Kinsale Capital Q3 Operating EPS Rises 9.4%, Premiums Decline

Kinsale Cap Gr (NYSE: KNSL ) reported third-quarter financial results on Friday. The transcript from the company's third-quarter earnings call has been provided below. This transcript is brought to you APIs. For real-time access to our entire catalog, please visit for a consultation.

Access the full call at Summary Kinsale Capital Group reported a 9.4% increase in diluted operating earnings per share for Q3 2026, with an annualized operating ROE of 25.6%. Gross written premium decreased by 4.8% and net written premium by 1.5%, impacted by competitive E&S market conditions and a shift from larger to smaller accounts. The company's combined ratio remained strong at 75.4%, with favorable prior-year development contributing to an improved loss ratio. Strategic focus includes continuing growth initiatives through new products, broker appointments, and leveraging technology for competitive advantage.

The company repurchased 269,000 shares for $100 million in Q3, maintaining a low debt to total capitalization ratio of 10%. Management highlighted the importance of technology and analytics in maintaining low expense ratios and competitive pricing. Kinsale plans to continue cautious reserve practices in long-tail lines amid competitive pressures. Future guidance suggests maintaining a disciplined approach to growth, with an emphasis on profitability and managing competitive market conditions.

Full Transcript OPERATOR Before we get started, let me remind everyone that through the course of the teleconference, Kinsale Cap Gr 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 third quarter results.

Kinsale Cap Gr'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 I will now turn the conference over to Kinsale Cap Gr's Chairman, President, and CEO, Mr. Michael Kehoe. Please go ahead, sir.

Michael Kehoe (Chief Executive Officer) Thank you, operator, and good morning everyone. Today I'm joined by Brian Petrocelli, our Chief Financial Officer, Stuart Winston, our Chief Underwriting Officer, Salman Alabai, our Chief Analytics and Technology Officer, and Chris Tangard, our Chief Accounting Officer. Before we get into the quarterly results, I want to acknowledge and congratulate our colleague Brian Petrocelli on his just announced retirement next year and his election to the Kinsale Cap Gr Board of Directors.

Brian has made significant contributions to Kinsale Cap Gr in a variety of roles, but especially as Executive Vice President and Chief Financial Officer for the last decade or so. Brian is not only a financial expert and a sound business manager, but he has great judgment and integrity and, most importantly, he's a quality human being. We will miss having him on the day-to-day team next year, but know that he will make a great addition to our Board, and we are grateful that he will continue contributing to Kinsale Cap Gr in that capacity. I also want to congratulate Chris Tangard, who will become Kinsale Cap Gr's CFO in March of 2027.

Chris joined the company from KPMG seven years ago. He has taken on a number of finance roles over the years, including his promotion to Chief Accounting Officer two years ago. As CFO, Chris will continue to build on our current success, and investors will have lots of opportunity to get to know him in the months ahead. In the third quarter 2026, Kinsale Cap Gr's diluted operating earnings per share increased 9.4% over 3Q25, generating an annualized operating ROE of 25.6% through nine months.

Gross written premium was down 4.8% and net written premium was down 1.5%. Kinsale Cap Gr's combined ratio was 75.4% for the quarter. E&S market conditions in the third quarter continued to be competitive and largely consistent with conditions in the second quarter. The level of competition and our growth rate continues to vary from one market segment to another.

As you can see from the Premium by Underwriting Division exhibit in our Q—and I'm sorry, we've got a fire alarm going off in the building adjacent to ours. We're going to keep persevering here. The continued intense competition in our commercial property division weighed on our growth rate in the quarter, and excluding that one division, our gross written premium was down half a percent. It's also important to note that even with the drop in gross written premium for the quarter, Kinsale Cap Gr's number of submissions, quotes, and bind orders grew in the mid-single-digit range.

Essentially, with the competition in the E&S market, our book shifted slightly from larger to smaller accounts. Not only is this shift positive for maintaining best-in-class margins, but it also shows that the Kinsale Cap Gr model works and works well even in the most competitive market we've seen in the last 10 years. Our disciplined underwriting and low-cost business model recognizes the importance of the insurance buyer in every transaction.

We deliver competitively priced insurance without compromising our margins, and we continue to grow the business and take market share subject only to a temporary written premium growth slowdown as we shift slightly away from larger transactions and write a slightly smaller average premium. While Kinsale Cap Gr always prioritizes profit over growth, we are still working very hard to grow the business. The various growth initiatives involve new and enhanced products, appointing new brokers, a robust marketing effort, and improved customer service. Stuart Winston will have some commentary on these topics here in a moment.

In this era of artificial intelligence, Kinsale Cap Gr's long-standing strategy of making technology a core competency is allowing us to widen our lead over many competitors. Kinsale Cap Gr's core enterprise system is custom-built for our business by our own engineers, analysts, and developers. We don't have any legacy software applications dating back decades ago. We also have all the company data from the first policy we wrote or the first claim we received 17 years ago recorded in the same database.

Kinsale Cap Gr's tech advantage allows for lower costs, better customer service, and more data at the transaction level to better manage the business. Further, we have built our analytics and actuarial team over the last decade to constantly evaluate our own data and data that we acquire to improve how we segment and price risk. This team of quants, combined with millions of dollars of investment and further combined with a superior tech stack, is creating underwriting and pricing algorithms superior to others in the E&S industry. And Salman Albai is going to have some further comments on this topic in a moment as well.

And with that, I'm going to turn the call over to Chris Tangard. Chris Tangard (Chief Accounting Officer) Thanks, Mike. Good morning everyone. Before I provide commentary on our quarterly results, I want to recap our capital allocation priorities and recent actions, particularly in light of the current competitive environment that Mike mentioned.

Our first capital allocation priority is to fund growth in our high-margin insurance business. Our second priority is to return excess capital to stockholders, primarily through share repurchases. We also pay a dividend that, while modest, has increased at a 17.5% compound annual growth rate since our IPO in 2016. We have no interest in M&A.

Over the last several years, we've generated significant capital in excess of what we need to operate the business in the current lower-growth phase of the cycle. This excess capital generation continues today. As a result, in the third quarter we repurchased 269,000 shares at an aggregate cost of $100 million, or just under 80% of net operating earnings in the quarter. The $100 million is consistent with the second quarter and an increase from the $62.5 million in the first quarter of this year.

At this time, we expect $100 million to be a good quarterly run rate and plan to be opportunistic otherwise. Our debt to total capitalization is low at approximately 10%, and should we need additional capital in the future, we would likely look to use leverage to generate higher returns on equity. Moving on to our financial results for the quarter, diluted earnings per share declined 28.4% and diluted operating earnings per share increased 9.4% compared to the third quarter of last year. Annualized return on equity and annualized operating return on equity for the nine months ended September 30 were 26.6% and 25.6%, respectively.

The decline in GAAP earnings was primarily driven by our sale of certain fixed maturity holdings in a loss position, largely offsetting our selling of certain equity investments in a gain position. As we repositioned the investment portfolio with the proceeds from these sales, we reinvested approximately $100 million in higher-conviction equity securities and replaced approximately $130 million of bonds yielding less than 2% with bonds yielding more than 5.5%. As the unrealized appreciation of equities is recorded through earnings each quarter, the majority of the equity gains were reflected in earnings in prior periods.

Conversely, the loss on the fixed maturity holdings was reflected in earnings upon sale. The net pre-tax earnings impact of the bond sales was $37.6 million, or $1.67 per diluted share in the third quarter. The sales had no impact on book value. Stripping out the investment noise, diluted operating earnings per share improved to $5.70.

Quarterly combined ratio was 75.4% compared to 74.9% in the third quarter of 2025. The loss ratio improved to 53.4% from 53.9%, largely driven by higher favorable prior-year development. The expense ratio increased 1 point to 22% from 21%, primarily due to higher net commissions resulting from higher reinsurance retentions, which results in lower ceding commissions. The higher retention is an intentional trade to retain more underwriting margin and float to generate investment income, which results in a slightly higher expense ratio.

As a result of these changes to our reinsurance program, which renewed on June 1, the retention ratio increased to 86.2% in the third quarter compared to 83.3% in the third quarter last year. The other underwriting portion of the expense ratio, which is the best measure of the operational efficiency of our business, was 10.2% for the third quarter of 2026, flat compared to the same period last year. Turning to investments, net investment income increased 17.5% to $58.3 million as a result of both a higher invested asset base and higher interest rates. Kinsale Cap Gr's float increased to $3.5 billion at September 30, up from $3.1 billion at year-end 2025.

New money yields are averaging north of 5% and the fixed maturity portfolio has an average duration of 4.4 years. Overall, we're pleased with our third quarter performance. We continue to produce best-in-class underwriting results, attractive investing returns, and strong returns on equity while returning meaningful capital to stockholders. And with that I'll turn it over to Stuart.

Stuart Winston (Executive Vice President & Chief Underwriting Officer) Thanks, Chris. At the risk of sounding like a broken record, the soft E&S market continued in the third quarter across property and certain long tail casualty lines. However, there are some favorable areas in the market that we are turning into growth opportunities. Our goal as an underwriting organization in a soft or softening market is to grow where we can, but more importantly maintain our profitability.

We will continue to be aggressive where we can, but at the same time maintain a conservative stance in areas where we feel irrational competition has taken hold. We offer our brokers one of the broadest risk appetites in the E&S market. We will continue developing new products and adding underwriting flexibility where it makes sense, further expanding that appetite. The breadth of our underwriting appetite allows us to pivot to the areas where growth is promising and take advantage.

Divisions like Agribusiness, Commercial Auto, Entertainment, Ocean Marine and Environmental all experienced double-digit growth for the quarter. We continue to see favorable underwriting conditions in Excess Casualty, Allied Health, Products Liability, Health Care, Energy and Agribusiness property as well. Before I move on, I want to briefly address the most recent CAT activity in the quarter and we expect its impact on our results to be immaterial. Moving on, overall new business submission growth increased 6% in the third quarter, a similar rate to Q2 of this year.

We continue to see a decline in new business submissions in the commercial property division that handles large shared and layered deals. Excluding the commercial property division, new business submissions were up 10% for the quarter and over half of our divisions are seeing submission growth in the double digits. 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 Amwins Pricing Index which showed a decrease of 3.1% compared to a 5.9% decrease in Q2 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 continue to drive growth. On the product side, we're looking to finish the year by rolling out an additional five or six new offerings ranging from small package policies to a digital health offering. And Hull and P&I continue to look for opportunities in the market to roll out new offerings to broaden our appetite.

We also continue to sign up new producers to drive submission growth. During the third quarter, we appointed 12 new wholesale brokers to the Kinsale platform and 124 new retail brokers to Aspera, our in-house broker through which we distribute most of our personal lines products. The durability of our model continued to show throughout the third quarter despite an influx of competition. Submissions, quotes and binders increased across the company while renewal retention remains steady.

New products in addition to our distribution network should continue to support growth. At the same time, large accounts remain under downward pressure. We will not chase business where the economics do not make sense. Instead, we will maintain our discipline and continue to focus on the small to medium enterprise space.

So to bring it all together, the market is soft and it may stay that way for a while. We aren't going to let the market change how we operate. We will grow where the opportunity is real. We'll hold the line where competition has outrun the risk and we will never trade profitability for volume.

Soft markets don't last forever, and neither do hard ones. What we can control is how we operate. In each, a broad risk appetite lets us find areas for growth. Our small account focus allows for more opportunities at more favorable rates and a tremendous efficiency advantage will support returns as pricing softens.

That's our model in a nutshell, and it's designed to perform across the whole of the market cycle. With that, I'll turn it over to Salman. Salman Thanks, Stuart. On the analytics and actuarial side, our guiding philosophy is that we constantly want to improve how we segment and price risk.

While many competitors cut rates across the board, our goal is to be more targeted and methodical. We will adjust rates where it makes sense, consistent with our target of a 20% return on equity or better. Two major components of our analytics strategy are third-party data and generalized linear models. Each year we acquire, analyze and incorporate more third-party data into our underwriting and pricing process.

This augments our internal data and information provided by the brokers to improve how we segment and price risk. Because all 17 years of Kinsale data resides in one database, we can perform analyses and implement improvements quickly. Generalized linear models are an increasingly important part of our pricing toolkit. They let us measure how various risk characteristics together drive loss at a granular level rather than relying on broad class level rates.

We also use other machine learning algorithms to find patterns that feed back into those models, data and ultimately our rates. Our rating engine brings this all together and produces a technical price for every risk, adjusted for the coverage provided. That tells our underwriters exactly where market pricing is relative to the actuarially sound price. The results show in our loss ratios.

In today's market, the analytics advantage we have is more important and more durable than ever and will allow us to maintain those low loss ratios while competitors with less sophisticated pricing face adverse selection. On technology, our talented engineers and developers have built our own proprietary systems. We do not have legacy software which lets us spend our effort on innovation rather than maintenance. Those proprietary systems support the fast response times our brokers expect, power our data and analytics advantage and keep our expense ratio the lowest among our competitors by a wide margin.

As we've noted in the past, AI has been adopted broadly across the company for some time now.