8-K

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): April 27, 2023

KINSALE CAPITAL GROUP, INC.

(Exact name of registrant as specified in its charter)

Delaware	001-37848	98-0664337
(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 $0.01 per share	KNSL	New York Stock Exchange

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 April 27, 2023, Kinsale Capital Group, Inc. (the “Company”) issued a press release announcing its financial results for the three months ended March 31, 2023. 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	Press Release of the Company dated April 27, 2023
104	Cover 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: April 27, 2023	By:	/s/ Bryan P. Petrucelli
		Bryan P. Petrucelli
		Executive Vice President, Chief Financial Officer and Treasurer

EX-99.1

Exhibit 99.1

Kinsale Capital Group Reports First Quarter 2023 Results

Richmond, VA, April 27, 2023 - Kinsale Capital Group, Inc. (NYSE: KNSL) reported net income of $55.8 million, $2.40 per diluted share, for the first quarter of 2023 compared to $31.8 million, $1.38 per diluted share, for the first quarter of 2022. Net operating earnings(1) were $56.8 million, $2.44 per diluted share, for the first quarter of 2023 compared to $37.7 million, $1.63 per diluted share, for the first quarter of 2022.

Highlights for the quarter included:

•Net income increased by 75.5% compared to the first quarter of 2022

•Net operating earnings(1) of $56.8 million increased by 50.6% compared to the first quarter of 2022

•Gross written premiums increased by 45.6% to $357.6 million compared to the first quarter of 2022

•Net investment income increased by 127.7% to $20.7 million compared to the first quarter of 2022

•Underwriting income(2) was $51.6 million in the first quarter of 2023, resulting in a combined ratio of 78.2%

•Annualized operating return on equity(5) was 29.1% for the three months ended March 31, 2023

"Our first quarter results demonstrate continued execution of our business model. We delivered gross written premium growth of 46%, a combined ratio of 78% and annualized operating return on equity of 29%. These results reflect the combination of disciplined underwriting, technology-enabled cost advantages and favorable E&S market conditions. We remain confident in our ability to create further shareholder value over the long term,” said President and Chief Executive Officer, Michael P. Kehoe.

Results of Operations

Underwriting Results

Gross written premiums were $357.6 million for the first quarter of 2023 compared to $245.5 million for the first quarter of 2022, an increase of 45.6%. The increase in gross written premiums during the first quarter of 2023 over the same period last year reflected strong submission flow from brokers and a favorable pricing environment.

Underwriting income(2) was $51.6 million, resulting in a combined ratio of 78.2%, for the first quarter of 2023, compared to $37.5 million and a combined ratio of 79.0% for the first quarter of 2022. The increase in underwriting income(2) was due to a combination of premium growth, favorable loss experience, lower net commissions and scale. Loss and expense ratios were 58.6% and 19.6%, respectively, for the first quarter of 2023 compared to 57.4% and 21.6% for the first quarter of 2022. Results for the first quarter of 2023 and 2022 included net favorable development of loss reserves from prior accident years of $9.0 million, or 3.8 points, and $8.3 million, or 4.7 points, respectively.

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Summary of Operating Results

The Company’s operating results for the three months ended March 31, 2023 and 2022 are summarized as follows:

	Three Months Ended March 31,
	2023			2022
	($ in thousands)
Gross written premiums	$	357,588		$	245,513
Ceded written premiums	(58,558)			(29,015)
Net written premiums	$	299,030		$	216,498
Net earned premiums	$	237,158		$	178,562
Losses and loss adjustment expenses	139,034			102,505
Underwriting, acquisition and insurance expenses	46,545			38,545
Underwriting income(2)	$	51,579		$	37,512
Loss ratio	58.6		%	57.4		%
Expense ratio	19.6		%	21.6		%
Combined ratio(3)	78.2		%	79.0		%
Annualized return on equity(4)	28.6		%	18.6		%
Annualized operating return on equity(5)	29.1		%	22.1		%

(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)    The combined ratio is the sum of the loss ratio and expense ratio as presented. Calculations of each component may not add due to rounding.

(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.

The following table summarizes losses incurred for the current accident year and the development of prior accident years for the three months ended March 31, 2023 and 2022:

	Three Months Ended March 31, 2023				Three Months Ended March 31, 2022
	Losses and Loss Adjustment Expenses		% of Earned Premiums		Losses and Loss Adjustment Expenses		% of Earned Premiums
Loss ratio:	($ in thousands)
Current accident year	$	146,503	61.8	%	$	110,789	62.1	%
Current accident year - catastrophe losses	1,574		0.6	%	62		—	%
Effect of prior accident year development	(9,043)		(3.8)	%	(8,346)		(4.7)	%
Total	$	139,034	58.6	%	$	102,505	57.4	%

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Investment Results

Net investment income was $20.7 million in the first three months of 2023 compared to $9.1 million in the first quarter of 2022, an increase of 127.7%. This increase was 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 $197.6 million in the first quarter of 2023 compared to $121.9 million in the first quarter of 2022, an increase of 62.1%. The Company’s investment portfolio had an annualized gross investment return(6) of 3.7% for the first quarter of 2023 compared to 2.5% 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 3.4 years and 3.5 years at March 31, 2023 and December 31, 2022, respectively. Cash and invested assets totaled $2.4 billion at March 31, 2023 and $2.2 billion at December 31, 2022.

(6)Gross investment return is investment income from fixed-maturity and equity securities (and short-term investments, if any), before any deductions for fees and expenses, expressed as a percentage of average beginning and ending book values of those investments during the period.

Other

The effective tax rates for the three months ended March 31, 2023 and 2022 were 18.4% and 18.2%, respectively. In both the first quarters of 2023 and 2022, 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 $815.7 million at March 31, 2023 compared to $745.4 million at December 31, 2022. Book value per share was $35.23 at March 31, 2023 compared to $32.28 at December 31, 2022. Annualized operating return on equity(5) was 29.1% for the first quarter of 2023, an increase from 22.1% for the first quarter of 2022, which was primarily due to continued profitable growth in the business from favorable E&S market conditions and rate increases.

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.

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For the three months ended March 31, 2023 and 2022, net income and diluted earnings per share reconcile to net operating earnings and diluted operating earnings per share as follows:

	Three Months Ended March 31,
	2023			2022
	($ in thousands, except per share data)
Net operating earnings:
Net income	$	55,800		$	31,791
Adjustments:
Change in the fair value of equity securities, before taxes	(3,518)			7,751
Income tax expense (benefit) (1)	739			(1,628)
Change in fair value of equity securities, after taxes	(2,779)			6,123
Net realized investment losses (gains), before taxes	4,652			(295)
Income tax (benefit) expense (1)	(977)			62
Net realized investment losses (gains), after taxes	3,675			(233)
Change in allowance for credit losses on investments, before taxes	81			—
Income tax benefit (1)	(17)			—
Change in allowance for credit losses on investments, after taxes	64			—
Net operating earnings	$	56,760		$	37,681
Diluted operating earnings per share:
Diluted earnings per share	$	2.40		$	1.38
Change in the fair value of equity securities, after taxes, per share	(0.12)			0.27
Net realized investment losses (gains), after taxes, per share	0.16			(0.01)
Diluted operating earnings per share(2)	$	2.44		$	1.63
Operating return on equity:
Average equity(3)	$	780,590		$	682,453
Annualized return on equity(4)	28.6		%	18.6		%
Annualized operating return on equity(5)	29.1		%	22.1		%

(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.

4

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 months ended March 31, 2023 and 2022, net income reconciles to underwriting income as follows:

	Three Months Ended March 31,
	2023		2022
	(in thousands)
Net income	$	55,800	$	31,791
Income tax expense	12,593		7,081
Income before income taxes	68,393		38,872
Net investment income	(20,695)		(9,088)
Change in the fair value of equity securities	(3,518)		7,751
Net realized investment losses (gains)	4,652		(295)
Change in allowance for credit losses on investments	81		—
Interest expense	2,570		253
Other expenses (6)	402		143
Other income	(306)		(124)
Underwriting income	$	51,579	$	37,512

(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, April 28, 2023 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 May 26, 2023.

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

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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 March 31,
	2023		2022
Revenues	(in thousands, except per share data)
Gross written premiums	$	357,588	$	245,513
Ceded written premiums	(58,558)		(29,015)
Net written premiums	299,030		216,498
Change in unearned premiums	(61,872)		(37,936)
Net earned premiums	237,158		178,562
Net investment income	20,695		9,088
Change in the fair value of equity securities	3,518		(7,751)
Net realized investment (losses) gains	(4,652)		295
Change in allowance for credit losses on investments	(81)		—
Other income	306		124
Total revenues	256,944		180,318
Expenses
Losses and loss adjustment expenses	139,034		102,505
Underwriting, acquisition and insurance expenses	46,545		38,545
Interest expense	2,570		253
Other expenses	402		143
Total expenses	188,551		141,446
Income before income taxes	68,393		38,872
Total income tax expense	12,593		7,081
Net income	55,800		31,791
Other comprehensive income (loss)
Change in net unrealized gains (losses) on available-for-sale investments, net of taxes	17,509		(63,930)
Total comprehensive income (loss)	$	73,309	$	(32,139)
Earnings per share:
Basic	$	2.43	$	1.40
Diluted	$	2.40	$	1.38
Weighted-average shares outstanding:
Basic	23,008		22,753
Diluted	23,290		23,093

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KINSALE CAPITAL GROUP, INC. AND SUBSIDIARIES

Unaudited Condensed Consolidated Balance Sheets

	March 31, 2023		December 31, 2022
Assets	(in thousands)
Investments:
Fixed-maturity securities at fair value	$	1,971,800	$	1,760,100
Equity securities at fair value	171,366		152,471
Real estate investments, net	76,475		76,387
Short-term investments	26,640		41,337
Total investments	2,246,281		2,030,295
Cash and cash equivalents	158,648		156,274
Investment income due and accrued	14,948		14,451
Premiums receivable, net	128,774		105,754
Reinsurance recoverables, net	218,796		220,454
Ceded unearned premiums	45,115		42,935
Deferred policy acquisition costs, net of ceding commissions	69,444		61,594
Intangible assets	3,538		3,538
Deferred income tax asset, net	53,320		56,983
Other assets	58,958		54,844
Total assets	$	2,997,822	$	2,747,122
Liabilities & Stockholders' Equity
Liabilities:
Reserves for unpaid losses and loss adjustment expenses	$	1,354,151	$	1,238,402
Unearned premiums	563,729		499,677
Payable to reinsurers	33,111		32,024
Accounts payable and accrued expenses	12,509		31,361
Debt	195,812		195,747
Other liabilities	22,779		4,462
Total liabilities	2,182,091		2,001,673
Stockholders' equity	815,731		745,449
Total liabilities and stockholders' equity	$	2,997,822	$	2,747,122

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XML

DEI Document	Apr. 27, 2023
Document and Entity Information [Abstract]
Document Type	8-K
Document Period End Date	Apr. 27, 2023
Entity Registrant Name	KINSALE CAPITAL GROUP, INC.
Entity Incorporation, State or Country Code	DE
Entity File Number	001-37848
Entity Tax Identification Number	98-0664337
Entity Address, Address Line One	2035 Maywill Street
Entity Address, Address Line Two	Suite 100
Entity Address, City or Town	Richmond
Entity Address, State or Province	VA
Entity Address, Postal Zip Code	23230
City Area Code	804
Local Phone Number	289-1300
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Title of 12(b) Security	Common Stock, par value $0.01 per share
Trading Symbol	KNSL
Security Exchange Name	NYSE
Entity Emerging Growth Company	false
Amendment Flag	false
Entity Central Index Key	0001669162