Kinsale Capital Group, Inc. (NYSE: KNSL) reported net income of
$33.0 million, $1.43 per diluted share, for the third quarter of
2022 compared to $36.6 million, $1.59 per diluted share, for the
third quarter of 2021. Net income included after-tax catastrophe
losses of $20.6 million in the third quarter of 2022 and $4.6
million in the third quarter of 2021. Net income was $91.9 million,
$3.98 per diluted share, for the first nine months of 2022 compared
to $104.3 million, $4.53 per diluted share, for the first nine
months of 2021. After-tax catastrophe losses were $20.7 million for
the first nine months of 2022 and $6.9 million for the first nine
months of 2021.
Net operating earnings(1) were $37.9 million, $1.64 per diluted
share, for the third quarter of 2022 compared to $36.7 million,
$1.59 per diluted share, for the third quarter of 2021. Net
operating earnings(1) were $120.0 million, $5.20 per diluted share,
for the first nine months of 2022 compared to $91.7 million, $3.98
per diluted share, for the first nine months of 2021.
Highlights for the quarter included:
- Net income decreased by 9.9% due principally to higher
catastrophe activity and a decline in the fair value of equity
investments during the quarter
- Net operating earnings(1) of $37.9 million increased by 3.3%
compared to the third quarter of 2021
- Gross written premiums increased by 43.8% to $284.1 million
compared to the third quarter of 2021
- Net investment income increased by 71.2% to $13.9 million
compared to the third quarter of 2021
- Underwriting income(2) was $34.3 million in the third quarter
of 2022, resulting in a combined ratio of 83.6%, compared to $38.1
million and a combined ratio of 75.7% in the third quarter of
2021
- Annualized operating return on equity(4) was 24.3% for the nine
months ended September 30, 2022
"Our third quarter results again reflected strong premium growth
of 44% as E&S market conditions remain favorable. Our
underlying business continues to generate positive results for the
quarter over last year and we achieved a combined ratio of just
under 84%, which included 12.5 points of incurred losses from
Hurricane Ian. These results reflect the combination of a superior
business model and favorable E&S market conditions. Looking
ahead, we remain confident in our ability to create shareholder
value through best-in-class underwriting and technology-driven low
costs,” said President and Chief Executive Officer, Michael P.
Kehoe.
Results of Operations
Underwriting Results
Gross written premiums were $284.1 million for the third quarter
of 2022 compared to $197.6 million for the third quarter of 2021,
an increase of 43.8%. Gross written premiums were $806.6 million
for the first nine months of 2022 compared to $560.6 million for
the first nine months of 2021, an increase of 43.9%. The increase
in gross written premiums during the third quarter and first nine
months of 2022 over the same periods last year reflected strong
submission flow from brokers and a favorable pricing
environment.
Underwriting income(2) was $34.3 million, resulting in a
combined ratio of 83.6%, for the third quarter of 2022, compared to
$38.1 million and a combined ratio of 75.7% for the same period
last year. The decrease in underwriting income(2) quarter over
quarter was largely due to higher catastrophe losses incurred,
offset in part by premium growth and favorable rate increases from
a strong underwriting environment and lower levels of relative
operating expenses. Loss and expense ratios were 64.4% and 19.2%,
respectively, for the third quarter of 2022 compared to 55.7% and
20.0% for the third quarter of 2021. The loss ratio for the third
quarter of 2022 included 12.5 points of net incurred catastrophe
losses, primarily related to Hurricane Ian. The loss ratio for the
third quarter of 2021 included 3.8 points of net incurred
catastrophe losses, primarily from Hurricane Ida. Results for the
third quarters of 2022 and 2021 included net favorable development
of loss reserves from prior accident years of $11.0 million, or 5.3
points, and $9.2 million, or 5.9 points, respectively.
Underwriting income(2) was $116.0 million, resulting in a
combined ratio of 79.9%, for the first nine months of 2022,
compared to $91.4 million and a combined ratio of 78.1% for the
first nine months of 2021. The increase in underwriting income(2)
period over period was due to a combination of premium growth and
favorable rate increases from a strong underwriting environment and
lower levels of relative reported losses and operating expenses,
offset in part by higher catastrophe losses incurred. Loss and
expense ratios were 59.6% and 20.3%, respectively, for the first
nine months of 2022 compared to 56.7% and 21.4% for the first nine
months of 2021. Results for the first nine months of 2022 and 2021
included net favorable development of loss reserves from prior
accident years of $28.9 million, or 5.0 points, and $25.4 million,
or 6.1 points, respectively. The loss ratio for the nine months
ended September 30, 2022 included 4.5 points of net incurred
catastrophe losses compared to 2.1 points for the same period last
year. The catastrophe activity in first nine months of 2022
primarily related to Hurricane Ian, and in first nine months of
2021 resulted from Hurricane Ida and the winter storms in
Texas.
Summary of Operating Results
The Company’s operating results for the three and nine months
ended September 30, 2022 and 2021 are summarized as follows:
Three Months Ended September
30,
Nine Months Ended September
30,
2022
2021
2022
2021
($ in thousands)
Gross written premiums
$
284,111
$
197,616
$
806,625
$
560,553
Ceded written premiums
(48,212
)
(26,939
)
(111,885
)
(77,825
)
Net written premiums
$
235,899
$
170,677
$
694,740
$
482,728
Net earned premiums
$
209,259
$
156,871
$
577,979
$
417,612
Losses and loss adjustment expenses
134,788
87,352
344,333
236,727
Underwriting, acquisition and insurance
expenses
40,145
31,465
117,662
89,490
Underwriting income(2)
$
34,326
$
38,054
$
115,984
$
91,395
Loss ratio
64.4
%
55.7
%
59.6
%
56.7
%
Expense ratio
19.2
%
20.0
%
20.3
%
21.4
%
Combined ratio
83.6
%
75.7
%
79.9
%
78.1
%
Annualized return on equity(3)
21.1
%
22.7
%
18.6
%
22.5
%
Annualized operating return on
equity(4)
24.2
%
22.8
%
24.3
%
19.8
%
(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)
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.
(4)
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 and nine months ended September 30, 2022 and 2021:
Three Months Ended
September 30, 2022
Three Months Ended
September 30, 2021
Losses and Loss Adjustment
Expenses
% of Earned Premiums
Losses and Loss Adjustment
Expenses
% of Earned Premiums
Loss ratio:
($ in thousands)
Current accident year
$
119,650
57.2
%
$
90,675
57.8
%
Current accident year - catastrophe
losses
26,130
12.5
%
5,882
3.8
%
Effect of prior accident year
development
(10,992
)
(5.3
) %
(9,205
)
(5.9
) %
Total
$
134,788
64.4
%
$
87,352
55.7
%
Nine Months Ended
September 30, 2022
Nine Months Ended
September 30, 2021
Losses and Loss Adjustment
Expenses
% of Earned Premiums
Losses and Loss Adjustment
Expenses
% of Earned Premiums
Loss ratio:
($ in thousands)
Current accident year
$
346,970
60.1
%
$
253,348
60.7
%
Current accident year - catastrophe
losses
26,213
4.5
%
8,792
2.1
%
Effect of prior accident year
development
(28,850
)
(5.0
) %
(25,413
)
(6.1
) %
Total
$
344,333
59.6
%
$
236,727
56.7
%
Investment Results
Net investment income was $13.9 million in the third quarter of
2022 compared to $8.1 million in the third quarter of 2021, an
increase of 71.2%. Net investment income was $33.5 million in the
first nine months of 2022 compared to $22.5 million in the first
nine months of 2021, an increase of 49.3%. These increases were
driven by growth in the Company's investment portfolio generated
largely from the investment of strong operating cash flows since
September 30, 2021 and to a lesser degree, higher interest rates
relative to the prior year periods. Net operating cash flows were
$456.7 million in the first nine months of 2022 compared to $301.9
million in the first nine months of 2021, an increase of 51.3%. The
Company’s investment portfolio had an annualized gross investment
return(5) of 2.7% for the first nine months of 2022 compared to
2.5% for the same period last year. The Company expects the current
rising interest rate environment to contribute to higher
reinvestment yields on fixed-maturity securities prospectively.
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 3.9 years and 4.3 years at
September 30, 2022 and December 31, 2021, respectively. Cash and
invested assets totaled $1.9 billion at September 30, 2022 and $1.7
billion at December 31, 2021.
(5)
Gross investment return is investment
income from fixed-maturity and equity securities, excluding cash
equivalents, before any deductions for fees and expenses, expressed
as a percentage of the average beginning and ending book values of
those investments during the period.
Other
On July 22, 2022, the Company entered into a Note Purchase and
Private Shelf Agreement and issued $125.0 million aggregate
principal amount of 5.15% senior notes, the proceeds of which were
used to fund surplus at Kinsale Insurance Company, refinance
indebtedness and for general corporate purposes.
On July 22, 2022, the Company entered into an Amended and
Restated Credit Agreement, which primarily extended the maturity
date to July 22, 2027 and increased the unsecured revolving credit
facility to $100.0 million.
The effective tax rates for the nine months ended September 30,
2022 and 2021 were 17.5% and 18.9%, respectively. In the first nine
months of 2022 and 2021, the effective tax rates were lower than
the federal statutory rate of 21% primarily due to the tax benefits
from stock-based compensation and tax-exempt investment income.
Stockholders' equity was $619.5 million at September 30, 2022
compared to $699.3 million at December 31, 2021. The decrease in
stockholders' equity was largely due to the decline in the fair
value of the Company's fixed-maturity investments, resulting from a
higher interest rate environment, offset in part by net income.
Annualized operating return on equity(4) was 24.3% for the first
nine months of 2022, an increase from 19.8% for the first nine
months of 2021, which was primarily due to growth in the business
from favorable E&S market conditions and rate increases and a
decrease in average stockholders' equity driven by the decline in
the fair value of investments, offset in part by higher catastrophe
losses incurred during the period.
Non-GAAP Financial Measures
Net Operating Earnings
Net operating earnings is defined as net income excluding the
effects of the change in the fair value of equity securities, after
taxes, and net realized investment gains and losses, after taxes.
Management believes the exclusion of these items provides a useful
comparison of the Company's underlying business performance from
period to period. Net operating earnings and percentages or
calculations using net operating earnings (e.g., diluted operating
earnings per share and annualized operating return on equity) are
non-GAAP financial measures. Net operating earnings should not be
viewed as a substitute for net income calculated in accordance with
GAAP, and other companies may define net operating earnings
differently.
For the three and nine months ended September 30, 2022 and 2021,
net income and diluted earnings per share reconcile to net
operating earnings and diluted operating earnings per share as
follows:
Three Months Ended September
30,
Nine Months Ended September
30,
2022
2021
2022
2021
($ in thousands, except per
share data)
Net operating earnings:
Net income
$
32,984
$
36,625
$
91,865
$
104,339
Adjustments:
Change in the fair value of equity
securities, before taxes
6,095
1,012
37,199
(13,644
)
Income tax (benefit) expense (1)
(1,280
)
(213
)
(7,812
)
2,865
Change in fair value of equity securities,
after taxes
4,815
799
29,387
(10,779
)
Net realized investment losses (gains),
before taxes
173
(895
)
(1,535
)
(2,397
)
Income tax (benefit) expense (1)
(36
)
188
322
503
Net realized investment losses (gains),
after taxes
137
(707
)
(1,213
)
(1,894
)
Net operating earnings
$
37,936
$
36,717
$
120,039
$
91,666
Diluted operating earnings per
share:
Diluted earnings per share
$
1.43
$
1.59
$
3.98
$
4.53
Change in the fair value of equity
securities, after taxes, per share
0.21
0.03
1.27
(0.47
)
Net realized investment losses (gains),
after taxes, per share
0.01
(0.03
)
(0.05
)
(0.08
)
Diluted operating earnings per
share(2)
$
1.64
$
1.59
$
5.20
$
3.98
Operating return on equity:
Average equity(3)
$
626,761
$
644,401
$
659,395
$
617,702
Annualized return on equity(4)
21.1
%
22.7
%
18.6
%
22.5
%
Annualized operating return on
equity(5)
24.2
%
22.8
%
24.3
%
19.8
%
(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)
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, 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, 2022 and 2021,
net income reconciles to underwriting income as follows:
Three Months Ended September
30,
Nine Months Ended September
30,
2022
2021
2022
2021
(in thousands)
Net income
$
32,984
$
36,625
$
91,865
$
104,339
Income tax expense
7,116
9,054
19,549
24,387
Income before income taxes
40,100
45,679
111,414
128,726
Net investment income
(13,858
)
(8,095
)
(33,540
)
(22,466
)
Change in the fair value of equity
securities
6,095
1,012
37,199
(13,644
)
Net realized investment losses (gains)
173
(895
)
(1,535
)
(2,397
)
Interest expense
1,716
243
2,306
752
Other expenses (6)
212
145
521
482
Other income
(112
)
(35
)
(381
)
(58
)
Underwriting income
$
34,326
$
38,054
$
115,984
$
91,395
(6)
Other expenses are comprised of 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, October 28, 2022 at 9:00 a.m.
(Eastern Time). Members of the public may access the conference
call by dialing (888) 660-6493, conference ID# 3573726, 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
25, 2022.
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 September
30,
Nine Months Ended September
30,
2022
2021
2022
2021
Revenues
(in thousands, except per
share data)
Gross written premiums
$
284,111
$
197,616
$
806,625
$
560,553
Ceded written premiums
(48,212
)
(26,939
)
(111,885
)
(77,825
)
Net written premiums
235,899
170,677
694,740
482,728
Change in unearned premiums
(26,640
)
(13,806
)
(116,761
)
(65,116
)
Net earned premiums
209,259
156,871
577,979
417,612
Net investment income
13,858
8,095
33,540
22,466
Change in the fair value of equity
securities
(6,095
)
(1,012
)
(37,199
)
13,644
Net realized investment (losses) gains
(173
)
895
1,535
2,397
Other income
112
35
381
58
Total revenues
216,961
164,884
576,236
456,177
Expenses
Losses and loss adjustment expenses
134,788
87,352
344,333
236,727
Underwriting, acquisition and insurance
expenses
40,145
31,465
117,662
89,490
Interest expense
1,716
243
2,306
752
Other expenses
212
145
521
482
Total expenses
176,861
119,205
464,822
327,451
Income before income taxes
40,100
45,679
111,414
128,726
Total income tax expense
7,116
9,054
19,549
24,387
Net income
32,984
36,625
91,865
104,339
Other comprehensive (loss)
income
Change in net unrealized losses on
available-for-sale investments, net of taxes
(46,652
)
(6,072
)
(165,464
)
(16,111
)
Total comprehensive (loss)
income
$
(13,668
)
$
30,553
$
(73,599
)
$
88,228
Earnings per share:
Basic
$
1.45
$
1.61
$
4.03
$
4.60
Diluted
$
1.43
$
1.59
$
3.98
$
4.53
Weighted-average shares
outstanding:
Basic
22,813
22,714
22,783
22,681
Diluted
23,114
23,064
23,099
23,057
KINSALE CAPITAL GROUP, INC.
AND SUBSIDIARIES
Unaudited Condensed
Consolidated Balance Sheets
September 30, 2022
December 31, 2021
Assets
(in thousands)
Investments:
Fixed-maturity securities at fair
value
$
1,605,847
$
1,392,066
Equity securities at fair value
133,735
172,611
Short-term investments
81,408
—
Total investments
1,820,990
1,564,677
Cash and cash equivalents
126,213
121,040
Investment income due and accrued
11,663
7,658
Premiums receivable, net
96,102
71,004
Reinsurance recoverables, net
188,803
122,970
Ceded unearned premiums
40,924
33,679
Deferred policy acquisition costs, net of
ceding commissions
58,445
41,968
Intangible assets
3,538
3,538
Deferred income tax asset, net
59,136
2,109
Other assets
58,418
57,012
Total assets
$
2,464,232
$
2,025,655
Liabilities & Stockholders'
Equity
Liabilities:
Reserves for unpaid losses and loss
adjustment expenses
$
1,197,317
$
881,344
Unearned premiums
471,736
347,730
Payable to reinsurers
26,323
16,112
Accounts payable and accrued expenses
22,218
23,250
Debt
123,159
42,696
Other liabilities
4,024
15,188
Total liabilities
1,844,777
1,326,320
Stockholders' equity
619,455
699,335
Total liabilities and stockholders'
equity
$
2,464,232
$
2,025,655
View source
version on businesswire.com: https://www.businesswire.com/news/home/20221027005633/en/
Kinsale Capital Group, Inc. Bryan Petrucelli Executive Vice
President, Chief Financial Officer and Treasurer 804-289-1272
ir@kinsalecapitalgroup.com
Kinsale Capital (NYSE:KNSL)
Historical Stock Chart
From Jun 2024 to Jul 2024
Kinsale Capital (NYSE:KNSL)
Historical Stock Chart
From Jul 2023 to Jul 2024