Kinsale Capital (KNSL) - 2024 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In Q3 2024, the company's operating earnings per share increased by 27% and gross written premium grew by 19% compared to Q3 2023 [3] - Net income and net operating earnings rose by 50.1% and 26.8%, respectively, with a combined ratio of 75.7% for the quarter [8] - The nine-month annualized operating return on equity was reported at 28.2% [3] Business Line Data and Key Metrics Changes - Premium growth was 19% in Q3, down from 21% in Q2 and 26% in Q1, attributed to increased competition in commercial property and certain liability lines [10] - The casualty business showed steady growth, particularly in general and excess casualty divisions, while the commercial property division experienced a slowdown [10][11] - New business submission growth was strong at around 23% for the quarter, indicating positive future growth prospects [12] Market Data and Key Metrics Changes - The overall E&S market remained steady with increased competition, leading to varied rate changes and growth rates across different underwriting divisions [5] - Rates increased by approximately 3% on a nominal basis, down from around 6% in the previous quarter [13] - The company noted strong growth in the transportation divisions, especially in commercial auto and high-value homeowners segments [12] Company Strategy and Development Direction - The company's strategy focuses on controlling underwriting, providing superior customer service, and leveraging technology for cost efficiency [4] - The management expressed confidence in the company's ability to generate strong returns and grow in various market environments [4] - A $100 million share buyback program was approved, reflecting confidence in the business strategy and long-term growth potential [7] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the modest natural catastrophe losses in the quarter and emphasized a cautious risk management strategy [6] - The competitive landscape is expected to evolve post-hurricanes, with potential impacts on pricing and competition levels [18] - Management remains optimistic about growth prospects, citing strong margins and a durable competitive advantage [13][29] Other Important Information - The expense ratio improved to 19.6$100 million buyback is modest and will not offset dilution from restricted shares but will minimize it [16] Question: Impact of hurricanes on competition - Management stated it is too early to determine the impact of hurricane losses on competition, with estimates ranging significantly [18] Question: Migration of business between E&S and standard markets - Management noted that the E&S market continues to grow, although competition has increased, affecting growth rates [20] Question: Pricing trends and loss ratios - Management confirmed that some divisions are experiencing double-digit rate increases, while others are below trend, but overall pricing remains strong [22] Question: Exposure to Hurricane Milton - Management estimated total after-tax losses from Hurricane Milton to be under $10 million, with a competitive market expected to evolve [6][25] Question: Future growth expectations - Management reiterated a long-term growth expectation of 10% to 20%, with the potential for variability based on market conditions [57] Question: Retention rates in the book - Management indicated that Kinsale retains about two-thirds of its policies year-over-year, consistent with industry norms [58] Question: Share buybacks versus dividends - Management explained the preference for share buybacks over special dividends, citing confidence in the business model and long-term growth [62]