Kinsale Capital (KNSL) 28 Apr 232023 Q1 Earnings call transcript

Ladies and gentlemen, thank you for standing by. My name is Brent, and I will be your conference operator today. At this time, I would like to welcome everyone to the Kinsale Capital Group First Quarter 2023 Earnings Conference Call. [Operator Instructions] Thank you.

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.

statements actual to results forward-looking which risk these cause could to always, are certain subject factors, As differ materially. are XXXX Form factors filings, reviewed risk listed company's the These various carefully. including the which annual XX-K, on report should be in SEC

has Kinsale's with Securities GAAP The measures reference non-GAAP management Commission may furnished at and its announcing in Form can press be press the the is www.kinsalecapitalgroup.com. measures today. these financial of the company's also to contains release a A the first Exchange website at X-K company in the that quarter reconciliation which call results. certain found release, available

turn CEO, conference Please sir. Kehoe. will to Kinsale's ahead, the Mr. now Michael President and go I over

Thank you, operator, and good morning, everyone.

format Petrucelli, in familiar to move Kinsale's call, will any a each Haney, Brian we'll you follow Kinsale's and and comments, may for Bryan I COO will on questions few make our where today's then CFO; and We have.

XXXX per company business underwriting and posted XX% return allow combined being the quarter favorable at operating same of These of market from attractive The over take the share to XXXX. equity and time. E&S Kinsale's by In for competitors the returns of ratio operating the the XX%. grew on by quarter, driven share generate XX% a gross premium earnings by disciplined technology-enabled Kinsale an us first low results which first are written and strategy quarter increased costs, and to XX%

from allows expand several rapid business a been The into are same the we favorable for have market with market years property and flow overall Kinsale. P&C continues opportunity an area growth of the time at market growth the and doing Adding Kinsale E&S margins which be and strong to us market, standard results to the now. accelerate of to commercial as for conditions the steady

we strong property write controls of the in on to last with As increase returns limit balanced business variety we quarter, we the the expected discussed a volatility.

portfolio We limits very geographically. carefully, Specifically, individual we of our restrict We the reinsurance our program. manage substantial business model purchased regularly. and a we concentration policy

Although premium premiums hurricane premium to amounted our first property XX% in written quarter. of subject just net volume our property premium. over exposure total the any personal commercial to The of is and lines XX% material Kinsale's

so, Further, our P&C of a estimates not Part income of over materially continue Kinsale the considerable years, losses. than that done major even the expected relative in the to losses success with to are for operating business conservative long-term more storm, creating time. establish have event believe we in future has changed to the growth and consistently reserves over the is future in premium. achieving just reserves those that develop adequate, favorably that for do setting claims likelihood up we

heightened time reserve In should an investors a inflation, is consequence, Kinsale's such and a sheet. important. in a high of even continue maintain of period confidence approach as level balance more with overall position And to

state be of rate continues view more subject while casualty premium growth. orderly and and market still is a distress, The property increases particular, the strong overall our positive Finally, in for more market to but the in is allows of market E&S competition, positive. to

we optimistic have sense about balance We XXXX for of are optimism next and the year. a of rising

mid-teens. the deliver will Kinsale something a continue point but in low the more technology-driven and when current even business take rate market best-in-class the to believe market, more in low modest, our we competitive to That growth to being model increases costs returns, our at to future. will give deliver disciplined Kinsale will also returns allow of strong In some said, to underwriting competition and way share perhaps

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

Thanks, Mike.

prior point XX% development with net the for all in X.X quarter from points just cat The income mentioned, premium, loss year either and less included reserve in a from increasing than growth by really ratio just Again, respectively. and and strong compared quarter losses last XX.X% XX% to reasons Mike XX%, combined period. written for a operating net the favorable year X.X with points that

in Most of in casualty the proportional compared improvement last ceding XX.X% quarterly the line year. our of expense also in ratio reinsurance the the of with commercial last quarter in to commissions is first year, expense property and from to quarter of XX.X% agreements the company's XX.X% related fourth ratio and

in result income On a of the X.X% XXX% quarter interest investment by investment quarter year. for last year continued with X.X% portfolio over growth the and investment side, higher return the first compared of a increased net rates last as to the of gross

quarter, monitor and actions to X.X in X.X And decreasing and the to continuing on of any close during averaging years of We curve, to inverted given money the Fed to new yields slightly related securities duration inflation current with the end impact year. rates. last new interest at duration the X% down our years and yield we're continue from money shorter invest

SPB sale positive past during during interest a to position QX recognized Book value resulting quarter. the the income loss million that portfolio an position income so. of value quarter. realized a positively over was of combination the securities or a of our be net Notwithstanding $X and year continues Bank rates our first have an movements, in or from loss unrealized security in didn't overall stock We fixed quarter so impacted income fair preferred and increase the on the the from in the fixed higher the

just gives maturity to the allows us operating rate The at environment interest cash ability I higher securities and to money which company new invest touched yields better the that us to generate to hold these positive continues strong on. flows,

our As it we relates to conditions change. market monitor continuously capital, needs as

the debt to related capital. our form we'll share Given towards that for in position of come supporting the our support approach. last half made bias and given with per lastly, equity to there's historical growth, modest to per additional $X.XX premium or share decisions with the improve a continued year debt share of and could second to the in operating the quarter And always diluted year. compared favorable conditions continues need was $X.XX market any per The current possibility earnings the consistent with debt and capital be

over Haney. I'll And it pass to with Brian that,

Brian. Thanks,

As four mentioned over annually. earlier, the growth consistent averaged grew XX% a in just several premium where first last of representing quarter, previous and we XX% quarters the the with continuation years

and Overall, The most the capacity continues market hard to our remains product in is Hurricane line. continued. with contraction in across and property strong E&S industry growth of of the the wake market be favorable

division, strong Inland Marine Property our well book continued in most growth In addition as to seeing are our our as Commercial across of divisions. we casualty

There casualty are pockets energy, particular, more in general Entertainment of significant product and a liability Our and competitive at and that flat grow are management slower liability. to some divisions, or growing, as continued business such pace.

resulted have top in property six Five natural speak about moment in and of last dramatically the in XX years, for last the rates. has the cutting to occurred pulling happened top the back raising years. The the history want This a few catastrophes has in I U.S. costliest capacity and significant years industry market two the two particular. carriers X last in some losses. of experienced have

for a It because historic through opportunity came has period same that we with profitability. Kinsale presented record

is current write at as -- terms property we've ever hard property the ability good and to extraordinary rates and as now The So and market terms. have are ever business seen. rates and the current as as seen, the we've we

aggregate carefully of and insured value said, so to and limit our order we are accumulation acceptable volatility we Mike balance. As manage mindful keep our of an volatility in with

in strong from with be represents consistent low the quarter, to modest a the continues most which range, but growth Submission XX% XXXX. previous generally of acceleration

so submission signal we growth for indicator rate of a market growth, view As that our positive is a as reminder, opportunity. leading submissions a

down and slight one a if over sell of rates move wide we that not being the during first But We number, see do very aggregate up the of the quarter. the in -- boil quarter, over a fourth all rates products those products a we little the improvement to X% real locket.

divisions boosting certainly but be changes The combination the trends which and of it that positive, number. property changes will rate The than trend. would that average, overall, be casualty rate higher still than very but the premium The market for for cost indicates were less property average. rate the changes are is loss well greatly, exceeding

rate and adequacy stress change different are rate that important to two things. It's

demonstrate, rates As our results our are than more adequate.

these our today return on important now. and that are such several ratio, getting note adjusting continually the rates We of to been for them trend competition. books in we've as We and market seen adequacy history. in in as also target the number putting best our increases feel excess on rate of reviewing rate shift years target the opportunity the on our considerations business It's we're we've equity, the a combined based

We keep we're an the situation board. necessary. a favorable the I good The do adjustments continuously are market across continue as make to but in feel on as We conditions eye position, said we inflation. generally and monitor

wide see part, hope are There and market too a carriers make behaving competitors stable, or for to coverage retrenching few particularly either offering cheap return. we are fronting the a that most and open among prices deals, manner. entrants, any to For in new rational MGAs their

and When for there But with this the for opportunity believe good and news will that further good our we Kinsale. a rational the we happy does, clearly, and up results. be the market economic are catch and reality Overall, be opportunity at moment, ultimately dislocation impacting market eventually with phenomenon isn't competitors. will actors those quarter, it will

with And over Mike. hand back that, I'll it to

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

question with [Operator first line Truist. Instructions] Mark the Your Hughes is of from

open. Your line is

morning. Thank Good you.

Mark. morning, Good

competitors, the than growth loss see development referred of does of the Mike, to you loss impact what to speculating and you severe have, about I Any that reinsurers for How in the inflation alluded mean on inflation about on think past, the E&S kind commentary your being And market? more you development some impact the among competitors? do in expected. that? the update have on

I to longer the most they're on increase tail lines, Well, your the inflation. in exposed think

building our of price, where business we've seen labor price. costs up think in I gone in gone it have book in have supplies up own

have part a a fact three higher And claim to that number fundamental for We been settled of like probably for conservative belabor to may XXX,XXX a future considerably strategy business claims. being so very the is two or ago it's that our set years settled always reserves today. for

if go back I inflation those Kinsale through for XX years. conservatism but us gives has that insulation -- the yes, the XX years, And you think some to clearly, impacted

an I think basis, have it a all probably favorably eroded developed little bit. the but years conservatism inception-to-date on those has

to going Bryan great of position to does 'XX all but a reserving. our think in 'XX, same an Given Not approach increases impact. from company And mentioned and XXXX, it's it takes way. in the every we're that overall conservative rate the impact We 'XX. terms now conservatism of the competitors have same

process. the the So more that company a at beginning optimistic is of

I I the market. pricing more can the think environment takeaway inflation is favorable think painful extend be. the the it But the E&S should for net

me on to exposed like much anything be that, banking may to think any how slowdown you do What Are Then the of construction. your related signs? seeing potential book Refresh the you about crisis. construction? early

think seeing I construction. It's -- broad growth umbrella. everything under include we're We're you of about business, in our good XX% that if No.

I it exceptions all with is the can lines So landscaping, and we're about, and I a across that the butter under sorts for mean, all moment include include that for management It two at seeing talked E&S well. the class But liability fit contractors. commercial Brian particular. residential industry that's janitorial things businesses, in bread home could casualty but repair umbrella, as of good Kinsale our that and think growth

a rate one question, quarter. a then on was ceded you ratio And for would think I think do with increasing property bit run Petrucelli. Okay. What sequentially be XXXX other Bryan it premium premium ratio? little actually, The down this good

probably depending if think for did first we in trying is think the quarters We change, I for on of at talked I indicators looking Mark, to a what we the That put going give have business. have can in something indicator first forward. I think an of about I looking mix what good you're what the is as at that we But to the past. model, you. going are good quarters of the

you. Very good. Thank

Mark. Thanks,

from the Pablo of Singzon JPMorgan. next question is with Your line

Your open. line is

to that writings a to expected catastrophe that you a have help it's of that with Good bit? morning. know, percentage how whether property changed percentage mentioned losses around Can or income You expectation? Mike, numbers you any do operating premiums not earnings up? sort of it, as of and even going or anybody quantify

variety Well, of at very gets when it you of look look probable across very there's a over, I at think five, the loss best numbers way array storm, curve that, you a different have maximum return a years, look major manageable. now every to they're experience storm, because when technical but periods. seven, at But if Kinsale's losses, major nine we a into

You third year the know, maybe quarter in terms of at example. of as look an last

I high In some when to hey, Our run XXs. ratios, had the was XXs, rate Ian, the we on in combine losses up into ticked low third ratio quarter Hurricane combined the the think related right.

volatility. generally opportunity we're at in We business how that's the tremendous the see the So a to trying manage, moment. property

for a said, more market we've there. favorable seen Brian never risk As the

that. mindful But And we're volatility. also so, take we advantage of want to of

the continue to convey. don't have to that. to of return give we to balance that one number you you a so, we everything we've down specific wanted we against And volatility, the all do years over the kind the the pull message That's to could statistic. But prospects things done

was Mike. context, that said second Understood, right. And I this that helpful on just your and new to comment, wanted something you've question, isn't follow-up the then

based before, but longer mid-teens. to cycles in growth is low think, is for Kinsale's on past You said market? the question around guess I you the in of the experience this term that

think over years? run see will maybe steep you rate Do that there's processes think of playing right? more you you that or more that do to a be do couple be How level decline even out, gradual a normalization going at

a years. over couple could of think I be gradual it

at years. reserve in my said four very we has comments, away industry's anytime extraordinary been I now optimistic go I for don't property will soon. position. market, in growing impact mean think just, today. on we're an Inflation distress we've rate As The the an the I

that to manifest has yet So itself.

a toward dynamic for which, is to We the very industry. United have a in the of States, challenge continue system course,

continue a a extraordinary. lot So continue bit And is be growth we healthy it our that, us somewhat. a very industry, abate, more the model to will think, a some It's XX%, or share, beyond at market is to to for I favorable. there's, should and And reasons, allow of even rate just market insurance business unique. it think that top-line the mature a XX% But competitive grow in little to a take a environment. future, at in recognition in point like

entities had could a Brian Understood. not And But lines line then and the missed, over I talk and to, impact business, associated negative Haney on pricing specific - something funding these companies. last apologies, dynamics, those I those? thing didn't if guess for mentioned me apologies about missed MGAs where specific sure I and represented if maybe hear a as you but but for I'm having if I it. market you and with are referenced of entities

to They that deals, us. liability. management definitely tend not liability, No, no, way is I an focus They're impact them large big would professional But say see which going in didn't I on why in to to one more having be going of on we're is mention it. probably common.

So from if what's going not to space, that's about be let's commentary going going on in our of on you've in large D&O, say, market we're the some heard public competitors, in. which D&O company right,

tend So - that lines, see them to we in. be would the would

you. Thank

cyber. to really see don't cyber, but write You got we

less or? of that's common the are sort sorry, property then me indicate like deals And in property

write are would they now MGAs of say, business in Yes, - they a Like less in space. that I use you way now property, it have Yes, but the to right certainly certainly with common. wouldn't lot is property. they're in market the to

you. right. All Thank

Jefferies. Andrew Anderson with question Your the from is line of next

line open. Your is

of any loss Hi, over second loss And morning, would of and the to attritional the in considering be on the of be the half it think growth last would from property quarters couple just impact I good ratio coming underlying ratio think not, year? would if what business? fair some lower the a

the property the say business lower pronounced inflation, loss on exposure. in the a run We'll uptick inflation, inflation social cat certain it ratio. that much claims. general, it's would write But a given of persistence true got commentary It's around lot in in I we of attritional

continue approach to We reserving. very to cautious take a

compelling don't in know with being conservatism. but said, think the XXs even really, that kind for a I with I immediate that see so, benefit, when up high return, our conservatism, And ratio, attractive you'll any And ratio. that of we're match loss delivering really with a you we're even expense

market few Florida appetite the weather, And geographic? maybe of recent could the in us remind state did commercial and And relative a residential, you maybe was change in it. ago? appetite to it also the where reforms months Got of just state

were book loss were have standard concentration plaguing of kind a the homeowners' kind the we writers a lot homeowners' Southeast in than hoped. was of Ian that's, We there. small United that actually AOB exempt the bit do little in States from a larger reducing issues had We We Florida. that we're of

on a for limits side. again, the both But big Florida Obviously, us property we and the is state have on concentration. strict we casualty

going is but in we our there. of our we're But I the Miami-Dade have write we'll exposure, most write we on County, commercial how limits have as most to side. much So think to of

Got you. it, thank

RBC the next comes of [Operator with Heleniak from line Scott question Capital Instructions] Your Markets.

open. is line Your

Yes. Good morning.

lot more seeing peers? competitors obviously, more can but of getting would looks retrench? uptick - there submission you're to been count, Just in from as a you wondering at that in you're particular - a looks where business which property, bit. area little I any is else any if while is improvement - for a there's anything that point there uptick think some dislocation obviously on or is and strong But your to just point the the pullback where like

one not that rate I the the pretty we with kind not a like submissions. ties obviously, few submission. area, more where product say the we're mean lot good And we're those are would board like, I property seeing areas growth there's, of are that very liability in is growth so, across the are to as seeing Yes, areas it much extent premium. and management in growing liability it's

fun property moving renews broad-based expect not as any guys form add excess thoughts you to the And that to Any treaty a - - pricing pretty X. it just on you have I'm that? they reinsurance versus right. you commercial June have if quota mistaken, share all a quota renewing at that, share you Okay, that loss? and that Anything the current changes on and keep expect where on whether on can

Yes, per Scott, see moment. renewal the this currently the for of commercial - up to to going whole I expect is through reinsurance it will But is at any XX.X% quota our that. Mike. expiring. or the be We're don't matter share, XX%. that that to intent in We're program we But we push improvement terms the renew deterioration property going for think

Yes.

Okay.

meaningful your an limits so to increases, question and some have had are the calls premiums higher insured just shift a and seeing Just to a values. book about opportunity the deductibles quarterly of as customers of heard the talk pretty customers rate to given seeing reflect just a conference and deductibles in to adjustments struggling conditions, increases, across lot you. some large there? We've the Are just you you with their are limits change in and the terms rate

yes. answer is The short

to for I we're way terms a money. because generally are save more looking So seeing people mean favorable

So be deductibles, like higher things purchasing sublimits, living through could limits, that. lower with it having

that of a six months? to that last nine way? kind gradually big that change Or headed versus is just Is

of going hard on as the has kind been evolving. market That's been

areas, significant change. it's not like certain pretty again, So I a just say it's pronounced no, would property. it's in

that on where lastly, favorable just where from then XXXX, you recent to that's there in coming the point And it's more areas Q, said from? you lines that anything development can that can accident that particular on of XXXX. call business Is years, Okay. the any out you

of I we medium short, other write think good anything than and Yes, tail portfolio. seeing mix point we're I think there's across a the don't experience the to longer on lines. can good call We

had a of percent in setting for probably tail. a and results but But disproportionate we dollars combination that persistent point some that row. a come increases from picks loss shorter -- anything conservative now the the very don't those And a are dramatic a longer to. I of loss The so there's rate years to trend versus getting specific number cost also don't have of

Okay. And was from that Ian was development worth there favorable any calling out?

No.

No.

lot. a Okay. All Thanks right.

Okay. Thank you.

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

Your line open. is

Yes. good going midst even Are anything you to anything anything the -- on I economy? other front, of in to premium ask would slowdown speak maybe was see the audit is that you there the all the suggests some that just news?

mean environment. about Yes. in economy the you keep think in that down, I talk slowing when inflationary I an it's to got mind we

adjusted So not the to on premium sales nominal based is be real audit sales, sales. not going and

really So two use that But is the good we're kind guess seeing would or year now. we audit premium. a say did we of big that it. I seen outsized flow thing we I haven't still COVID-related now seeing a one audits to aren't of ago an impact on see

Okay. Thank you.

Thanks Brian.

Point. line next Compass is from Alexander with question of Your Casey the

Your line open. is

Hi. Good morning.

issue. First common preferred additional commercial exposure kind note, exposure to any any particularly exposure? is debt the portfolio, a mortgage Just of Republic? regional or of investment also any bank maintenance In there And

healthy order. have and I'll commercial. do guess, the, them do through allocation to in I mortgages We reverse residential a

think they're AAA all almost I rated.

So we're there. in a cautious pretty position

have the in think terms exposure any of about banks, I a regional regional the we rated and Republic, variety banks. was pretty terms bonds highly of of First again, of X% across don't I think portfolio, In it

All right. you. Thank

Okay.

[Operator Instructions]

Operator, call it looks we have like one pending.

sir. Yes

comes question private Johnson, the of next line Tommy a Your from investor.

open. is line Your

example your intelligent you're one, want what from from an as of about. shareholder talks a but and voice I say Buffett a I is can't to past question, an ask Warren this Brian, and Mike day

saying this great have be life, in is lucky of incredible you have stockholder record. you're in proven invest you couple guys a that If and on, you a And and track true. an you just companies to hang

office, my I your exceed can't you us your you want when it know any phone, demonstrates that you business the been both a your and but and throughout I business, thought leadership knowledge buddy. follow it's laid plan, just remember Mike -- appreciation great my the it for I and on set the don't of I express time. explanation way out of your to of while ride, Your would have, the

All for right, Tommy. Well, kind confidence the and of thank years. words, thanks the you the vote for over

There now back are no questions at I further Kehoe. turn Mr. the Michael time. to call over this will

Okay. Well, thank you, in a great everybody, Have for participating this with morning, and we of again you months. day. look couple forward to here speaking a

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

You may now disconnect.