Kinsale Capital Group - Earnings Call - Q4 2020

Transcript

Operator (participant)

Ladies and gentlemen, thank you for standing by, and welcome to the Q4 2020 Kinsale Capital Group Earnings Conference Call. All lines have been placed on mute to prevent any background noise, and after the speaker's remarks, there will be a question and answer session. To ask a question during the session, you'll need to press star one on your telephone keypad. If you require operator assistance, please press star zero. 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 2020 quarterly reports on Form 10-Q and the 2019 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 fourth 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'll now turn the conference over to Kinsale's President and CEO, Mr. Michael Kehoe. Please go ahead, sir.

Michael Kehoe (CEO)

Thank you, Operator. Good morning, everyone, and thank you for joining us on our call today. With me are Brian Petrucelli, Kinsale's CFO, and Brian Haney, Kinsale's COO. We will follow our usual format this morning. I'll handle an introduction, and then Brian Petrucelli will follow with a financial report, and then Brian Haney with an operating report, after which we'll take questions. Last night, Kinsale reported operating earnings of $1.14 per diluted share for the fourth quarter of 2020, up over 83% above the fourth quarter of 2019. Gross written premiums were up almost 34% for the quarter. The company posted an 86.7% combined ratio and a 14.7% annualized operating return on equity for the full year of 2020, consistent with our guidance of a mid-80s combined ratio and mid-teens operating return, and notwithstanding the heightened CAT activity in the third quarter.

Kinsale is performing at a high level due to its unique business model. To recap briefly, Kinsale controls its own underwriting in lieu of contracting it out to third parties. It focuses on the E&S market, and it operates with a significant technology-enabled expense advantage. The combination of disciplined underwriting with low costs is a winner every time. The ongoing dislocation within the broad P&C market and the E&S market specifically is adding a tailwind to our efforts for the time being, allowing us to raise rates by double-digits and grow the top line by 42% for the full year 2020. Once the market normalizes, perhaps sometime in the next year or so, Kinsale remains well-positioned to continue to generate strong returns and to take market share. The only significant change we expect will be a slower growth rate, perhaps in the low double-digit range.

For both the fourth quarter and for much of 2020, Kinsale saw a lower level of reported losses than we anticipated. We believe this slowdown in loss activity is largely due to the slowdown or the shutdown of courts around the country due to the pandemic. As we stated on our third quarter conference call, we continue to reserve as though this slowdown in losses is temporary and that there will be a catch-up period in the future. Should the slowdown in losses be at least in part permanent, we would expect a benefit in the future in the form of additional reserve redundancy. From an operational standpoint, 95% of our employees successfully moved back to our one office here in Richmond, Virginia, early in the fourth quarter. For our business, this arrangement is superior to remote working.

It allows us to maintain better communication, to onboard and train new employees, to maintain a high level of productivity, and to continue to provide superior customer service to our brokers around the country. In sum, we are positive about the results from the fourth quarter and are optimistic about our opportunity for 2021 and beyond. I will now turn the call over to Brian Petrucelli.

Bryan Petrucelli (CFO)

Thanks, Mike. The results for the fourth quarter were strong and driven by continued solid premium growth, favorable loss experience, and disciplined expense management. We reported net income of $38.2 million for the fourth quarter of 2020, representing an increase of almost 114% when compared to $17.9 million last year, and due primarily to an approximately $10 million increase in underwriting income and an $11.5 million increase in investment returns. Net operating earnings, which excludes the volatility from equity investment gains and losses, increased by 84% to $26 million, up from $14 million in the fourth quarter of 2019. The company generated underwriting income of $21.6 million and a combined ratio of 81.6% for the quarter compared to $11.5 million and 86.1% last year. The combined ratio for the fourth quarter of 2020 included 3.1 points from net favorable prior year loss reserve development compared to 1.3 points last year.

Our effective income tax rate for the full year of 2020 was 11.9% compared to 16.7% last year, and lower primarily due to larger discrete tax benefits related to stock options exercised during the year. Annualized operating return on equity was 19% for the quarter and a little less than 15% for the year, as Mike mentioned, in line with our mid-teens guidance. Gross written premiums were approximately $150 million for the quarter, representing a 34% increase over last year, due primarily to continued market dislocation and the superior service standards that Mike touched on previously. Brian Haney will cover some specifics relative to market conditions here in a bit. On the investment side, net investment income increased by 17% over the fourth quarter last year, up to $6.5 million from $5.5 million as a result of continued growth in the investment portfolio.

Annualized gross investment returns, excluding cash and cash equivalents, was 2.9% for the year compared to 3.1% in 2019. Diluted operating earnings per share was $1.14 per share for the quarter compared to $0.63 per share last year. With that, I'll pass it over to Brian Haney.

Brian Haney (COO)

Thanks, Bryan. As mentioned earlier, premium grew 34% in the fourth quarter. Growth is still strong, and the market is trending in a favorable direction. We are still seeing growth across the board, but growth was particularly strong in our allied health, management liability, in the marine, and life sciences areas. As we discussed last quarter, the overall economy is still being affected by COVID-related restrictions. The significant uptick in COVID cases in the fourth quarter led many states to reimpose restrictions, particularly California and New York, which are two of our bigger states. With the vaccine rollout and the rapid drop in cases we've seen across the country in January and February, I fully expect that those restrictions will be loosened, and we should see the release of some pent-up economic activity, which should provide us with an additional tailwind.

Submission growth was in the high teens in the fourth quarter, down somewhat from the mid-20s in the third quarter. We attribute some of this to the ongoing effects of the lockdown. However, binder growth remained strong in the mid-20s. We continue to look to improve our efficiency and customer service, and this allows us to bind a higher percentage of the accounts we see while maintaining underwriting and pricing discipline. We also continue to incrementally expand the product line. One new segment we are developing is insurtech underwriting, which looks to capitalize on new distribution sources in the insurtech space. This is a natural fit for us as it allows us to further exploit the advantages we have in technology. We are also expanding our offerings in our new commercial auto segment, our aviation segment, as well as expanding our new entertainment segment.

As for rates, we are still pushing them up in response to market conditions. As a reminder, we have a very heterogeneous book of business, which complicates reducing all the rate movement to one single number. That all being said, we see rates being up in the low teens range in the aggregate during the quarter. Even beyond getting pure rate, we are tightening terms and conditions, which should contribute even more to the bottom line. With that, I'll hand it back over to Mike.

Michael Kehoe (CEO)

Thank you, Brian. Operator, we're now ready for any questions that come in.

Operator (participant)

At this time, I'd like to remind everyone in order to ask a question, please press Star followed by the number one on your telephone keypad. We'll pause for just a moment while we compile the Q&A roster. Our first question comes from the line of Jeff Schmidt with William Blair. Go ahead, please. Your line is open.

Jeff Schmidt (Research Analyst)

Hi, good morning. We're just wondering how submission activity is looking so far just in the first couple of months here of 2021, and given that comparisons are going to be tougher this year, are you seeing that slow down?

Michael Kehoe (CEO)

Yeah, I mean, normally we kind of like to focus on the quarter we just concluded. We're kind of early days in Q1, but I would say probably not a material departure from Q4.

Jeff Schmidt (Research Analyst)

Okay. Then the underlying loss ratio, it sounds like it was down a little bit on you referenced port activity being down just during the pandemic. I guess with just thinking about that differential in rates versus loss cost trends, it's pretty large there. Do you expect that to come down quite a bit more?

Michael Kehoe (CEO)

Jeff, we think the best way to look at the accident year loss ratio is over the course of the year versus the quarter. I think if you look at the press release, we went from a 62.1% ex-CAT accident year loss ratio in 2019 to drop to 61.5. A couple of things I always like to reiterate in terms of loss reserving is, number one, we strive to be very cautious and conservative. It is really a fundamental part of our management strategy is to post reserves that are likely to develop favorably over time. The other thing is that, hey, we are getting some significant rate increases and have been for some time. That's obviously allowing us to expand our margins. Some of that, I think you see in that six-tenths of a point lowering of the accident year loss ratio.

Some of it is showing up in more conservatism in the loss reserves. Clearly, there's a lot of companies that have been coming out with adverse development lately, and obviously we're striving to make sure that we're not ever going to be in that camp.

Jeff Schmidt (Research Analyst)

Right. Right. That is what I meant on that annual basis. That differential is so large, it seems like, yeah, like you said, you are being conservative there. Okay. That is all I had. Thanks.

Michael Kehoe (CEO)

You bet.

Operator (participant)

Our next question comes from the line of Mark Hughes with Truist. Go ahead, please. Your line is open.

Mark Hughes (Equity Analyst)

Yeah, thanks. Good morning.

Michael Kehoe (CEO)

Good morning, Mark.

Mark Hughes (Equity Analyst)

What were those submission references for Q4 versus Q3? I didn't pick that up. What did you say?

Brian Haney (COO)

We were in the submission growth rates in the upper teens in the fourth quarter and the mid-20s in the third quarter.

Mark Hughes (Equity Analyst)

Okay. The ports being closed, what has that meant in terms of development on older claims? Has it slowed it down? No impact? What's the effect of that?

Michael Kehoe (CEO)

Mark is Mike. We actually—and I think this is true across the industry—we only try a small percentage of our cases go to trial to be resolved. The slowdown in the court system, the court system a lot of times acts as a catalyst for mandatory settlement conferences, mediations, and the like. The fact that a lot of courts have been closed now, either in whole or in part, for almost a year has clearly impacted kind of the claims system overall. We have seen that in this drop-off in reported losses. It involves the 2020 accident year and some of the prior years as well.

I think the question is, as I commented earlier, hey, is there a bounce back where you go through a catch-up period as the courts reopen, or hey, maybe just some accidents never took place because of changes in people's behavior given the lockdown across the economy? We just want to reassure our investors that, hey, we always take the conservative approach. We're assuming that those losses are going to bounce back. We have reserved as though there is no slowdown. If there is good news down the road, hey, that'll be fun to announce.

Mark Hughes (Equity Analyst)

How do you feel about the kind of cycle where we sit now? I think you said perhaps sometime in the next year or so when things normalize. I think you've been pretty consistent about your timeline. How do you feel about it today?

Michael Kehoe (CEO)

I think we feel we haven't changed our minds, right? I mean, we grew at almost 34% in Q4. That's an extraordinary growth rate. At some point, that's going to obviously normalize. There's a lot of new capital coming into the industry. As you see from a lot of these announcements of other companies around the industry, there's a lot of distress out there that people are trying to work through, and it just takes some time. At some point, the new capital overwhelms the distress, and you get a more normalized competitive market. We feel pretty optimistic about 2021. Beyond that, it gets fairly speculative.

Mark Hughes (Equity Analyst)

Yeah. Yeah. How about from an expense ratio standpoint? Up a little bit sequentially this quarter, but obviously you're getting very good top-line growth and getting leverage. How do you think that shapes out in 2021?

Bryan Petrucelli (CFO)

Mark, it's Bryan Petrucelli. I think from an expense ratio standpoint, I wouldn't expect much of a change. Obviously, with premium growth, you do get some economies of scale, but I wouldn't expect any significant deviation from what you're seeing. It's always going to bounce around a little bit from quarter to quarter, but I think if you look up what we've done over the past year, that's a pretty good guide.

Mark Hughes (Equity Analyst)

If you can, one more, if I might, just anything on the CAT losses this quarter? Clearly, Q3 was much larger, but even Q4, you had CAT losses that were higher than your norm. Anything about the geography or lines of business where you were affected there? Any changes you might have made given the experience in the second half of 2020?

Michael Kehoe (CEO)

Mark, it's Mike. We haven't changed our strategy around natural catastrophe risk. We like the business. We approach it in a conservative fashion. In terms of—did you ask about the first quarter activity?

Mark Hughes (Equity Analyst)

No, no. I was just sort of curious the Q—well, if you want to say something about Q1, I'm all ears. I was thinking about the Q4 rather than Q3, whether there's any different complexion to the CAT losses.

Michael Kehoe (CEO)

No, no. It's a similar strategy. We're very conservative in how we manage the risk because it's quite volatile. Historically, the margins have been pretty compelling, right? We're trying to balance the return prospects with making sure we manage the volatility appropriately. No, really no changes. Obviously, there were a couple of straggler storms in Q4, Delta and Zeta, I think. I think that's where you see a little bit of CAT activity there in the financial statement.

Mark Hughes (Equity Analyst)

Thank you very much.

Michael Kehoe (CEO)

You bet.

Operator (participant)

Our next question comes from the line of Matt Carletti with JMP. Go ahead, please. Your line is open.

Matt Carletti (Managing Director)

Hey, thanks. Good morning. Jeff and Mark covered most of what I had, but Mike, I was hoping I could ask you to expand on a comment you had there in your answer to one of the prior questions referencing kind of new capital coming into the market. We've seen all the announcements of new capital, and I think everybody realizes some of that's in the E&S space broadly. Can you give us a little more color on what you're seeing kind of in your pocket of the E&S market being a bit smaller limit? Obviously, you guys leveraging your quick broker service and technology and so forth. Is it elsewhere in E&S, or are you seeing it a bit directly?

Michael Kehoe (CEO)

I would say we're really not seeing any kind of dramatic impact in the market as of today, right? When we talk about new capital, it's mostly things we're reading about in the trade press where different competitors or new companies are raising billions of dollars, some of which will go into the reinsurance market. Some of it clearly will end up in the E&S market. Eventually, hey, new competition shifts the balance between supply and demand, and inevitably, it'll affect us mostly in terms of the growth rate. As of today, I think you're hearing a continued sense of optimism.

Operator (participant)

Our next question comes from the line of Colin Ducharme with Sterling Capital. Go ahead, please. Your line is open.

Colin Ducharme (Executive Director)

Hi, good morning. Thanks for the question, and I appreciate the solid results in Q4 here. Just a couple of quick housekeeping items up front. Mike, I was interested in your headquarter update there, 95% of employees on site. That sounds great. Can you give us a little color in terms of the advantages that that now gives you? I inferred a little kind of speed to market there, but maybe if you could just offer some color on what hindrances you were facing in a remote environment and now what advantages gained in the in-person environment today versus where some of your peers in a remote space might still be facing. I have got a couple of follow-ups.

Michael Kehoe (CEO)

Okay. I would say, first of all, when the pandemic struck, about probably 90%+ of our employees were working remotely.

We clearly had the flexibility in terms of our system and whatnot to accommodate that. It's just that we're a company that's in a period of rapid growth. As you can expect, we're hiring on a regular basis underwriters, claims examiners. We've expanded dramatically, I think, our IT shop over the course of the last year or so. Part of that onboarding of new employees is training, right? Because you hire some employees that are new to the industry. A lot of it is getting employees familiar with our business culture, how we operate. It's very challenging to do that when everybody's working by themselves. It made sense for eight or 10 months, if you will, to have people working remotely. I think we worked hard to make sure people remained productive.

It also made sense to move people back to the arrangement we have today. There's probably about a 5% cohort of employees for a variety of medical reasons and the like that are continuing to work remotely, and that works fine. In general, we're big believers in having the team here in one location where the training, the onboarding, the communication is at its best. I would say Kinsale far and away maintains the best service standards with our brokers. I mean, I hear that constantly. We turn quotes around very quickly. We ask a lot of our employees. I think we tend to pay better than our competitors here in town as a consequence. I think that's a material part of our success as a business, providing a good customer service experience to our brokers.

Having people back in the office, I think long-term facilitates that as well.

Colin Ducharme (Executive Director)

Okay. Thanks. In terms of pricing, if you could offer some color regarding the relative pricing position Kinsale is now seeing in the market versus peers. We've seen from other peers who have already reported and also in trade press continued rate increases elsewhere. I don't know if you're experiencing an improved pricing umbrella as peers have continued to kind of push rates up. If you've got some anecdotal color or perhaps more quantitatively on a buying-to-quote percentage, how that differential has trended through time, what's the relative positioning? How has that trended for Kinsale?

Brian Haney (COO)

Yeah. This is Brian Haney. We are seeing still an acceleration of the rate changes. It's gradual. That's been going on for a long time now.

In the fourth quarter, it continued despite all the other stuff going on. I would say generally, when you look at industry commentary or industry surveys about rates, what we're seeing is consistent with them. I think to the extent that we're getting better buying-to-submit numbers, it's through better customer service or sort of from that angle rather than through adopting a more competitive posture with regards to rates. As the industry is pushing up rates, we are pushing up rates with them and then making up with productivity and efficiency.

Colin Ducharme (Executive Director)

Okay. Thanks. And then just cleaning up last couple of items here, kind of more forward-looking, just in thinking about how to properly kind of view the next 12 or so months.

If you could comment on the Midwest weather events, I'm assuming it's down the middle of the fairway in terms of exposures and how you think of the enforced book. Perhaps longer term, when we start to think about eco data beginning to improve and domestic recovery taking hold, if you could just talk about embedded potential within your enforced book. What I'm trying to articulate here is as you go through and do perhaps policy audits with SMBs with which you have exposure, to the extent they're experiencing a snapback in revenues and perhaps your exposure units are greater than you initially underwrote at binding, is there a chance in your enforced book that you've got an embedded rate tailwind that can take hold as the economy recovers? I hope I'm articulating that well. Thank you.

Michael Kehoe (CEO)

This is Mike. I'll start.

The Midwest CATs, I think you're referencing kind of the cold wave and the power disruption in Texas. There are some industry headlines. There are some trade press articles saying that the industry loss could parallel Hurricane Harvey from a number of years ago, which clearly it looks like it will. I would say it should be much less material for Kinsale. We do not expect an enormous flow of claims from that. I'm sure there will be some, but it should not be that material for us. In terms of the impact of economic growth on our book, I think you're absolutely spot on, Colin. I think that there is some of that heads up that economic activity I was talking about is going to result in, at some point down the road, increased audits and then increased revenue and exposure at renewal.

There is some growth we are going to get just from, let's say, a contractor who maybe had his sales go down 25% during the pandemic, have it go back up 25% or 30% or whatever. I mean, there should always be some growth that we get just by the exposure growth because most of our exposure bases are related to revenue or like items.

Colin Ducharme (Executive Director)

Thank you.

Operator (participant)

Our next question comes from the line of Scott Helmiak with RBC Capital Markets. Go ahead, please. Your line is open.

Scott Helmiak (Analyst)

Yes. Good morning. Wondering if you could talk about the—you mentioned some of the product offering expansion, aviation product, commercial auto, entertainment. I wonder if you could comment a little more on that and how that's going to impact your growth rate in terms of—are you going to be able to maintain kind of a similar growth rate that you saw maybe not necessarily in the past few quarters, but maybe in the fourth quarter, somewhere in the 20%-30% growth rate or more? And how much of that is going to be through new product expansion or distribution expansion?

Michael Kehoe (CEO)

Yeah. I would say that with any new product offerings or any product expansions we do, they're all very incremental. We're not trying to corner the market on anything. I wouldn't expect new products right out of the gate to really affect growth rate kind of in the near term. It's really for the long-term we're setting it up. We want to be able to compete down the road. These things take off slowly, and we're completely okay with that. The short answer is if you're looking forward to impact like next quarter's growth rate, I don't think aviation or entertainment or these other segments are going to materially move the needle. Years down the road, probably not.

Scott Helmiak (Analyst)

Okay. That's fair. You highlighted really pretty much all year how you've taken the opportunity to adjust some of the terms and conditions and how that's helped your margins. I wonder if you could just give us a few examples of some of the biggest shifts you've seen. Is it limits or deductibles or exclusions and kind of how that's evolved over the past few quarters and how that's sort of benefited you?

Michael Kehoe (CEO)

Yeah. I would say definitely we have restricted our use of higher limits. Basically, if on a cap, one at $10 million, a $10 million limit, now they're getting a $5 million. Maybe we took a $5 million limit to $2.5 million. Definitely adding sub-limits. Where we have exclusions, we're tightening the wording to make them even stricter. Then we're just adding new exclusions because we can. Other areas might be more frequent use of deductibles. We have two principal coverage triggers we use. The occurrence trigger is broader than the claims made. Not to get too technical here on an investor call, but we're pushing the more restrictive of the two, which gives us more certainty over the development of claims in the long haul.

There are a lot of things that in a more favorable market environment, we're able to negotiate terms that are a little bit more favorable to us as the risk bearer.

Scott Helmiak (Analyst)

Okay. That's good detail. The last one I have was just on the net premium retention ratio. Net premiums as a percent of gross premiums. It was up a little bit year-over-year in the first half of 2020 and down a little bit year-over-year in the second half of 2020. Any sense of where that might fall for 2021 and any expectations that we'll see any shifts in reinsurance treaties that might impact that for the year?

Michael Kehoe (CEO)

I think what you're seeing really is the mix of business is going to drive that. We've had a tremendous increase in our commercial property book and our excess casualty book that is subject to reinsurance. I think you're seeing retentions that react to that. I think going forward, it's always going to bounce around a little bit depending on mix of business. I think if you use where we are here in the fourth quarter for a guide here for the next six months or a year, it's probably as good as you—it's probably a good guide.

Scott Helmiak (Analyst)

Okay. Thanks for the answers. Best of luck.

Operator (participant)

Our next question comes from the line of Casey Alexander with Compass Point. Go ahead, please. Your line is open.

Casey Alexander (Stock Analyst)

Yeah. Hi. Good morning. Thanks for taking my question. Most of my questions have been asked and answered, but I would ask Brian. Brian, do you have a reasonable tax rate going forward to use for modeling purposes?

Brian Haney (COO)

Yeah. Obviously, we're a 21% statutory taxpayer. When we went public in 2016, we issued our options at that point. The last tranche of those vested this year. I would expect to see fewer of those to be exercised going forward. There are still a fair amount outstanding, but you shouldn't see as much of an impact going forward as you did here in the fourth quarter. I think for our guide, long-term, 17.5%-18% is probably a good guide.

Casey Alexander (Stock Analyst)

All right. Great. Thank you. That is my only remaining question. Thank you for taking my question.

Operator (participant)

Ladies and gentlemen, as a reminder, if you'd like to ask a question, please press star followed by the number one on your telephone keypad. Our next question comes from the line of Ron Bobman with Capital Returns. Go ahead, please. Your line is open.

Ron Bobman (Director)

Hi. Thanks. Congrats on the continued fabulous results. Almost all the questions I had in mind were asked. I would be curious, Mike, you talked about the current weather and losses and the conversation about it being a little bit sized in the Harvey neighborhood. I imagine that you're speaking to Kinsale's exposure to being not all that significant. I guess it's because your book is principally predominantly a casualty book. I was wondering if I could sort of tap your knowledge. For those companies that write E&S property, is E&S property sort of—would you sort of say like exposed to this event as admitted property, or would an E&S property writer be a little bit less exposed, whether it be because of coverage terms or deductibles?

Would you hazard a guess as to sort of the relative vulnerability to this event for that type of writer? I know that you guys dominate your book with casualty business and thus the modest or insignificant exposure that you referenced.

Michael Kehoe (CEO)

Yeah. I think for the industry, it's significant. I think it's significant for the admitted companies and the E&S companies. You've got coastal exposure along the Gulf. You've got hail is a big issue in the Dallas area. A lot of E&S homeowners is written up there. Texas is a big E&S state anyway, right? So there's plenty of E&S exposure. I just think for Kinsale, it's early days. We don't know definitively, but I suspect whatever the problem is for the industry, it's going to be considerably lighter for us at Kinsale just because of our strategy.

Ron Bobman (Director)

Okay. The only thing I'd add is, Mike, you said that if when the courts reopen and the plumbing sort of gets unplugged, that if the losses don't come in, it'll be fun to report that good news. Having put up an 81 combined, I would think that you'd be plenty of fun reporting today these results. Congrats. I don't know. Maybe it's funner, will be funner if that happens, but outstanding operation and report results.

Michael Kehoe (CEO)

Thanks, Ron. Appreciate it.

Operator (participant)

Our next question comes from the line of Heather Takahashi with Thriven. Go ahead, please. Your line is open.

Heather Takahashi (Senior Equity Research Analyst)

Hi guys.

Michael Kehoe (CEO)

Good morning, Heather.

Heather Takahashi (Senior Equity Research Analyst)

Good morning. A couple of questions. You mentioned in your opening remarks that you would have been hit by the closures in New York and California in terms of the premium growth in the quarter. Do you have a sense of what it would have been very, very roughly if it hadn't been for the COVID lockdowns?

Michael Kehoe (CEO)

No, not really. I mean, I could just tell you that we write a lot of construction business, and we write a lot of premises-related business. Those would have been the two most affected. It would be tough to—I mean, it definitely had a material impact, let's put it that way.

Heather Takahashi (Senior Equity Research Analyst)

Okay. Good. Okay. Another question. You mentioned that you're expanding into insurtech underwriting. Could you talk a bit more about that?

Michael Kehoe (CEO)

Yeah. There are a lot of new entities that are not traditional brokers but really sort of fulfill a role of distribution. They style themselves as insurtech. They are really technology companies. We are creating a unit whose job is to distribute through those sources just the way we would distribute through a wholesaler. The reason we are creating a separate unit for it is because it is going to have to be a different set of processes, much more tech-intensive, much lighter human touch. Basically, the same type of business, still E&S, still small and medium-sized accounts, still controlling and underwriting the pricing. It is just through a different funnel.

Heather Takahashi (Senior Equity Research Analyst)

Okay. It's just the distribution is different.

Michael Kehoe (CEO)

Yeah. Same business through a different distribution channel.

Heather Takahashi (Senior Equity Research Analyst)

Got it. Great. Thank you.

Michael Kehoe (CEO)

Thanks, Heather.

Operator (participant)

There are no further questions at this time. I'd like to turn the call back over to Mr. Kehoe.

Michael Kehoe (CEO)

Okay. I just want to thank everybody for participating today. We look forward to speaking with you again here at the end of the first quarter. Have a great day.

Operator (participant)

Ladies and gentlemen, this concludes today's conference call. You may now disconnect.