Kinsale Capital (US:KNSL)2025-07-25 14:02Financial Data and Key Metrics Changes - Kinsale's operating earnings per share increased by 27.5% and gross written premium grew by 4.9% compared to Q2 2024 [4] - The company posted a combined ratio of 75.8% and a six-month operating return on equity of 24.7% [4] - Book value per share increased by 16% since the end of 2024 [4] - Net income and net operating earnings increased by 44.9% and 27.4% respectively [10] - The expense ratio improved to 20.7% from 21.1% year-over-year [10] Business Line Data and Key Metrics Changes - The commercial property division saw premiums drop by 16.8% due to high competition and rate declines [6] - Excluding the commercial property division, Kinsale's premium grew by 14.3% in the second quarter [6] - Submission growth was 9% for the quarter, down from 10% in the first quarter [14] Market Data and Key Metrics Changes - The E and S market remains competitive, with robust premium growth in small business property, high-value homeowners, commercial auto, entertainment, and general casualty [12] - Pricing trends align with the AmWINS index, which reported a 2.4% overall decrease, with commercial property down 20% [15] Company Strategy and Development Direction - Kinsale focuses on small E and S accounts, maintaining control over underwriting and providing exceptional customer service [5] - The company is expanding its product suite, including broadening its agribusiness vertical and launching new homeowners products in multiple states [14] - Kinsale aims to capture market opportunities while remaining cautious around loss cost trends due to inflation [16] Management's Comments on Operating Environment and Future Outlook - Management acknowledges heightened competition, particularly in the commercial property division, but remains optimistic about growth prospects [22][23] - The company is cautious about long-tail casualty lines due to inflation and is conservative in its reserving practices [26][80] - Management believes that under-reserving in the industry could lead to significant issues for some players, but Kinsale's conservative approach positions it well [13][16] Other Important Information - Kinsale's reinsurance program was renewed with favorable terms, including increased retention on casualty treaties and a slight increase in ceding commissions [8] - The company reported a net investment income increase of 29.6% due to growth in its investment portfolio [11] Q&A Session Summary Question: Long-term growth target amidst competition - Management does not provide a specific growth prospect but believes a 10% to 20% growth over the cycle is a conservative estimate, acknowledging current headwinds in the commercial property division [22][23] Question: Underlying margin improvement - The underlying margin improvement is attributed to a mix of business, with a focus on cautious long-tail casualty reserving [25][26] Question: Commercial property pricing dynamics - The commercial property division is experiencing intense competition, with rates and terms dropping significantly [29][30] Question: New business growth contribution - While specific statistics on new versus renewal business growth are not available, management suggests that new business is likely driving most of the premium growth [42][44] Question: Reserve releases and trends - Management emphasizes a conservative approach to reserves, particularly for long-tail casualty lines, while short-tail business shows better results [80][81] Question: Cash flow and operational growth - Management indicates that as long as top-line growth continues, cash flow from operations should also increase, although it is influenced by loss experience [65][66]