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Item 5. Market for Registrant’s Common Equity

2022-02-25 compared with 2021-02-25 · 5 added, 115 removed, 18 unchanged (87% of the section changed)

3 unchanged sentences

Before then, there was no public market for our common stock.

As of February 18, 2021, we had 90 stockholders of record of our common stock.

Effective January 3, 2022, the Company transferred its common stock listing from the Nasdaq to the New York Stock Exchange ("NYSE") and continued to trade under its current symbol "KNSL." As of February 17, 2022, we had 94 stockholders of record of our common stock.

Dividend Policy

1 unchanged sentence

however, the declaration, payment and amount of future dividends is subject to the discretion of our Board of Directors.

Our Board of Directors give consideration to various risks and uncertainties, including those discussed under the headings "Risk Factors" and "Management’s Discussion and Analysis of Financial Condition and Results of Operations" and elsewhere in this Annual Report on Form 10-K when determining whether to declare and pay dividends, as well as the amount thereof.

Our Board of Directors may take into account a variety of factors when determining whether to declare any dividends, including (1) our financial condition, liquidity, results of operations (including our ability to generate cash flow in excess of expenses and our expected or actual net income), retained earnings and capital requirements, (2) general business conditions, (3) legal, tax and regulatory limitations, (4) contractual prohibitions and other restrictions, (5) the effect of a dividend or dividends on our financial strength ratings and (6) any other factors that our Board of Directors deem relevant.

Our Board of Directors gives consideration to various risks and uncertainties, including those discussed under the headings "Risk Factors" and "Management’s Discussion and Analysis of Financial Condition and Results of Operations" and elsewhere in this Annual Report on Form 10-K when determining whether to declare and pay dividends, as well as the amount thereof.

Our status as a holding company and a legal entity separate and distinct from our subsidiaries affects our ability to pay dividends and make other payments.

3 unchanged sentences

Performance Graph

The following performance graph compares the cumulative total shareholder return of an investment in (1) our common stock, (2) the cumulative total returns to the Nasdaq Composite Index and (3) the cumulative total returns to the Nasdaq Insurance Index, for the period from July 28, 2016 (the date our common stock began trading on Nasdaq) through December 31, 2020.

The graph assumes an initial investment of $100 and the reinvestment of dividends, if any.

Such returns are based on historical results and are not indicative of future performance.

July 28, 2016 December 31, 2016 December 31, 2017 December 31, 2018 December 31, 2019 December 31, 2020

2016 2017 2018 2019 2020 2021

Kinsale Capital Group, Inc.

2 unchanged sentences

Nasdaq Insurance Index $ 100.00 $ 116.95 $ 110.34 $ 133.15 $ 132.39 $ 170.09

Selected Consolidated Financial and Other Data

The following tables present our selected consolidated financial and other data, at the dates and for the periods indicated.

The selected consolidated financial and other data set forth below as of and for the years ended December 31, 2020, 2019, 2018, 2017 and 2016 have been derived from our audited consolidated financial statements for those years.

These historical results are not necessarily indicative of the results that may be expected for any future period.

The following information is only a summary and should be read in conjunction with the section entitled "Management’s Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and the accompanying notes included elsewhere in this Annual Report on Form 10-K.

Year Ended December 31,

2020 2019 2018 2017 2016

($ in thousands, except for per share data)

Gross written premiums $ 552,814 $ 389,694 $ 275,538 $ 223,191 $ 188,478

Ceded written premiums (1)

(74,595) (47,633) (39,924) (33,719) (21,214)

Net written premiums $ 478,219 $ 342,061 $ 235,614 $ 189,472 $ 167,264

Net earned premiums $ 412,754 $ 282,981 $ 212,688 $ 176,053 $ 133,816

Net investment income 26,110 20,133 15,688 10,569 7,487

Net investment gains (losses) (2)

20,388 12,748 (6,274) 151 176

Other income 634 26 12 3 136

Total revenues 459,886 315,888 222,114 186,776 141,615

Losses and loss adjustment expenses (1)

263,802 169,563 128,041 103,680 70,961

Underwriting, acquisition and insurance expenses (1)

94,296 70,217 53,425 44,146 28,551

Other expenses 1,375 57 168 429 2,567

Total expenses 359,473 239,837 181,634 148,255 102,079

Income before income taxes 100,413 76,051 40,480 38,521 39,536

Income tax expense (3)

11,994 12,735 6,693 13,620 13,369

Net income $ 88,419 $ 63,316 $ 33,787 $ 24,901 $ 26,167

Underwriting income (4)

$ 54,656 $ 43,201 $ 31,222 $ 28,227 $ 34,304

Per common share data:

Basic earnings per share:

Common stock $ 3.96 $ 2.94 $ 1.60 $ 1.19 $ 0.57

Class A common stock (5)

Class B common stock (5)

Diluted earnings per share:

Common stock $ 3.87 $ 2.86 $ 1.56 $ 1.16 $ 0.56

Class A common stock (5)

Class B common stock (5)

Cash dividends declared and paid 0.36 0.32 0.28 0.24 0.10

At December 31,

2020 2019 2018 2017 2016

($ in thousands)

Balance sheet data:

Cash and invested assets $ 1,288,555 $ 908,234 $ 643,051 $ 561,070 $ 480,349

Premiums receivable, net 48,641 34,483 24,253 19,787 16,984

Reinsurance recoverables, net (1)

93,215 72,574 56,788 49,593 70,317

Ceded unearned premiums (1)

24,265 16,118 16,072 13,858 13,512

Intangible assets 3,538 3,538 3,538 3,538 3,538

Total assets 1,546,896 1,090,550 773,063 667,849 614,389

Reserves for unpaid losses and loss adjustment expenses 636,013 460,058 369,152 315,717 264,801

Unearned premiums 260,986 187,374 128,250 103,110 89,344

Funds held for reinsurers (1)

— — — — 36,497

Debt 42,570 16,744 — — —

Total liabilities 970,658 684,670 509,077 429,660 404,175

Total stockholders' equity 576,238 405,880 263,986 238,189 210,214

Tangible stockholders' equity (6)

$ 573,443 $ 403,085 $ 261,191 $ 235,394 $ 207,914

Debt to total capitalization ratio (7)

6.9 % 4.1 % — % — % — %

Statutory capital and surplus (8)

$ 476,066 $ 348,811 $ 233,500 $ 213,833 $ 193,387

Year Ended December 31,

2020 2019 2018 2017 2016

Underwriting and other ratios:

Loss ratio (9)

63.9 % 59.9 % 60.2 % 58.9 % 53.0 %

Expense ratio (10)

22.8 % 24.8 % 25.1 % 25.1 % 21.3 %

Combined ratio (11)

86.7 % 84.7 % 85.3 % 84.0 % 74.3 %

Adjusted loss ratio (12)

NA NA NA NA 50.0 %

Adjusted expense ratio (12)

NA NA NA NA 26.8 %

Adjusted combined ratio (12)

NA NA NA NA 76.8 %

Return on equity (13)

18.0 % 18.9 % 13.5 % 11.1 % 16.2 %

Operating return on equity (14)

14.7 % 15.9 % 15.4 % 11.9 % 16.1 %

(1) Prior to our IPO in 2016, a significant amount of our business was reinsured through our multi-line quota-share reinsurance treaty ("MLQS") with third-party reinsurers.

The MLQS transferred a portion of the risk related to certain lines of business written by us to reinsurers in exchange for a portion of the gross written premiums on that business.

Effective January 1, 2017, the Company commuted the remaining outstanding MLQS covering the period January 1, 2015 to December 31, 2015, which reduced reinsurance recoverables on unpaid losses by approximately $27.9 million.

The commutation did not have any effect on the Company's results of operations or cash flows for the applicable period.

(2) Effective January 1, 2018, we adopted ASU 2016-01, which eliminated the available-for-sale classification for equity securities and required changes in unrealized gains and losses in fair value of these investments to be recognized in net income.

(3) During the fourth quarter of 2017, the Tax Cuts and Jobs Act of 2017 (the "TCJA") was enacted, which lowered the federal corporate tax rate from 35% to 21% starting January 1, 2018.

As a result of the TCJA enactment, deferred tax balances were remeasured to reflect the lower rate, which resulted in charge to tax expense of $1.9 million for the year ended December 31, 2017.

(4) Underwriting income is a non-GAAP financial measure.

See "Management’s Discussion and Analysis of Financial Condition and Results of Operations — Reconciliation of Non-GAAP Financial Measures" for a reconciliation of net income to underwriting income.

(5) In connection with the IPO, the Company amended and restated its certificate of incorporation, which reclassified the Company’s former Class A Common Stock and Class B Common Stock into a single class of common stock.

(6) Tangible stockholders’ equity is a non-GAAP financial measure.

See "Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Financial Condition" for a reconciliation of stockholders’ equity to tangible stockholders’ equity.

(7) The debt to total capitalization ratio is the ratio, expressed as a percentage, of total indebtedness for borrowed money, including financing leases, to the sum of total indebtedness for borrowed money, including financing leases if any, and stockholders’ equity.

(8) Statutory and surplus capital is the excess of assets over liabilities for our insurance subsidiary, as determined in accordance with statutory accounting principles prescribed by the NAIC.

(9) The loss ratio is the ratio, expressed as a percentage, of losses and loss adjustment expenses to net earned premiums, net of the effects of reinsurance.

(10) The expense ratio is the ratio, expressed as a percentage, of underwriting, acquisition and insurance expenses to net earned premiums.

(11) The combined ratio is the sum of the loss ratio and the expense ratio.

A combined ratio under 100% generally indicates an underwriting profit.

A combined ratio over 100% generally indicates an underwriting loss.

(12) The adjusted loss ratio, adjusted expense ratio and adjusted combined ratio are non-GAAP financial measures.

As previously discussed, the Company participated in a MLQS that transferred a portion of its risk related to certain lines of business to reinsurers that received a portion of the direct written premiums on that business.

We define our adjusted loss ratio, adjusted expense ratio and adjusted combined ratio as each of our loss ratio, expense ratio and combined ratio, respectively, excluding the effects of the MLQS.

See "Management’s Discussion and Analysis of Financial Condition and Results of Operations — Reconciliation of Non-GAAP Financial Measures" for a reconciliation of our loss ratio, expense ratio and combined ratio to our adjusted loss ratio, adjusted expense ratio and adjusted combined ratio.

(13) Return on equity represents net income expressed as a percentage of average beginning and ending stockholders’ equity during the period.

(14) Operating return on equity is net operating earnings expressed as a percentage of average beginning and ending stockholders’ equity during the period and is a non-GAAP financial measure.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 5. Market for Registrant’s Common Equity