Q4 2022 Kinsale Capital Group Inc Earnings Call
Before we get started let me remind everyone that through the course of the teleconference. Kinsale 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 companys various SEC filings, including the 2021 annual report on Form 10-K, which should be reviewed carefully. The company has furnished a form 8-K, but just curious and exchange commission that can change the press release announcing its fourth quarter results.
And sales management May also reference certain non-GAAP financial measures in the call today.
A reconciliation of GAAP of these measures can be found in the press release, which is available at the company's website at Www Dot Kinsale capital group Dot Com I will now.
I will turn the conference over to Ken sales, President and CEO , Mr. Michael Kehoe. Please go ahead Sir.
Thank you operator, and good morning, everyone.
Ryan Hany can sales Chief operating officer, and Bryan Petrucelli, Chief Financial Officer are both with me.
Each of US will make a few comments and then we'll move on to any questions that you may have for us.
In the fourth quarter can sales operating earnings per share increased by 48%.
And gross written premium grew by 45%.
The company posted a 72, 4% combined ratio for the quarter.
And an operating return on equity for all of 2022 of.
25%.
We believe these results are principally driven by <unk> sales and unique business model.
<unk> underwriting and technology driven low costs.
The results are also boosted by the favorable E&S market.
Which continues to experience a strong inflow of new business.
It allows for meaningful rate increases and exposure growth.
Can sale continues to raise rates above loss cost trend as we've been doing for four years now.
And we continue to establish reserves for future losses.
A conservative fashion.
Investors should have a high level of confidence in can sales balance sheet and reserve position.
As an E&S company part of can sales long term success is reacting quickly to market disruptions and turning those disruptions into opportunities.
Over the last couple of years and continuing even today can sale is taking advantage of disruption in the property market to grow our book of business at a rapid rate.
As always we are mindful of the volatility associated with property accounts.
Especially hurricane exposed properties in the southeastern United States.
Although we are writing more property business than ever we maintain strict limits on the geographic concentration of business.
We model the portfolio regularly we manage our policy limits carefully we purchase a substantial reinsurance program and most importantly, we are being well paid for the risks we are taking.
All of these steps allow us to write the business and capture an attractive return while continuing to limit the volatility of the book in.
In 2022 property amounted to just under 23% of our gross written premium.
With the low 10% of our overall gross written premium having any meaningful hurricane exposure.
We announced in late December that can sale and acquired two office buildings and 29 acres of land purchased over $76 million. This property is adjacent to our existing headquarters building.
One of the office buildings is subject to a long term lease. The other is mostly vacant and we are planning to renovate that property.
Purchase gives kinsale expansion space next to our existing building and also provides an interesting investment opportunity as we consider selling parts of that property to real estate developers over the next several years.
Lastly, we continue to have an optimistic outlook for the market for the balance of 2023.
At this point halfway through the first quarter. The property market is quite favorable, but we also see opportunities across our casualty product line as well.
Regardless of where the market goes in the next couple of years and given can sales competitive advantages. We expect the company to continue to grow and generate best in class returns under any market conditions.
Now I'll turn the call over to Bryan Petrucelli.
Thanks, Mike again just.
A really strong quarter and close to the end of the end of the year with a 45% growth.
And written premium and net income and operating income increasing by 39% and 48% respectively.
72, 4% combined ratio for the quarter includes three three points from net favorable prior year loss Reserve development.
Compared to four points last year.
And then a negligible impact from cat losses in either period.
Most of the improvement in the quarterly expense ratio sort of 19, 9% this quarter compared to 21, 4% last year related to ceding commissions from the Companys casualty and commercial property proportional reinsurance agreements.
Net investment income increased by 107% over the fourth quarter last year as.
As a result of continued growth in the investment portfolio and higher interest rates with a gross return of 3% for the year compared to 10, 5% last year for.
We're investing new money in shorter duration securities with new money yields averaging close to 5% during the quarter and duration has decreased to three and a half years down from four three years at the end of 2021.
Book value was positively impacted in Q4 from a combination of net income an increase in the fair value of our fixed income securities during the quarter.
And the $47 $5 million equity raise in November notwithstanding the positive fourth quarter movements are.
Our fixed income portfolio continues to be an overall unripe unrealized loss position, resulting from the higher interest rate environment.
The company continues to generate strong positive operating cash flows which gives us the ability to hold these securities to maturity and the higher interest rate environment allows us to invest new money at the better yields that I just touched on.
As it relates to capital as I mentioned, we raised approximately 70 $47 million on our.
Fourth quarter equity offering to fund the expected growth of the company.
We continuously monitor monitor our needs as market conditions change.
Given the continued favorable market conditions and related premium growth theres always the possibility that all needed.
I'll need additional supporting capital.
Support can come in the form of debt or equity with a bias towards debt given our current modest debt to capital position and.
And lastly diluted earnings per share was $2 60 per share for the quarter compared to $1 76.
<unk> per share last year.
With that I'll pass it over to Brian Haney, Thanks, Brian as mentioned earlier premium grew 45% in the fourth quarter largely consistent with the first three quarters overall, the E&S market remained favorable with strong growth across most of our product line.
The property market continues to be hard and in the wake of hurricane and the contraction in industry capacity has continued as we believed it would.
In addition to our property divisions, we're seeing strong growth across most of our casualty divisions, our energy General casualty and entertainment divisions in particular, continuing to grow at a significant pace. There is some pockets of business that are more competitive and flatter slower growing such as management liability in products liability.
Submission growth continues to be strong just under 20%, which represents a very slight deceleration from the previous quarter.
We sell a wide array of products and the rates on those products don't move in lockstep, but if we boil it all down to one number we see real rates being up around 7% in the aggregate during the fourth quarter compared to 8% in the third quarter. The property market is certainly boosting that number the rate changes for our property would be well higher than the average.
Rate changes for the casualty divisions with very greatly but overall will be less than the average, but still positive which indicates that the combination of rate change and premium trend is exceeding loss cost trend.
It is important to stress that rate change in rate adequacy or two different concepts.
There are more than adequate we're continually reviewing and adjusting our rates based on a number of considerations such as our target combined ratio our target return on equity the market opportunity and shifts in the competition.
We continue to keep an eye on inflation, we feel we're in a good position because we've been achieving rate increases ahead of loss cost trend for several years now as Mike mentioned.
These increases combined with our strategy of conservative reserving further protects us from the threat of inflation in some of our peers may be more exposed to.
The market conditions are generally favorable across the board, we do still see a proliferation of MGH and pumpkin deals.
We don't delegate underwriting authority ourselves virtually all our competitors do in some fashion or another.
Some of these <unk> are being overly aggressive on rates and terms not all but some but.
But despite these new NGA has a new fronting deals the market has not been too affected at this point overall clearly a good quarter and we are happy with the results and with that ill hand, it back over to Mike.
Thanks, Brian operator, we're ready for questions now.
At this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad.
And your first question comes from the line of Mike Zaremski from BMO. Your line is open.
Good morning, Mike.
Okay.
Everyone and happy Friday.
Yes.
Maybe.
First.
Our chain.
It sounds like a continued more optimism a bit under on the property growth fronts.
And.
I think we can see the cheating a bit more Q I believe two.
To reinsurers and just any I'm, assuming the math works right, if you're growing opportunistically into property versus higher reinsurance costs, maybe you can update us whether we how should we think you should think about the growth and whether we should think about any changes to the reinsurance reinsurance program throughout the year.
Okay. Yeah. This is Mike.
So are we.
We buy a lot of our reinsurance on our excess casualty book, where we put up larger limits and on our property book and so yes the growth in the property.
It is going to result in that mix of business shift both the growth in casualty and property.
He is going to result in.
A higher ceding ratio over time the property is seated on an earned premium basis, So theres a little bit of a lag between when we write the business and when we earn it.
But in general.
It would be reasonable to expect an incremental increase in the ceding ratio here for the near term.
And and.
Just thinking should we be thinking at all about kind of higher reinsurance costs kind of impacting kind of how we should think about any of the ratios into 'twenty three are that'll be kind of TBD as this time as the year.
Progresses.
I don't.
It's hard to say right our program renews on six one.
There's been a lot of commentary about reinsurance costs are rising.
And we would certainly expect.
That that would be the case in our cat excess of loss.
<unk>.
That's not an enormous cost for our company, we buy 75 million extra $25 million today. So.
On the proportional side I think the.
Yes.
The largest contract Ayres our commercial property quota share the results there have been quite favorable so we don't expect any kind of.
Dramatic change in economics on the renewal of that treaty and likewise on the casualty side I think we've seeded away generating attractive returns to our reinsurers in general over the long term and so I think that will be reflected in the.
And the renewal pricing, but again, it's a it's a 613, so it's a little bit speculative at this point.
Okay understood.
We obviously know that.
And Jonathan more profitable than the industry. So so maybe pricing for you guys.
Better.
Just thinking about the.
Your commentary.
About growth in the near term I mean it does.
Is there enough.
Line of sight into.
And to kind of new growth in the property side that we should be thinking about the gross premiums written.
Growth rate kind of continuing.
Near recent levels.
And at least for the foreseeable future.
The things we look at I would say if you look at the last four years, we've been growing.
These are just below or just above that 40% rate.
I would say that's an extraordinary growth rate in our industry.
It's driven in part by.
Some pretty dramatic increases in pricing.
And it's been driven in part by.
Strong growth in exposure.
I think Brian Haney commented that our flow of new business submissions continues around that 20% growth.
Level.
And we've always looked at that as a little bit of a leading indicator.
And then just some of the commentary again in the press and whatnot about distress in the reinsurance market.
There has been a little bit of commentary lately about reinsurers concerned with ads.
Adverse development across the industry for the 15% to 19 accident years on the casualty side.
I think that would be a good omen in terms of forecasting.
No.
Decent growth prospects for the industry.
The E&S.
Tax receipt information from some of the Big E&S States, like California, Texas, Florida, New York seemed to indicate that.
At this point in the first quarter of 2023, the E&S market continues to grow at a pretty dramatic rate. So all of those things I think give us a good sense of optimism for.
For 2023 certainly.
And that it gets a little bit more speculative.
Okay, Great and just lastly.
Some industry participants have seen a bit of of narrowing spread between pricing and estimated loss cost trend.
I appreciate the commentary you gave us on pricing just now but any anything notable.
You are seeing in terms of loss trend.
Any incremental pickup in.
In loss trend and any lines.
Yes, I think.
We noted a slight.
Deceleration in real rate and the reason we mentioned real right is because there is the effect of premium trend in there. So we're seeing generally the same thing as our competitors are doing we are just trying to.
Convey it in a way that makes more sense in sort of ties more towards.
The movement in adequacy.
Across the book and I think our estimate of loss cost trends pretty steady from the third quarter.
Yes.
See in the underlying data is not dissimilar to what our competitors say and it's like a very slight <unk>.
Celebration wherever you want to call up is why I have reduction in the <unk>.
Because what you said.
A reduction in the gap.
Spread yet got it spread that's where I'm sorry.
Okay. Thank you very much for the color.
Thanks, Mike.
Our next question comes from the line of Mark Hughes from Truest. Your line is open.
Good morning, Mark Yes. Thank you good morning.
Howdy.
So when you're talking about real rates up 7% your.
Defining that as nominal pricing less your judgment on inflation and trends is that right.
Plus also adjusted for the effect of premium trend remember a lot of our <unk>.
Policies are sold on <unk>.
Fashion sensitive exposure basis, so as prices go up the expire.
Underlying premium goes up without even irrespective of rate so.
For example, we cover products manufacturers, if the price of the product. They are selling goes up because of overall inflation, that's going to give us more premium without resulting in more exposure necessarily sorry, it's nominal rate change adjusted for loss cost trend and adjusted for premium trend.
Okay.
Spread essentially versus inflation.
Would still be well.
Considered seven points.
Is that the wrong way to think about them.
Another way of saying it is.
The real rate, where zero our rate adequacy should be steady to real rate is positive our rate adequacy in theory, you should be getting.
Longer and a room rate at <unk>, 7%.
Got you okay.
Dominic right, presumably is something higher than that add your inflation assumption on top of that would be your nominal rate is that right.
And the nominal rate is going to be something in the in the high single digits at this point.
Moscow started trials are going away.
In the higher single digits as well and then you have to get premium trucks.
Brian what was your precise comment about submission growth just under 20.
Compared to 20 years.
Better than 20 previously.
I think yes, I think it's exactly right just under 20% this quarter I think last quarter I said, just just slightly north of 20%, so, but it's a very modest actually.
In the fourth quarter would be very similar to the number we saw in the first quarter 2022, there really hasnt been a lot of change.
Yeah, Okay and then.
Mike You mentioned, the you don't buy that much <unk> what was the dollar amount of your payment.
Last year for the <unk> coverage.
And I'll have to get back to you on that.
I think it was.
$7 million or something like that it is a guess we'll get back to you on that.
Seven.
My question was how much did you pay for the reinsurance coverage.
Maybe how much did you see to the reinsurer.
Maybe you're answering my question.
It was somewhere in the mid single digits is what we paid for a cat ex ol treaty for the current year.
In terms of deposit premium.
Yeah.
So if you get inflation on that it's not a big deal to your point.
Correct.
And then how much more appetite do you have is there a.
Kind of upper bound in the near to medium term. When you think about where you are getting this growth in property and <unk>.
Excess casualty.
Sure.
How much more are you comfortable taking on to within your mix.
Well I think Youre always looking at the risk you take relative to your capital base and relative to the.
Expected profitability.
So we've got it.
Strong appetite to grow our business, especially when we're able to get rates.
Like we get in the current pricing environment keep in mind, we've been raising rates.
Ahead of trend for probably four years in a row now.
So.
This is an extraordinary opportunity to create wealth for our stockholders and so yes, we're working very hard to take advantage of it. The one added complication on the property side as property, depending on the coverage you're selling can come with an extraordinary amount of volatility in.
And Thats why I kind of belabor that point about yes.
Property is growing for us at a rapid rate, but we're doing all sorts of things to make sure that the volatility is not growing.
We maintain a very broad geographic spread sell a lot of our property business is really driven by fire apparel as opposed to.
No.
Hurricanes that you would get if you write coastal business in the southeast United States and the like so.
We see it as a tremendous opportunity we're working hard to take advantage of it but we're also managing the volatility carefully.
And then the.
Bryan Petrucelli.
The profitability of and when you think about.
Gross.
Written premium up 45%.
Consistent with earlier.
<unk>.
But maybe theres, a little more mix shift in favor of <unk>.
For the year the excess casualty.
You take luck with that to earn but you'd get ceding commissions and so it reduces year.
Expense ratio is the earnings contribution from net written premium comparable little bit less a little bit more.
When you think about the puts and takes around what you retain and how it impacts the P&L I'm just thinking this.
We're trying to gauge the quality of the 45% growth with fifth mix versus.
A different mix from earlier periods.
Mark.
Take the first swing at that I would look at it this way is.
As a public company.
Our investors.
Our non interested in a lot of volatility in our results.
And so one way, we manage that volatility is by buying reinsurance, especially on the property, where you have got natural catastrophe exposure and especially on the excess casualty, where we're putting up larger limits. There is a lot of margin in that business. Our reinsurers have made a decent return.
Re insuring our book of business over the years, but we're also well compensated with that ceding commission effectively we're offloading the volatility.
And we're replacing some of our investment income on those reserves with that ceding Commission.
I think in general, it's a very positive trade.
And.
I don't look at that is less profitable than our primary business. It just.
Theres other considerations beyond just profitability, it's again managing that volatility.
Perfect. Thank you.
Your next question comes from the line of Casey Alexander from Compass Point. Your line is open.
Yes. Thank you good morning first of all my first question is in relation.
Related to the seeding commissions and the impact on the expense ratio is there any persistency to that or is that really just a one time impact on the quarter.
Well I think it's going to depend on the mix of business right. So if you have continued growth in the lines of business for which.
We buy reinsurance that have related ceding commissions.
Theoretically you could have a little bit.
So you'd have a little movement movement, there, but I think in general I think if you look at our expense ratio over.
The 12 month period.
And focusing less on sort of the volatility quarter to quarter is probably a good good way for you to look at it.
Okay. Thank you.
Lee.
<unk> been earning more yield from your investment portfolio over the last couple of quarters. The duration has been going down pretty rapidly, which tells me that youre really just still rolling short term securities on that is there a strategy to eventually expand that duration and capture some of that.
Yield for the longer term.
Yes, Casey this is Mike.
The yield curve inverted so we're getting paid a lot more on the two two year duration. If you will then than you are on the floor of the five.
And so we're capturing that.
And we will probably shift at some point Budd.
We're willing to accept if you will the rollover risk of a shorter portfolio.
For the higher yield and where and I think as Brian indicated in his remarks that we're getting around 5% on new money. So thats.
I think thats, probably double where we were a little over a year ago.
Okay.
Lastly, what is the what's the age of the buildings that you bought.
I think one may have been built in the sixties in one.
Maybe in the Eighty's around 19.
I forget exactly but.
They are very well maintained and.
And I don't think there's any real issue with.
The one that's subject to the long term lease the older of the two does need to be renovated.
Our basis in that purchase is pretty modest.
We feel pretty positive about.
Return prospects on that deal.
Alright, Thank you for taking my questions.
<unk>.
Yeah.
And again, if you'd like to ask a question Press Star then the number one on your telephone keypad. Your next question comes from the line of Andrew Anderson from Jefferies. Your line is open.
Hey, good morning.
Really strong growth this quarter. So it doesn't appear to be coming in results, but I'll ask anyways.
Last quarter, you had mentioned some slowdown in construction related business has the degree of that changed or expanded to any other lines, maybe just more broadly just economic thoughts here.
Yes, we still see a little bit of <unk>.
Relative slowdown from previous years, I would like to point out.
Our construction unit Carver covers.
Residential and commercial.
Both new construction and renovation all across the spectrum Alright, if you look at total construction spending in the U S. It's not accurate down it's just not growing at the rate it had been growing the previous year. So what we're saying is consistent with what you would see in the.
Federal Reserve data on total construction spending it's growing probably around six or 7% nominally.
Got it thanks, and then the submission growth still very strong air ticked down just a bit but.
Perhaps with casualty, becoming less of a difficult marketplace for brokers to place business could that create some pressure on commission rates that youre paying to brokers since I think it's a bit below average right now.
And this is Mike I would say there is always pressure on commission.
Our brokers are critical to our success.
We worked very hard for them.
We do pay slightly lower commissions than some of our competitors, but we also offer the marketplace and our brokers a much broader our risk appetite.
Our non delegated underwriting authority.
We're able to consider some some tougher traditionally E&S placements.
Where a lot of our competitors that delegated underwriting authority, especially on small accounts.
<unk> almost migrate to more of a preferred type risk.
We also have a very high service model, we quoted an extraordinary percentage of the new business submissions we receive.
And we quote them very quickly.
So I think that helps offset some of the commission issues.
<unk>.
And finally, we're a low cost provider.
One of the extraordinary things about can sales business model is we're able to operate with an expense ratio thats really dramatically lower than the general marketplace.
Which gives us a lot of flexibility to offer more value to the business owner in the form of more competitively priced insurance, but at the same time deliver best in class returns to our stockholders. So.
For those reasons and a variety of others.
Yes, Theres always.
Pressure on commission, but we don't anticipate any changes there.
Thanks, and maybe just like a market related question I think we heard from a larger peer that they think of like a sandbox for small commercial E&S of around 8 billion is that roughly how you view it or is it a bit more of a moving target.
No we would say that that was wildly understate the market.
<unk>.
I haven't seen the 2022 statistics, but the biggest DNS rider in the United States is Lloyds, which is obviously not a single entity, but it's a marketplace and I think they were close to 17% market share in 2021.
I think that put some.
Yes.
A number over $8 billion and most of what they I think they write in the United States and small commercial they delegated underwriting authority to all of the wholesale brokers we work with.
For most of those brokers Lloyd's as one off or maybe is their largest.
Market. So we would look at the total addressable market for E&S is somewhere between two thirds and three quarters.
And we would estimate the market for 2022 was about 100 billion.
Great. Thank you.
Yes.
Your next question comes from the line of Pablo <unk> from Jpmorgan. Your line is open.
Hi, good morning.
Mike can you comment on the competitive environment, you're seeing in the market. So you know other companies have been growing fast as well some of them the largest right and I think at this point about our P&C industry is recognize the attractive at Virginia, E&S. So just sort of your thoughts on the latest on where do you see competition. These days.
Yeah I think.
As Brian Haney indicated we feel very positive about the market environment.
It varies by product line.
But in general, it's a bit of a seller's market more so than normal.
Normal intensely competitive period in the insurance cycle.
That being said, we only find about 10% of our new business quotes.
And thats consistent with the way we are.
Our book has performed over the last four years.
So I think that just reiterate.
There's plenty of competition there is a lot of new entrants.
Lots of front end companies.
<unk> or 'twenty or maybe even more that is opened up in the last couple of years. They exist to connect MGA to reinsurance capacity. So theres lots of delegated underwriting authority is out there.
<unk>.
But that being said there is a lot of business being pushed from the standards of the nonstandard market.
We are battling in competing with probably 75.
Other risk bearing entities.
I don't even know how many MGA is it's it's tons.
So it's kind of I would say it is a bit of a balanced market.
Property is a little bit of an exception just because of the.
Some of the cat losses, the last several years the reduction in reinsurance capacity.
Thats definitely a hard market.
But all of our casualty lines.
In general we feel very good about <unk>.
Positive rate changes good topline growth.
Phenomenal levels of profitability, even in this inflationary environment. So.
I think that kind of sums up our view.
Got it.
And then just a couple more questions on underwriting here. The first one is.
Just given your comment on the spread between pricing over loss trends.
Would it be reasonable to assume some level of continued improvement in your loss ratio next year, but maybe not as much as in previous years is that a fair way to think about it.
I would say just given the level of inflation.
The court systems are reopening from Covid.
Still a lot of.
Uncertainty out there and so I think that always causes us to be cautious in.
In terms of.
Establishing reserves for future claims.
And just being very conservative in that regard you saw our favorable.
Development dropped by a point or so again, you're just seeing some of the conservative approach to building the balance sheet. So.
I don't think were really forecasting where that loss ratio to go.
You have to balance.
I think the prices, we charge with expectations for inflation and loss development.
Okay.
And the comments made on cost control in the press release, you probably have run don't run the business. This way, but I guess, if there is some effort to make sure that revenue growth.
Outstrips expense growth or like how are you sort of thinking about that aspect of the business.
And I ask because you didn't mentioned it as one of the you had mentioned it in the commentary in the press release.
Well Pablo I think if you look at the way that our cost breakdown. So.
Say on average a 20% expense ratio on average.
12% or so relates to commissions and the other 8% relates to other operating expenses.
And of that 8% and the other operating expense bucket.
The vast majority of that relates to human capital costs. So as we're in a we're monitoring sort of the movement of the business.
We're hiring along the way to to manage that growth.
Yes.
As we see if the market shifts in growth.
Sort of goes in the other direction I think we are well positioned to react.
Pretty quickly on that.
Yes, I would just add that expense.
That expense advantage I think is a fundamental part of our business strategy and so it's something we're always working on not just maintaining but looking for ways to improve on it principally by driving more automation into our business process.
A slow steady process that involves rolling out new technology.
That's definitely an ongoing goal.
Okay, and then last one for me.
You did mention grow within your expectations on capital, but I guess my follow up there would be could you provide some sense of the guideposts youre thinking at Baldwin scarier and capital needs against growth right.
Recognizing that you have all these capital resource Essar earnings can actually support a decent amount of growth right. If you sustain like 20% <unk>, but I suppose there's some premium level and whether you think about it in terms of percentage growth or absolute dollars, where maybe you'll have to tap more capital.
But any sort of like very brought on high level guideposts that one might think about from the outside when considering your capital needs vis vis growth. Thank you.
Yes. So our retained earnings are phenomenal. If you look at the returns we're generating that finance is a lot of our growth I think Brian indicated that we would look to borrow some additional.
Money.
Should we need external capital and then hey.
The growth is so extraordinary that.
We need additional equity capital.
You're liable to see something like we've done in the last several years very small.
GAAP equity capital raises at attractive prices.
Really don't impact the existing shareholders much at all.
Got it thank you for your answers.
Okay.
Your next question comes from the line of Roland Mayer from RBC capital markets. Your line is open.
Hi, good morning sticking on the debt.
A discussion I think the debt to cap ratio is up to 21% in the quarter I get the high ROE solves that problem over time, but if I'm thinking about doing more debt offering would there be a level, where you would not take the debt to cap above that.
In the near term and where long term do you expect that debt to cap ratio to stabilize.
Yes. This is Mike I mean, we like that 20% or so range as a long term.
And conservative level of debt.
<unk> on our balance sheet.
The ratio has been boosted lately with the real estate purchase, but theres going to be some.
Real estate sales over time that will bring that back down.
But in terms of the insurance business in particular, we'd like to 20%.
We like the idea of.
Using debt versus equity if we can and.
Maintain a good conservative balance sheet.
Okay. Thank you and then I guess this is another way to come at the growth question. How does your head count scale relative to your premium growth and is there a point, where it becomes you know growing 40% on 40% on 40% becomes an issue of not being able to hire enough talent or can you just walk through sort of the organizational management of their growth.
Yes.
When youre growing a business as quickly as we are you are definitely adding underwriting and claims professionals. We are also in the last couple of years dramatically expanded our investment in our it department, we're making very significant investments there to drive further automation in our business process.
I think we've achieved in the last couple of years some pretty extraordinary.
Growth and productivity.
If you look at our year end head count in 2021, I think it was 367 employees.
I think year end 2022 is $4 57.
So we obviously hired a lot of people.
Our model is too.
This varies by department, but an underwriting we bring in a lot of new people to the industry and trained them.
In claims and in it.
It's more of a mix between new and more experienced professionals.
Yeah.
I think can sales put an enormous amount of effort and not just the last year, but going back years in developing people and developing human capital and I think it's.
It's paying off.
And allowing us to grow the business and not have.
Lack of personnel will be a constraint on growth.
That's very helpful. Thank you so much.
And there are no further questions at this time, Mr. <unk> I'll turn the call back over to you for some final closing remarks.
Okay. Thank you operator and <unk>.
Thank you for everybody for participating obviously the results we posted for 2022.
Are the result of a lot of extraordinary hard work by the can sail professionals, who come to work every day so.
We definitely want to recognize everybody on the <unk> sales team and all the kinsale brokers around the country that are a critical part of our success and obviously, we continue to work very hard for them to help them build their businesses and we look forward to talking to everybody again in a few months.
This concludes today's conference call. Thank you for your participation you may now disconnect.
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