Q4 2021 Kinsale Capital Group Inc Earnings Call
Yes.
Hello, before we get started let me remind everyone that through the course of the teleconference. Kinsale management may make comments that reflect pension space leased and.
Spectation 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 annual report on Form 10-K , which should be reviewed carefully.
Company has furnished a form 8-K with the Securities and Exchange Commission that contains the press release announcing fourth quarter results.
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 Dot can you fail capital group Dot com.
I will now talk to us all with the Kinsale, President and CEO Mr. Michael Kehoe. Please go ahead Sir.
Thank you operator, and good morning, everyone. Thank you for joining us on the call.
With me today are Brian Petra salary can sales CFO and Brian Haney <unk> sales.
After comments from each of us will turn to your questions.
Can sales operating earnings for the fourth quarter of 2021 were $1 76 per diluted share of <unk>, 54% increase from $1 14.
In the fourth quarter of 2020.
Gross written premium was up 36% for the quarter.
The company posted a 74, 5% combined ratio for the quarter and 77, 1% combined ratio for the year.
And our operating ROE.
For 2021 was 28%.
As we've discussed in prior calls can sales results are being driven principally by our unique business model.
Focusing on smaller accounts within the E&S market.
Controlling the underwriting and the claim handling process instead of outsourcing it.
Using our advanced technology to operate at a much lower cost structure than our competitors.
An additional tailwind has been a state of the E&S market.
<unk> grew by double digits in 2021 for the fourth year in a row.
Strong growth combined with opportunistic rate increases.
Having a favorable impact on our margins.
With our operating ROE of almost 21% in 2021, well above our mid teens guidance.
Surplus lines standing office tax data that was just released for January of 2022 shows the overall E&S market off to a strong start in the new year with double digit premium Bourbon.
Why does there seem to be a number of competitors struggling with adverse development from prior year loss reserves.
And the combination of these two data points and the confidence we have in our own business model give us a sense of optimism about 2022, both from a growth and a profitability standpoint.
Like everyone, we're seeing the impact of inflation in the economy.
Most of our policies are priced using an inflation sensitive measure like revenue or payroll.
And underlying business adjusted pricing because of inflation, our insurance premiums adjust as well.
In addition, we manage profitability of our underwriting operation carefully and make regular adjustments to our technical pricing to stay ahead of loss trend.
And finally, our rate increases have been running well ahead of inflation for several years now putting can sale in a strong position regarding both profitability and the strength of our loss reserves.
Investors should have confidence in can sales reserve position and our overall balance sheet.
Now I'll turn the call over to Bryan Petrucelli.
Thanks, Mike just another solid quarter.
Driven by strong premium growth favorable loss experienced and disciplined expense management.
As Mike said, we reported net income of $48 $4 million for the fourth quarter of 2021, representing an increase of 27% when compared to $38 $2 million last year.
Due primarily to higher end premium lower cat losses, and a little relative expenses.
Net operating earnings increased by approximately 55% of the $41 million from $26 million in the fourth quarter of last year.
The company generated underwriting income of $42 million.
And a combined ratio of 74, 5% for the quarter compared to $22 million 81, 6% last year with improvements to both the loss and expense ratios.
Combined ratio for the fourth quarter of 2021 included four points from net favorable prior year loss Reserve development.
And no cat losses, compared to three one points of favorable loss reserve development and five one points from cat losses last year.
The 21, 4% expense ratio for this quarter continues to benefit from some economies of scale with earned premiums that are growing faster than our operating expenses and slightly lower relative net commissions as a result of a shift in the mix of business to lines that are subject to reinsurance and where we receive ceding commissions.
Although it's possible that we will continue to achieve a modest level of additional economies of scale with some variability from quarter to quarter. We believe an expense ratio in the low to mid twenty's to be sustainable over time.
Our effective income tax rate for the year was 19, 1% compared to 11, 9% last year.
And higher primarily as a result of lower tax benefits from stock compensation activity. This year.
Operating return on equity was approximately 21% for the year and again as Mike mentioned ahead of our mid teens guidance.
Gross written premiums were approximately 200 $204 million for the quarter, representing a 36% increase over last year.
On the investment side net investment income increased by 32% over the fourth quarter last year up to $8 6 million from $6 $5 million last year as a result of continued growth in the investment portfolio.
Annualized gross investment returns, excluding cash and cash equivalents was two 5% for the year compared to two 9% last year.
And lastly, diluted operating earnings per share was $1 76 per share for the quarter compared to $1 14 per share last year and with that I'll pass it over to Brian Haney. Thanks, Brian .
As mentioned earlier premium grew 36% in the fourth quarter more or less the same as the third quarter.
The increase is generally driven by increasing submissions rate increases as well as economic growth, which drives up exposure basis.
Every one of our divisions was up for the quarter led by our Allied health inland Marine and public entity team.
<unk>.
Reopening of the economy and the robust economic growth is still providing us a significant boost and the rapid surge of Covid that began in December .
Countrywide did not appear to have a material effect on growth.
Submission growth was in the mid teens in the fall.
Quarter.
As for rates, we continue to push them up in response to market conditions.
As a reminder, we are a very heterogenous book of business, which complicates, reducing all the rate movement to a single number but all that being said, we see rates being up in the low teens range in the aggregate.
In the fourth quarter generally consistent with the past several quarters.
Our expense ratio continues to be a huge advantage for us because many of our competitors in the thirties and even some of the <unk>.
Often find ourselves able to be competitive on price, while still delivering superior returns to our investors.
We've also been busy and expanding our product offering.
Over the course of 2021, we created underwriting divisions focused on commercial auto aviation entertainment and product recall.
Also adding a small property division that focuses on accounts with smaller and charter values.
Beyond this we have also incrementally expanded our offerings and existing divisions and we plan to continue the product expansions in 2022 and beyond.
In summary, we feel good about the quarter, we are producing positive results and the market conditions continue to favor us.
Our business model works well in any market softer harder anything in between but the current market conditions are truly excellent and we are working hard to make the most of it.
Now I will turn it back over to Michael.
Thanks, Brian .
Operator, we're now ready to take any questions.
Come in.
Thank you Sir.
To ask a question Youll need to press star one on your telephone to withdraw your question. Please press the pound key.
Standby as we compile the Q&A roster.
And again to ask a question. Please press star one on your telephone.
Our first question comes from Mark Hughes of Truest. Your line is open.
Yes. Thank you very much good morning.
Morning, Mark.
Brian the expenses in the quarter were up a little bit sequentially. The ratio was up you had mentioned mix, but I'm not sure whether you were.
Applying that or.
The thing that that was impacting the quarter was there anything unusual or any expense accruals or compensation accruals or anything like that.
I would just say that there was a modest increase in variable comp during the quarter.
Other than that.
Nothing nothing meaningful.
And then.
When you look at the 2020 accident year Im curious whether there is anything you can say about the loss development you had.
Good.
Reserve gains in the quarter.
Little bit less so than what you might've seen in the.
In the first half.
I was.
2020, developing any anything about the.
Submission.
Or the claims activity that.
That's unusual or.
Any change from I think what was pretty benign at the time.
Mark This is Mike.
One thing we've talked about on prior calls has been the.
The fact that reported losses in 2020 one.
Let's come in below our expectations, we think a lot of that has to do with the COVID-19 pandemic the.
The closure of the court systems.
The alike.
Obviously, we've spoken in the past about the fact that we've.
Largely offset that.
Lower reported losses with higher Ivy and art. So I think we're well reserved if there is.
Kind of a mean reversion or a bounce back in.
And those loss trends.
It's.
If there is not a bounce back at some point and.
They're just going to be permanently lower than hey, that's good news that will drift out over the years ahead very gradually.
Okay.
I would just reiterate the fact that reserving conservatively isn't really a fundamental part of our business strategy.
And I think it's just a good reminder, especially peer.
Period of time, when there is a lot of distress across the P&C market.
I'll just reiterate investors should have a lot of confidence.
In our reserves on our balance sheet.
And then.
Thinking about the broader cycle I'll ask maybe the inning question or that.
That out there.
It's interesting that you're talking about sustained rate increases still strong submission growth.
Others have talked about maybe a little bit of tapering I'm just sort of.
Curious.
Here, how you see it at this point.
This is Mike again.
When we were at the.
Our conference a number of months ago, we had.
Yes.
Variety of conversations with reinsurers and it seemed.
They were all noting the fact that they anticipated.
Continued weakness on the part of some companies in terms of adverse development of their casualty books.
And of course, they also noted the fact that with the heightened cat activity Nobody has really made any money on property for the last five years.
And I.
I would say uniformly they attributed these two data points to their own optimism around the fact that the favorable trading environment will continue for some time.
And.
That makes sense to us.
I think there's also some data out there around.
Re trends maybe rates in some lines of business arent rising.
As rapidly as they were in the past some of those rate increases have come in a little bit.
I will just say if you go back to Brian Andy's comments, a few seconds ago.
Seeing good growth in our own business and the.
The January stamping office tax data indicates that 2020 twos opening pretty strongly for the E&S market overall.
And you combine that I think again the competence we have in our LNG unique business strategy, and obviously, we feel pretty positive about things.
Thank you.
Thank you.
As a reminder to ask a question you will need to press star one on your telephone. Please go to your question.
A question please press the pound key.
Our next question comes from Pablo <unk> Jpmorgan. Your line is open.
Okay.
Hi, Thanks, so on the fourth quarter loss ratio once again pretty good.
I'd be curious to hear if there's anything one off of about this quarter, whether from the mix of business versus other quarters.
Just to keep it on or perhaps.
Short tail losses like properties being unusually low just sort of any color you can provide there would be helpful and how to think about how that.
Loss ratio might trend going forward.
Yes, I don't think there was anything unique in the fourth quarter keep in mind, Paolo Theres always going to be a little bit of variability.
That's just inherent in the business.
Work hard to manage that volatility with the conservative reserving with our reinsurance program, we have an aligned.
There's always going to be a little bit of.
Variability, but nothing unique beyond just normal trading conditions.
Understood.
And then.
Just sort of.
A question.
On growth, but I guess from the perspective of its distribution.
I was just curious to hear more color and distribution expansion as a component of your growth meaning.
Are you seeing higher volumes and the same number of wholesalers today or are you working centuried more distributors today than at the start of the pandemic for example, and if so is there any way to size that.
Well I'd say, we're I mean, we're.
We're seeing more inflow of submissions from existing brokers, we're continuing to appoint occasionally.
Additional brokers.
Adding new products. So that's driving some of the new growth and then we are still working on sort of efficiency and process.
Get two more clubs and get to them faster. So that's driving some of that as well.
Nothing nothing.
Nothing that we haven't been doing for the last.
Okay.
Hello. This is Mike I'll just.
Add to Brian's comments, a lot of times, we talk about our technological advantage.
With regard to efficiency and operating our company at a low expense ratio and how how much of an advantage that is in a commodity industry like by P&C.
There is an equally important benefit when it comes to.
The service levels that we can provide to our brokers.
The more efficient our business process to better the service to our brokers and theirs.
Very direct correlation between.
The quality of your service and the propensity for Unifi.
I didn't quote I mean.
We don't talk about it a ton, but it's a really important part of our strategy and it's not a powerful benefit from having a.
A more advanced approach to technology.
Got it that makes sense and then last one for me.
Just wanted to pick up on your comment about the dislocation in the E&S market I guess, it's more of a qualitative question.
How would you describe or quantify a dislocation today versus maybe three or four years ago, where some of the larger competitors in the market like EOG and like you really clean portfolios.
Today, It seems like they are trying to grow probably not the seemingly that before but then again you need comments about.
Smaller companies.
<unk>.
Right. So I guess, if you take a step back overall is there more dislocations, even there was like three or four years ago or the same or less just your thoughts on that thank you.
I'll start and then I'll turn it over to Brian for his comments I would just say.
I think it might be more or less steady.
Some very large E&S writers.
Run off multiple billions of dollars of premium over the last several years I can think of one big one that has kind of reverted to growth.
But I can think of other very large E&S writers that are still triaging their books of business and then there's a ton of anecdotes about.
Companies smaller more boutique size E&S companies shutting down underperforming lines of business and canceling programs and the like but.
Offsetting the dislocation is the fact that there's been an explosion in the number of delegated underwriting authorities.
Somebody told me the other day, we're up to 21 fronting companies.
More or less facilitate those kind of.
Delegated arrangements.
So the delegated underwriting market is red hot as well right that would offset a lot of dislocation. So to me, it's kind of a mixed market and it has been for a number of years, but on whole I think it's still pretty favorable yes. This is Brian Haney.
Right now it's stable, but just the time periods you happened to pick the three to four years, it's definitely like that would extend out to 2018.
It's definitely much more favorable market now than it was in 2018.
Hey.
We're not seeing dramatic shifts either way at the moment in January of 2022.
Alright.
Got it thanks for your answers.
Okay. Thanks.
Thank you.
And again to ask a question.
Please star one on your telephone to withdraw your question. Please press the pound key.
<unk> compile the Q&A roster.
Okay.
And we have a question from Roland Naylor.
RBC capital markets. Your line is open.
Hi, Good morning, when you look at the long term growth rate I think you guys have talked about a mid teens.
Right longer term when you look at 'twenty two it seems like Theres a lot of stuff going favorably is there a way to.
Sort of ballpark, how much higher you think that growth rate could be in 'twenty two versus sort of your long term.
Goals.
Roland This is Mike.
Don't offer guidance on growth because it's hard.
Hard to get to nail that down with precision right.
What I would say is I think certainly over the long haul right when the market kind of mean reverse at some point in the future.
Low double digit growth is something we think we can maintain for the long haul given our extensive damage the uniqueness of our business model and the like.
If you look back over the last.
Four or five years, we've been growing.
30 or 40% rate.
And so.
The two data points I mentioned at the beginning of the call one it.
It looks like the E&S market is off to a double digit growth rate at the beginning of 2022, that's certainly quite positive for our growth.
And then again the dislocation in the market.
Not that there's not a ton of competition there is but as Brian said, Hey, this market is much more attractive to us as a risk bearing entity than what we experienced a few years back.
The combination of our strategy being quite unique and competitive combined with a.
Attractive overall market opportunity.
I think you can radar body English we're pretty optimistic.
I figured that was what the response is going to be but it is worth trying.
On the.
Lets sheet I was wondering you've raised capital a few times in the past to support growth as the business now able to support itself on a growth from organic capital generation or would there be a need at some point to raise further capital.
So I think we've talked about in the past, we have a somewhere around a 6% debt to cap ratio right now.
And I think over time want to get up to somewhere in the 2020% range. So yes, there may be.
Some need to raise additional capital that we would look to the debt markets.
For that here I'd say in the near to medium term.
Great. Thank you so much that's all my questions.
Thanks, Ron.
Thank you.
Okay.
And I am seeing no further questions in the queue I will turn the call back over to Mr. Michael Kehoe for closing remarks.
Okay, well, thank you everybody for joining us and I just wanted to.
Extend.
Thanks, and congratulations to all of Kinsale employees, we just finished the.
The best year in our company's history, and it's obviously the result of an enormous amount of hard work and dedication on their parts.
Thank you for all the listeners and we look forward to speaking with you again here in <unk>.
Two months.
Have a good day.
This concludes today's conference call. Thank you all for participating you may now disconnect have a pleasant day weekend.
Okay.
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Okay.
[music].
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Hello, before we get started let me remind everyone that through the course of the teleconference. Kinsale management may make comments that reflect pension split 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 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.
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 Dot Kinsale capital group Dotcom.
I will now talk to show what they can sale president and CEO Mr. Michael Kehoe. Please go ahead Sir.
Thank you operator, and good morning, everyone. Thank you for joining us on the call.
We today are Bryan Petrucelli, <unk>, CFO , and Brian Haney <unk> sales.
Comments from each of Us will turn to your questions.
Sales operating earnings for the fourth quarter of 2021 of our $1 76 per diluted share or 54% increase from $1 14 in the fourth quarter of 2020.
Gross written premium was up 36% for the quarter.
The company posted a 74, 5% combined ratio for the quarter and 77, 1% combined ratio for the year.
And our operating ROE for 2021 was 28%.
As we've discussed in prior calls and sales results are being driven principally by our unique business model.
Focusing on smaller accounts within the E&S market.
Controlling the underwriting and the claim handling process.
Instead of outsourcing yet.
And using our advanced technology to operate at a much lower cost structure than our competitors and.
An additional tailwind has been a state of the overall E&S market, which grew by double digits in 2021 for the fourth year in a row.
Strong growth combined with opportunistic rate increases.
Having a favorable impact on our margins.
With our operating ROE of almost 21% in 2021, well above our mid teens guidance.
Surplus lines staffing office tax data that was just released for January of 2022 shows the overall E&S market off to a strong start in the new year with double digit premium growth.
Likewise, there seem to be a number of competitors struggling with adverse development from prior year loss reserves.
And the combination of these two data points and the confidence we have in our own business model give us a sense of optimism about 2022, both from a growth and profitability standpoint.
Like everyone. We are seeing the impact of inflation in the economy.
Most of our policies are priced using an inflation sensitive measure like revenue or payroll.
And underlying business adjusted pricing because of inflation, our insurance premiums adjust as well.
In addition, we manage profitability of our underwriting operation carefully and make regular adjustments to our tactical pricing to stay ahead of loss trend.
And finally, our rate increases have been running well ahead of inflation for several years now putting can fill in a strong position regarding both profitability and the strength of our loss reserves.
Investors should have confidence in can sales reserve position and our overall balance sheet.
Now I will turn the call over to Bryan Petrucelli.
Thanks, Mike just another solid quarter.
Driven by strong premium growth favorable loss experienced and disciplined expense management.
As Mike said, we reported net income of $48 4 million for the fourth quarter of 2021, representing an increase of 27% when compared to $38 $2 million last year and due primarily to higher earned premium lower cat losses, and a little relative expenses.
Net operating earnings increased by approximately 55% up to $41 million from $26 million in the fourth quarter of last year.
The company generated underwriting income of $42 million.
And a combined ratio of 74, 5% for the quarter compared to $22 million 81, 6% last year with improvements to both the loss and expense ratios. The combined ratio for the fourth quarter of 2021 included four points from net favorable prior year loss Reserve development.
And no cat losses, compared to three one points of favorable loss reserve development and five one points from cat losses last year.
The 21, 4% expense ratio for this quarter continues to benefit from some economies of scale with earned premiums that are growing faster than our operating expenses.
Slightly lower relative net commissions as a result of a shift in our mix of business to lines that are subject to reinsurance and where we receive ceding commissions.
Although it's possible that we will continue to achieve a modest level of additional economies of scale with some variability from quarter to quarter. We believe an expense ratio in the low to mid twenty's to be sustainable over time.
Our effective income tax rate for the year was 19, 1% compared to 11, 9% last year.
And higher primarily as a result of lower tax benefits from stock compensation activity. This year.
Operating return on equity was approximately 21% for the year and again as Mike mentioned ahead of our mid teens guidance.
Gross written premiums were approximately to $204 million for the quarter, representing a 36% increase over last year.
On the investment side net investment income increased by 32% over the fourth quarter last year.
Up to $8 6 million from $6 $5 million last year as a result of continued growth in the investment portfolio.
Annualized gross investment returns, excluding cash and cash equivalents was two 5% for the year compared to two 9% last year.
And lastly, diluted operating earnings per share was a $1 76 per share for the quarter compared to $1 14 per share last year and with that I'll pass it over to Brian Haney.
Brian .
As mentioned earlier premium grew 36% in the fourth quarter more or less the same as the third quarter.
The increase is generally driven by increasing submissions rate increases as well as economic growth, which drives up exposure basis.
Every one of our divisions was up for the quarter led by our Allied health inland Marine and public entity teams.
The reopening of the economy and the robust economic growth is still providing us a significant boost and the rapid surge of Covid that began in December .
Countrywide did not appear to have a material effect on growth.
Submission growth was in the mid teens in the fourth quarter.
As for rates, we continue to push them up in response to market conditions.
A reminder, we are a very heterogenous book of business, which complicates, reducing all the rate movement to a single number but all that being said, we see rates being up in the low teens range in the aggregate during.
During the fourth quarter generally consistent with the past several quarters.
Our expense ratio continues to be a huge advantage for us.
Many of our competitors in the thirties and even some of the <unk>, we often find ourselves able to be competitive on price, while still delivering superior returns to our investors.
We've also been busy and expanding our product offering.
Over the course of 2021, we created underwriting divisions focused on commercial auto aviation Entertainment and product recall, we are also adding a small property division that focuses on accounts with smaller insured values.
Beyond this we have also incrementally expanded our offerings and existing divisions.
Plan to continue the product expansions in 2022 and beyond.
In summary, we feel good about the quarter, we are producing positive results and the market conditions continue to favor us.
Our business model works well in any market softer harder anything in between but the current market conditions are truly excellent and we are working hard to make the most of it.
And with that I'll turn it back over to Mike.
Thanks, Brian .
Operator, we're now ready to take any questions.
It had come in.
Thank you Sir.
To ask a question you will need to press star one on your telephone to withdraw your question. Please press the pound key standby.
Standby as we compile the Q&A roster.
And again to ask a question. Please press star one on your telephone.
Our first question comes from Mark Hughes of Truest. Your line is open.
Yes. Thank you very much good morning.
Good morning, Mark.
Brian in the expenses in the quarter were up a little bit sequentially. The ratio was up you had mentioned mix, but I'm not sure whether you were.
Applying that or.
You're saying that that was impacting the quarter was there anything unusual or any expense accruals or compensation accruals or anything like that.
Yes, I would just say hey, there was a modest increase in variable comp during the quarter.
Other than that.
Sure.
Nothing nothing meaningful.
And then the.
When you look at the 2020 accident year Im curious whether there is anything you can say about the loss development you had.
Good.
Reserve gains in the quarter.
Little bit less so than what you might've seen in the.
In the first half.
I was.
2020, developing any anything about the.
Submission.
Or the claims activity that.
That's unusual or.
Any change from I think what was pretty benign at the time.
Mark This is Mike.
One thing we've talked about on prior calls has been the.
The fact that reported losses in 2020 one.
Let's come in below our expectations, we think a lot of that has to do with Covid pandemic the.
The closure of the court systems.
The light.
Obviously, we've spoken in the past about the fact that needs.
Largely offset that.
Lower reported losses with higher Ivy and art so.
So I think we're well reserved with theirs.
Yes.
Kind of a mean reversion or a bounce back in.
And those loss trends, but.
If there is not a bounce back at some point.
They're just going to be permanently lower than hey, that's good news that will drift down over the years ahead very gradually.
Okay.
I would just reiterate the fact that reserving conservatively is really a fundamental part of our business strategy.
And I think it's just a good reminder, especially in a period of time, where there's a lot of distress across the P&C market.
I'll, just reiterate investors should add a lot of confidence.
In our reserves on our balance sheet.
And then thinking.
Thinking about the broader cycle I'll ask maybe the inning question or that throw that out there.
It's interesting that you're.
Are you talking about sustained rate increases.
Strong submission growth.
Others have talked about maybe a little bit of tapering I'm just sort of.
Curious too.
Here, how you see it at this point.
This is Mike again.
When we were at the.
Our conference a number of months ago, we had.
Yes.
A variety of conversations with reinsurers and it seems.
We're all noting the fact that they anticipated.
<unk> weakness on the part of some companies in terms of adverse development of their casualty books.
Of course, they also noted the fact that with the heightened cat activity Nobody has really made any money on property for the last five years.
<unk>.
I would say uniformly they attributed these two data points to their own optimism around the fact that the favorable trading environment will continue for some time.
And.
That makes sense to us.
I think there's also some data out there around re trends maybe rates in some lines of business arent rising.
As rapidly as they were in the past some of those rate increases have come in a little bit.
I'll just say if you go back to Brian in his comments a few seconds ago, we're seeing good growth in our own business and.
As of January stamping office tax data indicates that 2020 twos opening pretty strongly for the E&S market overall.
And you combine that I think again the confidence we have in our own unique business strategy and obviously, we feel pretty positive about things.
Thank you.
Yeah.
Thank you.
As a reminder to ask a question you need to press star one on your telephone. Please go ahead.
Question. Please press the pound key.
Our next question comes from Pablo <unk> Jpmorgan. Your line is open.
Hi, Thanks, so on the fourth quarter loss ratio once you've been pretty good.
I'd be curious to hear if there's anything one off of about this quarter, whether from the mix of business versus other quarters. They need just to keep it on or perhaps short tail losses like property, usually low just sort of any color. You can provide there would be helpful and how to think about how that.
Loss ratio might trend going forward.
Yes, I don't think there was anything unique in the fourth quarter keep in mind, Paolo Theres always going to be a little bit of variability.
That's just inherent in the business.
Work hard to manage that volatility with the conservative reserving with our reinsurance program, we have an aligned.
There's always going to be a little bit of.
I'll turn on development, but nothing unique beyond just normal trading conditions.
Understood.
And then.
Just sort of.
A question.
On growth, but I guess from the perspective of its distribution.
I was just curious to hear more color and distribution expansion is completed your growth meaning.
Are you seeing higher volumes and the same number of pros here today or are you working centuried more distributors today than at the start of the pandemic for example, and if so is there any way to size that.
Well I'd say, we're I mean, we're.
We're seeing more inflow of submissions from the existing brokers, we're continuing to appoint occasionally.
Additional brokers.
Adding new products. So that's driving some of the new growth and then we are still working on sort of efficiency and process.
Get two more clubs and get to them faster, so let's let's draw.
Driving some of that as well.
But nothing nothing.
Nothing that we haven't been doing for the last.
Pablo This is Mike.
Add to Brian's comments, a lot of times, we talk about our technological advantage.
With regard to efficiency and operating our company at a low expense ratio.
And how how much of an advantage that is in a commodity industry like like P&C.
There is an equally important benefit when it comes to.
The service levels that we can provide to our brokers.
The more efficient our business process to better the service to our brokers and theirs.
Or any direct correlation between those.
The quality of your service and the propensity for Unifi.
Given club I mean.
We don't talk about it a ton, but it's a really important part of our strategy and its another powerful benefit from having.
A more advanced approach to technology.
Got it that makes sense and then last one for me.
I just wanted to pick up on your comment about the dislocation in the E&S market I guess, it's more of a qualitative question.
How would you describe or quantify a dislocation today versus maybe three or four years ago, where some of the larger competitors in the market like EOG and like to really clean portfolios.
It seems like they're trying to grow probably not the CBD that before but then again you need comments about.
Smaller companies.
<unk> reserve issues right. So I guess, if you take a step back overall is there more dislocation today than there was like three or four years ago or the same or less just your thoughts on that thank you.
I'll start and then I'll turn it over to Brian for his comments I would just say.
I think it might be more or less steady.
Some very large E&S writers that is run off multiple billions of dollars of premium over the last several years I can think of one big one that is kind of reverted to growth.
But I can think of other very large E&S writers that are still triaging their books of business and then there's a ton of anecdotes about.
Companies smaller more boutique size E&S companies shutting down underperforming lines of business and canceling programs and the like.
Offsetting the dislocation is the fact that there's been an explosion in the number of delegated underwriting authorities.
Somebody told me the other day, we're up to 21 fronting companies.
More or less facilitate those kind of.
Delegated arrangements.
So the delegated underwriting market is red hot as well right that would offset a lot of the dislocation. So to me, it's kind of a mixed market and it has been for a number of years, but on whole I think it's still pretty favorable yes. This is Brian Haney.
Right now it's stable, but just the time periods you happened to pick that three to four years, it's definitely like that would extend out to 2018.
It's definitely a much more favorable market now than it was in 2018.
Hi.
We're not seeing dramatic shifts either way at the moment in January of 2022.
Alright.
Got it thanks for your answers.
Okay. Thanks, Kevin.
Thank you.
And again to ask a question.
Please star one on your telephone to withdraw your question. Please press the pound key.
<unk> compile the Q&A roster.
Okay.
And we have a question from Roland Naylor.
RBC capital markets. Your line is open.
Hi, Good morning, when you look at the long term growth rate I think you guys have talked about a mid teens Roe.
Longer term when you look at 'twenty two it seems like Theres a lot of stuff going favorably is there a way to.
Sort of ballpark, how much higher you think that growth rate could be in 'twenty two versus sort of your long term.
Goals.
Roland This is Mike.
Don't offer guidance on growth because it's hard.
Hard to.
So now I'll, let down the precision right.
What I would say is I think certainly over the long haul right when the market kind of mean reverse at some point in the future.
Low double digit growth is something we think we can maintain for the long haul given our extensive damage the uniqueness of our business model and the like.
You look back over the last.
Four or five years, we've been growing 30% 40% rate.
So.
The two data points I mentioned at the beginning of the call one it.
It looks like the E&S market is off to a double digit growth rate at the beginning of 2022, that's certainly quite positive for our growth.
And then again the dislocation in the market now.
Not that there's not a ton of competition there is but as Brian said, Hey, this market is much more attractive to us as a risk bearing entity than what we experienced a few years back.
The combination of our strategy being quite unique and competitive combined with a.
Attractive overall market opportunity.
I think you can radar body English we're pretty optimistic.
I figured that was what the response is going to be but it is worth trying.
On the balance sheet I was wondering you've raised capital a few times in the past to support growth as the business now able to support itself on a growth from organic capital generation or would there be a need at some point to raise further capital.
We've talked about in the past, we have a somewhere around a 6% debt to cap ratio right now.
And I think over time want to get up to somewhere in the 2020% range. So yes, there may be.
Some need to raise additional capital that we would look to the debt markets.
For that year, I'd say in the near to medium term.
Great. Thank you so much that's all my questions.
Hello.
Thank you.
Okay.
And I am seeing no further questions in the queue I will turn the call back over to Mr. Michael Kehoe for closing remarks.
Okay, well, thank you everybody for joining us and I just wanted to ask.
Extend.
Thanks, and congratulations to all the Kinsale employees, we just finished the.
The best year in our company's history, and it's obviously the result of an enormous amount of hard work and dedication on their parts.
Thank you for all the listeners and we look forward to speaking with you again here.
Two months.
Have a good day.
This concludes today's conference call. Thank you all for participating you may now disconnect have a pleasant day weekend.