income as an internal performance measure in the management of its operations because the Company believes it gives management and users of the Company's financial information useful insight into the Company's results of operations and underlying business performance. Underwriting income should not be viewed as a substitute for net income calculated in accordance with GAAP, and other companies may define underwriting income differently.
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Net income for the three and ninesix months ended SeptemberJune 30, 20212022 and 2020,2021, reconciles to underwriting income as follows:
Three Months Ended September 30,Nine Months Ended September 30,Three Months Ended June 30,Six Months Ended June 30,
(in thousands)2021202020212020
($ in thousands)($ in thousands)2022202120222021
Net incomeNet income$36,625 $14,890 $104,339 $50,238 Net income$27,090 $35,635 $58,881 $67,714 
Income tax expenseIncome tax expense9,054 1,231 24,387 7,355 Income tax expense5,352 7,973 12,433 15,333 
Income before income taxesIncome before income taxes45,679 16,121 128,726 57,593 Income before income taxes32,442 43,608 71,314 83,047 
Other expenses (1)
388 1,022 1,234 1,022 
Net investment incomeNet investment income(8,095)(7,008)(22,466)(19,613)Net investment income(10,594)(7,429)(19,682)(14,371)
Change in the fair value of equity securitiesChange in the fair value of equity securities1,012 (6,031)(13,644)(3,709)Change in the fair value of equity securities23,353 (7,565)31,104 (14,656)
Net realized investment gainsNet realized investment gains(895)(647)(2,397)(1,676)Net realized investment gains(1,413)(304)(1,708)(1,502)
Other expenses (1)
Other expenses (1)
503 398 899 846 
Other incomeOther income(35)(571)(58)(594)Other income(145)(12)(269)(23)
Underwriting incomeUnderwriting income$38,054 $2,886 $91,395 $33,023 Underwriting income$44,146 $28,696 $81,658 $53,341 
(1) Other expenses are comprised of interest expense on the Company's Credit Facility and other corporate expenses not allocated to our insurance operations.

Reconciliation of net operating earnings
Net operating earnings is defined as net income excluding the effects of the net change in the fair value of equity securities, after taxes, and net realized investment gains and losses, on investments, after taxes. Management believes the exclusion of these items provides a more 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.
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Net income for the three and ninesix months ended SeptemberJune 30, 20212022 and 2020,2021, reconciles to net operating earnings as follows:
Three Months Ended September 30,Nine Months Ended September 30,Three Months Ended June 30,Six Months Ended June 30,
(in thousands)2021202020212020
($ in thousands)($ in thousands)2022202120222021
Net incomeNet income$36,625 $14,890 $104,339 $50,238 Net income$27,090 $35,635 $58,881 $67,714 
Adjustments:Adjustments:
Change in the fair value of equity securities, before taxesChange in the fair value of equity securities, before taxes23,353 (7,565)31,104 (14,656)
Income tax (benefit) expense (1)
Income tax (benefit) expense (1)
(4,904)1,589 (6,532)3,078 
Change in the fair value of equity securities, after taxesChange in the fair value of equity securities, after taxes799 (4,764)(10,779)(2,930)Change in the fair value of equity securities, after taxes18,449 (5,976)24,572 (11,578)
Net realized investment gains, before taxesNet realized investment gains, before taxes(1,413)(304)(1,708)(1,502)
Income tax expense (1)
Income tax expense (1)
297 64 359 315 
Net realized investment gains, after taxesNet realized investment gains, after taxes(707)(511)(1,894)(1,324)Net realized investment gains, after taxes(1,116)(240)(1,349)(1,187)
Net operating earningsNet operating earnings$36,717 $9,615 $91,666 $45,984 Net operating earnings$44,423 $29,419 $82,104 $54,949 
Operating return on equity:Operating return on equity:Operating return on equity:
Average stockholders' equity (1)
$644,401 $495,123 $617,702 $470,006 
Annualized return on equity (2)
22.7 %12.0 %22.5 %14.3 %
Annualized operating return on equity (3)
22.8 %7.8 %19.8 %13.0 %
Average stockholders' equity (2)
Average stockholders' equity (2)
$649,818 $608,601 $666,701 $602,937 
Annualized return on equity (3)
Annualized return on equity (3)
16.7 %23.4 %17.7 %22.5 %
Annualized operating return on equity (4)
Annualized operating return on equity (4)
27.3 %19.3 %24.6 %18.2 %
(1)Income taxes on adjustments to reconcile net income to net operating earnings use an effective tax rate of 21%.
(2) 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.
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(2)(3) 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.
(3)(4) Annualized operating return on equity is net operating earnings expressed on an annualized basis as a percentage of average beginning and ending stockholders’stockholders' equity during the period.








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Reconciliation of tangible stockholders' equity
Tangible stockholders’ equity is defined as total stockholders’ equity less intangible assets, net of deferred taxes. Our definition of tangible stockholders’ equity may not be comparable to that of other companies, and it should not be viewed as a substitute for stockholders’ equity calculated in accordance with GAAP. We use tangible stockholders' equity internally to evaluate the strength of our balance sheet and to compare returns relative to this measure.
Stockholders' equity at SeptemberJune 30, 20212022 and December 31, 2020,2021, reconciles to tangible stockholders' equity as follows:
September 30, 2021December 31, 2020
($ in thousands)($ in thousands)June 30, 2022December 31, 2021
(in thousands)
Stockholders' equityStockholders' equity$659,165 $576,238 Stockholders' equity$634,066 $699,335 
Less: intangible assets, net of deferred taxesLess: intangible assets, net of deferred taxes2,795 2,795 Less: intangible assets, net of deferred taxes2,795 2,795 
Tangible stockholders' equityTangible stockholders' equity$656,370 $573,443 Tangible stockholders' equity$631,271 $696,540 

Critical accounting estimatesAccounting Estimates
We identified the accounting estimates which are critical to the understanding of our financial position and results of operations. Critical accounting estimates are defined as those estimates that are both important to the portrayal of our financial condition and results of operations and require us to exercise significant judgment. We use significant judgment concerning future results and developments in applying these critical accounting estimates and in preparing our condensed consolidated financial statements. These judgments and estimates affect our reported amounts of assets, liabilities, revenues and expenses and the disclosure of our material contingent assets and liabilities, if any. Actual results may differ materially from the estimates and assumptions used in preparing the condensed consolidated financial statements. We evaluate our estimates regularly using information that we believe to be relevant. Our critical accounting policies and estimates are described in our annual consolidated financial statements and the related notes in our Annual Report on Form 10-K for the year ended December 31, 2020.2021.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Market risk is the risk of economic losses due to adverse changes in the estimated fair value of a financial instrument as the result of changes in interest rates, equity prices, foreign currency exchange rates and commodity prices. Our primary market risks have been equity price risk associated with investments in equity securities and interest rate risk associated with investments in fixed maturities. We do not have any material exposure to foreign currency exchange rate risk or commodity risk.
There have been no material changes in market risk from the information provided in our Annual Report on Form 10-K for the year ended December 31, 2020.2021.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
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We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports we file under the Securities Exchange Act of 1934 (the "Exchange Act") is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO"), as appropriate, to allow timely decisions regarding required financial disclosure.
As of the end of the period covered by this Quarterly Report on Form 10-Q, we carried out an evaluation, under the supervision and with the participation of our management, including our CEO and CFO, of the effectiveness of the
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design and operation of our disclosure controls and procedures defined under Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based upon this evaluation, our CEO and CFO concluded that our disclosure controls and procedures were effective as of that date.
Changes in Internal Control over Financial Reporting
There was no change in our internal control over financial reporting during the thirdsecond quarter of 20212022 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
Inherent Limitations on Effectiveness of Controls
The effectiveness of any system of controls and procedures is subject to certain limitations, and, as a result, there can be no assurance that our controls and procedures will detect all errors or fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system will be attained.

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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
We are party to legal proceedings which arise in the ordinary course of business. We believe that the outcome of such matters, individually and in the aggregate, will not have a material adverse effect on our condensed consolidated financial position.
Item 1A. Risk Factors
There have been no material changes in our risk factors from those disclosed in our Annual Report on Form 10-K
for the year ended December 31, 2020.2021.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.

Item 6. Exhibits
Exhibit
Number		Description
101.INS **XBRL Instance Document
101.SCHXBRL Taxonomy Extension Schema Document
101.CALXBRL Taxonomy Extension Calculation Linkbase Document
101.DEFXBRL Taxonomy Extension Definition Linkbase Document
101.LABXBRL Taxonomy Extension Label Linkbase Document
101.PREXBRL Taxonomy Extension Presentation Linkbase Document
104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
* This certification is deemed not filed for purposes of section 18 of the Exchange Act, or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act.
** The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
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Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
KINSALE CAPITAL GROUP, INC.
Date: OctoberJuly 28, 20212022By:/s/ Michael P. Kehoe
Michael P. Kehoe
President and Chief Executive Officer
Date: OctoberJuly 28, 20212022By:/s/ Bryan P. Petrucelli
Bryan P. Petrucelli
Executive Vice President, Chief Financial Officer and Treasurer
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