Kinsale Capital (KNSL) - 2024 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In Q4 2024, the company's operating earnings per share increased by 19.4% and gross written premium grew by 12.2% compared to Q4 2023 [7] - The combined ratio for the quarter was 73.4%, with a full year 2024 operating return on equity of 29% [7][11] - Net investment income rose by 37.8% in Q4 compared to the previous year, driven by growth in the investment portfolio and higher interest rates [13] - The expense ratio for Q4 was 21.1%, up from 19.9% the previous year, while the full year expense ratio was 20.6%, slightly better than 20.8% last year [12] Business Line Data and Key Metrics Changes - Gross written premium growth was 12.2%, with casualty underwriting divisions growing at 15% and property divisions at 6% [16] - Catastrophe losses in Q4 were modest at $8 million pretax, with a significant impact from California wildfires estimated at$ 25 million pretax [17][19] Market Data and Key Metrics Changes - The overall E&S market in Q4 was steady but faced increased competition [10] - New business submissions growth was 17% for the quarter, down from 23% in the previous quarter [20] Company Strategy and Development Direction - The company focuses on small E&S accounts, maintaining control over underwriting and claims processes, and investing in technology and analytics to improve efficiency and profitability [8] - A new agribusiness underwriting unit was created to expand product offerings into adjacent markets [19] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about growth prospects, maintaining a guidance of 10% to 20% growth moving forward despite recent competitive pressures [39] - The company aims to balance profitability and growth, with expectations of continued strong returns and stock price appreciation [101] Other Important Information - The company repurchased $10 million in shares during Q4, with plans for modest repurchases each quarter [15] - The company is gradually increasing its allocation to common stock from 8% to 10% of cash and invested assets, with a target of 12% over the next year [14] Q&A Session Summary Question: Impact of larger shared account property on growth - Management confirmed that larger layered deals are under competitive pressure, affecting growth, but small property divisions are still growing rapidly with positive rate increases [28] Question: Sustainability of growth rates - Management believes that a growth rate of 10% to 20% is sustainable, driven by their low-cost operating model and strong customer service [37][40] Question: Capital buybacks and growth dynamics - Management indicated that the current buyback strategy is modest, with a focus on maintaining sufficient capital for operations while addressing excess capital through dividends and buybacks [46][48] Question: January results and expense ratio - Management refrained from commenting on January results but reiterated confidence in growth guidance, attributing the higher expense ratio to increased variable compensation [51][52] Question: California wildfire losses - The gross loss from the California wildfires was approximately$ 45 million, with a net pretax loss of $25 million expected [62] Question: Trends in loss ratios and reserves - Management stated that loss trend assumptions are in the high single digits, with a conservative approach to estimating future losses [113]