Kinsale Capital Group, Inc. (KNSL) Q4 2024 Earnings Summary

Executive Summary

• Q4 2024 delivered disciplined profitability: diluted EPS $4.68 (+5.6% YoY), diluted operating EPS $4.62 (+19.4% YoY), and combined ratio 73.4% (sequentially improved vs 75.7% in Q3) .
• Underwriting income rose to $97.9M and net investment income increased 37.8% YoY to $41.9M; gross written premium grew 12.2% YoY to $443.3M amid a more competitive backdrop .
• Sequentially, underwriting income (+12.7%) and net investment income (+5.8%) improved, while diluted EPS slipped vs Q3 ($4.68 vs $4.90) due partly to higher variable compensation in Q4 driving a 21.1% expense ratio (vs 19.9% in Q4’23) .
• Near-term catalyst: management estimates ~$25M pre-tax catastrophe loss (net of reinsurance) from January Southern California wildfires in Q1 2025; dividend was raised to $0.17 (from $0.15) and buybacks were ~$10M in Q4 .

What Went Well and What Went Wrong

What Went Well

• Combined ratio improved sequentially to 73.4% with favorable prior-year reserve development (2.6 points) and strong property results; underwriting income rose to $97.9M .
• Net investment income strength continued (+37.8% YoY to $41.9M) on higher new money yields (low 5% range) and larger portfolio; management expects continued benefit as book yields (~4.5%) lag new money yields .
• Management reaffirmed durable competitive advantages—“disciplined underwriting and technology-enabled low costs”—supporting long-term profitable growth at 10–20% .

What Went Wrong

• Expense ratio rose to 21.1% (from 19.9% in Q4’23), primarily due to higher variable compensation, partially offset by higher ceding commissions; management guides to focusing on full-year levels (20.6%) .
• Larger layered property transactions faced rate declines (mid-to-high teens), dampening property growth (property divisions +6% vs casualty +15%), reflecting a normalized market post crisis-pricing .
• Catastrophe impact: Q4 loss ratio included 2.2 points of net catastrophe losses (~$7.9M), and management disclosed an expected ~$25M pre-tax net wildfire loss in Q1 2025 .

Financial Results

Segment/Line commentary and KPIs:

Note: “—” indicates not disclosed in the referenced documents for those prior periods.

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “Our fourth quarter performance concluded another year of profitable growth resulting from disciplined underwriting and technology-enabled low costs.” — Michael P. Kehoe, CEO .
• “New money yields are averaging in the low 5% range and with book yields around 4.5%, so we should see some continued investment income benefit.” — Bryan Petrucelli, CFO .
• “Casualty underwriting divisions grew at 15%… Property divisions grew at 6%… larger layered property accounts were down mid- to high teens.” — Brian Haney, President & COO .
• “We expect our pretax losses net of reinsurance to be approximately $25 million” from Southern California wildfires for Q1 2025. — Michael P. Kehoe .
• “We expect to make modest buybacks each quarter… with larger purchases made opportunistically” — Michael P. Kehoe .

Q&A Highlights

• Growth sustainability and outlook: Management sees 10–20% top-line growth as conservative and sustainable; EPS growth should outpace revenue due to operating leverage and higher investment yields .
• Pricing trade-offs: Will “sharpen pencils” in ultra-high-margin lines to trade some excess profitability for growth; no cross-subsidization—each division must meet profitability targets .
• Layered property normalization: Competitive pressure and rate declines mid-to-high teens; small property still growing with positive rates .
• Expense ratio modeling: Q4 increase primarily from variable comp; management suggests focusing on full-year ratios as more indicative .
• Catastrophe loss and exposure: Q4 cat losses modest (~$8M pre-tax); Q1 2025 wildfire losses estimated ~$25M; portfolio balance and reinsurance limit volatility .

Estimates Context

• S&P Global consensus estimates for Q4 2024 were unavailable due to API rate limits at the time of retrieval; therefore, explicit “vs. estimates” comparisons cannot be provided. Values retrieved from S&P Global were not available for “Primary EPS Consensus Mean,” “Revenue Consensus Mean,” or the associated number of estimates.
• Modeling considerations based on disclosed commentary:
  • Net investment income run-rate likely higher given new money yields in the low 5% vs book yields ~4.5% .
  • Expense ratio may exhibit quarterly volatility; full-year 2024 at 20.6% vs 20.8% in 2023 .
  • Top-line growth expectations anchored at 10–20% long-term .
  • Near-term Q1 2025 cat loss headwind: ~$25M pre-tax net .

Key Takeaways for Investors

• Sequential margin improvement: Combined ratio improved to 73.4% (from 75.7%), with underwriting income up 12.7% QoQ—evidence of resilient underwriting amid competitive pressures .
• Investment income tailwind: Higher new money yields vs book yields and growing invested assets underpin stronger NII; management is increasing equity allocation to 10–12% over time .
• Growth recalibration: Top-line growth targeted at 10–20% long-term, reflecting normalized market dynamics and layered property rate compression; casualty divisions pacing growth (+15%) .
• Capital returns: Dividend raised to $0.17 and ongoing modest quarterly buybacks (~$10M in Q4), with opportunistic flexibility; $100M repurchase authorization in place .
• Near-term risk: Q1 2025 Southern California wildfires (~$25M pre-tax net) could be a temporary earnings headwind and trading catalyst around the next print .
• Reserve and loss trends: Favorable prior-year development (2.6 points) and shorter-tail property performance supported Q4 results; management maintains conservative assumptions .
• Strategic execution: Continued investment in technology, automation, data, and analytics to improve expense ratio, underwriting accuracy, and service—supports durable moat and profitability .