Kinsale Capital Group Inc (KNSL) Q1 2024 Earnings Call Transcript Highlights: Stellar Growth ...

• Operating Earnings Per Share: Increased by 43.4%

• Gross Written Premium: Grew by 25.5%

• Combined Ratio: Stood at 79.5%

• Operating Return on Equity: Reached 28.9%

• Net Income: Increased by 77.3%

• Net Operating Earnings: Rose by 43.8%

• Expense Ratio: Decreased from 21.7% to 20.7%

• Net Investment Income: Increased by 59.1%

• Diluted Operating Earnings Per Share: Was $3.50, up from $2.44 in the previous year

• Nominal Rate Changes: Rates up around 7%

Release Date: April 26, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Q & A Highlights

Q: Given the inflationary trends, do you expect changes to the historical seasonality pattern of reserve releases and loss ratios? A: Michael Patrick Kehoe, Chairman of the Board & CEO of Kinsale Capital Group, Inc., stated that they do not expect changes to the historical seasonality pattern. The company is setting slightly higher loss picks and releasing reserves at a slower pace as a measure of conservatism against the backdrop of inflation.

Q: With property pricing at a 20-year high, will Kinsale consider growing less in property lines if pricing decelerates, or is the margin still attractive? A: Michael Patrick Kehoe explained that while property pricing is very attractive for growth, the company prioritizes profitability over growth. The future growth rate of this line will depend on market trends, but they remain optimistic. Brian Donald Haney, President & COO, added that they do not operate an admitted company and hence do not write admitted business.

Q: What do you make of the state E&S data showing a meaningful deceleration in growth, particularly in March? A: Michael Patrick Kehoe acknowledged the slowdown but noted that the E&S market has been growing at a double-digit rate for years, and a 7% growth in Q1 is not surprising. He suggested that there might be lags in data reporting and emphasized the company's continued rapid growth and optimistic growth prospects.

Q: Are there any new divisions contributing meaningfully to growth, such as Commercial Auto or High Value Homeowners? A: Brian Donald Haney mentioned that while these divisions are not contributing meaningfully to total growth currently, they follow a trajectory where they start slowly and potentially become more significant over 3-5 years. The company has added several divisions since its inception, each following this growth pattern.

Q: How is Kinsale leveraging its position as a low-cost producer in terms of pricing and growth strategy? A: Brian Donald Haney discussed that Kinsale aims to maximize underwriting profit and shareholder value by finding the right combination of ROE and growth. They are considering rate reductions in certain areas to stimulate faster growth while maintaining strong profitability, leveraging their low-cost structure to compete effectively.

Q: Given the current reserving issues in the industry, do you see another pricing leg for casualty lines? A: Brian Donald Haney sees current opportunities in casualty deals, indicating a positive outlook for pricing in this segment. Michael Patrick Kehoe added that the expansion in delegated underwriting authorities, often aggressive in pricing, might contract, which he views as bullish for the market and for Kinsale.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.