Kinsale Capital Group - Earnings Call - Q3 2025

Executive Summary

• Kinsale delivered a strong Q3 2025: diluted GAAP EPS $6.09 (+24.3% YoY), diluted operating EPS $5.21 (+24.0% YoY), combined ratio 74.9%, underwriting income $105.7M, and total revenues $497.5M.
• Material beats versus S&P Global consensus: operating EPS $5.21 vs $4.82 estimate (+8.0%)* and revenue $497.5M vs $446.6M estimate (+11.4%)*; with net investment income up 25.1% YoY to $49.6M.
• Growth mixed: gross written premiums (GWP) +8.4% YoY to $486.3M, but Commercial Property Division GWP down 7.9% YoY; ex-Commercial Property GWP +12.3% YoY, driven by strong submissions across most divisions.
• Outlook/tone: management highlighted competitive E&S conditions, expense leadership, and tech/AI-enabled underwriting; property rate declines appear to be moderating; CFO flagged higher retention (June 1 renewal) lifting expense ratio to ~21% baseline near term.
• Corporate developments: Brian D. Haney elected to the Board; plans to retire March 2, 2026 (becoming Senior Advisor); Stuart P. Winston promoted to EVP & Chief Underwriting Officer; later, a $0.17 per share dividend was declared for payment on Dec 11, 2025.

What Went Well and What Went Wrong

What Went Well

• Combined ratio improved to 74.9% (loss 53.9%, expense 21.0%) with $15.8M (3.7 pts) favorable prior-year reserve development; underwriting income rose to $105.7M.
• Net investment income climbed 25.1% YoY to $49.6M on strong operating cash flows; cash and invested assets reached $4.9B, with AA- average credit quality and 3.6-year duration.
• CEO on strategy and execution: “disciplined underwriting and technology-enabled expense management…deliver long-term value”.

What Went Wrong

• Expense ratio increased to 21.0% from 19.6% YoY due to lower ceding commissions as retention rose; CFO expects ~21% to be a reasonable near-term baseline.
• Commercial Property Division GWP declined 7.9% YoY (Q3) amid lower rates and increased competition (including standard carriers).
• Current accident year loss ratio rose modestly (57.3% vs 55.1% YoY), partly offset by favorable prior-year development; CAT losses were minimal (0.3 pts) versus 3.8 pts YoY.

Transcript

Operator (participant)

Good morning and welcome to Kinsale Capital Group's third quarter 2025 earnings conference call. All participants are in a listen-only mode. After the speaker's remarks, we will conduct a question and answer session. To ask a question at this time, you will need to press star, followed by the number one on your telephone keypad. As a reminder, this conference call is being recorded. Before we get started, let me remind everyone that through the course of the teleconference, Kinsale's management may make comments that reflect their intentions, beliefs, and expectations for the future. As always, these forward-looking statements are subject to certain risk factors, which could cause actual results to differ materially. These risk factors are listed in the company's various SEC filings, including the 2024 annual report on Form 10-K, which should be reviewed carefully.

The company has furnished a Form 8-K with the Securities and Exchange Commission that contains the press release announcing its third quarter results. Kinsale's management may also reference certain non-GAAP financial measures in the call today. A reconciliation of GAAP to these measures can be found in the press release, which is available at the company's website at www.kinsalecapitalgroup.com. I will now turn the conference over to Kinsale's Chairman and CEO, Mr. Michael Kehoe. Please go ahead, sir.

Michael Kehoe (CEO and Chairman)

Thank you, Operator, and good morning, everyone. Bryan Petrucelli, our CFO, Brian Haney, our President and COO, and Stuart Winston, our EVP and Chief Underwriting Officer, are joining me on the call this morning. We announced some management changes last night, the most significant of which is Brian Haney's recent election to the Board of Directors and the announcement of his retirement and new role as Senior Advisor beginning next year. We congratulate him on his election and are encouraged that he will continue to have a prominent role in the governance and direction of Kinsale. Brian and I have worked together for almost 30 years at three different E&S companies. He was one of the original founders of Kinsale and has made tremendous contributions to our success over the almost 17 years we have been in business.

It's been a great run, and needless to say, we are fortunate that he will continue contributing to Kinsale as a Director and as a Senior Advisor with a focus on investor communications. I'd also like to congratulate Stuart Winston on his promotion to Executive Vice President and Chief Underwriting Officer. Stuart and his team have delivered some of the best underwriting results in the industry, so this recognition is well earned, and under his leadership, we have great expectations for continued profit and growth in the future. In the third quarter 2025, Kinsale's operating earnings per share increased by 24%, and gross written premium grew by 8.4% over the third quarter of 2024. For the quarter, the company posted a combined ratio of 74.9% and a nine-month operating return on equity of 25.4%.

Our book value per share has increased by 25.8% since the year-end 2024, and our float has increased by 20%. E&S market conditions were steady in the third quarter, generally competitive, with our growth rate varying from one market segment to another, with our overall growth rate at 8.4%. Our commercial property division premium dropped by 8% in the third quarter compared to a 17% drop in the second quarter. The overall third quarter growth rate, excluding our commercial property division, was 12.3%, and Brian Haney is going to provide some commentary on the market here in a moment. Kinsale's disciplined underwriting and low-cost business model is a consistent winner in an industry where the customers are intensely focused on cost.

As the E&S market has become more competitive over the last two years, Kinsale's efficiency has become a more significant competitive advantage by allowing us to deliver competitive policy terms to our customers without compromising our margins. Likewise, in a moment in the P&C cycle characterized by loose underwriting standards, Kinsale's control of its underwriting process and superior data and analytics helps deliver consistent and attractive results. With that, I'll turn the call over to Bryan Petrucelli.

Bryan Petrucelli (CFO)

Thanks, Mike. As Mike just noted, we continue to generate great results with net income and net operating earnings both increasing by 24% quarter over quarter. The 74.9% combined ratio for the quarter included 3.7 points from net favorable prior year loss reserve development compared to 2.8 points last year, with less than a point in CAT losses this year compared to 3.8 points in the third quarter of last year. We continue to take a cautious approach to releasing reserves. Gross written premium grew by 8.4% for the quarter, while net earned premium grew by 17.8%, which was higher than the gross written premium due to an increase in retention levels upon renewal of our reinsurance program on June 1. We produced a 21% expense ratio in the third quarter compared to 19.6% last year.

The higher expense ratio is attributable to lower ceding commissions generated on the company's casualty and commercial property quota share reinsurance agreements as a result of the higher reinsurance retention levels that I just mentioned. On the investment side, net investment income increased by 25.1% in the third quarter of last year as a result of continued growth in the investment portfolio generated from strong operating cash flows. Kinsale's float, mostly unpaid losses and unearned premium, grew to $3 billion at September 30, up from $2.5 billion at the year-end of 2024.

The annual gross return was 4.3% for the first nine months of this year and consistent with last year. New money yields are averaging slightly below 5%, with an average duration of 3.6 years on the company's fixed maturity investment portfolio. Lastly, diluted operating earnings per share continues to improve and was $5.21 per share for the quarter compared to $4.20 per share for the third quarter of 2024. With that, I'll pass it over to Brian Haney.

Brian Haney (President and COO)

Thanks, Brian. First, let me say it's been an absolute honor and privilege to have worked at Kinsale for the last 17 years. There's no better E&S company in the business, and there's no better group of people to work with. Kinsale has come a long way from those first days in 2009 when we were just starting out with Bryan Petrucelli, Mike, myself, as well as Bill Kenny, Anne Marie Morrison, and Ed Desch, who I see is on the phone call today. I'm grateful for the opportunities I've been given by Mike and the Board over the years. I'm proud to have played whatever part I could in the success of Kinsale.

It's a tremendous honor to have the opportunity to serve on this Board with so many talented directors whom I've worked with over the years, and I'm really pleased that I will continue to be associated with this great company. I'm very confident in our future. We have built an amazingly deep bench. We have great young executives like Stuart and many others like him. The investors should rest assured that this company is in great hands and will continue to be going forward. With that said, on to business. The E&S market remains competitive, as Mike said, though the intensity varies by division. The shared and layered commercial property continues to be very competitive, but it appears we hit an inflection point sometime early in the third quarter, or perhaps late in the second, where the rate of decline is abating.

When you look at all the property business in total, including the small property, agribusiness property, and then in the marine, the book actually grew in the third quarter. In other areas, we're seeing the most growth in commercial auto, entertainment, energy, and allied health. Although the market is competitive, our model of low expenses and absolute control over the underwriting and claims handling works well in any market. I would argue it works better in a competitive market because it makes our expense ratio more telling. Also, the fastest growing participants in the market today are largely fronting companies whose risk-bearing partners must contend with expense ratios often double ours or higher, and that math isn't going to work out for them. Submission growth was 6% for the quarter, which is down from 9% in the first quarter. That decline is driven by our commercial property division.

Our pricing trends are similar to the Amwins index, which reported an overall 0.4% decrease. Commercial property rates are still declining, but we feel we've reached that inflection point, as I mentioned, where the rate declines are stabilizing. I expect we will see rates in the commercial property market moderate going forward. Overall, we remain optimistic. Our results are good, our growth prospects are good, and as the low-cost provider in our space, we have a durable competitive advantage that should allow us to continue to gradually take market share from our higher expense competitors while continuing to deliver strong returns and build wealth for our investors. With that, I will turn it back over to Mike.

Michael Kehoe (CEO and Chairman)

Thanks, Brian. Operator, we're now ready for any questions in the queue.

Operator (participant)

Thank you. As a reminder, to ask a question, please press star followed by the number one on your telephone keypad. Our first question will come from Bob Huang from Morgan Stanley. Please go ahead. Your line is open.

Bob Huang (Equity Research Executive Director)

Good morning. Brian, congratulations on the new role and the retirement. If we go into your business outside of commercial property, can you comment on where you think the future opportunities would be, especially given it seems like there's a little bit of a growth deceleration for the quarter? Just kind of curious, outside of commercial property, what are the areas that you think are very attractive for you, and what are the areas you think you want to pull back a little bit?

Brian Haney (President and COO)

I think we've got opportunity across the whole book. I would say some of our newer areas that we've developed recently would be the transportation segment and the agribusiness segment, but I think there's still a great opportunity in casualty. Then some of the other property-related lines, I think there's still a great opportunity. High-value homeowners and our personal lines is an area we're putting a lot of emphasis into. We think that's a great opportunity. I think it's really widespread. There's a lot of different places we can grow.

Michael Kehoe (CEO and Chairman)

Yes. For the quarter, all of our property lines, except for the large commercial property division, all the other property-focused lines grew at a double-digit clip. I would reiterate what Brian said. We're pretty confident.

Bob Huang (Equity Research Executive Director)

Okay. Got it. No, that's very helpful. Thank you. My second question is with regards to technology. Obviously, that's one of your core competencies here, but just curious if you can give us a little bit of color in terms of new tech innovation and implementation into the business. Just curious as to how you're incorporating emerging technology into your business and where are the areas you feel that would be advantageous for Kinsale going forward.

Michael Kehoe (CEO and Chairman)

This is Mike. When we started the business 17 years ago, we talked about making tech a core competency of our company alongside the underwriting and the claim handling, and I think we've done that. We built our own enterprise system over the years. It took a long time. About two or so years ago, we started what we call target state architecture, which is a complete rewrite of that entire enterprise system. It's an enormous undertaking, but it kind of puts us in a position to really speed up the implementation of new technologies and whatnot. That target state is an enormous project. We're always enhancing and expanding our product line that involves our technology department. We've been making ample use of the new AI tools that have come out, both in our IT department as well as underwriting and claims, trying to drive automation in our business process.

There are a million ways, but I think it goes a long way to explaining why we're able to operate at such a significant cost advantage over our competitors. I think a lot of it is, hey, we've got a really well-designed enterprise system specifically for our company. We don't have legacy software going back 20, 30, 40 years. We don't have thousands of legacy applications. I think we're just in a really attractive spot.

Bob Huang (Equity Research Executive Director)

Okay. Got it. Really appreciate it. Thank you.

Operator (participant)

Our next question comes from Michael Phillips from Oppenheimer. Please go ahead. Your line is open.

Mike Phillips (Managing Director and Insurance Analyst)

Thank you. Good morning. I wanted to touch on one line of business, the construction liability line. I'm curious, was there any change in assumptions in that segment that affected your current year loss pick?

Michael Kehoe (CEO and Chairman)

I don't know that there were any changes there specifically. We do a quarterly review of our loss reserves by stat line of business. That goes, you know, we're in our, I think, 16th accident year. We've got about a dozen lines of business, so there's a high degree of complexity in that analysis. Could very well have picked up some adjustments in the construction, but I just don't know off the top of my head. I think in general, we feel great about the quarter. I think our losses continue to come in below our expectations. There's a little bit of variability in the loss ratios when you roll everything together, and I think that's normal. Again, we feel really positive about the loss performance.

Mike Phillips (Managing Director and Insurance Analyst)

Thank you, Mike. The second one would be on your excess casualty segment. Maybe could you talk about that segment, what you're seeing? Is there any growth opportunities there and what you're seeing maybe for loss trends in that segment? Thank you.

Stuart Winston (EVP and Chief Underwriting Officer)

Yeah. Michael, this is Stuart. We're still seeing good opportunities in excess casualty rates. Our rates are holding strong. We're seeing some pressure in the market at the high excess attachment points, where those are being more attractive for various competitors, but that's typically not where we play. We're typically in the lead or the first $10 million as to our placements. There's still a good opportunity for growth, and rates are holding strong where we participate in the market.

Mike Phillips (Managing Director and Insurance Analyst)

Okay. Thank you, Stuart. Appreciate it.

Operator (participant)

Our next question comes from Michael Zaremski from BMO Capital Markets. Please go ahead. Your line is open.

Michael Zaremski (Research Analyst)

Hey, thanks. Good morning. I'm just going back to casualty, but a broader brush on all casualty property, which is kind of your core business. You saw a bit of a sequential decel in premium growth there. Any color you can offer on just the state of the marketplace, casualty-specific, you know, pricing? You know, you talked about MGAs in the past as well. Are they still just as competitive? Thanks.

I'll start, Mike, and then I'll maybe get Stuart to make a few comments. I would just remind you that we write casualty business across many specific underwriting divisions, each one focused on a different industry segment or coverage, and they never move in tandem. There's always variability as you go from one area to the next. In general, I think things are still going well.

Stuart Winston (EVP and Chief Underwriting Officer)

Yeah. The long-tail casualty lines, you know, we're seeing moderate competition, but there's a lot of rational actors out there with the adverse development over the last couple of years in the market. There's segments like areas like excess casualty, social services, and the allied health group that are still really strong. The market will experience some dislocations. The same with premises liability. General casualty, entertainment, groups like that, it's still a very strong market there for growth.

Michael Zaremski (Research Analyst)

Okay. I mean, I guess that's very helpful. If you look at the cash eat trend, though, it's still kind of, you know, it's decelerating from a growth perspective. I'm not saying we, you know, growth, we want profitability, not growth. You shared your view that in shared layer, things are becoming less negative, I guess, from a pricing standpoint, I'm assuming. Do you think the casualty is also getting less competitive or will increasing competition remain kind of impacting the top line?

Michael Kehoe (CEO and Chairman)

Mike, it's Mike again. I would say we're in a very competitive period in the insurance cycle. It varies a little bit division by division. I think you've seen over the last two years, the Kinsale growth rate has kind of come in from an extraordinary 40% rate to, this quarter, high single digits. I think we've reiterated many times that, over the cycle, we think 10%-20% is a good conservative estimate of our growth potential. I think that's probably the best commentary we can offer. I mean, it's a diverse product line. It's a very competitive market. We've got a very competitive business strategy with the control we exercise over our underwriting. It drives a more accurate process. When you look at the cost advantage we have over competitors, it's extraordinary. I think we're in a great spot.

We were encouraged that the growth rate going from the second to the third quarter ticked up from 5%-8.4%. Brian Haney highlighted the fact that if you took the commercial property out, that put us in the low double digits. Admittedly, that was down from 14%-12%, but to me, that's just kind of normal variability quarter by quarter. I wouldn't read too much into that two-point decline.

Michael Zaremski (Research Analyst)

Okay. That's helpful. I think one last one in. Part of your, I think part of your special sauce, I believe, uniquely allows Kinsale to, I guess, maybe not need to pay profit-sharing commissions to some of your broker partners. Is it ever a consideration, especially in more competitive times like today, to rethink that strategy, or that that's not on the table?

Michael Kehoe (CEO and Chairman)

The profit commissions are typically associated with delegated underwriting, right? Many companies, especially in the SME area, aren't able to handle the volume of transactions internally, or for whatever reason. It's very common to outsource underwriting to MGAs and MGUs. I think a lot of companies try to put some sort of profit or growth contingency into the compensation mix for the broker in order to better align incentives. We're not in that space, and we're not considering it. Our business model is to control the underwriting, provide the best customer service in the industry. I think we also offer the broadest risk appetite. A lot of the business we write falls out of the delegated or binding programs that are in the marketplace. For those reasons, no, we're not considering a change in our compensation model.

Michael Zaremski (Research Analyst)

Thank you.

Operator (participant)

Our next question comes from Mark Hughes from Truist Securities. Please go ahead. Your line is open.

Mark Hughes (Equity Analyst)

Yeah, thank you very much. Congratulations, Brian, and also Stuart.

Michael Zaremski (Research Analyst)

Thank you.

Mike Phillips (Managing Director and Insurance Analyst)

Thanks, Mark.

Mark Hughes (Equity Analyst)

Current accident year loss ratio was up a little bit. Was that mix? Was that competitive pressure? What would you say that was caused by?

Michael Kehoe (CEO and Chairman)

Mark, I would just write that off to normal variability. The overall numbers are phenomenal. The reported losses are coming in below expectations. We're always trying to be cautious with our reserving. You can look around the industry. There are a lot of examples of companies that are too optimistic in their loss reserving. We never want to be in that group. Candidly, I would look at the loss performance as good news. Admittedly, it was up a couple of points, but to me, that's just normal variability.

Mark Hughes (Equity Analyst)

Yeah. Brian Petrucelli, the ceded premium at 17% and then the expense ratio at 21%, given the kind of the reinsurance structure at this point, the ceded commissions, are those reasonable starting points for the next few quarters?

Michael Kehoe (CEO and Chairman)

I think so, Mark. This is the first full quarter that we've had with the new reinsurance term. It's a pretty good match for you. I would say mix of business is always going to drive a little bit of variability in that. I think as we sit now, that's as good a guess as we can give you.

Mark Hughes (Equity Analyst)

Very good. One final question. The state E&S data in some of the coastal states, Florida, Texas, New York, it looked like your growth was a little faster there, kind of implying that maybe in other states, growth was a little slower. Is that a correct perception? Is there anything we should read into that? Are the non-coastal states perhaps a little more competitive? Is there anything to think about there?

Brian Haney (President and COO)

Mark, this is Brian Haney. I wouldn't read too much into it. We don't know exactly how those numbers are calculated, and we don't do anything to try to match them up with our own data.

Michael Kehoe (CEO and Chairman)

I think it's better to look at those state tax numbers over a number of months. I think there's a little bit more credibility the further you look back.

Mark Hughes (Equity Analyst)

If we put those numbers to the side, would you say there's any sort of dynamic where non-coastal, you know, those traditional E&S states, the New York, California, Texas, Florida, are you seeing more opportunity there perhaps than elsewhere, or would you not see it that way?

Brian Haney (President and COO)

No, I think it's stayed relatively the same since, Mark, it's relatively the same since we've been in business. Obviously, the core E&S states are going to be the largest bulk of our business, but I haven't seen a mix in that, a change in that.

Mark Hughes (Equity Analyst)

Very good. Thank you.

Michael Kehoe (CEO and Chairman)

Thanks, Mark.

Operator (participant)

Our next question comes from Andrew Andersen from Jefferies. Please go ahead. Your line is open.

Andrew Andersen (Equity Research VP)

Hey, good morning. I think maybe five to seven years ago, you kind of had talked about how there were certain areas you don't write, like public company D&O or trucking. Maybe just bigger picture, are there pockets that five to seven years ago you did not write, and now you're kind of rethinking that and perhaps see some new opportunities for growth?

Michael Kehoe (CEO and Chairman)

There are a bunch of examples. You know, we've made a bigger push into high-value homeowners. We started an agribusiness division. We started an aviation division, ocean marine. We're always enhancing the product line.

Stuart Winston (EVP and Chief Underwriting Officer)

Yeah, we're always looking at new products. It's not that we don't write that. We want to write it on our terms and our pricing to maintain our margin. If you look at commercial auto, we write a lot of auto adjacent, wheels adjacent business, but we will look at some small fleets at tighter terms. It's just not the large trucking schedule. We will take a look at these accounts, but it's going to be a little more controlled.

Andrew Andersen (Equity Research VP)

Got it. On the net commission ratio, about 10.5% in the quarter, and recognizing there was some change to reinsurance, the direct commission was pretty much unchanged. If we go back a few years when the mix was more tilted towards casualty, it was kind of in a 12%-13% range. Could we see it getting back up to that level, or are there some offsets within there that might help keep it maybe around 11% or so?

Michael Kehoe (CEO and Chairman)

Again, I think the 10.7% is as good a guide as we can give you. If we did have a change in mix of business, you could see that move around a little bit. You know, whether that goes up to 12% or 13%, you know, who knows? I think the best guide we can give you is what we have here for this first full quarter since those agreements have been in place.

Andrew Andersen (Equity Research VP)

Thank you.

Operator (participant)

Our next question comes from Andrew Kligerman from TD Cowen. Please go ahead. Your line is open.

Andrew Kligerman (Managing Director)

Hey, good morning. Congrats to Brian and Stuart. First question is on the net reserve release of $10 million or 3.7%. Just curious as to what the kind of mix on that was, you know, short-tail versus casualty, and maybe on the casualty side, vintage. Just kind of curious on the breakdown of that release.

Michael Kehoe (CEO and Chairman)

Andrew, this is Mike. I would say, without getting too specific, the last couple of quarters, maybe even the last two years, including this quarter, most of the releases have been disproportionately on our first-party business, so short-tail business like property.

Andrew Kligerman (Managing Director)

Got it. Okay. I've been noticing when talking to some of your competitors, some of them starting up micro and small, maybe even mid-businesses, but I'm seeing a lot of micro and small startups in the E&S area. Could you talk a little bit about maybe the number of competitors you're seeing in that area versus, say, three years ago?

Michael Kehoe (CEO and Chairman)

I think we have more competitors today than three years ago, but it's not just insurance companies. There are hundreds and hundreds of MGAs that have started in the last several years. There used to be one fronting company. Somebody told me the other day they're now 30. A lot of capital has come into the industry, and there's just a lot more competition that reflects that. That's certainly not new. I mean, it's always been a cyclical business. We're hardwired to compete and win in this environment, I think.

Andrew Kligerman (Managing Director)

Got it. The last one, in your commentary, you talked about rates in property. I heard the word stabilizing. I heard moderating. Could you possibly put some numbers around where rates were in property? I think you said that it started to inflect at the end of the second quarter. Maybe where were rates early in the second quarter going and maybe where are they now? Just to kind of get some numbers around that commentary.

Brian Haney (President and COO)

I don't have the exact numbers in front of me. I would have said it was double digits in the second quarter down. If I had to guess now, I would say it's probably single digits down. I do.

Michael Kehoe (CEO and Chairman)

High single digits.

Brian Haney (President and COO)

Let's call it high single. I don't have it in front of me, so that's just an absolute speculative guess. I do get the sense that, at least in the part of the market we're in, you have seen that inflection point, and I would expect to see that trend continue. I think that's going to normalize relatively quickly.

Andrew Kligerman (Managing Director)

Thanks for the insights.

Operator (participant)

Our next question comes from Ryan Tunis from Cantor Fitzgerald. Please go ahead. Your line is open.

Ryan Tunis (Equity Research Analyst)

Hey, Dave. Good morning. I guess just to follow up on the underlying loss ratio, it sounded like you attributed kind of the two-point year-over-year increase to just normal variability. Does that imply that we're not yet seeing pressure on that ratio coming from commercial property lines?

Michael Kehoe (CEO and Chairman)

No, we're not seeing pressure on our loss ratio from property lines because we've overperformed in property. That's why a disproportionate amount of the reserve redundancy has come from the short-tail lines like property. We've had great experience on property, and I think that's a tailwind. Where we're being more cautious, and it's not because we're seeing any kind of a negative trend, it's just that on long-tail casualty, there's a higher degree of uncertainty. It just takes time for those accident years to mature. Coming out of a period a few years ago where we had a significant uptick in inflation, all sorts of supply chain disruptions with COVID, we saw some of our long-tail lines develop a little bit higher and a little bit later than we would have anticipated. Starting several years ago, we've addressed that with much more conservative loss specs.

We're maintaining that conservatism to make sure that we always have more than enough. We want our reserves to kind of develop favorably year by year. When that happens, it just has a very therapeutic effect on the financial performance of our business.

Ryan Tunis (Equity Research Analyst)

Got it. That makes sense. I guess just a follow-up on the property. I guess it makes sense naturally that there'd be less pricing pressure in the third quarter simply because there's fewer like Florida shared and layer renewals. To what extent is the improved pricing environment just sort of a function of seasonal mix, if you will?

Michael Kehoe (CEO and Chairman)

I'm going to start by just saying we didn't say it improved. It deteriorated at a slower rate.

Brian Haney (President and COO)

Yeah, I would characterize it more as, you know, rates were going down so fast that the faster rates go down, the quicker they're going to normalize because the industry can't go around giving, you know, double-digit rate increases indefinitely. I think we've reached that point where you saw that, you know, second-order derivative turn positive. I don't think it's based on the third quarter being less, you know, hurricane-intensive.

Ryan Tunis (Equity Research Analyst)

Got it. Thanks for the answers.

Operator (participant)

Our next question comes from Joseph Tumillo from BofA Securities. Please go ahead. Your line is open.

Joseph Tumillo (Equity Research Associate)

Hey, good morning, guys. Most of my questions have been answered. I guess the first question I'm thinking about, I appreciate the submission rate was decelerating a little bit to the commercial property. If we exclude commercial property, has the submission rate kind of remained steady, or has that also kind of decreased along with the ex-property premiums?

Brian Haney (President and COO)

It's closer to around 9% excluding commercial property.

Joseph Tumillo (Equity Research Associate)

Great. Thank you. The other question, just thinking about, I saw you guys kind of stepped up the share repurchases this quarter from the $10 million from the previous ones. Just kind of thinking, was that just more opportunistic where you saw the share price going, or is that more of a function of kind of lower growth and a lot of the cash flow? I know you guys had mentioned before about kind of keeping the business kind of efficient with capital.

Michael Kehoe (CEO and Chairman)

I think it's the latter, Joe. We're generating mid-teens ROEs on a year-to-date basis, and I think our year-to-date growth rate is high single digits. We're definitely producing a lot of excess capital. Our first goal is always to grow the business. Secondarily to that, the last couple of years, we've been looking at a very small dividend and a very small share repurchase, but I think both of those could continue to grow.

Joseph Tumillo (Equity Research Associate)

Great. Thank you, guys.

Operator (participant)

Our next question comes from Pablo Singzon from JPMorgan. Please go ahead. Your line is open.

Pablo Singzon (Equity Research)

Hi. Good morning all, and congrats, Brian and Stuart. First question, with premium growth having slowed, how do you think about other underwriting expenses over the next one to two years, right? I think over the past several years, that's been a good story. Given that growth has slowed, are you managing that line to sort of trail the growth in premiums? Or just given where you think opportunities might lie, there's a chance that you might see some degradation as you're building out new opportunities?

Michael Kehoe (CEO and Chairman)

I think we have always worked like crazy to be as efficient as we can as a business, given the industry that we compete in. I think the other underwriting expenses will gradually come down over time as we drive productivity gains in the business through technology, etc. I don't think it's going to be sudden, but I think a gradual decline is what investors should expect.

Pablo Singzon (Equity Research)

Okay. I guess the second question also related to expenses, right? Clearly, I can tell it's an expense advantage over the rest of the industry. I'd be curious to hear your thoughts about whether or not you're willing to trade some of that expense ratio to generate higher premiums and underwriting income. I guess even if that trade is possible to begin with, right? Are you sort of happy with the current configuration of pricing, profitability, and volume?

Michael Kehoe (CEO and Chairman)

Look, I mean, I think there's just a clear recognition that the customers we serve, principally small business owners, are intensely focused on limiting how much money they spend on insurance. We're doing everything we can to be as efficient as possible to give them competitively priced insurance policies, but also to protect our margins. I don't see an advantageous trade where we would deliberately raise our costs, become less competitive, and somehow that's going to net, you know, a better opportunity for our company.

Pablo Singzon (Equity Research)

Okay.

Michael Kehoe (CEO and Chairman)

Please continue.

Pablo Singzon (Equity Research)

Sorry, Brian, go ahead. Yep.

Michael Kehoe (CEO and Chairman)

I was just going to say we're going to continue to work, you know, do everything we can to be the efficient insurance provider in the E&S space.

Pablo Singzon (Equity Research)

Gotcha. Just one small one. On reinsurance retention, do you think that could go up again in the next couple of years, or you don't see any change from the current status quo? Thank you.

Michael Kehoe (CEO and Chairman)

Yeah. Again, I think what you're seeing this quarter is our best guess. If we had some dramatic mix of business, it could move one way or the other, but our retention has changed many times over the years.

Pablo Singzon (Equity Research)

It has, yeah.

Michael Kehoe (CEO and Chairman)

Right, we've taken a bigger net position over and over again, and that's just consistent with our growth as a business.

Pablo Singzon (Equity Research)

Okay, thank you for your answers.

Operator (participant)

Our last question comes from Casey Alexander from Compass Point. Please go ahead. Your line is open.

Casey Alexander (Managing Director and Equity Analyst)

Good morning. Congrats to Brian and Stuart, particularly to Brian on his retirement. I'm sure that's something that we all look forward to. Not to beat a dead horse, but Brian, I am particularly taken by your comments that the property rate decline is stabilizing simply because in 20 years of covering property in the Southeast, particularly in the Southeast U.S., when you have a year like this that has a particularly low level of CAT activity, at least up to date, fingers crossed, right? You never know what happens in the month of November. It tends to attract alternative forms of capital that see very low loss ratios and think that they can get into the business. They tend to get into the business in commercial because it's quicker than residential, and it's irrational.I just wondered, does that not concern you that you're possibly going to see alternative capital in 2026 enter the property market and leading with some irrational pricing structures?

Stuart Winston (EVP and Chief Underwriting Officer)

You might be right. I was kind of referring more to the dynamics in the third quarter. Who knows?

Casey Alexander (Managing Director and Equity Analyst)

Okay, thank you.

Operator (participant)

We have no further questions in queue. I'd like to turn the call back over to Michael Kehoe for any closing remarks.

Michael Kehoe (CEO and Chairman)

All right. We appreciate everybody joining us and look forward to speaking with you again here in a few months. Have a great day.

Operator (participant)

This concludes today's conference call. Thank you for your participation. You may now disconnect.