Kinsale Capital Group, Inc. Q4 FY2024 earnings call

• Business strategy: Focus on small E&S accounts, control over underwriting/claims, best-in-class service, risk appetite, and technology-driven low cost.
• Financial results: Operating earnings per share up 19.4%, gross written premium up 12.2%, combined ratio 73.4%, full-year ROE 29%.
• Market impact: Southern California wildfires led to ~$25M pretax losses net of reinsurance; E&S market steady with increased competition.
• Technology investment: Heavy investment in technology, automation, data, analytics to improve expense ratio, customer service, underwriting.
• Product segments: Casualty up 15%, property up 6%; submission growth 17%; aggressive pricing in select areas with high margins to drive growth.

In the fourth quarter of 2024, Kinsale's operating earnings per share increased by 19.4% and gross written premium grew by 12.2% compared to the fourth quarter of 2023. The combined ratio for the quarter was 73.4%, and the full-year 2024 operating return on equity was 29%. The business is roughly 1/3 property and 2/3 casualty by mix. Casualty underwriting divisions grew by 15% in the quarter, while property divisions grew by 6%. New business submission growth was 17% in the quarter, though subject to volatility. Pricing varies by line, with excess casualty, commercial auto, and construction up high single digits, while larger layered property accounts were down mid- to high teens.

• Expect top-line growth of 10% to 20% long-term. - Continued investment in technology to enhance efficiency and growth. - Modest share repurchases expected each quarter, with opportunistic larger purchases as needed.

• Competition in the E&S market. - Volatility in new business submission growth. - Potential impact of catastrophe events on losses. - Industry trends affecting loss reserves and development.

Q: Commentary on market environment and pricing in small commercial casualty?

A: Mike Kehoe stated the mix of business is generally 1/3 property, 2/3 casualty. Larger layered deals are under competitive pressure post prior rate inflation. Small property divisions are growing rapidly with positive rate increases. Small casualty varies by product line, with excess casualty, commercial auto, and construction seeing healthy rate increases, while management and professional liability are being more aggressively priced.

Q: Thoughts on growth rate sustainability?

A: Mike Kehoe said 10% to 20% growth is a conservative estimate for top-line, driven by the company's durable competitive advantage as a low-cost provider, despite some industry dislocation abated by new capital. Productivity gains and higher investment yields will support earnings growth.

Q: Capital buybacks and capital needs?

A: Mike Kehoe mentioned modest quarterly buybacks, with opportunistic larger purchases. The company maintains a modest buyback and dividend strategy, ensuring sufficient capital to operate and absorb variability, with competitors having redundant capital.