Kinsale Capital (KNSL) 28 Oct 222022 Q3 Earnings call transcript

Hello and thank you for standing by. My name is Regina and I will be your conference Operator today. At this time, I would like to welcome everyone to Kinsale Capital Group Incorporated’s third quarter 2022 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question and answer session.

to then question your the like simply this telephone would star press number you ask during a time, keypad. If one on your withdraw question, star, again. To press one

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

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

Thank Brian you Petrucelli, Haney, Bryan me Operator and morning. and good Kinsale’s Kinsale’s joining CFO, morning everyone. this COO are

Southwest will have. the usual and third Each format. for our quarter of operating Kinsale’s of call than previously was annualized quarter. XX.X% was history the in ratio combined because the XXXX, was Florida, and quarter XX% for in of on make the Ian you year X.X% written follow of months. nine property for The move losses then about Hurricane and up insurance the mentioned recent few an same we’ll Ian. premium earnings casualty. more for XX.X%. comments comments quarter increased the a onto nine muted The will XX% quarter operating the and conference XXXX Kinsale’s first few XX% months Kinsale’s Our split The ratio any third in so premium from us questions growth ROE over for earnings an of company months combined operating posted Gross a X.X% Hurricane XX% was nine by strategy Through XXXX. may property

a hurricane For the comparison to two-thirds casualty. business property about the purposes, catastrophe-exposed profit balance of less sort rates because exposure is XX% overall are than some Slightly third the compelling. property losses, premium Kinsale does market E&S margins that has half property, of not.

of it, use We the individual risks the a this and concentration reinsurance business, type are strategies mindful, however, and of portfolio, volatility specifically to of variety limits control regular approach, modeling and underwriting robust of program. associated a property disciplined with on of the a business

Regarding Hurricane our a as our of which lines making loss significantly book particular, book, reduce this our about volatility of loss encouraging. With after-tax area. is our is adjustments at and our from sized $XX.X personal gross arose and outperformed variety we’re pricing underwriting underwriting lines this XX% course coming of Ian assumptions, and pricing commercial our from expectations, is to from gross in some of Ian this net these About of business, estimated exceeded gross in losses loss our of amount $XX.X and million. book XX% modestly million

to a losses XX%. ROE on model nine-month combined underwriting. low and operating top in absorb storm line and trends continuation have several we growth Hurricane last over the submissions, with profit margins strong above business growth a was operating This produce performance the still a ratio us our strong cost sub-XX% hard a relatively quarter of Beyond premium, strong in with the experienced Kinsale’s quarterly Ian, combined and favorable a allowed years, market the

the in rates We our future for confidence and fashion. and of in our investors prospects balance losses combined loss sheet continue a should in profitability. trend with with our growth for business provide to quarter conservative nature above we future This to and raise reserves establish unique the cost our continue model

outlook We E&S for balance continue to market have and an for the XXXX. XXXX optimistic of the for

the best-in-class the technology-driven next share conditions. to a future our market underwriting our take under certain, foreseeable market our and any we Beyond disciplined year, view little expect from less efficient of of competitors, bit grow returns becomes costs, with for business, model produce and market but less low

the turn I’ll to over call Petrucelli. Bryan Now

cat income Thanks Mike. Ian. of in Again, perspective, just another light quarter from operating from even an losses really strong

variable decrease XX% of we lower year. compared continue related result was year portion of QX in economies of value QX loss our earnings, compared in The income year, reserve last points around of points as activity equity our scale operating equity that cat expenses, fluctuations higher net to did quarter, slightly Although given of With increase development to X.X last and X.X% the achieve this over excludes higher X.X% last XX.X% during this as respect the earned premium year. to the the investments this from to reflected fair clip than combined a down XX.X% the decline included our XXXX contributed operating the compared in impact as year for which prior to year. at reported X.X compared X.X and cat to to year. faster compensation activity period favorable some values, this by quarter relative ratio to points losses approximately a continues points cat same a XX.X expense from net grow quarter last expenses, for the ratio a we A

and June that unrealized share agreement year business of expense. commercial some equity Book continues to our to as higher reinsurance at company our losses higher the on a value and in to reduction yields. property to in as shows generate ceding quarter primarily on to portfolio result due Additionally, we the operating X interest a commission positive better year money The us rate and the by the strong gives entered hold includes these at did a flows this allows last that which invest exist into environment quota decreased us not maturity, a up commission X.X% of investment volatility new cash markets. to securities interest ability rates

XXXX. we Net rate effects investing investment growth in years from We’re the income third duration recognize to X.X new result year last and new a over continued X% quarter XX% money investment portfolio yields money as the by in increased start some shorter as interest environment. duration the to and higher of down end the X.X securities close years, decreased averaging quarter, to with from during of at has

that, diluted pass share Lastly, share it Haney. quarter compared to Brian for share to over was earnings per operated per year. $X.XX With $X.XX last per I’ll the

Bryan. Thanks

growth earlier, remains mentioned grew the strong favorable Hurricane in the with a be two our market. Overall, The and As expect most Ian, the prolong the quarters. capacity to product hard the will first E&S industry we contraction hard XX% third continues of lines. property market wake premium of largely quarter, consistent across in which with market in

our seeing divisions. across we to casualty of property are growth addition continued our strong In divisions, most

two be of growing yet, products those at continues general wide move late on as as during XX%, we happened third if in providers’ down represents the further entertainment for other over wanes. in real casualty, and We slight the we market to reinsurers in number, quarter. sell the we array Hurricane strong, which acceleration but have well so will products a lockstep, significant boil rates loss a being quarters. firming Ian a from any particular the and it market energy, aggregate Submission one it and a pace. the tolerance and in see it little in Our we lead been the but the up rates divisions don’t first property haven’t growth believe seen from around perhaps all effects in to X% quarter, overall to rate capital

more are eye are board. now. increases combined achieving These strategy we are do cost an the virtually because underwriting reserving a have of authority conditions conservative authority We some ourselves, from of our position increases arrangements. company loss trends we We for may with We delegated protects to competitors inflation continuing other feel good on the be delegate We do in years been The but several further inflation. and threat of all ahead to. rate of that proliferation MGAs of do. favorable the market across exposed a underwriting see generally peers our our not keep

this reinsurers, at MGAs entrants the of by the to in significant new long are we because harbinger not consider are overly lax proliferation typically up a but beginning well affecting market, whose aggressive market underwriting; MGAs behavior Although of market the heavily to will certainly form it rely and their expansion from run in many undisciplined this is the come because be dramatic in pricing enthusiasm managed to curbed aggressive there much be the of on Ian. for Hurricane ramp and just losses point, some

of results the fact the deliver plan. quarter, As even to our significant business for to with the Kinsale, soundness in are testament is like and these, we our able a the that of people catastrophe hard a work

and that, difficult back our for to underwriting even Mike. deliver I’ll low for With investors it costs us technology-enabled the hand Our a allowed returns industry. superior have disciplined in quarter over to

quarter $X.XX the share per - was the correction one Just per diluted share. earnings operating for actually

questions that any in. come Operator, ready Okay. for we’re

[Operator first will of question Mark Securities. with Hughes Our Please instructions] line the go from come ahead. Truist

a Good you. quarter. ratio ceded morning. up premium bit The was thank the Yes, in

quota kind should of it, level, at - mentioned be--I’m go a you’ll you’d entered we that could You’d that go ceded was share that a assume back lower? X seeing it into continue XX% June higher, and premium,

of premium historically, this was was we but have that lower little of you premium Mark, primary driver. there level sort a bit is should than well, seen There see retained the as Brian. in at Yes That a yes. reinstatement

to you’re mid teens, is back kind the So saying? low, what that of

that’s yes. a think good estimate, I

a - hit, a you do you the it’s Then have lines Okay. than assume just underperformed Did the that’s manufactured happen you to storm said where that? issue I think personal or broader concentration housing?

is hey, in Mark, business like storm, as certainly issues, so we of the where involves and of to Florida, of we’re business, of area; frequency all just we accounts some the and that underwriting, perform the like. have That Hey reconciling would good phrase it just react pricing business we Yes, we in reinsurance we as Mike. write the lot but had anticipated. with a severity and with of as pricing, this plenty didn’t our underwriting the well morning, do assumptions, that concentration and I

we’re but term business. material so that not I to do about continuing see X% overall long term about are and the to optimistic it’s grow a long to to company now, would the committed opportunity of space. grow. probably our it’s as right business, that We track homeowner getting the on We say -

How of would would your take coastal willing much because going up pretty coastal, characterize but for I you pricing so you attractive, then be higher to and to the me, your book appetite that’s you I assume will exposed or That’s XX% be that? tell property? how assume that’s

commercial constraint don’t concentration, well right, get general, a Houston so performed say more on urban macro it’s exceptionally We ceiling we growth, or South manage storm. when - like. the in on--you especially areas depending But a strict property the I our strategy know, and Florida to that’s really into of always we would like have on have that you very in book bottom-up really a limits

of returns I years for a looking in of If a but now, sort a some so company our that of today are property, to volatility grow that. generated XX% lot it’s number book up higher few to our wouldn’t that hurricane-exposed that significant create way is be we very business. go dramatically a the doesn’t than points could expect results, certainly For in incrementally it of

Thank you very much.

You bet.

come question Compass Please Casey the ahead. with Alexander from of go Your line will next Point.

Ian, that had I the loss intention One, that between ways wholly dug hi. result multiple Yes, losses so losses or difference off magnitude out would figure I greater the XXXX, my as dug for a of that which A that retention how the the questions. to overestimated events is Good apologize trying but and Ian, mark, magnitude sort to multiple alarm mark all, into in estimate morning. Ian, quarter storm from of was the of in your one distort first and I the as the only into fact XXXX couple the far event - off for to, retention time? wasn’t compared two could one consensus. that way more was. the compared to your ratios your you that and had given be to raise my much only to was I’m bells I it I

may of offline. we detailed is this do Casey, with information that be that Mike. us don’t best question take have a to XXXX. XXXX know and that It I to comparison in front

We’re go a structure versus that’s ago reinsurance probably and the information about maybe two to contributed lot and to you of all happy years back talk we to that difference. public today the had -

Okay.

been expect the strategy recently reinsurance renewal southeast how significantly market impact there contour reports and changes number including might can out How going a of had cost that increased retention retention. in Secondly, forward in reinsurance your that and markets, those does renewal the participants your margins? increases,

bit little that early put and have but do reinsurance we’re in some own. - headlines an We years are been speculate, general, the a The company. how out, limits volatility, our we’ll with of some allow to do competitors, I well. have business reinsurance what in we that we’re Well, it’s in underwriting market as we what in over and would valuable I the always program our think this a at a of develops, ago, say the company decisions, different purchases we’re those varies better a reinsurance in year our mentioned we I interested answer of reinsurance as but say puts lot our of on so we little months onto specific how the a - own adjustments concentration of to in the volatility us manage managing important position business. certainly through like minutes and look couple part money of on we but way we a just do renewed but a part few probably We client, Kinsale than risk that’s our already a have part the do our making proactively I books. bit a would ago, our so that price also made is probably it take - by short aware partners area,

great. Thank you for I taking it. appreciate questions. right, my All

bet. You

question Singzon next from Morgan. the Your Pablo will go come JP of with line ahead. Please

Hi, good morning.

the mentioned. an your mentioning for couple I just inflation be one, mentioned improvement on I range the that or comparable wanted low had--you’ve the--I follow double-digit years, First because to pricing Is up adjustment you past real you of believe heard remarks. there considered to in been I to X% also is the there, believe you term

sure Just wanted apples to comparing to apples make here. I’m

find and - Haney. and stated increases, this clearer increases, which loss movement clearer--it cost rate the rate adequacy and nominal quarter correct trend. provides In You’re rate past, to this for we’ve the trend adjusted real we’ve of premium is a Brian the pivoted We that’s margin. so view the of are a

will [indiscernible] low double-digit, like right? probably line, so change material apples, mid-single--that inflation there no if so the make back sort bottom seems right, be it Okay, to apples you of it to

Yes.

thoughts second Okay, side, on question underwriting expectations. on through on you versus the of in that. guess, the but element your of property, was risk, property surprise Just there, coverage the I there had, part your peril your on it. was why got of negative your all or Is could elements I geographic if book enables spread? Mike, commercial approach wondering Then outperforming like, most I your there that outperformed an that talk comments personal [indiscernible]

price us achieve allowed control underwriting, over more use better Partly, risk, little it, Pablo. there’s We larger. last that us years the to when exposure accurate of gives a pronounced significant limits that that I very drive How candidly, has achieved--and to rate increases. couple to market our we put we there’s we of smaller tend mean, think bit that things lot hurricane we the Certainly we’ve rather a go than coverage be process. Well a into a the up results. own underwriting

concentration, our the lot is lots outperformer it’s--we Florida, takeaway face buy a again strict it’s an limits on that comes of and it. division, in that the of reinsurance the it have of general commercial bulk in into go through even But a We area, find significant very so property things business property pretty of hurricane in encouraging. so we

more. the I it. Maybe had Bryan next a couple Petrucelli. Got is one for

there think I evolve XX%, roughly about loss Any you of could ratio is Ian you or quarter, you think just this my something forward? might surprise a strong then sequentially pretty year-over-year the put going think us wrote so is number, wondering I but consistent losses this significant could whether least quarter, how were that business renewal if going could comment up [indiscernible] negative that at improvement. a was evolve versus year? that pretty at that’s forward, help us ratio about about last help one-off how was there but

as you that look think quarter, where it’s years, I in to going third throughout and the from to year quarter loss quarter. mentioned, pretty in down you the tendency drift year a were back last we if I has consistent think ratio to the

this I if last year at I this look so of similar movement year, to to trend, there year, comment think QX fairly it’s think to QX to last on. you a nothing the year QX unusual relative QX of

Any drift first to downward business year, the exists a of there color why throughout renews could pattern you that as in the picks is because in loss second year? the change And place? is the or provide of the that half the in

up little a confidence bit it have Mike our loss and see year. more pick trend, first in higher in in in little show to just of conservative the Each you calendar quarter, a the where to across the you quarter think reserving. would tends - attribute and more I going lower Pablo, sequential again. of second some so generally have this approach is I are year, to be to it’s losses that the half the you information the

sense. last negative from but seems one on what’s I makes it like me, guess, in California Then Obviously the geographies. hear number, Thanks. and, and in didn’t was premium actually any other overall curious stamping you’re to happening just growth seen looking I there this data, at Okay, from the premium it versus detract opportunities office was the growth quarter. California commentary

just when would attribute Mike volatility a number Yes, state-specific again. to that. this I that get like normal to down is you

well, there in across be causes slight can seen the I that a stamping our in think as to very portfolio. across growth and quarter think offices robust number sometimes the month, month I maybe that but commented, with general, we’ve Brian Haney lag reporting by whole vary

thank right, All you.

Again, for press one. any star, please questions,

from will the line RBC Heleniak next Your ahead. Scott Markets. with question Please go come Capital of

morning. good Yes,

to not talk competition wanted those quarter a quick if wonder you’re Just I heard end little submission earnings areas, few a you during It a on--you what how the bit. whether a into on a had insurers of you’re of and liability lines quarters, also typically the the strengthened and but sort the towards counts, comments little really about any the the quarter, question seeing ask October. past of all, then rates that down the they’ve much at trended sounds couple versus few drifting we’ve seeing be know, some where may specialty season, like this more in of

Haney. is We Brian pretty stable. in Yes, our things see this markets,

Excess probably accounts pretty on larger are to more be a We don’t certainly we casualty. lot some slight rate but the market has We lot a Property We wouldn’t rate a are upward going our a firmest, attention peers, casualty accelerated growth been The this is by see than on submissions, little accounts firm, trajectory. focus month some still less smaller bit the are all where seems it’s increases relative the where the of direction. pay very mind, don’t seeing of submission Now than is firm getting be if some tends surprise focus stable, pretty to in pretty on me positive year, it obviously but you’re decreases. to so the competition. consistent that to last lines keep professional of really movement average. prices might month everything been be it people in so. seeing just in

it very the in bit on was to Yes, it but saw better you pretty definitely little maybe the like sounds second close what quarter, strong. submissions a

focus my them I could big about on on we’re the so when deals, right a from MGAs not why effect seeing talked I in MGAs now. If start expand the thing, new to particular answer tend--those one MGAs, that’s larger tend

it energy, sense. for on to those--if see products, XXXX. see have just you’re was saw pretty curious, do Then existing Okay, hires, Is I just you’re preparing any you over for the if market out continue the growth in I’d build distribution? like and or initiatives of you growth planned the quarter imagine yes. areas expanding wondering mentioned with that Makes it entertainment, growth that How you sounds because casualty, so the new new some on just you areas itself, XXXX, optimistic there. you

this helps is because Scott, think well. say think a to that and because optimism, our different conditions I is we’re--we as business and quite bit little we would the of bit Mike. a model Yes both yes market the just

always In on that it’s year terms will on so been for we’re part the years, story. into gone next, expansion product continue incremental on and growth working going be of will line, the and - this certainly that’s of

we of a growth tend small products, in any year how new part long very think story it’s out roll a but at period over if time, very you be incremental, I look meaningful. the to it’s so they given of

mean, new you quota entered also quota but before benefit anything anything--I I a Yes, third treaty. you versus could quarter commission reinsurance notable changes share, was was there was share, the in quantify saw had what the if okay. share the that previously? had ceding quota you you wondering notable, any the versus there Then July you the just renewals, X there on question the

of our moved question, effect your don’t is property had the handle the approach away and artificial the treaties it of had commission commission is big effect word, the we the I were down whereas little right call, loss know so approach, to of excess I’ll generate commercial was shift but on an excess does business a let ceding quota from bit it Bryan a ceding of share the that of know of ratio, effect those this if approach, net. up the expense ceding can if on pushing they commission loss actually--I the quantify we They don’t but pushes it but-- slightly.

Yes, our a impact point, it about had one-point on expense ratio.

all perfect, a lot. Okay, That’s thanks right.

you. thank Okay,

is Truist Our next question follow-up Hughes from a with Mark Securities.

an slowdown any of from business, that among customer anything in Yes, units, standpoint, seeing economy that base? payroll, your you’re exposure thing, sort

this Mark, Brian Haney. Yes is

of line very the of broad we’re in honestly seeing and construction-related not seeing product some the it’s if anywhere, We’re pretty in seeing across we’re early it that business, construction-related the but yet. of But signs accounts. a most it that it, seeing we’re

had on in whether that, you that market extend it the or you’ve to bit seen in likely How if know Mike little line. could wonder mentioned could Bryan, then Understood, I a expand don’t judgment? in this the just past? something possibility was reinsurance that I and casualty that you hard your - is is the

over speculating, terms that When cat, too far big reduced wouldn’t of with lines there’s bleed in just beyond can property We’re go capacity. I other sometimes Mark, a into that.

that industry to the need some if suspect to hard will. talking of be, can and you you not to the there’s confidence the really that of in lot at some adequacy, if reserves sheet. favorable people, I talk our companies establish aren’t in in and have robust lot accident balance certainly should - no. we yes, to maybe a bigger industry - more I’m intimate always industry, investors strive some that been like that broader so reserves and companies Kinsale, has But for some a where Kinsale about think prolong perhaps the market, I a but historically they issue for conservative reserve particular, as reiterate, years they reinsurers, as casualty

you. thank Understood,

Morgan. Our next a Pablo question from JP the line is follow-up of with

thanks Hi, for follow-up. my taking

cycle have you or is that it remains out [indiscernible] of in Based in I be past guess, your back I turn? to do pricing the at future think when experience and, would on the of does one point from the admitted E&S into cycles future, reasonable looking First moved Mike. for E&S, that’s to assume [indiscernible] some further some

I in when dynamic Pablo, the it’s good today how is, think even mind, E&S to market keep grown. it’s

I look would grew think think the forth an Even a many business boom years a E&S year, that, if just the grew to by non-standard in and start business last like industry times, year from got market I couple non-standard. back whole constantly later standard in you’ve it say be back probably from I moving industry, new XX%. would they’ve out example a P&C year of they’ll the does grow. think E&S loss is years side, was history, you the term back favorable Not if on had year XX.X%. X% go that standard market time. the trend would XX I the goes growing long so and forth every last all the

to market. the two continue years the or there to E&S year. a in percent continues to in each I or the where think row think flow, standard recession It four standard ebb actually can shrank relative a E&S the of particularly the trend, long ’XX, five and only market grow the like, by, at great in ’XX, where but is were back expense term we likely market,

exposure. it, and just the construction on follow-up a the quick then on question Got

have, like premium construction exposure of the less to think notes it I right? seems the I [indiscernible] book. XX% than is your on sound based Does that

that’s of front the probably numbers exact relatively me, don’t I have but close. in

all Okay, you. Thank right.

to back time. turn call the We have remarks. closing I’ll any at no further questions this Kehoe Michael for

everyone forward Okay, three today, thank to you we you for day. months. a you Have participating great speaking Operator, with and again in and thank look

today’s call. joining. you concludes all that Thank gentlemen, and Ladies for

You now disconnect. may