Kinsale Capital Group, Inc. (NYSE:KNSL) reported net income of $92.6 million, $3.97 per diluted share, for the second quarter of 2024 compared to $72.8 million, $3.12 per diluted share, for the second quarter of 2023. Net income was $191.5 million, $8.21 per diluted share, for the first half of 2024 compared to $128.6 million, $5.52 per diluted share, for the first half of 2023.

Net operating earnings⁽¹⁾ were $87.4 million, $3.75 per diluted share, for the second quarter of 2024 compared to $67.2 million, $2.88 per diluted share, for the second quarter of 2023. Net operating earnings⁽¹⁾ were $169.1 million, $7.25 per diluted share, for the first half of 2024 compared to $123.9 million, $5.32 per diluted share, for the first half of 2023.

Highlights for the quarter included:

Diluted earnings per share increased by 27.2% to $3.97 compared to the second quarter of 2023
Diluted operating earnings⁽¹⁾ per share increased by 30.2% to $3.75 compared to the second quarter of 2023
Gross written premiums increased by 20.9% to $529.8 million compared to the second quarter of 2023
Net investment income increased by 48.3% to $35.8 million compared to the second quarter of 2023
Underwriting income⁽²⁾ was $76.1 million in the second quarter of 2024, resulting in a combined ratio⁽⁵⁾ of 77.7%
Annualized operating return on equity⁽⁷⁾was 28.8% for the six months ended June 30, 2024

"We are pleased with our second quarter results highlighted by continued growth and strong margins. Delivering long-term value for stockholders remains our focus as we leverage underwriting and technological competitive advantages and our low-cost model to profitably grow market share," said Chairman and Chief Executive Officer, Michael P. Kehoe.

Results of Operations

Underwriting Results

Gross written premiums were $529.8 million for the second quarter of 2024 compared to $438.2 million for the second quarter of 2023, an increase of 20.9%. Gross written premiums were $978.4 million for the first half of 2024 compared to $795.8 million for the first half of 2023, an increase of 22.9%. The increase in gross written premiums during the second quarter and first half of 2024 over the same periods last year reflected strong submission flow from brokers and a favorable pricing environment.

Underwriting income⁽²⁾ was $76.1 million, resulting in a combined ratio⁽⁵⁾ of 77.7% for the second quarter of 2024, compared to $61.5 million and a combined ratio⁽⁵⁾ of 76.7% for the same period last year. The increase in underwriting income⁽²⁾ quarter over quarter was largely due to combination of premium growth and lower relative net commissions. Loss⁽³⁾ and expense⁽⁴⁾ ratios were 56.6% and 21.1%, respectively, for the second quarter of 2024 compared to 55.7% and 21.0% for the second quarter of 2023. Results for the second quarters of 2024 and 2023 included net favorable development of loss reserves from prior accident years of $9.5 million, or 2.8 points, and $10.4 million, or 3.9 points, respectively.

Underwriting income⁽²⁾ was $141.1 million, resulting in a combined ratio⁽⁵⁾ of 78.6% for the first half of 2024 compared to $113.1 million and a combined ratio⁽⁵⁾ of 77.7% for the first half of 2023. The increase in underwriting income⁽²⁾ was primarily due to a combination of premium growth and lower relative net commissions. Loss⁽³⁾ and expense⁽⁴⁾ ratios were 57.7% and 20.9%, respectively, for the first half of 2024 compared to 56.4% and 21.3% for the first half of 2023. Results for the first half of 2024 and 2023 included net favorable development of loss reserves from prior accident years of $17.9 million, or 2.7 points, and $19.5 million, or 3.8 points, respectively.

Summary of Operating Results

The Company's operating results for the three and six months ended June 30, 2024 and 2023 are summarized as follows:

	Three Months Ended June 30,						Six Months Ended June 30,
		2024			2023			2024			2023
	($ in thousands)
Gross written premiums	$	529,770		$	438,222		$	978,414		$	795,810
Ceded written premiums		(99,534	)		(73,181	)		(197,124	)		(131,739	)
Net written premiums	$	430,236		$	365,041		$	781,290		$	664,071

Net earned premiums	$	332,461		$	257,046		$	641,979		$	494,204
Fee income		8,991			6,986			17,083			13,187
Losses and loss adjustment expenses		193,325			147,042			380,111			286,076
Underwriting, acquisition and insurance expenses		72,068			55,473			137,821			108,219
Underwriting income⁽²⁾	$	76,059		$	61,517		$	141,130		$	113,096

Loss ratio⁽³⁾		56.6	%		55.7	%		57.7	%		56.4	%
Expense ratio⁽⁴⁾		21.1	%		21.0	%		20.9	%		21.3	%
Combined ratio⁽⁵⁾		77.7	%		76.7	%		78.6	%		77.7	%

Annualized return on equity⁽⁶⁾		30.5	%		34.5	%		32.7	%		31.8	%
Annualized operating return on equity⁽⁷⁾		28.8	%		31.8	%		28.8	%		30.6	%

⁽¹⁾		Net operating earnings is a non-GAAP financial measure. See discussion of "Non-GAAP Financial Measures" below.
⁽²⁾		Underwriting income is a non-GAAP financial measure. See discussion of "Non-GAAP Financial Measures" below.
⁽³⁾		Loss ratio, expressed as a percentage, is the ratio of losses and loss adjustment expenses to the sum of net earned premiums and fee income.
⁽⁴⁾		Expense ratio, expressed as a percentage, is the ratio of underwriting, acquisition and insurance expenses to the sum of net earned premiums and fee income.
⁽⁵⁾		The combined ratio is the sum of the loss ratio and expense ratio as presented. Calculations of each component may not add due to rounding.
⁽⁶⁾		Annualized return on equity is net income expressed on an annualized basis as a percentage of average beginning and ending stockholders' equity during the period.
⁽⁷⁾		Annualized operating return on equity is net operating earnings expressed on an annualized basis as a percentage of average beginning and ending stockholders' equity during the period.

The following tables summarize losses incurred for the current accident year and the development of prior accident years for the three and six months ended June 30, 2024 and 2023:

	Three Months Ended June 30, 2024					Three Months Ended June 30, 2023
	Losses and Loss Adjustment Expenses			% of Sum of Earned Premiums and Fee Income		Losses and Loss Adjustment Expenses			% of Sum of Earned Premiums and Fee Income
Loss ratio:	($ in thousands)
Current accident year	$	199,406		58.4	%	$	156,008		59.1	%
Current accident year - catastrophe losses		3,420		1.0	%		1,451		0.5	%
Effect of prior accident year development		(9,501	)	(2.8	)%		(10,417	)	(3.9	)%
Total	$	193,325		56.6	%	$	147,042		55.7	%

	Six Months Ended June 30, 2024					Six Months Ended June 30, 2023
	Losses and Loss Adjustment Expenses			% of Sum of Earned Premiums and Fee Income		Losses and Loss Adjustment Expenses			% of Sum of Earned Premiums and Fee Income
Loss ratio:	($ in thousands)
Current accident year	$	394,060		59.8	%	$	302,511		59.6	%
Current accident year - catastrophe losses		3,998		0.6	%		3,025		0.6	%
Effect of prior accident year development		(17,947	)	(2.7	)%		(19,460	)	(3.8	)%
Total	$	380,111		57.7	%	$	286,076		56.4	%

Investment Results

Net investment income was $35.8 million in the second quarter of 2024 compared to $24.2 million in the second quarter of 2023, an increase of 48.3%. Net investment income was $68.8 million in the first half of 2024 compared to $44.9 million in the first half of 2023, an increase of 53.3%. These increases were driven by growth in the Company's investment portfolio generated largely from the investment of strong operating cash flows and higher interest rates relative to the prior year period. Net operating cash flows were $489.3 million in the first half of 2024 compared to $423.6 million in the first half of 2023, an increase of 15.5%. The Company's investment portfolio had an annualized gross investment return⁽⁸⁾ of 4.3% for the first half of 2024 compared to 3.8% for the same period last year. Funds are generally invested conservatively in high quality securities with an average credit quality of "AA-" and the weighted average duration of the fixed-maturity investment portfolio, including cash equivalents, was 3.0 years and 2.8 years at June 30, 2024 and December 31, 2023, respectively. Cash and invested assets totaled $3.6 billion at June 30, 2024 and $3.1 billion at December 31, 2023.

⁽⁸⁾

Gross investment return is investment income from fixed-maturity and equity securities (and short-term investments, if any), before any deductions for fees and expenses, expressed as a percentage of average beginning and ending book values of those investments during the period.

Other

The effective tax rates for the six months ended June 30, 2024 and 2023 were 17.3% and 18.9%, respectively. In the first half of 2024 and 2023, the effective tax rates were lower than the federal statutory rate of 21% primarily due to the tax benefits from stock-based compensation, including stock options exercised, and from tax-exempt investment income.

Stockholders' equity was $1.3 billion at June 30, 2024 compared to $1.1 billion at December 31, 2023. Book value per share was $53.99 at June 30, 2024 compared to $46.88 at December 31, 2023. Annualized operating return on equity⁽⁷⁾was 28.8% for the first half of 2024, a decrease from 30.6% for the first half of 2023. The decrease was due primarily to higher average stockholders' equity as a result of profitable growth offset in part by higher net operating earnings.

Non-GAAP Financial Measures

Net Operating Earnings

Net operating earnings is defined as net income excluding the effects of the change in the fair value of equity securities, after taxes, net realized investment gains and losses, after taxes, and change in allowance for credit losses on investments, after taxes. Management believes the exclusion of these items provides a useful comparison of the Company's underlying business performance from period to period. Net operating earnings and percentages or calculations using net operating earnings (e.g., diluted operating earnings per share and annualized operating return on equity) are non-GAAP financial measures. Net operating earnings should not be viewed as a substitute for net income calculated in accordance with GAAP, and other companies may define net operating earnings differently.

For the three and six months ended June 30, 2024 and 2023, net income and diluted earnings per share reconcile to net operating earnings and diluted operating earnings per share as follows:

	Three Months Ended June 30,						Six Months Ended June 30,
		2024			2023			2024			2023
	($ in thousands, except per share data)
Net operating earnings:
Net income	$	92,579		$	72,791		$	191,520		$	128,591
Adjustments:
Change in the fair value of equity securities, before taxes		(3,159	)		(5,811	)		(21,212	)		(9,329	)
Income tax expense ⁽¹⁾		663			1,220			4,455			1,959
Change in fair value of equity securities, after taxes		(2,496	)		(4,591	)		(16,757	)		(7,370	)

Net realized investment (gains) losses, before taxes		(2,879	)		(1,291	)		(6,745	)		3,361
Income tax expense (benefit) ⁽¹⁾		605			271			1,416			(706	)
Net realized investment (gains) losses, after taxes		(2,274	)		(1,020	)		(5,329	)		2,655

Change in allowance for credit losses on investments, before taxes		(476	)		(25	)		(486	)		56
Income tax expense (benefit) ⁽¹⁾		100			5			102			(12	)
Change in allowance for credit losses on investments, after taxes		(376	)		(20	)		(384	)		44
Net operating earnings	$	87,433		$	67,160		$	169,050		$	123,920

Diluted operating earnings per share:
Diluted earnings per share	$	3.97		$	3.12		$	8.21		$	5.52
Change in the fair value of equity securities, after taxes, per share		(0.11	)		(0.20	)		(0.72	)		(0.32	)
Net realized investment (gains) losses, after taxes, per share		(0.10	)		(0.04	)		(0.23	)		0.11
Change in allowance for credit losses on investments, after taxes, per share		(0.02	)		—			(0.02	)		—
Diluted operating earnings per share⁽²⁾	$	3.75		$	2.88		$	7.25		$	5.32

Operating return on equity:
Average equity⁽³⁾	$	1,214,086		$	843,773		$	1,172,018		$	808,632
Annualized return on equity⁽⁴⁾		30.5	%		34.5	%		32.7	%		31.8	%
Annualized operating return on equity⁽⁵⁾		28.8	%		31.8	%		28.8	%		30.6	%

⁽¹⁾		Income taxes on adjustments to reconcile net income to net operating earnings use a 21% effective tax rate.
⁽²⁾		Diluted operating earnings per share may not add due to rounding.
⁽³⁾		Average equity is computed by adding the total stockholders' equity as of the date indicated to the prior quarter-end or year-end total, as applicable, and dividing by two.
⁽⁴⁾		Annualized return on equity is net income expressed on an annualized basis as a percentage of average beginning and ending stockholders' equity during the period.
⁽⁵⁾		Annualized operating return on equity is net operating earnings expressed on an annualized basis as a percentage of average beginning and ending stockholders' equity during the period.

Underwriting Income

Underwriting income is defined as net income excluding net investment income, the change in the fair value of equity securities, net realized investment gains and losses, change in allowance for credit losses on investments, interest expense, other expenses, other income and income tax expense. The Company uses underwriting income as an internal performance measure in the management of its operations because the Company believes it gives management and users of the Company's financial information useful insight into the Company's results of operations and underlying business performance. Underwriting income should not be viewed as a substitute for net income calculated in accordance with GAAP, and other companies may define underwriting income differently.

For the three and six months ended June 30, 2024 and 2023, net income reconciles to underwriting income as follows:

	Three Months Ended June 30,						Six Months Ended June 30,
		2024			2023			2024			2023
	(in thousands)
Net income	$	92,579		$	72,791		$	191,520		$	128,591
Income tax expense		23,221			17,319			40,147			29,912
Income before income taxes		115,800			90,110			231,667			158,503
Net investment income		(35,847	)		(24,172	)		(68,780	)		(44,867	)
Change in the fair value of equity securities		(3,159	)		(5,811	)		(21,212	)		(9,329	)
Net realized investment (gains) losses		(2,879	)		(1,291	)		(6,745	)		3,361
Change in allowance for credit losses on investments		(476	)		(25	)		(486	)		56
Interest expense		2,564			2,724			4,986			5,294
Other expenses ⁽⁶⁾		796			417			2,759			819
Other income		(740	)		(435	)		(1,059	)		(741	)
Underwriting income	$	76,059		$	61,517		$	141,130		$	113,096

⁽⁶⁾

Other expenses includes primarily corporate expenses not allocated to the Company's insurance operations.

Conference Call

Kinsale Capital Group will hold a conference call to discuss this press release on Friday, July 26, 2024 at 9:00 a.m. (Eastern Time). Members of the public may access the conference call by dialing (800) 715-9871, conference ID# 7469751, or via the Internet by going to www.kinsalecapitalgroup.com and clicking on the "Investor Relations" link. A replay of the call will be available on the website until the close of business on August 23, 2024.

Forward-Looking Statements

This press release contains forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. In some cases, such forward-looking statements may be identified by terms such as "anticipates," "estimates," "expects," "intends," "plans," "predicts," "projects," "believes," "seeks," "outlook," "future," "will," "would," "should," "could," "may," "can have," "prospects" or similar words. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Although it is not possible to identify all of these risks and factors, they include, among others, the following: inadequate loss reserves to cover the Company's actual losses; inherent uncertainty of models resulting in actual losses that are materially different than the Company's estimates; adverse economic factors; a decline in the Company's financial strength rating; loss of one or more key executives; loss of a group of brokers that generate significant portions of the Company's business; failure of any of the loss limitations or exclusions the Company employs, or change in other claims or coverage issues; adverse performance of the Company's investment portfolio; adverse market conditions that affect its excess and surplus lines insurance operations; and other risks described in the Company's filings with the Securities and Exchange Commission. These forward-looking statements speak only as of the date of this release and the Company does not undertake any obligation to update or revise any forward-looking information to reflect changes in assumptions, the occurrence of unanticipated events, or otherwise.

About Kinsale Capital Group, Inc.

Kinsale Capital Group, Inc. is a specialty insurance group headquartered in Richmond, Virginia, focusing on the excess and surplus lines market.

KINSALE CAPITAL GROUP, INC. AND SUBSIDIARIES Unaudited Consolidated Statements of Income and Comprehensive Income

	Three Months Ended June 30,						Six Months Ended June 30,
		2024			2023			2024			2023
Revenues	(in thousands, except per share data)
Gross written premiums	$	529,770		$	438,222		$	978,414		$	795,810
Ceded written premiums		(99,534	)		(73,181	)		(197,124	)		(131,739	)
Net written premiums		430,236			365,041			781,290			664,071
Change in unearned premiums		(97,775	)		(107,995	)		(139,311	)		(169,867	)
Net earned premiums		332,461			257,046			641,979			494,204
Fee income		8,991			6,986			17,083			13,187
Net investment income		35,847			24,172			68,780			44,867
Change in the fair value of equity securities		3,159			5,811			21,212			9,329
Net realized investment gains (losses)		2,879			1,291			6,745			(3,361	)
Change in allowance for credit losses on investments		476			25			486			(56	)
Other income		740			435			1,059			741
Total revenues		384,553			295,766			757,344			558,911

Expenses
Losses and loss adjustment expenses		193,325			147,042			380,111			286,076
Underwriting, acquisition and insurance expenses		72,068			55,473			137,821			108,219
Interest expense		2,564			2,724			4,986			5,294
Other expenses		796			417			2,759			819
Total expenses		268,753			205,656			525,677			400,408
Income before income taxes		115,800			90,110			231,667			158,503
Total income tax expense		23,221			17,319			40,147			29,912
Net income		92,579			72,791			191,520			128,591

Other comprehensive (loss) income
Change in net unrealized losses on available-for-sale investments, net of taxes		(5,658	)		(14,107	)		(15,598	)		3,402
Total comprehensive income	$	86,921		$	58,684		$	175,922		$	131,993

Earnings per share:
Basic	$	4.00		$	3.16		$	8.28		$	5.59
Diluted	$	3.97		$	3.12		$	8.21		$	5.52

Weighted-average shares outstanding:
Basic		23,165			23,040			23,137			23,024
Diluted		23,329			23,301			23,332			23,293

KINSALE CAPITAL GROUP, INC. AND SUBSIDIARIES Unaudited Condensed Consolidated Balance Sheets

	June 30, 2024		December 31, 2023
Assets	(in thousands)
Investments:
Fixed-maturity securities at fair value	$	3,072,718	$	2,711,759
Equity securities at fair value		317,482		234,813
Real estate investments, net		15,045		14,791
Short-term investments		6,908		5,589
Total investments		3,412,153		2,966,952

Cash and cash equivalents		171,021		126,694
Investment income due and accrued		25,112		21,689
Premiums receivable, net		171,815		143,212
Reinsurance recoverables, net		302,092		247,836
Ceded unearned premiums		58,492		52,516
Deferred policy acquisition costs, net of ceding commissions		109,358		88,395
Intangible assets		3,538		3,538
Deferred income tax asset, net		57,410		55,699
Other assets		84,300		66,443
Total assets	$	4,395,291	$	3,772,974

Liabilities & Stockholders' Equity
Liabilities:
Reserves for unpaid losses and loss adjustment expenses	$	2,013,055	$	1,692,875
Unearned premiums		846,638		701,351
Payable to reinsurers		48,397		47,582
Accounts payable and accrued expenses		27,188		44,922
Debt		183,984		183,846
Other liabilities		18,826		15,566
Total liabilities		3,138,088		2,686,142

Stockholders' equity		1,257,203		1,086,832
Total liabilities and stockholders' equity	$	4,395,291	$	3,772,974

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Kinsale Capital Group Reports Second Quarter 2024 Results