Kinsale Capital Group, Inc. (NASDAQ:KNSL) Q2 2020 Earnings Conference Call - Final Transcript

Jul 31, 2020 • 09:00 am ET


Kinsale Capital Group, Inc. (NASDAQ:KNSL) Q2 2020 Earnings Conference Call - Final Transcript


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Ladies and gentlemen, thank you for standing by, and welcome to Kinsale Capital Group's Second Quarter 2020 Earnings Conference Call. [Operator Instructions] Before we get started, let me remind everyone that through the course of the teleconference, Kinsale's management may make comments that reflect their intentions, beliefs and expectations for the future. As always, these forward-looking statements are subject to certain risk factors, which could cause actual results to differ materially. These risk factors are listed in the company's various SEC filings, including the second quarter 2020 quarterly report on Form 10-Q and the 2019 annual report on Form 10-K, which should be reviewed carefully. The company has furnished a Form 8-K with the Securities and Exchange Commission that contains the press release announcing its second quarter results. Kinsale's management may also reference certain non-GAAP financial measures in the call today. A reconciliation of GAAP to these measures can be found in the press release, which is available at the company's website at

I will now turn the conference over to Kinsale's President and CEO, Mr. Michael Kehoe. Please go ahead, sir.

Michael P. Kehoe

Thank you, operator. Good morning, everyone, and thank you for joining us on the call today. With me are Bryan Petrucelli, Kinsale's CFO; and Brian Haney, Kinsale's COO. I will begin our presentation, and then Bryan Petrucelli will cover the financial performance for the quarter, and then Brian Haney will provide some color on the market and our underwriting operation. Last night, Kinsale reported operating earnings of $0.84 per diluted share for the second quarter of 2020, up 47% from the second quarter of 2019. Gross written premium was up 41% for the quarter, notwithstanding the disruption of the COVID virus. The company posted an 83.8% combined ratio and a 16.9% annualized operating return on equity for the six months ending June 30, 2020. The Kinsale strategy of disciplined and highly controlled underwriting, combined with technology-driven low costs and a focus on the E&S market, is propelling our profitability and growth and we believe will continue to do so over the long term. In addition to our own business strategy, our growth is being enhanced by a growing level of dislocation within the P&C market. After many years of intense competition, some competitors are experiencing adverse results and are withdrawing capacity, canceling some programs, raising prices, etc. We expect this dislocation to continue, thereby allowing Kinsale to grow at an elevated rate perhaps through 2021. At some point thereafter, we expect the level of dislocation to abate and our growth rate to normalize perhaps in the low double-digit range. Beyond the accelerated growth, industry dislocation is also allowing Kinsale to raise rates and in some cases, restrict coverage to further expand our profit margins. To take full advantage of this market opportunity, there is a possibility Kinsale could raise a modest amount of equity capital before year-end. At the end of the first quarter 2020, we noted that we did not expect the COVID-19 virus to have a