KNSL - Earnings call transcript Q2 2018 | Kinsale Capital Group, Inc.

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Operator

Good day ladies and gentlemen, and welcome to the Q2 2018 Kinsale Capital Group Inc., Earnings conference call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] Before we get started, let me remind everyone, that through the course of the teleconference, Kinsale's management may make comments that reflect their intentions, beliefs and expectations for the future.

As always, these forward-looking statements are subject to certain risk factors, which would cause actual results to differ materially. listed Annual company's which Report reviewed are including SEC should factors carefully. XXXX the on risk in various the filings, be These Form XX-K, Exchange X-K has its announcing results. the a company quarter contains Form The Securities press furnished second and Commission release that the with Kinsale's also non-GAAP reference financial call in the management may today. certain measures the in which is release, A GAAP these to press www.kinsalecapitalgroup.com. reconciliation at measures available the company's at of site can be found Web also to like Kinsale's now turn to Mr. conference over and would President I the CEO, Michael Kehoe. sir. go Please ahead,

Michael Kehoe

Thank you, and operator good morning everyone.

control disciplined cost targeting involves the begins returns market process. hard-to-place to sized, managing medium parties. inaccuracies to some for contract out Kinsale Bryan will offer few and disciplined accounts of with Joining excess and and Officer. It level external to an by Haney, superior and claim achieve the front of today's to advanced on lines minimize Bryan our then Haney I'm detailed opportunity small call me all we risk insurance to call their and Brian especially superior process. for superior underwriting we Operating stockholders. and and remarks At underwriting maintaining of the to introductory surplus combines is on Petrucelli, technology It adjusted color underwriting financial insurance follow deliver coverage customers is company see quarter Chief our in claims that underwriting some that and Chief information, companies means within returns. the us. that a Financial in Officer value to turn our Kinsale low market over absolute management and most the going with and the make underwriting to then, handling over Unlike Brian some or Petrucelli Kinsale

favorable help drive of elements Kinsale's loss All ratios. these

developers systems analysts a of sometimes built company. to the designed of On he systems business lower business lower. expense XX% side, handling proprietary much end-to-end system culture we and underwriting in to to entrepreneurial the are a to enterprise of cost a in a ratio our It's competitors, powerful than lower our combined at costs our of winner so data Combining Kinsale's end own customer is competitors. businesses the expense even game by the cases accuracy more advanced to care than single dozens Most Kinsale every the end with some advantage advantage policy. significant competitors and is disciplined time. an its allows and addition manage system buyer and disadvantage operate cost that XX% technology their service, achieve multiple about more an result Kinsale using uses lower industry using claim dramatically our XX% providing operate this enterprise or where in superior with own low an

second increased XX%. operating the by almost increased Premiums XX%. For net by quarter, earnings

consistent for in combined with Our guidance our XXXX teens a on of combined are months ratio The ROE. the a was quarter equity six six our return mid-XXs XX.X% was operating and XX.X%. mid ratio results and months forward of

For Petrucelli. Bryan call further turn over I'll detail, the to

Bryan Petrucelli

Mike. Thanks

second with for expectations. noted the results our quarter Mike in As were the line

quarter tax reduction and were Increases we of in of increase in million of believe combined and net continues our an by price income demonstrate particularly over than model and the periods low net income second increase the compared market in is in of higher slightly last net quarter of rate. reported strength $XX.X reported the leader largely for a income million million earnings year, operating investment million an competition. effective Although XX% XX.X%, XXXX, $X.X last intense We year. last Net operating earnings the to a $X.X XX.X% $X.X by increased for year. cost the income to ratio the company's driven

XX.X% loss continue to year. second Unrealized the XXXX favorable XX.X% increased premiums year. effective for the Act to detail be was was And the underwriting activity There X.X in increase tax was a during Brian most tax quarter year. to Our the of impact XX% last options this income end The activity quarter. XX% points were to X.X in and of a XXXX of an Tax net ratio underwriting in from million last operating million second and year from the at over year combined here net favorable points cat income quarter $XX.X that second first representing last Gross and the XX.X% prior for generated will ratio benefits in quarter stock rate equity last loss of development lines of to of of The for business. on enacted reserve recognition combined that this company for compared second XX.X% increase return the compared were compared quarter Reform And XXXX. to generated more meaningful of and of XX.X% for little XXXX. from million reserve the quarter half $X.X the the lower of due compared to a no Haney second of $XX.X bit. XXXX that quarter development overall across discuss exercised a written included

respectively million $X.XX share year. pass up over On the it $X.X EPS that, by per I'll quarter with operating Basic And XX.X% X.X% last X.X% over Haney. was last from investment gross Brian XXXX to to second increased $X.X net investment cents and to year. million returns share and of $X.XX increased year. $X.XX side, compared Annualized the to income per last investment from diluted

Brian Haney

Thanks Bryan.

and XX% care property the up division our from As divisions roughly premium strongly XX the quarter XX% grow first and the for allied health our two continues quarter. mentioned earlier, but All was grew, same the second grew quarter. in of commercial to the

a the competitors because re-underwritten space in books our have seeing Allied number business. healthcare more of their of We are opportunities

and On part particularly our for space shrank E&S the division part strategic construction more down push casualty hand, competitive a of slightly we was on which the on slightly. our in rate due also division other general operates a our to

divisions is where separate business the continue Our the things had XX% us of vast going in of that our worth quarter growth good particular we the [indiscernible] competitors. business indicator submissions most of there positive strongly; are underwrite XX in reminding the for from It's were to in-submissions. increase about fourth how and majority over two our Overall, of business We the at was submissions look leading submissions XX% quarter. up as a fourth quarter up XXXX.

we some gives E&S, flexibility unique freedom any by to us First giving admitted by tailor rate we are faced write risks XXX% our the specific the to forms don't insurance. business. us This great

selection us Second, believe the risk we authority don't control underwriting This parties. delegate and gives greater drives profitable underwriting over results. we to more and third

Moving One in still to The division's rate second positive on push is some book casualty contributed the quarter low increases part rate We our to in to which we rates, the for continue are single in seeing digits. XXX,XXX shrinkage. and and modest the business irrational by change selectively. construction in converting large overall accounts competition. rates draw up took we regards with that is and a some tend over I'm handful are on levels significant those on large, thinking is large condition accounts of premium This indicator accounts to we of to opportunities of opportunities. market because the

us normally get so to we premium. And that difficult to for money just willing given aren't it's compete to lose

market as medium write small good caps. large we in So which accounts see us behaving to is that the is a what still we did of that more That mainstay when the to success indication sign. we rationally past quarter being is is said, more this an

been very While back can't in increase seems the it healthy seeing we easier four to seeing, what to growth were the previous increase has The continue sure trending are at Each at XXXX. be for XXX% than a we growth prior favorable rate is We're since it. looking rate and XXXX. that a finding for we submissions higher opportunity to in now come we market last quarter. direction the by causing than are is the quarter a us

So this over optimistic about to Mike. we And it heading. turn I'll that, is back with where feel cautiously

Michael Kehoe

Operator, questions Brian. in. come ready we're that for Thanks any

Operator

the Instructions] Thank question Mark of first [Operator you. from Hughes comes line with Our SunTrust.

Your line is now open.

Mark Hughes

you. morning. Thank Good

Michael Kehoe

Good morning, Mark.

Mark Hughes

what that again? was in period for XX% The submission account increase

Michael Kehoe

was That over over -- quarter second second quarter the fourth quarter.

Mark Hughes

Second quarter over second quarter.

And third continues in Okay. that to I think suggested be then, here you quarter? robust a the

Michael Kehoe

to its it I don't have the rate going. I mentioned continue expect that, I at know, would if

Mark Hughes

behind Okay. And little like flat change more of few early last perhaps bit do XXXX going kind a year then single developing development, full favorable quarters losses your low any see you on? know have thinking any do there, in earlier How What's the pace is in digits up been you bit a book, kind of the there the inflation trajectory little more? XXXX. in about

Michael Kehoe

I smaller think exacerbates just you different that the some the and the business whenever to our quarters on compare or different that volatility company results bit. fact it's you acknowledge based natural have the in in variability there's little -- hey years, a volatility probably a

a 'XX, I was in good quarter. comparing XXXX well as We exceptionally of not kind XXXX quarter an second anomaly, 'XX quite think think quarter bit exceptionally with an second was second was it as quarter if but you're good good. of

that there's definitely type on jury profitability of know verdicts thing inflation of and today. our don't and pricing we inflation last in for it's a just damages But divisions of the and there's to think In analysis address anything of manage review we it's account front. terms exceptional our and claims and all trends, something underway how I in and our our if actuarial part I normal

in similar bit? that So has you've a to little inflation prior what the would say seen you years, picked up is

Bryan Petrucelli

say would its what somewhere seeing. are we I

Mark Hughes

emerging had are of seeing are the end anything that of you large markets types you you or then, or line spot creating some that terms that that And there, in accounts business mentioned opportunities are opportunity? can

Michael Kehoe

It's our would But -- the across there's I accounts. skilled the space healthcare divisions seeing of are facilities. and in the nursing more some these space say allied allied board. many

Bryan Petrucelli

accounts, emphasize on competitive about the to in that small we a handful the sized of also because that's transactions think has best where that's are. So a right? our today. market would to And focus been margins consistent we're I strategy talking medium

of see see little for more a mentioned opportunity XX now remarks, Brian the becoming fact larger that trend more we I his indication an a a might think bit accounts on market the or risk as and there favorable X that's no to that we month.

Mark Hughes

And up loss follow-up those spec you're more normally higher associated accounts, larger volume. would on with getting a that put you despite

involve but So higher a is little profit good, the it ratio? contribution might loss

Brian Haney

that accounts handful specifically are not reserving. these in so a going reserve come don't I distressed. us we of for to this to will And say it address accounts, specifically we're --

So get they rate loss a bad very to they they and really us. high when have experience a come

I expect accounts, have So actually to them we loss handful do I would right, would the these better expect experience. that

Mark Hughes

you. Thank Understood.

Michael Kehoe

Mark. Thanks

Operator

you. Thank

Our comes from RBC line Mark next question Dwelle of Markets. the Capital with

now Your open. is line

Mark Dwelle

already. the results. Good on of Yes. Hughes much a morning. few say my Not Mark took to questions

market think given. commentary I appreciate the that you've

areas continue just economy by being you or forth. you're to I If would and is compared you're a the much volumes E&S the of contracting, is drives how and portion growth market because where a growing your the to relationships you strong look usually at driven so you what which distribution say lot where penetrate more as guess expand primarily

Michael Kehoe

a know P&C by good probably growth that got robust economy Mark. Mike I part don't -- answer industry. I very that. to we've growth precise know the that. is our driving across Mark, don't have driven This morning, we Clearly a that's actually is of and Kehoe.

and the has year of I think are will E&S segment. expense which at years competitors. not don't trend every been is taking have we if And think, standard market our market, from most taking you a know clearly strategy I with from share the Kinsale's any? the you if E&S standard is Bryan, clearly, share the long-term growing segment I line model, business but

Bryan Petrucelli

say as growth market that of sort are our is, look rate number one just whole market think could and the guesstimate growth and to growth difference between share. taking that the rate in the way at a you average E&S is I probably that

Mark Dwelle

Okay.

Bryan Petrucelli

half. I Which and would would half guess be around somewhere

Mark Dwelle

line about just there of bit a healthcare you about risks? that's writing assume primarily you're more of describe a exposures I exposure. of Can kind allied understanding way just the In talked you the kind by little that what liability

Michael Kehoe

on focuses Kinsale healthcare The allied non-hospital division healthcare risks. at essentially non-physician

rates market year social So for homes that everything this service, we And as that it favorable firmed or year or it's down here agency, independent for healthcare living, skilled is wrote skilled segment the ago, one two risk from risk has thing no -- in so the the the pricing come a for trade living, last because about drug was alcohol a and home in low the so business that nursing until is nursing assisted Up liability we've treatment, not up. there. noticed the had home. insurance us

prices, Now still low lot an companies, from It's that we're you've some we to segment, very of the we've ton a competitive. There's seen opportunities. withdraw a in And it. in but not we're that market. dislocation the get seen starting losses carriers that's area writing business, some see where more

injury, a So a liability driver be fall of big the care type nursing thing. would improper book is skilled that of homes resident be loss could for either medical

Mark Dwelle

different continues just any anything happening there noting? of to it had in you. that investment helpful. Obviously it's That's I question Thank portfolio. or terms benefit, the that's changes The worth last

Bryan Petrucelli

not Bryan are in we we purchase It's past. rate of still in other real rates but We of in in than no changes just seeing increases to dramatic Mark, about really continue no enough the talked the there. some take changes interest -- its advantage strategy the kilos Petrucelli. the what floating

Michael Kehoe

of portfolio a continues the grow at of healthy size to course The club.

Mark Dwelle

good part. Of that's a Thanks course much. very question. all That's my

Michael Kehoe

Thanks Mark.

Operator

with question Adam Thank William you. from line Klauber next comes of Our [Operator Instructions] the Blair.

is line now Your open.

Adam Klauber

Good guys. morning

Michael Kehoe

Adam. morning, Good

Adam Klauber

now? is fast How [indiscernible] the and did that how grown big unit

Michael Kehoe

of I last come I of our XX% for this think growth year. X.XX% the up then it'll book book somewhere quarter, from around you X% so think year in our said

So part growing the club. it's at healthy but small business, it's it a of

Adam Klauber

did then, your property grow the Yes. book how did And you grow? property -- book

Bryan Petrucelli

was Don't strong. exact figure. know the But pretty it

Michael Kehoe

exiting adverse up long driven Kinsale is of too give good and activity It that pretty was results tightening some get way probably prices it insurance low, to a space. highly year, creates starts but again, a also to the drive like growth being a results the companies. for think, I company And that standards their catastrophe our strongest for underwriting And growth. area see competitive was the We dislocation carriers for poor think as just by you time. business, when opportunities that in last

Adam Klauber

And time. then, the Great. you standard Right. Right. over expanded think market E&S I at that Clearly of expense the has market. mentioned

risk guess moving risks? of out market-by-market. more to But the have know seen Over market or I last the more six into like you months. standard And its prevalence coming I E&S E&S like

Michael Kehoe

It's of of just for into business broader really Kinsale's kind of in direction. a anecdotal, that would good But It's but the It's feel sense market I E&S just other there's going say now lot general, right optimism opportunity. but the we're course. seeing a opportunity, come the dynamic of kind not business E&S not we like of space. pretty not

Adam Klauber

Okay.

any then areas? of new months or And the brought new you product Okay. in starting any last couple on have teams

Michael Kehoe

as what six normal Nothing. insurance teams last teams. No no months. or do we the new enhancements. a of new on always we're a That's but product in new divisions Obviously, working part company,

Adam Klauber

Okay.

finally, grow Do this good is level is very then, And you year. as the as next sustainable a you doing over expense -- ratio grow? think this you Okay. well your

Michael Kehoe

I think so.

expense term the system, but made of lot our ratio in last reinvesting that now automation, front. particularly to the I more really of kind the driving of because in ratio, to lower. And it's a a expense long like technology opportunity in of an might also near to think driving some of if idea the to there's superior area opportunity years progress the XX%. that have on always And payback drive to business. the investments I opposed be We little I'm a business. it. a on -- so have there's in focus as thinking think But to is We've way grows going more over it's business a also of our technology X variability the invest in the going an powerful the go to of building that that little I our we XX% bit XX% level think bit

would the But business expenses And say in what kind managing reinvesting to also even so I better future. the of the our aggressively. in very balancing two, get we're

Adam Klauber

Great. a Thanks lot.

Michael Kehoe

Adam. Thanks

Operator

you. Mark line Thank the a have from with question coming of follow-up SunTrust. We do Hughes

is open. line Your now

Mark Hughes

how Lloyd on think I Yes. the Thank end restructuring competition through their observations you. do a about is space market? Refresh behavior? kind impact me of perhaps, going relevant the they're any at smaller any the much you on to your anticipate then, of strategic review the or E&S, of And

Michael Kehoe

in significant pretty of our lines. many is Lloyd Yes.

for I about space XX%. think for E&S whole the

Brian Haney

largest the writer Collectively are they Yes. E&S far. by

Michael Kehoe

significantly affects and market the then us. So that probably anything affect significantly will Lloyd's

Mark Hughes

you're Are you that some be been -- -- accounts might larger accounts getting could before? have it of Lloyd's these

Brian Haney

Lloyd's ones think more not I were specifically of The can that accounts.

Michael Kehoe

larger And where unique that think we its delegates -- through And accounts accounts that a probably I typically underwriting from Mark Lloyds competitors. binding quarters write directly tend Lloyds to with brokers with London. our in we authority competing to underwrites to I Lloyds. the smaller we're Lloyds' to business Kinsale would three business Lloyds compete underwrite behalf. the not focuses authorities on that's say of

Mark Hughes

probably retrenchment? they for not be area Lloyds them you But an experience a that perhaps has or that didn't could that think on focus great for been for some presumably that would

Michael Kehoe

we that by I seen that it's to that's bit better office. contract very drives at because you're Obviously, better is Lloyds whether But underwriting the struggle the or and will selection Every we know partial own like manage haven't which underwriter carriers. of strategy, the Kinsale underwriting a frequently our directly. carrier homogenous They We out small in piece it better other very enough are different a on followed a Lloyds to We've larger in about business accounts. little or business personally dislocation and some hey that Kinsale we companies control other the talking model contract of binding compete books risk closely in space our underwritten its delegated the cost is with. of specific underwriting authority every is underwriting the result. with think programs,

Mark Hughes

Thank you.

Michael Kehoe

Okay.

Operator

you. Thank

this no Mr. the would over for call to Kehoe questions any remarks. further Mike now I like at have back to We time. further turn

Michael Kehoe

operator. you, Thank Okay.

to all participating But I look forward think thank with speaking in for again and want today. done to you I three we're I months. everybody

Operator

and today's does in today's Ladies for conclude program. participating thank conference. you This gentlemen,

disconnect. You great a day. may have Everyone all

Kinsale Capital (KNSL) 7 Aug 182018 Q2 Earnings call transcript