Overview

Kinsale Capital Group is an established and growing specialty insurance company that focuses exclusively on the Excess and Surplus (E&S) insurance market in the United States. The company offers property and casualty (P&C) insurance products, with 67.4% of its gross written premiums coming from casualty insurance and 32.6% from property insurance in 2024. Kinsale’s goal is to deliver long-term value for its shareholders by generating consistent and strong underwriting profits while managing its capital prudently.

Financial Performance

In 2024, Kinsale reported strong financial results, with net income of $414.8 million, up 34.6% from $308.1 million in 2023. This increase was primarily due to continued profitable growth in the business and strong investment performance, including higher investment income and higher unrealized gains on equity investments.

Underwriting income, which excludes investment income and other non-underwriting items, was $325.9 million in 2024, up 20.5% from $270.4 million in 2023. The corresponding combined ratio, which is the sum of the loss ratio and expense ratio, was 76.4% in 2024 compared to 75.4% in 2023. The increase in the combined ratio was primarily due to higher catastrophe losses in 2024.

Premiums and Underwriting

Gross written premiums increased by 19.2% to $1.9 billion in 2024, up from $1.6 billion in 2023. This growth was driven by higher submission activity from brokers and a favorable, yet increasingly competitive, pricing environment. The increase in gross written premiums was most notable in the General Casualty, Excess Casualty, Small Business Casualty, Commercial Property, and Construction lines of business.

Net written premiums increased by 16.8% to $1.5 billion in 2024, up from $1.3 billion in 2023. The company’s net retention ratio, which is the ratio of net written premiums to gross written premiums, was 79.0% in 2024 compared to 80.6% in 2023. The decrease in the net retention ratio was primarily due to a higher cession rate on the commercial property quota share treaty, offset in part by an increase in the retention on the casualty treaty.

Net earned premiums, which represent the earned portion of gross written premiums less the portion ceded to reinsurers, increased by 25.9% to $1.4 billion in 2024 from $1.1 billion in 2023, reflecting the growth in gross written premiums.

Loss Ratio and Reserves

The loss ratio, which is the ratio of losses and loss adjustment expenses to the sum of net earned premiums and fee income, was 55.8% in 2024 compared to 54.6% in 2023. The increase in the loss ratio was primarily due to higher catastrophe losses incurred during the period and lower relative net favorable development of loss reserves from prior accident years.

Kinsale’s reserves for losses and loss adjustment expenses, which represent the company’s best estimate of the ultimate cost of settling reported and unreported claims, were $2.3 billion on a gross basis and $2.0 billion net of reinsurance as of December 31, 2024. Of these reserves, 90.4% on a gross basis and 90.0% on a net basis were for incurred but not reported (IBNR) losses.

Expense Ratio

The expense ratio, which is the ratio of underwriting, acquisition, and insurance expenses to the sum of net earned premiums and fee income, was 20.6% in 2024 compared to 20.8% in 2023. The decrease in the expense ratio was primarily due to lower relative net commissions as a result of higher ceding commissions earned under the commercial property quota share treaty.

Investing Results

Kinsale’s net investment income increased by 46.9% to $150.3 million in 2024, up from $102.3 million in 2023, primarily due to growth in the investment portfolio and higher interest rates. The company’s investment portfolio, excluding cash equivalents and real estate investments, had a gross investment return of 4.4% as of December 31, 2024, compared to 4.0% as of December 31, 2023.

The change in the fair value of equity securities, which includes appreciation of common stocks, ETFs, and non-redeemable preferred stocks, was $43.4 million in 2024, up from $15.3 million in 2023, generally consistent with changes in the broader U.S. stock market.

Liquidity and Capital Resources

Kinsale is organized as a holding company, with its insurance subsidiary, Kinsale Insurance, as the primary operating entity. The holding company receives cash from various sources, including loans, equity and debt issuances, corporate service fees from the insurance subsidiary, and dividends from the insurance subsidiary.

As of December 31, 2024, the holding company had $12.3 million in cash and investments, compared to $17.1 million as of December 31, 2023. Management believes there is sufficient liquidity available at both the holding company and insurance subsidiary levels to meet operating cash needs and obligations for the next 12 months.

Kinsale Insurance is subject to insurance regulatory requirements that restrict its ability to pay dividends to the holding company. The maximum amount of dividends Kinsale Insurance can pay the holding company during 2025 without regulatory approval is $351.9 million.

In October 2024, Kinsale’s Board of Directors authorized a $100 million share repurchase program, under which the company had $90 million of capacity remaining as of December 31, 2024.

Debt and Real Estate

Kinsale has $125 million of 5.15% senior notes and $50 million of 6.21% senior notes outstanding as of December 31, 2024. The company also has $11 million outstanding under a $100 million revolving credit facility.

In December 2022, Kinsale acquired real estate property adjacent to its current headquarters for $76.6 million. During 2023, the company sold one of the office buildings and the parking deck for $62 million and determined it would occupy the remaining building for its future headquarters. The remaining $15 million in real estate assets are held for investment purposes.

Outlook and Strengths

Kinsale’s strong financial performance in 2024, characterized by profitable growth, disciplined underwriting, and effective capital management, positions the company well for the future. The company’s focus on the E&S market, where it has developed deep expertise, and its use of technology to enhance its operations are key strengths that should continue to drive success.

However, the company faces risks and uncertainties, including the potential for larger-than-expected losses, changes in the regulatory environment, and increasing competition in the E&S market. Kinsale’s management team will need to navigate these challenges while maintaining the company’s strong underwriting discipline and prudent capital management.

Overall, Kinsale’s 2024 results demonstrate its ability to generate consistent and attractive returns for shareholders, and the company appears well-positioned to continue its growth and success in the years ahead.