KNSL - Earnings call transcript Q2 2020 | Kinsale Capital Group, Inc.

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Operator

Ladies and gentlemen, thank you for standing by and welcome to Kinsale Capital Group, Second Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. [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 could cause actual results to differ materially. on listed quarter company's Form XXXX the Annual are including SEC XX-Q factors should XXXX second which the quarterly Report risk in carefully. various the filings, and be These reviewed XX-K Form report on a release The press the Securities contains its second quarter X-K and company Form with Commission Exchange has that furnished announcing the results. financial Kinsale's management call today. the may also measures reference in certain non-GAAP can company's be is A at found the these reconciliation of which the GAAP press available measures at website to www.kinsalecapitalgroup.com. release, in I turn and conference to CEO, over Mr. will the now Kinsale's President Michael Kehoe. Please go ahead, sir.

Michael Kehoe

quarter, quarter XXXX, and posted of disciplined thank And and on long with continue Last combined Thank today. underwriting growth. underwriting, quarter our for the Brian disruption strategy the do for for we'll $X.XX the per financial technology costs, controlled up June you, profitability for then market Kinsale market E&S over the provide Bryan diluted focus operating of operator. to of Haney was virus. highly ending and from XX, Petrucelli, Haney, is Good morning, operation. the are XX.X% begin combined me and the XX.X% I on believe the us everyone low some The earnings a Kinsale's of XX% call COVID propelling return Gross term. The the of then notwithstanding XXXX. for we so and and share driven our the XXXX. performance on the COO. equity up ratio quarter, will and written company second the a and an XX% operating premium color Brian the annualized six months you and Kinsale's Petrucelli second on cover Bryan night, reported CFO joining Kinsale With will will presentation the

years our within own some of In P&C some market. business addition enhanced results experiencing etc. many programs, dislocation raising adverse are of strategy, canceling After the a prices competitors and growing are capacity, growth level being our intense is to withdrawing by competition,

dislocation this abate XXXX. low thereafter, to At to allowing our Kinsale level dislocation in normalize, to at growth rate, expect point We thereby perhaps we rate double digit an to expect perhaps of elevated and continue, the through some grow range. the

growth not submissions Kinsale’s the we submission did profitability have a experienced COVID-XX the end. industry opportunity, raise could Kinsale profit take is new coverage to some in the in we raise and Three At drop expand XXXX, exact restrict and months same growth, of of capital off there premium. have this amount couple we V-shaped Beyond accelerated first equity weeks possibility temporary a end market our reversed dislocation in on virus activity also is a impact March year the Kinsale of to that material the within allowing a a later, cases, before to have The rates full growth. or we recovery margins. the position. business further of in To noted advantage expect modest of quarter and

all the three payout. had side, claims claim of number exclusions coverage we small ago we any would were policies On months preclude anticipated a noted that involved

from to coverage call similar policies in I'll over Bryan place, of either against now place impact And Petrucelli. turn COVID-XX any with defenses small see claims today, material or the a don't the growth We essentially number with we arising virus. are in to profitability

Bryan Petrucelli

ideal the Mike. less generated profitability than Thanks, Mike economic is in growth quarter. second that mentioned the encouraging, and The the by given COVID-XX premium conditions just

up for XX.X% the Net investment our equity which that we million, and earnings, consistently on and from XXX% to of are significant to gains gains the annualized and reported mid-XXs combined to $XX.X ROE by included produce last came million compared to with our prior primary operating million year back a this the XX.X% net by that when year. declines company XXXX ratio mid-teens ratio million in guidance. the company, volatility and and Just second recovered our were Net and XX.X% reaction quarter to in as losses, compared quarter compared from as the as the a loss last dollars returns $XX X.X ratios driven the million second operating line combined XX.X% generated XXXX. second quarter nicely quarter of the income reminder, We a operating our way $XX.X combined year. points and are equity first to favorable goals equity The year. quarter quarter, right for development the of investments, of combined markets in million unrealized increase in $XX.X last income reserve exclude on markets compared points pre-tax financial increased an representing included underwriting million COVID-XX. XX% of XXXX, $XX.X to $XX second or net The $XX so from of X.X of income are ratio

first year, written reasons income of continued of million, including market effective Mike representing discrete the options period. the for the and six service over were mentioned includes from Our that all during XX% the benefits tax tax was premiums stock dislocation XX.X%, and levels. again last exercise a previously Gross increase rate sustained months XXXX recognized for the $XXX

for given Brian year. operating share Annualized cash by year, quarter $X.X returns did over from EPS second equivalents the up investment interest it to just from investment $X.XX investment as pass $X.X the to was per XX% -- to year, however, decrease cash excluding net rate quarter X.X% gross portfolio. income did $X.XX share lower environment. a And million last I'll per result growth over the continued compared and of last that, increased year, Haney. X% Diluted to investment last million On with increase side, in last

Brian Haney

Bryan. Thanks,

COVID COVID in are was two rate of that quarter, April. essentially and grew There hardening out I the in or quarter. factors then, seen say Anecdotally, related the quarter, competing same than in rate rate of the XX% the Since premium recovery earlier, the lower growth in the the on bottomed growth felt XX% lockdowns. is we've have rate. growth that peaked second been mentioned in first The the in was could rate, effect that bulk perspective that growth E&S your growth significant the big the affecting June rate our second As market January. as in depending the

E&S property, say somewhat, all at the is the of are by led in trending markets of results commercial being spaces vanguard market back. we the health undisciplined is this I to still COVID in than hardening. and poor others. significantly in weighing economic allied more of are compete that the undoubtedly impact Years of while seriously market. the the growth bad market would The behavior of the effect aggressive #[off-mic] point, casualty, our probably the and overwhelmed hardening opportunity the overly have and pull underwriting So on excess direction among and to in of forced competition

limits, classes conditions, competitors of entirely, some many also been been to which terms They've reduce re-underwrite had their and books some soft years the of business, rates, Some dramatically terminate increase and business exit had of compelled market. long some inadequate tighten for have to programs.

opportunity more has us. this to for of All led

are hardening levels, back maintained in we now earlier, worse not have April. We underwriting so XX% the the market, discipline effect saw the But, in COVID June, we though what in to Submission XX% even still Based on down growth soft from in effects to the undoubtedly I have rates we pre-COVID the and some lockdowns. submissions first returned there's forced were the believe second growth mentioned slightly being ongoing pull essentially quarter. market. quarter, from throughout was in as

them for response pushing we to market rates, up conditions. As are still in

movements complicates not are, the a we however the see increase, book in As in range all to to of aggregate second the all being which that is we business, this rate terms But during to very one XX% the being quarter. and in a conditions. XX% number. XX% said, heterogeneous reminder, What reducing up XX% reflected rates single rate have

As affect changes, have in be pushing though may has hardened, margins. and reflected conditions. the Even does rate terms we been also more market it profit that favorable not

XX% that the XX% to that, profitability it expect turn book. back I'll might understate the in And to the change in with we So Mike.

Michael Kehoe

Thanks, Brian. now. the questions line to up for Operator, we're ready open

Operator

[Operator Instructions]. our JMP with first from you And is Carletti Matt question ahead. Thank Please go Securities.

Matt Carletti

morning. Hey, good

Michael Kehoe

Matt. Good morning

Matt Carletti

if growth I was -- submissions give comments you Mike, kind us hoping of are kind and levels. little I you on, your and have you in then or of know Can appreciate of during the Brian's where back picture it pre-COVID the an was? you look premium at to offer and early just a I that mean quarter July, May, saw, you just They April, that kind you progression? if June curious what could may be of,

Michael Kehoe

last nearly most the to was V-shaped and monthly that XXs week that dramatic rate. never don't we our to a growth from then don't high that premium, track But call a detail we off saw premium. the rate will. that down -- of submissions we XXs Premium in Yeah, period went new I don't premium we on by at growth you about Right, this the you if this know, so you of touched couple to conference -- to we was, low and kind kind its day severe on X%. X% see didn't recovery, drop in that -- a in moment, the for dramatic, was But there basis, we have a mean drop provide.

Matt Carletti

with we're had great. you the you Okay, are I nice written, the or the getting bottom a Or model just kind some expense premium earned took one-time line? any a is leverage ratio seeing on gross the in one in that other expense of there? And on leverage that in was, down step just there COVID-related curious, catches of benefits of then the the as one, question up quarter. the And just companies. ratio know, the kind you're

Michael Kehoe

to Bryan -- handle let wanted to going I'm one. that Petrucelli

Bryan Petrucelli

that's what you're Matt. seeing. exactly That's Yeah, --

to but IT keep folks rate of at it's we what are seeing a than our know, claims area underwriting and much we're growth kind with You up growth a hiring perspective. in lower premium our and from just

seeing there. think economies you some I of -- scale be some could So

Matt Carletti

Well you. forward. best luck and thank Great, going done

Michael Kehoe

man. Thanks,

Operator

Thank you.

SunTrust. Our next Hughes go from question ahead. comes with Mark Please

Mark Hughes

morning. Good you. thank Yeah,

Michael Kehoe

Good morning, Mark.

Mark Hughes

June in comparable sort suggested of as had kind that saying? QX, Haney, XX% premium to January. January growth you or is you levels of to assume the back was what Well you're Brian do that And had

Brian Haney

was don't I We how those Mike have put to just growth was to context about what recovered. saying rates just had in details provide. giving that

Mark Hughes

Right.

June as than better whole? quarter the So a being

Brian Haney

Yeah.

Mark Hughes

your is January similar somewhat point? And

Brian Haney

May was higher -- June Yeah, June was much then. April than and

Mark Hughes

continues momentum it? July, into that presumably same is And Yeah.

Brian Haney

-- I mean, we

Michael Kehoe

we I'm But, yet. hardening we’re like E&S know, Well you the if to -- want quarter not to a I comment strong XXXX. made through we of the not is do get we're where opportunity, feel think intro, market of going the don't yet. on to going I certain back sense have that, go as remarks in going. third of we to pretty, XXXX the I we've pretty quarter into to optimism the and through think Mark third just a perhaps And certainly sure got But the specifics you

Mark Hughes

develop about the in etc.? and how period older both terms with claims year they on down, activity, shut How courts you've the through seen of what on then Understood. new the current claims claims, this

Michael Kehoe

the the know, don't slowdown the the kind of But state, try within interruption is. you don't cases. We what There tremendously this changes. report probably very down. exactly yes, But the has been varies in in have by some and the any of of courts each a -- in we modest courts claims sometimes resolved. large to the have state you on impact even you know, general, think progression system been court in percentage have anything material I being terms -- Yeah, know of closed general, had

for we of know, try account our in type You adjustments to certainly those reserving.

and we're our slowdown talk post develop that. You very we are reserves on there certainly do not trying track favorably know, is on conservative, we But that keep more to to that mind some to think -- about focus at level. we likely probably frequently in much yeah, than a

are that clip. Although, at we're old pretty a good good still new opening -- claims claims and closing pretty

So, that’s my thought.

Mark Hughes

related I QX, like [current] to this that an And extra talked into amount putting the IBNR, any year, quarter? think you Understood? dynamic accident about

Michael Kehoe

industry. bit we're its or that I'm -- going concern You first the about the was go of exactly, we COVID. into on up put P&C wasn't a the quarter, I the just know, think and And of little the think a But created you sure of we dramatic is $X.X million, more the QX, was reaction its in impact on not the know, in impact economy. that virus investor we there a got what to would of the, less into because every was weeds I detail lot that it quarter. I COVID by level that it uncertainty specifically to say nature

You in insurance, heavily right I'm things thinking exposed of of general know the property industrial business, general, shut toward skewed like Kinsale We impact on trade are But but has on not virus. commercial the avoided at cancellation, mortgage credit, that, of of business more that and exposure. event industry, things do of etc. the the like say, down, property coming exposed an it's course, litigation to all. we're economy, in the impact claims the lines I would most out or its

know, the we in how it maybe hotels were. -- quarter. think, But insured’s every of the We expect down that's you conclude don't second if in we or place do reserving -- the to for address ratio, and on of there's, our too. of combination strive way the of terms like of that that and at best that's really were the defenses kind very most always strict you just business all way loss And to we it. material those goes then look our that in I you the not be factors, impact probably shut know the that conservative quarter, you So other restaurants growth virus coverage, during have if any so

Mark Hughes

opportunity. One final the you're on there premium outsized might. so you where casualties was question, Would that that impact growth excess I if the an of anticipate does seeded one and a of The lines ratio? the lot seeing have

Michael Kehoe

one over turn Brian I'm going that Haney. to to

Brian Haney

outstrips allied health other of the there's are the -- and growing the is that lines too. there and yes. also that growing extent growth I mean to book, the growth the rest I mean, But significantly pretty so

tough to it could. it's So say, mean, I

Mark Hughes

shift? mix obvious No

Brian Haney

No.

Mark Hughes

good. That��s

Brian Haney

everyone's of I Now, fast. mean, question though, growing. because basically, just It's how a

Mark Hughes

Yeah, okay. Thank much. very you

Michael Kehoe

Thanks Mark.

Operator

you. Thank

question Please from with next ahead. Capital comes Mayor go Rowland RBC Markets. Our

Rowland Mayor

Good guys. morning

Michael Kehoe

morning. Good

Rowland Mayor

sheet. ones a balance quick So the couple on

line, First, this less why you other you can us, within remind from, $X $XX line, million liabilities year? -- that know, to it’s gone it’s than other why liabilities million

Michael Kehoe

Bryan?

Bryan Petrucelli

with -- the There it like to liabilities includes building. some securities Yeah, Bryan. this -- is That things payable. is some there in respect

currently under construction. know that's of And You headquarters, the that's majority that's really our that.

Rowland Mayor

there's headquarters sense. sort Yeah, QX be it done makes And to that and is still on in track delays? been of

Bryan Petrucelli

target, Now got me we're And largely think. Mike, you on correct this wrong. I if I've

I September or mid September-ish, complete of think -- sort mid at late that. looking to mid-September we're

Rowland Mayor

longer should end, a final then going is year And duration bit portfolio up that a there bit from one it. critical last Got The to one. is down and get anything used investment notable term? and on we

Bryan Petrucelli

the wouldn't in going dislocation the change markets dramatic I some of to take a I to of think expect you in it's duration in that any COVID. portfolio just related the forward. our modest most advantage adjustment saw

Rowland Mayor

that's about XX% Got it. seeing is be opportunities equities going portfolio there? of still, or the are And to you

Bryan Petrucelli

than I too the wouldn't Yeah, severe We the I wouldn't April in you our the little to March, to much of take decline add more timeframe, increase advantage but a did an XX%. expect much to -- market the it bit of position know, increase the, in in there. expect

Rowland Mayor

Okay, perfect. all was Thank you had. for your That I answers.

Bryan Petrucelli

Sure.

Michael Kehoe

Thank you.

Operator

Thank Blair. Jeff our go with Please last question you. And from Smith ahead. is William

Jeff Smith

good morning. Hi,

Michael Kehoe

Good morning.

Jeff Smith

lines touch on but a did I came of could rate seeing touch you're of you on business? in the late your little increases on or some you

Michael Kehoe

you do want one? Haney, take that Brian to Yeah,

Brian Haney

the was the up I think what in are rates XX%, aggregate. to XX% said Yeah, we

in detail allied casualty more we management I but excess the generally go liability, would health that, mentioned say differences know, don't You into about I spaces lines, than others. hard that property, were commercial

those you infer than that So going can are average. rates higher up

Jeff Smith

half, there first loss And picks that with in seems change QX half. in the then Okay. sort picks here And be conservative think year with of would been the you case? case that or will anything then do lower you've the that mean, second it see you'd is I kind this in was that of historically particular. the like

Michael Kehoe

have don't reserving. kind know any our real we seasonality loss I that of Yeah, to

estimates. goal in you course general, our we tempered be measure successful. how We those investors we strong a balance of and with that it's very conservatism you think, conservative strive our And, we've And, sheet. fact put best know, have an account to want I to to forth set been but in I can of in business. know, a is really confidence to think it lot -- estimate our of for uncertain be cautious the

we're decades, our but accident we inception years, company our that's not now. accident for of XXXX are favorably know, been except have an a You year all And developed basis. in around XXth for on to-date

we've I know, to build which on you looking we're that. track anything Petrucelli, think to would that? record you add a So, and Bryan got good

Bryan Petrucelli

that's think it, that's way to good a -- I Mike. Yeah, describe

Jeff Smith

what And growth GPW quarter? was of exposure then Okay. in on the the impact

Michael Kehoe

want Brian you to Haney, that? take

Brian Haney

the have -- it exposure quarters I would would answered this of effects I put the it don't exact probably second let's it would of an impact. our because did if figures. contributed way, previous growth I less less those of Or be -- COVID. it. we to Yeah, I quarter probably speculating probably had was say, than growth just in in

Jeff Smith

it you it wasn't but Right, think? positive, negative, stayed was -- it

Brian Haney

it actually we shut I majority the during didn't stayed because would businesses I positive the lockdown. down think think yeah, I insure -- of the

Jeff Smith

Okay.

thank you. Okay,

Operator

Kehoe Michael for And turn concludes today. his call will for final I Q&A our you. session this remarks. to the Thank to like

Michael Kehoe

participated. months. you a you here to look operator Okay, call in few the for speaking a great Have forward and again well, And for we you who day. thank organizing everybody thank with

Operator

with we for And ladies and you in participating today's that, thank conference. gentlemen,

You now great a day. may disconnect. Have

Kinsale Capital (KNSL) 31 Jul 202020 Q2 Earnings call transcript