KNSL - Earnings call transcript Q1 2021 | Kinsale Capital Group, Inc.

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Operator

Good morning, ladies and gentlemen. And welcome to the First Quarter 2021 Kinsale Capital Group, Inc. Earnings Conference Call. At this time, all the participants are in a listen-only mode. Later we will conduct a question-and-answer session. reminder, call a being As Instructions] this is conference recorded. [Operator

that remind get Kinsale's through comments beliefs started we the everyone expectations management their for and let make teleconference Before the me that future. intentions, of the may reflect course

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

Michael Kehoe

underwriting strategy a make us a of of call we at of the The combined underwriting call everyone with expense market. the return our posted from XXXX, morning is thank driven an you, over on the operating from the a -- contract mid-XXs and we on market, also few benefiting over to diluted over that premium the Operating earnings quick on questions. will our guidance per all Last quarter annualized operating are return our a in and Chief competitors. in a unlike and technology operator will own share size results. E&S A the XXXX. control of ahead appropriate of take equity. in and powerful operate small-to-medium ratio, of company Officer reported it mid-teens comments quarter. most was which written our Financial principal focus Kinsale on XX% Thank almost the We results operating we Kinsale XX.X% for part up and Kinsale good it combined Brian night, for well XX% of Gross which equity driver me. XX% today. for an Kinsale's Officer of and parties quarter, a of is in first least ratio, quarter underwriting given $X.XX you are the on accounts combination. increase competitors, first the for Chief and turn Petrucelli, joining of any costs the is our Bryan Haney, us The outside is after Kinsale's significant dislocation out low disciplined at and continued advantage recap Each

and the nonstandard to for continue going of some into expect This We of still has two their capacity standard seeing market, the duration through business, years within working the possibly XXXX etcetera. being books we of withdrawn some and business being been or canceled, correcting process last programs or on for are problems so it longer. are carriers the pushed process

this moment. a will margins color us the on at topic For expand in here provide Kinsale, grow and additional allowing time. the dislocation some is rapidly Haney same to Brian

double-digit terms strong in an and in more continue to our accommodate to growth, slowly period continue in to to that we've the quarter office XXXX, staff, grow employees range. hiring back Kinsale better moved benefit past, As innovations, been take this new the XXXX the fourth we operation especially of customer and said abates service brokers From we've premium given providing do when the dislocation employees from of we out to training the rolling superior in and power low the early we'll share market model, so will etcetera. technology our that possibly likely new but our in or standpoint, business of

Speaking initiative over of system, years and a have we core hard Owning measure to two One competitive last improving that that agile now of and having enterprise of don't this maintain we our is year systems customer continue and on legacy or not A maintaining up to work, employees prior that are working in have technology, systems seven productivity, improve exploit. we out system rolling IT-related data from new our invest collection. and is by core accuracy work our features in to XXXXs legacy our commitment none functions advantage the to service, we positions little any. because XX% ago. that five of from XXXX's eight and development work teams them enterprise

Bryan to Petrucelli. turn I'll call Now, over the

Bryan Petrucelli

year we strong market results continue increase driven We income of million equity $XX when the ratio driven was from $X.X to a XXXX improvements significant to reaction equity compared losses prior negligible of million by loss premium $XX.X be XXX% ratio expense $XX points $XX excludes quarter value for and of for The year with experience X.X XX% from year saw of in resulting the company last which loss combined to volatility XXXX management. favorable the compared due either income Mike. XX.X% loss Net expense up losses, compared where favorable the for investment the quarter generated and first movements to movements million a and representing compared development, primarily $XX.X the million favorable XXXX, X.X disciplined XXXX first unfavorable underwriting to first million a to of quarter net $XX increased quarter returns increase points million from and gains for year. cat to the and last increase from and Thanks, of operating growth, income and $XX.X last million of earnings, reported by the solid reserve in in in an ratios. pandemic. underwriting The equity and to to market last in quarter a included net The combined million first XX% year both period. by investment

from see related to pace reported capacity and continue of slower inefficiencies limited in COVID-XX. a We judicial to operating losses the courts other

our likely result, there a a we As benefit area. We continue there. some to conservative in approach believe take in reserving is this permanent

a take believe and it's before courts to and the any see we normalize recognizing However, prudent open as approach redundancy. related operations wait

commissions Mike The on from expense the and commissions. representing that market the ratio of a are premium operating lower and last mix economies that growth XX.X% receive for ahead approximately scales $XXX the recognition we decreased XX% of over return related Additionally, ratio touched increase in and as and equity our subject to favorable were superior standards. was guidance. our for ceding and Annualized resulting from a dislocation pricing previously of of loss on. benefited premiums shift quarter, of relative that business dislocation Mike million lines mentioned result market to accident again our to mid-teens quarter reinsurance ongoing service trends slightly year, where Gross written current slightly from year in our a net the due

and Haney. X.X% earnings it to share by was compared was $X.X gross last million investment side, XXXX equivalents cash year. for net I'll first from On share to the increased to Annualized over year. to up per investment the $X.X excluding returns cash $X.XX quarter income year, the and over million investment compared XX.X% in share per X.X% pass diluted last operating Brian quarter per that, $X.XX With last

Brian Haney

Bryan. Thanks,

the in XX% XXXX. the quarter, grew fourth premium first slightly from earlier, mentioned quarter As of up

to While still continues were and of very strong New two we Last market industry still very in led up significantly. attractive. there getting commercial environmental bigger of although areas are in most product and of and competition is is liability Growth many re-impose the plenty was result California to still the are major a our quarter, which property, restrictions events. favorable, rates areas, and Commercial particularly terms harden the particularly the York, cases as are property states. COVID uptick states space

With construction casualty. late sense premium in as respective quarter in some fourth the tailwinds, the in has opportunity. and saw loosening, the as down the into restrictions the resurgence a and continued general distribution for some general in quarter, in which market Submission full growth us widespread drop growth early mid-teens restrictions were a the loosened was quarter, that like second particularly quarter first us in and high the teens the we're cases seeing but from year of optimism submission the we first COVID resurgence areas and quarter, vaccine has provided and in giving good

continue in we rates, response market to conditions. up push As them for to

former tightening that even margins but are one rates up in are generally to see heterogeneous very are the Keep the business, rate rate terms further a the of reducing well books we we're and conditions, we like quarter. business. or said, bottom we cure that first mind, all our have As trend. many we With being improve to to of correct with unlike in increases Even rates beyond complicates poor being all to rate line. which the a reminder, consistent getting range number, the -- movement raising contribute up not should we more in the money-losing feel rectify during quarter, said, of which the decisions of competitors, teens aggregate getting book low all fourth single in rates excess

expect over time. some So margin gradually improvement we

and vanguard be whether that terms have marketing employees, in any marketing. seeing this of But are corporate really we to competitors there the or would office the Lastly, as brokers many and customer on of our find service Mike is Starting our in not not yet last to an instilling year marketing, for superior us very culture. much a our been doing resources we training person mentioned, interaction, the to advantage front. see office making We're in lockdowns We're in returned permit. general. our in back just resumed no in-person substitute January, on the help since great in new it'd in where training the have been trips providing face-to-face employees October of working in-person that's

with office that, marketing trips, but to enjoy us. until Our return suspect, I'll resume back hand ceded the their over eventually have And they we to then to were advantage temporary it this Mike. competitors and I will ultimately,

Michael Kehoe

take Brian. the questions Thanks, to ready that Operator, queue. in are any we're

Operator

is line Schmitt Jeff [Operator of Blair. with Instructions] Your William first question the from

Michael Kehoe

Jeff. morning, Good

Jeff Schmitt

be Hi, morning. to continues good. Growth Yes. good obviously really

compounding of getting You dislocation, close continue had been dislocation couple and that? your you to kind areas increases high rate to obviously, that of where it -- is few a has is were years view or what for on adequacy years a still see effect, mentioned you some in seeing there

Michael Kehoe

in back right. adequate were XXXX, Yes, we I think

closely stay course very of adjusting greater. abreast technical operating trend, but return of book of to mid-teens we equity we So pricing or monitor our profitability to we're and on that business manage always generally

XXXX, And rate into in getting so not increases from that's are that increases Bryan I that XXXX, past. a make opportunistic in the our to black think partly underpriced are the is, expanding we're these in trying the hole was rate XXXX, filling business point, margins

pretty So interesting opportunity it's us. a, for

Jeff Schmitt

it favorable there some okay. years what I I like adverse from in that and was that Is Right, development years. prior and what was XXXX was right, was And lines XXXX that or from all $X and from? on it guess and came then accident a million question some, guess, looks

Michael Kehoe

of to call saw granularity on think prior is I the in Yes, from on comparison. get but favorable the level development what increase say into we a I right, years, ready year-over-year an that would we're

we development. first favorable think I I quarter versus quarter from first to think went XXXX, % XXXX up X.X% something X.X So,

Our to that is reserves post highly about goal develop talked favorably time. we've are very likely conservative over to frequently that

our effect in an the and economy every our been we've to that in in achieved is they one, volatility favorably single been the reserves developed coverage than the accident from us year but business of business margin Other you scale XXXX. fact rate will has bit all as to time, given favorably developed see back years, they've on talking a was about, time bit terms the of giving that general, accident I think except over in of little inception-to-date more we've slightly a single in basis. year expansion growth develop year that XXXX, the full increases, ratio. expense every those we've the little on which restrictive goal first sell Occasionally, able

those we caveat between know, recognize in and we're and reserves when some pretty reserving interesting You will margin general write we seeing hey, The solid. lag a profitability, be, it's our clearly very sometimes come expansion. creates will there business only when the conservative that but would down

Jeff Schmitt

absolutely. Right

Okay, thank answers. the you for

Michael Kehoe

Thanks, Jeff.

Operator

with line from Mark next Truist. Hughes Your is of the question

Michael Kehoe

Good morning, Mark.

Mark Hughes

you. in Yes, Morning. Good Can quarter. talk frequency about thank the you

the but year, courts down how opening I frequency think was has about last it wonder here slowly, are progressed like that you talked I seemed to just QX?

Michael Kehoe

Yes. reserved to a losses -- kind to comments fully QX. Mark, we you cautious don't, for be is we'll going those whether was that's year characterize disruption going a expected a that's little we think, trying news reported recognize redundancy lower of to it we but system than some bounce over losses continued as it's court is back as of that, if of were Brian a in again, that, know, those the there we're is Mike very us just in taking whether this the great reported claims bit normal, permanent that's advantage it revert uncertainty as related that or and last there, to creates to make are time. in approach were those to and we're and the claims -- hey, they Clearly

Mark Hughes

why do you a have pretty for but book did well area the dollar around you the some hits so in industry-wide Texas, position did relative both, in think winter were XQ XQ? what now losses about cat you we hurricanes, your of puts storm better about When versus to the magnitude of business the substantial in losses,

Brian Haney

So, this Haney. Brian is

a coast side, would it the it's Texas, write as property affected terms So, deals by shared a freezing commercial on and bad layered and have we the where restrictive in with but conditions. would the write lot in amount side be towards not insurance concentrated the on amount in very been we do personal excess do fair freezing, areas a fair

having commercial So whatever not losses. a reason, the property we ended of out lot for

Mark Hughes

and from I into you of it resurging break to reopening continued I mix the activity, have okay. late Do QX. versus And said E&S? submission Yes, And much then teens shift how re-accelerated then into then, in think way the kind mid-teens business quarter out then small the to slowed high is but correct? for that that any

Brian Haney

correct. first you the part, yes, So are

described particular restrictions COVID really to is sure correctly sort I As We and what is it. it although earlier, know to pretty of that you related with way said out to much there no beyond of that. break do what effects don't something then the how had

Mark Hughes

California and New So, where in York, presumably opening in were up. you're restrictions seeing but there more place

Brian Haney

me I don't have that the detailed stats with me, but it was would not if surprise true.

Mark Hughes

like of there's -- then, in context business How And seems the if signs inflation about your up. think in Yes. does the it kick we a lot inflation Mike, economy. of of do

Michael Kehoe

our Mark, right. of of I metrics, way. think off sensitive inflation business would of is Most it priced this

premiums. of in So, if to inflation of the general form there the going economy, a higher the is benefit get we're in that

and On the hey, we other between a hand, premiums is claims. collect when there pay lag

Fed course, to and there exposure it some and the recognizes of higher extent results inflation in is rates. there the So that the

is for fixed portfolio. there an exposure know, there income You

we're very standpoint. a income positioned think conservatively fixed I from

anecdotes inflation there's think uncertainty that is trend is handle loss X%. I time -- the great of the January well what lot there, back been aggressively our handle is to think the way position inflation, around in how that things about cost the raising know There's of saying accurate, but well social we that indicate pretty prices us we've there in ahead in going cost like tons the our positioned a not talking impacting trends. that will to there from steady conservatism a right. or of given XXXX, CPI you commentators Fed mean that I puts fact loss I we're answer business, tell that real general I comes inflation priced any think to

well very like. the positioned think that we're handle and I to

Mark Hughes

And mentioned say then agile you one question, doing? are since What that you they final teams. eight development

Michael Kehoe

high I'd point about on year achieved over ratio in improving different We've new business. on had got the XXth this expense terms a And to technology those submissions but a some long verticals in -- numbers system. of that, business, is as XXX,XXX the too. lot our to to XXXX. XX We just Kinsale put into teams go to way have focus we volume in divided our our business

quotes, I like audits, inspections, think cancellations, of of the XXX,XXX we employees. into business finished XXs of XXs binders, that transactions around of XXX translated and new etcetera business full-time new thousands or thousands of various multiple directionally endorsements somewhere thousands renewal I think, binders, year, reinstatements, XXs of

the a kind to go to of years, speaks able got but I achieve that that the way too. been think over So, we've level to automation of indirectly long we've

so our repetitive and our more jobs looking little to etcetera. to tasks into claims We automated. employee's we're for more make have support to examiners, And drive our want more software more bit the a underwriters'

So it's companies clearly, think a of has an one skills taken over think big one owning terms has real it durability time. to the not that the the just I improve think IT advantage we I our of this capabilities, approach and we're few with to an initiative, build fact in it, and it's system given it, building it's to staff some and core but that

Mark Hughes

you. Thank

Operator

the with Your RBC Mayor of line is next Markets. Capital question Rowland from

Rowland Mayor

morning guys. Hi, good

bit year-over-year, that? business in anything property First premium quick is or the shift ratio more down retention a else the there one, is that was a to commercial still

Michael Kehoe

during little drove It's well. dollars first couple of partly have a and as that that premium in million in reinstatement the a bit business shift quarter we did down

Rowland Mayor

saying year a be where then, expect the your the a is up of sounded slow tighter on sort might Got how competition not it versus but than And like you margin seeing lot, does pace but, reach rapid growth adequacy, might of, you bit ago you're this catch we point as the balance improvement competition and that before of words or was sort the bit, a flows should margin begin it. parsing that's it as sort of opportunistic -- improvement gross rate to do now? to be

Michael Kehoe

about both opportunity, we're I really, and near of the future expansion candidly, market but last Yes, we're of, term pretty the extraordinary think excited growth. getting the kind because foreseeable for couple for margin years,

heats up, to of aggressive. more a got our lot competition be pricing we've leeway As in

expense going secondary, is term. goal, achieve And is so we'll model, both, the to we able be to our to we're business balance both the over profitability think obviously continue in growth given but our principal advantage long

Rowland Mayor

Great. Are there able to be to if changed similar still it year you're of might year? rate, sort last ago competition has one any are your where on retentions you a they where metrics give sort of recently, hit to -- or is renewal was were quoting the flat

Brian Haney

say Yes, like said. it really static. don't we We but was recently, steady. competition that's trying was generally have have, you actually, heated what mis-parsed I we were implying metrics think at, pretty share we been the stance if look marketing you to competitive And not might up pretty that has I about

not of because those competition not seeing metrics anecdotally and in we are just So, seeing competition, it's we're deterioration in any increase static. any

Rowland Mayor

Great, my questions. all were clarification. thanks the Those for

Michael Kehoe

Thanks, Rowland.

Operator

Your next line from with Pablo Morgan. Singzon the of J.P. question is

Pablo Singzon

of to the how accident mostly does impact favorable you're follow morning. good this year traction for up early fairly just that about which have the and I loss I any to what decision topic development, XXXX? drove was thinking on from guess Hi, XXXX. wanted on

Michael Kehoe

Mike. is Pablo Yes.

assumptions line property those lines of business. that over released for our by reporting tail they tail how teens, lines of actuarial patterns considered couple statutory it's casualty reserves is a for patterns part are that you and anticipate, into the which gets govern our longer line business X,X,X have and -- have of casualty you upper We and of of years it excess I a think for years short like the some vary

larger to before it's you're what was assumptions, those claims formulaic than that also do they're year on general, an the accident dramatically it. I every release So, a actual effect pretty in because adjust we -- based that's but is and those think activity XXXX annually seeing, And steady. came compare we there that patterns

play that long, rates, especially So helps. there's progressive year the dollars each gone just growth a robust yes, given more in we've but that

Pablo Singzon

exceeding sense. or whether the expect. I loss referenced, dollar the especially about detail being second could on loss cost margin improvement maybe large expansion your some point then remarks. you XXXX provide was see makes question, margin pricing given that you that And you costs trending even wondering you had the Yes, in if

Bryan Petrucelli

loss Yes. and cost and back up XXXX around We've around X%, rates talked X% XXXX, for as Brian think XX% moved raising XX% low-teens we said if trend to you of double about that we that before, in kind that's to where steady go I range see to below QX. were that we a that's

Pablo Singzon

[ph] more, then, a And it. Got of just mixed-expense have couple question.

think steady there earned commission has time. of over other the I come expense about So net but rate down underwriting clearly XX% at held expenses consistently

giving how growth, your your of part just of base. should that non-commission your the expense part So -- we think about

nature some being presume other of fixed I more long over perhaps costs valued but So in part was term. premiums, it the by

Michael Kehoe

expect Yes, would steady. to say relatively we be I would it

I I a it sharp most competitors is of Brian ratio that as we more earlier we overall even steady more a our improvement we're economies expense an in the because future, from as it's our than of efficient to to drop. lower dramatic and opposed but getting be about it's improvement to incremental are there to dramatically lot and not kind quarter reason and scale quarter. technology going talk The some working think commented be but of see any

Pablo Singzon

then thoughts you last sized guys Thanks. what on have bill any infrastructure a from me, decent for might mean book, your And construction business? it. Got

Michael Kehoe

us. positive up further are construction to just going some I for It's that's you -- it I it and would pick already assume haven't about already thought mean but [indiscernible].

Pablo Singzon

answers. your for Thanks Okay.

Michael Kehoe

Pablo. Thanks,

Operator

no further questions. time At this are there

Michael Kehoe

every results a thank we'll, a I joining a employees the to to for history back and our it. just working in on And they quick very I lot us want call and of think you're the that's hard, and acknowledgment, I goes best of we posted and that business come foundation here the to are of our think Operator, everybody seeing the day. Okay. just results just company's work it

kudos and again months. few look to to in with So here forward speaking them, we everybody a

Operator

and conference. today's day. for this have ladies you gentlemen, concludes Okay, participation wonderful your Thank and a

disconnect. all may You

Kinsale Capital (KNSL) 30 Apr 212021 Q1 Earnings call transcript