What changed in this filing

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Item 7. Management’s Discussion and Analysis

2024-02-23 compared with 2023-02-24 · 93 added, 90 removed, 541 unchanged (25% of the section changed)

14 unchanged sentences

In 2023, the percentage breakdown of our gross written premiums was 67.3% casualty and 32.7% property.

Our commercial lines offerings include commercial property, small business casualty, excess casualty, construction, general casualty, allied health, products liability, life sciences, professional liability, energy, management liability, entertainment, small property, environmental, health care, public entity, inland marine, commercial auto, aviation, product recall and ocean marine.

We also write a small amount of homeowners insurance in the personal lines market, which in aggregate represented 2.8% of our gross written premiums in 2022.

Our commercial lines offerings include commercial property, excess casualty, small business casualty, construction, general casualty, allied health, products liability, small business property, life sciences, entertainment, energy, professional liability, management liability, environmental, excess professional, health care, public entity, commercial auto, inland marine, aviation, ocean marine, product recall, and railroad.

We also write homeowners' coverage in the personal lines market, which in aggregate represented 2.5% of our gross written premiums in 2023.

Our goal is to deliver long-term value for our stockholders by growing our business and generating attractive returns.

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We believe that we have differentiated ourselves from our competitors by effectively leveraging technology, vigilantly controlling expenses and maintaining control over our underwriting and claims management.

We have been closely monitoring the impact of the COVID-19 pandemic and related economic effects on all aspects of our business, including its impact on premium volume, losses and the fair value of our investment portfolio.

Consistent with 2021, the Company's results of operations, financial position and cash flows were not materially impacted by COVID-19 and the related economic effects during the year ended December 31, 2022.

Components of Our Results of Operations

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The volume of our ceded written premiums is impacted by the level of our gross written premiums and any decision we make to increase or decrease retention levels.

Fee income includes policy fees charged to insureds and is recognized in earnings when the related premium is written.

Policy fees are a flat charge to insureds and fee income is impacted primarily by the volume of business we write.

In the period ended June 30, 2023, we reclassified policy fees to fee income.

Historically, these fees were presented as a reduction to underwriting, acquisition and insurance expenses.

We modified the definitions of the loss and expense ratios to include fee income in the denominator of each ratio.

We have reclassified prior periods' results to conform to the current period's presentation.

See Note 17 of the notes to the consolidated financial statements for further information regarding fee income.

Losses and loss adjustment expenses

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The amortization of such policy acquisition costs is charged to expense in proportion to premium earned over the policy life.

underwriting expenses represent the general and administrative expenses of our insurance business such as employment costs, telecommunication and technology costs, and legal and auditing fees.

Other underwriting expenses represent the general and administrative expenses of our insurance business such as employment costs, telecommunication and technology costs, and legal and auditing fees.

Net investment income

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Change in fair value of equity securities

Change in fair value of equity securities represents the increase or decrease in the fair value of equity securities held during the period.

Change in fair value of equity securities consists of two components:

(1) the reversal of the gain or loss recognized in previous periods on equity securities sold and (2) the change in unrealized gain or loss resulting from mark-to-market adjustments on equity securities still held.

Net realized investment gains (losses)

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Currently, substantially all of our income tax expense is comprised of federal income taxes.

Our insurance subsidiary, Kinsale Insurance Company, is not subject to income taxes in the states in which it operates;

Our insurance subsidiary, Kinsale Insurance, is not subject to income taxes in the states in which it operates;

however, our non-insurance subsidiaries are subject to state income taxes but have not generated any material taxable income to date.

2 unchanged sentences

Underwriting income is a non-GAAP financial measure.

We define underwriting income as net income, excluding net investment income, net 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 income, other expenses and income tax expense.

See "—Reconciliation of Non-GAAP Financial Measures" for a reconciliation of net income in accordance with GAAP to underwriting income.

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See "—Reconciliation of Non-GAAP Financial Measures" for a reconciliation of net income in accordance with GAAP to net operating earnings.

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

Expense ratio, expressed as a percentage, is the ratio of underwriting, acquisition and insurance expenses to net earned premiums.

Combined ratio is the sum of the loss ratio and the expense ratio.

Loss ratio , expressed as a percentage, is the ratio of losses and loss adjustment expenses to the sum of net earned premiums and fee income.

Expense ratio , expressed as a percentage, is the ratio of underwriting, acquisition and insurance expenses to the sum of net earned premiums and fee income.

Combined ratio is the sum of the loss ratio and the expense ratio as presented.

A combined ratio under 100% indicates an underwriting profit.

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Net earned premiums $ 1,072,537 $ 794,119 $ 278,418 35.1 %

Fee income 27,026 19,604 7,422 37.9 %

Losses and loss adjustment expenses 600,219 457,913 142,306 31.1 %

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Net investment income 102,335 51,282 51,053 99.6 %

Change in fair value of equity securities (27,723) 22,812 (50,535) (221.5) %

Change in fair value of equity securities 15,277 (27,723) 43,000 NM

Net realized investment gains 6,040 1,191 4,849 407.1 %

1 unchanged sentence

Interest expense (10,301) (4,284) (6,017) 140.5 %

Other expenses, net (24) (457) 433 (94.7) %

Other income (expenses), net 479 (24) 503 NM

Income before taxes 384,017 195,564 188,453 96.4 %

6 unchanged sentences

Combined ratio (3)

75.4 % 78.5 %

Return on equity 33.6 % 22.0 %

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See "—Reconciliation of Non-GAAP Financial Measures" for a reconciliation of net income in accordance with GAAP to net operating earnings.

(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.

Net income was $308.1 million for the year ended December 31, 2023 compared to $159.1 million for the year ended December 31, 2022, an increase of $149.0 million, or 93.6%.

The increase in net income in 2022 over 2021 was primarily due to strong growth in the business from favorable E&S market conditions and continued rate increases and an increase in investment income year over year driven by higher investment balances.

These increases were partially offset by a decline in the fair value of our equity investment portfolio driven by adverse movements in the capital markets during the year and higher catastrophe losses incurred.

Our underwriting income was $175.5 million for the year ended December 31, 2022 compared to $133.6 million for the year ended December 31, 2021, an increase of $41.9 million, or 31.4%.

The increase in our underwriting income was due to a combination of premium growth and favorable rate increases from a strong underwriting environment and lower levels of operating expenses relative to premium growth and management's cost control efforts.

These increases were offset in part by higher catastrophe losses incurred.

The increase in net income in 2023 over 2022 was primarily due to a combination of continued profitable growth, an increase in investment income driven by higher investment balances and higher interest rates and higher returns on equity investments.

Underwriting income was $270.4 million for the year ended December 31, 2023 compared to $175.5 million for the year ended December 31, 2022, an increase of $94.9 million, or 54.1%.

The increase in underwriting income was primarily due to a combination of premium growth, rate increases, favorable loss experience and lower net commissions.

The corresponding combined ratios were 75.4% for the year ended December 31, 2023 compared to 78.5% for the year ended December 31, 2022.

Gross written premiums were $1.1 billion for the year ended December 31, 2022 compared to $764.4 million for the year ended December 31, 2021, an increase of $337.7 million, or 44.2%.

The increase in gross written premiums for the year ended December 31, 2022 over the prior year was due to higher submission activity from brokers and higher rates across most lines of business, resulting from continued favorable conditions in the E&S market.

Gross written premiums were $1.6 billion for the year ended December 31, 2023 compared to $1.1 billion for the year ended December 31, 2022, an increase of $466.7 million, or 42.3%.

The increase in gross written premiums for the year ended December 31, 2023 was primarily due to higher submission activity from brokers and higher rates across most lines of business, resulting from continued favorable conditions in the E&S market.

The average premium per policy written by us was $15,200 in 2023 compared to $12,400 in 2022.

Excluding our personal lines insurance, which has relatively low premiums per policy written, the average premium per policy written was $14,700 in 2022 compared to $12,900 in 2021.

Excluding our personal insurance division, which has relatively low premiums per policy written, the average premium per policy written was $16,400 in 2023 compared to $14,700 in 2022.

The increase in the average premium per policy written was due to changes in the mix of business and higher rates on bound accounts during 2023 compared to the prior year.

Gross written premiums increased across substantially all of our lines of business for the year ended December 31, 2022 and were most notable in the following lines of business:

• Commercial Property, which represented approximately 16.8% of our gross written premiums in 2022, increased by $112.3 million, or 154.8%, for the year ended December 31, 2022 over the prior year;

• Small Business Casualty, which represented approximately 13.6% of our gross written premiums in 2022, increased by $36.8 million, or 32.7%, for the year ended December 31, 2022 over the prior year;

• Excess Casualty, which represented approximately 13.4% of our gross written premiums in 2022, increased by $39.0 million, or 35.9%, for the year ended December 31, 2022 over the prior year;

• Construction, which represented approximately 11.1% of our gross written premiums in 2022, increased by $21.1 million, or 20.8%, for the year ended December 31, 2022 over the prior year, and

• General Casualty, which represented approximately 6.3% of our gross written premiums in 2022, increased by $33.7 million, or 93.6%, for the year ended December 31, 2022 over the prior year.

Net written premiums increased by $276.6 million, or 41.9%, to $936.8 million for the year ended December 31, 2022 from $660.2 million for the year ended December 31, 2021.

Gross written premiums increased across substantially all of our underwriting divisions for the year ended December 31, 2023 and were most notable in the following lines of business:

• Commercial Property, which represented approximately 26.3% of our gross written premiums in 2023, increased by $230.5 million, or 127.0%, for the year ended December 31, 2023;

• General Casualty, which represented approximately 7.5% of our gross written premiums in 2023, increased by $49.0 million, or 70.2%, for the year ended December 31, 2023;

• Excess Casualty, which represented approximately 12.4% of our gross written premiums in 2023, increased by $46.6 million, or 31.6%, for the year ended December 31, 2023;

• Small Business Casualty, which represented approximately 11.1% of our gross written premiums in 2023, increased by $24.7 million, or 16.5%, for the year ended December 31, 2023 and

• Construction, which represented approximately 8.8% of our gross written premiums in 2023, increased by $15.4 million, or 12.5%, for the year ended December 31, 2023.

Net written premiums increased by $327.8 million, or 35.0%, to $1.3 billion for the year ended December 31, 2023 from $936.8 million for the year ended December 31, 2022.

The increase in net written premiums was largely due to higher gross written premiums for the year ended December 31, 2023.

Our net retention ratio was 80.6% for the year ended December 31, 2023 compared to 85.0% for the year ended December 31, 2022.

The decrease in the net retention ratio was due to higher premiums ceded under the new commercial property quota share reinsurance treaty, effective June 1, 2022, and a change in the mix of business.

Net earned premiums were $794.1 million for the year ended December 31, 2022 compared to $582.9 million for the year ended December 31, 2021, an increase of $211.2 million, or 36.2%.

The decrease in the net retention ratio was primarily due to higher premiums ceded under the commercial property quota share and excess casualty variable quota share reinsurance treaties as a result of growth in our property and excess casualty lines and a higher cession rate on the commercial property quota share effective with the June 2023 renewal.

Net earned premiums were $1.1 billion for the year ended December 31, 2023 compared to $794.1 million for the year ended December 31, 2022, an increase of $278.4 million, or 35.1%.

As previously discussed, the increase was due to growth in gross written premiums in 2023 compared to 2022.

Our loss ratio was 54.6% for the year ended December 31, 2023 compared to 56.3% for the year ended December 31, 2022.

The increase in the loss ratio for the year ended December 31, 2022 was due primarily to higher catastrophe losses incurred and lower net favorable development of loss reserves from prior accident years as a percentage of earned premiums.

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

During the year ended December 31, 2021, current year incurred losses and loss adjustment expenses included $8.6 million of net catastrophe losses primarily attributable to Hurricane Ida and the winter storms in Texas.

The decrease in the loss ratio for the year ended December 31, 2023 was due primarily to lower catastrophe losses incurred during the period, offset in part by lower relative net favorable development of loss reserves from prior accident years.

During the year ended December 31, 2022, current year incurred losses and loss adjustment expenses included $26.6 million of net catastrophe losses primarily attributable to Hurricane Ian.

During the year ended December 31, 2023, prior accident years developed favorably by $35.8 million, of which $49.0 million was attributable to the 2021 and 2022 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 2017 through 2019 accident years due to long-tailed property damage claims within the construction-related primary casualty business that are more exposed to the increase in inflation.

During the year ended December 31, 2022, loss reserves for 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.

During the year ended December 31, 2021, loss reserves for 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 levels of reported losses.

Although we 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.

In 2021, our outlook was more favorable than in the prior year and, based on observed trends, we 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.

This favorable development was offset in part by adverse development, mostly attributable to the 2016 and 2018 accident years due to modest adjustments in actuarial assumptions.

On an inception-to-date basis as of December 31, 2023, all accident years have developed favorably, with the exception of the 2011 accident year.

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($ in thousands) Losses and Loss Adjustment Expenses

% of Earned Premiums Losses and Loss Adjustment Expenses

% of Earned Premiums

% of Sum of Earned Premiums and Fee Income Losses and Loss Adjustment Expenses

% of Sum of Earned Premiums and Fee Income

Current accident year

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Year Ended December 31,

($ in thousands) Underwriting Expenses % of Earned Premiums Underwriting Expenses % of Earned Premiums

Commissions incurred:

Direct $ 138,451 17.4 % $ 98,847 16.9 %

Ceding (44,695) (5.6) % (25,702) (4.4) %

($ in thousands) Underwriting Expenses % of Sum of Earned Premiums and Fee Income Underwriting Expenses % of Sum of Earned Premiums and Fee Income

Net commissions incurred 113,717 10.3 % 93,756 11.5 %

3 unchanged sentences

The expense ratio was 20.8% for the year ended December 31, 2023 compared to 22.2% for the year ended December 31, 2022.

The decrease in the expense ratio was due to lower net commissions incurred and lower other underwriting expenses as a percentage of earned premiums.

The decrease in the net commissions incurred ratio was largely due to higher ceding commissions resulting from the new commercial property quota share treaty, effective June 1, 2022, and a change in the mix of business.

The decrease in the other underwriting expense ratio was primarily due to higher net earned premiums, without a proportional increase in the amount of other underwriting expenses, as a result of management's focus on controlling costs.

Direct commissions paid as a percent of gross written premiums was 14.6% for the years ended December 31, 2022 and 2021.

The decrease in the expense ratio was primarily due to lower relative net commissions due to higher ceding commissions earned under the commercial property quota share treaty as a result of commercial property premium growth and a higher cession rate on the commercial property quota share treaty effective June 2023.

Direct commissions paid as a percent of gross written premiums was 14.5% and 14.6% for the years ended December 31, 2023 and 2022, respectively.

Investing results

Our net investment income increased by 65.2% to $51.3 million for the year ended December 31, 2022 from $31.0 million for the year ended December 31, 2021, primarily due to growth in our investment portfolio balance generated from the investment of strong operating cash flows since December 31, 2021 and higher interest rates relative to the prior year.

Our net investment income increased by 99.6% to $102.3 million for the year ended December 31, 2023 from $51.3 million for the year ended December 31, 2022, primarily due to growth in our investment portfolio largely generated from the investment of strong operating cash flows and higher interest rates relative to the prior year period.

The following table summarizes the components of net investment income, change in the fair value of equity securities, net realized investment gains and change in allowance for credit losses on investments for the years ended December 31, 2023 and 2022:

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Change in allowance for credit losses on investments (187) (366) 179

Net unrealized and realized investment gains (26,898) 25,640 (52,538)

Net unrealized and realized investment gains (losses) 21,130 (26,898) 48,028

Total $ 123,465 $ 24,384 $ 99,081

1 unchanged sentence

Our investment portfolio, excluding cash equivalents and unrealized gains and losses, had a gross investment return of 4.0% as of December 31, 2023, compared to 3.0% as of December 31, 2022.

During the year ended December 31, 2022, the decrease in fair value of equity securities of $(27.7) million was comprised of higher unrealized losses related to ETF securities of $(19.6) million and higher unrealized losses related to non-redeemable preferred stock of $(8.1) million.

During the year ended December 31, 2023, the increase in the fair value of equity securities of $15.3 million was comprised of unrealized gains related to ETFs and common stocks of $12.8 million and unrealized gains related to non-redeemable preferred stock of $2.5 million.

The change in the fair value of ETFs and common stocks during 2023 primarily reflected changes in the broader U.S.

stock market.

During the year ended December 31, 2022, the decrease in the fair value of equity securities of $(27.7) million was comprised of higher unrealized losses related to ETF securities of $(19.6) million and higher unrealized losses related to non-redeemable preferred stock of $(8.1) million.

The decrease in the fair value of our ETF and common stock portfolio reflected lower valuations in the broader U.S.

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The change in unrealized losses during 2022 attributable to non-redeemable preferred stock reflected a higher interest rate environment.

During the year ended December 31, 2021, the increase in the fair value of equity securities of $22.8 million was comprised of unrealized gains related to ETF securities of $23.2 million and unrealized losses related to non-redeemable preferred stock of $0.4 million.

The increase in the fair value of our ETF portfolio largely reflected the performance in the broader domestic stock markets.

We perform quarterly reviews of all available-for-sale securities within our investment portfolio to determine whether the decline in a security's fair value is deemed to be a credit loss.

Based on our review, we recorded an allowance for credit losses of $0.4 million for the year ended December 31, 2022.

There were no credit losses recorded for the year ended December 31, 2021.

Based on our review, we recorded credit loss expense of $0.2 million and $0.4 million for the year ended December 31, 2023 and 2022, respectively.

See Note 2 of the notes to the consolidated financial statements for further information regarding credit losses.

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Operating return on equity was 31.8% for 2023, an increase from 25.0% for 2022.

The increase in the operating return on equity was due primarily to growth in the business from favorable market conditions and rate increases and a decrease in average stockholders' equity driven by the decline in the fair value of investments as a result of the higher interest rate environment.

These increases were offset in part by higher catastrophe losses incurred during 2022.

The increase in operating return on equity was attributable largely to continued profitable growth from continuing favorable market conditions and rate increases.

Liquidity and Capital Resources

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In December of 2022, we acquired real estate property adjacent to our current headquarters for $76.6 million.

The property is comprised of two office buildings totaling over 580,000 square feet situated on approximately 29 acres of land.

The property is expected to provide flexibility for future expansion of our operations as well as serve as an investment opportunity.

The acquisition was funded primarily through a draw down on our revolving credit facility.

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

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

On July 22, 2022, we entered into a Note Purchase and Private Shelf Agreement (the “Note Purchase Agreement”), which provides for the issuance of senior promissory notes with an aggregate principal amount of up to $150.0 million.

Pursuant to the Note Purchase Agreement, on July 22, 2022 we issued $125.0 million aggregate principal amount of 5.15% senior promissory notes (the “Series A Notes”), the proceeds of which were used to fund surplus at Kinsale Insurance Company, refinance indebtedness and for general corporate purposes.

The property is comprised of two office buildings totaling over 580,000 square feet and a parking deck situated on approximately 29 acres of land.

During 2023, we sold one office building and the parking deck for approximately $62.0 million in cash, net of seller’s costs, and determined we would occupy the remaining building for future expansion of our operations.

Upon this determination, we reclassified the carrying value of the building to property and equipment within other assets on the consolidated balance sheet.

We have plans for future capital expenditures related to the renovation of the building that we plan to fund through draw downs on our Credit Facility.

The remaining $14.8 million presented on the consolidated balance sheet represents the portion of remaining real estate assets held for investment purposes.

In July 2022, we entered into a Note Purchase and Private Shelf Agreement (the "Note Purchase Agreement"), which provides for the issuance of senior promissory notes with an aggregate principal amount of up to $150.0 million.

In September 2023, we entered into an amendment to the Note Purchase Agreement, which increased the authorized aggregate principal amount of senior promissory notes that may be issued thereunder to $200.0 million.

Pursuant to the Note Purchase Agreement, on July 22, 2022 we issued $125.0 million aggregate principal amount of 5.15% senior promissory notes (the "Series A Notes") and on September 18, 2023 we issued a $50.0 million aggregate principal amount 6.21% senior promissory note (the "Series B Note"), the proceeds of which were used to fund surplus at Kinsale Insurance, refinance indebtedness and for general corporate purposes.

See Note 11 for further information regarding the Note Purchase Agreement.

On July 22, 2022, we entered into an Amended and Restated Credit Agreement, which 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 certain conditions.

In July 2022, we entered into an Amended and Restated Credit Agreement, which 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 certain conditions.

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).

See Note 11 for further information regarding the Amended and Restated Credit Agreement.

On July 25, 2022, a portion of the 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.

Shelf registration

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We also use cash to pay commissions to brokers, as well as to pay for ongoing operating expenses such as salaries, consulting services and taxes.

As described under "—Reinsurance" below, we use reinsurance to manage the risk that we take on our

As described under "—Reinsurance" below, we use reinsurance to manage the risk that we take on our policies.

We cede, or pay out, part of the premiums we receive to our reinsurers and collect cash back when losses subject to our reinsurance coverage are paid.

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We have historically generated positive operating cash flows allowing our cash and invested assets to grow.

The increase in cash provided by operating activities in 2022 compared to 2021 was due primarily to growth in business and the timing of claim payments and reinsurance recoverable balances.

The increase in cash provided by operating activities in 2023 compared to 2022 was due primarily to growth in business and the timing of claim payments and reinsurance recoveries.

For the year ended December 31, 2023, net cash used in investing activities of $860.9 million reflected growth in our business operations.

For the year ended December 31, 2023, funds from operations were used to purchase fixed-maturity securities, particularly corporate bonds and asset- and mortgage-backed securities of $1.3 billion, and to a lesser extent, sovereigns and government agency bonds of $26.3 million and municipal bonds of $4.9 million.

During 2023, we received proceeds of $245.6 million from sales of fixed-maturity securities, largely corporate bonds and mortgage- and asset-backed securities and $176.5 million from redemptions of asset- and mortgage-backed securities and corporate bonds.

For the year ended December 31, 2023, purchases of equity securities of $86.6 million primarily consisted of common stocks.

Proceeds from sales of equity securities of $30.6 million consisted of primarily ETFs and common stocks.

In addition, net sales of short-term investments of $36.7 million consisted of U.S.

Treasuries, government agency and corporate bonds.

Net cash used in investing activities also included proceeds of $62.0 million from the sale of a portion of our real estate investment property in the third quarter of 2023.

For the year ended December 31, 2022 , net cash used in investing activities was $708.6 million.

For the year ended December 31, 2022, funds from operations were used to purchase fixed-maturity securities, particularly corporate bonds and asset- and mortgage-backed securities of $713.2 million, and to a lesser extent, municipal bonds of $22.2 million and sovereigns of $16.0 million.

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Net cash used in investing activities also included the purchase of a real estate investment property for $76.6 million in December of 2022 and property and equipment of $6.9 million.

For the year ended December 31, 2021 , net cash used in investing activities was $352.0 million.

For the year ended December 31, 2021, these funds were used to purchase fixed-maturity securities, particularly corporate bonds and asset- and mortgage-backed securities of $633.6 million, and to a lesser extent, municipal bonds of $14.4 million and sovereigns of $6.9 million.

During 2021, we received proceeds of $113.0 million from sales of fixed-maturity securities, largely corporate bonds in order to take advantage of favorable valuations.

In addition, we received proceeds of $216.1 million from redemptions of asset- and mortgage-backed securities and corporate bonds.

For the year ended December 31, 2021, purchases of ETFs and nonredeemable preferred stock were $2.1 million and $22.7 million, respectively.

Net cash used in investing activities included purchases of property and equipment of $5.9 million.

For the year ended December 31, 2023, net cash used in financing activities was $28.5 million and reflected proceeds of $50.0 million from the issuance of the Series B Note on September 18, 2023.

Proceeds from the sale of our real estate investment were used to pay down $62.0 million from our Credit Facility.

Financing activities also reflected dividends of $0.56 per common share, or $13.0 million in the aggregate.

Payroll taxes withheld and remitted on restricted stock awards were $4.3 million, offset in part by proceeds received from our equity compensation plans of $0.9 million.

For the year ended December 31, 2022 , net cash provided by financing activities was $186.0 million and reflected proceeds of $125.0 million from the issuance of the Series A Notes on July 22, 2022, a portion of which were used to pay off the outstanding loans of $43.0 million under the Amended and Restated Credit Agreement on July 25, 2022, and proceeds of $47.5 million from our equity offering in November 2022.

In December 2022, we drew down

$73.0 million from our revolving credit facility to finance the purchase of our real estate investment property.

In December 2022, we drew down $73.0 million from our revolving credit facility to finance the purchase of our real estate investment property.

Financing activities also reflected dividends of $0.52 per common share, or $11.9 million in the aggregate.

Proceeds received from our equity compensation plans were $1.1 million, offset by payroll taxes withheld and remitted on restricted stock awards of $3.3 million for the year ended December 31, 2022 .

For the year ended December 31, 2021 , net cash used in financing activities was $11.1 million and reflected dividends of $0.44 per common share, or $10.0 million in the aggregate.

Proceeds received from our equity compensation plans were $1.0 million, offset by payroll taxes withheld and remitted on restricted stock awards of $2.1 million for the year ended December 31, 2021 .

We enter into reinsurance contracts to limit our exposure to potential large losses.

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Our property catastrophe reinsurance includes a reinstatement provision which requires us to pay reinstatement premiums after a loss has occurred in order to preserve coverage.

Including the reinstatement provision, the maximum aggregate loss recovery limit is $150 million and is in addition to the per-occurrence coverage provided by our treaty coverages.

Including the reinstatement provision, the maximum aggregate loss recovery limit is $255.0 million and is in addition to the coverage provided by our other property reinsurance.

Reinsurance contracts do not relieve us from our obligations to policyholders.

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See Note 8 to the consolidated financial statements and "—Critical Accounting Estimates" for a discussion of reinsurance recoverables.

As of December 31, 2022, we had $125 million of 5.15% Series A Senior Notes outstanding, net of debt issuance costs.

As of December 31, 2023, we had $125.0 million of 5.15% Series A Senior Notes outstanding.

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

Interest accrues quarterly and is payable in arrears.

As of December 31, 2022, we had $72.5 million outstanding, net of debt issuance costs, under the Amended and Restated Credit Agreement, which has a maturity of July 22, 2027.

As of December 31, 2023, we had $50.0 million of the 6.21% Series B Senior Note outstanding.

Principal payments are required annually beginning on July 22, 2030 in equal installments of $10.0 million through July 22, 2034, the maturity date.

Interest accrues quarterly and is payable in arrears.

As of December 31, 2023, we had $11.0 million outstanding under the Amended and Restated Credit Agreement, which has a maturity of July 22, 2027.

Interest on the outstanding amounts is based on 3-month Adjusted Term SOFR plus a margin of 1.625%.

3 unchanged sentences

Stockholders' equity

At December 31, 2022, total stockholders' equity was $745.4 million and tangible stockholders' equity was $742.7 million, compared to total stockholders' equity of $699.3 million and tangible stockholders' equity of $696.5 million at December 31, 2021.

The increase in both total stockholders' equity and tangible stockholders' equity in 2022 compared to 2021 was primarily due to profits generated during the period, proceeds from our equity offering in November 2022 and net activity related to stock-based compensation plans.

These increases were offset in part by an increase in unrealized losses on available-for-sale investments, net of taxes, due to the higher interest rate environment and dividends declared during 2022.

At December 31, 2023, total stockholders' equity and tangible stockholders' equity were $1.1 billion, compared to total stockholders' equity of $745.4 million and tangible stockholders' equity of $742.7 million at December 31, 2022.

The increase in both total stockholders' equity and tangible stockholders' equity in 2023 compared to 2022 was primarily due to profits generated during the period, a decrease in unrealized losses on available-for-sale investments, net of taxes and net activity related to stock-based compensation plans.

These increases were offset in part by dividends declared during 2023.

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

3 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 was paid on March 14, 2022 to all stockholders of record on March 2, 2022.

This dividend was paid on March 13, 2023 to all stockholders of record on February 28, 2023.

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

83 unchanged sentences

Underwriting income $ 270,374 $ 175,488

(1) Other expenses are comprised of corporate expenses not allocated to our insurance operations.

(1) Other expenses are corporate expenses not allocated to our insurance operations.

Reconciliation of net operating earnings

8 unchanged sentences

Change in the fair value of equity securities, before taxes (15,277) 27,723

Income tax (benefit) expense (1)

Income tax expense (benefit) (1)

3,208 (5,822)

15 unchanged sentences

(1) Income taxes on adjustments to reconcile net income to net operating earnings use an effective tax rate of 21%.

(2) Computed by adding the total stockholders' equity as of the date indicated to the prior year-end total and dividing by two.

(2) Average equity is computed by adding the total stockholders' equity as of the date indicated to the prior year-end total and dividing by two.

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

125 unchanged sentences

For securities where we are unable to obtain fair values from a pricing service or broker, fair values are estimated using information obtained from our investment accounting vendor.

We perform several procedures to ascertain the reasonableness of investment values included in the consolidated financial statements at December 31, 2022, including (1) obtaining and reviewing the internal control report from our investment accounting vendor that obtain fair values from third party pricing services, (2) discussing with our investment accounting vendor their process for reviewing and validating pricing obtained from outside pricing services and (3) reviewing the security pricing received from our investment accounting vendor and monitoring changes in unrealized gains and losses at the individual security level.

We perform several procedures to ascertain the reasonableness of investment values included in the consolidated financial statements at December 31, 2023, including (1) obtaining and reviewing the internal control report from our investment accounting vendor that obtains fair values from third party pricing services, (2) discussing with our investment accounting vendor its process for reviewing and validating pricing obtained from outside pricing services and (3) reviewing the security pricing received from our investment accounting vendor and monitoring changes in unrealized gains and losses at the individual security level.

Investment securities are subject to fluctuations in fair value due to changes in issuer-specific circumstances, such as credit rating, and changes in industry-specific circumstances, such as movements in credit spreads based on the market’s perception of industry risks.

18 unchanged sentences

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 7. Management’s Discussion and Analysis