knsl-20200730
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
Date of report (Date of earliest event reported): July 30, 2020
KINSALE CAPITAL GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware
001-3784898-0664337
(State or other jurisdiction
of incorporation)
(Commission File Number)
(IRS Employer Identification No.)
2221 Edward Holland Drive
Suite 600
Richmond, Virginia 23230
(Address of principal executive offices, including zip code)
(804) 289-1300
(Registrant’s telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
 Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.01KNSLNasdaq Global Select Market
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐



Item 2.02  Results of Operations and Financial Condition.
On July 30, 2020, Kinsale Capital Group, Inc. (the “Company”) issued a press release announcing its financial results for the three and six months ended June 30, 2020. A copy of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K.

Item 9.01 Financial Statements and Exhibits.
        (d) Exhibits.
Exhibit No.Description
99.1
104Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Kinsale Capital Group, Inc.
Dated: July 30, 2020By:/s/ Bryan P. Petrucelli
Bryan P. Petrucelli
Executive Vice President, Chief Financial Officer and Treasurer


Document
Exhibit 99.1
https://cdn.kscope.io/3c079ea27e70d1ae0b09716f2a5b3547-kinsalecapitalgrouplog.jpg
Kinsale Capital Group, Inc. Reports 2020 Second Quarter Results
Richmond, VA, July 30, 2020 - Kinsale Capital Group, Inc. (NASDAQ:KNSL) reported net income of $30.3 million, $1.33 per diluted share, for the second quarter of 2020 compared to $13.8 million, $0.63 per diluted share, for the second quarter of 2019. Net income was $35.3 million, $1.56 per diluted share, for the first half of 2020 compared to $32.5 million, $1.49 per diluted share, for the first half of 2019.
Net operating earnings(1) were $19.1 million, $0.84 per diluted share, for the second quarter of 2020 compared to $12.4 million, $0.57 per diluted share, for the second quarter of 2019. Net operating earnings(1) were $36.4 million, $1.60 per diluted share, for the first half of 2020 compared to $26.3 million, $1.21 per diluted share, for the first half of 2019.
Highlights for the second quarter and first half of 2020 included:
Net income increased by 119.8% compared to the second quarter of 2019
Net operating earnings(1) of $19.1 million increased by 53.7% compared to the second quarter of 2019
41.2% growth in gross written premiums to $134.1 million compared to the second quarter of 2019
38.3% increase in net investment income to $6.6 million compared to the second quarter of 2019
Underwriting income(2) of $15.7 million in the second quarter of 2020, resulting in a combined ratio of 83.8%
16.9% annualized operating return on equity(1) for the six months ended June 30, 2020

(1) Net operating earnings and annualized operating return on equity are non-GAAP financial measures. See discussion of "Non-GAAP Financial Measures" below.
“Our second quarter performance yielded strong results as favorable market conditions continued to gain ground and new business submissions accelerated during the course of the quarter. As a result, written premiums were 41% higher for the quarter over last year and we achieved a combined ratio of just under 84%. We remain steadfast in our commitment to provide best-in-class returns by capitalizing on our strategy of disciplined underwriting and technology enabled low costs.” said President and Chief Executive Officer, Michael P. Kehoe.
Results of Operations
Underwriting Results
Gross written premiums were $134.1 million for the second quarter of 2020 compared to $94.9 million for the second quarter of 2019, an increase of 41.2%. Gross written premiums were $258.1 million for the first half of 2020 compared to $179.6 million for the first half of 2019, an increase of 43.7%. Submission activity and rates on bound accounts continued to improve, which resulted in higher gross written premiums during the second quarter and first half of 2020 over the same periods last year.
Underwriting income(2) was $15.7 million, resulting in a combined ratio of 83.8%, for the second quarter of 2020, compared to $10.1 million and a combined ratio of 84.8% for the same period last year. The increase in underwriting income(2) for the second quarter of 2020 was due primarily to premium growth quarter over quarter and higher favorable development on loss reserves from prior accident years. Loss and expense ratios were 60.1% and 23.7%, respectively, for the second quarter of 2020 compared to 59.9% and 24.9% for the






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second quarter of 2019. Results for the second quarter of 2020 and 2019 included favorable development on loss reserves from prior accident years of $3.6 million, or 3.7 points, and $1.4 million, or 2.2 points, respectively.
Underwriting income(2) was $30.1 million, resulting in a combined ratio of 83.9%, for the first half of 2020, compared to $22.2 million and a combined ratio of 82.6% for the same period last year. The increase in underwriting income(2) for the first half of 2020 was due primarily to premium growth period over period, offset in part by lower favorable development on loss reserves from prior accident years. Loss and expense ratios were 60.0% and 23.9%, respectively, for the first half of 2020 compared to 57.5% and 25.1% for the first half of 2019. Results for the first half of 2020 and 2019 included favorable development on loss reserves from prior accident years of $6.6 million, or 3.5 points, and $7.8 million, or 6.1 points, respectively.
Summary of Operating Results
The Company’s operating results for the three and six months ended June 30, 2020 and 2019 are summarized as follows:
Three Months Ended June 30,Six Months Ended June 30,
2020201920202019
($ in thousands)
Gross written premiums$134,091  $94,947  $258,127  $179,573  
Ceded written premiums(16,484) (12,260) (32,467) (23,819) 
Net written premiums$117,607  $82,687  $225,660  $155,754  
Net earned premiums $96,957  $66,087  $186,718  $127,578  
Losses and loss adjustment expenses58,304  39,579  112,037  73,311  
Underwriting, acquisition and insurance expenses
22,961  16,437  44,544  32,053  
Underwriting income(2)
$15,692  $10,071  $30,137  $22,214  
Loss ratio60.1 %59.9 %60.0 %57.5 %
Expense ratio23.7 %24.9 %23.9 %25.1 %
Combined ratio83.8 %84.8 %83.9 %82.6 %
Annualized return on equity(3)
28.2 %18.5 %16.4 %22.7 %
Annualized operating return on equity(4)
17.8 %16.7 %16.9 %18.4 %
(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 stockholders’ equity during the period.
(4) Annualized operating return on equity is net operating earnings expressed on an annualized basis as a percentage of stockholders’ equity during the period. See discussion of "Non-GAAP Financial Measures" below.







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The following tables summarize losses incurred for the current accident year and the development of prior accident years for the three and six months ended June 30, 2020 and 2019:

Three Months Ended
June 30, 2020
Three Months Ended
June 30, 2019
Losses and Loss Adjustment Expenses% of Earned PremiumsLosses and Loss Adjustment Expenses% of Earned Premiums
Loss ratio:($ in thousands)
Current accident year$61,530  63.4 %$40,360  61.1 %
Current accident year - catastrophe losses
390  0.4 %639  1.0 %
Effect of prior accident year development(3,616) (3.7)%(1,420) (2.2)%
Total$58,304  60.1 %$39,579  59.9 %

Six Months Ended
June 30, 2020
Six Months Ended
June 30, 2019
Losses and Loss Adjustment Expenses% of Earned PremiumsLosses and Loss Adjustment Expenses% of Earned Premiums
Loss ratio:($ in thousands)
Current accident year$118,201  63.3 %$80,458  63.1 %
Current accident year - catastrophe losses
461  0.2 %669  0.5 %
Effect of prior accident year development(6,625) (3.5)%(7,816) (6.1)%
Total$112,037  60.0 %$73,311  57.5 %

Investment Results
The Company’s net investment income was $6.6 million in the second quarter of 2020 compared to $4.8 million in the second quarter of 2019, an increase of 38.3%. The Company’s net investment income was $12.6 million in the first half of 2020 compared to $9.3 million in the first half of 2019, an increase of 35.2%. This increase was primarily due to growth in our investment portfolio balance generated from the investment of excess operating funds since June 30, 2019 and from proceeds from our equity offering in the third quarter of 2019. The Company’s investment portfolio, excluding cash and cash equivalents, had an annualized gross investment return(5) of 3.0% for the first half of 2020 compared to 3.2% for the first half of 2019. Funds are generally invested conservatively in high quality securities, including government agency, asset- and mortgage-backed securities, and municipal and corporate bonds with an average credit quality of "AA-." The weighted average duration of the fixed-maturity investment portfolio, including cash equivalents, was 4.6 years at June 30, 2020 and 4.3 years at December 31, 2019. Cash and invested assets totaled $1.1 billion at June 30, 2020 compared to $908.2 million at December 31, 2019.
(5) Gross investment return is investment income from fixed-maturity and equity securities, before any deductions for fees and expenses, expressed as a percentage of average beginning and ending balances of those investments during the period.

Other
Total comprehensive income, which includes the change in after-tax unrealized gains and losses from the Company’s available-for-sale investments, was $57.3 million for the second quarter of 2020 compared to $20.3 million for the second quarter of 2019. Total comprehensive income was $53.1 million for the first half of 2020 compared to $45.8 million for the first half of 2019. The increase in total comprehensive income for






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both the second quarter and first half of 2020 was due to higher net income in addition to higher fair values of the Company's fixed-maturity investments.
The effective tax rates for the six months ended June 30, 2020 and 2019 were 14.8% and 17.4%, respectively. In the first half of 2020, the effective tax rate was 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 $456.1 million at June 30, 2020, compared to $405.9 million at December 31, 2019. Annualized operating return on equity(4) was 16.9% for the first six months of 2020, a decrease from 18.4% for the first six months of 2019, which was attributable to the proceeds received from the Company's equity offering in the third quarter of 2019.
Non-GAAP Financial Measures
Net Operating Earnings
Net operating earnings is defined as net income excluding the effects of the net change in the fair value of equity securities, after taxes, and net realized gains and losses on investments, after taxes. Management believes the exclusion of these items provides a more useful comparison of the Company's underlying business performance from period to period. Net operating earnings and percentages or calculations using net operating earnings (e.g., diluted operating earnings per share and annualized operating return on equity) are non-GAAP financial measures. Net operating earnings should not be viewed as a substitute for net income calculated in accordance with GAAP, and other companies may define net operating earnings differently.
For the three and six months ended June 30, 2020 and 2019, net income and diluted earnings per share reconcile to net operating earnings and diluted operating earnings per share as follows:
Three Months Ended June 30,Six Months Ended June 30,
2020201920202019
($ in thousands, except per share data)
Net operating earnings:
Net income$30,262  $13,767  $35,348  $32,487  
Change in the fair value of equity securities, after taxes
(10,933) (1,508) 1,834  (6,165) 
Net realized (gains) losses on investments, after taxes
(200) 186  (813) (36) 
Net operating earnings$19,129  $12,445  $36,369  $26,286  
Diluted operating earnings per share:
Diluted earnings per share$1.33  $0.63  $1.56  $1.49  
Change in the fair value of equity securities, after taxes, per share
(0.48) (0.07) 0.08  (0.28) 
Net realized (gains) losses on investments, after taxes, per share
(0.01) 0.01  (0.04) —  
Diluted operating earnings per share(1)
$0.84  $0.57  $1.60  $1.21  
Operating return on equity:
Average stockholders' equity(2)
$428,724  $298,398  $430,997  $285,947  
Annualized return on equity(3)
28.2 %18.5 %16.4 %22.7 %
Annualized operating return on equity(4)
17.8 %16.7 %16.9 %18.4 %






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(1)  Diluted operating earnings per share may not add due to rounding.
(2) 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.
(3) Annualized return on equity is net income expressed on an annualized basis as a percentage of average stockholders’ equity during the period.
(4) Annualized operating return on equity is net operating earnings expressed on an annualized basis as a percentage of stockholders’ equity during the period.

Underwriting Income
Underwriting income is defined as net income excluding net investment income, the net change in the fair value of equity securities, net realized gains and losses on investments, other income, other expenses 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 six months ended June 30, 2020 and 2019, net income reconciles to underwriting income as follows:
Three Months Ended June 30,Six Months Ended June 30,
2020201920202019
(in thousands)
Net income$30,262  $13,767  $35,348  $32,487  
Income tax expense6,180  2,768  6,124  6,849  
Income before income taxes36,442  16,535  41,472  39,336  
Other expenses—  21  —  57  
Net investment income(6,645) (4,806) (12,605) (9,321) 
Change in the fair value of equity securities(13,839) (1,909) 2,322  (7,804) 
Net realized investment (gains) losses(253) 235  (1,029) (45) 
Other income(13) (5) (23) (9) 
Underwriting income$15,692  $10,071  $30,137  $22,214  

Conference Call
Kinsale Capital Group will hold a conference call to discuss this press release on Friday, July 31, 2020, at 9:00 a.m. (Eastern Time). Members of the public may access the conference call by dialing (844) 239-5282, conference ID# 4996240, 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 September 30, 2020.
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 "believe," "expect," "seek," "may," "will," "intend," "project," "plan," "estimate" 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






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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.
Contact
Kinsale Capital Group, Inc.
Bryan Petrucelli
Executive Vice President, Chief Financial Officer and Treasurer
804-289-1272
ir@kinsalecapitalgroup.com






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KINSALE CAPITAL GROUP, INC. AND SUBSIDIARIES
Unaudited Consolidated Statements of Income and Comprehensive Income
Three Months Ended June 30,Six Months Ended June 30,
2020201920202019
Revenues(in thousands, except per share data)
Gross written premiums$134,091  $94,947  $258,127  $179,573  
Ceded written premiums(16,484) (12,260) (32,467) (23,819) 
Net written premiums117,607  82,687  225,660  155,754  
Change in unearned premiums(20,650) (16,600) (38,942) (28,176) 
Net earned premiums96,957  66,087  186,718  127,578  
Net investment income6,645  4,806  12,605  9,321  
Change in the fair value of equity securities13,839  1,909  (2,322) 7,804  
Net realized investment gains (losses)
253  (235) 1,029  45  
Other income13   23   
Total revenues117,707  72,572  198,053  144,757  
Expenses
Losses and loss adjustment expenses58,304  39,579  112,037  73,311  
Underwriting, acquisition and insurance expenses
22,961  16,437  44,544  32,053  
Other expenses—  21  —  57  
Total expenses81,265  56,037  156,581  105,421  
Income before income taxes36,442  16,535  41,472  39,336  
Total income tax expense6,180  2,768  6,124  6,849  
Net income30,262  13,767  35,348  32,487  
Other comprehensive income
Change in unrealized gains on available-for-sale investments, net of taxes
27,008  6,555  17,785  13,335  
Total comprehensive income$57,270  $20,322  $53,133  $45,822  
Earnings per share:
Basic$1.37  $0.65  $1.60  $1.53  
Diluted$1.33  $0.63  $1.56  $1.49  
Weighted-average shares outstanding:
Basic22,153  21,210  22,131  21,190  
Diluted22,707  21,832  22,694  21,803  






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KINSALE CAPITAL GROUP, INC. AND SUBSIDIARIES
Unaudited Condensed Consolidated Balance Sheets
June 30, 2020December 31, 2019
Assets(in thousands)
Investments:
Fixed-maturity securities at fair value
$893,364  $729,532  
Equity securities at fair value107,905  78,294  
Total investments1,001,269  807,826  
Cash and cash equivalents62,976  100,408  
Investment income due and accrued6,174  4,743  
Premiums receivable, net50,866  34,483  
Reinsurance recoverable73,123  72,574  
Ceded unearned premiums19,399  16,118  
Deferred policy acquisition costs, net of ceding commissions
28,942  23,564  
Intangible assets3,538  3,538  
Deferred income tax asset, net—  3,374  
Other assets43,061  23,922  
Total assets$1,289,348  $1,090,550  
Liabilities & Stockholders' Equity
Liabilities:
Reserves for unpaid losses and loss adjustment expenses$525,801  $460,058  
Unearned premiums229,599  187,374  
Payable to reinsurers14,407  7,151  
Accounts payable and accrued expenses9,936  12,366  
Credit facility33,107  16,744  
Other liabilities20,323  977  
Deferred income tax liability, net61  —  
Total liabilities833,234  684,670  
Stockholders' equity456,114  405,880  
Total liabilities and stockholders' equity$1,289,348  $1,090,550  







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