Kinsale Capital Group, Inc. Q2 2026 Earnings Call

Welcome to the second quarter 2026 Kinsale Capital Group, Inc. earnings conference call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. 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 2025 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 second 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, President, and CEO, Mr. Michael Kehoe. Please go ahead, sir. Thank you, operator, and good morning, everyone.

Today I'm joined by Bryan Petrucelli, our Chief Financial Officer, Stuart Winston, our Chief Underwriting Officer, and Salmaan Allibhai, our Chief Analytics and Technology Officer. In the second quarter 2026, Kinsale's diluted operating earnings per share increased by 15.9% over the second quarter 2025, generating an annualized operating return on equity of 24.4%. Gross written premium was down 5%, and net written premium was down 1.4%, and net earned premium was up 8.9% for the quarter. Kinsale's combined ratio was 75.5% for the quarter. E&S market conditions in the second quarter continued to be competitive and largely consistent with conditions in the first quarter. The level of competition and our growth rate continue to vary from one market segment to another.

Continuing the trend from the last few quarters, our Commercial Property Division, where we write larger layered property accounts, is where competition is the most intense and where you are seeing material rate declines combined with expanding coverage. It's definitely a buyer's market, and as a consequence, we are writing a shrinking volume of business in that specific market. Excluding the Commercial Property Division, Kinsale had growth in gross written premium of 3.7% for the quarter and 4.8% for the first half of the year. Given that 60% of the Commercial Property Division premium was written in the first half of last year, the year-over-year growth comparison becomes modestly easier in the next two quarters of 2026. Just as we always do, in today's competitive market, we prioritize profitability over growth.

When competition in the market is intense, it's not unusual to see some competitors underpricing risk, and that is a common occurrence in today's market. Notwithstanding the state of the market, we are working hard to grow our business through product enhancements and new products, geographic expansion of some product lines, new broker appointments, robust marketing efforts, and improved customer service. Stuart Winston will offer further detail and commentary on the market environment and our efforts to drive growth here in a moment. In addition to working harder, we are also using analytics and technology to work smarter. Kinsale has made technology a core competency of our business since our founding 17 years ago. We own our own custom-built enterprise system. We don't have legacy applications dating back decades in time, and we are driving system enhancements and automation at the fastest pace in our company history.

Additionally, analysis of our own data and data that we acquire allows us to continually refine our underwriting and pricing models, thereby driving exceptional loss ratios even in a competitive market and even with a conservative approach to loss reserving. Salmaan Allibhai will provide some additional detail on our efforts in this area shortly. Finally, we continue to use excess capital to buy back our own stock. Last night, we announced an expansion of our buyback authorization to include an additional $250 million, bringing our current authorization to $337 million. Given the competitive advantages of the Kinsale business model around underwriting accuracy, data and analytics, technology, combined with the enormous cost advantage we have over every single competitor, Kinsale shares represent a good value at today's price. A very good value. With that, I'll turn the call over to Bryan Petrucelli.

Thanks, Mike. The business continues to generate strong profitability even in this period of heightened competitiveness that Mike just noted. Net income and net operating earnings increased by 31.1% and 13.3%, respectively, quarter-over-quarter. The 75.5% combined ratio for the quarter included four and a half points from net favorable prior year loss reserve development, compared to 3.9 points last year, with 1.3 points in cat losses this year compared to less than a point in the second quarter of last year. We produced a 21.7% expense ratio for the quarter, compared to 20.7% last year. The other underwriting expense portion of this ratio, which is the best measure of the operational efficiency of the business, was 10.3% for the quarter compared to 10.6% in the second quarter of 2025. The overall expense ratio increase is attributable to a higher net commission ratio resulting from higher reinsurance retentions.

The larger retention provides a positive economic trade for the company, with a higher net commission ratio being more than offset by greater underwriting and investment income. On the investment side, net investment income increased by 19.9% in the second quarter over 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 $3.4 billion at June 30, up from $3.1 billion at the end of 2025. Annualized gross return was 4.5% for the first half of 2026, compared to 4.3% last year. New money yields are averaging around 5.25%, with an average duration of four and a quarter years on the company's fixed maturity investment portfolio.

Lastly, diluted operating earnings per share continues to improve and was $5.54 per share for the quarter, compared to $4.78 per share for the second quarter of 2025. With that, I'll pass it over to Stuart.

Thanks, Brian. The soft E&S market continued in the second quarter, but still offers opportunities for growth. Growth driven by compromised profit margins is easy to manufacture but costly to unwind. Because of this, our approach to soft markets like Commercial Property, Construction, or certain Professional Lines, is not to chase the market down, but to continue to price business in a way that meets our return thresholds and to be opportunistic where it makes sense. In markets where favorable conditions exist, we'll lean into them. Areas like excess casualty, commercial auto, Entertainment, Environmental, Agribusiness Casualty, and Energy all had favorable underwriting conditions during the quarter and all saw meaningful growth. Overall, new business submission growth increased 6% in the second quarter, a similar rate to the first quarter of 2026.

We continue to see a decline in new business submissions in the Commercial Property Division that handled large shared and layered deals. Excluding the Commercial Property Division, new business submissions were up 8% for the quarter, and over half of our divisions are seeing submission growth in the double digits. As I mentioned last quarter, we continue to see strong momentum across the business, especially in the small to medium enterprise segment where we're most focused. With an average premium of approximately $12,000, our platform is built around smaller accounts, and that part of the market remained active in the quarter. Submissions, quotes, and binders all increased for the company, with the most meaningful growth coming from accounts with premiums of $25,000 and below. We believe that consistency highlights the durability of our model across all market environments.

While our lines of business are experiencing varying levels of competition and pricing pressure, the combined pricing trend for Kinsale is in line with the MS Amlin's pricing index, which showed a decrease of 5.9% compared to a 3.3% decrease in Q1 of 2026. While we continue to see strong rate pressure in Commercial Property, other lines like commercial auto, excess casualty, and Entertainment present opportunities for meaningful rate increases. Distribution and product expansion remain key drivers of growth. On the product side, we have rolled out nine new product offerings or enhancements across various underwriting groups so far this year, with five more set to launch imminently and another 10 in the pipeline, a pace that reflects the depth of our appetite and our ability to move quickly when we see opportunity.

We've also made meaningful progress on distribution, appointing 24 new wholesale brokers to the Kinsale platform and 176 new retail brokers to Aspera, our in-house broker through which we distribute most of our personal lines products. With new offerings in our homeowners line, Aspera continues to expand both its product line and geographic footprint, extending our reach into personal lines markets where we see a long-term demand. Underpinning all of this is our ongoing focus on operational efficiency. Workflow improvements, utilizing AI and other technology upgrades across our underwriting functions have allowed us to maintain our service standards and in many areas, improve them, ensuring that growth does not come at the expense of the execution our brokers and insurers expect from us, all the while staying disciplined and managing returns.

Staying disciplined on price and terms means that there will be business that we choose not to write, and we are comfortable with that. The long-term health of the portfolio matters more than any individual account. That mindset is embedded in how we evaluate every risk that comes through the door. When the market softens and competitors begin to stretch on terms and conditions to hold onto accounts, we're going to stay disciplined to our underwriting standards. If we lose accounts due to competition, whether it's pricing or terms that no longer meet our profitability threshold, we view that as the model working as intended. What we will not do is sacrifice profitability for the sake of top-line growth.

We will continue to leverage our low-cost advantage over our competition to write profitable business in the softening market and focus on small to medium-sized risks where there's still a strong market opportunity and be opportunistic when large deals come our way. With that, I'll hand it over to Salmaan.

Thanks, Stuart. As Mike noted earlier, we continue to use analytics and technology to drive profitability and efficiency in the business. Several months ago, we brought the two functions together as a single team. Both have been core competencies from day one. Now they are working more efficiently from the same strategic roadmap. In a more competitive part of the cycle, the importance of analytics and actuarial functions increase dramatically. Every day, we are working to get better at segmenting and pricing risk by adding to our ever-expanding third-party data repository and utilizing more sophisticated statistical and machine learning algorithms to identify the characteristics that drive loss. We've been able to do this well over the years because we have all 17 years of our company's data in one database. This data-driven approach gives us an advantage balancing profitability with growth.

On the technology front, we are working hard to drive efficiency and automation across our business processes. One of our greatest advantages is that we do not have legacy software dating back decades. This means our team is primarily focused on innovation and developing new capabilities as opposed to maintaining outdated systems. When it comes to AI, we continue to see meaningful benefits via increased productivity and new capabilities. Every associate in the company has an enterprise license for two of the leading frontier models. Our analytics, technology, underwriting, and claims teams are all using AI daily to improve the way we work, employing dozens of skills, bots, and agentic tools. We've built AI functionality into our proprietary underwriting worksheets, and those efforts are accelerating. We also have a team of our analytics and technology professionals working directly with folks in the business to develop additional custom AI solutions.

Artificial intelligence is changing the way we work for the better. It is improving productivity, customer service, and accuracy across our business, and doing so at a rapid pace. We are confident that the technology lead Kinsale has built over our competitors is growing even larger. With that, I'll hand it back over to Mike.

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

We will now begin the question and answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. The first question comes from the line of Pablo Singzon with JPMorgan. Your line is now open. Please go ahead. Thank you.

Good morning, everyone. The current year accident year loss ratio improved from 2Q 2025, which I think is a bit different from what many other commercial insurers are reporting. I was hoping you could please talk through the key factors that drove that. Was it lower non-cat property losses mix, changes in loss picks and so on?

Pablo, this is Salmaan. Yep. I would just reiterate that losses for the quarter came in below expectations, as they have for the last few quarters. There's really nothing out of the ordinary. It's just kind of normal variability and mix of business. The loss ratio is a composite of a dozen statutory lines of business. I would just reiterate that our reserves are as conservative as they've ever been in our company's history.

Got it. Thanks, Salmaan. My second question, just on the reinsurance and ceding commission rate. I think the commission rate has actually been going up for Kinsale over the past couple of years. I was wondering if you expect the same this year after the renewals. Thanks. Pablo, this is Brian.

I said if you look at what we had here in second quarter, it's a pretty good indication, I think, of where we're going to be going forward. You could see a slight uptick in that going forward. We renewed our reinsurance treaties on June 1st, so there's only one month of effect of the new treaty. I think if you're just looking at the loss ratio in general, you may have a slight uptick there in commissions. We could get some efficiency gains on the operating side, given the AI activities that we talked about previously. I think if you look in aggregate, the second quarter expense ratio should be a good measure for you going forward.

Understood. Thank you. The second question is from Hristian Getsov with Wells Fargo.

Go ahead, your line is open.

Hi. Good morning. My first question is on the E&S casualty. Just given that segment is softening a bit, I guess given GWP, I think was up 3% versus up 4% in the first quarter, how much are ROEs compressing in the line, assuming your views on loss trends, high single digits to low double digits haven't changed?

Well, we manage everything to a 20% ROE or greater. I think most of our product lines are probably running ahead of that. I think we were, what, 24.4% for the quarter.

There's always a give and take where we're trying to balance profit and growth.

Got it. For my second question, I guess given the softer market, you've been pretty protective of your commissions or ratios to brokers, I guess how are you guys thinking about broker commissions on a go-forward basis? Typically brokers like to up their commissions in a softer market, and it seems like maybe they're placing more business with the admitted side, just given the economics are a bit better on that front. How are you guys thinking about changes there?

Yeah. Christian, this is Mike again. I would say, look, brokers are critical to our success. Obviously, they're looking to maximize their economics. That makes sense. There's some tension between the wholesalers that we distribute most of our business through and their retail clients in terms of how they split the gross commission. Of course, the customer, the buyer, is keenly focused on lower cost insurance. You're always going to have some tension across the spectrum, if you will. Of course, in a soft market when rates have drifted down, that puts pressure on everybody. I think it's a normal tension in the business. I would say we offer our brokers the best customer service in the industry. I don't think there's anybody even close to Kinsale's quote ratio and response time. I think we also offer the broadest risk appetite.

We're a go-to market for your very hard-to-place accounts. Between that and just competition in the market, as Stuart Winston mentioned a few minutes ago, we continue to grow our business, especially when you set aside that one Commercial Property Division, which is going through kind of a unique correction. We're confident in our model and but acknowledge the tension in the market, if you will.

Great. Thank you. Next question is from Dan Cohen with BMO.

Go ahead, your line is open.

Morning. Thanks. Maybe just focusing on the commercial property side. Does Kinsale view this 2Q as maybe the trough there, given some larger players are pulling out? Is the view that property pricing can maybe become less negative in 2027, or could maybe Kinsale get back on some of these larger shared placements next year as they continue to pull back?

Hey, Dan, it's Stuart Winston. Yeah, there's no telling where it's going to go in 2027. There still is pressure from various MGAs in London. A lot of traditional markets are still heavy in the shared layered deals, putting up larger limits, stretch primaries. It's still squeezing and it's still competitive. Our role now is to keep our pricing as close to tactical and meet our return thresholds, and if we shrink because of it is what it is in that division.

That makes sense. Then maybe just focusing on the 37 growth figure, excluding the large account property. Just what's driving that acceleration? Is it pricing or are you seeing some business starting to return to the admitted market? I guess just what would need to change maybe for that number to start to inflect here in the future?

Yeah, like I said in my comments, there's heavy competition in some long-tail lines from London that's starting to creep into some other liability occurrence and long-tail lines. It's depressing pricing across the market for Construction lines of business. We're starting to see some more competition around general casualty type business. There are pockets of opportunity that we can grow, and we're going to lean into those.

Are you seeing any of that business return to the admitted market at this time, or no?

There are some. There is some flow to the admitted market, but it's not pervasive.

Thank you. Next question is from Andrew Andersen with Jefferies.

Please go ahead. Your line is now open.

Hey, good morning. You had mentioned in the press release that there was an increase in inbound accounts. I think that was some new language added, but maybe you could just talk about how much of that increase in inbound accounts is coming from some of the broker engagement that you've been working on versus more competitive pricing.

Yeah, it's a little bit of both. Sorry, it's Stuart still. It's a little bit of both. We're doing a good job with our idle broker initiative to reengage brokers that have slipped off over the years. We're seeing an increase of flow from them. Our hit ratios have stayed roughly the same, renewal and new business. With the growth in submissions, we're just seeing more accounts bind.

Andrew, part of why we put that in there is just to explain, if you will, some of where our confidence in our business model comes from, right? We wrote a ton of business in that Commercial Property Division as that market went into a crisis. Obviously, the crisis is over and rates are coming down pretty dramatically. The underlying business, although obviously we're growing at a slower clip, the business model's still working quite well.

Yep. Some carriers have been pointing to maybe some incremental improvement in claims emergence and loss cost trends, even if they're not declaring victory on social inflation by any means, what is your current view of the social inflation and casualty loss trend landscape?

This is Solomon. For a casualty loss cost trends, we'd say that probably mid-single digits, it varies by line of business. Social inflation, because we write smaller accounts and lower limits, I don't think we've been as exposed to social inflation as some of the other carriers. We're just not seeing a whole lot of it.

Okay. Maybe just a clarification, when you were explaining the accident year loss ratio earlier, you kind of mentioned normal variability and some lower losses. Was that entirely on short tail property business?

I think it's across the board, the short tail lines of business have been performing well for us, especially well for us.

Andrew, we're being a little more conservative as we have for a couple of years in slowing down the release of IBNR in the longer tail occurrence business, and allowing it to flow out a little bit more quickly in the short tail lines where there's a lot more certainty around ultimate loss ratios.

Thank you. Next question is from Mark Hughes with Truist.

Please go ahead, your line is open.

Yeah. Thanks. Good morning. I just wanted to revisit.

Morning, Mark My question on the property pricing, the property cycle.

Any kind of granularity you can provide around what you saw in Q2 versus Q1? I'm thinking of the E&S data seemed to point to incremental softening in Q2. Trying to understand when or if we can get to a point of some kind of equilibrium, and that it might stabilize at this lower level. Any thoughts there would be helpful.

Hey, Mark, this is Mike. I'll start, then I'll flip it over to Stuart for his comments. Eventually we're going to get to some equilibrium because although catastrophe losses in particular can be intermittent and kind of unpredictable, they do happen. I think being disciplined on how we price that business combined with, just as a reminder, a very disciplined risk management protocol around concentration of business and the like. We're very confident about what we're doing in that space. When it happens, I think we don't have any insight into that. We do have some other property-oriented underwriting divisions that are seeing growth opportunity.

Yeah, Mark, if you look at specialized areas like Agribusiness Property, we're seeing growth there, that's a more stable market. Our small business property is definitely more stable than the large shared and layered deals. It's been a much more consistent market over the last year and a half, two years.

Inland Marine. Inland Marine. We're starting to see a little more competition in Inland Marine, we have five buckets of products in that division, so it's spread out.

Yeah, there's no telling. If the wind blows, we'll be in a better position, but I think people are starting to get to the floor of their pricing for property, there's still pressure from London.

Yeah. Okay. You touched on the current accident year number, which was quite good in the quarter. I think you've been, as I read your results, the property has been more profitable than casualty, the mix has been changing here. What should we think about the underlying current accident year loss ratio given the mix shift out of property in the casualty? Should it drift up, or is this kind of level sustainable?

Mark, this is Solomon. It's hard to say. It could drift up over time. Like I alluded to earlier, the losses are coming in below our expectations. We feel good about where we're booking the loss ratios right now.

We feel very good about the level of conservatism in the IBNR, the reserves, which is a positive indicator for future loss ratio performance.

One final one, if I might. The buyback, pretty meaningful number this quarter. As you think about it on a go-forward basis, if you're maintaining moderate top-line growth, is that going to be something that you'll continue to lean into? How do you think about the pacing there?

Yeah. Mark, this is Mike. We're going to continue to lean into it. You recall, I guess about a year, a little over a year ago, we had our first buyback authorization of $100 million that we exhausted. We did a $250 authorization after that. I think we have $80 million or so left on, then this new $250 million authorization. That's our principal capital allocation strategy. Obviously, we pay a small dividend. As growth accelerates in the future, we'll obviously lean back into growth. That would be our first priority. In this interim phase where growth's a little bit more limited, we think this is a wise use of capital given our confidence in the business model and future profitability and price appreciation.

All right. Thank you. Next question is from Dan Cohen with BMO.

Please go ahead, your line is open.

All right. Thanks. Thanks for letting me back in. Maybe just on the product expansion that you mentioned in your prepared remarks, just how's that contributed to growth over the past year or so, and maybe the potential growth uplift going forward on those new products and whatnot? Thanks. Yeah, Dan, it's Stuart Winston.

When we roll out new products and new enhancements, we never want to be the market that jumps in feet first into a market and grows like a weed. It's always going to be a crawl, walk, run pace to grow. The new products are creating growth, they are driving submissions, they are driving new premium. It'll be a slow growth. As the market turns, we'll ramp up and go from there.

Operator, it looks like that's the end of the questions.

Yes, there are no further questions at this time. We've reached the end of our Q&A session. I will now turn the call back to Michael Kehoe.

Okay. Well, thanks everybody for participating. I want to thank all the Kinsale employees for their tremendous effort in driving these good results. We look forward to speaking with everybody again at the end of the next quarter. Have a great day. This concludes today's call.

Thank you for attending. You may now disconnect.