knsl-20211028
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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): October 28, 2021
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.)
2035 Maywill Street
Suite 100
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 October 28, 2021, Kinsale Capital Group, Inc. (the “Company”) issued a press release announcing its financial results for the three and nine months ended September 30, 2021. 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: October 28, 2021By:/s/ Bryan P. Petrucelli
Bryan P. Petrucelli
Executive Vice President, Chief Financial Officer and Treasurer


Document
Exhibit 99.1
https://cdn.kscope.io/48dc000272689ee1706d52b1e4cd06c0-kinsalecapitalgrouplogoa23a.jpg
Kinsale Capital Group, Inc. Reports 2021 Third Quarter Results
Richmond, VA, October 28, 2021 - Kinsale Capital Group, Inc. (Nasdaq: KNSL) reported net income of $36.6 million, $1.59 per diluted share, for the third quarter of 2021 compared to $14.9 million, $0.65 per diluted share, for the third quarter of 2020. Net income included after-tax catastrophe losses of $4.6 million in the third quarter of 2021 and $13.2 million in the third quarter of 2020. Net income was $104.3 million, $4.53 per diluted share, for the first nine months of 2021 compared to $50.2 million, $2.21 per diluted share, for the first nine months of 2020. After-tax catastrophe losses were $6.9 million for the first nine months of 2021 and $13.5 million for the first nine months of 2020.
Net operating earnings(1) were $36.7 million, $1.59 per diluted share, for the third quarter of 2021 compared to $9.6 million, $0.42 per diluted share, for the third quarter of 2020. Net operating earnings(1) were $91.7 million, $3.98 per diluted share, for the first nine months of 2021 compared to $46.0 million, $2.02 per diluted share, for the first nine months of 2020.
Highlights for the quarter included:
Net income increased by 146.0% compared to the third quarter of 2020
Net operating earnings(1) of $36.7 million increased by 281.9% compared to the third quarter of 2020
36.5% growth in gross written premiums to $197.6 million compared to the third quarter of 2020
15.5% increase in net investment income to $8.1 million compared to the third quarter of 2020
Underwriting income(2) of $38.1 million in the third quarter of 2021, resulting in a combined ratio of 75.7%
19.8% annualized operating return on equity(4) for the nine months ended September 30, 2021

“Third quarter premium growth and profitability were both favorable. In particular, our quarterly combined ratio of 75.7% reflects the margin expansion resulting from several years of robust rate increases as well as our disciplined underwriting and low cost model. Looking ahead, we remain optimistic about overall market conditions as well as our ability to deliver strong returns and expand our market share over the long term,” said President and Chief Executive Officer, Michael P. Kehoe.

Results of Operations
Underwriting Results
Gross written premiums were $197.6 million for the third quarter of 2021 compared to $144.8 million for the third quarter of 2020, an increase of 36.5%. Gross written premiums were $560.6 million for the first nine months of 2021 compared to $402.9 million for the first nine months of 2020, an increase of 39.1%. Growth in gross written premiums during the third quarter and first nine months of 2021 over the same periods last year was driven by higher submission activity from brokers and rate increases on bound accounts.
Underwriting income(2) was $38.1 million, resulting in a combined ratio of 75.7%, for the third quarter of 2021, compared to $2.9 million and a combined ratio of 97.3% for the same period last year. The increase in underwriting income(2) quarter over quarter, was due to a combination of factors including premium growth and continued rate increases from a strong underwriting environment, lower catastrophe activity and higher net favorable development of loss reserves from prior accident years. Loss and expense ratios were 55.7% and 20.0%, respectively, for the third quarter of 2021 compared to 76.1% and 21.2% for the third quarter of






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2020. Results for the third quarters of 2021 and 2020 included net favorable development of loss reserves from prior accident years of $9.2 million, or 5.9 points, and $3.0 million, or 2.8 points, respectively. The loss ratio for the third quarter of 2021 included 3.8 points of net incurred losses related to catastrophes, primarily from Hurricane Ida. The loss ratio for the third quarter of 2020 included 15.4 points of net incurred losses related to catastrophes, primarily related to Hurricanes Laura and Sally, and the California wildfires.
Underwriting income(2) was $91.4 million, resulting in a combined ratio of 78.1%, for the first nine months of 2021, compared to $33.0 million and a combined ratio of 88.8% for the same period last year. The increase in underwriting income(2) for the first nine months of 2021 compared to the prior year period was primarily due to premium growth and continued rate increases, higher net favorable development of loss reserves from prior accident years and lower catastrophe activity. Loss and expense ratios were 56.7% and 21.4%, respectively, for the first nine months of 2021 compared to 65.9% and 22.9% for the first nine months of 2020. Results for the first nine months of 2021 and 2020 included net favorable development of loss reserves from prior accident years of $25.4 million, or 6.1 points, and $9.6 million, or 3.3 points, respectively. The loss ratio for the nine months ended September 30, 2021 included 2.1 points of net incurred losses related to catastrophes compared to 5.8 points for the same period last year. The catastrophe activity in first nine months of 2021 primarily related to Hurricane Ida and winter storms Uri and Viola in Texas. Catastrophe activity in first nine months of 2020 primarily related to Hurricanes Laura and Sally and the California wildfires.
Summary of Operating Results
The Company’s operating results for the three and nine months ended September 30, 2021 and 2020 are summarized as follows:
Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
($ in thousands)
Gross written premiums$197,616 $144,777 $560,553 $402,904 
Ceded written premiums(26,939)(22,529)(77,825)(54,996)
Net written premiums$170,677 $122,248 $482,728 $347,908 
Net earned premiums $156,871 $108,244 $417,612 $294,962 
Losses and loss adjustment expenses87,352 82,431 236,727 194,468 
Underwriting, acquisition and insurance expenses
31,465 22,927 89,490 67,471 
Underwriting income(2)
$38,054 $2,886 $91,395 $33,023 
Loss ratio55.7 %76.1 %56.7 %65.9 %
Expense ratio20.0 %21.2 %21.4 %22.9 %
Combined ratio75.7 %97.3 %78.1 %88.8 %
Annualized return on equity(3)
22.7 %12.0 %22.5 %14.3 %
Annualized operating return on equity(4)
22.8 %7.8 %19.8 %13.0 %
(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.






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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 nine months ended September 30, 2021 and 2020:

Three Months Ended
September 30, 2021
Three Months Ended
September 30, 2020
Losses and Loss Adjustment Expenses% of Earned PremiumsLosses and Loss Adjustment Expenses% of Earned Premiums
Loss ratio:($ in thousands)
Current accident year$90,675 57.8 %$68,764 63.5 %
Current accident year - catastrophe losses
5,882 3.8 %16,670 15.4 %
Effect of prior accident year development(9,205)(5.9)%(3,003)(2.8)%
Total$87,352 55.7 %$82,431 76.1 %

 Nine Months Ended
September 30, 2021
Nine Months Ended
September 30, 2020
Losses and Loss Adjustment Expenses% of Earned PremiumsLosses and Loss Adjustment Expenses% of Earned Premiums
Loss ratio:($ in thousands)
Current accident year$253,348 60.7 %$186,965 63.4 %
Current accident year - catastrophe losses
8,792 2.1 %17,131 5.8 %
Effect of prior accident year development(25,413)(6.1)%(9,628)(3.3)%
Total$236,727 56.7 %$194,468 65.9 %

Investment Results
Net investment income was $8.1 million in the third quarter of 2021 compared to $7.0 million in the third quarter of 2020, an increase of 15.5%. Net investment income was $22.5 million in the first nine months of 2021 compared to $19.6 million in the first nine months of 2020, an increase of 14.5%. These increases were primarily due to growth in the Company's investment portfolio generated from the investment of positive operating cash flow since September 30, 2020 and proceeds from the Company's equity offering in the third quarter of 2020. The Company’s investment portfolio, excluding cash and cash equivalents, had an annualized gross investment return(5) of 2.5% for the first nine months of 2021 compared to 3.0% for the first nine months of 2020. 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 4.4 years and 4.3 years at September 30, 2021 and December 31, 2020, respectively. Cash and invested assets totaled $1.6 billion at September 30, 2021 compared to $1.3 billion at December 31, 2020.
(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 the average beginning and ending book value of those investments during the period.

Other
Total comprehensive income was $88.2 million for the first nine months of 2021 compared to $74.6 million for the first nine months of 2020. The increase was due to higher net income offset in part by a decrease in the fair values of the Company's fixed-maturity investments, resulting from a higher interest rate environment.






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The effective tax rates for the nine months ended September 30, 2021 and 2020 were 18.9% and 12.8%, respectively. In the first nine months of 2021 and 2020, 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 $659.2 million at September 30, 2021, compared to $576.2 million at December 31, 2020. Annualized operating return on equity(4) was 19.8% for the first nine months of 2021, an increase from 13.0% for the first nine months of 2020, which was attributable primarily to growth in the business from continuing favorable market conditions and rate increases and higher net favorable development of loss reserves from prior accident years.
Non-GAAP Financial Measures
Net Operating Earnings
Net operating earnings is defined as net income excluding the effects of the change in the fair value of equity securities, after taxes, and net realized investment gains and losses, after taxes. Management believes the exclusion of these items provides a more useful comparison of the Company's underlying business performance from period to period. Net operating earnings and percentages or calculations using net operating earnings (e.g., diluted operating earnings per share and annualized operating return on equity) are non-GAAP financial measures. Net operating earnings should not be viewed as a substitute for net income calculated in accordance with GAAP, and other companies may define net operating earnings differently.
For the three and nine months ended September 30, 2021 and 2020, net income and diluted earnings per share reconcile to net operating earnings and diluted operating earnings per share as follows:
Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
($ in thousands, except per share data)
Net operating earnings:
Net income$36,625 $14,890 $104,339 $50,238 
Change in the fair value of equity securities, after taxes
799 (4,764)(10,779)(2,930)
Net realized investment gains, after taxes(707)(511)(1,894)(1,324)
Net operating earnings$36,717 $9,615 $91,666 $45,984 
Diluted operating earnings per share:
Diluted earnings per share$1.59 $0.65 $4.53 $2.21 
Change in the fair value of equity securities, after taxes, per share
0.03 (0.21)(0.47)(0.13)
Net realized investment gains, after taxes, per share(0.03)(0.02)(0.08)(0.06)
Diluted operating earnings per share(1)
$1.59 $0.42 $3.98 $2.02 
Operating return on equity:
Average stockholders' equity(2)
$644,401 $495,123 $617,702 $470,006 
Annualized return on equity(3)
22.7 %12.0 %22.5 %14.3 %
Annualized operating return on equity(4)
22.8 %7.8 %19.8 %13.0 %
(1)     Diluted operating earnings per share may not add due to rounding.






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(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 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.
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, 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 nine months ended September 30, 2021 and 2020, net income reconciles to underwriting income as follows:
Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
(in thousands)
Net income$36,625 $14,890 $104,339 $50,238 
Income tax expense 9,054 1,231 24,387 7,355 
Income before income taxes45,679 16,121 128,726 57,593 
Other expenses (5)
388 1,022 1,234 1,022 
Net investment income(8,095)(7,008)(22,466)(19,613)
Change in the fair value of equity securities
1,012 (6,031)(13,644)(3,709)
Net realized investment gains(895)(647)(2,397)(1,676)
Other income(35)(571)(58)(594)
Underwriting income$38,054 $2,886 $91,395 $33,023 
(5)    Other expenses are comprised of interest expense on the Company's Credit Facility and other 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 29, 2021, at 9:00 a.m. (Eastern Time). Members of the public may access the conference call by dialing (844) 239-5282, conference ID# 3495415 , 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 December 30, 2021.

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






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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 September 30,Nine Months Ended September 30,
2021202020212020
Revenues(in thousands, except per share data)
Gross written premiums$197,616 $144,777 $560,553 $402,904 
Ceded written premiums(26,939)(22,529)(77,825)(54,996)
Net written premiums170,677 122,248 482,728 347,908 
Change in unearned premiums(13,806)(14,004)(65,116)(52,946)
Net earned premiums156,871 108,244 417,612 294,962 
Net investment income8,095 7,008 22,466 19,613 
Change in the fair value of equity securities(1,012)6,031 13,644 3,709 
Net realized investment gains 895 647 2,397 1,676 
Other income35 571 58 594 
Total revenues164,884 122,501 456,177 320,554 
Expenses
Losses and loss adjustment expenses87,352 82,431 236,727 194,468 
Underwriting, acquisition and insurance expenses
31,465 22,927 89,490 67,471 
Other expenses388 1,022 1,234 1,022 
Total expenses119,205 106,380 327,451 262,961 
Income before income taxes45,679 16,121 128,726 57,593 
Total income tax expense9,054 1,231 24,387 7,355 
Net income36,625 14,890 104,339 50,238 
Other comprehensive income
Change in net unrealized gains on available-for-sale investments, net of taxes(6,072)6,554 (16,111)24,339 
Total comprehensive income$30,553 $21,444 $88,228 $74,577 
Earnings per share:
Basic$1.61 $0.66 $4.60 $2.26 
Diluted$1.59 $0.65 $4.53 $2.21 
Weighted-average shares outstanding:
Basic22,714 22,398 22,681 22,220 
Diluted23,064 22,928 23,057 22,775 






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

September 30, 2021December 31, 2020
Assets(in thousands)
Investments:
Fixed-maturity securities at fair value
$1,342,873 $1,081,800 
Equity securities at fair value151,792 129,662 
Total investments1,494,665 1,211,462 
Cash and cash equivalents90,012 77,093 
Investment income due and accrued7,276 6,637 
Premiums receivable, net63,709 48,641 
Reinsurance recoverables112,026 93,215 
Ceded unearned premiums32,783 24,265 
Deferred policy acquisition costs, net of ceding commissions
40,273 31,912 
Intangible assets3,538 3,538 
Deferred income tax asset, net392 — 
Other assets54,221 50,133 
Total assets$1,898,895 $1,546,896 
Liabilities & Stockholders' Equity
Liabilities:
Reserves for unpaid losses and loss adjustment expenses$814,856 $636,013 
Unearned premiums334,620 260,986 
Payable to reinsurers15,097 12,672 
Accounts payable and accrued expenses16,725 13,651 
Credit facility42,664 42,570 
Deferred income tax liability, net— 4,648 
Other liabilities15,768 118 
Total liabilities1,239,730 970,658 
Stockholders' equity659,165 576,238 
Total liabilities and stockholders' equity$1,898,895 $1,546,896 







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