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Kinsale Capital Group, Inc. (KNSL) Q2 2025 Earnings Summary

Executive Summary

  • Kinsale delivered a clean beat: operating EPS of $4.78 vs S&P Global consensus $4.42 (+8.1%) and revenue of $469.8M vs $435.0M (+8.0%); GAAP diluted EPS was $5.76, up 45% YoY . Estimates marked with * from S&P Global.*
  • Underwriting remained strong despite heightened competition: combined ratio improved to 75.8% (vs 82.1% in Q1), aided by 3.9 pts of favorable prior-year reserve development and lower cat losses (0.9 pt) .
  • Premium growth moderated (+4.9% YoY) as Commercial Property gross written premium declined 16.8% YoY; ex-Commercial Property, premiums rose 14.3% YoY, underscoring breadth across divisions .
  • Management highlighted conservatism in reserving and competitive cost position; reinsurance program changes increased net retentions (casualty retention to $3M; property quota share retention to 60%; cat XoL retention to $75M), supporting margin durability across cycles .
  • Potential stock catalysts: the beat on operating EPS and revenue, stronger investment income (+29.6% YoY), sustained favorable reserve development, and narrative on MGA/fronting under-reserving potentially normalizing competitive dynamics .

What Went Well and What Went Wrong

What Went Well

  • Record per-share net income and operating earnings; “disciplined underwriting and technology-enabled expense management” drove results (GAAP diluted EPS $5.76; operating EPS $4.78) .
  • Underwriting performance strengthened: combined ratio 75.8%, underwriting income $95.5M; favorable prior-year development was 3.9 pts vs 2.8 pts last year .
  • Investment income accelerated: $46.5M (+29.6% YoY), reflecting portfolio growth and new money yields in the low-to-mid 5% range with ~3.1-year duration .
  • Quote: “Our loss reserves have never been more conservatively stated than they are right now” — CEO Michael Kehoe, emphasizing reserve strength amid industry concerns .

What Went Wrong

  • Commercial Property division headwinds: gross written premium declined 16.8% YoY, with sharper competition and rate declines; large Southeastern wind accounts particularly pressured .
  • Elevated catastrophe losses in 1H (3.4 pts on loss ratio), primarily Palisades Fire; though Q2 cat impact was modest (0.9 pt), 1H cat losses weighed on ROE vs prior year .
  • Pricing softness broadly consistent with AmWINS Index (-2.4% overall); Commercial Property down ~20%, and some professional/management liability lines slightly negative .

Financial Results

Core P&L and Margin Trend (oldest → newest)

MetricQ4 2024Q1 2025Q2 2025
Total Revenues ($USD Millions)$412.1 $423.4 $469.8
Net Earned Premiums ($USD Millions)$359.7 $365.8 $383.6
Net Investment Income ($USD Millions)$41.9 $43.8 $46.5
Underwriting Income ($USD Millions)$97.9 $67.5 $95.5
Combined Ratio (%)73.4% 82.1% 75.8%
Loss Ratio (%)52.3% 62.1% 55.1%
Expense Ratio (%)21.1% 20.0% 20.7%
Diluted EPS ($)$4.68 $3.83 $5.76
Diluted Operating EPS ($)$4.62 $3.71 $4.78

Growth Drivers and Premiums

MetricQ4 2024Q1 2025Q2 2025
Gross Written Premiums ($USD Millions)$443.3 $484.3 $555.5
Ceded Written Premiums ($USD Millions)$97.2 $102.6 $96.8
Net Written Premiums ($USD Millions)$346.1 $381.7 $458.7
Fee Income ($USD Millions)$8.5 $9.6 $10.8

Q2 2025 YoY Comparison

MetricQ2 2024Q2 2025
Net Earned Premiums ($USD Millions)$332.5 $383.6
Underwriting Income ($USD Millions)$76.1 $95.5
Combined Ratio (%)77.7% 75.8%
Loss Ratio (%)56.6% 55.1%
Expense Ratio (%)21.1% 20.7%
Net Investment Income ($USD Millions)$35.8 $46.5
Gross Written Premiums ($USD Millions)$529.8 $555.5
Diluted EPS ($)$3.97 $5.76
Diluted Operating EPS ($)$3.75 $4.78
Net Income ($USD Millions)$92.6 $134.1

KPIs and Balance Sheet

MetricQ4 2024Q1 2025Q2 2025
Annualized ROE (%)29.9% 23.3% 32.5%
Annualized Operating ROE (%)29.6% 22.5% 24.7% (1H)
Book Value/Share ($)$63.75 $67.92 $73.93
Stockholders’ Equity ($USD Billions)$1.48 $1.58 $1.72
Cash & Invested Assets ($USD Billions)$4.1 $4.3 $4.6

Division Highlights and Market Indicators (Q2 2025)

  • Commercial Property gross written premiums: -16.8% YoY; ex-Commercial Property: +14.3% YoY .
  • Submission growth: +9% overall (low double digits ex-Commercial Property) .
  • Pricing: AmWINS Index -2.4% overall; Commercial Property ~-20%; casualty mixed/modestly positive; some professional/management liability slightly negative .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Formal Financial Guidance (Revenue/EPS/Margins)FY/QuarterNone providedNone providedMaintained: no formal guidance
DividendQ2 2025N/A$0.17 per share; payable Jun 12, 2025; record May 29, 2025Declared
Share RepurchasesQ1 2025N/A$10.0M repurchases at $428.28 avg; 23,348 sharesOngoing modest program
Share RepurchasesQ2 2025N/A$10.0M repurchases at $429.02 avg; 23,309 sharesOngoing modest program
Reinsurance – Casualty Treaty RetentionRenewed Jun 1, 2025$2.5M$3.0MIncreased retention
Reinsurance – Property Quota Share RetentionRenewed Jun 1, 202550%60%; ceding commission increased slightlyIncreased net; improved commission
Reinsurance – Cat XoL RetentionRenewed Jun 1, 2025$60M$75M; purchased additional top limitHigher retention; more top limit

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024, Q1 2025)Current Period (Q2 2025)Trend
Competitive Landscape (MGAs/fronting)“Favorable, yet increasingly competitive” pricing in 4Q; Q1 flagged fronting companies with unsustainable gross loss ratios and adverse development Management reiterates misalignment and under-reserving among MGAs/fronting; expects eventual normalization benefiting disciplined underwriters Competitive pressure persists; potential future tailwind as losses materialize
Commercial Property Pricing/VolumesQ1: Rates down ~20%; division -18% YoY; seasonally heavier in 1H; headwind expected in Q2 Q2: ~-20% pricing trend persists; division -16.8% YoY; submissions down; ex-division growth mid-teens Stable sequential pressure; YoY easier comps likely in 2H
Reserve ConservatismQ1: Construction defect/long-tail casualty booked conservatively (mid-80s for AYs 2020–2024) Explicit assertion reserves “never more conservatively stated”; slower releases on long-tail, more on short-tail property Ongoing conservative stance
Reinsurance ProgramQ1: Indicated potential to take more net as scale grows Actual renewal raised retentions (casualty/property/cat); ceding commission improved slightly Net exposure increased modestly; supports margin capture
Personal/Homeowners ExpansionQ1: Growth opportunity in high-value homeowners and broader personal lines New homeowners product launched in TX, LA, CO, CA; more states planned; homeowners share small but growing Expanding footprint; potential mix shift over time
Investment Income/PortfolioQ4/Q1: Strong growth in NII; gross return ~4.3–4.4% NII +29.6% YoY; new money yields low–mid 5%; duration ~3.1 years; float grew to $2.9B Continuing tailwind from rates and portfolio growth
Macro/InflationQ1: caution on inflation; conservative casualty assumptions Continued caution; inflation above target; reserves conservative Steady caution stance

Management Commentary

  • “In the second quarter our business produced record per share net income and net operating earnings… disciplined underwriting and technology-enabled expense management” — Michael P. Kehoe, Chairman & CEO .
  • “Our loss reserves have never been more conservatively stated than they are right now” — Kehoe, underscoring balance sheet strength .
  • “We expect our ROEs in the low to mid‑20s or better… we want to maintain healthy capital but not hold excessive redundant capital” — Kehoe on returns and capital management .
  • “The E&S market remains competitive… much of the aggressive pricing is coming from MGAs and fronting companies… under‑reserving is a self‑correcting problem” — Brian Haney, President & COO .
  • “Net investment income increased by 29.6%… new money yields low to mid 5%… average duration 3.1 years” — Bryan Petrucelli, CFO .

Q&A Highlights

  • Growth trajectory: Management maintains 10–20% growth over the cycle but acknowledges near-term headwinds from Commercial Property competition; ex-Commercial Property growth mid‑teens .
  • Underlying margins: Improvement driven by short‑tail lines; conservative stance on long‑tail casualty amid inflation uncertainty .
  • Capital return: Routine modest buybacks and dividend; willingness to adjust opportunistically without compromising capital strength .
  • Reinsurance and ceding: Renewal implies lower ceding over time given larger net; mix-dependent ceding ratio outlook .
  • Homeowners expansion: Launch across multiple states; opportunity in personal lines without near-term shift from 70/30 casualty/property mix .

Estimates Context

  • Q2 2025 operating EPS: $4.78 actual vs $4.42 consensus*, beat +$0.36 (+8.1%). Q2 2025 revenue: $469.8M actual vs $435.0M consensus*, beat +$34.8M (+8.0%). GAAP diluted EPS was $5.76 (for reference) . Values with * retrieved from S&P Global.
  • Forward consensus (next quarter): Q3 2025 EPS $4.82*, revenue $446.6M*, with 12 EPS estimates and 6 revenue estimates feeding consensus; context suggests continued competitive market but favorable margin profile due to reserve conservatism and reinsurance optimization. Values with * retrieved from S&P Global.
MetricConsensus EstimateActual (Q2 2025)Surprise
Operating EPS ($)4.42*4.78 +$0.36 (+8.1%)*
Revenue ($USD Millions)435.0*469.8 +$34.8 (+8.0%)*

Key Takeaways for Investors

  • Quality beat driven by underwriting discipline and investment income; favorable reserve development (3.9 pts) and modest cat losses supported margins .
  • Competitive pressures concentrated in large Commercial Property; ex-division growth robust (+14.3% YoY), indicating diversified growth momentum .
  • Reinsurance renewal increased net retentions (casualty/property/cat) and improved property quota share economics, positioning Kinsale to capture more margin while maintaining prudent risk controls .
  • Balance sheet strength: conservative reserves, book value per share up to $73.93, equity to $1.72B; float at $2.9B, enabling ongoing NII tailwinds .
  • Personal lines/homeowners expansion adds a new growth vector; watch mix shifts and potential ceding ratio evolution as net retentions rise .
  • Near term, expect mid-teens growth ex-Commercial Property with strong ROE in low-to-mid 20s, per management commentary; no formal guidance provided .
  • Trading setup: EPS/revenue beat and margin improvement are positive; a durable low-cost advantage and reserve conservatism can mitigate competitive risk; monitor casualty loss trends, property pricing normalization, and MGA/fronting market stress as potential catalysts .

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