KNSL - Earnings call transcript Q3 2021 | Kinsale Capital Group, Inc.

Due to licensing restrictions, you must log in to view earnings call transcripts.

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 third 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 Kehoe. I the CEO, and Michael to turn now President call go Please sir. ahead,

Michael Kehoe

Thank your us appreciate on everyone. joining today. you, And call operator. morning, We good the

for posted then were with additional our quarter a of Officer, earnings move Brian third from Haney, you. XX.X% we'll Chief the brief for Operating me, a the commentary was XX.X% Financial per then questions third significant written Gross will follow diluted of for premium rather combined a ratio Chief and We months. Bryan each ratio the Officer; share, nine quarter some provide will and usual format and any any to for XXXX the XXXX. up introduction Petrucelli, quarter the Kinsale's, on company increase combined The Kinsale's from from operating XX.X% $X.XX quarter. Kinsale's

Our And rate increases continue for operating long-term a return significant low our over underwriting disciplined for margin years with run cost of equity. to expansion XX% nine XX.X%. XX% and Multiple ahead goal. of meaningful return on that our months is combined we of allowing was expect guidance on model to operating equity well

due and experience our margins loss are books commercial cat light is next the our severity property of Our in catastrophe storm personal we do the loss business in This consistent think rate that from lines our Hurricane years. Ida We with was in exposed tax. relatively comprehensive of $X.X million last of of to the limits the net property modest cat of is XX to the seek a over reinsurance the quarter also from program. the XXXX higher underwriting third multiple loss mostly quarter relatively a of the figure to XXXX the events on occurrence last strict we to of good of cat of business to volatility is and year. third compared concentration while The compelling, limit business the combination

We business. commentary numbers continue conference returns casualty stated. strong some are market of our there optimistic reserve of lots and recent trends own reserves and our considerably industry weaker for our and our be about was remain on at about property In issues the to prospects to competitors among things additional commentary contrast, But years. last own other experience on moment. three whole Both the stated industry here these were moving business Haney pricing robust examples to the continue. to our some the provide over five of as cycle in reasons a will Brian P&C among for lack

As money we next consider last capital XXXX to should fund to need additional we some quarter, borrowing we any in growth. expect year our mentioned

term and longer goal debt X% Our for ratio XX%. about to is total today the approach capital is that to

Additional helpful financial Bryan to our Petrucelli. I'll should Bryan? leverage the returns. over be to call now turn

Bryan Petrucelli

Thanks, Mike.

primarily the increased year. earnings last expense The loss $X.X million the for XXXX, was the Net development. $X.X $XX.X combined representing losses in Hurricane results income cat Ida last Just XX.X development million and loss We that by of X.X losses when X.X points reserve from of to favorable quarter points The $XX.X to third million and quarter and XXX% and ratio last of year XXXX to loss for to favorable to year loss year from million third $XX.X net lower reserve due the XXX% and losses included operating of quarter premium, quarter compared up primarily with cat higher-end improvements XX.X% favorable of million an million another growth, strong to points development ratio premium management. generated and X.X the points increase prior both ratios. driven to $XX.X underwriting for XX.X% cat solid compared of favorable a quarter last of expense disciplined combined company with compared third from nice and experience, of income reported be year. from operating reserve loss the net a continuing

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

a possible of over time. is to achieve economies XXs in we some it believe of an low-to-mid scale, modest expense sustainable variability to that we'll from ratio additional continue in level be the quarter-to-quarter, with Although

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

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

Brian Haney

Thanks, Bryan.

last growth basis. consistent is increase in by first growth generally premium up XX.X% down of the from well the rate rates exposure the year. increases, as quarter grew was the the increasing second our hard The XX%in was with quarter earlier, driven of robust still mentioned economic as quarter divisions for by general which and which and quarter. a teens As in quarter submissions, is third our fourth casualty quarter drives the division up the of in been in growth the economic by Reopening growth hit XXXX. one us economy providing third Every in significant low the the the particularly was lockdowns had Submission led boost. roughly

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

have expect up to teens in that in being all low a during which rates consistent business very of the quarters. change complicates the market all we driven heterogeneous hardenings see the single being aggregate number. reminder, generally have As one movements the But quarter we term. we past third book the so market the near in rate several the do that not a with The exist, reducing to a still said, conditions

at be close that therefore We inflation, this we to additional building of rate achieving are cost point are trend the we attention increases and we paying excess margin. should feel loss on

technology our our recent Investor Conference, meaningful a on sole superior advantage. at expense its has ratio E&S, Now, test our competitors, on Kinsale our several focus and advantages over

Another emerged advantage during has COVID.

five that of few, last maybe came lines to We office it's one days back the person the the a office that in October. are been ensure week. surplus in pulling the We only, person

learning with we a find to coworkers only keep person. in as teaching the then if you growth and hire of to see have company like you actually absorb people and then face-to-face. that lot up can better the feel is train We Also, your culture

execute train to in of going to and are the don’t plan. business and you're way attempting our hand-in-hand truly and train to This avoided their results seeing company advantage learning with recruit now competitors is and market that as not year they to us by being people terms learn on be the the second they'd Our well loss significant product and People pick In that we just people. up conditions line. person, optimistic. continue By for new don’t remotely. them, it's favor We're a staff good to of culture remotely in in a us. train summary, producing extraordinary academics goes continue our ability

but to Mike. Our hard business we with are back are of And it them. excellent; in market, the and market works most well turn harder, between, over to softer, the working I'll current really make that, model conditions any

Michael Kehoe

Thanks, ready we're for now queue. Operator, any Brian. questions in the

Operator

with you. we question have Thank William Jeff a with Schmitt Instructions] [Operator Blair. First

line is Your open.

Jeff Schmitt

good Hi, morning.

Michael Kehoe

morning. Good

Jeff Schmitt

with Growth inflation worsening obviously guess is and strong much really And just conditions? constraints what was across of is much and terms curious of was in I I how supply the of you're by book that the offset tightening exposure how kind and growth quarter. that seeing

Bryan Petrucelli

are that and all the to up but We I'd bring and would increased equal. rates, exposure don’t submissions, exactly I increased increased say effects to know roughly break if

guess. let's but is call increase of a third in a growth exposure So, the that's

Jeff Schmitt

what roughly this that stage, added I was up? presume at been And Okay. moving it's

Bryan Petrucelli

third say the just of a Well, XX%.

Jeff Schmitt

you. Okay, can loss Right, drop a XX% maybe bit what And to you quite that, and underlying a I got large I of obviously that? to ratio with moved speak and then, okay. that mean drove down

Michael Kehoe

one, Well, Yes Jeff, quarter, number we had this is extraordinary right. Mike. an

getting very just rate almost the So, we've cost loss increases fairly But three now, months. from loss good bigger years trend. significant above activity driver well is for been the

expansion. showing the over of to of have up some our that now that conservatism loss pricing is added clearly terms We but the in margin reserves years improvement in

it nutshell. that's So, a in

Jeff Schmitt

okay. it, for Got the answers. Thanks

Michael Kehoe

Thanks, Jeff.

Operator

you. Thank

Truist. with Hughes Mark have we Next

is open. line Your

Mark Hughes

helped you. morning. the earned any the the have written. The Good relative there Was other or to might expected issues adjustments, quarter that thank Yes, I've the given premium in strong what quarter? quite was timing in earned audit

Michael Kehoe

is speak writing This We most showing a the big the business so model there's can't conditions in Mark. that different on have also Mike. premium mix retentions of to as quarter-to-quarter. you're head. our through there's in going bit the impact that our Again, that's market be and driver we is But to the top they morning, Good on growth a little driver of as Clearly we're can to variability and seeing attribute based is always that are. business. that favorable the to little audit my that, the bit do the I of the earned. being big at with just and more of policies general of

Mark Hughes

Bryan, XXs. low-to-mid then, XX% essentially expense you ratio say the And Yes.

so. the in guidance one up back of Assuming us? of from Is assume your market then or some around topline to ratio the the there that growing this reason holds proforma or might more go giving some expense guide is should the but optimism is long-term here why a you're more be just you're conditions going a

Bryan Petrucelli

just months this at guide quarter-to-quarter. has point. I it the sort would would nine Yes. you of the point say, Mark, varied ratio best to probably XX.X I of the from is

Mark Hughes

that largely then accident Okay, XXXX? years the the you the from good. was quarter, a in very And reserve there, that do gains

Bryan Petrucelli

that We write queue. Yes. in the little kind of bit up a

confidence likely yes should is I think a XXXX. it's reserves think point we and up for company. investors unfavorably from I than I where the of that everybody's sheet. stated see set it long-term, for I real I'd to have that it's purposefully balance think they're moves lot with to benefit. And they of largely in strength make We Again, develop would reserves respect integrity our favorably our are to think a we conservatively it more the as

Mark Hughes

And then one question. more just

year you now You operational be? see an underwriting what's and leverage, potentially leverage next of capital on would refresh with talked about kind where underwriting debt. me your ceiling raising The your

Michael Kehoe

cap is net think equity premium I about to X:X.

lags that premium know net driving point cap invest superior in you And any The A on we Our returns we to the predicated helpful to equity business. don’t raise into think cap little which inject expect by that amount. terms financial going statutory general a more forward. equity additional a bit we is is want surplus that'll of significant to be pretty leverage rating

Mark Hughes

Thank you, very much.

Michael Kehoe

Mark. Thanks,

Operator

you. Thank

Mark Capital we with RBC have Next Markets. Dwelle

Mark Dwelle

Yes, good morning.

questions. of couple a Just

Are on group that parallel towards commented from there standard good And higher business particular E&S kind with business of lines? migration lines submissions? that, seeing of of submissions. You you continuing lines to rate in see any the the the of you're in growth queue are

Brian Haney

this is Mark, Haney. Brian

because we're year the last seeing business lot it been related impacted. cat submission general increase and of premises severely in So, that this the led is a have lockdowns during

areas to in place a the business So, one because if in for increase business our it's environmental area up. sure sciences huge down inflations that's where is had not programs --. then yes, last from necessarily -- year that I'm also seeing not COVID. and life also And to where space our from progress of seeing are seeing standard because our lines we movement we're we're as space, the it movement

Mark Dwelle

Is getting higher writing commented I which excess, the reinsurance. know is had insured, subject writing, want it's more of the primarily I property was you commissions in you're excess? based was, casualty question it of that ask it we ceding is to about same more about The to business, significantly more that getting you're while business on not mainly

Brian Haney

two a quota It's the ceding be casualty excess, that in in have yes. share product, there the Mark, and our commission Yes. that’s involved, we lines has of personal it'd areas, also Homeowners agreement

Mark Dwelle

are Okay. a or there better comment of been general think not pricing guys And those I as overall. you pretty becoming point? viewed terms increases. any scarce. are then, that good you in this quite have of priced at still market that the adequately that well-priced not Are after of seeing part just areas three maybe in rate Obviously generally would years

Michael Kehoe

Mark, is this Hey Mike.

that But today it’s too risk E&S in market the different was I ago. market. better standard that for takes couple think years a view I of pricings yes, pricing it's and of reminder it think a the a the very industry,

from be there a risk that follow-on minute as in last to if that adjusted that So, is to answer the pricing significant being increase. delegated times a a underwriting very there a continues. I ago, standard is a authorities think rate some different a years, likewise are fact of And moving to And a lot approach Brian's business. of nonstandard, will couple just

the the got and So, that rate light that. prior very we low I in said increases, the portfolio. similar that increases across rate significant year he low-teens increases we're our increases to prior comments double think digit year similar especially of That's in Brian's fact getting

margin So, it the the to on is really think show up line. I that starting improvement speaks to bottom

standard E&S policy. that to So, a customer to policy gets it the our extent moving is an say from

You a Their XX% XX% a getting might to drag, might the yes. XX% but getting increase. be increase customer be

Mark Dwelle

thank you. thanks That's my okay. Mike. helpful, all Yes, questions, That's

Operator

you. Thank

Next Pablo we have JPMorgan. Singzon with

Pablo Singzon

morning. Hi, good

on ratio. quick accident a this year pretty just follow-up the was loss So, Obviously, good.

they're little considering which Is what when I you like of year. think next running happen at on a they If about to level XX, of sort last good of a year-to-date, look did XX'ish? below might couple XX that the in years think

Michael Kehoe

any, its think Pablo. I that's good as

that's favourable, a likely clearly good Alright. that it's over quite point. the trends a set mean, I trying time. starting think we're think to are reserves we good pricing favourably clearly I to are develop

think starting set good always picks some but in those conservatism we there's So, loss a how I that's point.

Pablo Singzon

on comment. your just Okay. conservatism onto And reserve to then, Mike, follow-up just -- the

ongoing loss sizeable five of perspective that emblematic conservative an a or good overbooked a were think if by conservatism reserve I the accident that is normal picks on six more ratio have about you year-to-date, of like right. unique anything XXXX, is back Was you COVID that releases to not, from correct, So, XXXX it up on about to loss because gap want points. XXXX year you trip And maybe your in assuming you there five pretty six a when that. business. point that is But or seems

Michael Kehoe

we to can to overarching X% don’t in but to or XXXX I the regulation; have Clearly, like. pandemic; that with lot of a government what sorts business in accommodate do being to would all shifting closed and different that for reduction have material tell relative you reported front a speak the losses had X% I down; expected. was to the specifics ways me business is of Yes. the operations in the trend

to systems that as reopens we activity losses offset make they the just and the And cover that additional and catch in that reduction hey if set in so, a yes, to the up is the reopen like, sure well-positioned loss were to reported did economy up that. there future court reserves in loss

driver of a kind was the --. just big So, for XXXX, that

Pablo Singzon

it. Got

Michael Kehoe

in loss is coming reported The well.

Pablo Singzon

would follow-up be as be XXXX? one they've going, in that probably then assume And reasonable in in just it conservatism that, of it. would safe Got tailwinds all been from the unwind to to assume should things go on it year if just words to like other there you won't be that further or XXXX

Michael Kehoe

Yes.

year; not that's our of yes down all conservatism over years We ahead. think little-by-little absolutely. the would we in I unwind drift one

Pablo Singzon

you inflation. had last me, then some comments And from about Okay.

So, increased away function I'm to trying actual I can Thanks. if the guess not you all that because you're could what you've I has extent to and what between to presume talk as inflation, sort of gap that speak extent your but numbers of assumptions. to sure pricing trend and eaten loss

Michael Kehoe

is think the Yes. all our comment The rate But increases seeing. important ticking across are investors I loss point we're in that headlines is for trend assumptions low portfolio we're hey with up, right, which teen. the Bryan's the getting

maybe view So, X%. the trend we cost X% loss whether though historically think or like I

Bryan Petrucelli

Yes.

Michael Kehoe

a its well we’re but think I that. of higher even that currently north than points few

Pablo Singzon

you. Thank

Michael Kehoe

Pablo. Thanks,

Operator

Thank you.

President. have further no We questions. Please continue,

Michael Kehoe

everybody to just again congratulate Kinsale in. helped months. here employees we Okay. a you I thank Have to day. make in this speaking that want I great to happen. for the Well, want And a all listening and few forward with look

Operator

This all, participating. Thank for conference you concludes today's call.

may disconnect. You now

Kinsale Capital (KNSL) 29 Oct 212021 Q3 Earnings call transcript