Kinsale Capital Group Reports First Quarter 2025 Results

4 days ago

Kinsale Capital Group, Inc. (NYSE: KNSL) reported net income of $89.2 million, $3.83 per diluted share, for the first quarter of 2025 compared to $98.9 million, $4.24 per diluted share, for the first quarter of 2024. Net income included after-tax catastrophe losses of $17.8 million in the first quarter of 2025 and $0.5 million in the first quarter of 2024. Net operating earnings⁽¹⁾ were $86.4 million, $3.71 per diluted share, for the first quarter of 2025 compared to $81.6 million, $3.50 per diluted share, for the first quarter of 2024.

Highlights for the quarter included:

Diluted earnings per share decreased by 9.7% to $3.83 compared to the first quarter of 2024
Diluted operating earnings⁽¹⁾ per share increased by 6.0% to $3.71 compared to the first quarter of 2024
Gross written premiums increased by 7.9% to $484.3 million compared to the first quarter of 2024
Net investment income increased by 33.1% to $43.8 million compared to the first quarter of 2024
Underwriting income⁽²⁾ was $67.5 million in the first quarter of 2025, resulting in a combined ratio⁽⁵⁾ of 82.1%
Annualized operating return on equity⁽⁷⁾was 22.5% for the three months ended March 31, 2025

“Our business continues to produce exceptional profitability through the market cycle. We remain confident in our ability to deliver sustainable long-term value for stockholders as we execute our strategy of disciplined underwriting and technology-enabled expense management,” said Chairman and Chief Executive Officer, Michael P. Kehoe.

Results of Operations

Underwriting Results

Gross written premiums were $484.3 million for the first quarter of 2025 compared to $448.6 million for the first quarter of 2024, an increase of 7.9%. Gross written premiums in the Commercial Property Division, the Company's largest division, decreased 18.4% relative to the prior year period due to rate declines and an increasingly competitive environment including from standard carriers. Excluding the Commercial Property Division, gross written premiums grew 16.7%.

Underwriting income⁽²⁾ was $67.5 million, resulting in a combined ratio⁽⁵⁾ of 82.1% for the first quarter of 2025, compared to $65.1 million and a combined ratio⁽⁵⁾ of 79.5% for the same period last year. The increase in underwriting income⁽²⁾ was largely due to continued growth in the business offset in part by higher catastrophe losses incurred. Loss⁽³⁾ and expense⁽⁴⁾ ratios were 62.1% and 20.0%, respectively, for the first quarter of 2025 compared to 58.8% and 20.7% for the first quarter of 2024. Results for the first quarter of 2025 and 2024 included net favorable development of loss reserves from prior accident years of $14.6 million, or 3.9 points, and $8.4 million, or 2.7 points, respectively. The loss ratio for the first quarter of 2025 included 6.0 points of net catastrophe losses, primarily related to the Palisades Fire. The loss ratio for the first quarter of 2024 included 0.2 points of net catastrophe losses.

Summary of Operating Results

The Company’s operating results for the three months ended March 31, 2025 and 2024 are summarized as follows:

	Three Months Ended March 31,
	2025			2024
	($ in thousands)
Gross written premiums	$	484,275		$	448,644
Ceded written premiums		(102,570	)		(97,590	)
Net written premiums	$	381,705		$	351,054

Net earned premiums	$	365,790		$	309,518
Fee income		9,559			8,092
Losses and loss adjustment expenses		232,976			186,786
Underwriting, acquisition and insurance expenses		74,912			65,753
Underwriting income⁽²⁾	$	67,461		$	65,071

Loss ratio⁽³⁾		62.1	%		58.8	%
Expense ratio⁽⁴⁾		20.0	%		20.7	%
Combined ratio⁽⁵⁾		82.1	%		79.5	%

Annualized return on equity⁽⁶⁾		23.3	%		35.1	%
Annualized operating return on equity⁽⁷⁾		22.5	%		28.9	%

⁽¹⁾Net operating earnings is a non-GAAP financial measure. See discussion of "Non-GAAP Financial Measures" below.
⁽²⁾Underwriting income is a non-GAAP financial measure. See discussion of "Non-GAAP Financial Measures" below.
⁽³⁾Loss ratio, expressed as a percentage, is the ratio of losses and loss adjustment expenses to the sum of net earned premiums and fee income.
⁽⁴⁾Expense ratio, expressed as a percentage, is the ratio of underwriting, acquisition and insurance expenses to the sum of net earned premiums and fee income.
⁽⁵⁾The combined ratio is the sum of the loss ratio and expense ratio as presented. Calculations of each component may not add due to rounding.
⁽⁶⁾Annualized return on equity is net income expressed on an annualized basis as a percentage of average beginning and ending stockholders’ equity during the period.
⁽⁷⁾Annualized operating return on equity is net operating earnings expressed on an annualized basis as a percentage of average beginning and ending stockholders’ equity during the period.

The following tables summarize losses incurred for the current accident year and the development of prior accident years for the three months ended March 31, 2025 and 2024:

	Three Months Ended March 31, 2025					Three Months Ended March 31, 2024
	Losses and Loss Adjustment Expenses			% of Sum of Earned Premiums and Fee Income		Losses and Loss Adjustment Expenses			% of Sum of Earned Premiums and Fee Income
Loss ratio:	($ in thousands)
Current accident year	$	225,047		60.0	%	$	194,654		61.3	%
Current accident year - catastrophe losses		22,578		6.0	%		578		0.2	%
Effect of prior accident year development		(14,649	)	(3.9	)%		(8,446	)	(2.7	)%
Total	$	232,976		62.1	%	$	186,786		58.8	%

Investment Results

Net investment income was $43.8 million in the first quarter of 2025 compared to $32.9 million in the first quarter of 2024, an increase of 33.1%. This increase was driven by growth in the Company's investment portfolio generated largely from the investment of strong operating cash flows. Net operating cash flows were $229.8 million in the first quarter of 2025 compared to $210.4 million in the first quarter of 2024, an increase of 9.2%. The Company’s investment portfolio had an annualized gross investment return⁽⁸⁾ of 4.3% for both the first quarter of 2025 and 2024. Funds are generally invested conservatively in high quality securities with an average credit quality of "AA-" and the weighted average duration of the fixed-maturity investment portfolio, including cash equivalents, was 3.0 years at both March 31, 2025 and December 31, 2024. Cash and invested assets totaled $4.3 billion at March 31, 2025 and $4.1 billion at December 31, 2024.

⁽⁸⁾Gross investment return is investment income from fixed-maturity and equity securities (and short-term investments, if any), before any deductions for fees and expenses, expressed as a percentage of average beginning and ending book values of those investments during the period.

Other

The effective tax rates for the three months ended March 31, 2025 and 2024 were 20.6% and 14.6%, respectively. In the first quarter of 2025 and 2024, the effective tax rates were lower than the federal statutory rate of 21% primarily due to the tax benefits from stock-based compensation, including stock options exercised, and from tax-exempt investment income. The effective tax rate was higher for the three months ended March 31, 2025 compared to the same period in 2024 due primarily to a lower volume of stock option exercises.

Stockholders' equity was $1.6 billion at March 31, 2025 compared to $1.5 billion at December 31, 2024. Book value per share was $67.92 at March 31, 2025 compared to $63.75 at December 31, 2024. Annualized operating return on equity⁽⁷⁾was 22.5% for the first quarter of 2025, a decrease from 28.9% for the first quarter of 2024. The decrease was due primarily to higher average stockholders' equity and higher net catastrophe losses primarily related to the Palisades Fire. Average stockholders' equity increased as a result of profitable growth and an increase in the fair value of our fixed-income portfolio.

Share Repurchases

During the first quarter of 2025, the Company repurchased 23,348 shares of its common stock in the open market at an average price of $428.28 per share for a total cost of $10.0 million.

Non-GAAP Financial Measures

Net Operating Earnings

Net operating earnings is defined as net income excluding the effects of the change in the fair value of equity securities, after taxes, net realized investment gains and losses, after taxes, and change in allowance for credit losses on investments, after taxes. Management believes the exclusion of these items provides a useful comparison of the Company's underlying business performance from period to period. Net operating earnings and percentages or calculations using net operating earnings (e.g., diluted operating earnings per share and annualized operating return on equity) are non-GAAP financial measures. Net operating earnings should not be viewed as a substitute for net income calculated in accordance with GAAP, and other companies may define net operating earnings differently.

For the three months ended March 31, 2025 and 2024, net income and diluted earnings per share reconcile to net operating earnings and diluted operating earnings per share as follows:

	Three Months Ended March 31,
	2025			2024
	($ in thousands, except per share data)
Net operating earnings:
Net income	$	89,227		$	98,941
Adjustments:
Change in the fair value of equity securities, before taxes		(3,038	)		(18,053	)
Income tax expense ⁽¹⁾		638			3,791
Change in fair value of equity securities, after taxes		(2,400	)		(14,262	)

Net realized investment gains, before taxes		(537	)		(3,866	)
Income tax expense ⁽¹⁾		113			812
Net realized investment gains, after taxes		(424	)		(3,054	)

Change in allowance for credit losses on investments, before taxes		20			(10	)
Income tax (benefit) expense ⁽¹⁾		(4	)		2
Change in allowance for credit losses on investments, after taxes		16			(8	)
Net operating earnings	$	86,419		$	81,617

Diluted operating earnings per share:
Diluted earnings per share	$	3.83		$	4.24
Change in the fair value of equity securities, after taxes, per share		(0.10	)		(0.61	)
Net realized investment gains, after taxes, per share		(0.02	)		(0.13	)
Diluted operating earnings per share⁽²⁾	$	3.71		$	3.50

Operating return on equity:
Average equity⁽³⁾	$	1,533,268		$	1,128,901
Annualized return on equity⁽⁴⁾		23.3	%		35.1	%
Annualized operating return on equity⁽⁵⁾		22.5	%		28.9	%

⁽¹⁾Income taxes on adjustments to reconcile net income to net operating earnings use a 21% effective tax rate.
⁽²⁾Diluted operating earnings per share may not add due to rounding.
⁽³⁾Average equity is computed by adding the total stockholders' equity as of the date indicated to the prior quarter-end or year-end total, as applicable, and dividing by two.
⁽⁴⁾Annualized return on equity is net income expressed on an annualized basis as a percentage of average beginning and ending stockholders' equity during the period.
⁽⁵⁾Annualized operating return on equity is net operating earnings expressed on an annualized basis as a percentage of average beginning and ending stockholders' equity during the period.

Underwriting Income

Underwriting income is defined as net income excluding net investment income, the change in the fair value of equity securities, net realized investment gains and losses, change in allowance for credit losses on investments, interest expense, other expenses, other income and income tax expense. The Company uses underwriting income as an internal performance measure in the management of its operations because the Company believes it gives management and users of the Company's financial information useful insight into the Company's results of operations and underlying business performance. Underwriting income should not be viewed as a substitute for net income calculated in accordance with GAAP, and other companies may define underwriting income differently.

For the three months ended March 31, 2025 and 2024, net income reconciles to underwriting income as follows:

	Three Months Ended March 31,
	2025			2024
	(in thousands)
Net income	$	89,227		$	98,941
Income tax expense		23,084			16,926
Income before income taxes		112,311			115,867
Net investment income		(43,819	)		(32,933	)
Change in the fair value of equity securities		(3,038	)		(18,053	)
Net realized investment gains		(537	)		(3,866	)
Change in allowance for credit losses on investments		20			(10	)
Interest expense		2,538			2,422
Other expenses ⁽⁶⁾		660			1,963
Other income		(674	)		(319	)
Underwriting income	$	67,461		$	65,071

⁽⁶⁾Other expenses includes primarily corporate expenses not allocated to the Company's insurance operations.

Conference Call

Kinsale Capital Group will hold a conference call to discuss this press release on Friday, April 25, 2025 at 9:00 a.m. (Eastern Time). Members of the public may access the conference call by dialing (800) 715-9871, conference ID# 6520221, or via the Internet by going to www.kinsalecapitalgroup.com and clicking on the "Investor Relations" link. A replay of the call will be available on the website until the close of business on May 23, 2025.

Forward-Looking Statements

This press release contains forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. In some cases, such forward-looking statements may be identified by terms such as "anticipates," "estimates," "expects," "intends," "plans," "predicts," "projects," "believes," "seeks," "outlook," "future," "will," "would," "should," "could," "may," "can have," "prospects" or similar words. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Although it is not possible to identify all of these risks and factors, they include, among others, the following: inadequate loss reserves to cover the Company's actual losses; inherent uncertainty of models resulting in actual losses that are materially different than the Company's estimates; adverse economic factors; a decline in the Company's financial strength rating; loss of one or more key executives; loss of a group of brokers that generate significant portions of the Company's business; failure of any of the loss limitations or exclusions the Company employs, or change in other claims or coverage issues; adverse performance of the Company's investment portfolio; adverse market conditions that affect its excess and surplus lines insurance operations; and other risks described in the Company's filings with the Securities and Exchange Commission. These forward-looking statements speak only as of the date of this release and the Company does not undertake any obligation to update or revise any forward-looking information to reflect changes in assumptions, the occurrence of unanticipated events, or otherwise.

About Kinsale Capital Group, Inc.

Kinsale Capital Group, Inc. is a specialty insurance group headquartered in Richmond, Virginia, focusing on the excess and surplus lines market.

KINSALE CAPITAL GROUP, INC. AND SUBSIDIARIES
Unaudited Consolidated Statements of Income and Comprehensive Income

	Three Months Ended March 31,
	2025			2024
Revenues	(in thousands, except per share data)
Gross written premiums	$	484,275		$	448,644
Ceded written premiums		(102,570	)		(97,590	)
Net written premiums		381,705			351,054
Change in unearned premiums		(15,915	)		(41,536	)
Net earned premiums		365,790			309,518
Fee income		9,559			8,092
Net investment income		43,819			32,933
Change in the fair value of equity securities		3,038			18,053
Net realized investment gains		537			3,866
Change in allowance for credit losses on investments		(20	)		10
Other income		674			319
Total revenues		423,397			372,791

Expenses
Losses and loss adjustment expenses		232,976			186,786
Underwriting, acquisition and insurance expenses		74,912			65,753
Interest expense		2,538			2,422
Other expenses		660			1,963
Total expenses		311,086			256,924
Income before income taxes		112,311			115,867
Total income tax expense		23,084			16,926
Net income		89,227			98,941

Other comprehensive income (loss)
Change in net unrealized losses on available-for-sale investments, net of taxes		26,382			(9,940	)
Total comprehensive income	$	115,609		$	89,001

Earnings per share:
Basic	$	3.85		$	4.28
Diluted	$	3.83		$	4.24

Weighted-average shares outstanding:
Basic		23,170			23,108
Diluted		23,313			23,335

KINSALE CAPITAL GROUP, INC. AND SUBSIDIARIES
Unaudited Condensed Consolidated Balance Sheets

	March 31, 2025		December 31, 2024
Assets	(in thousands)
Investments:
Fixed-maturity securities at fair value	$	3,716,253	$	3,537,563
Equity securities at fair value		433,077		398,359
Real estate investments, net		15,045		15,045
Short-term investments		38,816		3,714
Total investments		4,203,191		3,954,681

Cash and cash equivalents		142,026		113,213
Investment income due and accrued		27,146		27,366
Premiums receivable, net		148,565		140,027
Reinsurance recoverables, net		374,115		337,891
Ceded unearned premiums		54,073		52,736
Deferred policy acquisition costs, net of ceding commissions		112,313		109,263
Intangible assets		3,538		3,538
Deferred income tax asset, net		50,313		60,215
Other assets		99,719		87,774
Total assets	$	5,214,999	$	4,886,704

Liabilities & Stockholders' Equity
Liabilities:
Reserves for unpaid losses and loss adjustment expenses	$	2,470,643	$	2,285,668
Unearned premiums		845,701		828,449
Payable to reinsurers		44,766		43,959
Accounts payable and accrued expenses		22,962		55,159
Debt		184,191		184,122
Other liabilities		63,761		5,786
Total liabilities		3,632,024		3,403,143

Stockholders' equity		1,582,975		1,483,561
Total liabilities and stockholders' equity	$	5,214,999	$	4,886,704

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