Kinsale Capital Group, Inc. 10-Q

Item 1. Financial Statements KINSALE CAPITAL GROUP, INC. AND SUBSIDIARIES Consolidated Balance Sheets (Unaudited) September 30, 2024 December 31, 2023 (in thousands, except share and per share data) Assets Investments: Fixed-maturity securities, available for sale, at fair value (amortized cost: $ 3,528,675 , allowance for credit losses: $ 63 – 2024; $ 2,834,463 and $ 553 – 2023) $ 3,467,038 $ 2,711,759 Equity securities, at fair value (cost: $ 282,485 – 2024; $ 193,543 – 2023) 365,626 234,813 Real estate investments, net 15,045 14,791 Short-term investments — 5,589 Total investments 3,847,709 2,966,952 Cash and cash equivalents 111,691 126,694 Investment income due and accrued 26,083 21,689 Premiums and fees receivable, net of allowance for credit losses of $ 23,224 – 2024; $ 13,383 – 2023 134,952 143,212 Reinsurance recoverables, net of allowance for credit losses of $ 936 – 2024; $ 744 – 2023 318,636 247,836 Ceded unearned premiums 55,370 52,516 Deferred policy acquisition costs, net of ceding commissions 110,590 88,395 Intangible assets 3,538 3,538 Deferred income tax asset, net 34,995 55,699 Other assets 88,679 66,443 Total assets $ 4,732,243 $ 3,772,974 Liabilities and Stockholders' Equity Liabilities: Reserves for unpaid losses and loss adjustment expenses $ 2,160,763 $ 1,692,875 Unearned premiums 844,701 701,351 Payable to reinsurers 43,215 47,582 Accounts payable and accrued expenses 39,780 44,922 Debt 184,053 183,846 Other liabilities 24,782 15,566 Total liabilities 3,297,294 2,686,142 Stockholders’ equity: Common stock, $ 0.01 par value, 400,000,000 shares authorized, 23,288,145 and 23,181,919 shares issued and outstanding at September 30, 2024 and December 31, 2023 respectively 233 232 Additional paid-in capital 357,935 352,970 Retained earnings 1,123,532 828,247 Accumulated other comprehensive loss ( 46,751 ) ( 94,617 ) Total stockholders’ equity 1,434,949 1,086,832 Total liabilities and stockholders’ equity $ 4,732,243 $ 3,772,974 See accompanying notes to condensed consolidated financial statements. 4 Table of Contents KINSALE CAPITAL GROUP, INC. AND SUBSIDIARIES Consolidated Statements of Income and Comprehensive Income (Unaudited) Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 (in thousands, except per share data) Revenues: Gross written premiums $ 448,646 $ 377,789 $ 1,427,060 $ 1,173,599 Ceded written premiums ( 98,709 ) ( 83,509 ) ( 295,833 ) ( 215,248 ) Net written premiums 349,937 294,280 1,131,227 958,351 Change in unearned premiums ( 1,185 ) ( 12,778 ) ( 140,496 ) ( 182,645 ) Net earned premiums 348,752 281,502 990,731 775,706 Fee income 8,489 6,841 25,572 20,028 Net investment income 39,644 27,086 108,424 71,953 Change in the fair value of equity securities 20,659 ( 5,533 ) 41,871 3,796 Net realized investment gains (losses) ( 8 ) 4,274 6,737 913 Change in allowance for credit losses on investments 4 ( 143 ) 490 ( 199 ) Other income 518 340 1,577 1,081 Total revenues 418,058 314,367 1,175,402 873,278 Expenses: Losses and loss adjustment expenses 200,240 155,552 580,351 441,628 Underwriting, acquisition and insurance expenses 70,139 60,348 207,960 168,567 Interest expense 2,589 2,573 7,575 7,867 Other expenses 692 401 3,451 1,220 Total expenses 273,660 218,874 799,337 619,282 Income before income taxes 144,398 95,493 376,065 253,996 Total income tax expense 30,169 19,378 70,316 49,290 Net income 114,229 76,115 305,749 204,706 Other comprehensive income (loss): Change in net unrealized losses on available-for-sale investments, net of taxes 63,464 ( 23,511 ) 47,866 ( 20,109 ) Total comprehensive income $ 177,693 $ 52,604 $ 353,615 $ 184,597 Earnings per share: Basic $ 4.93 $ 3.30 $ 13.21 $ 8.89 Diluted $ 4.90 $ 3.26 $ 13.10 $ 8.79 Weighted-average shares outstanding: Basic 23,175 23,058 23,150 23,036 Diluted 23,335 23,315 23,333 23,298 See accompanying notes to condensed consolidated financial statements. 5 Table of Contents KINSALE CAPITAL GROUP, INC. AND SUBSIDIARIES Consolidated Statements of Changes in Stockholders' Equity (Unaudited) Shares of Common Stock Common Stock Additional Paid-in Capital Retained Earnings Accumu- lated Other Compre- hensive Loss Total Stock- holders' Equity (in thousands, except share and per share data) Balance at December 31, 2023 23,181,919 $ 232 $ 352,970 $ 828,247 $ ( 94,617 ) $ 1,086,832 Issuance of common stock under stock-based compensation plan 105,314 1 932 — — 933 Stock-based compensation expense — — 3,524 — — 3,524 Restricted shares withheld for taxes ( 11,318 ) — ( 5,842 ) — — ( 5,842 ) Dividends declared ($ 0.15 per share) — — — ( 3,479 ) — ( 3,479 ) Other comprehensive loss, net of tax — — — — ( 9,940 ) ( 9,940 ) Net income — — — 98,941 — 98,941 Balance at March 31, 2024 23,275,915 233 351,584 923,709 ( 104,557 ) 1,170,969 Issuance of common stock under stock-based compensation plan 13,249 — 219 — — 219 Stock-based compensation expense — — 3,709 — — 3,709 Restricted shares withheld for taxes ( 2,916 ) — ( 1,123 ) — — ( 1,123 ) Dividends declared ($ 0.15 per share) — — — ( 3,492 ) — ( 3,492 ) Other comprehensive loss, net of tax — — — — ( 5,658 ) ( 5,658 ) Net income — — — 92,579 — 92,579 Balance at June 30, 2024 23,286,248 233 354,389 1,012,796 ( 110,215 ) 1,257,203 Issuance of common stock under stock-based compensation plan 1,897 — 51 — — 51 Stock-based compensation expense — — 3,495 — — 3,495 Dividends declared ($ 0.15 per share) — — — ( 3,493 ) — ( 3,493 ) Other comprehensive income, net of tax — — — — 63,464 63,464 Net income — — — 114,229 — 114,229 Balance at September 30, 2024 23,288,145 $ 233 $ 357,935 $ 1,123,532 $ ( 46,751 ) $ 1,434,949 6 Table of Contents KINSALE CAPITAL GROUP, INC. AND SUBSIDIARIES Consolidated Statements of Changes in Stockholders' Equity (Unaudited) - Continued Shares of Common Stock Common Stock Additional Paid-in Capital Retained Earnings Accumu- lated Other Compre- hensive Loss Total Stock- holders' Equity (in thousands, except per share data) Balance at December 31, 2022 23,090,526 $ 231 $ 347,015 $ 533,121 $ ( 134,918 ) $ 745,449 Issuance of common stock under stock-based compensation plan 70,047 1 323 — — 324 Stock-based compensation expense — — 1,988 — — 1,988 Restricted shares withheld for taxes ( 6,628 ) — ( 2,104 ) — — ( 2,104 ) Dividends declared ($ 0.14 per share) — — — ( 3,235 ) — ( 3,235 ) Other comprehensive income, net of tax — — — — 17,509 17,509 Net income — — — 55,800 — 55,800 Balance at March 31, 2023 23,153,945 232 347,222 585,686 ( 117,409 ) 815,731 Issuance of common stock under stock-based compensation plan 15,046 — 230 — — 230 Stock-based compensation expense — — 2,543 — — 2,543 Restricted shares withheld for taxes ( 6,816 ) — ( 2,130 ) — — ( 2,130 ) Dividends declared ($ 0.14 per share) — — — ( 3,243 ) — ( 3,243 ) Other comprehensive loss, net of tax — — — — ( 14,107 ) ( 14,107 ) Net income — — — 72,791 — 72,791 Balance at June 30, 2023 23,162,175 232 347,865 655,234 ( 131,516 ) 871,815 Issuance of common stock under stock-based compensation plan 10,750 — 172 — — 172 Stock-based compensation expense — — 2,415 — — 2,415 Dividends declared ($ 0.14 per share) — — — ( 3,244 ) — ( 3,244 ) Other comprehensive loss, net of tax — — — — ( 23,511 ) ( 23,511 ) Net income — — — 76,115 — 76,115 Balance at September 30, 2023 23,172,925 $ 232 $ 350,452 $ 728,105 $ ( 155,027 ) $ 923,762 See accompanying notes to condensed consolidated financial statements. 7 Table of Contents KINSALE CAPITAL GROUP, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows (Unaudited) Nine Months Ended September 30, 2024 2023 (in thousands) Operating activities: Net cash provided by operating activities $ 763,324 $ 648,308 Investing activities: Purchase of property and equipment ( 13,157 ) ( 5,501 ) Purchase of real estate investment ( 312 ) ( 1,733 ) Sale of real estate investment — 62,036 Change in short-term investments, net 5,730 13,071 Purchases – fixed-maturity securities ( 1,265,072 ) ( 947,920 ) Purchases – equity securities ( 115,099 ) ( 62,047 ) Sales – fixed-maturity securities 274,168 204,416 Sales – equity securities 34,230 7,503 Maturities and calls – fixed-maturity securities 317,412 113,811 Net cash used in investing activities ( 762,100 ) ( 616,364 ) Financing activities: Proceeds from notes payable — 50,000 Payoff of credit facility — ( 62,000 ) Debt issuance costs — ( 43 ) Payroll taxes withheld and remitted on share-based payments ( 6,965 ) ( 4,234 ) Proceeds from stock options exercised 1,203 726 Dividends paid ( 10,465 ) ( 9,723 ) Net cash used in financing activities ( 16,227 ) ( 25,274 ) Net change in cash and cash equivalents ( 15,003 ) 6,670 Cash and cash equivalents at beginning of year 126,694 156,274 Cash and cash equivalents at end of period $ 111,691 $ 162,944 See accompanying notes to condensed consolidated financial statements. 8 Table of Contents KINSALE CAPITAL GROUP, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) 1. Summary of Significant Accounting Policies Basis of presentation The unaudited condensed consolidated financial statements and notes have been prepared in accordance with U.S. generally accepted accounting principles ("U.S. GAAP") for interim financial information and do not contain all of the information and footnotes required by U.S. GAAP for complete financial statements. As such, these unaudited condensed consolidated interim financial statements should be read in conjunction with the audited consolidated financial statements of Kinsale Capital Group, Inc. and its subsidiaries ("the Company") included in the Annual Report on Form 10-K for the year ended December 31, 2023. In the opinion of management, all adjustments necessary for a fair presentation of the condensed consolidated financial statements have been included. Such adjustments consist only of normal recurring items. All significant intercompany balances and transactions have been eliminated in consolidation. Interim results are not necessarily indicative of results of operations for the full year. Use of estimates The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, if any, at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Prospective accounting pronouncements ASU 2023-07, Segment Reporting - Improvements to Reportable Segment Disclosures In November 2023, the FASB issued ASU 2023-07, "Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures," which expands reportable segment disclosure requirements by requiring disclosures of significant reportable segment expenses that are regularly provided to the Chief Operating Decision Maker ("CODM") and included within each reported measure of a segment's profit or loss. The ASU also requires disclosure of the title and position of the individual identified as the CODM and an explanation of how the CODM uses the reported measures of a segment's profit or loss in assessing segment performance and deciding how to allocate resources. Additionally, ASU 2023-07 requires all segment profit or loss and assets disclosures to be provided on an annual and interim basis. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning one year later. Early adoption is permitted and the amendments must be applied retrospectively to all prior periods presented. The Company does not expect the adoption of this guidance to materially affect the consolidated financial statements, and the Company is currently evaluating the effect the guidance will have on its disclosures. 9 Table of Contents 2. Investments Available-for-sale investments The following tables summarize the available-for-sale investments at September 30, 2024 and December 31, 2023: September 30, 2024 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Allowance for Credit Losses Estimated Fair Value (in thousands) Fixed maturities: U.S. Treasury securities and obligations of U.S. government agencies $ 15,160 $ 18 $ ( 430 ) $ — $ 14,748 Obligations of states, municipalities and political subdivisions 180,797 279 ( 17,192 ) — 163,884 Corporate and other securities 1,914,970 24,241 ( 37,114 ) ( 63 ) 1,902,034 Asset-backed securities 745,541 8,781 ( 629 ) — 753,693 Residential mortgage-backed securities 521,368 3,449 ( 41,037 ) — 483,780 Commercial mortgage-backed securities 150,839 1,517 ( 3,457 ) — 148,899 Total fixed-maturity investments $ 3,528,675 $ 38,285 $ ( 99,859 ) $ ( 63 ) $ 3,467,038 December 31, 2023 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Allowance for Credit Losses Estimated Fair Value (in thousands) Fixed maturities: U.S. Treasury securities and obligations of U.S. government agencies $ 28,003 $ 57 $ ( 806 ) $ — $ 27,254 Obligations of states, municipalities and political subdivisions 191,080 212 ( 20,248 ) — 171,044 Corporate and other securities 1,437,468 5,532 ( 54,755 ) ( 552 ) 1,387,693 Asset-backed securities 641,700 2,833 ( 2,773 ) — 641,760 Residential mortgage-backed securities 463,904 1,732 ( 48,530 ) — 417,106 Commercial mortgage-backed securities 72,308 11 ( 5,416 ) ( 1 ) 66,902 Total fixed-maturity investments $ 2,834,463 $ 10,377 $ ( 132,528 ) $ ( 553 ) $ 2,711,759 Available-for-sale securities in a loss position The Company regularly reviews all its available-for-sale investments with unrealized losses to assess whether the decline in the fair value is deemed to be a credit loss. The Company considers a number of factors in completing its review of credit losses, including the extent to which a security's fair value has been below cost and the financial condition of an issuer. In addition to specific issuer information, the Company also evaluates the current market and interest rate environment. Generally, a decline in a security’s value caused by a change in the market or interest rate environment does not constitute a credit loss. For fixed-maturity securities, the Company also considers whether it intends to sell the security or, if it is more likely than not that it will be required to sell the security before recovery, and its ability to recover all amounts outstanding when contractually due. When assessing whether it intends to sell a fixed-maturity security or, if it is 10 Table of Contents likely to be required to sell a fixed-maturity security before recovery of its amortized cost, the Company evaluates facts and circumstances including, but not limited to, decisions to reposition the investment portfolio, potential sales of investments to meet cash flow needs and potential sales of investments to capitalize on favorable pricing. 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. Inputs into the 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. Any remaining decline in fair value represents the noncredit portion of the impairment, which is recognized in other comprehensive income. The Company reports investment income due and accrued separately from available-for-sale investments and has elected not to measure an allowance for credit losses for investment income due and accrued. 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. At September 30, 2024, the Company's credit loss review resulted in an allowance for credit losses on three securities. The following table presents changes in the allowance for expected credit losses on available-for-sale securities for the three and nine months ended September 30, 2024 and 2023: Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 (in thousands) Beginning balance $ 67 $ 422 $ 553 $ 366 Increase to allowance from securities for which credit losses were not previously recorded — 1 — 1 Reduction from securities sold during the period — — ( 479 ) ( 12 ) Net (decrease) increase from securities that had an allowance at the beginning of the period ( 4 ) 142 ( 11 ) 210 Ending balance $ 63 $ 565 $ 63 $ 565 11 Table of Contents 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: September 30, 2024 Less than 12 Months 12 Months or Longer Total Estimated Fair Value Gross Unrealized Losses Estimated Fair Value Gross Unrealized Losses Estimated Fair Value Gross Unrealized Losses (in thousands) Fixed maturities: U.S. Treasury securities and obligations of the U.S. government agencies $ — $ — $ 14,178 $ ( 430 ) $ 14,178 $ ( 430 ) Obligations of states, municipalities and political subdivisions 11,653 ( 121 ) 124,714 ( 17,071 ) 136,367 ( 17,192 ) Corporate and other securities 53,750 ( 140 ) 512,074 ( 36,974 ) 565,824 ( 37,114 ) Asset-backed securities 23,995 ( 104 ) 38,154 ( 525 ) 62,149 ( 629 ) Residential mortgage-backed securities 7,450 ( 27 ) 255,572 ( 41,010 ) 263,022 ( 41,037 ) Commercial mortgage-backed securities 18,304 ( 77 ) 56,031 ( 3,380 ) 74,335 ( 3,457 ) Total fixed-maturity investments $ 115,152 $ ( 469 ) $ 1,000,723 $ ( 99,390 ) $ 1,115,875 $ ( 99,859 ) At September 30, 2024, the Company held 686 fixed-maturity securities in an unrealized loss position with a total estimated fair value of $ 1.1 billion and gross unrealized losses of $ 99.9 million. Of these securities, 633 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 September 30, 2024, except for securities previously discussed, unrealized losses were caused by interest rate changes or other market factors and were not credit-specific issues. At September 30, 2024, 79.9 % of the Company’s fixed-maturity securities were rated "A-" or better and all of the Company’s fixed-maturity securities made expected coupon payments under the contractual terms of the securities. 12 Table of Contents December 31, 2023 Less than 12 Months 12 Months or Longer Total Estimated Fair Value Gross Unrealized Losses Estimated Fair Value Gross Unrealized Losses Estimated Fair Value Gross Unrealized Losses (in thousands) Fixed maturities: U.S. Treasury securities and obligations of U.S. government agencies $ — $ — $ 15,484 $ ( 806 ) $ 15,484 $ ( 806 ) Obligations of states, municipalities and political subdivisions 20,886 ( 221 ) 121,911 ( 20,027 ) 142,797 ( 20,248 ) Corporate and other securities 246,355 ( 1,444 ) 651,525 ( 53,311 ) 897,880 ( 54,755 ) Asset-backed securities 142,287 ( 872 ) 217,401 ( 1,901 ) 359,688 ( 2,773 ) Residential mortgage-backed securities 26,158 ( 49 ) 268,891 ( 48,481 ) 295,049 ( 48,530 ) Commercial mortgage-backed securities 8,775 ( 55 ) 56,731 ( 5,361 ) 65,506 ( 5,416 ) Total fixed-maturity investments $ 444,461 $ ( 2,641 ) $ 1,331,943 $ ( 129,887 ) $ 1,776,404 $ ( 132,528 ) Contractual maturities of available-for-sale fixed-maturity securities The amortized cost and estimated fair value of available-for-sale fixed-maturity securities at September 30, 2024 are summarized, by contractual maturity, as follows: September 30, 2024 Amortized Estimated Cost Fair Value (in thousands) Due in one year or less $ 355,278 $ 355,263 Due after one year through five years 1,090,396 1,093,854 Due after five years through ten years 438,248 436,588 Due after ten years 227,005 194,961 Asset-backed securities 745,541 753,693 Residential mortgage-backed securities 521,368 483,780 Commercial mortgage-backed securities 150,839 148,899 Total fixed-maturity securities $ 3,528,675 $ 3,467,038 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. 13 Table of Contents Real estate investments Real estate investments represents directly owned property held for investment purposes and consisted of land with a carrying value of $ 15.0 million and $ 14.8 million at September 30, 2024 and December 31, 2023, respectively. There was no accumulated depreciation on real estate investments at September 30, 2024 and December 31, 2023. Net investment income The following table presents the components of net investment income for the three and nine months ended September 30, 2024 and 2023: Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 (in thousands) Interest: Taxable bonds $ 38,009 $ 24,644 $ 103,871 $ 63,672 Tax exempt municipal bonds 391 522 1,225 1,704 Cash equivalents and short-term investments 615 758 1,726 2,337 Dividends on equity securities 1,494 1,271 4,331 3,692 Real estate investment income — 851 153 3,565 Gross investment income 40,509 28,046 111,306 74,970 Investment expenses ( 865 ) ( 960 ) ( 2,882 ) ( 3,017 ) Net investment income $ 39,644 $ 27,086 $ 108,424 $ 71,953 There was no depreciation expense related to real estate investments for the three and nine months ended September 30, 2024 or three months ended September 30, 2023 as the Company sold the related assets during 2023. Investment expenses included depreciation expense related to real estate investments of $ 0.5 million for the nine months ended September 30, 2023. 14 Table of Contents Realized investment gains and losses The following table presents realized investment gains and losses for the three and nine months ended September 30, 2024 and 2023: Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 (in thousands) Fixed-maturity securities: Realized gains $ 114 $ 74 $ 1,055 $ 1,811 Realized losses ( 90 ) ( 51 ) ( 1,129 ) ( 2,268 ) Net realized (losses) gains from fixed-maturity securities 24 23 ( 74 ) ( 457 ) Equity securities: Realized gains — — 7,271 1,626 Realized losses ( 31 ) — ( 455 ) ( 4,487 ) Net realized gains (losses) from equity securities ( 31 ) — 6,816 ( 2,861 ) Realized (losses) gains from the sales of short-term investments ( 1 ) 1 — ( 19 ) Realized (loss) gains on sale of real estate investments — 4,250 ( 5 ) 4,250 Net realized investment gains (losses) $ ( 8 ) $ 4,274 $ 6,737 $ 913 The net realized gains or losses on sales of equity securities represent the total gains or losses from the purchase dates of the equity securities. The change in unrealized gains (losses) in the consolidated statement of income 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. Change in net unrealized gains (losses) on fixed-maturity securities For the three months ended September 30, 2024 and 2023, the change in net unrealized gains (losses) for fixed-maturity securities was $ 80.3 million and $( 29.8 ) million respectively. For the nine months ended September 30, 2024 and 2023, the change in net unrealized gains (losses) for fixed-maturity securities was $ 60.6 million and $( 25.4 ) million, respectively. Insurance – statutory deposits The Company had invested assets with a fair value of $ 3.5 million and $ 5.8 million on deposit with state regulatory authorities at September 30, 2024 and December 31, 2023, respectively. Payable for investments purchased The Company recorded a payable for investments purchased, not yet settled, of $ 22.4 million and $ 12.3 million at September 30, 2024 and December 31, 2023, respectively. The payable balance was included in the "other liabilities" line item of the consolidated balance sheet. 15 Table of Contents 3. Fair Value Measurements Fair value is estimated for each class of financial instrument based on the framework established in the fair value accounting guidance. Fair value is defined as the price in the principal market that would be received for an asset or paid to transfer a liability to facilitate an orderly transaction between market participants on the measurement date. Market participants are assumed to be independent, knowledgeable, able and willing to transact an exchange and not acting under duress. Fair value hierarchy disclosures are based on the quality of inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Adjustments to transaction prices or quoted market prices may be required in illiquid or disorderly markets in order to estimate fair value. The three levels of the fair value hierarchy are defined as follows: Level 1 - Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities traded in active markets. Level 2 - Inputs to the valuation methodology include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability and market-corroborated inputs. Level 3 - Inputs to the valuation methodology are unobservable for the asset or liability and are significant to the fair value measurement. Fair values of the Company's investment portfolio are estimated using unadjusted prices obtained by its investment accounting vendor from nationally recognized third-party pricing services, where available. Values for U.S. 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. The estimates of fair value of these investments are included in the amounts disclosed as Level 2. For those investments where significant inputs are unobservable, the Company's investment accounting vendor obtains valuations from pricing vendors or brokers using the market approach and income approach valuation techniques and are disclosed as Level 3. Management performs several procedures to ascertain the reasonableness of investment values included in the condensed consolidated financial statements, including 1) obtaining and reviewing internal control reports from the Company's investment accounting vendor that assess fair values from third party pricing services, 2) discussing with the Company's investment accounting vendor its process for reviewing and validating pricing obtained from third party pricing services and 3) reviewing the security pricing received from the Company's investment accounting vendor and monitoring changes in unrealized gains and losses at the individual security level. The Company has evaluated the various types of securities in its investment portfolio to determine an appropriate fair value hierarchy level based upon trading activity and the observability of market inputs. 16 Table of Contents The following tables present the balances of assets measured at fair value on a recurring basis as of September 30, 2024 and December 31, 2023, by level within the fair value hierarchy: September 30, 2024 Level 1 Level 2 Level 3 Total (in thousands) Assets Fixed maturities: U.S. Treasury securities and obligations of U.S. government agencies $ 14,748 $ — $ — $ 14,748 Obligations of states, municipalities and political subdivisions — 163,884 — 163,884 Corporate and other securities — 1,902,034 — 1,902,034 Asset-backed securities — 753,693 — 753,693 Residential mortgage-backed securities — 483,780 — 483,780 Commercial mortgage-backed securities — 148,899 — 148,899 Total fixed-maturity securities 14,748 3,452,290 — 3,467,038 Equity securities: Exchange traded funds 126,620 — — 126,620 Non-redeemable preferred stock — 26,281 — 26,281 Common stocks 212,725 — — 212,725 Total equity securities 339,345 26,281 — 365,626 Total $ 354,093 $ 3,478,571 $ — $ 3,832,664 17 Table of Contents December 31, 2023 Level 1 Level 2 Level 3 Total (in thousands) Assets Fixed maturities: U.S. Treasury securities and obligations of U.S. government agencies $ 22,235 $ 5,019 $ — $ 27,254 Obligations of states, municipalities and political subdivisions — 171,044 — 171,044 Corporate and other securities — 1,387,693 — 1,387,693 Asset-backed securities — 641,760 — 641,760 Residential mortgage-backed securities — 417,106 — 417,106 Commercial mortgage-backed securities — 66,902 — 66,902 Total fixed-maturity securities 22,235 2,689,524 — 2,711,759 Equity securities: Exchange traded funds 106,300 — — 106,300 Non-redeemable preferred stock — 33,173 — 33,173 Common stocks 95,340 — — 95,340 Total equity securities 201,640 33,173 — 234,813 Short-term investments 1,862 3,727 — 5,589 Total $ 225,737 $ 2,726,424 $ — $ 2,952,161 There were no assets or liabilities measured at fair value on a nonrecurring basis as of September 30, 2024 or December 31, 2023. The carrying amount of the Company's fixed-rate senior notes was $ 175.0 million, less debt issuance costs, and the corresponding estimated fair value was $ 175.8 million and $ 171.6 million at September 30, 2024 and December 31, 2023, respectively. 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 September 30, 2024 and December 31, 2023. See Note 13 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 $ 18.6 million and $ 11.8 million at September 30, 2024 and December 31, 2023, respectively. 4. Allowance for Credit Losses Premiums receivable Premiums receivable balances are carried at face value, net of any allowance for credit losses. 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 estimate considers historical loss data, current and future economic conditions and specific identification of collectability concerns, where applicable. The following table presents the change in the allowance for credit losses for premiums receivable for the three and nine months ended September 30, 2024 and 2023: 18 Table of Contents Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 (in thousands) Beginning balance $ 21,226 $ 12,167 $ 13,383 $ 8,067 Current period change for estimated uncollectible premiums 2,596 2,341 12,938 7,459 Write-offs of uncollectible premiums receivable ( 598 ) ( 129 ) ( 3,097 ) ( 1,147 ) Ending balance $ 23,224 $ 14,379 $ 23,224 $ 14,379 5. Deferred Policy Acquisition Costs The following table presents the amounts of policy acquisition costs deferred and amortized for the three and nine months ended September 30, 2024 and 2023: Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 (in thousands) Balance, beginning of period $ 109,358 $ 85,326 $ 88,395 $ 61,594 Policy acquisition costs deferred: Direct commissions 65,773 54,580 209,146 169,223 Ceding commissions ( 31,207 ) ( 24,230 ) ( 89,522 ) ( 62,779 ) Other underwriting and policy acquisition costs 3,765 1,623 10,418 7,511 Policy acquisition costs deferred 38,331 31,973 130,042 113,955 Amortization of net policy acquisition costs ( 37,099 ) ( 31,118 ) ( 107,847 ) ( 89,368 ) Balance, end of period $ 110,590 $ 86,181 $ 110,590 $ 86,181 Amortization of net policy acquisition costs is included in the line item "underwriting, acquisition and insurance expenses" in the accompanying consolidated statements of income and comprehensive income. 19 Table of Contents 6. Property and Equipment, Net Property and equipment are included in "other assets" in the accompanying consolidated balance sheets and consist of the following: September 30, 2024 December 31, 2023 (in thousands) Building $ 37,190 $ 37,181 Parking deck 5,072 5,072 Land 3,068 3,068 Equipment 4,315 3,958 Software 18,916 15,375 Furniture and fixtures 3,185 3,065 Land improvements 474 474 Leasehold improvements 153 153 Construction in progress - building 16,568 6,623 Property and equipment 88,941 74,969 Accumulated depreciation ( 15,252 ) ( 11,565 ) Total property and equipment, net $ 73,689 $ 63,404 7. Underwriting, Acquisition and Insurance Expenses Underwriting, acquisition and insurance expenses for the three and nine months ended September 30, 2024 and 2023 consist of the following: Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 (in thousands) Underwriting, acquisition and insurance expenses incurred: Direct commissions $ 66,039 $ 53,035 $ 187,169 $ 143,181 Ceding commissions ( 32,297 ) ( 23,396 ) ( 88,483 ) ( 59,882 ) Other underwriting expenses 36,397 30,709 109,274 85,268 Total $ 70,139 $ 60,348 $ 207,960 $ 168,567 Other underwriting expenses within underwriting, acquisition and insurance expenses include salaries, bonus and employee benefits expenses of $ 27.6 million and $ 23.1 million for the three months ended September 30, 2024 and 2023, respectively and $ 78.3 million and $ 63.0 million for the nine months ended September 30, 2024 and 2023, respectively. 8. Stock-based Compensation On July 27, 2016, the Kinsale Capital Group, Inc. 2016 Omnibus Incentive Plan (the "2016 Incentive Plan") became effective. The 2016 Incentive Plan, which is administered by the Compensation, Nominating and Corporate Governance Committee of the Company’s Board of Directors, provides for grants of stock options, restricted stock, restricted stock units and other stock-based awards to officers, employees, directors, independent contractors and 20 Table of Contents consultants. The number of shares of common stock available for issuance under the 2016 Incentive Plan may not exceed 2,073,832 . The total compensation cost that has been charged against income for share-based compensation arrangements was $ 10.7 million and $ 6.9 million for the nine months ended September 30, 2024 and 2023, respectively. Restricted Stock Awards During the nine months ended September 30, 2024, the Company granted restricted stock awards under the 2016 Incentive Plan. The restricted stock awards were valued on the date of grant and will vest over a period of 1 to 4 years corresponding to the anniversary date of the grants. The fair value of restricted stock awards was determined based on the closing trading price of the Company’s shares on the grant date or, if no shares were traded on the grant date, the last preceding date for which there was a sale of shares. Except for restrictions placed on the transferability of restricted stock, holders of unvested restricted stock have full stockholder’s rights, including voting rights and the right to receive dividends. Unvested shares of restricted stock awards and accrued dividends, if any, are forfeited upon the termination of service to or employment with the Company. A summary of restricted stock activity under the 2016 Incentive Plan for the nine months ended September 30, 2024 is as follows: Nine Months Ended September 30, 2024 Number of Shares Weighted Average Grant Date Fair Value per Share Non-vested outstanding at the beginning of the period 107,822 $ 250.86 Granted 47,689 $ 502.43 Vested ( 41,502 ) $ 231.05 Forfeited ( 2,417 ) $ 283.11 Non-vested outstanding at the end of the period 111,592 $ 366.18 Employees surrender shares to pay for withholding tax obligations resulting from any vesting of restricted stock awards. During the nine months ended September 30, 2024, shares withheld for taxes in connection with the vesting of restricted stock awards totaled 14,234 . The weighted average grant-date fair value per share of the Company's restricted stock awards granted during the nine months ended September 30, 2024 and 2023 was $ 502.43 and $ 313.35 , respectively. The fair value of restricted stock awards that vested during the nine months ended September 30, 2024 and 2023 was $ 19.8 million and $ 12.6 million, respectively. As of September 30, 2024, the Company had $ 32.1 million of total unrecognized stock-based compensation expense expected to be charged to earnings over a weighted-average period of 2.4 years. Stock Options On July 27, 2016, the Board of Directors approved, and the Company granted, 1,036,916 stock options with an exercise price equal to the initial public offering price of $ 16.00 per share and a weighted-average grant-date fair value of $ 2.71 per share. The options have a maximum contractual term of 10 years and vested in 4 equal annual installments following the date of the grant. The value of the options granted was estimated at the date of grant using the Black-Scholes pricing model. 21 Table of Contents A summary of option activity as of September 30, 2024, and changes during the period then ended are presented below: Number of Shares Weighted-Average Exercise Price Weighted-Average Remaining Years of Contractual Term Aggregate Intrinsic Value (in thousands) Outstanding at January 1, 2024 201,560 $ 16.00 Granted — — Forfeited — — Exercised ( 75,188 ) 16.00 Outstanding at September 30, 2024 126,372 $ 16.00 1.8 $ 56,813 Exercisable at September 30, 2024 126,372 $ 16.00 1.8 $ 56,813 The total intrinsic value of options exercised was $ 34.4 million and $ 14.6 million during the nine months ended September 30, 2024 and 2023, respectively. 9. Earnings Per Share The following represents a reconciliation of the numerator and denominator of the basic and diluted earnings per share computations contained in the condensed consolidated financial statements: Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 (in thousands, except per share data) Net income $ 114,229 $ 76,115 $ 305,749 $ 204,706 Weighted average common shares outstanding - basic 23,175 23,058 23,150 23,036 Effect of potential dilutive securities: Conversion of stock options 123 208 141 220 Conversion of restricted stock 37 49 42 42 Weighted average common shares outstanding - diluted 23,335 23,315 23,333 23,298 Earnings per common share: Basic $ 4.93 $ 3.30 $ 13.21 $ 8.89 Diluted $ 4.90 $ 3.26 $ 13.10 $ 8.79 There were 43,000 and zero anti-dilutive stock awards for the three months ended September 30, 2024 and 2023, respectively. There were 44,000 and 47,000 anti-dilutive stock awards for the nine months ended September 30, 2024 and 2023, respectively. 10. Income Taxes The Company uses the estimated annual effective tax rate method for calculating its tax provision in interim periods, which represents the Company's best estimate of the effective tax rate expected for the full year. The estimated 22 Table of Contents annual effective tax rate typically differs from the U.S. statutory tax rate, primarily as a result of tax-exempt investment income and any discrete items recognized during the period. The Company's effective tax rates were 18.7 % and 19.4 % for the nine months ended September 30, 2024 and 2023, respectively. The effective tax rates were lower than the federal statutory rate of 21 % due primarily to the tax benefits from stock-based compensation, including stock options exercised, and from income generated by certain tax-exempt investments. 11. Reserves For Unpaid Losses and Loss Adjustment Expenses The following table presents a reconciliation of consolidated beginning and ending reserves for unpaid losses and loss adjustment expenses: September 30, 2024 2023 (in thousands) Gross reserves for unpaid losses and loss adjustment expenses, beginning of year $ 1,692,875 $ 1,238,402 Less: reinsurance recoverable on unpaid losses 241,357 177,039 Net reserves for unpaid losses and loss adjustment expenses, beginning of year 1,451,518 1,061,363 Incurred losses and loss adjustment expenses: Current year 608,423 470,235 Prior years ( 28,072 ) ( 28,607 ) Total net losses and loss adjustment expenses incurred 580,351 441,628 Payments: Current year 24,207 22,156 Prior years 156,992 136,380 Total payments 181,199 158,536 Net reserves for unpaid losses and loss adjustment expenses, end of period 1,850,670 1,344,455 Reinsurance recoverable on unpaid losses 310,093 220,452 Gross reserves for unpaid losses and loss adjustment expenses, end of period $ 2,160,763 $ 1,564,907 During the nine months ended September 30, 2024, the reserves for unpaid losses and loss adjustment expenses held at December 31, 2023 developed favorably by $ 28.1 million, of which $ 45.6 million was attributable to the 2021 through 2023 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 primarily from the 2017 through 2019 accident years due to construction defect claims that are more exposed to inflation and from the 2020 accident year due to a large property claim. Current accident year incurred losses and loss adjustment expenses for the nine months ended September 30, 2024 included $ 17.6 million of net catastrophe losses primarily related to Hurricanes Helene, Francine and Beryl and tornadoes in the Midwest. During the nine months ended September 30, 2023, the reserves for unpaid losses and loss adjustment expenses held at December 31, 2022 developed favorably by $ 28.6 million, of which $ 39.0 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 primarily to construction defect claims that are more exposed to inflation . 23 Table of Contents 12. Reinsurance The following table summarizes the effect of reinsurance on premiums written and earned for the three and nine months ended September 30, 2024 and 2023: Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 (in thousands) Premiums written: Direct $ 448,646 $ 377,789 $ 1,427,060 $ 1,173,599 Ceded ( 98,709 ) ( 83,509 ) ( 295,833 ) ( 215,248 ) Net written $ 349,937 $ 294,280 $ 1,131,227 $ 958,351 Premiums earned: Direct $ 450,583 $ 362,689 $ 1,283,710 $ 982,922 Ceded ( 101,831 ) ( 81,187 ) ( 292,979 ) ( 207,216 ) Net earned $ 348,752 $ 281,502 $ 990,731 $ 775,706 The following table summarizes ceded losses and loss adjustment expenses for the three and nine months ended September 30, 2024 and 2023: Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 (in thousands) Ceded incurred losses and loss adjustment expenses $ 22,698 $ 27,381 $ 92,903 $ 89,371 The following table presents reinsurance recoverables on paid and unpaid losses as of September 30, 2024 and December 31, 2023: September 30, 2024 December 31, 2023 (in thousands) Reinsurance recoverables on paid losses $ 8,543 $ 6,479 Reinsurance recoverables on unpaid losses, net 310,093 241,357 Reinsurance recoverables, net $ 318,636 $ 247,836 13. Debt Note Purchase and Private Shelf Agreement On July 22, 2022, the Company entered into a Note Purchase and Private Shelf Agreement (as subsequently amended, the "Note Purchase Agreement") with PGIM, Inc. ("Prudential") and the purchasers of the Series A and Series B Senior Notes (as defined below). The Note Purchase Agreement provides for issuance of senior promissory notes with an aggregate principal amount of up to $ 200.0 million through September 18, 2026. Pursuant to the Note Purchase Agreement, on July 22, 2022 , the Company issued $ 125.0 million aggregate principal amount of 5.15 % Series A Senior Notes Due July 22, 2034 (collectively, the "Series A Notes”), and on September 24 Table of Contents 18, 2023, the Company issued a $ 50.0 million aggregate principal amount 6.21 % Series B Senior Note ("Series B Note") due July 22, 2034 . The Series A and B Notes are senior unsecured obligations of the Company and rank pari passu with the Company’s Amended and Restated Credit Agreement. Principal payments on the Series A Notes are required annually beginning on July 22, 2030 in equal installments of $ 25.0 million through July 22, 2034 . Principal payments on the Series B Note are required annually beginning on July 22, 2030 in equal installments of $ 10.0 million through July 22, 2034 . Credit Agreement 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 provides the Company with a $ 100.0 million senior unsecured revolving credit facility (the "Credit Facility"), with the option to increase the aggregate commitment by $ 30.0 million. 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). 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%. For the nine months ended September 30, 2024, the annual weighted-average interest rate of borrowings under the Credit Facility was 7.04 %. The following table presents the Company's outstanding debt as of September 30, 2024 and December 31, 2023: Issuance Maturity September 30, 2024 December 31, 2023 (in thousands) Credit Facility Various 7/22/2027 $ 11,000 $ 11,000 5.15 % Series A Notes 7/22/2022 7/22/2034 125,000 125,000 6.21 % Series B Note 9/18/2023 7/22/2034 50,000 50,000 Less: Unamortized debt issuance costs ( 1,947 ) ( 2,154 ) Total debt $ 184,053 $ 183,846 Both the Note Purchase Agreement and the Amended and Restated Credit Agreement contain 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 September 30, 2024, the Company was in compliance with all of its financial covenants under both the Note Purchase Agreement and the Credit Facility. In October 2024, the covenants limiting restricted payments under the Note Purchase Agreement and Amended and Restated Credit Agreement were amended. The amendments allow the Company to make restricted payments so long as the aggregate amount of all such restricted payments does not exceed the greater of $300.0 million and 6.5% of the total assets of the Company and its subsidiaries at the end of the most recently completed fiscal quarter. 25 Table of Contents 14. Other Comprehensive Income (Loss) The following table summarizes the components of other comprehensive income (loss) for the three and nine months ended September 30, 2024 and 2023: Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 (in thousands) Unrealized gains (losses) on fixed-maturity securities arising during the period, before income taxes $ 80,292 $ ( 29,931 ) $ 60,816 $ ( 26,997 ) Income tax (expense) benefit ( 16,861 ) 6,286 ( 12,771 ) 5,670 Unrealized gains (losses) arising during the period, net of income taxes 63,431 ( 23,645 ) 48,045 ( 21,327 ) Less reclassification adjustment: Net realized losses on fixed-maturity securities, before income taxes ( 46 ) ( 27 ) ( 264 ) ( 1,343 ) Income tax benefit 10 6 56 282 Reclassification adjustment included in net income ( 36 ) ( 21 ) ( 208 ) ( 1,061 ) Change in allowance for credit losses on investments, before income taxes 4 ( 143 ) 490 ( 199 ) Income tax (expense) benefit ( 1 ) 30 ( 103 ) 42 Reclassification adjustment included in net income 3 ( 113 ) 387 ( 157 ) Other comprehensive income (loss) $ 63,464 $ ( 23,511 ) $ 47,866 $ ( 20,109 ) The sale or credit loss of an available-for-sale fixed-maturity security results in amounts being reclassified from accumulated other comprehensive income (loss) to realized gains or losses in current period earnings. The related tax effect of the reclassification adjustment is recorded in income tax expense in current period earnings. See Note 2 for additional information. 15. Contingencies Contingencies arise in the normal conduct of the Company’s operations and are not expected to have a material effect on the Company’s financial condition or results of operations. However, adverse outcomes are possible and could negatively affect the Company’s financial condition and results of operations. In June 2019, Marie Hughes, as authorized administrator for the estate of George Hughes, filed a wrongful death claim against Venetian Hills Apartments, LLC ("Venetian Hills") in DeKalb County in Georgia state court. On December 20, 2023, the jury awarded a verdict to the plaintiff of $140.0 million. Venetian Hills was a policyholder of a $1.0 million general liability policy issued by Kinsale Insurance. The Company believes exclusions in the policy apply to the claim and intends to defend any action related to this proceeding vigorously. The Company expects to appeal the verdict at the conclusion of post trial motions and does not expect a resolution as to the Company’s liability, if any, with respect to this matter in the foreseeable future, and potentially for multiple years. 26 Table of Contents The Company does not believe this legal proceeding will have a material adverse effect on its results of operations or business. The Company believes adequate provision has been made in its consolidated financial statements and its existing reserves account for liabilities to the Company relating to claims such as this legal proceeding . 27 Table of Contents