What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2023-02-24 compared with 2022-02-25 · 242 added, 119 removed, 1139 unchanged (24% of the section changed)

101 unchanged sentences

Fixed-maturity securities available-for-sale, at fair value (amortized cost:

$ 1,371,519 – 2021;

$ 1,933,632 allowance for credit loss:

$ 366 – 2022;

$ 1,371,519 and $0 – 2021)

$ 1,760,100 $ 1,392,066

3 unchanged sentences

152,471 172,611

Real estate investments, net 76,387 —

Short-term investments 41,337 —

Total investments 2,030,295 1,564,677

1 unchanged sentence

Investment income due and accrued 14,451 7,658

Premiums receivable, net 71,004 48,641

Reinsurance recoverables, net 122,970 93,215

Premiums receivable, net of allowance for credit losses of $ 8,067 in 2022 and $ 3,391 in 2021

105,754 71,004

Reinsurance recoverables, net of allowance for credit losses of $ 459 in 2022 and $ 400 in 2021

220,454 122,970

Ceded unearned premiums 42,935 33,679

Deferred policy acquisition costs, net of ceding commissions 61,594 41,968

Intangible assets 3,538 3,538

Indefinite-lived intangible assets 3,538 3,538

Deferred income tax asset, net 56,983 2,109

6 unchanged sentences

Accounts payable and accrued expenses 31,361 23,250

Credit facility 42,696 42,570

Deferred income tax liability, net — 4,648

Debt 195,747 42,696

Other liabilities 4,462 15,188

Total liabilities 2,001,673 1,326,320

Commitments and contingencies

Contingencies

Stockholders’ equity:

3 unchanged sentences

Retained earnings 533,121 385,942

Accumulated other comprehensive income 18,125 41,380

Accumulated other comprehensive (loss) income ( 134,918 ) 18,125

Stockholders’ equity 745,449 699,335

17 unchanged sentences

1,191 2,828 3,533

Change in allowance for credit losses on investments ( 366 ) — —

Other income 697 212 634

2 unchanged sentences

Underwriting, acquisition and insurance expenses 160,718 124,900 94,296

Interest expense 4,284 994 168

Other expenses 721 669 1,207

20 unchanged sentences

Balance at December 31, 2019 22,206 $ 222 $ 229,229 $ 162,911 $ 13,518 $ 405,880

Adoption of new accounting standard for credit losses, net

— — — 78 — 78

Issuance of common stock, net of issuance costs

9 unchanged sentences

Balance at December 31, 2020 22,757 228 291,315 243,315 41,380 576,238

Adoption of new accounting standard for credit losses, net

— — — 78 — 78

Issuance of common stock, net of issuance costs

311 3 56,695 — — 56,698

Issuance of common stock under stock-based compensation plan

4 unchanged sentences

— — — ( 10,032 ) — ( 10,032 )

Other comprehensive income, net of income taxes

— — — — 27,862 27,862

Other comprehensive loss, net of income taxes — — — — ( 23,255 ) ( 23,255 )

Net income — — — 152,659 — 152,659

Balance at December 31, 2021 22,834 228 295,040 385,942 18,125 699,335

Issuance of common stock, net of issuance costs

155 2 47,496 — — 47,498

Issuance of common stock under stock-based compensation plan

17 unchanged sentences

Adjustments to reconcile net income to net cash provided by operating activities:

Net unrealized gains on equity securities ( 22,812 ) ( 16,855 ) ( 12,389 )

Change in fair value of equity securities 27,723 ( 22,812 ) ( 16,855 )

Net realized investment gains ( 1,191 ) ( 2,828 ) ( 3,533 )

Change in allowance for credit losses on investments 366 — —

Deferred tax (benefit) expense ( 14,191 ) ( 576 ) 616

8 unchanged sentences

Deferred policy acquisition costs ( 19,626 ) ( 10,056 ) ( 8,348 )

Income taxes (recoverable) payable ( 3,882 ) ( 1,611 ) 1,221

Income taxes payable (recoverable) 7,518 ( 3,882 ) ( 1,611 )

Accounts payable and accrued expenses 8,111 10,102 3,087

3 unchanged sentences

Purchase of property and equipment ( 6,901 ) ( 5,920 ) ( 32,875 )

Purchase of real estate investment ( 76,623 ) — —

Sale of property and equipment — — 5,077

Change in short-term investments, net ( 40,638 ) — —

Purchases – fixed-maturity securities ( 751,402 ) ( 654,922 ) ( 530,732 )

6 unchanged sentences

Proceeds from issuance of common stock, net of issuance costs 47,498 — 56,698

Proceeds from credit facility — 25,700 17,300

Proceeds from borrowings under credit facility 73,000 — 25,700

Proceeds from notes payable 125,000 — —

Repayment of credit facility ( 43,000 ) — —

Debt issuance costs ( 2,381 ) — —

2 unchanged sentences

Dividends paid ( 11,927 ) ( 10,021 ) ( 8,073 )

Net cash (used in) provided by financing activities ( 11,140 ) 76,144 77,755

Net cash provided by (used in) financing activities 185,992 ( 11,140 ) 76,144

Net change in cash and cash equivalents 35,234 43,947 ( 23,315 )

29 unchanged sentences

Short-term investments

Short-term investments are carried at cost, which approximates fair value.

Short-term investments are carried at amortized cost, which approximates fair value.

Short-term investments have maturities greater than three months but less than one year at the date of purchase.

There were no short-term investments at December 31, 2021 or December 31, 2020.

Fixed-maturity and equity securities

11 unchanged sentences

Realized gains and losses on disposition of investments are based on specific identification of the investments sold on the trade date.

Real estate investments

Real estate investments include real estate and the related assets purchased for investment purposes.

Real estate and the related depreciable assets are carried at cost, net of accumulated depreciation.

Depreciation is calculated on a straight-line basis over the estimated useful life of the assets and is included in net investment income.

Rental income is recognized on a straight-line basis over the term of the respective lease and is included in net investment income.

Land is not depreciated.

Real estate is evaluated for impairment when events or circumstances indicate the carrying value of the real estate may not be recoverable.

Intangibles related to real estate investments consist of the value attributable to the acquired in-place leases.

These intangibles are amortized to expense over the related lease term of 12 years.

Amortization of the intangibles related to real estate investments is reflected in net investment income in the consolidated statement of income.

See Note 2 for further details regarding real estate investments.

Reinsurance premiums, commissions, and ceded unearned premiums on reinsured business are accounted for on a basis consistent with that used in accounting for the original policies issued and the terms of the reinsurance contracts.

8 unchanged sentences

The allowance for credit losses represents an estimate of amounts considered uncollectible based on the Company’s assessment of the collectability of receivables that are past due.

The Company recorded an allowance for credit losses of $ 3.4 million and $ 3.1 million at December 31, 2021 and 2020, respectively, and believes that all other amounts due are collectible.

The estimate considers historical loss data, current and future economic conditions and specific identification of collectability concerns where applicable.

The following table presents the rollforward of the allowance for credit losses for premiums receivable for the years ended December 31, 2022 and 2021:

Year Ended December 31,

(in thousands)

Beginning balance $ 3,391 $ 3,087

Current period change for estimated uncollectible premiums 5,988 2,189

Write-offs of uncollectible premiums receivable ( 1,312 ) ( 1,885 )

Ending balance $ 8,067 $ 3,391

Deferred policy acquisition costs, net of ceding commissions

16 unchanged sentences

Land improvements 474 474

Construction in progress - building 2,618 —

61,766 54,865

1 unchanged sentence

Total property and equipment, net $ 53,475 $ 49,295

During 2020, the Company sold a portion of both the land and parking deck for approximately $ 6.5 million to a real estate developer for the development of an apartment building.

At December 31, 2020, the Company received $ 5.0 million of the proceeds from the sale and is expected to receive the remaining $ 1.5 million upon completion of the apartment building.

This receivable is included in "other assets" on the accompanying consolidated balance sheet.

Intangible assets

Intangible assets are recorded at fair value at the date of acquisition.

The Company's intangible assets are comprised solely of indefinite-lived intangible assets, which arose from regulatory approvals granted by the various state insurance departments to write insurance business in the respective states on a non-admitted basis.

Indefinite-lived intangible assets

Indefinite-lived intangible assets are recorded at fair value at the date of acquisition.

The Company's indefinite-lived intangible assets are comprised solely of regulatory approvals granted by the various state insurance departments to write insurance business in the respective states on a non-admitted basis.

In accordance with U.S.

1 unchanged sentence

Indefinite-lived intangible assets are tested for impairment during the fourth quarter on an annual basis, or earlier if there is reason to suspect that their values may have been diminished or impaired.

There were no impairments recognized in 2021, 2020, or 2019.

There were no impairments recognized in December 31, 2022, 2021, or 2020.

In addition, as of December 31, 2022, no triggering events occurred that suggested an updated review was necessary.

21 unchanged sentences

Under this approach, stranded tax effects remaining in AOCI are released only when the entire portfolio of the available-for-sale fixed-maturity securities are liquidated, sold or extinguished.

Commitments and contingencies

Contingencies

Liabilities for loss contingencies, arising from noninsurance policy claims, assessments, litigation, fines, and penalties and other sources, are recorded when it is probable that a liability has been incurred and the amount of the assessment and/or remediation can be reasonably estimated.

15 unchanged sentences

The update requires a financial asset measured at amortized cost to be presented at the net amount expected to be collected by means of an allowance for credit losses that runs through net income.

Credit losses relating to available-for-sale fixed-

maturity securities must also be recorded through an allowance for credit losses, which is limited to the amount by which fair value is below amortized cost.

Credit losses relating to available-for-sale fixed-maturity securities must also be recorded through an allowance for credit losses, which is limited to the amount by which fair value is below amortized cost.

The measurement of credit losses on available-for-sale securities is similar under previous U.S.

15 unchanged sentences

December 31, 2022

Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value

Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Allowance for Credit Losses Estimated Fair Value

(in thousands)

14 unchanged sentences

Fixed maturities:

Treasury securities and obligations of U.S.

government agencies

$ 6,936 $ — $ ( 89 ) $ 6,847

Obligations of states, municipalities and political subdivisions

14 unchanged sentences

For fixed-maturity securities where a decline in fair value is below the amortized cost basis and the Company intends to sell the security, or it is more likely than not that the Company will be required to sell the security before recovery of its amortized cost, an impairment is recognized in net income based on the fair value of the security at the time of assessment.

For fixed-maturity securities that the Company does not intend to sell or for which it is more likely than not that the Company would not be required to sell before recovery of its amortized cost, the Company compares the estimated present value of the cash flows expected to be collected to the amortized cost of the security.

estimated present value of the cash flows expected to be collected to the amortized cost of the security.

Inputs into the present value cash flow analysis include default rates and recoverability rates based on credit rating.

The extent to which the estimated present value of the cash flows expected to be collected is less than the amortized cost of the security represents the credit-related portion of the impairment, which is recognized in net income through an allowance for credit losses.

2 unchanged sentences

Investment income due and accrued is written off through earnings at the time the issuer of the bond defaults or is expected to default on payments.

As of December 31, 2022, the Company's credit loss review resulted in an allowance for credit losses on 7 securities.

The following table presents changes in the allowance for expected credit losses on available-for-sale securities:

Year Ended December 31,

(in thousands)

Beginning balance $ — $ —

Increase to allowance from securities for which credit losses were not previously recorded 366 —

Reduction from securities sold during the period — —

Net increase (decrease) from securities that had an allowance at the beginning of the period — —

Ending balance $ 366 $ —

The following tables summarize gross unrealized losses and estimated fair value for available-for-sale investments by length of time that the securities have continuously been in an unrealized loss position:

15 unchanged sentences

Total fixed-maturity investments $ 1,101,679 $ ( 85,954 ) $ 480,343 $ ( 88,616 ) $ 1,582,022 $ ( 174,570 )

At December 31, 2021, the Company held 234 fixed-maturity securities with a total estimated fair value of $ 650.4 million and gross unrealized losses of $ 9.8 million.

At December 31, 2022, in addition to the securities included in the allowance for credit losses, the Company held 944 fixed-maturity securities with a total estimated fair value of $ 1.6 billion and gross unrealized losses of $ 174.6 million.

Of those securities, 210 were in a continuous unrealized loss position for greater than one year.

As discussed above, the Company regularly reviews all fixed-maturity securities within its investment portfolio to determine whether a credit loss has occurred.

Based on the Company's review as of December 31, 2021, unrealized losses were caused by interest rate changes or other market factors and were not credit-specific issues.

Based on the Company's review as of December 31, 2022, except for securities previously discussed, the

securities' in unrealized loss positions were caused by interest rate changes or other market factors and were not credit-specific issues, nor did the Company intend to sell these securities.

At December 31, 2022, 78.6 % of the Company’s fixed-maturity securities were rated "A-" or better and all of Company's fixed-maturity securities made expected coupon payments under the contractual terms of the securities.

Based on its review, the Company concluded that there were no credit losses from fixed-maturity securities with unrealized losses for the year ended December 31, 2021.

December 31, 2021

3 unchanged sentences

Fixed maturities:

Treasury securities and obligations of U.S.

government agencies

$ 6,847 $ ( 89 ) $ — $ — $ 6,847 $ ( 89 )

Obligations of states, municipalities and political subdivisions

20 unchanged sentences

Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties, and the lenders may have the right to put the securities back to the borrower.

Real estate investments

During the year ended December 31, 2022, the Company completed the purchase of a real estate investment property.

Real estate investments consisted of the following at December 31, 2022 and 2021:

(in thousands)

Building $ 44,931 $ —

Land 17,946 —

Intangible in-place lease 9,749 —

Site improvements 2,686 —

Parking deck 1,311 —

Accumulated depreciation ( 236 ) —

Total real estate investments, net $ 76,387 $ —

Concurrent with the purchase of the real estate investment property, the Company entered into two operating lease agreements for office space as the lessor.

The terms of these two leases are 5 years and 12 years.

Future minimum rental income expected on these operating leases is $ 4.4 million in 2023, $ 4.5 million in 2024, $ 4.6 million in 2025, $ 4.8 million in 2026, $ 4.9 million in 2027 and $ 36.2 million thereafter.

Net investment income

7 unchanged sentences

Dividends on equity securities 4,406 3,962 3,512

Real estate investment income 234 — —

Gross investment income 54,077 33,129 27,885

1 unchanged sentence

Net investment income $ 51,282 $ 31,048 $ 26,110

Investment expenses included depreciation expense related to real estate investments of $ 0.2 million for the year ended December 31, 2022.

There were no real estate investments for the years ended December 31, 2021 and 2020.

Realized investment gains and losses

10 unchanged sentences

Realized losses ( 297 ) ( 210 ) ( 119 )

Net realized losses from equity securities ( 113 ) ( 119 ) ( 132 )

Short-term securities - realized gains — 13 3

Net realized gains (losses) from equity securities 1,066 ( 113 ) ( 119 )

Realized (losses) gains from the sales of short-term investments ( 49 ) — 13

Net realized investment gains $ 1,191 $ 2,828 $ 3,533

4 unchanged sentences

Payable for investments purchased

The Company recorded a payable for investments purchased, not yet settled, of $ 15.0 million at December 31, 2021.

The Company recorded a payable for investments purchased, not yet settled, of $ 1.8 million and $ 15.0 million at December 31, 2022 and 2021, respectively.

The payable balance was included in the "other liabilities" line item of the consolidated balance sheet.

12 unchanged sentences

Values for U.S.

Treasuries and exchange traded funds are generally based on Level 1 inputs which use quoted prices in active markets for identical assets.

Treasuries, exchange traded funds and common stocks are generally based on Level 1 inputs which use quoted prices in active markets for identical assets.

For other fixed-maturity securities and non-redeemable preferred stock, the pricing vendors use a pricing methodology involving the market approach, including pricing models which use prices and relevant market information regarding a particular security or securities with similar characteristics to establish a valuation.

21 unchanged sentences

Non-redeemable preferred stock — 38,162 — 38,162

Common stocks 10,107 — — 10,107

Total equity securities 114,309 38,162 — 152,471

Short-term investments 31,366 9,971 — 41,337

Total $ 162,416 $ 1,791,492 $ — $ 1,953,908

3 unchanged sentences

Fixed maturities:

Treasury securities and obligations of U.S.

government agencies

$ 6,847 $ — $ — $ 6,847

Obligations of states, municipalities and political subdivisions

11 unchanged sentences

There were no assets or liabilities measured at fair value on a nonrecurring basis as of December 31, 2022 or 2021.

The carrying amount of the Company's 5.15% Series A Senior Notes was $ 125.0 million, less debt issuance cost, and the corresponding estimated fair value was $ 117.2 million at December 31, 2022.

The fair value measurement was determined using a discounted cash flow analysis that factors in current market yields for comparable borrowing arrangements under the Company's credit profile.

Since this methodology is based upon market yields for comparable arrangements, the measurement is categorized as Level 2.

The estimated fair value of outstanding borrowings under the Company's revolving Credit Facility approximated its carrying value at December 31, 2022 and 2021.

See Note 11 for further information regarding the Company's debt arrangements.

The Company holds cash equivalents that are managed as part of its investment portfolio and, due to the short-term maturities of these assets, the carrying value of these investments approximates fair value.

The Company held cash equivalents of $ 58.0 million and $ 44.7 million at December 31, 2022 and 2021, respectively.

In addition, the estimated fair value of the Credit Facility approximated its carrying value as of December 31, 2021 and 2020.

See Note 11 for further information regarding the Credit Facility.

Deferred policy acquisition costs

21 unchanged sentences

Ceding commissions ( 44,695 ) ( 25,702 ) ( 16,145 )

Other operating expenses 51,755 40,519 34,182

Other underwriting expenses 66,962 51,755 40,519

Total $ 160,718 $ 124,900 $ 94,296

Other operating expenses within underwriting, acquisition and insurance expenses included salaries, employee benefits and bonus expense of $ 48.9 million, $ 35.9 million and $ 27.8 million, for the years ended December 31, 2021, 2020 and 2019, respectively.

Other underwriting expenses within underwriting, acquisition and insurance expenses included salaries, employee benefits and bonus expense of $ 64.8 million, $ 48.9 million and $ 35.9 million, for the years ended December 31, 2022, 2021 and 2020, respectively.

The Company’s subsidiaries file a consolidated U.S.

10 unchanged sentences

The Company paid $ 43.1 million, $ 40.6 million and $ 13.0 million in federal income taxes during the years ended December 31, 2022, 2021 and 2020, respectively.

Current income taxes recoverable was $ 5.1 million and $ 1.2 million at December 31, 2021 and 2020, respectively and included in "other assets" in the accompanying consolidated balance sheets.

The prevailing federal income tax rate was 21 % in 2021, 2020 and 2019.

Current income taxes (payable) recoverable were $( 2.5 ) million and $ 5.1 million at December 31, 2022 and 2021, respectively, and included in "other liabilities" and "other assets" in the accompanying consolidated balance sheets.

The prevailing federal income tax rate was 21 % in December 31, 2022, 2021 and 2020.

The Company’s effective income tax rate on income before income taxes differs from the prevailing federal income tax rate and is summarized as follows:

9 unchanged sentences

Total $ 36,450 $ 36,142 $ 11,994

The significant components of the net deferred tax asset (liability) are summarized as follows:

The significant components of the net deferred tax asset are summarized as follows:

(in thousands)

Deferred tax assets:

Unrealized losses on fixed-maturity securities $ 36,370 $ —

Unpaid losses and loss adjustment expenses 20,256 15,723

16 unchanged sentences

Total deferred tax liabilities 22,678 29,329

Net deferred tax asset (liability) $ 2,109 $ ( 4,648 )

Net deferred tax asset $ 56,983 $ 2,109

At December 31, 2022 and 2021, the Company had state net operating losses ("NOLs") of $ 112.9 million and $ 96.1 million, respectively.

3 unchanged sentences

No other valuation allowances were established against the Company’s deferred tax assets at December 31, 2022 and 2021, as the Company believes that it is more likely than not that the remaining deferred tax assets will be realized given the carry back availability, reversal of existing temporary differences and future taxable income.

With respect to deferred tax assets associated with unrealized losses on fixed-maturity securities, management has the ability and intent to execute a tax planning strategy to hold those securities to recovery or maturity to the extent not matched with realized capital gains or available carry back to ensure recognition of the deferred tax asset.

After consideration of all available evidence, we concluded that it is more likely than not that these deferred tax assets will be realized.

The Company did not have any material uncertain tax positions in 2022 or 2021.

1 unchanged sentence

Reserves for unpaid losses and loss adjustment expenses

The reserves for unpaid losses and loss adjustment expenses represent the Company's estimated ultimate cost of all unreported and reported but unpaid insured claims and the cost to adjust these losses that have occurred as of or before the balance sheet date.

Reserves are estimated using individual case-basis valuations of reported claims and statistical analyses.

32 unchanged sentences

$ 1,238,402 $ 881,344 $ 636,013

During the year ended December 31, 2021, prior accident years developed favorably by $ 32.0 million, of which $ 33.7 million was attributable to the 2020 accident year and was related to a lower-than-expected level of reported losses.

Although the Company does not have any significant direct COVID-19 exposure, the related disruption in the court system and the general economy

created additional uncertainty in estimating loss reserves in 2020.

During the year ended December 31, 2022, prior accident years developed favorably by $ 35.9 million, of which $ 41.8 million was attributable to the 2020 and 2021 accident years due to lower emergence of reported losses than expected across most lines of business.

This favorable development was offset in part by adverse development largely from the 2016 and 2018 accident years due to routine variability in reported losses and modest adjustments in actuarial assumptions.

Current accident year incurred losses and loss adjustment expenses for the year ended December 31, 2022 included $ 26.6 million of catastrophe losses primarily related to Hurricane Ian.

Although the Company did not have any significant direct COVID-19 exposure, the related disruption in the court system and the general economy created additional uncertainty in estimating loss reserves in 2020.

As a result, accident year 2020 actuarial assumptions were adjusted in 2020 to increase IBNR to account for this additional uncertainty.

The Company's current outlook is more favorable than in the prior year and, based on observed trends, the Company reevaluated and adjusted certain assumptions for accident year 2020 in 2021 to reflect the favorable experience.

In 2021, the Company's outlook was more favorable than in the prior year and, based on observed trends, the Company reevaluated and adjusted certain assumptions for accident year 2020 to reflect the favorable experience.

In addition, $ 3.8 million of favorable development was attributable to accident year 2019 due to reported losses emerging at lower levels than expected.

5 unchanged sentences

Current year incurred losses and loss adjustment expenses for the year ended December 31, 2020 included $ 23.2 million of catastrophe losses primarily related to Hurricane Laura, Hurricane Sally and the California wildfires.

During the year ended December 31, 2019, our net incurred losses for accident years 2018 and prior developed favorably by $ 9.4 million.

This favorable development included $ 13.0 million for the 2018 accident year, $ 1.6 million for the 2017 accident year.

This favorable development was primarily due to reported losses emerging at a lower level than expected, on the other liability and products liability lines of business.

The favorable development was offset by adverse development of $ 5.2 million for the 2011 through 2015 accident years.

The unfavorable development was primarily attributable to the other liability occurrence line of business.

This adverse development largely resulted from management’s decision to lengthen the actuarial loss development factors to provide for emergence of reported losses over a longer period of time based on trends observed in loss experience, which added a modest amount of conservatism to the Company’s IBNR reserves.

Incurred and Paid Claims Development

29 unchanged sentences

2021 14,268 21,257

Total 113,214

All outstanding liabilities before 2018, net of reinsurance —

10 unchanged sentences

Unaudited 2014

Unaudited 2014 Unaudited 2015

Unaudited 2015

1 unchanged sentence

Unaudited 2017

Unaudited 2019 Unaudited 2020 Unaudited 2021 Total of IBNR Liabilities Plus Expected Development on Reported Claims Cumulative Number of Reported Claims

Unaudited 2018

Unaudited 2019

Unaudited 2020

Unaudited 2021

Unaudited 2022 Total of IBNR Liabilities Plus Expected Development on Reported Claims Cumulative Number of Reported Claims

($ in thousands)

2013 $ 15,238 $ 11,639 $ 9,113 $ 7,917 $ 7,002 $ 6,463 $ 6,128 $ 6,087 $ 6,215 $ 5,994 $ 134 228

21 unchanged sentences

Unaudited 2022

($ in thousands)

2013 $ 499 $ 1,915 $ 4,436 $ 5,070 $ 5,320 $ 5,439 $ 5,482 $ 5,612 $ 5,843 $ 5,853

7 unchanged sentences

2021 1,146 8,437

Total 102,209

All outstanding liabilities before 2013, net of reinsurance 8

13 unchanged sentences

Unaudited 2022 Total of IBNR Liabilities Plus Expected Development on Reported Claims Cumulative Number of Reported Claims

($ in thousands)

2013 $ 30,616 $ 28,771 $ 28,037 $ 29,039 $ 31,731 $ 33,248 $ 33,973 $ 33,128 $ 33,002 $ 32,798 $ 1,691 877

21 unchanged sentences

Unaudited 2022

($ in thousands)

2013 $ 1,099 $ 4,469 $ 7,957 $ 14,890 $ 21,348 $ 26,715 $ 28,248 $ 29,610 $ 30,116 $ 30,268

39 unchanged sentences

Direct $ 1,102,092 $ 764,373 $ 552,814

Assumed — — 125

Ceded ( 165,282 ) ( 104,164 ) ( 74,595 )

28 unchanged sentences

Public Offerings

In November 2022, the Company completed an underwritten public offering and sold and issued 155,000 shares of its common stock at a price of $ 308.30 per share, to the underwriter.

The Company received net proceeds from the offering of $ 47.5 million.

On August 7, 2020, the Company completed an underwritten public offering and sold and issued 310,500 shares of its common stock at a price of $ 190.00 per share.

After deducting underwriting discounts and commissions and offering expenses, the Company received net proceeds of $ 56.7 million.

On August 12, 2019, the Company completed an underwritten public offering and sold and issued 741,750 shares of its common stock at a price of $ 93.00 per share.

After deducting underwriter discounts and commissions and offering expenses, the Company received net proceeds from the offering of approximately $ 65.9 million.

Equity-based Compensation

46 unchanged sentences

On February 15, 2023 , the Company’s Board of Directors declared a cash dividend of $ 0.14 per share of common stock.

This dividend is payable on March 14, 2022 to all stockholders of record on March 2, 2022 .

This dividend is payable on March 13, 2023 to all stockholders of record on February 28, 2023 .

Earnings per share

13 unchanged sentences

Diluted $ 6.88 $ 6.62 $ 3.87

There were 30 thousand, 35 thousand and 54 thousand anti-dilutive stock awards for the years ended December 31, 2021, 2020 and 2019, respectively.

There were no anti-dilutive stock awards for the year ended December 31, 2022.

There were 30 thousand and 35 thousand anti-dilutive stock awards for the years ended December 31, 2021 and 2020, respectively.

Basic earnings per share was computed by dividing the earnings attributable to the common stockholders by the weighted average number of shares of common stock outstanding during the period.

Diluted earnings per share was computed by dividing earnings attributable to common stockholders by the weighted average number of shares of common stock outstanding during the period, including potentially dilutive shares of common stock for the period determined using the treasury stock method.

Note Purchase and Private Shelf Agreement

On July 22, 2022, the Company entered into a Note Purchase and Private Shelf Agreement (the “Note Purchase Agreement”) with PGIM, Inc.

(“Prudential”) and the purchasers of the Notes (as defined below), named in the Purchaser Schedule attached thereto (collectively, the “Note Purchasers”).

Pursuant to the Note Purchase Agreement, on July 22, 2022 , the Company issued to the Note Purchasers $ 125.0 million aggregate principal amount of 5.15 % Series A Senior Notes Due July 22, 2034 (collectively, the "Series A Notes”).

The Note Purchase Agreement also provides for the issuance of additional shelf notes from time to time issued thereunder (the “Shelf Notes” and, together with the Series A Notes, the “Notes”) not to exceed $ 150.0 million of Notes outstanding thereunder.

The proceeds of the Notes may be used, among other things, to fund surplus at Kinsale Insurance Company, or any other insurance subsidiary of the Company, refinance indebtedness and for general corporate purposes.

The Series A Notes are senior unsecured obligations of the Company and rank pari passu with the Company’s Amended and Restated Credit Agreement.

Debt issuance costs of $ 1.9 million were incurred in connection with the issuance of the Series A Notes and have been recorded on the consolidated balance sheet within "Debt" as a contra-liability.

The Note Purchase Agreement contains representations and affirmative and negative covenants, including financial covenants customary for agreements of this type, as well as customary events of default provisions.

As of December 31, 2022, the Company was in compliance with all of its financial covenants under the Note Purchase Agreement.

The Series A Notes bear interest at 5.15 % per annum and mature on July 22, 2034 , unless paid earlier by the Company.

Should the Company elect to prepay the Series A Notes, such aggregate prepayment will include the applicable make-whole amount(s), as defined within the applicable Note Purchase Agreement.

Principal payments are required annually beginning on July 22, 2030 in equal installments of $ 25.0 million through July 22, 2034 .

On July 25, 2022, proceeds from the Series A Notes were used to pay off outstanding loans of $ 43.0 million, plus accrued interest, under our Amended and Restated Credit Agreement, fund surplus at Kinsale Insurance Company and for general corporate purposes.

Credit Agreement

On May 28, 2019, the Company entered into a Credit Agreement (the “Credit Agreement”) that provided the Company with a $ 50.0 million senior unsecured revolving credit facility (the “Credit Facility”) and an uncommitted accordion feature that permits the Company to increase the commitments by an additional $ 30.0 million.

The Credit Facility has a maturity of May 28, 2024 .

Borrowings under the Credit Facility were used to fund construction of the Company’s new headquarters and may also be used for working capital and general corporate purposes.

Loans under the Credit Facility may be subject to varying rates of interest depending on whether the loan is a Eurodollar loan or an alternate base rate (ABR) loan, at the Company's election.

Eurodollar loans bear an interest rate per annum equal to adjusted LIBOR for the applicable interest period plus a margin of 1.75%.

ABR loans bear an interest rate per annum equal to the higher of the prime rate, the New York Federal Reserve Board Rate or the one-month adjusted LIBOR, plus the applicable margin of 0.75% to 1.75%, depending on which interest option was applicable for the particular ABR loan.

At December 31, 2021, there was $ 42.7 million outstanding under the Credit Facility, net of debt issuance cost of $ 0.3 million, with a weighted average interest rate of 1.92 %.

For the years ended December 31, 2021, 2020 and 2019, total interest expense under the Credit Facility was $ 1.0 million, $ 1.0 million and $ 0.2 million, respectively.

For the years ended December 31, 2020 and 2019, $ 0.8 million and $ 0.2 million of interest expense was capitalized as part of the real estate project under construction, respectively.

Interest paid was $ 0.9 million, $ 0.8 million and $ 0.1 million for the years ended December 31, 2021, 2020 and 2019, respectively.

The Credit Agreement also contains representations and warranties and affirmative and negative covenants customary for financings of this type, as well as customary events of default.

On July 22, 2022, the Company entered into an Amended and Restated Credit Agreement, with JPMorgan Chase Bank, N.A., as administrative agent and as issuing bank, Truist Bank, as syndication agent, and the lenders party thereto (collectively, the “Lenders”).

The Amended and Restated Credit Agreement extended the maturity date to July 22, 2027 , and increased the aggregate commitment to $ 100.0 million, with the option to increase the aggregate commitment by $ 30.0 million, subject to the Company obtaining commitments from existing or new lenders and satisfying other conditions specified in the Amended and Restated Credit Agreement.

The Company is required to pay a Commitment Fee Rate (as defined therein) of 0.25 % on the average daily amount of the Available Revolving Commitment (as defined therein).

Borrowings under the Amended and Restated Credit Agreement may be used for general corporate purposes (which may include, without limitation, to fund future growth, to finance working capital needs, to fund capital expenditures, and to refinance, redeem or repay indebtedness).

Debt issuance costs of $ 0.5 million were incurred in connection with the Amended and Restated Credit Agreement and have been recorded on the consolidated balance sheet within "Debt" as a contra-liability.

During December 2022, the Company drew down $ 73.0 million at an interest rate of 6.2 % to fund the purchase of its real estate investment property, previously discussed.

At December 31, 2022, there was $ 72.5 million outstanding, net of unamortized debt issuance costs.

The Amended and Restated Credit Agreement also contains representations and affirmative and negative covenants, including financial covenants customary for agreements of this type, as well as customary events of default provisions.

As of December 31, 2022, the Company was in compliance with all of its financial covenants under the Credit Facility.

The loans under the Amended and Restated Credit Agreement bear interest, at the Company's option, at a rate equal to the Adjusted Term SOFR Rate (as defined therein) plus 1.625% or the Alternate Base Rate (as defined therein) plus 0.625%.

Interest paid under both agreements totaled $ 2.4 million, $ 0.9 million and $ 0.8 million for the years ended December 31, 2022, 2021 and 2020, respectively.

Contingencies

16 unchanged sentences

121 2,644 2,119

Income tax expense ( 25 ) ( 555 ) ( 445 )

Reclassification adjustment included in net income 96 2,089 1,674

Change in allowance for credit losses on investments, before income taxes ( 366 ) — —

Income tax benefit 77 — —

10 unchanged sentences

(in thousands)

Small Business $ 112,142 $ 83,289 $ 63,181

Commercial Property $ 184,766 $ 72,513 $ 48,099

Small Business Casualty 149,366 112,553 85,046

Excess Casualty 147,485 108,486 76,537

Construction 122,524 101,441 87,164

Commercial Property 78,722 51,789 29,115

General Casualty 69,784 36,043 24,591

Allied Health 68,678 59,208 37,562

1 unchanged sentence

Life Sciences 41,346 40,487 31,004

General Casualty 36,042 24,591 20,931

Professional Liability 41,273 33,226 27,051

Management Liability 32,163 24,061 14,820

Energy 32,974 19,925 16,985

Environmental 13,584 8,568 5,179

Management Liability 30,738 31,304 23,370

Entertainment 22,268 12,396 4,614

Small Property 21,002 6,160 3,691

Environmental 19,455 13,584 8,568

Health Care 17,062 11,271 7,666

Inland Marine 9,703 6,910 3,467

Public Entity 15,512 10,066 3,697

Commercial Insurance 411 1,757 1,674

Inland Marine 14,396 9,752 6,910

Commercial Auto 5,949 977 177

Aviation 4,424 2,099 42

Product Recall 1,419 810 24

Ocean Marine 8 — —

Total commercial 1,070,803 737,371 531,104

1 unchanged sentence

Total $ 1,102,092 $ 764,373 $ 552,814

Small Business underwrites commercial general liability on smaller risks with an emphasis on artisan contractors and premises related exposures.

Excess Casualty underwrites excess liability over risks that would fit within the general casualty, construction, products liability and small business divisions.

Certain prior year amounts are reclassified to conform to current year's divisions and the business underwritten within them.

Commercial Property underwrites first-party coverage on manufacturing facilities, government and municipal buildings, professional buildings, offices and general commercial properties, vacant properties, as well as entertainment and retail facilities.

Small Business Casualty underwrites commercial general liability on smaller risks with an emphasis on artisan contractors and premises related exposures.

Excess Casualty underwrites excess liability over risks that would fit within the general casualty, construction, products liability and small business casualty divisions.

Coverage is written over the Company's primary liability policies as well as those of other insurers.

1 unchanged sentence

Construction underwrites commercial general liability coverage on contractors focusing on new residential construction, residential remodeling and renovation and commercial construction.

General Casualty underwrites general liability and liquor liability on hospitality, habitational and retail risks, among others, with similar premises liability loss exposures.

Allied Health underwrites commercial general liability, professional liability and excess liability on allied health and social service risks including assisted living facilities, home health care agencies and outpatient medical facilities.

1 unchanged sentence

Life Sciences underwrites general liability, products liability and professional liability coverage for manufacturers, distributors and developers of dietary supplements, medical devices, pharmaceuticals, biologics, health and beauty products, durable medical equipment and clinical trials.

General Casualty underwrites general liability and liquor liability on hospitality, habitational and retail risks, among others, with similar premises liability loss exposures.

During 2021, certain business previously underwritten by this division is now underwritten by the Entertainment division and prior year amounts have been reclassified to conform to the current year's presentation.

Professional Liability underwrites small-to-medium sized non-medical professional liability risks.

The classes of risks include accountants, architects and engineers, financial planners, insurance agents, lawyers, realtors, and certain other professions.

Management Liability underwrites directors and officers liability, employment practices liability and fiduciary liability coverage on a variety of commercial and government risks.

Energy underwrites commercial general liability, pollution liability, professional liability and excess liability on enterprises engaged in the business of energy production or distribution or mining including drillers, lease operators, contractors, product manufacturers and alternative energy.

Environmental underwrites commercial general liability, pollution liability and professional liability on a wide range of commercial risks where environmental exposures exist that are operational in nature or related to the premises.

Management Liability underwrites directors and officers liability, employment practices liability and fiduciary liability coverage on a variety of commercial and government risks.

Entertainment underwrites commercial general liability for small-to-medium sized entertainment classes, including such classes as bowling alleys, campgrounds, escape rooms, fitness centers, museums and paintball facilities, among others.

As previously discussed, during 2021, certain business previously underwritten by the General Casualty division is now underwritten by this division and prior year amounts have been reclassified to conform to the current year's presentation.

Small Property underwrites Commercial Property coverage for smaller properties including banks, daycare centers, strip malls, and greenhouses, among others.

Health Care underwrites medical professional liability for physicians, surgeons, dentists, chiropractors and podiatrists.

Policies cover both individuals and small practice groups.

Inland Marine underwrites a variety of inland marine coverages including builders risk, contractors' equipment, transportation risks and mobile equipment.

Public Entity underwrites law enforcement professional liability and school board liability.

Commercial Insurance underwrites commercial general liability on small accounts, through the Company's wholly-owned broker, Aspera.

Inland Marine underwrites a variety of inland marine coverages including builders risk, contractors' equipment, transportation risks and mobile equipment.

Commercial Auto underwrites garage liability and excess auto coverages.

Aviation underwrites general liability coverage for small-to-medium sized aviation-related businesses.

Product recall underwrites recall expense and liability coverage for life sciences and general products sector consumable, commercial, and consumer goods.

Ocean Marine underwrites marine cargo coverage for small-to-medium sized risks that transport goods and products in domestic inland waterways and certain U.S.

coastal waters.

Personal Insurance writes homeowners coverage on manufactured homes with catastrophe exposure due to coastal location.

The Company does business with two unaffiliated insurance brokers that generated $ 137.0 million and $ 118.8 million of gross written premiums for the year ended December 31, 2021, representing 17.9 % and 15.5 % of gross written premiums, respectively.

The Company does business with three unaffiliated insurance brokers that generated $ 203.3 million, $ 178.6 million and $ 118.0 million of gross written premiums for the year ended December 31, 2022, representing 18.4 %, 16.2 % and 10.7 % of gross written premiums, respectively.

No other broker generated 10.0% or more of the gross written premiums for the year ended December 31, 2022.

23 unchanged sentences

Summary of Investments—Other than Investments in Related Parties

Type of Investment Cost or Amortized Cost Fair Value Amount at which shown on Balance Sheet

Type of Investment Cost or Amortized Cost Fair Value

(if applicable) Amount at which shown on Balance Sheet

(in thousands)

2 unchanged sentences

government agencies $ 17,934 $ 16,741 $ 16,741

$ 6,936 $ 6,847 $ 6,847

Obligations of states, municipalities and political subdivisions 230,746 204,632 204,632

216,375 228,045 228,045

Corporate and other securities 909,285 832,892 832,892

1 unchanged sentence

Residential mortgage-backed securities 349,066 293,962 293,962

340,804 337,685 337,685

Commercial mortgage-backed securities 65,353 58,867 58,867

3 unchanged sentences

Non-redeemable preferred stock 45,822 38,162 38,162

Common stocks 10,035 10,107 10,107

Total equity securities 126,478 152,471 152,471

Short-term investments 41,350 41,337 41,337

Real estate investments (none acquired in satisfaction of debt) 76,387 76,387

Total investments $ 2,177,847 $ 2,030,295

15 unchanged sentences

Due to subsidiaries — 47

Credit facility 42,696 42,570

Income taxes payable 2,948 —

Debt 195,747 42,696

Other liabilities 82 73

17 unchanged sentences

Management fees from subsidiaries $ 8,686 $ 7,002 $ 5,709

Net investment income 121 — —

Net realized investment gains 8 — —

Total revenues 8,815 7,002 5,709

Operating expenses 9,765 7,972 6,624

Interest expense 4,284 994 168

Other expenses — — 1,164

19 unchanged sentences

Net income $ 159,114 $ 152,659 $ 88,419

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

Adjustments to reconcile net income to net cash (used in) provided by operating activities:

Deferred tax benefit ( 367 ) ( 347 ) ( 68 )

3 unchanged sentences

Dividends received from subsidiary — 8,000 —

Net cash provided by (used in) operating activities 17,912 17,559 ( 4,654 )

Net cash (used in) provided by operating activities ( 65,175 ) 17,912 17,559

Investing activities

4 unchanged sentences

Common stock issued, net of transaction costs 47,498 — 56,698

Common stock issued, stock options exercised 982 3,622 2,750

Payroll taxes withheld and remitted on share-based payments ( 2,101 ) ( 1,803 ) ( 617 )

Dividends paid ( 10,021 ) ( 8,073 ) ( 6,929 )

Proceeds from credit facility 73,000 — 25,700

Proceeds from notes payable 125,000 — —

Repayment of credit facility ( 43,000 ) — —

Debt issuance costs

Net cash (used in) provided by financing activities ( 11,140 ) 76,144 77,755

( 2,381 ) — —

Payroll taxes withheld and remitted on share-based payments ( 3,288 ) ( 2,101 ) ( 1,803 )

Common stock issued, stock options exercised 1,090 982 3,622

Dividends paid ( 11,927 ) ( 10,021 ) ( 8,073 )

Net cash provided by (used in) financing activities 185,992 ( 11,140 ) 76,144

Net change in cash and cash equivalents 20,193 6,201 ( 6,331 )

19 unchanged sentences

Those estimates are inherently subject to change, and actual results may ultimately differ from those estimates.