Kinsale Capital (US:KNSL)2025-07-24 20:14PART I. FINANCIAL INFORMATION Item 1. Financial Statements This section presents Kinsale Capital Group's unaudited condensed consolidated financial statements, including balance sheets, income statements, cash flows, and detailed notes, for Q2 and H1 2025 Consolidated Balance Sheets Total assets grew to $5.56 billion as of June 30, 2025, from $4.89 billion at year-end 2024, driven by increased investments and cash, while liabilities rose due to higher reserves for unpaid losses, and stockholders' equity increased to $1.72 billion Consolidated Balance Sheet Highlights (as of June 30, 2025 vs. Dec 31, 2024) | Metric | June 30, 2025 ($ thousands) | December 31, 2024 ($ thousands) | Change (%) | | :--- | :--- | :--- | :--- | | Total Investments | 4,481,315 | 3,954,681 | +13.3% | | Total Assets | 5,556,526 | 4,886,704 | +13.7% | | Reserves for unpaid losses | 2,623,653 | 2,285,668 | +14.8% | | Total Liabilities | 3,833,953 | 3,403,143 | +12.7% | | Total Stockholders' Equity | 1,722,573 | 1,483,561 | +16.1% | Consolidated Statements of Income and Comprehensive Income Net income for Q2 2025 significantly increased to $134.1 million from $92.6 million in Q2 2024, driven by higher net earned premiums and investment income, with diluted EPS rising to $5.76 Income Statement Summary (Q2 & H1 2025 vs. 2024) | Metric | Q2 2025 ($ thousands) | Q2 2024 ($ thousands) | H1 2025 ($ thousands) | H1 2024 ($ thousands) | | :--- | :--- | :--- | :--- | :--- | | Gross Written Premiums | 555,522 | 529,770 | 1,039,797 | 978,414 | | Net Earned Premiums | 383,613 | 332,461 | 749,403 | 641,979 | | Total Revenues | 469,814 | 384,553 | 893,211 | 757,344 | | Net Income | 134,121 | 92,579 | 223,348 | 191,520 | | Diluted EPS | $5.76 | $3.97 | $9.59 | $8.21 | Condensed Consolidated Statements of Cash Flows For the six months ended June 30, 2025, net cash from operating activities was $498.9 million, while investing activities used $440.2 million and financing activities used $33.7 million, resulting in a $24.9 million increase in cash and cash equivalents Cash Flow Summary (Six Months Ended June 30) | Activity | 2025 ($ thousands) | 2024 ($ thousands) | | :--- | :--- | :--- | | Net cash provided by operating activities | 498,870 | 489,293 | | Net cash used in investing activities | (440,248) | (432,165) | | Net cash used in financing activities | (33,734) | (12,801) | | Net change in cash and cash equivalents | 24,888 | 44,327 | Notes to Condensed Consolidated Financial Statements The notes detail significant accounting policies, the $4.5 billion investment portfolio primarily in fixed-maturity securities, favorable prior-year loss reserve development of $30.1 million, and information on reinsurance and debt structure - The investment portfolio is primarily composed of fixed-maturity securities, valued at $3.92 billion at fair value as of June 30, 2025, with corporate and other securities representing the largest portion at $2.1 billion26 - For the six months ended June 30, 2025, reserves for unpaid losses from prior years developed favorably by $30.1 million, mainly from the 2020-2024 accident years due to lower than expected loss emergence, particularly in property lines66 - The company has one reportable segment: Excess and Surplus Lines Insurance, with the Chief Executive Officer identified as the Chief Operating Decision Maker (CODM)7980 - The company is involved in a legal proceeding related to a $140.0 million jury verdict against a policyholder, which management believes will not have a material adverse effect on its financial results, having made adequate provisions in its reserves838485 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial performance, highlighting continued profitable growth and higher investment income as key drivers for increased net income in Q2 and H1 2025, alongside premium growth, a strong combined ratio, investment strategy, liquidity, capital resources, and reinsurance programs Results of Operations The company's results show strong growth in net income, driven by higher net earned premiums and investment income, with Q2 2025 net income rising 44.9% to $134.1 million and H1 2025 net income increasing 16.6% to $223.3 million, despite declines in the Commercial Property division Key Performance Metrics (Q2 2025 vs. Q2 2024) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Gross Written Premiums | $555.5M | $529.8M | | Net Income | $134.1M | $92.6M | | Underwriting Income (Non-GAAP) | $95.5M | $76.1M | | Combined Ratio | 75.8% | 77.7% | | Annualized Return on Equity | 32.5% | 30.5% | Key Performance Metrics (H1 2025 vs. H1 2024) | Metric | H1 2025 | H1 2024 | | :--- | :--- | :--- | | Gross Written Premiums | $1.04B | $0.98B | | Net Income | $223.3M | $191.5M | | Underwriting Income (Non-GAAP) | $162.9M | $141.1M | | Combined Ratio | 78.8% | 78.6% | | Annualized Return on Equity | 27.9% | 32.7% | - Gross written premiums in the Commercial Property Division decreased 16.8% in Q2 2025 and 17.5% in H1 2025 due to rate declines and a more competitive environment, while excluding this division, gross written premiums grew 14.3% in Q2 and 15.5% in H1115130 - The loss ratio for H1 2025 increased to 58.5% from 57.7% in H1 2024, primarily due to higher catastrophe losses ($26.3 million) related to the Palisades Fire67133 Liquidity and Capital Resources The company maintains a strong liquidity position, with primary cash sources from premiums, $70.0 million remaining under its share repurchase program, $184.3 million in total debt, and an available $100.0 million revolving credit facility, which management deems sufficient for the next 12 months - The company's Board of Directors authorized a $100.0 million share repurchase program in October 2024, with $70.0 million of capacity remaining as of June 30, 2025146 - Total debt outstanding as of June 30, 2025, was $184.3 million, consisting of a credit facility and Series A & B Senior Notes75 - The company's reinsurance program includes significant coverage for property catastrophe events, with a retention of $75.0 million per catastrophe163 Financial Condition Total stockholders' equity increased to $1.7 billion at June 30, 2025, from $1.5 billion at year-end 2024, driven by profits and an increase in the fair value of fixed-maturity investments, with the investment portfolio growing to $4.6 billion and maintaining a high credit quality - Total stockholders' equity and tangible stockholders' equity both increased to $1.7 billion at June 30, 2025, up from $1.5 billion at December 31, 2024168 Fixed-Maturity Securities Credit Quality (June 30, 2025) | Rating (S&P or Equivalent) | Fair Value ($ thousands) | % of Total | | :--- | :--- | :--- | | AAA | 1,293,859 | 33.0% | | AA | 644,483 | 16.4% | | A | 1,168,777 | 29.8% | | BBB | 746,078 | 19.1% | | Below BBB and unrated | 64,881 | 1.7% | | Total | 3,918,078 | 100.0% | Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's primary market risks are equity price risk and interest rate risk associated with its investment portfolio, with no material changes reported since its 2024 Annual Report on Form 10-K - The company's main market risks are equity price risk and interest rate risk from its investment portfolio, with no material changes in this risk profile reported since the end of fiscal year 2024184185 Item 4. Controls and Procedures Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of June 30, 2025, with no material changes to internal control over financial reporting occurring during the second quarter of 2025 - Based on an evaluation as of June 30, 2025, the CEO and CFO concluded that the company's disclosure controls and procedures were effective187 - There were no changes in internal control over financial reporting during the second quarter of 2025 that materially affected, or are reasonably likely to materially affect, the company's internal controls188 PART II. OTHER INFORMATION Item 1. Legal Proceedings The company is party to legal proceedings arising in the ordinary course of business, including a significant wrongful death claim detailed in Note 16, which management believes will not have a material adverse effect on the company's financial position - The company is involved in legal proceedings from the normal course of business and does not expect them to have a material adverse effect, with specific details on a particular case available in Note 16190 Item 1A. Risk Factors There have been no material changes to the company's risk factors from those disclosed in its Annual Report on Form 10-K for the year ended December 31, 2024, and the Q1 2025 Form 10-Q - No material changes to risk factors have occurred since the company's 2024 10-K and Q1 2025 10-Q filings191 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section details the company's share repurchase activity, noting that during the second quarter of 2025, the company repurchased 23,309 shares at an average price of $429.02 per share, leaving $70.0 million available under its current repurchase authorization Share Repurchase Activity (Q2 2025) | Period | Total Shares Purchased | Average Price Paid | Approx. Value Remaining ($M) | | :--- | :--- | :--- | :--- | | April 2025 | 23,309 | $429.02 | $70.0 | | May 2025 | 0 | N/A | $70.0 | | June 2025 | 0 | N/A | $70.0 | | Total Q2 | 23,309 | $429.02 | $70.0 | Item 5. Other Information This section discloses information regarding securities trading plans adopted by directors and executive officers, specifically noting that CEO Michael P. Kehoe adopted a Rule 10b5-1 trading plan for the sale of 27,576 options during Q2 2025 - On May 22, 2025, CEO Michael P. Kehoe adopted a Rule 10b5-1 trading plan for the sale of 27,576 options that expire on July 27, 2026197 Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including the company's certificate of incorporation, by-laws, incentive plans, and officer certifications as required by the Sarbanes-Oxley Act