RICHMOND, Va.--(BUSINESS WIRE)--Kinsale Capital Group, Inc. (NYSE: KNSL) reported net income of $114.2 million, $4.90 per diluted share, for the third quarter of 2024 compared to $76.1 million, $3.26 per diluted share, for the third quarter of 2023. Net income included after-tax catastrophe losses of $10.8 million in the third quarter of 2024 and $0.9 million in the third quarter of 2023. Net income was $305.7 million, $13.10 per diluted share, for the first nine months of 2024 compared to $204.7 million, $8.79 per diluted share, for the first nine months of 2023. Net income included after-tax catastrophe losses of $13.9 million in the first nine months of 2024 and $3.3 million in the first nine months of 2023.

Net operating earnings⁽¹⁾ were $97.9 million, $4.20 per diluted share, for the third quarter of 2024 compared to $77.2 million, $3.31 per diluted share, for the third quarter of 2023. Net operating earnings⁽¹⁾ were $267.0 million, $11.44 per diluted share, for the first nine months of 2024 compared to $201.1 million, $8.63 per diluted share, for the first nine months of 2023.

Highlights for the quarter included:

• Diluted earnings per share increased by 50.3% to $4.90 compared to the third quarter of 2023
• Diluted operating earnings⁽¹⁾ per share increased by 26.9% to $4.20 compared to the third quarter of 2023
• Gross written premiums increased by 18.8% to $448.6 million compared to the third quarter of 2023
• Net investment income increased by 46.4% to $39.6 million compared to the third quarter of 2023
• Underwriting income⁽²⁾ was $86.9 million in the third quarter of 2024, resulting in a combined ratio⁽⁵⁾ of 75.7%
• Annualized operating return on equity⁽⁷⁾ was 28.2% for the nine months ended September 30, 2024

“Our third quarter results reflect the continued execution of our strategy of disciplined underwriting and technology-enabled low costs. Our reported 75.7% combined ratio includes a modest 3.8 points of net catastrophe losses. Looking ahead, we remain confident in our ability to drive profitable growth and deliver long-term value for stockholders,” said Chairman and Chief Executive Officer, Michael P. Kehoe.

Results of Operations

Underwriting Results

Gross written premiums were $448.6 million for the third quarter of 2024 compared to $377.8 million for the third quarter of 2023, an increase of 18.8%. Gross written premiums were $1.4 billion for the first nine months of 2024 compared to $1.2 billion for the first nine months of 2023, an increase of 21.6%. The increase in gross written premiums during the third quarter and first nine months of 2024 over the same periods last year reflected strong submission flow from brokers and a favorable, yet increasingly competitive, pricing environment.

Underwriting income⁽²⁾ was $86.9 million, resulting in a combined ratio⁽⁵⁾ of 75.7% for the third quarter of 2024, compared to $72.4 million and a combined ratio⁽⁵⁾ of 74.8% for the same period last year. The increase in underwriting income⁽²⁾ quarter over quarter was largely due to combination of premium growth and lower relative net commissions offset in part by higher catastrophe losses. Loss⁽³⁾ and expense⁽⁴⁾ ratios were 56.1% and 19.6%, respectively, for the third quarter of 2024 compared to 53.9% and 20.9% for the third quarter of 2023. Results for the third quarters of 2024 and 2023 included net favorable development of loss reserves from prior accident years of $10.1 million, or 2.8 points, and $9.1 million, or 3.2 points, respectively. The loss ratio for the third quarter of 2024 included 3.8 points of net catastrophe losses, primarily related to Hurricanes Helene, Francine and Beryl and tornadoes in the Midwest. Net catastrophe losses were negligible for the third quarter of 2023.

Underwriting income⁽²⁾ was $228.0 million, resulting in a combined ratio⁽⁵⁾ of 77.6% for the first nine months of 2024, compared to $185.5 million and a combined ratio⁽⁵⁾ of 76.7% for the first nine months of 2023. The increase in underwriting income⁽²⁾ was primarily due to a combination of premium growth and lower relative net commissions offset in part by higher catastrophe losses. Loss⁽³⁾ and expense⁽⁴⁾ ratios were 57.1% and 20.5%, respectively, for the first nine months of 2024 compared to 55.5% and 21.2% for the first nine months of 2023. Results for the first nine months of 2024 and 2023 included net favorable development of loss reserves from prior accident years of $28.1 million, or 2.7 points, and $28.6 million, or 3.6 points, respectively. The loss ratio for the first nine months of 2024 included 1.7 points of net catastrophe losses, primarily related to Hurricanes Helene, Francine and Beryl and tornadoes in the Midwest. Net catastrophe losses were negligible for the first nine months of 2023.

Summary of Operating Results

The Company’s operating results for the three and nine months ended September 30, 2024 and 2023 are summarized as follows:

The following tables summarize losses incurred for the current accident year and the development of prior accident years for the three and nine months ended September 30, 2024 and 2023:

Investment Results

Net investment income was $39.6 million in the third quarter of 2024 compared to $27.1 million in the third quarter of 2023, an increase of 46.4%. Net investment income was $108.4 million in the first nine months of 2024 compared to $72.0 million in the first nine months of 2023, an increase of 50.7%. These increases were driven by growth in the Company's investment portfolio generated largely from the investment of strong operating cash flows and higher interest rates relative to the prior year period. Net operating cash flows were $763.3 million in the first nine months of 2024 compared to $648.3 million in the first nine months of 2023, an increase of 17.7%. The Company’s investment portfolio had an annualized gross investment return⁽⁸⁾ of 4.3% for the first nine months of 2024 compared to 3.9% for the same period last year. 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 3.1 years and 2.8 years at September 30, 2024 and December 31, 2023, respectively. Cash and invested assets totaled $4.0 billion at September 30, 2024 and $3.1 billion at December 31, 2023.

Other

The effective tax rates for the nine months ended September 30, 2024 and 2023 were 18.7% and 19.4%, respectively. In the first nine months of 2024 and 2023, 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.

Stockholders' equity was $1.4 billion at September 30, 2024 compared to $1.1 billion at December 31, 2023. Book value per share was $61.62 at September 30, 2024 compared to $46.88 at December 31, 2023. Annualized operating return on equity⁽⁷⁾ was 28.2% for the first nine months of 2024, a decrease from 32.1% for the first nine months of 2023. The decrease was due primarily to higher average stockholders' equity as a result of profitable growth and an increase in the fair value of our fixed income portfolio offset in part by higher net operating earnings.

Share Repurchase Authorization

In October 2024, the Company's Board of Directors authorized a share repurchase program authorizing the repurchase of up to $100.0 million of the Company's common stock. The shares may be repurchased from time to time in open market purchases, privately-negotiated transactions, block purchases, accelerated share repurchase agreements or a combination of methods and pursuant to safe harbors provided by Rule 10b-18 and Rule 10b5-1 under the Securities Exchange Act of 1934. The timing, manner, price and amount of any repurchases under the share repurchase program will be determined by the Company in its discretion. The stock repurchase program does not require the Company to repurchase any specific number of shares, and may be modified, suspended or terminated at any time.

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 and nine months ended September 30, 2024 and 2023, net income and diluted earnings per share reconcile to net operating earnings and diluted operating earnings per share as follows:

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 and nine months ended September 30, 2024 and 2023, net income reconciles to underwriting income as follows:

Conference Call

Kinsale Capital Group will hold a conference call to discuss this press release on Friday, October 25, 2024 at 9:00 a.m. (Eastern Time). Members of the public may access the conference call by dialing (800) 715-9871, conference ID# 7469751, 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 November 22, 2024.

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.