10-K: Kinsale Capital Group Reports Strong 2023 Results Driven by Premium Growth and Underwriting Profitability

Sentiment:

Annual Results 23 February 2024 4:07 PM

📋All filings for Kinsale Capital Group, INC

Kinsale Capital Group's 2023 annual report reveals a significant increase in gross written premiums and a strong combined ratio, highlighting the company's successful year.

Capital raiseThe company has a universal shelf registration statement with the SEC that expires in 2025, which allows it to issue an unspecified amount of common stock, preferred stock, depositary shares and warrants.In November 2022, the company completed an underwritten public offering and sold and issued 155,000 shares of its common stock at a price of $308.30 per share, to the underwriter, receiving net proceeds of $47.5 million.

Better than expectedThe company's gross written premiums increased by 42.3%, exceeding expectations.The company's return on equity was 33.6%, exceeding expectations.The company's combined ratio was 75.4%, exceeding expectations.The company's operating return on equity was 31.8%, exceeding expectations.

Summary

Kinsale Capital Group experienced a 42.3% increase in gross written premiums, reaching $1.6 billion for the year ended December 31, 2023.
The company's return on equity was 33.6%, and its combined ratio was 75.4% for the same period.
Operating return on equity, a non-GAAP measure, was reported at 31.8% for 2023.
The company's focus on the excess and surplus lines market, combined with its proprietary technology platform, contributed to its strong performance.
Kinsale's average premium per policy was $15,200 in 2023, and $16,400 excluding the personal insurance division.
The company's loss and loss adjustment expense ratio was 54.6% for the year ended December 31, 2023.
The expense ratio was 20.8% for the year ended December 31, 2023.

Sentiment

Score: 9

Explanation: The document presents a very positive outlook with strong financial results, significant growth, and effective risk management. The company's performance metrics are well above industry averages, and the management team has a proven track record. The risks are well-managed and the company is well-positioned for future growth.

Positives

The company's exclusive focus on the E&S market has historically resulted in lower loss ratios and higher margins.
Kinsale has a broad appetite to underwrite a diverse set of risks across the E&S market.
The company's proprietary technology platform provides efficiency, accuracy, and speed across all processes.
Kinsale's expense ratio is significantly lower than its competitors.
The company manages all claims in-house, leading to more favorable outcomes and higher reserve accuracy.
The management team has an average of over 30 years of relevant experience.
The company maintains a conservative balance sheet.

Negatives

The company relies on a select group of brokers, and the loss of any of these brokers could negatively impact the business.
The E&S insurance market is cyclical, which may affect the company's financial performance.
The company is subject to reinsurance counterparty credit risk.
The company's employees could take excessive risks, which could negatively affect the business.
The company is subject to extensive regulation, which may adversely affect its ability to achieve its business objectives.

Risks

Loss reserves may be inadequate to cover actual losses.
Models used to evaluate risk may be inaccurate, leading to materially different actual losses.
The failure of loss limitations or exclusions could have a material adverse effect.
The company may be unable to obtain reinsurance coverage at reasonable prices.
Severe weather conditions, catastrophes, and pandemics may adversely affect the business.
Adverse economic factors, including recession and inflation, could affect growth and profitability.
A decline in the company's financial strength rating may adversely affect the amount of business written.
The company could be adversely affected by the loss of key executives or an inability to attract and retain qualified personnel.
The company relies on a select group of brokers, and such relationships may not continue.
The company's E&S insurance operations are subject to increased risk from changing market conditions and the cyclical nature of the business.
The company's employees could take excessive risks.
Competition for business in the insurance industry is intense.
The company may act based on inaccurate or incomplete information regarding the accounts it underwrites.
The failure of the company's information technology and telecommunications systems could materially adversely affect the business.
The company may be forced to sell investments to meet liquidity requirements.
The company's credit agreements contain financial and other covenants, the breach of which could result in acceleration of payment of amounts due under borrowings.
The company may require additional capital in the future, which may not be available or may only be available on unfavorable terms.
The company is subject to extensive regulation, which may adversely affect its ability to achieve its business objectives.

Future Outlook

The company believes it is well-positioned to continue capitalizing on attractive opportunities in its target market and to prudently grow its business.

Management Comments

The company's goal is to deliver long-term value for its stockholders by growing the business and generating attractive returns.
The company seeks to accomplish this by generating consistent and attractive underwriting profits while managing capital prudently.
The company believes its systems and technology are at the digital forefront of the insurance industry.
The company believes it has differentiated itself from competitors by effectively leveraging technology, vigilantly controlling expenses, and maintaining control over underwriting and claims operations.

Industry Context

The report highlights Kinsale's strong performance in the E&S market, which has historically operated at lower loss ratios and higher margins compared to the standard P&C market. This positions Kinsale favorably within the broader insurance industry.

Comparison to Industry Standards

A.M. Best's domestic professional surplus lines composite produced an average net loss and loss adjustment expense ratio of 69.3% and grew direct premiums written by 9.6% annually from 2001 to 2022, versus 73.6% and 4.2%, respectively for the property and casualty industry.
Kinsale's loss and loss adjustment expense ratio was 54.6% for the year ended December 31, 2023, which is significantly better than the industry average.
Kinsale's expense ratio was 20.8% for the year ended December 31, 2023, which is significantly lower than its competitors.
Kinsale's combined ratio of 75.4% for 2023 is a strong result compared to the industry average.
Kinsale's operating return on equity of 31.8% for 2023 is a strong result compared to the industry average.

Legal Proceedings

The company is subject to legal proceedings in the normal course of operating its insurance business.
The company is not involved in any legal proceedings which reasonably could be expected to have a material adverse effect on its business, results of operations or financial condition.

Stakeholder Impact

Shareholders benefit from the strong financial performance and return on equity.
Employees benefit from competitive compensation and benefit programs.
Customers benefit from the company's ability to provide coverage for hard-to-place risks.
Brokers benefit from the company's high degree of service and rapid response times.
Reinsurers benefit from the company's strong financial position and risk management practices.

Next Steps

The company plans to continue to capitalize on attractive opportunities in its target market and to prudently grow its business.
The company will continue to dedicate resources to maintain and improve its technology.
The company will continue to monitor and adjust its reserves as necessary using new information on reported claims and a variety of statistical techniques.

Key Dates

Date	Description
2009-06-03	Kinsale Capital Group, Inc. was formed.
2010-02-05	Kinsale acquired American Healthcare Specialty Insurance Company, later renamed Kinsale Insurance Company.
2011-07-21	The Nonadmitted and Reinsurance Reform Act of 2010 (NRRA) became effective.
2013-08-21	Aspera Insurance Services, Inc. was established.
2014-09-05	Kinsale Capital Group, Ltd. was re-domesticated from Bermuda to Delaware and renamed Kinsale Capital Group, Inc.
2016-07-27	The Kinsale Capital Group, Inc. 2016 Omnibus Incentive Plan became effective.
2016-07-28	Kinsale's common stock began trading on the Nasdaq Global Select Market.
2018-12-03	Kinsale Real Estate, Inc. and 2001 Maywill, LLC were incorporated.
2022-01-03	The Company transferred its common stock listing from the Nasdaq to the New York Stock Exchange.
2022-07-22	The Company entered into a Note Purchase and Private Shelf Agreement and issued $125.0 million aggregate principal amount of 5.15% Series A Senior Notes.
2022-07-22	The Company entered into an Amended and Restated Credit Agreement.
2022-08	The Company filed a universal shelf registration statement with the SEC.
2022-09-08	2000 Maywill, LLC was incorporated.
2022-11	The Company completed an underwritten public offering and sold and issued 155,000 shares of its common stock.
2022-12	The Company acquired real estate adjacent to its current headquarters.
2023-06-01	The Company purchased catastrophe reinsurance coverage of $127.5 million per event in excess of its $47.5 million per event retention.
2023-09-18	The Company entered into a First Amendment to the Note Purchase Agreement and issued a $50.0 million aggregate principal amount 6.21% Series B Senior Note.
2023-09	The Company used proceeds from the sale of its real estate investment property to pay down $62.0 million from its Credit Facility.
2024-02-12	The Company's Board of Directors declared a cash dividend of $0.15 per share of common stock.
2024-02-21	The Company amended the Kinsale Capital Group, Inc. 2016 Omnibus Incentive Plan.

Keywords

excess and surplus lines, insurance, reinsurance, underwriting, premiums, claims, technology, financial results, risk management, investment portfolio

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