Kinsale Capital (KNSL)2025-02-21 21:11Financial Performance - Gross written premiums increased by 19.2% to 1,870.3 million, up from 1,870.3 million, a 19.2% increase from 15,100 in 2024, increasing to 366.4 million (19.6%), AmWINS Brokerage at 213.9 million (11.4%) for 2024[51]. - The average commission paid to brokers in 2024 was 14.7% of gross written premiums, slightly lower than competitors[52]. Underwriting and Claims Management - The loss and loss adjustment expense ratio was 55.8% for the year ended December 31, 2024[28]. - The expense ratio was 20.6% for the year ended December 31, 2024, indicating effective expense management[30]. - The claims department consisted of approximately 90 professionals with an average of 9 years of experience, managing all claims in-house without third-party delegation[57]. - Kinsale Insurance's ability to accurately underwrite risks and set competitive yet profitable rates is critical; inaccuracies could adversely affect results of operations[174]. - The company must accurately and timely evaluate and pay claims, as failures could lead to regulatory actions and adversely affect its reputation[188]. Risk Management - The company focuses on catastrophe risk management, utilizing stochastic models to analyze severe loss risks, particularly from hurricanes, with a focus on 100-year and 250-year return periods[66]. - Reinsurance contracts are primarily used to limit exposure to large losses, with significant programs in place, including a commercial lines quota-share reinsurance treaty[69]. - The company maintained reserves for specific claims incurred and reported, as well as for claims incurred but not reported, continuously monitoring and adjusting reserves as necessary[64]. - The company faces significant uncertainty regarding claims frequency and severity, which could adversely affect growth and profitability[137]. - Severe weather conditions and catastrophes can lead to increased claims and reserves, adversely affecting liquidity and financial condition[153]. - Global climate change poses a risk to the company's financial results due to potential increases in severe weather and catastrophic events[155]. Investment Portfolio - The company's cash and invested assets totaled 3.1 billion at December 31, 2023[81]. - The fixed-maturity securities portfolio had a fair value of 2.0 billion, with 52.5% in the industrials and other sector[86]. - The average credit quality of the fixed-maturity portfolio was rated "AA-" as of December 31, 2024[82]. - The company faces risks related to the performance of its investment portfolio, which is influenced by interest rates and market conditions[192]. - The company’s investment portfolio is subject to increased valuation uncertainties in illiquid markets, affecting the fair value of its securities[194]. Regulatory Environment - Kinsale Insurance operates on an excess and surplus lines basis in all 50 states, the District of Columbia, Puerto Rico, and the U.S. Virgin Islands, allowing for freedom of rate and form on most business[93]. - The company is regulated by insurance authorities in Arkansas, which requires annual financial statements and adherence to capital and surplus requirements[89]. - Kinsale Insurance must maintain compliance with state laws requiring diversification of investment portfolios and limits on certain investment categories[103]. - The company is subject to extensive regulation, which may limit its operational flexibility and impose additional compliance costs[201]. - The Arkansas Insurance Department requires annual reporting by Arkansas-domiciled insurers to confirm that the minimum amount of risk-based capital necessary for operations has been met[122]. Employee and Corporate Culture - Kinsale Insurance offers a comprehensive benefits package, including a company-matched 401(k) plan and educational assistance programs[132]. - The company emphasizes a performance-based culture with variable compensation tied to equity-based incentives for executives[126]. - Kinsale Insurance had 674 employees as of December 31, 2024, with 660 being full-time employees[125]. Market Conditions and Competition - The company faces increased risks in its E&S insurance operations due to changing market conditions and cyclical nature, which may adversely affect financial performance[166]. - Competition in the insurance industry is intense, with larger companies having greater resources and market recognition, which could hinder the company's competitive position[170]. - Economic downturns could result in fewer policy sales and increased claims, negatively impacting growth and profitability[157]. - The company underwrites a significant portion of its insurance in California, Florida, and Texas, making it vulnerable to economic downturns in these states[158]. Financial Stability and Capital Management - Kinsale Insurance has an "A" (Excellent) rating from A.M. Best, indicating strong financial stability and ability to meet policyholder obligations[87]. - As of December 31, 2024, Kinsale Insurance maintained risk-based capital levels significantly in excess of amounts that would require any corrective actions[122]. - The company may require additional capital in the future, which could be unavailable or only accessible on unfavorable terms[200]. - The maximum dividend distribution from Kinsale Insurance for 2025 without regulatory approval is 184.1 million under two bank credit agreements, subject to financial covenants[199].