KNSL - Earnings call transcript Q2 2021 | Kinsale Capital Group, Inc.

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Operator

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. These risk factors are listed in the company's various SEC filings including the 2020 Annual Report on Form 10-K, which should be reviewed carefully. The company has furnished a Form 8-K with the Securities and Exchange Commission that contains the press release announcing its second quarter results. Kinsale's management may also reference certain non-GAAP financial measures in the call today. to which can company's is www.kinsalecapitalgroup.com. GAAP the found website of release, press available reconciliation these be measures in at A at the will Kinsale's, over I the CEO, and Mr. to turn now President conference Kehoe. Michael go sir. Please ahead,

Michael Kehoe

you technology-enabled strategy also costs quarter focus XX.X% that small and will an ratio questions the Thank few operating second E&S for but mid- you, We XX% joining any the control continued driven written favorable in and operating the Kinsale's, Kinsale's take on may $X.XX first The XXXX. equity. were After months by business then of from for the earnings XX% us me Gross Brian Petrucelli, the and the quarter. the XX.X% return of our over Kinsale's XX% return combined operation have. morning, were comments premium Haney, company XXXX call segment. our make Bryan per underwriting Officer they within on market, Financial each from are over growth a of appreciate as was are quarter for today. with the E&S driven, our XXXX. you're the are second second Chief increase quarter especially and operator account good of diluted up share, rate we of of an posted on and combines everyone. equity low Officer; results a Chief us mid-teens Operating well. six combined the conditions ahead ratio guidance numbers market annualized These on operating unique well XXs a

here double-digit we commentary positively a will increases growth across offer additional book to low on submissions, business, margins. some topic business of leading see of a the see Brian impacting moment. continue see in a continue new in and we indicator this our which Haney We rate are as to bit steady which

well. the and about of We are year the for market year conditions optimistic balance as perhaps next

levels, strong year, expect well additional the capital Petrucelli. use next capital. growth I'll don't even additional company need now is to capital would expect with debt do over currently in the need any situated the we we we Bryan and Regarding rate. To lieu of capital that extent to the this year turn to call equity

Bryan Petrucelli

couple losses, development for The on last loss the negligible to points winter the a prior last net The quarter continue to higher of development the to from storms. ratio related loss to strong reserve of Net and Mike. Thanks, disciplined when experience last with of growth, development favorable ratio premium loss quarter quarter million, second million up The X.X $XX.X management. X.X and company income losses of ratios. income XXXX, the The premium reported due Texas by primarily cat of both expense development. increase included million results second by representing an of operating driven loss for were X.X and of from for in expense to to and from favorable the quarter, be year increased second compared reserve points the quarter year. reserve and net from year $XX.X of XX.X% losses We to million the XX.X% and net points XX.X%, cat improvements for XX% solid and combined year million compared and $XX.X to losses this quarter earnings a XXXX and underwriting XXXX. of favorable generated combined cat million loss favorable $XX.X second $XX.X primarily $XX earned compared

touched previously this expect ongoing of continues year ratio cat always ratio slightly be decreased that losses, expense exclusive our and from favorable than ratio for some mix where accident recognition current Mike expense lower shift economies expenses faster XX.X% our in there in and quarter as slightly result business to net commissions. some variability relative of reinsurance we ceding are of benefit quarterly of scale, on, to commissions pricing a will a loss Our given lines that from premiums of are our receive operating subject that in earned trends our the we to and growing

due approximately quarter the income quarter. Annualized from first tax compensation benefits XX.X%, XX.X% on was ahead due Gross And increase year, to effective the mentioned, mid-teens stated, XX.X% this Mike quarter, the Mike compared the for for as that of $XXX guidance. standards. months of representing return rate our superior higher for six last conditions year operating year. also stock was activity tax market over superior to favorable service our last to this were again, million XX% Our and lower written – equity premiums and a

equivalents year. compared was quarter I'll to pass share to share per XX.X% for operating X.X% million Brian year, investment with per year, the $X.X quarter growth share over to for $X.XX side, continued over last investment $X.XX $X.X was the gross year. our a And compared Diluted the earnings of Annualized investment by increased excluding portfolio. Haney. cash cash the million and from it On last to second up X% year last per result so net in far investment that returns last as income

Brian Haney

Thanks, Bryan.

casualty a the and up was which property. economy by is teens and commercial the of as the quarter the reopening second up XXXX. as Every in the quarter the for providing As mentioned one and quarter rebound the growth, driven of was from represented The allied premium up is in rate strong in by quarter our quarter. -- growth significant second robust higher health, led growth XX% economic earlier, growth the Submission driving divisions is of volume up economic premiums. XX% quarter first XX% the generally grew submission fourth The boost. increases which from XX% well excess in a upper first in us and

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

being single a heterogeneous we two past being that low second of during have number. But in which the As the a the quarter one range business movement rates all reminder, book all aggregate said consistent with up generally quarters. the reducing we the teens complicates see to very in rate

Some revenue ebb. that data It's past industry to started a is to written majority have high discussing our note the suggest mix that for not inflation at peak rate and inflation-sensitive as is payroll. moment. on increases business but perhaps policies for feel worth a such of important rate exposure or bases stayed that increases are It reason whatever point, we this of our

trends before costs matter general lost be that medical all go the in noticing loss of bulk for Inflation and course. legal biggest of our businesses been up And The It losses policies. the industry. up general affects inflation inflation shows for us a premiums which rest up wages, and are of the loss is on the we commensurately are by price the inflation. affected whole. time are as while our also So of to we the construction costs cost, insure tamed price a have and for components goes economy trends of our going of losses in

on inflation building we excess on margins. of or our are spot hard are we further improvement margin with that strong because are returns. and will in the elevated, prolong it We staying improve and we rate that this But In rates. getting so the we're implicitly are the is raising transitory, the insurers of inflation correct rate strong We to the increases to inflation it hard whether it we the stay market already the feel not in market us. were erode aiming top a in what is of are are problem, aware for summary are event with it. expect will already optimistic. We we longer good feel Whatever true the any rates not that we increased because elevated will remains longer but

We great reserves. strong a as a as great sheet have conservative team, results with balance well

current turn works over with it but hard conditions in market Mike. are back business in really to or any well between, softer And Our I'll that model good. the market

Michael Kehoe

Operator, to we're come any questions take Brian. Thanks, that now ready in.

Operator

you, Blair. Jeff from question Thank have We Schmitt from the [Operator William first sir. our Instructions] line of

Your line is open.

Michael Kehoe

Jeff. morning, Good

Jeff Schmitt

morning. Good Hi.

perspective. a how curious handle from Just reserving inflation you

I whether tend of pretty sort it's or be not have transitory to have to you on you'd a view conservative. think

Just wondering how you're accounting for that?

Michael Kehoe

Yes. I a all actual it's And this that our many actuarial we've to post about various the times favorably mean, more part strategy against than I constantly are we're trends. that likely loss cost assumptions to reviewing fundamental much of experience business think, spoken reserves unfavorably. including develop

adjust as we so estimates data our in And accordingly. comes

said inflation-sensitive Brian our most of off policies are priced As metrics. of

But and that your does our picks up that inflation get through extent of that insureds inflated kind off base. the are to question? our premiums priced experience insurance the So that at revenue flows

Jeff Schmitt

you to just then Yes. curious a of that. whether transitory make call just out highest have No on I excess how pointed growth of But that's the you was handle some had I think was health allied areas casualty. and you if or

they, is I touch just the farthest adequacy, -- rate maybe are those? that's think on there Could those been in sort of, have those dislocation areas or from greater lines? you

Michael Kehoe

of is have just that the in would and the to fairly practices mean, of and where up lot property are kind And the seen competitors writing you going a market we those industry in cat a just been a with course-correct we're those that's number I burned margin. would had Commercial activity get what common some I and Well, adequate we're casualty turn Allied areas. have on. like blown a that business. really charging there's type in health of challenges sort see would then high rates has I soft earning thing say, excess of market see industry. say has a people of

I our say our this. feel pretty So rates would experience -- and we good about in but

Jeff Schmitt

but you've And rate the the referring are farther for obviously time Yeah. I market, adequate areas those was is off. to mean, market more -- Right. okay. some been I where

Thanks Okay. answers. fort the

Operator

Thank you.

from question We the line another Mark of have Hughes from Truist.

open. line Your is

Mark Hughes

Good you. morning. Thank Yeah.

Michael Kehoe

Good morning Mark.

Mark Hughes

what points QX the expected, that storms inflation was material The that? of on XXX than development higher costs or drove

Michael Kehoe

retention, couple was were I and a we excess be the process to attaching days, an claims adjustment it excess can schedule of in $XX turns where the be the early of is on hey, an substantial And there think a million. commercial loss in over course or schedule. some number we're we it this position. a underlying And higher if larger think of ambiguity out

of that se. I think thing. it it I inflation to attribute type wouldn't per was

just we an was and it in process think the excess I position. adjustment ambiguity were in

Mark Hughes

social what's How of in book your going Understood. I you impacted movement when you've of but in let's we to this in see think times. activity systems, you that a been But I think -- movement stay could anything number by terms any inflation of do that? about court about spoken of you on most court sense that's say? from us give or think away the a

Michael Kehoe

of say general real. loss is I to think well-ahead in endeavor We stay would it. trend I cost

I quite think sure going book there's a focus current verdicts nuclear things our a costs it given accounts, everybody smaller say certainly that our macro some No, and inflation, are up. else. across from our whole terms for impacting fact going up indicated Brian in claims I'm like. costs is we're would think general that material we But inflation smaller along estimates. these of I on up, to put we're hey we little of limits see as the are I to business? that labor bit come inoculates the us. property in that with when And of us the trends price well are in, -- commercial extent seeing

Mark Hughes

years, some of was little was development now? the much are know I And depth. that of through year development less dynamic terms quarter favorable time. X.X seeing unusual you frequency the XXXX that in obviously had in older reserve the severity accident your a in of some XXXX? points, then and an How more how you've

Michael Kehoe

increases every I years. we and management prior some those the against with adjustments huge we business. for mean actuarial XXXX say some as of conservatively our years. team gotten reported comparing -- there think the our assumptions adjust. But always that across assumptions we're we of quarter. in positioned modest more think positioned. I charge a quarter coming more XXXX as I are normalize make than us a a loss That's bounce even current last back that couple redundancy we years. I is general would function of a would investor make uptick that just we conservatively from activity the able of couple dramatic Yeah. where reported we've were -- largely expected. years last priority well-positioned And of years. I We've an I and that we those accident And amount we're the to modest hey are we're increases accident rate one all we'll note And the make general thing added And activity. standpoint sure quarter seeing also case looking higher COVID the and lower out the the you're some by But Each in in to IBNR were then has actual various the accident think that's all loss a it to in were in been of issue offset in with every year at pretty that goes losses price to of dramatic that's

about And for good the feel see very So very about the starting we we we expansion to feel reserves bottom we're on good the modest company. -- the line. again margin

Mark Hughes

back you year any bounce in accident terms claim? Have XXXX off seen the of

Michael Kehoe

No.

Mark Hughes

among Okay. case wholesale that sorry your to the on on, get that discussion that is And that question. there's IPO was think consolidation one the final meaning any consolidation brokers. there to the was terms that then drone of to thoughts market? but in Any Ryan their ability of has I'm is part -- whether I the Specialty's

Michael Kehoe

brokers. been of but the and of brokers. kind consolidation. national of And of on any hasn't a number definitely as work characterize all there's large We We has us. Well, have -- the acquired firms, bit had wholesale lot with others with Ryan quite as a them we a impact do business smaller. but it well,

Some last are start-ups certainly a with been business. are our more the impacted very of of are hasn't lot local. couple years. as We and it regional some as in activity, some There well. have today, acquisition work that of them there's opened really But,

bit do good at we what of So, do. quite they're with very all those they work a firms and

Mark Hughes

you. Thank

Operator

sir. you, Thank

another line Casey of Compass have from We Point. question Alexander from the

open. Your is line

Casey Alexander

Hi. Good for you. morning. I questions have of a couple

how and level this growth manpower, of First high your estate a -- extent rate footprint to given And does from particularly does all, to in stress add also footprint, need eventually dynamic? the some this producing, your you're work-at-home changes kind and to your and expenses impact of support the estate growth? what real work-at-home relation extraordinary that habits to real that

Michael Kehoe

-- growing We're rate of it There's for morning. This Casey, double-digit at stress on of years listen, it number a years big recruiting paid and been what now. that's good now. is team. management we strong get Mike. of of lot people. we we've do the a we've Yes, And course, lot hiring puts a been a your hard of for a and training and number hey, But working at to component a like.

kind that's So, usual. business of as

your plenty was part of of question? real In occupy. estate third We've terms the we got that building there. What the no of capacity footprint, the there's stress in

Casey Alexander

that? how this just Well, work-at-home habits impact

Michael Kehoe

service those to training delivering business big of And employees our hit March Working a goals employees together office the office XXXX. of we're -- by we component. furthered our facilitates work guess, virus strategy number in team our I in of hires, back back of office or all to office. when best-in-class work by an the basically the and XX% home We're new having We want did A new move given it and first that April part the our in learn communication. is culture. October, an was brokers. from together everybody in, Yes. all the those But are

that's how we're operating. And so,

Casey Alexander

characterize clear a now of you of kind secondly, it a accelerated next year. was you you discussion during a discussed the environment I competitive the what How a the And course year that offered the ago in was vision Thanks. the would great. in year and competitive quarter the of competitors towards growth decrease compared environment over to set would say, the ago? Okay,

Brian Haney

pretty I'd flat. say, it's

new competitors. small, to some still we've pullback tend be larger they So, and seen we've seen some but from competitors

on less So way or the balance, more was. it it's

Casey Alexander

questions. you're my appreciate Thank Great. taking right. you. All I

Michael Kehoe

Casey. Thanks,

Operator

Thank you, sir.

question line Rowland another have RBC the We Mayor Capital. from from of

line is open. Your

Rowland Mayor

When Hi. rate pure increases, included low-teens terms Good rate and number? changing conditions is effects in guys about of morning. talked you the that that or

Brian Haney

It's rate. pure

Michael Kehoe

not inflation effect the -- effect the including on exposure the that including Not of base.

Rowland Mayor

points to And sort the two is one say or tightening is equivalent way or Got worth and or of there your points, another conditions pricing of any or quantify it. impact the it of any... terms of is and that one two

Brian Haney

It would quantify. be tough something. It's to worth

Michael Kehoe

a is One any. good as or two as probably guess

Rowland Mayor

we've companies to quarters down was entered guys enough competition? the Do really really I market comment is growth. seen next That dialing you at it. that my double -- you following up of question. a hasn't not to in just It's yet guess that about Casey's really all? worked lot have talk Got coming your higher

Michael Kehoe

look -- there's competition. mean I plenty there's of

it think prior was I steady Brian year. from said the

Our the hit business XX%. was somewhere same between that. year. same submissions continues before on the It be was last and year XX% to ratio new It the

plenty there's mean it's I but intensely very a that competitive less it ago characterize from It's five was in ago competition. as or diminished just bit today four years there's would little a doesn't when a of no market. So more It's we what were competition. where years

Rowland Mayor

two No, that questions. makes sense. only Those Congrats quarter. on were my the

Michael Kehoe

Thanks, Rowland.

Operator

from from you. have Instructions] Thank of Pablo the [Operator Singzon We line another JPMorgan. question

open. line Your is

Pablo Singzon

Thank Hi. you.

I thoughts low half first low in question, element down be an there digits drift year range. this loss think you said a of the point first like call think in getting it gap is that? And is I maybe, you've mid-single-digit like the it the And you of my share one to from point, accident to past increases. we're year, of those about between loss in it in double in setting? last light to Can which To in picks first half reasonable assume would your something in trends, picture I seems conservatism the time? fix loss So on it improvement your loss said guess, the price year over

Michael Kehoe

Yeah. XXth But element very settled the adjusted think Mike. develop there's as ones they're and loss over those of an And out. they're business. every years, morning, accident company. the developed losses think Pablo, those likely absolutely our highly in good one is you picks. favorably in this down would conservatism in year to I of come our and say, early we're a accident It's inception-to-date And look year but on relatively I back young have basis. – an I if

And goal for people want important sheet. We team. so management of to that's a lot in as have a confidence us balance really a our

absolutely, we're disciplined high-quality to good underwriting that a really yeah, match up incrementally. we with so operation, you getting conservative and the And And increases. margin very expect reserves expansion continue rate

Pablo Singzon

lines, could obviously would same strong just Got So that been – it. for you expanding, that And see likely least trending? right? given years, even going you of persist see in where the speak has growth But passengers about at as has the do company along expense the ratio the premiums trending? been ratio next even couple you down expense how the

Brian Haney

capital making We in IT. investments obviously are and human

expense But long-term more short a the where XX% to see XX% I drift a you possibility, I range we think, grow, over you'll that. – where think probably it term improvement to we over see the seeing in is now a could As little term, slight it. looking long But there's XX% the the is over ratio. would in if you're down see that

Michael Kehoe

business saw a which comments. that as of his that is lines could mind it's our a we uptick where excess get mix lot business it down, instance. said Yeah. commission, of we reinsure – ceding push if in Keep an in Brian casualty help some for We of on earlier business

that's component. So one big

think the headcount. mix of variable I and is business then

Pablo Singzon

big remind at? And or levels then again can being the And what last be Got what kind, us me. on plays but Kinsale growth capital, running surplus Thanks next picture leveraged depending just it. comfortable funded your be But would running for on kind be how and I update potentially you'd you question at? suppose for leverage comfortable debt I equity out. of could guess, year, what Thanks. sort by of

Michael Kehoe

Yeah.

XX% of capital target. debt total think our I a kind is to it's long-term

X% I today. think we're about

grow why equity So we to need would go. debt as made about at this we to point. we not capital a that's business, the the look But got really we ways additional to comments

Pablo Singzon

and would grow affect, premium what been you me you on, premium how leverage I raise – it. the that question, much and should Kinsale might But leverage clear. at? have I will that that or And depending leverage be comfortable well Got – of affect running actually leverage. was premium to you. your but Thank right to guess Premium have how

Michael Kehoe

capital but I and drivers model. Yeah. The model, for a there's, charges investments premium big The and are AM Best BCAR other et it's mean within that reserves complex cetera. growth that

premium specific that ratio the in GAAP surplus higher no equity surplus. -- there's and to would so premium numbers. different model That's stat they're a but surplus statutory written X.X:X correlated but to GAAP And be and somewhere guesstimate the net just not than are we from little equity driven bit

maintain -- number we're that So for to Best that's And really and our A we're rating. going A-rated worth. our is for That's rating. a that's Obviously, us. Best important AM what AM

So,…

Pablo Singzon

Okay.

Michael Kehoe

I X.XX X is think to … guess. X.X to a good

Pablo Singzon

Okay. you. Thank thank you,

Operator

Pablo. you, Thank

from another the Jamie We PhiloSmith. Inglis question of have from line

open. Your line is

Jamie Inglis

and it side. claim that on But if side little tied pay while morning. inflation while interested rates depending of type work? revenue about sort the a revenue are policy. helps be we participate how Good the and Hi. allows on because to could your today quite ago how it in cetera or written following a on payroll your to it or other on a comments your premiums the it's inflation et up does I'm you in the was a claims ago policy when of you On

in allow it the way? or -- put today So bank not inflation a point work does of the is that view, of from reserve does to more that you in sort a way

Michael Kehoe

those provides or is its to through a I like position this on Mike. going complex and us. insulation focus to limit that that of premium policies today very say work us would their mechanism inflated lot be that round way a business. of way commented which is for through earlier And inflation of at say, of ensuring has pricing of think policy given Brian go collect for fact three inflation-sensitive would audit a protection Clearly be a the contractor I to that then, That's a works that the additional How provides the the we'd in higher years things we book the posting going little that was our inflation $XX,XXX, fact we're provides our we charged say, The then, probably business. topic. benefit. that negative. in claim conservatism But the claim if we because it in I right? going -- general, lower a is our inflation is But to against probably there's, Haney end of also rates This protection. protection. settle we're collect pricing. But would a and year a And stable would write an bit there's, that reserve and additional Brian, lot either And premium. different tend another of with I

Jamie Inglis

help. for Okay. Great. Thanks your

Michael Kehoe

bet. You

Operator

sir. no are I questions There Kehoe call closing sir. you, remarks, Thank turn Michael the back will at to now this time. for Mr. further

Michael Kehoe

thank a a call And another Have in for us. and forward you we months. few operator, here you positive good look day. joining to everybody Thank Okay.

Operator

concludes Thank call. you, today's and sir. this Ladies gentlemen, conference

disconnect. You may you participating. now Thank for

a good have You day.

Kinsale Capital (KNSL) 30 Jul 212021 Q2 Earnings call transcript