SEC Form 10-Q filed by Kinsale Capital Group Inc.

10/24/24 4:11:43 PM ET

$KNSL

Property-Casualty Insurers

Finance

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knsl-20240930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q


☒			Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2024


☐			Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from _______ to _______

Commission File Number: 001-37848



	KINSALE CAPITAL GROUP, INC.
	(Exact name of registrant as specified in its charter)
Delaware		98-0664337
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

2035 Maywill Street

Suite 100

Richmond, Virginia 23230

(Address of principal executive offices, including zip code)

(804) 289-1300

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01 per share	KNSL	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer ☐

Non-accelerated filer ☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Number of shares of the registrant's common stock outstanding at October 18, 2024: 23,287,978

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KINSALE CAPITAL GROUP, INC.

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		Page
PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements	4
	Consolidated Balance Sheets at September 30, 2024 (Unaudited) and December 31, 2023	4
	Consolidated Statements of Income and Comprehensive Income (Unaudited) for the Three and Nine Months Ended September 30, 2024 and 2023	5
	Consolidated Statements of Changes in Stockholders' Equity (Unaudited) for Each Quarter Within the Nine Months Ended September 30, 2024 and 2023	6
	Condensed Consolidated Statements of Cash Flows (Unaudited) for the Nine Months Ended September 30, 2024 and 2023	8
	Notes to Condensed Consolidated Financial Statements (Unaudited)	9
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	28
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	50
Item 4.	Controls and Procedures	51

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	52
Item 1A.	Risk Factors	52
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	52
Item 5.	Other Information	52
Item 6.	Exhibits	53
	Signatures	54

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Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include any statement that does not directly relate to historical or current fact. These statements may discuss, among others, our future financial performance, our business prospects and strategy, our anticipated financial position, liquidity and capital, dividends and general market and industry conditions. You can identify forward-looking statements by words such as "anticipates," "estimates," "expects," "intends," "plans," "predicts," "projects," "believes," "seeks," "outlook," "future," "will," "would," "should," "could," "may," "can have," "prospects" or similar terms. Forward-looking statements are based on management’s current expectations and assumptions about future events, which are subject to uncertainties, risks and changes in circumstances that are difficult to predict. These statements are only predictions and are not guarantees of future performance. Actual results may differ materially from those contemplated by a forward-looking statement. Factors that may cause such differences include, without limitation:

•the possibility that our loss reserves may be inadequate to cover our actual losses, which could have a material adverse effect on our financial condition, results of operations and cash flows;

•the inherent uncertainty of models resulting in actual losses that are materially different than our estimates;

•the failure of any of the loss limitations or exclusions we employ, or change in other claims or coverage issues, having a material adverse effect on our financial condition or results of operations;

•the inability to obtain reinsurance coverage at reasonable prices and on terms that adequately protect us;

•the possibility that severe weather conditions and catastrophes, including due to climate change, pandemics and similar events adversely affecting our business, results of operations and financial condition;

•adverse economic factors, including recession, inflation, periods of high unemployment or lower economic activity resulting in the sale of fewer policies than expected or an increase in frequency or severity of claims and premium defaults or both, affecting our growth and profitability;

•a decline in our financial strength rating adversely affecting the amount of business we write;

•the potential loss of one or more key executives or an inability to attract and retain qualified personnel adversely affecting our results of operations;

•our reliance on a select group of brokers;

•the changing market conditions of our excess and surplus lines ("E&S") insurance operations, as well as the cyclical nature of our business, affecting our financial performance;

•our employees taking excessive risks;

•the intense competition for business in our industry;

•the effects of litigation having an adverse effect on our business;

•the performance of our investment portfolio adversely affecting our financial results;

•the ability to pay dividends being dependent on our ability to obtain cash dividends or other permitted payments from our insurance subsidiary;

•being forced to sell investments to meet our liquidity requirements;

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•our credit agreements contain a number of financial and other covenants, the breach of which could result in acceleration of payment of amounts due under our borrowings;

•extensive regulation adversely affecting our ability to achieve our business objectives or the failure to comply with these regulations adversely affecting our financial condition and results of operations; and

•the other risks and uncertainties discussed in Part I, Item 1A of the Annual Report on Form 10-K for the year ended December 31, 2023.

Forward-looking statements speak only as of the date on which they are made. Except as expressly required under federal securities laws or the rules and regulations of the Securities and Exchange Commission ("SEC"), we do not assume any obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. You should not place undue reliance on forward-looking statements. All forward-looking statements attributable to us are expressly qualified by these cautionary statements.

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

KINSALE CAPITAL GROUP, INC. AND SUBSIDIARIES

Consolidated Balance Sheets (Unaudited)


	September 30, 2024		December 31, 2023
	(in thousands, except share and per share data)
Assets
Investments:
Fixed-maturity securities, available for sale, at fair value (amortized cost: $3,528,675, allowance for credit losses: $63 – 2024; $2,834,463 and $553 –2023)	$	3,467,038	$	2,711,759
Equity securities, at fair value (cost: $282,485 – 2024; $193,543 – 2023)	365,626		234,813

Real estate investments, net	15,045		14,791
Short-term investments	—		5,589
Total investments	3,847,709		2,966,952
Cash and cash equivalents	111,691		126,694
Investment income due and accrued	26,083		21,689
Premiums and fees receivable, net of allowance for credit losses of $23,224 – 2024; $13,383 – 2023	134,952		143,212
Reinsurance recoverables, net of allowance for credit losses of $936 – 2024; $744 – 2023	318,636		247,836
Ceded unearned premiums	55,370		52,516
Deferred policy acquisition costs, net of ceding commissions	110,590		88,395
Intangible assets	3,538		3,538
Deferred income tax asset, net	34,995		55,699
Other assets	88,679		66,443
Total assets	$	4,732,243	$	3,772,974

Liabilities and Stockholders' Equity
Liabilities:
Reserves for unpaid losses and loss adjustment expenses	$	2,160,763	$	1,692,875
Unearned premiums	844,701		701,351
Payable to reinsurers	43,215		47,582
Accounts payable and accrued expenses	39,780		44,922
Debt	184,053		183,846

Other liabilities	24,782		15,566
Total liabilities	3,297,294		2,686,142

Stockholders’ equity:
Common stock, $0.01 par value, 400,000,000 shares authorized, 23,288,145 and 23,181,919 shares issued and outstanding at September 30, 2024 and December 31, 2023 respectively	233		232
Additional paid-in capital	357,935		352,970
Retained earnings	1,123,532		828,247
Accumulated other comprehensive loss	(46,751)		(94,617)
Total stockholders’ equity	1,434,949		1,086,832
Total liabilities and stockholders’ equity	$	4,732,243	$	3,772,974

See accompanying notes to condensed consolidated financial statements.

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KINSALE CAPITAL GROUP, INC. AND SUBSIDIARIES

Consolidated Statements of Income and Comprehensive Income (Unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
	(in thousands, except per share data)
Revenues:
Gross written premiums	$	448,646	$	377,789	$	1,427,060	$	1,173,599
Ceded written premiums	(98,709)		(83,509)		(295,833)		(215,248)
Net written premiums	349,937		294,280		1,131,227		958,351
Change in unearned premiums	(1,185)		(12,778)		(140,496)		(182,645)
Net earned premiums	348,752		281,502		990,731		775,706
Fee income	8,489		6,841		25,572		20,028
Net investment income	39,644		27,086		108,424		71,953
Change in the fair value of equity securities	20,659		(5,533)		41,871		3,796
Net realized investment gains (losses)	(8)		4,274		6,737		913
Change in allowance for credit losses on investments	4		(143)		490		(199)
Other income	518		340		1,577		1,081
Total revenues	418,058		314,367		1,175,402		873,278

Expenses:
Losses and loss adjustment expenses	200,240		155,552		580,351		441,628
Underwriting, acquisition and insurance expenses	70,139		60,348		207,960		168,567
Interest expense	2,589		2,573		7,575		7,867
Other expenses	692		401		3,451		1,220
Total expenses	273,660		218,874		799,337		619,282
Income before income taxes	144,398		95,493		376,065		253,996
Total income tax expense	30,169		19,378		70,316		49,290
Net income	114,229		76,115		305,749		204,706
Other comprehensive income (loss):
Change in net unrealized losses on available-for-sale investments, net of taxes	63,464		(23,511)		47,866		(20,109)
Total comprehensive income	$	177,693	$	52,604	$	353,615	$	184,597


Earnings per share:
Basic	$	4.93	$	3.30	$	13.21	$	8.89
Diluted	$	4.90	$	3.26	$	13.10	$	8.79

Weighted-average shares outstanding:
Basic	23,175		23,058		23,150		23,036
Diluted	23,335		23,315		23,333		23,298

See accompanying notes to condensed consolidated financial statements.

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KINSALE CAPITAL GROUP, INC. AND SUBSIDIARIES

Consolidated Statements of Changes in Stockholders' Equity (Unaudited)


	Shares of Common Stock	Common Stock		Additional Paid-in Capital		Retained Earnings		Accumu- lated Other Compre- hensive Loss		Total Stock- holders' Equity
	(in thousands, except share and per share data)
Balance at December 31, 2023	23,181,919	$	232	$	352,970	$	828,247	$	(94,617)	$	1,086,832
Issuance of common stock under stock-based compensation plan	105,314	1		932		—		—		933
Stock-based compensation expense	—	—		3,524		—		—		3,524
Restricted shares withheld for taxes	(11,318)	—		(5,842)		—		—		(5,842)
Dividends declared ($0.15 per share)	—	—		—		(3,479)		—		(3,479)
Other comprehensive loss, net of tax	—	—		—		—		(9,940)		(9,940)
Net income	—	—		—		98,941		—		98,941
Balance at March 31, 2024	23,275,915	233		351,584		923,709		(104,557)		1,170,969
Issuance of common stock under stock-based compensation plan	13,249	—		219		—		—		219
Stock-based compensation expense	—	—		3,709		—		—		3,709
Restricted shares withheld for taxes	(2,916)	—		(1,123)		—		—		(1,123)
Dividends declared ($0.15 per share)	—	—		—		(3,492)		—		(3,492)
Other comprehensive loss, net of tax	—	—		—		—		(5,658)		(5,658)
Net income	—	—		—		92,579		—		92,579
Balance at June 30, 2024	23,286,248	233		354,389		1,012,796		(110,215)		1,257,203
Issuance of common stock under stock-based compensation plan	1,897	—		51		—		—		51
Stock-based compensation expense	—	—		3,495		—		—		3,495
Dividends declared ($0.15 per share)	—	—		—		(3,493)		—		(3,493)
Other comprehensive income, net of tax	—	—		—		—		63,464		63,464
Net income	—	—		—		114,229		—		114,229
Balance at September 30, 2024	23,288,145	$	233	$	357,935	$	1,123,532	$	(46,751)	$	1,434,949

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KINSALE CAPITAL GROUP, INC. AND SUBSIDIARIES

Consolidated Statements of Changes in Stockholders' Equity (Unaudited) - Continued


	Shares of Common Stock	Common Stock		Additional Paid-in Capital		Retained Earnings		Accumu- lated Other Compre- hensive Loss		Total Stock- holders' Equity
	(in thousands, except per share data)
Balance at December 31, 2022	23,090,526	$	231	$	347,015	$	533,121	$	(134,918)	$	745,449
Issuance of common stock under stock-based compensation plan	70,047	1		323		—		—		324
Stock-based compensation expense	—	—		1,988		—		—		1,988
Restricted shares withheld for taxes	(6,628)	—		(2,104)		—		—		(2,104)
Dividends declared ($0.14 per share)	—	—		—		(3,235)		—		(3,235)
Other comprehensive income, net of tax	—	—		—		—		17,509		17,509
Net income	—	—		—		55,800		—		55,800
Balance at March 31, 2023	23,153,945	232		347,222		585,686		(117,409)		815,731
Issuance of common stock under stock-based compensation plan	15,046	—		230		—		—		230
Stock-based compensation expense	—	—		2,543		—		—		2,543
Restricted shares withheld for taxes	(6,816)	—		(2,130)		—		—		(2,130)
Dividends declared ($0.14 per share)	—	—		—		(3,243)		—		(3,243)
Other comprehensive loss, net of tax	—	—		—		—		(14,107)		(14,107)
Net income	—	—		—		72,791		—		72,791
Balance at June 30, 2023	23,162,175	232		347,865		655,234		(131,516)		871,815
Issuance of common stock under stock-based compensation plan	10,750	—		172		—		—		172
Stock-based compensation expense	—	—		2,415		—		—		2,415
Dividends declared ($0.14 per share)	—	—		—		(3,244)		—		(3,244)
Other comprehensive loss, net of tax	—	—		—		—		(23,511)		(23,511)
Net income	—	—		—		76,115		—		76,115
Balance at September 30, 2023	23,172,925	$	232	$	350,452	$	728,105	$	(155,027)	$	923,762

See accompanying notes to condensed consolidated financial statements.

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KINSALE CAPITAL GROUP, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows (Unaudited)


	Nine Months Ended September 30,
	2024		2023
	(in thousands)
Operating activities:
Net cash provided by operating activities	$	763,324	$	648,308

Investing activities:
Purchase of property and equipment	(13,157)		(5,501)
Purchase of real estate investment	(312)		(1,733)
Sale of real estate investment	—		62,036

Change in short-term investments, net	5,730		13,071
Purchases – fixed-maturity securities	(1,265,072)		(947,920)
Purchases – equity securities	(115,099)		(62,047)
Sales – fixed-maturity securities	274,168		204,416
Sales – equity securities	34,230		7,503
Maturities and calls – fixed-maturity securities	317,412		113,811
Net cash used in investing activities	(762,100)		(616,364)

Financing activities:

Proceeds from notes payable	—		50,000
Payoff of credit facility	—		(62,000)
Debt issuance costs	—		(43)
Payroll taxes withheld and remitted on share-based payments	(6,965)		(4,234)
Proceeds from stock options exercised	1,203		726
Dividends paid	(10,465)		(9,723)
Net cash used in financing activities	(16,227)		(25,274)
Net change in cash and cash equivalents	(15,003)		6,670
Cash and cash equivalents at beginning of year	126,694		156,274
Cash and cash equivalents at end of period	$	111,691	$	162,944

See accompanying notes to condensed consolidated financial statements.

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KINSALE CAPITAL GROUP, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

1. Summary of Significant Accounting Policies

Basis of presentation

The unaudited condensed consolidated financial statements and notes have been prepared in accordance with U.S. generally accepted accounting principles ("U.S. GAAP") for interim financial information and do not contain all of the information and footnotes required by U.S. GAAP for complete financial statements. As such, these unaudited condensed consolidated interim financial statements should be read in conjunction with the audited consolidated financial statements of Kinsale Capital Group, Inc. and its subsidiaries ("the Company") included in the Annual Report on Form 10-K for the year ended December 31, 2023. In the opinion of management, all adjustments necessary for a fair presentation of the condensed consolidated financial statements have been included. Such adjustments consist only of normal recurring items. All significant intercompany balances and transactions have been eliminated in consolidation. Interim results are not necessarily indicative of results of operations for the full year.

Use of estimates

The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, if any, at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Prospective accounting pronouncements

ASU 2023-07, Segment Reporting - Improvements to Reportable Segment Disclosures

In November 2023, the FASB issued ASU 2023-07, "Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures," which expands reportable segment disclosure requirements by requiring disclosures of significant reportable segment expenses that are regularly provided to the Chief Operating Decision Maker ("CODM") and included within each reported measure of a segment's profit or loss. The ASU also requires disclosure of the title and position of the individual identified as the CODM and an explanation of how the CODM uses the reported measures of a segment's profit or loss in assessing segment performance and deciding how to allocate resources. Additionally, ASU 2023-07 requires all segment profit or loss and assets disclosures to be provided on an annual and interim basis. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning one year later. Early adoption is permitted and the amendments must be applied retrospectively to all prior periods presented. The Company does not expect the adoption of this guidance to materially affect the consolidated financial statements, and the Company is currently evaluating the effect the guidance will have on its disclosures.

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2. Investments

Available-for-sale investments

The following tables summarize the available-for-sale investments at September 30, 2024 and December 31, 2023:


	September 30, 2024
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Allowance for Credit Losses		Estimated Fair Value
	(in thousands)
Fixed maturities:
U.S. Treasury securities and obligations of U.S. government agencies	$	15,160	$	18	$	(430)	$	—	$	14,748
Obligations of states, municipalities and political subdivisions	180,797		279		(17,192)		—		163,884
Corporate and other securities	1,914,970		24,241		(37,114)		(63)		1,902,034
Asset-backed securities	745,541		8,781		(629)		—		753,693
Residential mortgage-backed securities	521,368		3,449		(41,037)		—		483,780
Commercial mortgage-backed securities	150,839		1,517		(3,457)		—		148,899
Total fixed-maturity investments	$	3,528,675	$	38,285	$	(99,859)	$	(63)	$	3,467,038


	December 31, 2023
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Allowance for Credit Losses		Estimated Fair Value
	(in thousands)
Fixed maturities:
U.S. Treasury securities and obligations of U.S. government agencies	$	28,003	$	57	$	(806)	$	—	$	27,254
Obligations of states, municipalities and political subdivisions	191,080		212		(20,248)		—		171,044
Corporate and other securities	1,437,468		5,532		(54,755)		(552)		1,387,693
Asset-backed securities	641,700		2,833		(2,773)		—		641,760
Residential mortgage-backed securities	463,904		1,732		(48,530)		—		417,106
Commercial mortgage-backed securities	72,308		11		(5,416)		(1)		66,902
Total fixed-maturity investments	$	2,834,463	$	10,377	$	(132,528)	$	(553)	$	2,711,759

Available-for-sale securities in a loss position

The Company regularly reviews all its available-for-sale investments with unrealized losses to assess whether the decline in the fair value is deemed to be a credit loss. The Company considers a number of factors in completing its review of credit losses, including the extent to which a security's fair value has been below cost and the financial condition of an issuer. In addition to specific issuer information, the Company also evaluates the current market and interest rate environment. Generally, a decline in a security’s value caused by a change in the market or interest rate environment does not constitute a credit loss.

For fixed-maturity securities, the Company also considers whether it intends to sell the security or, if it is more likely than not that it will be required to sell the security before recovery, and its ability to recover all amounts outstanding when contractually due. When assessing whether it intends to sell a fixed-maturity security or, if it is

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likely to be required to sell a fixed-maturity security before recovery of its amortized cost, the Company evaluates facts and circumstances including, but not limited to, decisions to reposition the investment portfolio, potential sales of investments to meet cash flow needs and potential sales of investments to capitalize on favorable pricing.

For fixed-maturity securities where a decline in fair value is below the amortized cost basis and the Company intends to sell the security, or it is more likely than not that the Company will be required to sell the security before recovery of its amortized cost, an impairment is recognized in net income based on the fair value of the security at the time of assessment. For fixed-maturity securities that the Company does not intend to sell or for which it is more likely than not that the Company would not be required to sell before recovery of its amortized cost, the Company compares the estimated present value of the cash flows expected to be collected to the amortized cost of the security. Inputs into the cash flow analysis include default rates and recoverability rates based on credit rating. The extent to which the estimated present value of the cash flows expected to be collected is less than the amortized cost of the security represents the credit-related portion of the impairment, which is recognized in net income through an allowance for credit losses. Any remaining decline in fair value represents the noncredit portion of the impairment, which is recognized in other comprehensive income.

The Company reports investment income due and accrued separately from available-for-sale investments and has elected not to measure an allowance for credit losses for investment income due and accrued. Investment income due and accrued is written off through earnings at the time the issuer of the bond defaults or is expected to default on payments.

At September 30, 2024, the Company's credit loss review resulted in an allowance for credit losses on three securities. The following table presents changes in the allowance for expected credit losses on available-for-sale securities for the three and nine months ended September 30, 2024 and 2023:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
	(in thousands)
Beginning balance	$	67	$	422	$	553	$	366
Increase to allowance from securities for which credit losses were not previously recorded	—		1		—		1
Reduction from securities sold during the period	—		—		(479)		(12)
Net (decrease) increase from securities that had an allowance at the beginning of the period	(4)		142		(11)		210
Ending balance	$	63	$	565	$	63	$	565

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The following tables summarize gross unrealized losses and estimated fair value for available-for-sale investments by length of time that the securities have continuously been in an unrealized loss position:


	September 30, 2024
	Less than 12 Months				12 Months or Longer				Total
	Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses
	(in thousands)
Fixed maturities:
U.S. Treasury securities and obligations of the U.S. government agencies	$	—	$	—	$	14,178	$	(430)	$	14,178	$	(430)
Obligations of states, municipalities and political subdivisions	11,653		(121)		124,714		(17,071)		136,367		(17,192)
Corporate and other securities	53,750		(140)		512,074		(36,974)		565,824		(37,114)
Asset-backed securities	23,995		(104)		38,154		(525)		62,149		(629)
Residential mortgage-backed securities	7,450		(27)		255,572		(41,010)		263,022		(41,037)
Commercial mortgage-backed securities	18,304		(77)		56,031		(3,380)		74,335		(3,457)
Total fixed-maturity investments	$	115,152	$	(469)	$	1,000,723	$	(99,390)	$	1,115,875	$	(99,859)

At September 30, 2024, the Company held 686 fixed-maturity securities in an unrealized loss position with a total estimated fair value of $1.1 billion and gross unrealized losses of $99.9 million. Of these securities, 633 were in a continuous unrealized loss position for greater than one year. As discussed above, the Company regularly reviews all fixed-maturity securities within its investment portfolio to determine whether a credit loss has occurred. Based on the Company's review as of September 30, 2024, except for securities previously discussed, unrealized losses were caused by interest rate changes or other market factors and were not credit-specific issues. At September 30, 2024, 79.9% of the Company’s fixed-maturity securities were rated "A-" or better and all of the Company’s fixed-maturity securities made expected coupon payments under the contractual terms of the securities.

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	December 31, 2023
	Less than 12 Months				12 Months or Longer				Total
	Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses
	(in thousands)
Fixed maturities:
U.S. Treasury securities and obligations of U.S. government agencies	$	—	$	—	$	15,484	$	(806)	$	15,484	$	(806)
Obligations of states, municipalities and political subdivisions	20,886		(221)		121,911		(20,027)		142,797		(20,248)
Corporate and other securities	246,355		(1,444)		651,525		(53,311)		897,880		(54,755)
Asset-backed securities	142,287		(872)		217,401		(1,901)		359,688		(2,773)
Residential mortgage-backed securities	26,158		(49)		268,891		(48,481)		295,049		(48,530)
Commercial mortgage-backed securities	8,775		(55)		56,731		(5,361)		65,506		(5,416)
Total fixed-maturity investments	$	444,461	$	(2,641)	$	1,331,943	$	(129,887)	$	1,776,404	$	(132,528)

Contractual maturities of available-for-sale fixed-maturity securities

The amortized cost and estimated fair value of available-for-sale fixed-maturity securities at September 30, 2024 are summarized, by contractual maturity, as follows:


	September 30, 2024
	Amortized		Estimated
	Cost		Fair Value
	(in thousands)
Due in one year or less	$	355,278	$	355,263
Due after one year through five years	1,090,396		1,093,854
Due after five years through ten years	438,248		436,588
Due after ten years	227,005		194,961
Asset-backed securities	745,541		753,693
Residential mortgage-backed securities	521,368		483,780
Commercial mortgage-backed securities	150,839		148,899
Total fixed-maturity securities	$	3,528,675	$	3,467,038

Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties, and the lenders may have the right to put the securities back to the borrower.

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Real estate investments

Real estate investments represents directly owned property held for investment purposes and consisted of land with a carrying value of $15.0 million and $14.8 million at September 30, 2024 and December 31, 2023, respectively. There was no accumulated depreciation on real estate investments at September 30, 2024 and December 31, 2023.

Net investment income

The following table presents the components of net investment income for the three and nine months ended September 30, 2024 and 2023:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
	(in thousands)
Interest:
Taxable bonds	$	38,009	$	24,644	$	103,871	$	63,672
Tax exempt municipal bonds	391		522		1,225		1,704
Cash equivalents and short-term investments	615		758		1,726		2,337
Dividends on equity securities	1,494		1,271		4,331		3,692
Real estate investment income	—		851		153		3,565
Gross investment income	40,509		28,046		111,306		74,970
Investment expenses	(865)		(960)		(2,882)		(3,017)
Net investment income	$	39,644	$	27,086	$	108,424	$	71,953

There was no depreciation expense related to real estate investments for the three and nine months ended September 30, 2024 or three months ended September 30, 2023 as the Company sold the related assets during 2023. Investment expenses included depreciation expense related to real estate investments of $0.5 million for the nine months ended September 30, 2023.

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Realized investment gains and losses

The following table presents realized investment gains and losses for the three and nine months ended September 30, 2024 and 2023:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
	(in thousands)
Fixed-maturity securities:
Realized gains	$	114	$	74	$	1,055	$	1,811
Realized losses	(90)		(51)		(1,129)		(2,268)
Net realized (losses) gains from fixed-maturity securities	24		23		(74)		(457)

Equity securities:
Realized gains	—		—		7,271		1,626
Realized losses	(31)		—		(455)		(4,487)
Net realized gains (losses) from equity securities	(31)		—		6,816		(2,861)
Realized (losses) gains from the sales of short-term investments	(1)		1		—		(19)
Realized (loss) gains on sale of real estate investments	—		4,250		(5)		4,250
Net realized investment gains (losses)	$	(8)	$	4,274	$	6,737	$	913

The net realized gains or losses on sales of equity securities represent the total gains or losses from the purchase dates of the equity securities. The change in unrealized gains (losses) in the consolidated statement of income consists of two components: (1) the reversal of the gain or loss recognized in previous periods on equity securities sold and (2) the change in unrealized gain or loss resulting from mark-to-market adjustments on equity securities still held.

Change in net unrealized gains (losses) on fixed-maturity securities

For the three months ended September 30, 2024 and 2023, the change in net unrealized gains (losses) for fixed-maturity securities was $80.3 million and $(29.8) million respectively. For the nine months ended September 30, 2024 and 2023, the change in net unrealized gains (losses) for fixed-maturity securities was $60.6 million and $(25.4) million, respectively.

Insurance – statutory deposits

The Company had invested assets with a fair value of $3.5 million and $5.8 million on deposit with state regulatory authorities at September 30, 2024 and December 31, 2023, respectively.

Payable for investments purchased

The Company recorded a payable for investments purchased, not yet settled, of $22.4 million and $12.3 million at September 30, 2024 and December 31, 2023, respectively. The payable balance was included in the "other liabilities" line item of the consolidated balance sheet.

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3. Fair Value Measurements

Fair value is estimated for each class of financial instrument based on the framework established in the fair value accounting guidance. Fair value is defined as the price in the principal market that would be received for an asset or paid to transfer a liability to facilitate an orderly transaction between market participants on the measurement date. Market participants are assumed to be independent, knowledgeable, able and willing to transact an exchange and not acting under duress. Fair value hierarchy disclosures are based on the quality of inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Adjustments to transaction prices or quoted market prices may be required in illiquid or disorderly markets in order to estimate fair value.

The three levels of the fair value hierarchy are defined as follows:

Level 1 - Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities traded in active markets.

Level 2 - Inputs to the valuation methodology include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability and market-corroborated inputs.

Level 3 - Inputs to the valuation methodology are unobservable for the asset or liability and are significant to the fair value measurement.

Fair values of the Company's investment portfolio are estimated using unadjusted prices obtained by its investment accounting vendor from nationally recognized third-party pricing services, where available. Values for U.S. Treasuries, exchange traded funds and common stocks are generally based on Level 1 inputs, which use quoted prices in active markets for identical assets. For other fixed-maturity securities and non-redeemable preferred stock, the pricing vendors use a pricing methodology involving the market approach, including pricing models which use prices and relevant market information regarding a particular security or securities with similar characteristics to establish a valuation. The estimates of fair value of these investments are included in the amounts disclosed as Level 2. For those investments where significant inputs are unobservable, the Company's investment accounting vendor obtains valuations from pricing vendors or brokers using the market approach and income approach valuation techniques and are disclosed as Level 3.

Management performs several procedures to ascertain the reasonableness of investment values included in the condensed consolidated financial statements, including 1) obtaining and reviewing internal control reports from the Company's investment accounting vendor that assess fair values from third party pricing services, 2) discussing with the Company's investment accounting vendor its process for reviewing and validating pricing obtained from third party pricing services and 3) reviewing the security pricing received from the Company's investment accounting vendor and monitoring changes in unrealized gains and losses at the individual security level. The Company has evaluated the various types of securities in its investment portfolio to determine an appropriate fair value hierarchy level based upon trading activity and the observability of market inputs.

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The following tables present the balances of assets measured at fair value on a recurring basis as of September 30, 2024 and December 31, 2023, by level within the fair value hierarchy:


	September 30, 2024
	Level 1		Level 2		Level 3		Total
	(in thousands)
Assets
Fixed maturities:

U.S. Treasury securities and obligations of U.S. government agencies	$	14,748	$	—	$	—	$	14,748
Obligations of states, municipalities and political subdivisions	—		163,884		—		163,884
Corporate and other securities	—		1,902,034		—		1,902,034
Asset-backed securities	—		753,693		—		753,693
Residential mortgage-backed securities	—		483,780		—		483,780
Commercial mortgage-backed securities	—		148,899		—		148,899
Total fixed-maturity securities	14,748		3,452,290		—		3,467,038

Equity securities:
Exchange traded funds	126,620		—		—		126,620
Non-redeemable preferred stock	—		26,281		—		26,281
Common stocks	212,725		—		—		212,725
Total equity securities	339,345		26,281		—		365,626

Total	$	354,093	$	3,478,571	$	—	$	3,832,664

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	December 31, 2023
	Level 1		Level 2		Level 3		Total
	(in thousands)
Assets
Fixed maturities:
U.S. Treasury securities and obligations of U.S. government agencies	$	22,235	$	5,019	$	—	$	27,254
Obligations of states, municipalities and political subdivisions	—		171,044		—		171,044
Corporate and other securities	—		1,387,693		—		1,387,693
Asset-backed securities	—		641,760		—		641,760
Residential mortgage-backed securities	—		417,106		—		417,106
Commercial mortgage-backed securities	—		66,902		—		66,902
Total fixed-maturity securities	22,235		2,689,524		—		2,711,759

Equity securities:
Exchange traded funds	106,300		—		—		106,300
Non-redeemable preferred stock	—		33,173		—		33,173
Common stocks	95,340		—		—		95,340
Total equity securities	201,640		33,173		—		234,813
Short-term investments	1,862		3,727		—		5,589
Total	$	225,737	$	2,726,424	$	—	$	2,952,161

There were no assets or liabilities measured at fair value on a nonrecurring basis as of September 30, 2024 or December 31, 2023.

The carrying amount of the Company's fixed-rate senior notes was $175.0 million, less debt issuance costs, and the corresponding estimated fair value was $175.8 million and $171.6 million at September 30, 2024 and December 31, 2023, respectively. The fair value measurement was determined using a discounted cash flow analysis that factors in current market yields for comparable borrowing arrangements under the Company's credit profile. Since this methodology is based upon market yields for comparable arrangements, the measurement is categorized as Level 2. The estimated fair value of outstanding borrowings under the Company's revolving Credit Facility approximated its carrying value at September 30, 2024 and December 31, 2023. See Note 13 for further information regarding the Company's debt arrangements.

The Company holds cash equivalents that are managed as part of its investment portfolio and, due to the short-term maturities of these assets, the carrying value of these investments approximates fair value. The Company held cash equivalents of $18.6 million and $11.8 million at September 30, 2024 and December 31, 2023, respectively.

4. Allowance for Credit Losses

Premiums receivable

Premiums receivable balances are carried at face value, net of any allowance for credit losses. The allowance for credit losses represents an estimate of amounts considered uncollectible based on the Company’s assessment of the collectability of receivables that are past due. The estimate considers historical loss data, current and future economic conditions and specific identification of collectability concerns, where applicable. The following table presents the change in the allowance for credit losses for premiums receivable for the three and nine months ended September 30, 2024 and 2023:

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	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
	(in thousands)
Beginning balance	$	21,226	$	12,167	$	13,383	$	8,067
Current period change for estimated uncollectible premiums	2,596		2,341		12,938		7,459
Write-offs of uncollectible premiums receivable	(598)		(129)		(3,097)		(1,147)
Ending balance	$	23,224	$	14,379	$	23,224	$	14,379

5. Deferred Policy Acquisition Costs

The following table presents the amounts of policy acquisition costs deferred and amortized for the three and nine months ended September 30, 2024 and 2023:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
	(in thousands)
Balance, beginning of period	$	109,358	$	85,326	$	88,395	$	61,594
Policy acquisition costs deferred:
Direct commissions	65,773		54,580		209,146		169,223
Ceding commissions	(31,207)		(24,230)		(89,522)		(62,779)
Other underwriting and policy acquisition costs	3,765		1,623		10,418		7,511
Policy acquisition costs deferred	38,331		31,973		130,042		113,955
Amortization of net policy acquisition costs	(37,099)		(31,118)		(107,847)		(89,368)
Balance, end of period	$	110,590	$	86,181	$	110,590	$	86,181

Amortization of net policy acquisition costs is included in the line item "underwriting, acquisition and insurance expenses" in the accompanying consolidated statements of income and comprehensive income.

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6. Property and Equipment, Net

Property and equipment are included in "other assets" in the accompanying consolidated balance sheets and consist of the following:


	September 30, 2024		December 31, 2023
	(in thousands)
Building	$	37,190	$	37,181
Parking deck	5,072		5,072
Land	3,068		3,068
Equipment	4,315		3,958
Software	18,916		15,375
Furniture and fixtures	3,185		3,065
Land improvements	474		474
Leasehold improvements	153		153

Construction in progress - building	16,568		6,623
Property and equipment	88,941		74,969
Accumulated depreciation	(15,252)		(11,565)
Total property and equipment, net	$	73,689	$	63,404

7. Underwriting, Acquisition and Insurance Expenses

Underwriting, acquisition and insurance expenses for the three and nine months ended September 30, 2024 and 2023 consist of the following:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
	(in thousands)
Underwriting, acquisition and insurance expenses incurred:
Direct commissions	$	66,039	$	53,035	$	187,169	$	143,181
Ceding commissions	(32,297)		(23,396)		(88,483)		(59,882)
Other underwriting expenses	36,397		30,709		109,274		85,268
Total	$	70,139	$	60,348	$	207,960	$	168,567

Other underwriting expenses within underwriting, acquisition and insurance expenses include salaries, bonus and employee benefits expenses of $27.6 million and $23.1 million for the three months ended September 30, 2024 and 2023, respectively and $78.3 million and $63.0 million for the nine months ended September 30, 2024 and 2023, respectively.

8. Stock-based Compensation

On July 27, 2016, the Kinsale Capital Group, Inc. 2016 Omnibus Incentive Plan (the "2016 Incentive Plan") became effective. The 2016 Incentive Plan, which is administered by the Compensation, Nominating and Corporate Governance Committee of the Company’s Board of Directors, provides for grants of stock options, restricted stock, restricted stock units and other stock-based awards to officers, employees, directors, independent contractors and

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consultants. The number of shares of common stock available for issuance under the 2016 Incentive Plan may not exceed 2,073,832.

The total compensation cost that has been charged against income for share-based compensation arrangements was $10.7 million and $6.9 million for the nine months ended September 30, 2024 and 2023, respectively.

Restricted Stock Awards

During the nine months ended September 30, 2024, the Company granted restricted stock awards under the 2016 Incentive Plan. The restricted stock awards were valued on the date of grant and will vest over a period of 1 to 4 years corresponding to the anniversary date of the grants. The fair value of restricted stock awards was determined based on the closing trading price of the Company’s shares on the grant date or, if no shares were traded on the grant date, the last preceding date for which there was a sale of shares. Except for restrictions placed on the transferability of restricted stock, holders of unvested restricted stock have full stockholder’s rights, including voting rights and the right to receive dividends. Unvested shares of restricted stock awards and accrued dividends, if any, are forfeited upon the termination of service to or employment with the Company.

A summary of restricted stock activity under the 2016 Incentive Plan for the nine months ended September 30, 2024 is as follows:


	Nine Months Ended September 30, 2024
	Number of Shares	Weighted Average Grant Date Fair Value per Share
Non-vested outstanding at the beginning of the period	107,822	$	250.86
Granted	47,689	$	502.43
Vested	(41,502)	$	231.05
Forfeited	(2,417)	$	283.11
Non-vested outstanding at the end of the period	111,592	$	366.18

Employees surrender shares to pay for withholding tax obligations resulting from any vesting of restricted stock awards. During the nine months ended September 30, 2024, shares withheld for taxes in connection with the vesting of restricted stock awards totaled 14,234.

The weighted average grant-date fair value per share of the Company's restricted stock awards granted during the nine months ended September 30, 2024 and 2023 was $502.43 and $313.35, respectively. The fair value of restricted stock awards that vested during the nine months ended September 30, 2024 and 2023 was $19.8 million and $12.6 million, respectively. As of September 30, 2024, the Company had $32.1 million of total unrecognized stock-based compensation expense expected to be charged to earnings over a weighted-average period of 2.4 years.

Stock Options

On July 27, 2016, the Board of Directors approved, and the Company granted, 1,036,916 stock options with an exercise price equal to the initial public offering price of $16.00 per share and a weighted-average grant-date fair value of $2.71 per share. The options have a maximum contractual term of 10 years and vested in 4 equal annual installments following the date of the grant. The value of the options granted was estimated at the date of grant using the Black-Scholes pricing model.

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A summary of option activity as of September 30, 2024, and changes during the period then ended are presented below:


	Number of Shares	Weighted-Average Exercise Price		Weighted-Average Remaining Years of Contractual Term	Aggregate Intrinsic Value (in thousands)
Outstanding at January 1, 2024	201,560	$	16.00
Granted	—	—
Forfeited	—	—
Exercised	(75,188)	16.00
Outstanding at September 30, 2024	126,372	$	16.00	1.8	$	56,813
Exercisable at September 30, 2024	126,372	$	16.00	1.8	$	56,813

The total intrinsic value of options exercised was $34.4 million and $14.6 million during the nine months ended September 30, 2024 and 2023, respectively.

9. Earnings Per Share

The following represents a reconciliation of the numerator and denominator of the basic and diluted earnings per share computations contained in the condensed consolidated financial statements:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
	(in thousands, except per share data)
Net income	$	114,229	$	76,115	$	305,749	$	204,706

Weighted average common shares outstanding - basic	23,175		23,058		23,150		23,036
Effect of potential dilutive securities:
Conversion of stock options	123		208		141		220
Conversion of restricted stock	37		49		42		42
Weighted average common shares outstanding - diluted	23,335		23,315		23,333		23,298

Earnings per common share:
Basic	$	4.93	$	3.30	$	13.21	$	8.89
Diluted	$	4.90	$	3.26	$	13.10	$	8.79

There were 43,000 and zero anti-dilutive stock awards for the three months ended September 30, 2024 and 2023, respectively. There were 44,000 and 47,000 anti-dilutive stock awards for the nine months ended September 30, 2024 and 2023, respectively.

10. Income Taxes

The Company uses the estimated annual effective tax rate method for calculating its tax provision in interim periods, which represents the Company's best estimate of the effective tax rate expected for the full year. The estimated

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annual effective tax rate typically differs from the U.S. statutory tax rate, primarily as a result of tax-exempt investment income and any discrete items recognized during the period. The Company's effective tax rates were 18.7% and 19.4% for the nine months ended September 30, 2024 and 2023, respectively. The effective tax rates were lower than the federal statutory rate of 21% due primarily to the tax benefits from stock-based compensation, including stock options exercised, and from income generated by certain tax-exempt investments.

11. Reserves For Unpaid Losses and Loss Adjustment Expenses

The following table presents a reconciliation of consolidated beginning and ending reserves for unpaid losses and loss adjustment expenses:


	September 30,
	2024		2023
	(in thousands)
Gross reserves for unpaid losses and loss adjustment expenses, beginning of year	$	1,692,875	$	1,238,402
Less: reinsurance recoverable on unpaid losses	241,357		177,039

Net reserves for unpaid losses and loss adjustment expenses, beginning of year	1,451,518		1,061,363
Incurred losses and loss adjustment expenses:
Current year	608,423		470,235
Prior years	(28,072)		(28,607)
Total net losses and loss adjustment expenses incurred	580,351		441,628

Payments:
Current year	24,207		22,156
Prior years	156,992		136,380
Total payments	181,199		158,536
Net reserves for unpaid losses and loss adjustment expenses, end of period	1,850,670		1,344,455
Reinsurance recoverable on unpaid losses	310,093		220,452
Gross reserves for unpaid losses and loss adjustment expenses, end of period	$	2,160,763	$	1,564,907

During the nine months ended September 30, 2024, the reserves for unpaid losses and loss adjustment expenses held at December 31, 2023 developed favorably by $28.1 million, of which $45.6 million was attributable to the 2021 through 2023 accident years due to lower emergence of reported losses than expected across most lines of business. This favorable development was offset in part by adverse development primarily from the 2017 through 2019 accident years due to construction defect claims that are more exposed to inflation and from the 2020 accident year due to a large property claim. Current accident year incurred losses and loss adjustment expenses for the nine months ended September 30, 2024 included $17.6 million of net catastrophe losses primarily related to Hurricanes Helene, Francine and Beryl and tornadoes in the Midwest.

During the nine months ended September 30, 2023, the reserves for unpaid losses and loss adjustment expenses held at December 31, 2022 developed favorably by $28.6 million, of which $39.0 million was attributable to the 2021 and 2022 accident years due to lower emergence of reported losses than expected across most lines of business. This favorable development was offset in part by adverse development largely from the 2017 through 2019 accident years due primarily to construction defect claims that are more exposed to inflation.

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12. Reinsurance

The following table summarizes the effect of reinsurance on premiums written and earned for the three and nine months ended September 30, 2024 and 2023:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
	(in thousands)
Premiums written:
Direct	$	448,646	$	377,789	$	1,427,060	$	1,173,599

Ceded	(98,709)		(83,509)		(295,833)		(215,248)
Net written	$	349,937	$	294,280	$	1,131,227	$	958,351

Premiums earned:
Direct	$	450,583	$	362,689	$	1,283,710	$	982,922

Ceded	(101,831)		(81,187)		(292,979)		(207,216)
Net earned	$	348,752	$	281,502	$	990,731	$	775,706

The following table summarizes ceded losses and loss adjustment expenses for the three and nine months ended September 30, 2024 and 2023:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
	(in thousands)
Ceded incurred losses and loss adjustment expenses	$	22,698	$	27,381	$	92,903	$	89,371

The following table presents reinsurance recoverables on paid and unpaid losses as of September 30, 2024 and December 31, 2023:


	September 30, 2024		December 31, 2023
	(in thousands)
Reinsurance recoverables on paid losses	$	8,543	$	6,479
Reinsurance recoverables on unpaid losses, net	310,093		241,357
Reinsurance recoverables, net	$	318,636	$	247,836

13. Debt

Note Purchase and Private Shelf Agreement

On July 22, 2022, the Company entered into a Note Purchase and Private Shelf Agreement (as subsequently amended, the "Note Purchase Agreement") with PGIM, Inc. ("Prudential") and the purchasers of the Series A and Series B Senior Notes (as defined below). The Note Purchase Agreement provides for issuance of senior promissory notes with an aggregate principal amount of up to $200.0 million through September 18, 2026.

Pursuant to the Note Purchase Agreement, on July 22, 2022, the Company issued $125.0 million aggregate principal amount of 5.15% Series A Senior Notes Due July 22, 2034 (collectively, the "Series A Notes”), and on September

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18, 2023, the Company issued a $50.0 million aggregate principal amount 6.21% Series B Senior Note ("Series B Note") due July 22, 2034.

The Series A and B Notes are senior unsecured obligations of the Company and rank pari passu with the Company’s Amended and Restated Credit Agreement.

Principal payments on the Series A Notes are required annually beginning on July 22, 2030 in equal installments of $25.0 million through July 22, 2034.

Principal payments on the Series B Note are required annually beginning on July 22, 2030 in equal installments of $10.0 million through July 22, 2034.

Credit Agreement

On July 22, 2022, the Company entered into an Amended and Restated Credit Agreement, with JPMorgan Chase Bank, N.A., as administrative agent and as issuing bank, Truist Bank, as syndication agent, and the lenders party thereto (collectively, the "Lenders"). The Amended and Restated Credit Agreement provides the Company with a $100.0 million senior unsecured revolving credit facility (the "Credit Facility"), with the option to increase the aggregate commitment by $30.0 million. The Company is required to pay a Commitment Fee Rate (as defined therein) of 0.25% on the average daily amount of the Available Revolving Commitment (as defined therein). Borrowings under the Amended and Restated Credit Agreement may be used for general corporate purposes (which may include, without limitation, to fund future growth, to finance working capital needs, to fund capital expenditures, and to refinance, redeem or repay indebtedness).

The loans under the Amended and Restated Credit Agreement bear interest, at the Company's option, at a rate equal to the Adjusted Term SOFR Rate (as defined therein) plus 1.625% or the Alternate Base Rate (as defined therein) plus 0.625%. For the nine months ended September 30, 2024, the annual weighted-average interest rate of borrowings under the Credit Facility was 7.04%.

The following table presents the Company's outstanding debt as of September 30, 2024 and December 31, 2023:



	Issuance	Maturity	September 30, 2024		December 31, 2023
			(in thousands)
Credit Facility	Various	7/22/2027	$	11,000	$	11,000
5.15% Series A Notes	7/22/2022	7/22/2034	125,000		125,000
6.21% Series B Note	9/18/2023	7/22/2034	50,000		50,000
Less: Unamortized debt issuance costs			(1,947)		(2,154)
Total debt			$	184,053	$	183,846

Both the Note Purchase Agreement and the Amended and Restated Credit Agreement contain representations and affirmative and negative covenants, including financial covenants customary for agreements of this type, as well as customary events of default provisions. As of September 30, 2024, the Company was in compliance with all of its financial covenants under both the Note Purchase Agreement and the Credit Facility.

In October 2024, the covenants limiting restricted payments under the Note Purchase Agreement and Amended and Restated Credit Agreement were amended. The amendments allow the Company to make restricted payments so long as the aggregate amount of all such restricted payments does not exceed the greater of $300.0 million and 6.5% of the total assets of the Company and its subsidiaries at the end of the most recently completed fiscal quarter.

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14. Other Comprehensive Income (Loss)

The following table summarizes the components of other comprehensive income (loss) for the three and nine months ended September 30, 2024 and 2023:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
	(in thousands)
Unrealized gains (losses) on fixed-maturity securities arising during the period, before income taxes	$	80,292	$	(29,931)	$	60,816	$	(26,997)
Income tax (expense) benefit	(16,861)		6,286		(12,771)		5,670
Unrealized gains (losses) arising during the period, net of income taxes	63,431		(23,645)		48,045		(21,327)
Less reclassification adjustment:
Net realized losses on fixed-maturity securities, before income taxes	(46)		(27)		(264)		(1,343)
Income tax benefit	10		6		56		282
Reclassification adjustment included in net income	(36)		(21)		(208)		(1,061)
Change in allowance for credit losses on investments, before income taxes	4		(143)		490		(199)
Income tax (expense) benefit	(1)		30		(103)		42
Reclassification adjustment included in net income	3		(113)		387		(157)
Other comprehensive income (loss)	$	63,464	$	(23,511)	$	47,866	$	(20,109)

The sale or credit loss of an available-for-sale fixed-maturity security results in amounts being reclassified from accumulated other comprehensive income (loss) to realized gains or losses in current period earnings. The related tax effect of the reclassification adjustment is recorded in income tax expense in current period earnings. See Note 2 for additional information.

15. Contingencies

Contingencies arise in the normal conduct of the Company’s operations and are not expected to have a material effect on the Company’s financial condition or results of operations. However, adverse outcomes are possible and could negatively affect the Company’s financial condition and results of operations.

In June 2019, Marie Hughes, as authorized administrator for the estate of George Hughes, filed a wrongful death claim against Venetian Hills Apartments, LLC ("Venetian Hills") in DeKalb County in Georgia state court. On December 20, 2023, the jury awarded a verdict to the plaintiff of $140.0 million.

Venetian Hills was a policyholder of a $1.0 million general liability policy issued by Kinsale Insurance. The Company believes exclusions in the policy apply to the claim and intends to defend any action related to this proceeding vigorously. The Company expects to appeal the verdict at the conclusion of post trial motions and does not expect a resolution as to the Company’s liability, if any, with respect to this matter in the foreseeable future, and potentially for multiple years.

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The Company does not believe this legal proceeding will have a material adverse effect on its results of operations or business. The Company believes adequate provision has been made in its consolidated financial statements and its existing reserves account for liabilities to the Company relating to claims such as this legal proceeding.

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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The discussion and analysis below include certain forward-looking statements that are subject to risks, uncertainties and other factors described in "Risk Factors" in this Quarterly Report on Form 10-Q and in the Annual Report on Form 10-K for the year ended December 31, 2023. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of many factors.

The results of operations for the three and nine months ended September 30, 2024 are not necessarily indicative of the results that may be expected for the full year ended December 31, 2024, or for any other future period. The following discussion should be read in conjunction with the unaudited condensed consolidated financial statements and the notes thereto included in Part I, Item 1 of this Quarterly Report, and in conjunction with our audited consolidated financial statements and the notes thereto included in the Annual Report on Form 10-K for the year ended December 31, 2023.

References to the "Company," "Kinsale," "we," "us," and "our" are to Kinsale Capital Group, Inc. and its subsidiaries, unless the context otherwise requires.

Overview

Founded in 2009, Kinsale is a specialty insurance company. Kinsale focuses exclusively on the excess and surplus lines ("E&S") market in the U.S., where we use our underwriting expertise to write coverages for hard-to-place small business risks and personal lines risks. We market these insurance products in all 50 states, the District of Columbia, the Commonwealth of Puerto Rico and the U.S. Virgin Islands, primarily through a network of independent insurance brokers.

We have one reportable segment, our Excess and Surplus Lines Insurance segment, which offers property and casualty ("P&C") insurance products through the E&S market. For the first nine months of 2024, the percentage breakdown of our gross written premiums was 67.0% casualty and 33.0% property. Our commercial underwriting divisions include commercial property, excess casualty, small business casualty, general casualty, construction, allied health, small business property, products liability, entertainment, energy, professional liability, life sciences, commercial auto, excess professional, environmental, inland marine, health care, management liability, public entity, aviation, ocean marine, product recall, railroad and agribusiness. We also write homeowners' coverage in the personal lines market, which in aggregate represented 2.5% of our gross written premiums in the first nine months of 2024.

Components of Our Results of Operations

Gross written premiums

Gross written premiums are the amounts received or to be received for insurance policies written or assumed by us during a specific period of time without reduction for policy acquisition costs, reinsurance costs or other deductions. The volume of our gross written premiums in any given period is generally influenced by:

•New business submissions;

•Conversion of new business submissions into policies;

•Renewals of existing policies; and

•Average size and premium rate of bound policies.

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We earn insurance premiums on a pro rata basis over the term of the policy. Our insurance policies generally have a term of one year. Net earned premiums represent the earned portion of our gross written premiums, less that portion of our gross written premiums that is ceded to third-party reinsurers under our reinsurance agreements.

Ceded written premiums

Ceded written premiums are the amount of gross written premiums ceded to reinsurers. We enter into reinsurance contracts to limit our exposure to potential large losses. Ceded written premiums are earned over the reinsurance contract period in proportion to the period of risk covered. The volume of our ceded written premiums is impacted by the level of our gross written premiums, any decision we make to increase or decrease retention levels and reinstatement premiums, if any.

Fee income

Fee income includes policy fees charged to insureds and is recognized in earnings when the related premium is written. Policy fees are a flat charge to insureds and fee income is impacted primarily by the volume of business we write.

Losses and loss adjustment expenses

Losses and loss adjustment expenses are a function of the amount and type of insurance contracts we write and the loss experience associated with the underlying coverage. In general, our losses and loss adjustment expenses are affected by:

•Frequency of claims associated with the particular types of insurance contracts that we write;

•Trends in the average size of losses incurred on a particular type of business;

•Mix of business written by us;

•Changes in the legal or regulatory environment related to the business we write;

•Trends in legal defense costs;

•Wage inflation

•Social inflation;

•Inflation in material costs, and

•Inflation in medical costs.

Losses and loss adjustment expenses are based on an actuarial analysis of the estimated losses, including losses incurred during the period and changes in estimates from prior periods. Losses and loss adjustment expenses may be paid out over a period of years.

Underwriting, acquisition and insurance expenses

Underwriting, acquisition and insurance expenses include policy acquisition costs and other underwriting expenses. Policy acquisition costs are principally composed of the commissions we pay our brokers, net of ceding commissions we receive on business ceded under certain reinsurance contracts. Policy acquisition costs also include underwriting expenses that are directly related to the successful acquisition of those policies which are deferred. The amortization of policy acquisition costs is charged to expense in proportion to premium earned over the policy life.

Other underwriting expenses represent the general and administrative expenses of our insurance business such as employment costs, telecommunication and technology costs, and legal and auditing fees.

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Net investment income

Net investment income is an important component of our results of operations. We earn investment income on our portfolio of cash and invested assets. Our cash and invested assets are primarily composed of fixed-maturity securities, and may also include cash equivalents, equity securities and short-term investments. The principal factors that influence net investment income are the size of our investment portfolio and the yield on that portfolio. As measured by amortized cost (which excludes changes in fair value), the size of our investment portfolio is mainly a function of our invested equity capital combined with premiums we receive from our insureds less payments on policyholder claims. Net investment income also includes rental income and depreciation expense from our real estate investment property, if any.

Change in fair value of equity securities

Change in fair value of equity securities represents the increase or decrease in the fair value of equity securities held during the period.

Net realized investment gains (losses)

Net realized investment gains (losses) are a function of the difference between the amount received by us on the sale of a security and the security's amortized cost.

Income tax expense

Currently, substantially all of our income tax expense relates to federal income taxes. Our insurance subsidiary, Kinsale Insurance Company, is not subject to income taxes in the states in which it operates; however, our non-insurance subsidiaries are subject to state income taxes, but have not generated any material taxable income to date. The amount of income tax expense or benefit recorded in future periods will depend on the jurisdictions in which we operate and the tax laws and regulations in effect.

Key metrics

We discuss certain key metrics, described below, which we believe provide useful information about our business and the operational factors underlying our financial performance.

Underwriting income is a non-GAAP financial measure. We define underwriting income as net income, excluding net investment income, net 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 income, other expenses and income tax expense. See "—Reconciliation of Non-GAAP Financial Measures" for a reconciliation of net income in accordance with GAAP to underwriting income.

Net operating earnings is a non-GAAP financial measure. We define net operating earnings as net income excluding the net 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. See "—Reconciliation of Non-GAAP Financial Measures" for a reconciliation of net income in accordance with GAAP to net operating earnings.

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.

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.

Combined ratio is the sum of the loss ratio and the expense ratio. A combined ratio under 100% indicates an underwriting profit. A combined ratio over 100% indicates an underwriting loss.

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Return on equity is net income expressed on an annualized basis as a percentage of average beginning and ending total stockholders’ equity during the period.

Operating return on equity is a non-GAAP financial measure. We define operating return on equity as net operating earnings expressed on an annualized basis as a percentage of average beginning and ending total stockholders’ equity during the period. See "—Reconciliation of Non-GAAP Financial Measures" for a reconciliation of net income in accordance with GAAP to net operating earnings.

Net retention ratio is the ratio of net written premiums to gross written premiums.

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 the average beginning and ending book values of those investments during the period.

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Results of Operations

Three months ended September 30, 2024 compared to three months ended September 30, 2023

The following table summarizes our results of operations for the three months ended September 30, 2024 and 2023:


	Three Months Ended September 30,
($ in thousands)	2024			2023			Change		% Change

Gross written premiums	$	448,646		$	377,789		$	70,857	18.8	%
Ceded written premiums	(98,709)			(83,509)			(15,200)		18.2	%
Net written premiums	$	349,937		$	294,280		$	55,657	18.9	%

Net earned premiums	$	348,752		$	281,502		$	67,250	23.9	%
Fee income	8,489			6,841			1,648		24.1	%
Losses and loss adjustment expenses	200,240			155,552			44,688		28.7	%
Underwriting, acquisition and insurance expenses	70,139			60,348			9,791		16.2	%
Underwriting income (1)	86,862			72,443			14,419		19.9	%
Net investment income	39,644			27,086			12,558		46.4	%
Change in the fair value of equity securities	20,659			(5,533)			26,192		NM
Net realized investment gains (losses)	(8)			4,274			(4,282)		NM
Change in allowance for credit losses on investments	4			(143)			147		NM
Interest expense	(2,589)			(2,573)			(16)		0.6	%
Other expense, net	(174)			(61)			(113)		NM
Income before taxes	144,398			95,493			48,905		51.2	%
Income tax expense	30,169			19,378			10,791		55.7	%
Net income	$	114,229		$	76,115		$	38,114	50.1	%

Net operating earnings (2)	$	97,911		$	77,223		$	20,688	26.8	%

Loss ratio	56.1		%	53.9		%
Expense ratio	19.6		%	20.9		%
Combined ratio (3)	75.7		%	74.8		%

Annualized return on equity	33.9		%	33.9		%
Annualized operating return on equity (2)	29.1		%	34.4		%

NM - Percentage change not meaningful.

(1) Underwriting income is a non-GAAP financial measure. See "—Reconciliation of Non-GAAP Financial Measures" for a reconciliation of net income in accordance with GAAP to underwriting income.

(2) Net operating earnings and annualized operating return on equity are non-GAAP financial measures. Net operating earnings is defined as net income excluding the net 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. Annualized operating return on equity is defined as net operating earnings expressed on an annualized basis as a percentage of average beginning and ending total stockholders’ equity during the period. See "—Reconciliation of Non-GAAP Financial Measures" for a reconciliation of net income in accordance with GAAP to net operating earnings.

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(3) 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.

Net income was $114.2 million for the three months ended September 30, 2024 compared to $76.1 million for the three months ended September 30, 2023, an increase of 50.1%. The increase in net income for the third quarter of 2024 from the same period last year was primarily due to higher returns on equity investments, continued profitable growth and an increase in investment income driven by higher investment balances and higher interest rates.

Underwriting income was $86.9 million for the three months ended September 30, 2024 compared to $72.4 million for the three months ended September 30, 2023, an increase of 19.9%. The corresponding combined ratios were 75.7% for the three months ended September 30, 2024 compared to 74.8% for the three months ended September 30, 2023. The increase in underwriting income in the third quarter of 2024 compared to the third quarter of 2023 was primarily due to a combination of premium growth and lower relative net commissions offset in part by higher catastrophe losses during the period.

Premiums

Gross written premiums were $448.6 million for the three months ended September 30, 2024 compared to $377.8 million for the three months ended September 30, 2023, an increase of $70.9 million, or 18.8%. The increase in gross written premiums for the third quarter of 2024 over the same period last year was due to higher submission activity from brokers and a favorable, yet increasingly competitive, pricing environment. The average premium per policy written was approximately $14,500 in the third quarter of 2024 compared to approximately $14,400 in the third quarter of 2023. Excluding our personal lines insurance, which has a relatively low premium per policy written, the average premium per policy written was approximately $15,300 in the third quarter of 2024 compared to $15,500 in the third quarter of 2023.

Net written premiums increased by $55.7 million, or 18.9%, to $349.9 million for the three months ended September 30, 2024 from $294.3 million for the three months ended September 30, 2023. The increase in net written premiums for the third quarter of 2024 compared to the same period last year was primarily due to higher gross written premiums. The net retention ratio was 78.0% for the three months ended September 30, 2024 compared to 77.9% for the three months ended September 30, 2023.

Net earned premiums increased by $67.3 million, or 23.9%, to $348.8 million for the three months ended September 30, 2024 from $281.5 million for the three months ended September 30, 2023 and was directly related to growth in gross written premiums.

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Loss ratio

The following table summarizes the loss ratios for the three months ended September 30, 2024 and 2023:


	Three Months Ended September 30,
	2024				2023
($ in thousands)	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:
Current accident year before catastrophe losses	$	196,750	55.1	%	$	163,545	56.7	%
Current year catastrophe losses	13,615		3.8	%	1,154		0.4	%
Effect of prior year development	(10,125)		(2.8)	%	(9,147)		(3.2)	%
Total	$	200,240	56.1	%	$	155,552	53.9	%

The loss ratio was 56.1% for the three months ended September 30, 2024 compared to 53.9% for the three months ended September 30, 2023. The increase in the loss ratio in the third quarter of 2024 compared to the third quarter of 2023 was due primarily to higher catastrophe losses incurred and lower relative net favorable development of loss reserves from prior accident years. Net catastrophe losses incurred during the third quarter of 2024 were primarily attributable to Hurricanes Helene, Francine and Beryl and tornadoes in the Midwest.

During the three months ended September 30, 2024, prior accident years developed favorably by $10.1 million, of which $14.9 million was attributable to the 2021 through 2023 accident years due to lower emergence of reported losses than expected across most lines of business. This favorable development was offset in part by adverse development largely from the 2017 through 2019 accident years due to construction defect claims that are more exposed to inflation.

During the three months ended September 30, 2023, prior accident years developed favorably by $9.1 million, of which $12.0 million was attributable to the 2021 and 2022 accident years due to lower emergence of reported losses than expected across most lines of business. This favorable development was offset in part by adverse development largely from the 2017 through 2019 accident years due primarily to construction defect claims that are more exposed to inflation.

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Expense ratio

The following table summarizes the components of the expense ratio for the three months ended September 30, 2024 and 2023:


	Three Months Ended September 30,
	2024				2023
($ in thousands)	Underwriting Expenses		% of Sum of Earned Premiums and Fee Income		Underwriting Expenses		% of Sum of Earned Premiums and Fee Income




Net commissions incurred	33,742		9.4	%	29,639		10.3	%
Other underwriting expenses	36,397		10.2	%	30,709		10.6	%
Underwriting, acquisition and insurance expenses	$	70,139	19.6	%	$	60,348	20.9	%

The expense ratio was 19.6% for the three months ended September 30, 2024 compared to 20.9% for the three months ended September 30, 2023. The expense ratio continues to benefit from higher ceding commissions earned under the commercial property quota share treaty as a result of commercial property premium growth. Direct commissions paid as a percent of gross written premiums was 14.7% and 14.6% for the three months ended September 30, 2024 and 2023, respectively.

Investing results

The following table summarizes net investment income, change in the fair value of equity securities and net realized investment (losses) gains for the three months ended September 30, 2024 and 2023:


	Three Months Ended September 30,
($ in thousands)	2024		2023		Change

Interest from fixed-maturity securities	$	38,400	$	25,166	$	13,234
Dividends from equity securities	1,494		1,271		223
Cash equivalents and short-term investments	615		758		(143)
Real estate investment income	—		851		(851)
Gross investment income	40,509		28,046		12,463
Investment expenses	(865)		(960)		95
Net investment income	39,644		27,086		12,558
Change in the fair value of equity securities	20,659		(5,533)		26,192
Net realized investment (losses) gains	(8)		4,274		(4,282)
Change in allowance for credit losses on investments	4		(143)		147
Net realized and unrealized investment gains (losses)	20,655		(1,402)		22,057
Total	$	60,299	$	25,684	$	34,615

Net investment income increased by 46.4% to $39.6 million for the three months ended September 30, 2024 from $27.1 million for the three months ended September 30, 2023. This increase was primarily due to growth in our investment portfolio generated from the investment of strong operating cash flows and higher interest rates relative to the prior year period. Our investment portfolio, excluding cash equivalents and unrealized gains and losses, had an annualized gross investment return of 4.4% and 4.1% for the three months ended September 30, 2024 and 2023, respectively.

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During the third quarter of 2024, the change in fair value of equity securities included changes in unrealized gains related to common stocks of $13.1 million and exchange traded funds ("ETFs") of $6.9 million and unrealized gains related to non-redeemable preferred stock of $0.7 million. The change in the fair value of ETFs and common stocks during the third quarter of 2024 reflected changes in the broader U.S. stock market.

During the third quarter of 2023, the change in fair value of equity securities included unrealized losses related to ETFs of $(3.6) million, unrealized losses related to common stocks of $(2.1) million and unrealized gains related to non-redeemable preferred stock of $0.2 million. The change in the fair value of ETFs and common stocks during the third quarter of 2023 reflected changes in the broader U.S. stock market.

During the third quarter of 2023, net realized investment gains of $4.3 million primarily related to the sale of a portion of our real estate investment property.

Income tax expense

Our effective tax rate was 20.9% for the three months ended September 30, 2024 compared to 20.3% for the three months ended September 30, 2023. The effective tax rates were lower than the federal statutory rate of 21% due to the tax benefits from stock-based compensation, including stock options exercised, and from tax-exempt investment income.

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Nine months ended September 30, 2024 compared to nine months ended September 30, 2023

The following table summarizes our results of operations for the nine months ended September 30, 2024 and 2023:


	Nine Months Ended September 30,
($ in thousands)	2024			2023			Change		% Change

Gross written premiums	$	1,427,060		$	1,173,599		$	253,461	21.6	%
Ceded written premiums	(295,833)			(215,248)			(80,585)		37.4	%
Net written premiums	$	1,131,227		$	958,351		$	172,876	18.0	%

Net earned premiums	$	990,731		$	775,706		$	215,025	27.7	%
Fee income	25,572			20,028			5,544		27.7	%
Losses and loss adjustment expenses	580,351			441,628			138,723		31.4	%
Underwriting, acquisition and insurance expenses	207,960			168,567			39,393		23.4	%
Underwriting income (1)	227,992			185,539			42,453		22.9	%
Net investment income	108,424			71,953			36,471		50.7	%
Change in fair value of equity securities	41,871			3,796			38,075		NM
Net realized investment gains	6,737			913			5,824		NM
Change in allowance for credit losses on investments	490			(199)			689		NM
Interest expense	(7,575)			(7,867)			292		(3.7)	%
Other expense, net	(1,874)			(139)			(1,735)		NM
Income before taxes	376,065			253,996			122,069		48.1	%
Income tax expense	70,316			49,290			21,026		42.7	%
Net income	$	305,749		$	204,706		$	101,043	49.4	%

Net operating earnings (2)	$	266,962		$	201,143		$	65,819	32.7	%

Loss ratio	57.1		%	55.5		%
Expense ratio	20.5		%	21.2		%
Combined ratio (3)	77.6		%	76.7		%

Annualized return on equity	32.3		%	32.7		%
Annualized operating return on equity (2)	28.2		%	32.1		%

NM - Percentage change not meaningful.

(1) Underwriting income is a non-GAAP financial measure. See "—Reconciliation of Non-GAAP Financial Measures" for a reconciliation of net income in accordance with GAAP to underwriting income.

(3) 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.

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Overview

Net income was $305.7 million for the nine months ended September 30, 2024 compared to $204.7 million for the nine months ended September 30, 2023, an increase of 49.4%. The increase in net income for the first nine months of 2024 over the same period last year was primarily due to a combination of continued profitable growth, higher returns on equity investments, and an increase in investment income driven by both higher investment balances and higher interest rates.

Underwriting income was $228.0 million for the nine months ended September 30, 2024 compared to $185.5 million for the nine months ended September 30, 2023, an increase of 22.9%. The corresponding combined ratios were 77.6% for the nine months ended September 30, 2024 compared to 76.7% for the nine months ended September 30, 2023. The increase in underwriting income for the first nine months of 2024 compared to the same period last year was primarily due to a combination of premium growth and lower relative net commissions, offset in part by higher catastrophe losses during the period.

Premiums

Gross written premiums were $1.4 billion for the nine months ended September 30, 2024 compared to $1.2 billion for the nine months ended September 30, 2023, an increase of $253.5 million, or 21.6%. The increase in gross written premiums for the first nine months of 2024 over the same period last year was due to higher submission activity from brokers and a favorable, yet increasingly competitive, pricing environment. The average premium per policy written was $15,400 in the first nine months of 2024 compared to $15,300 in the first nine months of 2023. Excluding our personal insurance division, which has a relatively low premium per policy written, the average premium per policy written was $16,200 for the first nine months of 2024 and $16,500 for the first nine months of 2023.

Net written premiums increased by $172.9 million, or 18.0%, to $1.1 billion for the nine months ended September 30, 2024 from $958.4 million for the nine months ended September 30, 2023. The increase in net written premiums for the first nine months of 2024 compared to the same period last year was primarily due to higher gross written premiums. The net retention ratio was 79.3% for the nine months ended September 30, 2024 compared to 81.7% for the same period last year. The decrease in the net retention ratio was primarily due to a higher cession rate on the commercial property quota share treaty effective with the June 2023 renewal, offset in part by an increase in our retention on our casualty treaty effective with the June 2024 renewal.

Net earned premiums increased by $215.0 million, or 27.7%, to $990.7 million for the nine months ended September 30, 2024 from $775.7 million for the nine months ended September 30, 2023 due to growth in gross written premiums.

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Loss ratio

The following table summarizes the loss ratios for the nine months ended September 30, 2024 and 2023:


	Nine Months Ended September 30,
	2024				2023
($ in thousands)	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:
Current accident year before catastrophe losses	$	590,810	58.1	%	$	466,056	58.6	%
Current year catastrophe losses	17,613		1.7	%	4,179		0.5	%
Effect of prior year development	(28,072)		(2.7)	%	(28,607)		(3.6)	%
Total	$	580,351	57.1	%	$	441,628	55.5	%

The loss ratio was 57.1% for the nine months ended September 30, 2024 compared to 55.5% for the nine months ended September 30, 2023. The increase in the loss ratio in the first nine months of 2024 compared to the first nine months of 2023 was due primarily to higher catastrophe losses incurred in the period and lower relative net favorable development of loss reserves from prior accident years. Net catastrophe losses incurred during the nine months ended September 30, 2024 were primarily attributable to Hurricanes Helene, Francine and Beryl and tornadoes in the Midwest.

During the nine months ended September 30, 2024, prior accident years developed favorably by $28.1 million, of which $45.6 million was attributable to the 2021 through 2023 accident years due to lower emergence of reported losses than expected across most lines of business. This favorable development was offset in part by adverse development primarily from the 2017 through 2019 accident years due to construction defect claims that are more exposed to inflation and from the 2020 accident year due to a large property claim.

Expense ratio

The following table summarizes the components of the expense ratio for the nine months ended September 30, 2024 and 2023:


	Nine Months Ended September 30,
	2024				2023
($ in thousands)	Underwriting Expenses		% of Sum of Earned Premiums and Fee Income		Underwriting Expenses		% of Sum of Earned Premiums and Fee Income




Net commissions incurred	98,686		9.7	%	83,299		10.5	%
Other underwriting expenses	109,274		10.8	%	85,268		10.7	%
Total	$	207,960	20.5	%	$	168,567	21.2	%

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The expense ratio was 20.5% for the nine months ended September 30, 2024 compared to 21.2% for the nine months ended September 30, 2023. The decrease in the expense ratio was primarily due to lower relative net commissions due to higher ceding commissions earned under the commercial property quota share treaty as a result of commercial property premium growth. Direct commissions paid as a percentage of gross written premiums was 14.7% and 14.5% for the nine months ended September 30, 2024 and 2023, respectively.

Investing results

The following table summarizes net investment income, change in the fair value of equity securities and net realized investment gains (losses) for the nine months ended September 30, 2024 and 2023:


	Nine Months Ended September 30,
($ in thousands)	2024		2023		Change

Interest from fixed-maturity securities	$	105,096	$	65,376	$	39,720
Dividends from equity securities	4,331		3,692		639
Cash equivalents and short-term investments	1,726		2,337		(611)
Real estate investment income	153		3,565		(3,412)
Gross investment income	111,306		74,970		36,336
Investment expenses	(2,882)		(3,017)		135
Net investment income	108,424		71,953		36,471
Change in fair value of equity securities	41,871		3,796		38,075
Net realized investment gains	6,737		913		5,824
Change in allowance for credit losses on investments	490		(199)		689
Net realized and unrealized investment gains	49,098		4,510		44,588
Total	$	157,522	$	76,463	$	81,059

Net investment income increased by 50.7% to $108.4 million for the nine months ended September 30, 2024 from $72.0 million for the nine months ended September 30, 2023. The increase in the first nine months of 2024 compared to the same period last year was primarily due to growth in our investment portfolio largely generated from the investment of strong operating cash flows and higher interest rates relative to the prior year period. Our investment portfolio, excluding cash equivalents and unrealized gains and losses, had an annualized gross investment return of 4.3% and 3.9% for the nine months ended September 30, 2024 and 2023, respectively.

During the first nine months of 2024, the change in fair value of equity securities of $41.9 million included changes in unrealized gains related to common stocks of $25.4 million and ETFs of $13.2 million and changes in unrealized gains related to non-redeemable preferred stock of $3.3 million. The change in the fair value of common stocks and ETFs during the first nine months of 2024 primarily reflected higher valuations in the broader U.S. stock market and the change in fair value of preferred stock relates primarily to the disposition of certain preferred stock securities in a loss position.

During the first nine months of 2023, the change in fair value of equity securities included unrealized gains related to ETFs and common stocks of $2.7 million and unrealized gains related to non-redeemable preferred stock of $1.1 million. The change in the fair value of ETFs and common stocks during the first nine months of 2023 primarily reflected changes in the broader U.S. stock market.

During the first nine months of 2024, net realized investment gains of $6.7 million were primarily related to sales of ETFs due to opportunistic repositioning of our equity portfolio. During the first nine months of 2023, net realized investment gains of $0.9 million included a realized gain of $4.3 million from the sale of a portion of our real estate

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investment property, offset by realized investment losses primarily related to disposing of securities issued by certain banking and financial institutions.

We perform quarterly reviews of all available-for-sale securities within our investment portfolio to determine whether the decline in a security's fair value is deemed to be a credit loss. Based on our review, we recorded a reduction to the allowance for credit losses at September 30, 2024 of $0.5 million. See Note 2 of the notes to the consolidated financial statements for further information regarding credit losses.

Income tax expense

Our effective tax rate was 18.7% for the nine months ended September 30, 2024 compared to 19.4% for the nine months ended September 30, 2023. The effective tax rate was 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.

Return on equity

Our annualized return on equity was 32.3% for the nine months ended September 30, 2024 compared to 32.7% for the nine months ended September 30, 2023. Our annualized operating return on equity was 28.2% for the nine months ended September 30, 2024 compared to 32.1% for the nine months ended September 30, 2023. The decrease in annualized operating return on equity for the nine months ended September 30, 2024 compared to the prior period was due primarily to higher average stockholders' equity as a result of profitable growth and an increase in the fair value of our fixed income portfolio offset in part by higher net operating earnings.

Liquidity and Capital Resources

Sources and uses of funds

We are organized as a Delaware holding company with our operations primarily conducted by our wholly-owned insurance subsidiary, Kinsale Insurance Company, which is domiciled in Arkansas. Accordingly, we may receive cash through (1) loans from banks and other third parties, (2) issuance of equity and debt securities, (3) corporate service fees from our insurance subsidiary, (4) payments from our subsidiaries pursuant to our consolidated tax allocation agreement and other transactions, and (5) dividends from our insurance subsidiary. We may use the proceeds from these sources to contribute funds to Kinsale Insurance Company in order to support premium growth, reduce our reliance on reinsurance, pay dividends and taxes and for other business purposes.

We receive corporate service fees from Kinsale Insurance Company to reimburse us for most of the operating expenses that we incur. Reimbursement of expenses through corporate service fees is based on the actual costs that we expect to incur with no mark-up above our expected costs.

In August 2022, we filed a universal shelf registration statement with the SEC that expires in 2025. We can use this shelf registration to issue an unspecified amount of common stock, preferred stock, depositary shares and warrants. The specific terms of any securities we issue under this registration statement will be provided in the applicable prospectus supplements.

In October 2024, the Company's Board of Directors authorized a share repurchase program authorizing the repurchase of up to $100.0 million of the Company's common stock. The shares may be repurchased from time to time in open market purchases, privately-negotiated transactions, block purchases, accelerated share repurchase agreements or a combination of methods and pursuant to safe harbors provided by Rule 10b-18 and Rule 10b5-1 under the Securities Exchange Act of 1934. The timing, manner, price and amount of any repurchases under the share repurchase program will be determined by the Company in its discretion. The stock repurchase program does

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not require the Company to repurchase any specific number of shares, and may be modified, suspended or terminated at any time.

In July 2022, we entered into a Note Purchase and Private Shelf Agreement (the "Note Purchase Agreement"), which provides for the issuance of senior promissory notes with an aggregate principal amount of up to $150.0 million. In September 2023, we amended the Note Purchase Agreement, which increased the authorized aggregate principal amount of senior promissory notes that may be issued thereunder to $200.0 million.

Pursuant to the Note Purchase Agreement, on July 22, 2022 we issued $125.0 million aggregate principal amount of 5.15% senior promissory notes (the “Series A Notes”) and on September 18, 2023 we issued a $50.0 million aggregate principal amount 6.21% senior promissory note (the "Series B Note"), the proceeds of which were used to fund surplus at Kinsale Insurance Company, refinance indebtedness and for general corporate purposes. See Note 13 for further information regarding the Note Purchase Agreement.

In July 2022, we entered into an Amended and Restated Credit Agreement, which extended the maturity date to July 22, 2027, and increased the aggregate commitment to $100.0 million, with the option to increase the aggregate commitment by $30.0 million, subject to certain conditions. Borrowings under the Amended and Restated Credit Agreement may be used for general corporate purposes (which may include, without limitation, to fund future growth, to finance working capital needs, to fund capital expenditures, and to refinance, redeem or repay indebtedness). See Note 13 for further information regarding the Amended and Restated Credit Agreement.

In connection with the share repurchase authorization, in October 2024, the covenants limiting restricted payments under the Note Purchase Agreement and Amended and Restated Credit Agreement were amended. The amendments allow the Company to make restricted payments so long as the aggregate amount of all such restricted payments does not exceed the greater of $300.0 million and 6.5% of the total assets of the Company and its subsidiaries at the end of the most recently completed fiscal quarter.

Management believes that the Company has sufficient liquidity available both in Kinsale and in its insurance subsidiary, Kinsale Insurance Company, as well as in its other operating subsidiaries, to meet its operating cash needs and obligations and committed capital expenditures for the next 12 months.

Cash flows

Our most significant source of cash is from premiums received from our insureds, which we generally receive at the beginning of the coverage period. Our most significant cash outflow is for claims that arise when a policyholder incurs an insured loss. Because the payment of claims occurs after the receipt of the premium, often years later, we invest the cash in various investment securities that earn interest and dividends. We also use cash to pay commissions to insurance brokers, as well as to pay for ongoing operating expenses such as salaries, consulting services and taxes. As described under "—Reinsurance" below, we use reinsurance to help manage the risk that we take related to the issuance of our policies. We cede, or pay out, part of the premiums we receive to our reinsurers and collect cash back when losses subject to our reinsurance coverage are paid.

The timing of our cash flows from operating activities can vary among periods due to the timing by which payments are made or received. Some of our payments and receipts, including loss settlements and subsequent reinsurance receipts, can be significant, so their timing can influence cash flows from operating activities in any given period. Management believes that cash receipts from premiums, proceeds from investment sales and redemptions and investment income are sufficient to cover cash outflows in the foreseeable future.

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Our cash flows for the nine months ended September 30, 2024 and 2023 were:


	Nine Months Ended September 30,
	2024		2023
	(in thousands)
Cash and cash equivalents provided by (used in):
Operating activities	$	763,324	$	648,308
Investing activities	(762,100)		(616,364)
Financing activities	(16,227)		(25,274)
Change in cash and cash equivalents	$	(15,003)	$	6,670

Net cash provided by operating activities was approximately $763.3 million for the nine months ended September 30, 2024 compared to $648.3 million for the same period in 2023. This increase was largely driven by higher premium volume and the timing of claim payments and reinsurance recoveries.

Net cash used in investing activities was $762.1 million for the nine months ended September 30, 2024 compared to $616.4 million for the nine months ended September 30, 2023. Net cash used in investing activities during the first nine months of 2024 included purchases of fixed-maturity securities of $1.3 billion, which included primarily corporate bonds, asset- and mortgage-backed securities, and to a lesser extent, municipal securities and U.S. Treasuries. During the first nine months of 2024, we received proceeds of $274.2 million from sales of fixed-maturity securities, largely corporate bonds, mortgage- and asset-backed securities, municipal securities, U.S. Treasuries and government agency bonds and $317.4 million from redemptions and maturities of asset- and mortgage-backed securities and corporate bonds. For the nine months ended September 30, 2024, purchases of equity securities of $115.1 million consisted of common stocks and ETFs. During the first nine months of 2024, we received proceeds of $34.2 million primarily from sales of ETFs and common stocks and, to a lesser extent, calls of non-redeemable preferred stock.

Net cash used in investing activities of $616.4 million for the nine months ended September 30, 2023 included purchases of fixed-maturity securities of $947.9 million, which were comprised largely of corporate bonds, asset- and mortgage-backed securities, and to a lesser extent, U.S. Treasuries and municipal securities. During the first nine months of 2023, we received proceeds of $204.4 million from sales of fixed-maturity securities, largely corporate bonds, asset-backed securities and municipal securities and $113.8 million from redemptions and maturities of asset- and mortgage-backed securities and corporate bonds. For the nine months ended September 30, 2023, purchases of equity securities of $62.0 million consisted of common stocks. During the first nine months of 2023, we received proceeds of $7.5 million from sales of equity securities, primarily ETFs and common stocks. In addition, net sales of short-term investments of $13.1 million consisted of U.S. Treasuries and corporate bonds. Net cash used in investing activities also included proceeds of $62.0 million from the sale of a portion of our real estate investment property in the third quarter of 2023.

During the first nine months of 2024, cash used in financing reflected dividends paid of $0.45 per common share, or $10.5 million in aggregate. In addition, for the nine months ended September 30, 2024, payroll taxes withheld and remitted on restricted stock awards were $7.0 million, offset in part by proceeds received from our equity compensation plans of $1.2 million.

During the first nine months of 2023, cash used in financing activities reflected proceeds of $50.0 million from the issuance of the Series B Note on September 18, 2023. Proceeds from the sale of our real estate investment were used to pay down $62.0 million from our Credit Facility. Financing activities also reflected dividends paid of $0.42 per common share, or $9.7 million in aggregate. In addition, for the nine months ended September 30, 2023, payroll

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taxes withheld and remitted on restricted stock awards were $4.2 million, offset in part by proceeds received from our equity compensation plans of $0.7 million.

Reinsurance

We enter into reinsurance contracts primarily to limit our exposure to potential large losses. Reinsurance involves an insurance company transferring ("ceding") a portion of its exposure on a risk to another insurer, the reinsurer. The reinsurer assumes the exposure in return for a portion of the premium. Our reinsurance is primarily contracted under quota-share reinsurance treaties and excess of loss treaties. In quota-share reinsurance, the reinsurer agrees to assume a specified percentage of the ceding company's losses arising out of a defined class of business in exchange for a corresponding percentage of premiums, net of a ceding commission. In excess of loss reinsurance, the reinsurer agrees to assume all or a portion of the ceding company's losses, in excess of a specified amount. Under excess of loss reinsurance, the premium payable to the reinsurer is negotiated by the parties based on their assessment of the amount of risk being ceded to the reinsurer because the reinsurer does not share proportionately in the ceding company's losses.

We renew our reinsurance treaties annually. During each renewal cycle, there are a number of factors we consider when determining our reinsurance coverage, including (1) plans to change the underlying insurance coverage we offer, (2) trends in loss activity, (3) the level of our capital and surplus, (4) changes in our risk appetite and (5) the cost and availability of reinsurance coverage.

To manage our natural catastrophe exposure, we use computer models to analyze the risk of severe losses. We measure exposure to these losses in terms of probable maximum loss ("PML"), which is an estimate of the amount of loss we would expect to meet or exceed once in a given number of years (referred to as the return period). When managing our catastrophe exposure, we generally focus on the 100-year and the 250-year return periods.

The following is a summary of our significant reinsurance programs as of September 30, 2024:

Line of Business Covered

Company Policy Limit

Reinsurance Coverage

Company Retention

Property (1)

Up to $10.0 million per occurrence

50% up to $379.8 million per catastrophe

50% of commercial property losses

Property - catastrophe (2)

N/A

$175.0 million excess of $60.0 million

$60.0 million per catastrophe

Primary casualty (3)

Up to $10.0 million per occurrence

$8.0 million excess of $2.0 million

$2.0 million per occurrence

Excess casualty (4)

Up to $10.0 million per occurrence

Variable quota share

$2.5 million per occurrence as described in note (4) below

(1) Our property quota-share reinsurance reduces the financial impact of property losses on our commercial property, small business property, high value homeowners and inland marine policies up to a loss recovery of $189.9 million for an event. This reinsurance is not applicable to any individual policy with a limit of $2.0 million or less.

(2) Our property catastrophe reinsurance reduces the financial impact of a catastrophe event involving multiple claims and policyholders. Our property catastrophe reinsurance includes a reinstatement provision which requires us to pay reinstatement premiums after a loss has occurred in order to preserve coverage. Including the reinstatement of coverage, the maximum aggregate loss recovery limit is $350.0 million. This coverage applies after the coverage provided by the commercial property quota-share treaty.

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(3) This reinsurance is not applicable to any individual policy with a per-occurrence limit of $2.0 million or less.

(4) For excess casualty policies with a per-occurrence limit higher than $2.5 million, the ceding percentage varies such that the retention is always $2.5 million or less. For example, for a $5.0 million limit excess policy, our retention would be 50%, whereas for a $10.0 million limit excess policy, our retention would be 25%. For policies for which we also write an underlying primary limit, the combined retention on the primary and excess policies would not exceed $2.5 million. This reinsurance is not applicable to any individual policy with a per-occurrence limit of $2.5 million or less.

Reinsurance contracts do not relieve us from our obligations to policyholders. Failure of the reinsurer to honor its obligation could result in losses to us, and therefore, we established an allowance for credit risk based on historical analysis of credit losses for highly rated companies in the insurance industry. In formulating our reinsurance programs, we are selective in our choice of reinsurers and we consider numerous factors, the most important of which are the financial stability of the reinsurer, its history of responding to claims and its overall reputation. In an effort to minimize our exposure to the insolvency of our reinsurers, we review the financial condition of each reinsurer annually. In addition, we continually monitor for rating downgrades involving any of our reinsurers. At September 30, 2024, all reinsurance contracts that our insurance subsidiary was a party to were with companies with A.M. Best ratings of "A-" (Excellent) or better. As of September 30, 2024, we recorded an allowance for credit losses of $0.9 million related to our reinsurance balances.

Ratings

Kinsale Insurance Company has a financial strength rating of "A" (Excellent) with a stable outlook from A.M. Best. A.M. Best assigns ratings to insurance companies, which currently range from "A++" (Superior) to "F" (In Liquidation). "A" (Excellent) is the third highest rating issued by A.M. Best. The "A" (Excellent) rating is assigned to insurers that have, in A.M. Best's opinion, an excellent ability to meet their ongoing obligations to policyholders. This rating is intended to provide an independent opinion of an insurer's ability to meet its obligation to policyholders and is not an evaluation directed at investors.

The financial strength ratings assigned by A.M. Best have an impact on the ability of the insurance companies to attract and retain agents and brokers and on the risk profiles of the submissions for insurance that the insurance companies receive. The "A" (Excellent) rating obtained by Kinsale Insurance Company is consistent with our business plan and allows us to actively pursue relationships with the agents and brokers identified in our marketing plan.

Financial Condition

Stockholders' equity

At September 30, 2024, total stockholders' equity and tangible stockholders' equity were $1.4 billion compared to total stockholders' equity and tangible stockholders' equity of $1.1 billion at December 31, 2023. The increases in both total and tangible stockholders' equity over the prior year-end balances were due to profits generated during the period, an increase in the fair value of our fixed-maturity investments and net activity related to stock-based compensation plans, offset in part by payment of dividends. Tangible stockholders’ equity is a non-GAAP financial measure. See "—Reconciliation of non-GAAP financial measures" for a reconciliation of stockholders' equity in accordance with GAAP to tangible stockholders' equity.

Investment portfolio

At September 30, 2024, our cash and invested assets of $4.0 billion consisted of fixed-maturity securities, equity securities, cash and cash equivalents and real estate investments. At September 30, 2024, the majority of the investment portfolio was composed of fixed-maturity securities of $3.5 billion that were classified as available-for-

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sale. Available-for-sale investments are carried at fair value with unrealized gains and losses on these securities, net of applicable taxes, reported as a separate component of accumulated other comprehensive income. At September 30, 2024, we also held $365.6 million of equity securities, which included ETFs, common stocks and non-redeemable preferred stock, $111.7 million of cash and cash equivalents and $15.0 million of real estate investments.

Our fixed-maturity securities, including cash equivalents, had a weighted average duration of 3.1 years and 2.8 years at September 30, 2024 and December 31, 2023, respectively and an average rating of "AA-" at both September 30, 2024 and December 31, 2023.

At September 30, 2024 and December 31, 2023, the amortized cost and estimated fair value on fixed-maturity securities were as follows:


	September 30, 2024						December 31, 2023
	Amortized Cost		Estimated Fair Value		% of Total Fair Value		Amortized Cost		Estimated Fair Value		% of Total Fair Value
	($ in thousands)
Fixed-maturity securities:
U.S. Treasury securities and obligations of U.S. government agencies	$	15,160	$	14,748	0.4	%	$	28,003	$	27,254	1.0	%
Obligations of states, municipalities and political subdivisions	180,797		163,884		4.7	%	191,080		171,044		6.3	%
Corporate and other securities	1,914,970		1,902,034		54.9	%	1,437,468		1,387,693		51.2	%
Asset-backed securities	745,541		753,693		21.7	%	641,700		641,760		23.7	%
Residential mortgage-backed securities	521,368		483,780		14.0	%	463,904		417,106		15.4	%
Commercial mortgage-backed securities	150,839		148,899		4.3	%	72,308		66,902		2.4	%
Total fixed-maturity securities	$	3,528,675	$	3,467,038	100.0	%	$	2,834,463	$	2,711,759	100.0	%

The table below summarizes the credit quality of our fixed-maturity securities at September 30, 2024 and December 31, 2023, as rated by Standard & Poor’s Financial Services, LLC ("Standard & Poor's"):


	September 30, 2024				December 31, 2023
Standard & Poor’s or Equivalent Designation	Estimated Fair Value		% of Total		Estimated Fair Value		% of Total
	($ in thousands)
AAA	$	1,003,025	28.9	%	$	773,649	28.5	%
AA	657,354		19.0	%	626,287		23.1	%
A	1,108,182		32.0	%	859,706		31.7	%
BBB	618,558		17.8	%	384,539		14.2	%
Below BBB and unrated	79,919		2.3	%	67,578		2.5	%
Total	$	3,467,038	100.0	%	$	2,711,759	100.0	%

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The amortized cost and estimated fair value of our fixed-maturity securities summarized by contractual maturity as of September 30, 2024 and December 31, 2023, were as follows:


	September 30, 2024						December 31, 2023
	Amortized Cost		Estimated Fair Value		% of Total Fair Value		Amortized Cost		Estimated Fair Value		% of Total Fair Value
	($ in thousands)
Due in one year or less	$	355,278	$	355,263	10.2	%	$	193,054	$	191,792	7.1	%
Due after one year through five years	1,090,396		1,093,854		31.6	%	1,051,112		1,038,158		38.3	%
Due after five years through ten years	438,248		436,588		12.6	%	184,603		167,555		6.2	%
Due after ten years	227,005		194,961		5.6	%	227,782		188,486		6.9	%
Asset-backed securities	745,541		753,693		21.7	%	641,700		641,760		23.7	%
Residential mortgage-backed securities	521,368		483,780		14.0	%	463,904		417,106		15.4	%
Commercial mortgage-backed securities	150,839		148,899		4.3	%	72,308		66,902		2.4	%
Total fixed-maturity securities	$	3,528,675	$	3,467,038	100.0	%	$	2,834,463	$	2,711,759	100.0	%

Actual maturities may differ from contractual maturities because some borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

Restricted investments

In order to conduct business in certain states, we are required to maintain letters of credit or assets on deposit to support state-mandated insurance regulatory requirements and to comply with certain third-party agreements. Assets held on deposit or in trust accounts are primarily in the form of high-grade securities. The fair value of our restricted assets was $3.5 million and $5.8 million at September 30, 2024 and December 31, 2023, respectively.

Reconciliation of Non-GAAP Financial Measures

Reconciliation of underwriting income

Underwriting income is a non-GAAP financial measure that we believe is useful in evaluating our underwriting performance without regard to investment income. Underwriting income is defined as net income excluding net investment income, the net 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. We use underwriting income as an internal performance measure in the management of our operations because we believe it gives us and users of our financial information useful insight into our results of operations and our 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.

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Net income for the three and nine months ended September 30, 2024 and 2023, reconciles to underwriting income as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
($ in thousands)	2024		2023		2024		2023

Net income	$	114,229	$	76,115	$	305,749	$	204,706
Income tax expense	30,169		19,378		70,316		49,290
Income before income taxes	144,398		95,493		376,065		253,996
Net investment income	(39,644)		(27,086)		(108,424)		(71,953)
Change in the fair value of equity securities	(20,659)		5,533		(41,871)		(3,796)
Net realized investment (gains) losses	8		(4,274)		(6,737)		(913)
Change in allowance for credit losses on investments	(4)		143		(490)		199
Interest expense	2,589		2,573		7,575		7,867
Other expenses (1)	692		401		3,451		1,220
Other income	(518)		(340)		(1,577)		(1,081)
Underwriting income	$	86,862	$	72,443	$	227,992	$	185,539

(1) Other expenses includes primarily corporate expenses not allocated to our insurance operations.

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Reconciliation of net operating earnings

Net operating earnings is defined as net income excluding the effects of the net change in the fair value of equity securities, after taxes, net realized investment gains and losses, after taxes, and the change in allowance for credit losses on investments, after taxes. We believe the exclusion of these items provides a useful comparison of our 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.

Net income for the three and nine months ended September 30, 2024 and 2023, reconciles to net operating earnings as follows:


	Three Months Ended September 30,						Nine Months Ended September 30,
($ in thousands)	2024			2023			2024			2023


Net income	$	114,229		$	76,115		$	305,749		$	204,706
Adjustments:
Change in the fair value of equity securities, before taxes	(20,659)			5,533			(41,871)			(3,796)
Income tax expense (benefit) (1)	4,338			(1,162)			8,793			797
Change in the fair value of equity securities, after taxes	(16,321)			4,371			(33,078)			(2,999)

Net realized investment (gains) losses, before taxes	8			(4,274)			(6,737)			(913)
Income tax expense (benefit) (1)	(2)			898			1,415			192
Net realized investment (gains) losses, after taxes	6			(3,376)			(5,322)			(721)

Change in allowance for credit losses on investments, before taxes	(4)			143			(490)			199
Income tax expense (benefit) (1)	1			(30)			103			(42)
Change in allowance for credit losses on investments, after taxes	(3)			113			(387)			157
Net operating earnings	$	97,911		$	77,223		$	266,962		$	201,143

Operating return on equity:
Average stockholders' equity (2)	$	1,346,076		$	897,789		$	1,260,891		$	834,606
Annualized return on equity (3)	33.9		%	33.9		%	32.3		%	32.7		%
Annualized operating return on equity (4)	29.1		%	34.4		%	28.2		%	32.1		%

(1) Income taxes on adjustments to reconcile net income to net operating earnings use an effective tax rate of 21%.

(2) Average stockholders' 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.

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(3) 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.

(4) 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.

Reconciliation of tangible stockholders' equity

Tangible stockholders’ equity is defined as total stockholders’ equity less intangible assets, net of deferred taxes. Our definition of tangible stockholders’ equity may not be comparable to that of other companies, and it should not be viewed as a substitute for stockholders’ equity calculated in accordance with GAAP. We use tangible stockholders' equity internally to evaluate the strength of our balance sheet and to compare returns relative to this measure.

Stockholders' equity at September 30, 2024 and December 31, 2023, reconciles to tangible stockholders' equity as follows:


($ in thousands)	September 30, 2024		December 31, 2023

Stockholders' equity	$	1,434,949	$	1,086,832
Less: intangible assets, net of deferred taxes	2,795		2,795
Tangible stockholders' equity	$	1,432,154	$	1,084,037

Critical Accounting Estimates

We identified the accounting estimates which are critical to the understanding of our financial position and results of operations. Critical accounting estimates are defined as those estimates that are both important to the portrayal of our financial condition and results of operations and require us to exercise significant judgment. We use significant judgment concerning future results and developments in applying these critical accounting estimates and in preparing our condensed consolidated financial statements. These judgments and estimates affect our reported amounts of assets, liabilities, revenues and expenses and the disclosure of our material contingent assets and liabilities, if any. Actual results may differ materially from the estimates and assumptions used in preparing the condensed consolidated financial statements. We evaluate our estimates regularly using information that we believe to be relevant. Our critical accounting policies and estimates are described in our annual consolidated financial statements and the related notes in our Annual Report on Form 10-K for the year ended December 31, 2023.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Market risk is the risk of economic losses due to adverse changes in the estimated fair value of a financial instrument as the result of changes in interest rates, equity prices, foreign currency exchange rates and commodity prices. Our primary market risks have been equity price risk associated with investments in equity securities and interest rate risk associated with investments in fixed maturities. We do not have any material exposure to foreign currency exchange rate risk or commodity risk.

There have been no material changes in market risk from the information provided in our Annual Report on Form 10-K for the year ended December 31, 2023.

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Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports we file under the Securities Exchange Act of 1934 (the "Exchange Act") is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO"), as appropriate, to allow timely decisions regarding required financial disclosure.

As of the end of the period covered by this Quarterly Report on Form 10-Q, we carried out an evaluation, under the supervision and with the participation of our management, including our CEO and CFO, of the effectiveness of the design and operation of our disclosure controls and procedures defined under Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based upon this evaluation, our CEO and CFO concluded that our disclosure controls and procedures were effective as of that date.

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting during the third quarter of 2024 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

Inherent Limitations on Effectiveness of Controls

The effectiveness of any system of controls and procedures is subject to certain limitations, and, as a result, there can be no assurance that our controls and procedures will detect all errors or fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system will be attained.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

We are party to legal proceedings which arise in the ordinary course of business. We believe that the outcome of such matters, individually and in the aggregate, will not have a material adverse effect on our condensed consolidated financial position. Refer to Note 15 of the notes to the condensed consolidated financial statements for further information regarding legal proceedings.

Item 1A. Risk Factors

There have been no material changes in our risk factors from those disclosed in our Annual Report on Form 10-K

for the year ended December 31, 2023.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 5. Other Information

Entry into a Material Definitive Agreement

On October 22, 2024, the Company entered into:

• Second Amendment to the Note Purchase and Private Shelf Agreement (the "NPA Amendment") with PGIM, Inc. and the other noteholders party thereto; and

• Amendment No. 2 to the Amended and Restated Credit Agreement (the "Credit Agreement Amendment") with JPMorgan Chase Bank, N.A., as administrative agent and as a lender, Truist Bank, as a lender, and CIBC Bank USA, as a lender.

Each of the Note Purchase and Private Shelf Agreement and Amended and Restated Credit Agreement contain a restrictive covenant limiting Restricted Payments (as defined therein) and contained a general basket allowing for Restricted Payments of up to $100,000,000. The NPA Amendment and Credit Agreement Amendment amended each general basket to allow the Company to make Restricted Payments up to an aggregate amount of the greater of $300,000,000 and 6.5% of the total assets of the Company and its subsidiaries at the end of the most recently completed fiscal quarter.

The NPA Amendment amended Paragraph 6H(vi) of the Note Purchase and Private Shelf Agreement by deleting the reference to "$100,000,000" therein and replacing it with "the greater of (x) $300,000,000 and (y) 6.5% of the Total Assets of the Company and its consolidated Subsidiaries as of the end of the most recently completed fiscal quarter".

The Credit Agreement Amendment amended Section 6.08(f) of the Amended and Restated Credit Agreement by deleting the reference to "$100,000,000" therein and replacing it with “the greater of (x) $300,000,000 and (y) 6.5% of the Total Assets of the Borrower and its consolidated Subsidiaries as of the end of the most recently completed fiscal quarter” in its place.

The foregoing descriptions of the NPA Amendment and the Credit Agreement Amendment do not purport to be complete and are qualified in their entirety by reference to the full and complete terms contained in the NPA Amendment and the Credit Agreement Amendment, a copy of each of which is attached as an exhibit hereto.

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Securities Trading Plans of Directors and Executive Officers

Transactions in our securities by our non-employee directors and executive officers are required to be made in accordance with our Policy on the Prevention of Insider Trading and Selective Disclosure (the "Insider Trading Policy"), which, among other things, requires that the transactions be in accordance with applicable U.S. federal securities laws that prohibit trading while in possession of material nonpublic information. Rule 10b5-1 under the Exchange Act provides an affirmative defense that enables prearranged transactions in securities in a manner that avoids concerns about initiating transactions at a future date while possibly in possession of material nonpublic information. Our Insider Trading Policy permits our non-employee directors and executive officers to enter into trading plans designed to comply with Rule 10b5-1.

During the third quarter of 2024, none of our non-employee directors or executive officers adopted, modified or terminated a Rule 10b5-1 trading plan or adopted, modified or terminated a non-Rule 10b5-1 trading arrangement (as defined in Item 408(c) of Regulation S-K).

Item 6. Exhibits


Exhibit Number						Description
3.1						Second Amended and Restated Certificate of Incorporation of Kinsale Capital Group, Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the SEC on May 24, 2018)
3.2						Amended and Restated By-Laws of Kinsale Capital Group, Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the SEC on September 18, 2023)


10.1						Second Amendment to the Note Purchase and Private Shelf Agreement, dated as of October 22 , 2024, among Kinsale Capital Group, Inc., PGIM, Inc. and the other noteholders party thereto
10.2						Amendment No. 2 to the Amended and Restated Credit Agreement, dated as of October 22, 2024, among Kinsale Capital Group, Inc., as borrower, JPMorgan Chase Bank, N.A., as administrative agent and as lender, Truist Bank, as lender, and CIBC Bank USA, as lender
31.1						Certification of principal executive officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2						Certification of principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1*						Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2*						Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS **						XBRL Instance Document
101.SCH						XBRL Taxonomy Extension Schema Document
101.CAL						XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF						XBRL Taxonomy Extension Definition Linkbase Document
101.LAB						XBRL Taxonomy Extension Label Linkbase Document
101.PRE						XBRL Taxonomy Extension Presentation Linkbase Document
104						Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

* This certification is deemed not filed for purposes of section 18 of the Exchange Act, or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act.

** The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

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Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


		KINSALE CAPITAL GROUP, INC.
Date: October 24, 2024	By:	/s/ Michael P. Kehoe
		Michael P. Kehoe Chairman and Chief Executive Officer

Date: October 24, 2024	By:	/s/ Bryan P. Petrucelli
		Bryan P. Petrucelli Executive Vice President, Chief Financial Officer and Treasurer

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Date	Price Target	Rating	Analyst
10/28/2024	$535.00	Peer Perform → Outperform	Wolfe Research
9/16/2024		Outperform → Peer Perform	Wolfe Research
7/12/2024		Perform	Oppenheimer
5/20/2024	$403.00	Hold	TD Cowen
4/29/2024	$555.00 → $425.00	Outperform → Sector Perform	RBC Capital Mkts
2/28/2024	$434.00 → $544.00	Outperform → Market Perform	BMO Capital Markets
9/22/2023	$521.00	Outperform	Wolfe Research
6/2/2023	$270.00 → $389.00	Underperform → Outperform	BMO Capital Markets

SEC Form 10-Q filed by Kinsale Capital Group Inc.

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