Earnings call transcript: Kinsale Capital beats Q2 2025 forecasts

Kinsale Capital Group Inc. (KNSL), an $11.12 billion market cap insurer, reported strong second-quarter results for 2025, surpassing earnings and revenue forecasts. The company achieved an earnings per share (EPS) of $4.78, exceeding the expected $4.41, marking an 8.39% surprise. Revenue reached $469.81 million, also beating the forecasted $433 million by 8.5%. Despite these positive results, the stock experienced a slight decline of 0.53% in aftermarket trading, closing at $474. According to InvestingPro, the company maintains a "GREAT" financial health score of 3.41 out of 5, reflecting its robust operational performance.

Key Takeaways

• Kinsale Capital’s EPS surpassed expectations by 8.39%.
• Revenue exceeded forecasts by 8.5%, highlighting strong sales performance.
• The stock saw a minor decline of 0.53% in aftermarket trading.
• New product launches and expanded offerings contributed to growth.
• Concerns over commercial property pricing and underwriting practices persist.

Company Performance

Kinsale Capital demonstrated robust performance in Q2 2025, with a 27.5% increase in operating earnings per share compared to the same quarter last year. The company also reported a 4.9% growth in gross written premium year-over-year. Its strategic focus on expanding product offerings and maintaining a competitive edge in the excess and surplus (E&S) market has contributed to its strong financial results.

Financial Highlights

• Revenue: $469.81 million, up from the previous forecast of $433 million.
• Earnings per share: $4.78, compared to $3.75 in Q2 2024.
• Combined ratio: 75.8%.
• Six-month operating return on equity: 24.7%.
• Book value per share increased 16% since year-end 2024.

Earnings vs. Forecast

Kinsale Capital’s EPS of $4.78 significantly outperformed the forecast of $4.41, resulting in an 8.39% earnings surprise. The revenue of $469.81 million also surpassed expectations by 8.5%, indicating strong operational performance and effective management strategies.

Market Reaction

Despite the strong earnings report, Kinsale’s stock experienced a slight decline of 0.53% in aftermarket trading. The stock is currently trading below its 52-week high of $531.79 but remains above its 52-week low of $405. Trading at a P/E ratio of 27.32, the stock appears slightly undervalued according to InvestingPro’s Fair Value analysis. This movement reflects investor caution amid ongoing market challenges, such as pricing pressures in the commercial property sector.

Outlook & Guidance

Kinsale Capital remains optimistic about its growth prospects, maintaining a target of 10-20% growth over the market cycle. The company expects a return on equity in the low to mid-20s and is focused on expanding its product suite, particularly in entertainment, high-value homeowners, and small business property lines. The company has maintained dividend payments for 10 consecutive years with a 13.33% dividend growth rate, demonstrating its commitment to shareholder returns. For detailed analysis of Kinsale’s growth potential and comprehensive financial metrics, investors can access the full Pro Research Report on InvestingPro.

Executive Commentary

CEO Michael Kehoe stated, "In both hard markets and soft, Kinsale’s differentiated strategy and execution allow us to drive both profit and growth." He also emphasized a cautious approach to reserving, particularly in long-tail casualty lines, highlighting the company’s strategic prudence.

Risks and Challenges

• Competitive pressures in the E&S market could impact pricing strategies.
• Concerns about underwriting practices in the MGA and fronting company sectors.
• Potential challenges in commercial property pricing, especially in Southeastern wind accounts.
• Conservative reserving approach may affect future earnings visibility.

Q&A

During the earnings call, analysts raised questions about the company’s approach to commercial property challenges and its conservative reserving strategy. Executives addressed these concerns, emphasizing the importance of cautious underwriting and the potential for expansion in the homeowners line.

Full transcript - Kinsale Capital Group Inc (KNSL) Q2 2025:

Conference Operator: Good morning, and welcome to Kinsale Capital Group’s Second Quarter twenty twenty five Earnings Conference Call. All participants are in a listen only mode. After the speakers’ remarks, we will conduct a question and answer session. As a reminder, this conference call is being recorded. 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 2024 Annual Report on Form 10 ks, which should be reviewed carefully. The company has furnished a Form eight ks 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. A reconciliation of GAAP to these measures can be found in the press release, which is available at the company’s website at www.kinsalecapitalgroup.com.

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

Michael Kehoe, Chairman and CEO, Kinsale Capital Group: Thank you, operator, and good morning, everyone. Brian Petrucelli, our CFO and Brian Haney, our President and COO, are both joining me on the call this morning. In the second quarter twenty twenty five, Kinsale’s operating earnings per share increased by 27.5 and gross written premium grew by 4.9% over the second quarter of twenty twenty four. For the quarter, the company posted a combined ratio of 75.8% and a six month operating return on equity of 24.7 percent. Our book value per share increased by 16% since the year end 2024.

In both hard markets and soft, Kinsale’s differentiated strategy and execution allow us to drive both profit and growth. We focus on small E and S accounts. We maintain absolute control over our underwriting. We provide exceptional customer service and offer the broadest risk appetite in the business. We have advanced technology and no legacy software, a strong emphasis on data and analytics, and by far, we have the lowest costs in the industry.

This strategy and the skill and experience of our almost 700 full time employees give us confidence in our prospects for both profitability and growth in the years ahead in all types of market environments. The E and S market in the second quarter was consistent with the first quarter. Overall, it is a competitive market with the level of competition varying quite a bit from one industry segment to another. Our commercial property division saw premium drop by 16.8% in the second quarter due to high levels of competition and rate declines. Absent this division, Kinsale’s premium grew by 14.3% in the second quarter.

Brian Haney will offer some more in-depth commentary on the market here in a moment. We renewed our reinsurance program on June 1. Given the strong returns we have generated for our reinsurers over many years, the overall program was slightly more favorable for Kinsale upon renewal. Some of the modest changes in the program include a $3,000,000 retention on our casualty treaty, up from a $2,500,000 retention on the expiring. On our commercial on our property quota share contract, the ceding commission we received from reinsurers increased slightly, reflecting favorable historical results, and our retention increased to 60% from 50% on the expiring program.

On the catastrophe excess of loss treaty, we increased our retention from $60,000,000 to $75 and purchased some additional limit at the top of the tower. As we have stated many times over the years, we endeavor to post loss reserves with some measure of conservatism so that they are more likely to develop favorably than unfavorably over time. Our sixteen year track record bears out our commitment to cautious reserving and building a strong balance sheet. At a time when there are substantial questions around the reserve adequacy of the broader P and C industry, it’s important for investors in Kinsale to know that our loss reserves have never been more conservatively stated than they are right now. And with that, I’ll turn the call over to Brian Petrucelli.

Brian Petrucelli, CFO, Kinsale Capital Group: Thanks Mike. Again, just another strong quarter with net income and net operating earnings increasing by 44.927.4% respectively. The 75.8% combined ratio for the quarter included 3.9 points from net favorable prior year loss reserve development compared to 2.8 points last year with less than a point in cat losses this year compared to one point in Q2 of twenty twenty four. As Mike mentioned, we continue to take a cautious approach to releasing reserves. We produced a 20.7% expense ratio in the second quarter compared to 21.1% last year.

The expense ratio continues to benefit from ceding commissions generated on the company’s casualty and commercial property quota share reinsurance agreements and from the company’s intense focus on managing expenses on a daily basis. On the investment side, net investment income increased by 29.6% in the second quarter over last year as a result of continued growth in investment portfolio generated from strong operating cash flows. Kin sales float, mostly unpaid losses and unearned premium, grew to $2,900,000,000 at June 30 this year, up from $2,500,000,000 at the end of twenty twenty four. Annualized gross return was 4.3% for the first half of the year and consistent with last year. Other

Dan, Analyst: than

Brian Petrucelli, CFO, Kinsale Capital Group: the modest increase in the allocation to common stock that we mentioned last quarter, we haven’t made any significant changes to our investment strategy and continue to monitor inflation, interest rates and related Fed policy commentary and will adjust as circumstances change. New money yields are averaging in the low to mid 5% range with an average duration of three point one years. And lastly, diluted operating earnings per share continues to improve and was $4.78 per share for the quarter compared to $3.75 per share for the second quarter of twenty twenty four. And with that, I’ll pass it over to Brian Haney.

Brian Haney, President and COO, Kinsale Capital Group: Thanks, Brian.

Michael Kehoe, Chairman and CEO, Kinsale Capital Group: The E and S market remains competitive,

Brian Haney, President and COO, Kinsale Capital Group: so the intensity varies by division. We’re seeing robust premium growth in small business property, high value homeowners, commercial auto, entertainment and general casualty. Meanwhile, commercial property, construction, life sciences and management liability are facing tougher competition and in some cases declining premiums. The market is clearly more competitive than a year ago, however, of the aggressive pricing is coming from MGAs and fronting companies. While there are some highly regarded MGAs out there with long track records of success, the model as a whole is challenged by misalignment of interests.

Some fronting companies are posting unsustainable gross loss ratios of 100% or higher signaling capital destruction. Notably,

Dan, Analyst: largest reserve line, other liability occurrence, the top six E and

Brian Haney, President and COO, Kinsale Capital Group: S fronting carriers are projecting twenty twenty four gross loss ratios well below ours despite consistently worse experience in older accident years and consistently worse loss development. Either they, as a group, have experienced a miraculous turnaround or they are under reserving. Eventually loss reserves turn into paid claims and posting inadequate reserves only pushes the problem down the road for a time. The situation is reminiscent on a smaller scale of the mortgage crisis of two thousand and eight, where you had a misalignment of interest between the originators and bearers of risk, which resulted in a fundamental mispricing of that risk. Given the size of the problem, this will not be as significant for the economy as the mortgage crisis, but it will be very significant for the insurance industry and for some players in it in particular.

And it’s encouraging to us because ultimately under reserving is a self correcting problem. We continue expanding our product suite to capture market opportunity. In Q2, we broadened our agribusiness vertical to include property coverage and launched a new homeowners product in Texas, Louisiana, Colorado and California with more states on the way. Submission growth was 9% for the quarter, which is down slightly from the 10% in the first quarter. Our Commercial Property division experienced a decline in submissions, which depressed the company’s overall submission growth rate.

Without that, the submission growth rate would have been in the low double digits. Pricing trends align with the AmWINS index, which reported a 2.4% overall decrease. Commercial property, especially in Southeastern wind zones, was down 20%. Casualty pricing was mixed but modestly positive. Some professional and management liability lines were slightly negative.

Finally, we continue to be cautious around loss cost trends. Headline inflation is above the Fed’s 2% target. And with various governmental policy changes, it’s not clear where things go from here, which is even more reason to be cautious and conservative with our reserves. Overall, we remain optimistic. Our loss results are good.

Our growth prospects are good. And as the low cost provider in our space, we have a durable competitive advantage. And with that, I’ll hand it back over to Mike.

Michael Kehoe, Chairman and CEO, Kinsale Capital Group: Thanks, Brian. Operator, we’re ready for Q and A.

Conference Operator: Thank you. Our first question comes from Andrew Kligerman from TD Cowen. Please go ahead. Your line is open.

Michael Kehoe, Chairman and CEO, Kinsale Capital Group: Andrew, this is Mike. We’re we’ve got a very poor connection, so we weren’t able to understand your question. Do you wanna try one more time? Operator, let’s drop that call and let’s go to the next one.

Conference Operator: Certainly. Our next question comes from Michael Zaremski from BMO Capital Markets. Please go ahead. Your line is open.

Dan, Analyst: Hey, good morning. It’s Dan on for Mike. Maybe first just on your longer term growth target. One of your peers recently lowered their near term growth target due to the heightened pricing environment competition. With two quarters below 10% to 20% that you’ve guided to, is there any thought to recalibrating the near term number?

Or is there still belief in that 10 to 20 number? Thanks.

Michael Kehoe, Chairman and CEO, Kinsale Capital Group: Yes. We don’t offer a growth prospect because ultimately we don’t really know what that number is going to be. I think 10% to 20% over the course of the cycle is a it’s a good faith estimate and it’s actually I think a conservative one. I think one of the challenges of estimating the near term growth is that there is going to be a fair amount of variability over the years. Right now, we’re in a period of heightened competition.

That’s most pronounced in our commercial property division, especially some of that business that’s concentrated in larger Southeastern Wind accounts. That’s where we’re seeing kind of a big market correction. So we did report the fact that if you take the commercial property division out of it, we grew in the mid teens. We think that’s a really healthy number that showcases the competitiveness of our model. The accuracy of our underwriting, the market segment we focus on, the fact that we operate at an enormous expense advantage over our competitors.

So we’re quite optimistic, but we’re also realistic that near term we’ve got some headwinds with competition. And maybe the last comment I’d make is that the year over year comparison in our Commercial Property division will be a little bit easier the second half of the year than it was the first because we wrote a disproportionate amount of that business in the first half of last year. So we’ll get a little bit of a less of a headwind if you will on the I don’t know what you call it, correction in the Commercial Property division.

Dan, Analyst: That’s helpful. And then switching gears to the underlying margin. Just with rates being negative in the first half of 25% and higher casualty mix, can you just help us reconcile the source of the underlying margin improvement year over year?

Michael Kehoe, Chairman and CEO, Kinsale Capital Group: Well, I mean, there’s we lay it all out in the release, right? It’s the current accident year. I think the cat losses were down maybe.

Dan, Analyst: Sorry. I meant I just meant the underlying current accident year. The

Michael Kehoe, Chairman and CEO, Kinsale Capital Group: current accident year is a composite of a variety of lines of business. I think kind of the general movement within that number would be we continue to be very cautious around long tail casualty. Brian Haney mentioned the fact that inflation is still higher than the Fed’s target. I think longer tail casualty lines are a little bit more exposed to that. So we’re being conservative on the longer tail casualty.

And to the extent that we’re over performing, it’s probably disproportionately due to our shorter tail lines like property where the experience has been really quite compelling.

Conference Operator: Our next question comes from Pablo Singzon from JPMorgan. Please go ahead. Your line is open.

Pablo Singzon, Analyst, JPMorgan: Hi, good morning. First question I had is about the commercial property business. I was curious to get your sense of the positive gap between expected profitability and technical pricing today or put another way, right? How much further do you think prices can drop before the market sort of throws up in hands and says that this is as far as it will go? Any sort of sense you have around that?

Michael Kehoe, Chairman and CEO, Kinsale Capital Group: Pablo, this is Mike. I would just remind you that we write property coverage in a whole variety of different underwriting divisions or verticals within our company. The commercial property division specifically is where we’re seeing the most intense competition. And it’s not just rates dropping, although that’s happening. It’s also terms and conditions, line sizes and the like.

So it’s a whole mix of things. We also have a small property division. We write inland marine coverage. We write high value homeowners. We have a regular homeowners book.

The other areas are much more attractive to us than in particular the larger Southeastern wind accounts. So it’s a mix. But in terms of the where the market goes from here, we don’t really have any kind of special insight into that.

Brian Petrucelli, CFO, Kinsale Capital Group: Okay.

Pablo Singzon, Analyst, JPMorgan: And then just switching to I guess capital, right, and capital return. So with premium growth flowing from recent levels, right, I think even if you assume some pickup from the recent trend, your ROE will just naturally decline, right? You’re just going off like pretty high growth years and you’re going to accumulate capital. Is there some ROE level where you might consider leaning more into capital return here? Thanks.

Michael Kehoe, Chairman and CEO, Kinsale Capital Group: Yes. Think we expect our ROEs in the low to mid-20s or better. The returns are always a function of the pricing we get. It’s loss cost trends. It’s the amount of conservatism in our IBNR drifts out over time, right?

So there’s a lot of things that goes into the returns. In terms of returning capital, it’s something we look at every year and we’ll continue to adjust. But we want to maintain a healthy capital position, but we don’t ever want to hold an excessive amount of redundant capital either. So right now we address that in a very small way through the dividend and the share buybacks and we’ll continue to evaluate that on a go forward basis.

Pablo Singzon, Analyst, JPMorgan: Thank you.

Conference Operator: Our next question comes from Michael Phillips from Oppenheimer. Please go ahead. Your line is open.

Michael Phillips, Analyst, Oppenheimer: Yes, thanks. Good morning. I wanted to get a

Michael Kehoe, Chairman and CEO, Kinsale Capital Group: little more color on I think it

Michael Phillips, Analyst, Oppenheimer: was Brian’s comments on the pricing. The casualty side, I think you said mixed but positive. Can you provide a little more color on where you’re seeing the mixed? What you meant by that? And then maybe specifically if you can drill down into the excess casualty book and specifically what you’re seeing in pricing there?

Thank you.

Brian Haney, President and COO, Kinsale Capital Group: Yes. I think some of the you look at the casualty lines, some of the higher return, lower growing lines like, let’s say, products liability would be experiencing rate increases on the lower end or rate decreases. And then some of the more longer tail lines, let’s say, like construction or excess casualty would be at the higher end.

Michael Phillips, Analyst, Oppenheimer: Okay. And then I guess sticking with construction, it’s not the first time you’ve mentioned some adjustments, actual adjustments on the reserves for construction defect and liability. I guess can you say what you’re seeing for trends there, loss trends there and any certain geographies that are more conducive to kind of those adjustments you made?

Brian Haney, President and COO, Kinsale Capital Group: I think a lot of the California used to be a very big state for us in construction and we’ve kind of pivoted away from that. So I would say to the extent that we were seeing abnormally high loss development that required some sort of adjustment, that’s where we were seeing it. And so when we adjusted the loss to album patterns we also adjusted our rates and it resulted in us growing outside of California which is good.

Michael Phillips, Analyst, Oppenheimer: Okay. So your adjustments I’m sorry, the adjustments you made were because of the

Joe Tamayo, Analyst, Bank of America: California book, but you’re seeing positive I

Pablo Singzon, Analyst, JPMorgan: was just making I

Brian Haney, President and COO, Kinsale Capital Group: was just giving you some color detail about what was going on within the construction book. Generally speaking, it was worse California where we were a little over concentrated and are no longer over concentrated.

Joe Tamayo, Analyst, Bank of America: Thank you.

Conference Operator: Our next question comes from Bob Huang from Morgan Stanley. Please go ahead. Your line is open.

Bob Huang, Analyst, Morgan Stanley: Good morning. My question is on growth and specifically new business. I’m not sure if you touched this already, so apologies. Just curious how much of the premium growth for the quarter was driven by new business growth? And broadly speaking, I understand that we’re facing challenges in property, but is there a way to think about that new business and the renewal business dynamics going forward?

Are there lines of business that are more exciting than others? Just curious of your view on that.

Michael Kehoe, Chairman and CEO, Kinsale Capital Group: I don’t think we have the stats in front of us to kind of bifurcate the growth between the renewal book and the new business book. But I would say, generally, it would probably be driven mostly by new business because the pricing environment we’re in today, we’re not seeing dramatic changes. And then what was the second part of the question was?

Bob Huang, Analyst, Morgan Stanley: Yes. Just in terms of like if we think about just the growth going forward, is there any specific line of business where you think new business would be more exciting?

Michael Kehoe, Chairman and CEO, Kinsale Capital Group: Well, Brian Haney mentioned a whole series of underwriting divisions where we’re still seeing very robust top line growth. And that typically correlates to a better pricing environment and maybe a little more dislocation within the industry etcetera. So entertainment

Mark Hughes, Analyst, Truist: value homeowners.

Michael Kehoe, Chairman and CEO, Kinsale Capital Group: High value homeowners. We’re rolling out a new homeowners product in a variety of states. Our small business property unit is still growing at a really good clip. I think the pricing there is favorable. There’s it’s we have a we’re I guess we’re still a boutique insurance company, but we’ve got a relatively broad product line and we participate in a whole range of different industry segments.

And it’s just a good reminder, they don’t all move in tandem. And in general, we feel generally positive about the market.

Bob Huang, Analyst, Morgan Stanley: Okay. Really appreciate that. Thank you. Maybe just like one follow-up on that comment, specifically homeowner, right? 2.7% of your total premium year to date is homeowner.

You talked about the excitement of that going forward. Is that purely just driven by what’s going on in California that’s resulting in homeowner now growing? Like I’m guessing that business should be growing exponentially from here. Does that change your seventy-thirty split on casualty and property going forward? Like how should I think about the growth trajectory there?

Michael Kehoe, Chairman and CEO, Kinsale Capital Group: Yes. Look homeowners is a volatile line of business where the broader P and C industry is I think underwritten that business to a loss for like five or seven years in a row. Historically, it’s been mostly standard markets. I think there’s now a shift where more of that business is coming into the E and S market. And so Kinsale is working hard to address the opportunity there.

It’s partly California, but it’s partly in the Southeastern states, Texas around to the Mid Atlantic driven by coastal wind. But as we as Brian I think mentioned earlier in his comments, we’ve also rolled out a new homeowners product Colorado for instance. So yes, I think we see that as a growing opportunity for the company in a whole range of different states. And I wouldn’t expect any kind of near term shift in the seventy-thirty split between casualty and property. But depending on how successful we are over the years ahead, it could shift a little bit.

Our

Conference Operator: next question comes from Andrew Anderson from Jefferies. Just

Michael Kehoe, Chairman and CEO, Kinsale Capital Group0: looking at the OpEx ratio, it looks like it’s been about 8% year to date. And I think you were doing some technology investments that I think have ended. So is that 8% kind of a good run rate for the near term?

Brian Petrucelli, CFO, Kinsale Capital Group: Yes, I think that is.

Michael Kehoe, Chairman and CEO, Kinsale Capital Group0: Okay. And if we look at the session ratio, it came in this quarter. And if we go back a few years, was kind of in a mid teens territory. Now that was before you were more writing more property business. So perhaps it’s not going to go back towards the mid teens, but should we be thinking about 17% kind of near term?

Michael Kehoe, Chairman and CEO, Kinsale Capital Group: I mean, it’s going to Andrew, is Mike. It’s going to depend on the mix of business, of course. When we renewed our reinsurance program, we took a little bit bigger net on the casualty and on the property, a little bit bigger cat retention. So the reinsurance program will result in a little bit of a shift to a lower ceding ratio and then the rest of it’s going to be mix of business over time. So to be honest, don’t have a number to give you, but you can just judgmentally expect it to maybe go down a bit.

Brian Petrucelli, CFO, Kinsale Capital Group: Thank you.

Conference Operator: Our next question comes from Joe Tamayo from Bank of America. Please go ahead. Your line is open.

Joe Tamayo, Analyst, Bank of America: Hey, good morning everyone and thanks for taking my questions. My first question is regarding the buy and submit ratio. I believe historically this has ranged from like 9% to 11%, 12%. But I was just curious to see where we are on that today. And generally this year has that ratio remained relatively steady for most divisions excluding commercial property?

Brian Haney, President and COO, Kinsale Capital Group: Yes. It’s been relatively stable.

Joe Tamayo, Analyst, Bank of America: Okay. All right. Great. Thank you. And then the other question kind of just kind of furthering on the conversation regarding the competition MGAs.

It seems like some of your competitors have also joined in that competition, even one mentioning being approached by acquisitions. I’m kind of curious to see where you guys think we are in the cycle with MGAs given kind of the loss ratios and the history they’ve been putting up. Like, is this something that we kind of expect coming to a head in the near term? I know it’s really no way to predict it, but just kind of curious on your thoughts on this.

Michael Kehoe, Chairman and CEO, Kinsale Capital Group: Joe, this is Mike. We don’t really have an opinion on that. You guys are in the business finalizing companies and prognosticating. So we’ll leave that in your capable hands.

Joe Tamayo, Analyst, Bank of America: Okay, great. Thanks for the talk.

Conference Operator: Our next question comes from Mark Hughes from Truist. Please go ahead. Your line is open.

Mark Hughes, Analyst, Truist: Yes, thanks. Good morning. The commercial property pricing, how would you describe it sequentially?

Pablo Singzon, Analyst, JPMorgan: I

Mark Hughes, Analyst, Truist: think last quarter and this quarter you said down 20%. Does that mean stable sequentially?

Brian Haney, President and COO, Kinsale Capital Group: Yes. Yes, I would say that’s fair.

Mark Hughes, Analyst, Truist: Very good. How about the, current accident year trajectory? I think, historically, you’ve started out the year, I think, being a little more conservative, a little higher current accident year loss picks. Anything that you have seen through the six months that might interfere with that historical pattern of improvement in the back half?

Michael Kehoe, Chairman and CEO, Kinsale Capital Group: No, I don’t think I mentioned earlier that we’re obviously, we evaluate and analyze our loss development every quarter. And it was in response to a prior question, Mark. We continue to be cautious around the long tail casualty. And to the extent that there’s any shift in the good news coming out, it’s largely driven by the short tail business like property.

Mark Hughes, Analyst, Truist: Mike, any more thoughts on this dynamic in Florida where it seems like more business is going into the E and S market even as the pricing is softening up? Why that would be? How long that might last? Is that something you’ve seen in prior cycles?

Michael Kehoe, Chairman and CEO, Kinsale Capital Group: I don’t think we know. We don’t have anything definitive to offer. I’ll just maybe comment that E and S is reaching all time highs, not just in Florida, but all over the country in terms of its share of the overall premium dollar being placed. And so I think as people become more comfortable with E and S markets, I think the acceptance of the E and S paper has just increased and it’s just becoming more and more common. So it’s a healthier way to manage an insurance company, especially when we have as dynamic a tort system as we do in The United States.

Certainly, Florida has seen a lot of shifts in tort law over the years. And then, of course, on the property side with reacting to natural catastrophes, there’s been a significant uptick in cat activity the last five or seven years. And E and S companies with freedom of right and form can react to that much more quickly than the standard companies can. So it just seems like it’s a positive trend all the way around.

Mark Hughes, Analyst, Truist: Very good. Then one more if I can. Brian Petrucelli, the cash flow is up a little bit through six months. What kind of top line growth do you need in order to keep the cash flow in positive well, it’s obviously in positive territory, but increasing year over year. If you get 5% growth, will cash from operations still move up?

Or is there some point at which the payout and losses starts to dampen that? Any general thoughts I would be

Brian Petrucelli, CFO, Kinsale Capital Group: think that’s a fair assumption, Mark.

Michael Kehoe, Chairman and CEO, Kinsale Capital Group: And I think one thing that’s probably depressed it a little bit is paying out all the cat losses from the Palisades wildfire. These are short term short tail claims that get resolved quickly, especially when you have a limits loss. So I think that’s probably depressed the growth rate there on a temporary basis.

Mark Hughes, Analyst, Truist: So as long as top line is moving up then cash from operations should likewise move up?

Michael Kehoe, Chairman and CEO, Kinsale Capital Group: Yes. But it’s always a function of your loss experience. And again, I think we’re good underwriters. We’re establishing very conservative loss reserves. So I’d be optimistic.

Joe Tamayo, Analyst, Bank of America: Thank you very much.

Michael Kehoe, Chairman and CEO, Kinsale Capital Group: Thanks, Mark.

Conference Operator: Our next question comes from Andrew Kligerman from TD Cowen. Please go ahead. Your line is open.

Michael Kehoe, Chairman and CEO, Kinsale Capital Group1: Hi. Can you hear me this time? So sorry for the bad line before.

Michael Kehoe, Chairman and CEO, Kinsale Capital Group: You’re crystal clear.

Brian Haney, President and COO, Kinsale Capital Group: Oh, good. Good. Good.

Michael Kehoe, Chairman and CEO, Kinsale Capital Group1: Thank you. And, again, so so I’ve been hearing so much about a lot of these start ups in kind of small, mid e and s. What are you seeing in terms of that competition? Are you seeing a big pickup? And how is that affecting pricing?

Michael Phillips, Analyst, Oppenheimer: I think

Brian Haney, President and COO, Kinsale Capital Group: I would say that the small startup balance sheet business are not having a lot of effect just because they’re dwarfed by what the MGAs are doing. Those six E and S fronting companies I mentioned write something like $6,000,000,000 in gross written premium. So it would take a long time for the newer balance sheet businesses to make a dent in that.

Michael Kehoe, Chairman and CEO, Kinsale Capital Group1: Interesting. And then following up on an earlier question about sessions and seeding off, I think the number is like 17%. This quarter, I noticed that gross written was up five, but net written was up close to seven. So over time, like, let’s let’s look out maybe five, ten years from now. Do you see that session declining to as low as 10%?

Do you need to seed that much over time?

Michael Kehoe, Chairman and CEO, Kinsale Capital Group: We seed more premium on the property side where we have significant natural catastrophe exposure and where the limits are higher. So what the ceding ratio looks like down the road is really going to be a function of the mix of business more than anything. I think on a homeowners policy, the seating ratio would be modest. If it’s a hotel on the beach in Florida, it’s going to be more significant.

Michael Kehoe, Chairman and CEO, Kinsale Capital Group1: Thanks a lot. Okay.

Conference Operator: Our next question comes from Pablo Singzong from JPMorgan. Please go ahead. Your line is open.

Pablo Singzon, Analyst, JPMorgan: Hi. Thanks for taking my follow-up. So you go through this in the 10 Q, but I was wondering if you could provide more commentary in the reserve releases you booked this quarter. I think in the 10 Q, you mentioned accident years 2020, 2024. But I was more curious about the balance of releases between casualty and property.

I think in 1Q you highlighted property more. I’m wondering if that’s still the case or if there’s any material change this quarter. Thank you.

Michael Kehoe, Chairman and CEO, Kinsale Capital Group: Wait, Pablo, you’re asking for some commentary on the reserve movements in 2020 through 2024?

Dan, Analyst: No, no, no, no.

Pablo Singzon, Analyst, JPMorgan: What you booked this quarter, right? I think it was from accident years 2020 to 2024. But I was just curious about any color on the lines of business where you released the reserves, right? I think in 1Q, you highlighted property a bit more. Anyway any sort of commentary on the releases you booked this quarter?

Thank you.

Michael Kehoe, Chairman and CEO, Kinsale Capital Group: Yes. I would say this that we have I think it’s about a dozen statutory lines of business we write. This is our sixteenth year in business. I don’t think we have any open claims for the first couple of years we’re in business. But in general, is a lot going on in our reserves every quarter.

And so I don’t think we want to get into any kind of granularity on a conference call because it’s just it’s too technical. But in broad strokes, I think it’s important for the investors to understand, one, that we’re being very conservative in setting aside reserves today to pay claims in the future, especially in an area an era of heightened inflation, etcetera. And then the second thing is, in terms of broad movement in our reserves, we’re being more conservative, so slower to release on the long tail casualty lines where we think there’s the greatest degree of uncertainty. And then to the extent that there’s good news coming out of our results, it’s disproportionately on the short tail business, which is property for us. 30% of our business is property.

Those claims tend to be reported and resolved relatively quickly compared to the casualty business. So again, it’s just kind of reinforcing we’re trying to be cautious in building a rock solid balance sheet.

Pablo Singzon, Analyst, JPMorgan: Okay, Mike. Thank you.

Conference Operator: Our last question comes from Andrew Anderson from Jefferies. Please go ahead. Your line is open.

Michael Kehoe, Chairman and CEO, Kinsale Capital Group0: Thanks. Just wanted to go back to the pricing commentary on casualty and the modestly positive. I guess that sounds a little low. It could be partly that you’re in small commercial, but it could also be interpreted that you’re just competing more to win business. So I guess is that the case?

And do you feel that you’re more competitive pricing between the competition and the spread there is growing in your favor?

Michael Kehoe, Chairman and CEO, Kinsale Capital Group: Andrew, think we said we saw in our book something similar to the AmWin’s index, which I think was pricing rate and exposure down about 2.4%. Our large commercial property deals, Southeastern wind accounts were down about 20%. Everything else is a little bit of a mix, up or down slightly.

Brian Haney, President and COO, Kinsale Capital Group: I would say getting back to my comment about MGA fronting business, I think it’s true that our casualty experience has been better than the industry. And so I think there’s more of an opportunity for us or there’s less of a need for us to increase rates than there is for the industry.

Michael Kehoe, Chairman and CEO, Kinsale Capital Group0: Thank you.

Conference Operator: We have no further questions at this time. I’d like to turn the call back to Michael Kehoe for any closing remarks.

Michael Kehoe, Chairman and CEO, Kinsale Capital Group: Okay. Well, you everybody for listening and we look forward to speaking with you again down the road a little bit.

Conference Operator: This concludes today’s conference call. Thank you for your participation. You may now disconnect.

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