Kinsale Capital Group, Inc. Q2 FY2025 earnings call

• Operating earnings per share increased by 27.5% and gross written premium grew by 4.9% in Q2 2025 compared to Q2 2024.
• Combined ratio was 75.8%, 6-month operating return on equity was 24.7%, and book value per share increased by 16% since year-end 2024.
• Strategy focuses on small E&S accounts, absolute underwriting control, exceptional customer service, broad risk appetite, advanced technology, and low costs.
• Renewed reinsurance program on June 1 was slightly more favorable, with changes in retention and ceding commission on various treaties.
• Net income and net operating earnings increased by 44.9% and 27.4% respectively. Expense ratio was 20.7% in Q2 2025. Net investment income increased by 29.6% due to growth in investment portfolio. Float was $2.9 billion at June 30, 2025.

In the second quarter of 2025, Kinsale's Commercial Property division saw a 16.8% drop in premium due to high competition and rate declines. Absent this division, premium grew by 14.3%. The company has robust premium growth in small business property, high-value homeowners, commercial auto, entertainment, and general casualty, while commercial property, construction, life sciences, and management liability face tougher competition and declining premiums. Revenue contribution details vary by division with commercial property being a significant area affected by competition.

• No specific near-term growth target offered, but 10%-20% over the cycle is a conservative estimate.
• ROE is expected to be in the low to mid-20s or better, and capital return is evaluated annually with a focus on maintaining a healthy capital position.

• E&S market is highly competitive with varying intensity by division, leading to rate declines and challenges in certain segments.
• MGAs and front-end companies have unsustainable gross loss ratios, indicating potential capital destruction.
• Inflation above the Fed's 2% target poses risks to long-tail casualty lines, as they are more exposed to inflation.

Q: Unidentified Analyst asked about near-term growth target and recalibrating due to competition.

A: Michael Kehoe said they don't offer a growth prospect, 10%-20% over the cycle is conservative, and there are headwinds in commercial property but mid-teens growth when excluding that division.

Q: Pablo Singzon asked about commercial property pricing gap.

A: Michael Kehoe said Commercial Property division faces intense competition with rates dropping, terms changing, etc., and other property divisions are more attractive.

Q: Pablo Singzon asked about capital return and ROE decline.

A: Michael Kehoe said ROE is a function of pricing, loss costs, and IBNR conservatism, and capital return is evaluated annually.

Q: Michael Phillips asked about casualty pricing mix.

A: Brian Haney said casualty pricing is mixed, with some lines having rate increases/decreases and longer-tail lines at higher end.

Q: Jian Huang asked about new business growth and lines of business.

A: Michael Kehoe said they don't bifurcate growth between renewal and new business, but homeowner's business is a growing opportunity with new products in various states.

Q: Andrew Andersen asked about OpEx ratio and session ratio.

A: Bryan Petrucelli said OpEx ratio is a good run rate, and session ratio depends on business mix and reinsurance program.

Q: Joseph Tumillo asked about buying commit ratio and MGA competition.

A: Michael Kehoe said they don't have an opinion on MGA competition prognosticating.

Q: Mark Hughes asked about commercial property pricing sequentially and current accident year.

A: Brian Haney said commercial property pricing is stable sequentially, and they are cautious on long-tail casualty with good news from short-tail property.

Q: Andrew Kligerman asked about competition from start-ups and session ratio.

A: Brian Haney said small start-ups have little effect, and session ratio depends on business mix.

Q: Pablo Singzon asked about reserve releases by line of business.

A: Michael Kehoe said they are conservative in setting reserves, slower to release on long-tail casualty, and good news is from short-tail property.