Q4 2023 Kinsale Capital Group Inc Earnings Call
Operator: Ladies and gentlemen, good morning. My name is Abby, and I will be your conference operator today. At this time, I would like to welcome everyone to the fourth quarter 2023 Kinsale Capital Group Incorporated Earnings Conference Call. Before we get started, let me remind everyone that, through the course of the teleconference, Kinsale's management may make comments that reflect their intentions, beliefs, and expectations for the future. As always, these forward-looking statements are subject to certain risk factors which could cause actual results to differ materially. These risk factors are listed in the company's various SEC filings, including the 2022 annual report on Form 10-K, which should be reviewed carefully. The company has filed a Form 8K with the Securities and Exchange Commission that contains the press release announcing its fourth quarter results. Kinsale 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 on the company's website at www.kinsalecapitalgroup.com. I will now turn the conference over to Kinsale's President and CEO, Mr. Michael Kehoe. Please go ahead, sir.
Ladies and gentlemen, good morning, My name is Abby and I will be your conference operator today.
At this time I would like to welcome everyone to the fourth quarter 2023 Kinsale capital Group incorporated earnings Conference call.
Abby: 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.
Abby: As always these forward looking are subject.
Abby: Subject to certain risk factors, which could cause actual results to differ materially.
Abby: These break risk factors are listed in the company's various SEC filings, including the 2022 annual annual report on Form 10-K, which should be reviewed carefully.
Abby: The company has a form 8-K with the Securities and Exchange Commission that contains the press release announcing its fourth quarter results.
Abby: Kinsale management May also reference certain non-GAAP.
Abby: Financial measures in the call today.
Abby: A reconciliation of GAAP to these measures can be found in the press release, which is available on the company's website at Www Dot Kinsale capital group Dotcom.
Abby: I will now turn the conference over to Kim sales, President and CEO, Mr. Michael Kehoe. Please go ahead Sir.
Michael P. Kehoe: Thank you, Operator, and good morning, everyone. Bryan Petrucelli, our CFO, and Brian Haney, our President and COO, and I will each offer a few remarks, and then we'll move on to any questions you may have. In the fourth quarter of 2023, Kinsale's operating earnings per share increased by 49%, and Gross Written Premium grew by 33.8% over the fourth quarter of 2022. For the quarter, the company posted a combined ratio of 72.1%, and posted an operating ROE of 31.8% for the full year 2023. The company's strategy of disciplined DNS underwriting and technology-enabled low costs drives these results and allows us to take market share from competitors at the same time. Specifically, for those newer to the company, Kinsale focuses exclusively on the E&S market, writing smaller accounts.
Thank you operator, and good morning, everyone, Bryan Petrucelli, our CFO and Brian Haney, <unk>, our president and CFO.
Michael P. Kehoe: Well each offer a few remarks.
Michael P. Kehoe: And then we will move on to any questions you may have.
Michael P. Kehoe: In the fourth quarter of 2023 can sales operating earnings per share increased by 49%.
Michael P. Kehoe: And gross written premium grew by 33, 8% over the fourth quarter 2022.
Michael P. Kehoe: For the quarter the company posted a combined ratio of 72, 1%.
Michael P. Kehoe: <unk> posted an operating ROE of 31, 8% for the full year of 2023.
Michael P. Kehoe: The company's strategy of disciplined E&S underwriting and technology enabled low costs.
Michael P. Kehoe: All of these results.
Michael P. Kehoe: And allows us.
Michael P. Kehoe: Good returns and to take market share from competitors at the same time.
Michael P. Kehoe: Specifically for those newer to the company and sales focus is exclusively on the E&S market.
Michael P. Kehoe: And on writing smaller accounts.
Michael P. Kehoe: We provide our brokers with the broadest risk appetite and the best customer service in the business.
Michael P. Kehoe: We provide our brokers with the broadest risk appetite and the best customer service in the business, and we use our low expense ratio to offer our customers competitively priced insurance, while also delivering best-in-class margins to our stockholders. Since much of this expense advantage is predicated on our advanced systems and our team of world-class technology professionals. We believe the competitive advantage of our technology model not only has durability but has the potential to become even more powerful in the years ahead. As we have noted over the last several years, the E&S market continues to benefit from the inflow of business from standard companies and from rate increases driven by inflation and relatively tight underwriting conditions. Our growth in the fourth quarter was similar to the third and was largely consistent with the industry commentary about the property market becoming more orderly. We continue to be optimistic about growth in 2024. Finally, a reminder about our reserving process and approach. We collect premiums up front and pay claims out over the subsequent several years.
Michael P. Kehoe: And we use our low expense ratio to offer our customers competitively priced insurance, while also delivering best in class margins to our stockholders.
Michael P. Kehoe: Since much of this expense advantage is predicated on our advanced systems and.
Michael P. Kehoe: And our team of World Class technology professionals, we believe the competitive advantage of our technology model not only has durability to it but it has the potential to become even more powerful in the years ahead.
Michael P. Kehoe: As we have noted over the last several years the E&S market continues to benefit from the inflow of business from standard companies in Prime rate increase is driven by inflation and relatively tight underwriting conditions are.
Michael P. Kehoe: Our growth in the fourth quarter was similar to the third and was largely consistent with the industry commentary about the property market, becoming more orderly.
Michael P. Kehoe: We continue to be optimistic about growth in 2024.
Michael P. Kehoe: Finally, a reminder, about our reserving process and approach.
Michael P. Kehoe: We collect premiums upfront and pay claims out over the subsequent several years.
Michael P. Kehoe: Accordingly, we post reserves now for claims we will have to pay in the future. We deliberately set those reserves in a conservative fashion. We've set aside more than we think we will need to allow for some uncertainty in the process, and the possibility of a changing tort system, and the uptick in inflation we've experienced more recently in the last couple of years. Our 2016-19 accident years have developed favorably on an inception-to-date basis. But the level of conservatism in those years has been partially eroded by inflation.
Michael P. Kehoe: Accordingly, we post reserves now for claims we will have to pay in the future.
Michael P. Kehoe: Deliberately set those reserves in a conservative fashion, we set aside more than we think we will need to allow for some uncertainty in the process.
Michael P. Kehoe: A possibility of a changing towards system.
Michael P. Kehoe: And the uptick in inflation, we have experienced.
Michael P. Kehoe: More recently in the last couple of years.
Michael P. Kehoe: Our 2016 through 19 accident years have developed favorably on an inception to date basis, but the level of conservatism in those years has been partially eroded by inflation.
Michael P. Kehoe: Subsequent to 2019, we have benefited from very significant rate increases.
Michael P. Kehoe: Subsequent to 2019, we have benefited from very significant rate increases, above the loss cost trend, and we have used some of that additional rate to add to the level of conservatism in our reserves. Investors should have a high level of confidence in the Kinsale balance sheet, as we expect overall reserves to continue to develop favorably in the years ahead.
Michael P. Kehoe: <unk> loss cost trend and we have used some of that additional rate to add to the level of conservatism in our reserves.
Michael P. Kehoe: Investors should have a high level of confidence in the can sell balance sheet.
Michael P. Kehoe: And we expect overall reserves to continue to develop favorably in the years ahead.
Michael P. Kehoe: And with that I'm going to turn the call over to Bryan Petrucelli.
Bryan P. Petrucelli: Thanks, Mike. Another solid quarter with 33.8% growth in written premium, very low cat activity, and net income and net operating earnings increasing by 53.7% and 49.6%, respectively. The 72.1% combined ratio for the quarter included 2.3 points from net favorable prior year loss reserve development compared to 3.2 points last year, and negligible catastrophe losses in either period. The expense ratio continues to benefit from higher seating commissions from the company's casualty and commercial property proportional reinsurance agreements as a result of growth in both of those lines of business. The expense ratio can bounce around a bit from quarter to quarter, so we believe it's best to evaluate the components of the expense ratio over a 12-month period. For the year, we noted that the expense ratio decreased by 1.4 points from 22.2% in 2022 to 20.8% this year.
Bryan P. Petrucelli: Thanks, Mike.
Bryan P. Petrucelli: Another solid quarter with 33, 8% growth in written premium very low cat activity and net income and net operating earnings increasing by 53, 7% and 49, 6% respectively.
Bryan P. Petrucelli: With 72, 1% combined ratio for the quarter included 2.3 points from net favorable prior year loss Reserve development.
Bryan P. Petrucelli: Compared to three two points last year.
Bryan P. Petrucelli: Now negligible cat losses in either period.
Bryan P. Petrucelli: The expense ratio continues to benefit from higher ceding commissions from the Companys casualty and commercial property proportional reinsurance agreements as a result of growth in both of those lines of business.
Bryan P. Petrucelli: The expense ratio can bounce around a bit from quarter to quarter. So we believe it's best to evaluate the components of the expense ratio over a 12 month period.
For the year, we noted that the expense ratio decreased by one four points from 22, 2% in 2022% to 28% this year.
Bryan P. Petrucelli: Breaking this decrease down a little further, 1.2 points came from net commissions, with the remaining.2 point from other underwriting expenses. On the investment side, net investment income increased by 71.2% over the fourth quarter last year, as a result of continued growth in the investment portfolio, generated from strong operating cash flows and higher interest rates, with a gross return of 4% for the year, compared to 3% last year. We're continuing to invest new money and shorter duration securities with new money yields averaging in the low to mid 5% range, and duration decreased to 2.8 years down from 3.5 years at the end of last year. And lastly, diluted operating earnings per share continue to improve and was $3.87 per share for the quarter compared to $2.60 per share last year. With that, I'll pass it over to Bryan Haney.
Bryan P. Petrucelli: Breaking this decrease down a little further.
Bryan P. Petrucelli: 1.2 points came from net commissions with the remaining <unk>.
Bryan P. Petrucelli: Two point from other underwriting expenses.
Bryan P. Petrucelli: On the investment side net investment net investment income increased by 71, 2% over the fourth quarter last year.
As a result of continued growth in the investment portfolio.
Bryan P. Petrucelli: Generated from strong operating cash flows and higher interest rates.
Bryan P. Petrucelli: With a gross return of 4% for the year compared to 3% last year.
Bryan P. Petrucelli: We're continuing to invest new money.
Bryan P. Petrucelli: And shorter duration securities with new money yields averaging in the low to mid 5% range and duration decreased to two eight years down from three and a half years at the end of last year and.
Bryan P. Petrucelli: And lastly, diluted operating earnings per share continues to improve and was $3 87 per share for the quarter compared to $2 60 per share last year.
Bryan P. Petrucelli: And with that I'll pass it over to Brian Haney.
Brian D. Haney: Thanks, Brian. As mentioned earlier, premiums grew 34% in the fourth quarter and 42% for the year. We continue to see growth across our book of business with particularly strong growth in our property divisions, along with entertainment, general casualty, excess casualty, and the commercial audit division. Submission growth continues to be strong and actually experienced a bit of an acceleration to the mid-twenties for the quarter. This number is subject to some variability, but in general, we use submissions as a leading indicator of growth.
Brian D. Haney: Thanks, Brian as mentioned earlier premium grew 34% from the fourth quarter and 42% for the year, we continue to see growth across our book of business with particularly strong growth in our property divisions, along with entertainment.
Brian D. Haney: General casualty excess casualty commercial auto questions.
Brian D. Haney: Submission growth continues to be strong and actually experienced a bit of an acceleration to the mid <unk> for the quarter.
Brian D. Haney: This number is subject to some variability, but in general we view submissions as a leading indicator of growth and so we see the submission growth rate is a positive signal.
Brian D. Haney: And so we see the submission growth rate as a positive signal. We sell a wide array of products, and the rates in those products don't move in lockstep, but if we pull it down to one number, we see real rates being up around 5%. Please now, we've been increasing rates above the loss cost trend for several years now, and it's also important to stress that our rate change and rate adequacy are two different things. As our results demonstrate, our rates were more than adequate.
Brian D. Haney: We sell a wide array of products and the rates on those products.
Brian D. Haney: <unk> staff, but every boil it down to one number we see real rates being up around 5%. Please note we have been increasing.
Brian D. Haney: Increasing rates above loss cost trend for several years now.
And it's also important to stress that our rate change in rate adequacy are two different things.
Brian D. Haney: Our results demonstrate our rates are more than adequate.
Brian D. Haney: We're continually reviewing our rates, adjusting them based on a number of considerations, such as our target return on equity, the market opportunity, and shifts in the competition. But in any event, we feel that the business we're putting on the books today is the most adequately priced business we've seen in our history. Another thing I'd like to note is that in industry commentary, some companies are seeing generally favorable developments in workers' comp that's offsetting to some extent adverse developments in general liability. Just as a reminder, Kinsale doesn't write any workers' comp, and general liability represents the largest share of our reserves.
Brian D. Haney: We're continually reviewing our rates adjusting.
Brian D. Haney: Based on a number of considerations such as our target return on equity and market opportunity and shifts in the competition.
Brian D. Haney: But in any event, we feel about business, we're putting on the books today is the most adequately priced business we've seen in our history.
Brian D. Haney: Another thing I'd like to.
Brian D. Haney: Seen in industry commentary a trend that.
Brian D. Haney: Some companies are seeing generally favorable development on workers' comp that's offsetting to some extent adverse development in general liability just as a reminder, kinsale doesn't write any workers' comp and general liability represents the largest share of our reserves. So when you see kinsale, having favorable development you should know that this is a result of diligently staying ahead of the trends.
Brian D. Haney: So when you see Kinsale having favorable developments, you should know that this is a result of diligently staying ahead of the trends in the general liability market, and it does differentiate us somewhat in the industry. That being said, the notable industry trend of weakness in general liability reserves goes well for us and may serve to prolong the favorable market conditions. And finally, inflation is moderated, somewhat dramatized, but getting the inflation rate to the Fed's target has proven to be a much longer effort than many prognosticators had forecasted. The longer the elevated inflation persists...
Brian D. Haney: In the general liability market and it does differentiate us somewhat in the industry.
Brian D. Haney: That being said the notable industry trend of weakness in general liability reserves bodes well for us and may serve to prolong the favorable market conditions.
Brian D. Haney: Finally inflation has moderated somewhat from its highs, but getting the inflation rates of the fed's target has proven to be much longer effort that many prognosticators forecast.
Brian D. Haney: The longer the elevated inflation persists the more pressure the industry will see on reserves, particularly on longer cat lines.
Brian D. Haney: The more pressure the industry will see on reserves, particularly on longer tail lines, we are dedicated to staying vigilant about this so that we may continue to have reserves that are more likely to develop favorably than adversely. Overall, once again, a good quarter, and we're really happy with the results. And with that, I'll hand it back over to Mike. Thanks, Bryan.
Brian D. Haney: We are dedicated to staying vigilant about this.
Brian D. Haney: But we may continue to have reserves that are more likely to develop favorably that adversely overall once again, a good quarter and we're really happy with the results and with that I'll hand, it back over to Mike. Thanks, Brian Operator, we're ready for any.
Michael P. Kehoe: Operator, we're ready for any questions in the queue. Thank you. If you would like to ask a question during this time, simply press the star key followed by the number one on your telephone keypad.
Mike: Questions in the queue.
Speaker Change: Thank you if you would like to ask a question. During this time simply press the star key followed by the number one on your telephone keypad. If you would like to withdraw your question Press Star One a second time and we will pause for just a moment to compile the Q&A roster.
Operator: If you would like to withdraw your question, press star one a second time, and we will pause for just a moment to compile the Q&A roster, www.kinsale.com. And we will take our first question from Bill Karkatchi with Wolf Research. Your line is open. Thank you. Good morning.
And we will take our first question from Bill <unk> with Wolfe Research. Your line is open.
Bill: Thank you good morning, I wanted to follow up on your comments about the conservatism and implicit in your reserving I was hoping you could offer a little bit more color on the loss emergence trends that youre seeing from those that sort of 2019 and prior accident year period, particularly in this environment, whereas as you describe.
Bill Karkatchi: I wanted to follow up on your comments about the conservatism and implicit in your reserving. I was hoping you could offer a little bit more color on the loss emergence trends that you're seeing from those that sort of 2019 and prior accident year periods, you know, particularly in this environment, whereas, as you described, some carriers are experiencing adverse developments and, along those lines, latency effects associated with core closures during COVID resulting in tail elongation. Just curious about how much that remains in focus. Bill, this is Mike.
Bill: Some carriers are experiencing adverse development.
Bill: Along those lines are latency effects associated with court closures during COVID-19, resulting in Chile elongation, just curious whether how much that remains in focus.
Mike: Bill This is Mike.
In general I would say that.
Michael P. Kehoe: In general, I would say that, you know, there was some disruption with regard to the pandemic. However, it varies dramatically by accident year and by line of business. I mean, there's a level of complexity there that I think would preclude us from getting into too much detail on a conference call, but in general, I would say that Kinsale has done a good job over our, you know, this is our 15th accident-free year in business. And I think we've done a really good job of setting aside conservative reserves. Not every single year, but effectively, I think 13 of the 14 prior years have developed favorably on an inception-to-date basis.
Mike: There was some disruption with regard to the pandemic.
Mike: Yeah.
Mike: It varies dramatically by accident year and by line of business.
Mike: I mean, theres, a theres a level of complexity, there that I think would preclude us from getting into too much detail on a conference call but.
Mike: In general.
Mike: I would say that can sale has done a good job over our this is our 15th accident year in business and I think we've done a really good job in setting aside conservative reserves.
Mike: Not every single year, but effectively I think.
Mike: 13% of 2014 prior years have developed favorably on an inception to date basis. So.
Michael P. Kehoe: You know, hopefully investors will look at that track record of conservatism. As we just talked about, we've been adding and raising our rates ahead of the lost cost trend for a number of years in a row now, and that's given us the opportunity to add even more conservatism. I think the conservatism's warranted with the uptick in inflation in general, but, you know, changes in tort law and social inflation, et cetera, there's all sorts of reasons for caution. I just think it's important for our investors to understand that Kinsale is very proactive and very conservative in setting aside reserves today to pay claims in the future. That's helpful, Mike. Thank you.
Mike: Hopefully investors look at that track record of conservatism.
As we just talked about we've been adding.
Mike: Raising our rates.
Mike: Ahead of loss cost trend for a number of years in a row now and that's given us the opportunity to add even more conservatism I think the conservatism is warranted with the uptick in inflation in general but.
Mike: Changes in tort law.
Mike: Social inflation et cetera, I mean, theres, all sorts of reasons for caution and.
Mike: I just think it's important for our investors to understand that can sale, it's very proactive and very conservative in setting aside.
Mike: <unk> today to pay claims in the future.
Speaker Change: That's helpful. Mike. Thank you and I understand you're probably limited in what you can say about that.
Speaker Change: Judge Court judgment described in the 8-K that you filed at the end of last year, but.
Michael P. Kehoe: And I understand you're probably limited in what you can say about that court judgment described in the AK that you filed at the end of last year. But following the thought process that you just described, at a high level, as we sort of think about social inflation pressures and the risk that those could prove more pervasive in coming years than might have been contemplated at the time that the business was written, do you feel like the conservatism that you contemplated from the outset sort of protects you from that dynamic? Yeah, in a nutshell, yes.
Speaker Change: Following the thought process that that you just described at a high level as we sort of think about social inflation pressures and the risk that those could prove more pervasive in coming years, and then might have been contemplated at the time that the business was written you feel like the conservatism.
Speaker Change: That you've contemplated from the outset sort of protects you from from that dynamic.
Speaker Change: Yes.
Speaker Change: A nutshell, yes, I would say, we can't get into talking about that specific claim because.
Michael P. Kehoe: I would say, you know, we can't get into talking about that specific claim because, you know, it's active litigation, but we said in the 8K that we didn't think it would have a material adverse effect; adequate provision has been made in the consolidated financial statements and existing reserves to account for any liability the company related to claims such as this legal proceeding. I would say, in general. There's been a lot of commentary over the last couple of years about social inflation. Some of that probably picks up on this concept of nuclear verdicts, and there has been a dramatic uptick. Kinsale is an ENS company, and we make frequent use of coverage limitations to help us control our exposure to loss.
Speaker Change: It's active litigation, but we said in the 8-K.
Speaker Change: We didn't think it would have a material adverse effect.
Speaker Change: Adequate provision has been made.
Speaker Change: And the consolidated financial statements and existing reserves to account for any liability to the company related to claims such as this legal proceeding.
Speaker Change: I'd say in general.
Speaker Change: There's been a lot of commentary over the last couple of years of that social inflation.
Speaker Change: Some of that probably picks up this concept of nuclear verdicts and.
Speaker Change: There has been a dramatic uptick can sale of an E&S company and we make frequent use of coverage limitations to help us control our exposure to loss. We also tend to focus on smaller accounts, which probably insulates us a little bit.
Speaker Change: And I think.
Speaker Change: We run a very disciplined underwriting operation, we've got really good systems, which translates into robust data to manage profitability. So it's something that creates I think a challenge for the industry, but I think in sales very good at staying ahead of us.
Michael P. Kehoe: We also tend to focus on smaller accounts, which probably insulates us a little bit, um, And I think, you know, we run a very disciplined underwriting operation, www.kinsale.com you know, changes in the torque system. Added to that, when you add to that the conservatism and how we approach reserving, again, I think investors should have a lot of confidence in the Kinsale balance sheet. Understood. That's really helpful, Mike. Thank you. If I could squeeze in one last one.
Changes in the tort system and.
Speaker Change: Added to that.
Speaker Change: Add to that.
Speaker Change: Services and how we approach reserving again, I think investors should have a lot of confidence in the <unk> balance sheet.
Speaker Change: Understood. That's really helpful. Mike. Thank you if I could squeeze in one last one are you considering.
Bryan P. Petrucelli: Are you considering, for Bryan, are you considering extending duration as the debate around the timing of Fed cuts continues? And maybe you could just frame how investors should be thinking about potential downside risk to earnings from a lower rate environment. Yeah, I mean, we certainly keep up with what's going on from an interest rate perspective and an inflation perspective. I think, you know, in the near term, we're probably going to continue to invest in that three-year time frame, but hey, it's something we look at every month and every quarter in working with our investment teams to ensure that we're taking, you know, being opportunistic but being aware of rural river risk Very helpful. Thank you for taking the time to answer my questions. , and The New York Times.
Speaker Change: For Brian are you considering extending duration as the debate around the timing of fed cuts continues and.
Speaker Change: Maybe you could just.
Speaker Change: Frame, how investors should be thinking about potential downside risk to earnings from from a lower rate environment.
Brian D. Haney: Brian Yes.
Brian D. Haney: I mean, we certainly are.
Brian D. Haney: Keep up with what's going on from an interest interest rate perspective, and an inflation perspective I think.
Brian D. Haney: The near term.
Brian D. Haney: We're probably.
Brian D. Haney: You're going to continue to invest in that three year timeframe.
Brian D. Haney: But hey, it's something we look at every month and every quarter and working with our investment.
Brian D. Haney: <unk> two to ensure that we're taking being opportunistic but being aware of rollover risk and what have you.
Speaker Change: Very helpful. Thank you for taking my questions.
Speaker Change: Thanks Bill.
Operator: Thank you. Thank you. And we will take our next question from Mike Zaremsky with BMO. Your line is open. Hey, good morning.
Speaker Change: And we will take our next question from Mike Zaremski with BMO. Your line is open.
Speaker Change: Okay.
Mike Zaremski: Hey, good morning.
Mike Zaremsky: Maybe we can just start on, you mentioned this submission increased a bit into the mid-20s. I know there's some variability you cited on that, but any color there, I feel like... Insurance Investors have been grappling with a potential uptick and slow on the casualty side given social inflationary pressures impacting everyone kind of. Maybe more than offset or offset by less property flow to the extent property has gotten a lot of price and the wind doesn't blow too tough in 24, but any color would be helpful.
Mike Zaremski: Maybe we can just start on you mentioned this submission.
Mike Zaremski: Increased a bit into the mid twenties, I know theres. Some variability you decided on that but any.
Speaker Change: Although I feel like insurance investors have been grappling with.
Speaker Change: A potential uptick in flow on the casualty side, given social inflationary pressures impacting everyone kind of <unk>.
Speaker Change: And maybe more than offset or offset by by less property flow it to the extent proper.
Speaker Change: Property has gotten a lot of price and the wind doesn't blow to toughen 24, but any color would be helpful.
Brian D. Haney: Yeah, I mean, one thing to note is the growth rate actually has been relatively steady, so I think if you go back and read the commentary, it's been in that 20 low 20s range and slightly accelerated range. It just so happens that there was a little more acceleration this quarter, which could just be volatility. I would agree that we are seeing, I think, continued casualty submission inflow, which is probably stemming from some of the reserve So, and you're right, Mike mentioned that the property market is more orderly, but we are still seeing a strong flow of submissions. It's just that there's more capacity, and it's... It's a little less distressed than it was last year. Okay.
Speaker Change: Yes, I mean, one thing to note is the growth rate actually has been relatively steady. So I think if you go back and read the commentary it's been.
Speaker Change: And that 20 low twenties range.
Slightly accelerated range I can just so happened it was a little more acceleration this quarter that could just be.
Speaker Change: Utility I would agree that.
We are seeing I think.
Continued casualty submission.
Speaker Change: <unk>, which is probably stemming from some of the reserve issues at some of the other competitors are having so.
Speaker Change: And you're right, Mike Mike mentioned that the property markets more orderly.
Speaker Change: But we are still seeing a strong submission.
Speaker Change: Submissions as just there is more capacity and it's just it's a little less distressed that it was last year.
Speaker Change: Okay.
Michael P. Kehoe: On to your comments about your technology and how your technology is evolving. It could become more powerful. How would that translate into KPIs we see as investors? Would you potentially get more submissions or just be able to act quicker on the submissions? Or do you feel like it would just allow you to price risk better, or all of the above, or any color would be great? Well, I think one of the... Mike, this is Mike.
Speaker Change: On the your comments about your technology and how your technology is evolving it could become more powerful how would that would that how would that translate into kpis.
Speaker Change: We see as investors would would it would you potentially get more submissions are just be able to act more quicker on the submissions or do you feel like it will just allow you to price risk better all of the above or any color would be great.
Well I think one of the Mike This is Mike.
Michael P. Kehoe: One of the interesting things about technology is it impacts multiple areas of the business in a material way. So, can it speed up customer service?
Mike Zaremski: One of the interesting things about technology as it impacts.
Mike Zaremski: Multiple areas of the business in a material way.
Mike Zaremski: So.
Mike Zaremski: Tenant speed up customer service absolutely.
Michael P. Kehoe: Absolutely. Can it allow us to incorporate more third-party data in how we evaluate an individual risk and segment and price risk and drive a more accurate underwriting model? Absolutely. Can it help us increase the productivity of our workers, effectively lowering our expenses?
Mike Zaremski: Ken It allow us to incorporate more third party data and how we evaluate and individual risk and segment and price risk.
Mike Zaremski: And drive a more accurate underwriting model absolutely.
Mike Zaremski: Can it help us increase the productivity of our workers and effectively lowering our expenses.
Michael P. Kehoe: Absolutely. Yeah, I mean, for all these reasons and probably others, it's the reason we've prioritized that the way we have over the years and continue to make an enormous commitment. I mean, I think about 20%, maybe slightly over 20% of our headcount is in our IT department. And I think that just anecdotally speaks to how important we think it is to our business model and, you know, having made technology a core competency of our business 15 years ago when we started the company alongside underwriting and claim handling. I think it just puts us in a very interesting position today, compared to a lot of companies in the industry that maybe aren't quite as far along. Okay, I got it.
Mike Zaremski: Absolutely.
Mike Zaremski: <unk>.
Speaker Change: Yeah, I mean, it's.
Speaker Change: Okay.
Speaker Change: For all these reasons and probably others. It's the reason we prioritize that the way we have over the years.
Speaker Change: And continue to make an enormous commitment I mean I think.
Speaker Change: About 20, maybe slightly over 20% of our head count.
Speaker Change: And our it department.
Speaker Change: And I think that just anecdotally speaks to how important we think it is to our business model.
Speaker Change: Having made technology, a core competency of our business 15 years ago. When we started the company alongside of underwriting and claim handling.
Speaker Change: I think it just puts us in a.
Speaker Change: A very interesting position today.
Speaker Change: Compared to a lot of companies in the industry.
Speaker Change: Maybe arent quite as far along.
Speaker Change: Okay got it I feel like you.
Mike Zaremsky: I feel like, yeah, you've been talking about it a lot, but I guess you have something to say it could kind of decouple your long-term thoughts on growth, because I know the company still expects growth over the long term to decline, along with the marketplace. Lastly, just quickly on your commentary, so I believe you made the comment in your prepared remarks, Mike, that you added some reserves, some conservatism, which seems prudent in light of higher inflation levels. I don't know if I understand that correctly when we see the...
Speaker Change: <unk> been talking about it a lot.
Speaker Change: If you haven't belonged to say it could kind of.
Speaker Change: A couple of your long term thoughts on growth because.
Speaker Change: The company still expects growth over the long term.
Speaker Change: To decline.
Speaker Change: Along with the marketplace.
And then lastly, just just quickly on your commentary so.
Speaker Change: I believe you you you made the comments in your prepared remarks, Mike that you added some reserves some conservatism.
Speaker Change: Which seems prudent.
Speaker Change: In light of higher inflation levels I don't know.
Speaker Change: I understand that correctly, when we see the.
Michael P. Kehoe: The, The statutory data, are we going to see some topping off of certain action years or anything you were trying to tell us there? Well, I was really speaking more toward a general management approach to the business, which is recognizing that, you know, ours is an uncertain business to some extent. There's all sorts of quantitative methods that we use to, you know, drive more certainty, but there is an element of uncertainty, and we collect premiums up front; we pay the claims over a number of years. And so I think it's just prudent to be as cautious as possible, within reason, in terms of setting aside dollars today to pay claims in the future. When inflation picked up... You know, that wasn't really anticipated. You know, I don't know by anybody, but certainly not by us.
Speaker Change: The statutory data are we going to see some topping off of of certain accident years or anything youre trying to tell us there.
Well I was really speaking more toward a general management approach to the business.
Speaker Change: Which is recognizing that.
Speaker Change: <unk>.
Speaker Change: This is an uncertain business to some extent there is all sorts of quantitative methods that we used to.
Speaker Change: Drive more certainty but.
Speaker Change: There is an element of uncertainty.
We collect premiums upfront we paid claims.
Speaker Change: Over a number of years and so I think it's just prudent.
Speaker Change: To be as cautious as possible within reason.
Speaker Change: In terms of setting aside dollars today to pay claims in the future when inflation picked up.
Speaker Change: That wasn't really anticipated.
Speaker Change: I don't know by antibody, but certainly not by us.
Michael P. Kehoe: And so I do think that had a negative impact on the level of conservatism for a couple of those years. But I wasn't really speaking to anything specifically, but, you know, we're going to file our case soon, and our statutary statement soon thereafter. And there's a lot of very granular information that people can look at in terms of reserves by accident year and by statutory line of business. Okay, but just to be clear, I think, you know, in the past, you said that every year develops favorably or most, you know, most of your year. So are you saying we might see something a little bit different, like as many will probably see for many peers and when you file the K? Our 2011 year developed adversely was the first full year we were in business, and the company was tiny. I think our losses at the end of 2011 were $12.4 million, and it's developed up to $15 million. Yes, we had one bad year, but in general, it's immaterial.
Speaker Change: And so I do think that had a negative impact in the level of conservatism from a couple of those years.
Speaker Change: I wasn't really speaking to anything specifically, but.
File our case soon in our Stat statement soon thereafter, and Theres a lot of very.
Speaker Change: Granular information.
Speaker Change: People can look at in terms of.
Speaker Change: Reserves.
Speaker Change: The accident year and by statutory line of business.
Okay, but just to be clear I think in the past you said that every year its about favorably.
Speaker Change: Our most.
Speaker Change: Most of your year. So are you, saying well, we might see something a little bit different as many we will see probably from any peers. When you filed the K.
Speaker Change: Yeah.
Speaker Change: Our 2011 year developed adversely was the first full year, we are in business and the company was tiny I think our ultimate our I think our losses at the end of 2011 were $12 4 million and it's developed up to 15. So it's.
Yes, we had one bad year, but in general it's immaterial.
Michael P. Kehoe: For the last several years, I think Bryan Haney made the comments about the fact that we've been getting great increases ahead of loss cost trends. So, again, these are the most conservatively reserved years in our company's history, and it coincides with the market becoming a little bit tighter, if you will, with insurance companies having more pricing power. So in that...
Speaker Change: The last several years.
Speaker Change: I think it was Brian Haney made the comments about the fact that we've been getting rate increases ahead of loss cost trend.
Speaker Change: Again these are the most conservatively reserved years in our company's history and it coincides with the market, becoming a little bit tighter if you will.
Speaker Change: Insurance companies, having more pricing power so in that.
Michael P. Kehoe: Favorable pricing environment. Yeah, we leaned into it and grew our business, you know, in a pretty dramatic fashion, But the reserves reflect... The net of all this is, I think our reserves are in a great spot. Okay, got it. Thanks for bearing with me.
Favorable pricing environment, yes, we leaned into it and grew our business.
Speaker Change: And a pretty dramatic fashion.
Speaker Change: But the reserves reflect.
Speaker Change: So.
Speaker Change: The net of all of that said I think our reserves are in a great spot.
Mark Hughes: Thank you, www.kinsale.com, and we will take our next question from Mark Hughes with Truist. Your line is open. Yeah, thank you. Good morning, online.
Speaker Change: Okay got it thanks for bearing with me. Thank you.
Speaker Change: We will take our next question from Mark Hughes with <unk>. Your line is open.
Mark Hughes: Yes. Thank you good morning.
Mark Hughes: Online.
Mark Hughes: The expense ratio, quite good in the quarter, below 20%. With the mix of business you have now, I know you mentioned, I guess, the seeding commission's $120 billion and Better Acquisition Costs. I assume that's the feeding commissions. Is 20% a good bogeyman, given the current mix, etc., for 2024? Mark, I think that's, you know... Consistent with what I said, I think looking at the expense ratio over the 12-month period probably gives you a very good indication of where we expect to be going forward. Yeah, was there anything else? Anything in the fourth quarter that was unusual?
Mark Hughes: The expense ratio.
Mark Hughes: David in the quarter below 20%.
Sure.
Mark Hughes: With the mix of business you have no I know you mentioned I guess, the ceding commissions of 120 bps.
Mark Hughes: And better acquisition costs I assume that.
Ceding commissions.
Mark Hughes: Is 20% good bogey, given the current mix et cetera for 2024.
Mark I think thats.
Consistent what I said I think looking at looking at the expense ratio over the 12 month period, probably gives you a very good indication of where we expect to be going forward.
Mark Hughes: Was there anything else or anything in the fourth quarter that was unusual I hear what youre, saying, but.
Mark Hughes: I hear what you're saying, but I'm trying to recall what the fourth quarter has. There might be some seasonality that makes it lower than the full year. No, I would say, you know, quarter to quarter, there's always going to be a little bit of variability, but there wasn't anything in particular to note in Q4. And then the seeded premiums, 22 and a half percent, which I assume goes along with your property exposure. If casualty maybe outgrows property a little bit in coming periods, should that come down, or what are some rough thoughts there? Yeah, Mark, it's Mike.
Mark Hughes:
Mark Hughes: I'm trying to recall, what the fourth quarter.
Mark Hughes: Some seasonality that makes it lower than the full year.
Speaker Change: No I would say quarter to quarter, there is always going to be a little bit of variability, but there wasn't anything in particular to note.
Speaker Change: Q4.
Speaker Change: Yes.
Speaker Change: Understood and then the ceded premium.
Speaker Change: Two 5%.
Speaker Change: As.
Speaker Change: I assume that.
Speaker Change: It goes along with your property exposure.
Speaker Change: If casualty, maybe outgrows property, a little bit in coming periods should that come down or what's the rough thoughts there.
Speaker Change: Yes, Mark its Mike the mix of business, there is always going to impact that.
Michael P. Kehoe: The mix of business is always going to impact it. We buy a little more reinsurance on the property side because of some of the volatility that goes with it, certain accounts that are exposed to natural catastrophes, and we buy more reinsurance when we put up larger limits, so our excess casualty book. The primary policy is we typically keep net. Yeah, yeah. And then, Brian Haney, you talk about the accelerating submissions.
Mike Zaremski: We buy a little more reinsurance on the property side because of some of the volatility in that goes with.
Mike Zaremski: Certain accounts that are exposed to natural catastrophe and we buy more reinsurance when.
Mike Zaremski: We put up larger limits, so our excess casualty book.
Mike Zaremski: Sure.
The primary policies, we typically keep net.
Mike Zaremski: Sure.
Mike Zaremski: Yes, yes.
And then Brian Haney talking about accelerating submission.
Brian D. Haney: Will that be accompanied by a little more pricing? Are you pushing a little bit more on the rate in this environment? It's not going to affect how we look at price.
Mike Zaremski: Will that be accompanied by a little more pricing or are you pushing a little bit more on the.
Mike Zaremski: Great.
Mike Zaremski: And in this environment.
Brian D. Haney: It's not going to affect how we look at price I mean, we are pushing pricing up but thats less to do with the submission in cloud and more to do with.
Brian D. Haney: I mean, we are pushing prices up, but that's less to do with submission and more to do with heading, you know, kind of optimizing wealth building. So we're taking into account all the market conditions and what the competitors are doing and coming up with a line with, you know, where we're going to push the rate. Um, so I know going from, you know, 20 to the low 20s to 25 would not affect how we break the business. And then just a final question, the.
Brian D. Haney: Heading kind of optimizing the welfare.
Brian D. Haney: So we're taking a look at all the market condition.
Brian D. Haney: What the competitors.
Brian D. Haney: And coming out by line width.
Brian D. Haney: Where we're going to push rates.
Brian D. Haney: So now going from <unk>.
Brian D. Haney: 20 to low 20% 25 would not affect how we break the business.
Brian D. Haney: And then.
Speaker Change: Just a final question.
Brian D. Haney: Property is more orderly; is it as attractive now? Pricing still seems like it's going up, and if it was attractive last quarter, it's still attractive now.
Speaker Change: Property is more orderly as that.
Speaker Change: As attractive now of pricing, we still think that it's going up and if it was attractive.
Speaker Change: Last quarter.
Speaker Change: So it's still as attractive now how are you looking at your appetite for property given year.
Brian D. Haney: How are you looking at your appetite for property given your current mix and the price level? Well, I guess I would say this is Brian Haney. I would say that prices are still going up, so it's more attractive than it was last year when it was less orderly.
Speaker Change: Current mix.
Speaker Change: The price levels.
Well I guess I would say this is Brian Haney I would say that.
Speaker Change: Prices are still going up.
Speaker Change: So it's more attractive than it was last year when it was less of a way.
Brian D. Haney: So, we still see a great opportunity in property. Excellent, thank you, www.kinsale.com. As a reminder, if you would like to ask a question, press star 1. And we will take our next question from Andrew Anderson with Jeffries. Your line is open. Hey, good morning.
Speaker Change: So we still see a great opportunity in property.
Speaker Change: Excellent. Thank you.
Speaker Change: Yes.
Speaker Change: As a reminder, if you would like to ask a question press star one and.
Speaker Change: We will take our next question from Andrew Anderson with Jefferies. Your line is open.
Andrew Anderson: Hey, good morning, maybe going back to pricing and competitive positioning I'm trying to think about the underlying loss ratio into 'twenty, four and how I had been thinking about kinsale over the past couple of years as you haven't had to compete much on pricing and I suppose one way of looking at that as the bow and policy to issue quote ratio, which.
Andrew Anderson: Maybe going back to pricing and competitive positioning, trying to think about the underlying loss ratio into 24 and how I've been thinking about Kinsale over the past couple years is that you haven't had to compete much on pricing. And I suppose one way of looking at that is the bound policy to issue quote ratio, which hasn't moved much. So it sounds like if you're not competing more in a relative position with pricing versus peers, we could still see flat underlying loss ratios into next year. Is that a fair way to think about the competitive market and underlying margins? Andrew, this is Mike. I would probably take issue with the idea that we don't compete on price. I mean, we bind at 10 12%.
Andrew Anderson: Hasn't moved much.
Speaker Change: So it sounds like if youre not competing more on a relative position with pricing versus peers, we could still see flat underlying loss ratios into next year is that a fair way to think about.
Speaker Change: Competitive market and underlying margins.
Speaker Change: Andrew This is Mike I would probably take issue with the idea that we don't compete on price, we buy 10, 12% and I think it varies a little bit by lineup.
Michael P. Kehoe: I think it varies a little bit by line of business, but we bind 10 or 12% of our new business quotes. And I would say price is the biggest driver, you know, it's a huge concern to our customers. Um, clearly, the last few years have been a little bit more of a seller's market. So that's given us the ability to raise rates and at the same time grow the top line at a really good clip. But, you know, you're not completely divorced from sensitivity around price, so and the U.S. Department of Transportation. This is not an ordinary meeting. This is a very special meeting.
Mike Zaremski: A line of business, but we buying 10 or 12% of our new business quotes.
Mike Zaremski: And I would say price is the biggest driver.
It's a huge concern to our customers.
Speaker Change: Clearly the last few years have been a little bit more of a seller's market. So that's given us the ability to raise rates.
And at the same time grow the topline it up in a really good clip.
Speaker Change: Thank you.
Speaker Change: Youre not completely divorced from sensitivity around price so.
It's still a competitive business in terms of where loss ratios could go from here I mean, we don't really forecast that publicly.
Michael P. Kehoe: We have all the members of the coalition gathered here today to discuss a very important issue in our country. It is an, You know, it's still a competitive business in terms of where loss ratios could go from here. I mean, we don't really forecast that publicly, but if you take into account all the information we're providing, I think you can probably come up with a good guesstimate. Okay, and in the context of submission flows and maybe rates coming down a little bit in property from some industry data, just trying to get an idea of the average premium in property versus casualty. And, you know, if you were to lose some property business because of the pricing dynamic, does the casualty transaction flow overweight that because the average premium there would be higher?
Speaker Change: Publicly but.
Speaker Change: If you take into account all of the information, we're providing us I think you can probably come up with a good guesstimate.
Speaker Change: Okay, and then the context submission flows and maybe rate coming down a little bit in property from some industry data Im just trying to get an idea of the average premium in property versus casualty and if you were to lose some property business because of the pricing dynamic does the casualty transaction.
Speaker Change: Flow overweight that because the average premium there would be higher.
Michael P. Kehoe: I would say the average premium for property depends on what sort of property we're talking about. Commercial property would have a relatively high average premium, but our small property team, our high-value homeowners team, and our personal insurance book all have relatively low average premiums. I wouldn't anticipate a huge impact from it. You know, the market is becoming more orderly, but I don't think it's a, you know, it's not a dramatic effect. It's just right.
Speaker Change: I would say.
Speaker Change: The average premium for property, depending on what sort of property we're talking about.
Speaker Change: Commercial property would have a relatively high average premium.
Speaker Change: Our small property team are.
Speaker Change: Highlight homeowners team our personal in terms block all high relatively low average premiums.
Speaker Change: I don't.
Speaker Change: Wouldn't anticipate.
A huge impact from.
Speaker Change: I mean, the market is becoming more orderly, but I don't think.
Speaker Change: It's not a dramatic effect.
Michael P. Kehoe: It just explains why the property growth rate went from a very, very large number in the fourth quarter of 2022 to a still large but less large number in the fourth quarter of 2023. Thank you. And Mike, maybe just one clarification.
Speaker Change: Interest explains why that.
Speaker Change: Property growth rate went from a very very large number in the.
Speaker Change: The fourth quarter of 2022 to a.
Speaker Change: Still large.
Speaker Change: Life's large number in the fourth quarter of 2023.
Thank you and then Mike maybe just one clarification, you mentioned accident year 2016 to 19 favorable inception to date.
Michael P. Kehoe: You mentioned accident years 16 to 19, favorable inception to date. I just want to be clear, that is on both a consolidated basis but also on a general liability slash casualty basis as well. It's on a consolidated basis, as you get down to, I think we've got about a dozen statutory lines of business. You run into more variability because you have smaller numbers, but on a consolidated basis, we've got a really good track record of posting Reserves in a conservative fashion that has developed favorably over time. Yeah, I guess I was trying to get at it not benefiting from property outweighing casualty because you weren't really writing much casualty back then to begin with, or property back then.
Speaker Change: Just want to be clear that is on both a consolidated basis, but also on.
Speaker Change: General liability slash casualty basis as well.
Speaker Change: And it's not.
Mike Zaremski: So on a consolidated basis as you get down to I think it was that we've got about a dozen statutory lines of business.
Mike Zaremski: You run into more variability because you've got smaller numbers, but.
Mike Zaremski: On a consolidated basis, we've got a really good track record.
Mike Zaremski: Posting reserves in a conservative fashion that developed favorably over time.
Speaker Change: Yes, I guess I was trying to get at it has not.
Speaker Change: Benefiting from property outweigh in casualty because you weren't really ready much casualty back then to begin with our property back then to begin with.
Speaker Change: Yes.
Speaker Change: It gets it gets pretty complex set of Andrew because property is a short tail line that develops pretty quickly.
Michael P. Kehoe: Yeah, it gets pretty complex, though, Andrew, because property is a short-tail line that develops pretty quickly. Some of our casualty business, I'm not an actuary, but I call it a medium-tail, right? It's kind of in the middle, and then we write a lot of long tail casualty. I think, candidly, our book of business is a nice mix of short, medium, and long. But, in general, I would say the casualty business has performed well. We don't have one line of business for general liability.
Speaker Change: Some of our casualty business.
Speaker Change: I'm not an actuary about call it medium tail, Ryan it's kind of in the Middle and then we write a lot of long tail casualty I think candidly our book of business is a nice mix of short medium and long.
Speaker Change: Sure.
But in general I would say the casualty business has performed well we don't have one line of business for general liability is.
Speaker Change: Other liability occurrence other liability claims made products liability occurrence products liability claims made.
Speaker Change: We may even track the excess separately from the primary so.
Speaker Change: Okay, and I think I think there is.
Michael P. Kehoe: Other liability occurrence, other liability claims made, products liability occurrence, products liability claims made. We may even track the excess separately from the primary. Again, I think there's such a kind of complexity running amok for a conference call. But in general, I think the takeaway for investors is that they should have a lot of confidence in the Kinsale balance sheet. And the reason we're reiterating that is kind of to Brian's point earlier.
Speaker Change: Kind of complexity run amok for a conference call, but in general I think the takeaway for investors is.
Speaker Change: They should have a lot of confidence in the kinsale balance sheet and the reason, we're reiterating that it's kind of to Brian's point earlier, there's a lot of companies coming out, saying, hey, we need to take a big charge, because we didn't put enough away in past years, and we're trying to give our investors confidence that hey, that's not coming here.
Understood. Thank you.
Speaker Change: And we will take our next question from Pablo <unk> with JP Morgan Your line is open.
Michael P. Kehoe: There are a lot of companies coming out saying, OK, we need to take a big charge because we didn't put enough away in the past years. And we're trying to give our investors confidence that, hey, that's not coming here. Understood. Thank you, www.kinsale.com. And we will take our next question from Pablo Singham with J.P. Morgan. Your line is open. Hi, thanks for squeezing me in.
Pablo: Hi, Thanks for squeezing me in so first question maybe for Brian Haney.
Pablo: The disclosure and submission count growth, but I was hoping to get some perspective on how policies in force are growing just given that your book is more weighted to new business and others would it be reasonable to assume that growth is in the same neighborhood of submission count growth and if not how much lower.
Speaker Change: I don't have those numbers off the top of my head I think.
Speaker Change: One other way to look at it.
Speaker Change: If you look at our average program, it's probably going up.
Pablo Singham: So first question, maybe for Brian Haney, I appreciate the disclosure and submission on growth, but I was hoping to get some perspective on how policies in force are growing. Given that your book is more weird, and others, growth. Submission congruent, and if not, I'm sorry. I don't have those numbers off the top of my head. I think the one other way to look at it is if you look at our average premium, it's probably going up a bit. And then if you look at our premium growth and back out our average premium growth, that's going to give you a pretty good estimate of growth. So I would probably say it's going up. It might be close to submission growth. I won't be guessing if I said anything.
Speaker Change: That and then.
Speaker Change: If you look at our premium growth and back out our average premium growth that's kind of give you a pretty good estimate of course, Chris So I would probably say it's going up.
Speaker Change: It might be close to production growth I would be guessing about that and I think it's probably going up somewhere between 20 and 30%.
Speaker Change: Yes.
Speaker Change: Thanks that makes sense and then another one for you Brian Haney.
Speaker Change: Assume consistent loss costs, increasing in the mid single digit neighborhood right and couple that with the 5% pricing metrics you provided.
Speaker Change: Would it be fair to assume that nominal premiums are going you know maybe high single digits, assuming for that risk exposures.
Speaker Change: Yes.
Brian D. Haney: Yes is the short answer.
Brian D. Haney: You got the competing it backs up the real rate.
Brian D. Haney: Premium trends, so we get with elevate with inflation being elevated we do get more premium just by virtue of prices of the underlying products going up and then the loss cost trend offsetting that so yes. That's what you have described.
Brian D. Haney: Got it and then the third question for maybe for Bryan Petrucelli one.
Brian D. Haney: It's probably going to go up somewhere between 20 and 30 percent. Yep, thanks, that makes sense. And then another one for you, Brian Haney, if we... Inc.
Bryan P. Petrucelli: The 120 bps benefit from net commissions in 'twenty four.
Bryan P. Petrucelli: Was that the full run rate or will there be some more of that in 'twenty five.
Bryan P. Petrucelli: So again I think that depends on as Mike mentioned earlier mix of business, but.
Pablo Singham: Single-digit neighborhood, right? And a couple of that with the 5% pricing metrics provided. Would it be fair to assume that nominal premiums are going, you know, maybe into the high single digits? Yeah, so the yes is the short answer. You've got the competing effects of the real rate, and the premium trend. So with inflation being elevated, we do get more premium just by virtue of prices of the underlying products going up and then the lost cost trend offsetting that. So yes, that's what you said was fair. Got it. And then a third question for maybe Brian Petrucelli: the 1.2, the 120 bits benefit from that.
Bryan P. Petrucelli: No.
Speaker Change: As that property book grows and becomes a larger percentage of.
Speaker Change: The overall.
Speaker Change: Premium base, we are seeding off more of that business than we do on the casualty side.
Speaker Change: So.
Speaker Change: It's probably important to remind people that even the business we see the way.
Speaker Change: We do get a ceding commission back if you will from the reinsurers.
Speaker Change: It has some embedded.
Speaker Change: Profit in it for us.
Yep Yep.
Speaker Change: And then last for me, maybe for Mike or Brian Haney.
Speaker Change: I know this is something we will see in the filings, but I was hoping you could provide a preview into components.
Speaker Change: Premium growth this quarter compared to the third quarter and I'm thinking specifically of.
Bryan P. Petrucelli: Was that the full run rate, or will there be some more of that? Again, I think that depends on, as Mike mentioned earlier, the mix of business, but, you know, as that property book grows and becomes a larger percentage of the overall premium base, we are ceding more of that business than we do on the casualty side. So it's probably important to remind people that even the business we see is away, we do get a seating commission back, if you will, from the reinsurers, that has some embedded profit in it for us. And then lastly, maybe for Mike or Brian Haney, I know this is something we'll see in the filings, but I was hoping you could provide a preview on the premium growth this quarter compared to the third quarter, right?
Speaker Change: The breakdown by property, which I think grew more than 80% in the third quarter in casualty, which grew about 20%.
Speaker Change: Like the growth rates for those lines are fairly consistent in the fourth quarter would you agree or disagree with that.
Speaker Change: Well I mean property grew at a robust clip in the fourth quarter casualty as Brian said.
Speaker Change: <unk> steady, but <unk>.
Speaker Change: Very strong double digit growth.
Speaker Change: Our transportation segment grew fairly well.
Speaker Change: Professional lines, probably grew a little bit less than the rest of the book. So I think what you said was.
Speaker Change: Accurate.
Speaker Change: Okay, Alright, thank you for the answers.
Speaker Change: Thanks Pablo.
Speaker Change: And we will take some follow up question is from Mark Hughes with Trust. Your line is open.
Mark Hughes: Yes. Thank you the current accident year losses ex cat were flat for the full year compared to 2022.
Bryan P. Petrucelli: Breakdown Building Property, which I think, third quarter and cash flow. It seems like the growth rates for those launches are fairly consistent in the fourth quarter. Well, I mean, property grew at a robust clip in the fourth quarter. Casualty, as Brian said, was, you know, pretty steady, but, you know, very strong double-digit growth. The Transportation segment grew fairly well. Professional lines probably grew a little bit less than the rest of the book.
Mark Hughes: Given what you see in terms of the mix of business loss cost trends all of that.
Mark Hughes: Is that a good starting point for 2020 for understanding it's too.
Mark Hughes: Seasonality and that tends to be higher or more.
Mark Hughes: Early part of the year and lower as the year progresses.
Speaker Change: Well, we don't forecast that.
Speaker Change: You said thats, what youre going to do I wouldn't I don't think we take issue with it.
Okay.
Michael P. Kehoe: So, I think what you said was... accurate. Okay. All right. Thank you for that. Thanks, Pablo, www.kinsale.com, And we will take some follow-up questions from Mark Hughes with Truist. Your line is open. Yeah, thank you. The current accident year losses X cap was flat for the full year compared to 2022.
Speaker Change: Fair enough. Thank you.
Speaker Change: And we will take follow up questions from Mike Zaremski with BMO. Your line is open.
Mike Zaremski: Hey, Thanks real quick I know you gave us some.
Mike Zaremski: Now gets on the expense ratio pushes and pulls in the prepared remarks.
Mike Zaremski: So I guess, we can just use that to think through that.
Mark Hughes: Given what you see in terms of mixed business, lost cost trends, all of that, is that a good starting point for 2024? Understanding that you do have seasonality in that and it tends to be higher in the early part of the year and lower as the year progresses.
Mike Zaremski: For 24 numbers unless you wanted to kind of maybe hold our hands a little bit more in.
Mike Zaremski: And help us think through how.
Mike Zaremski: How much of.
Mark Hughes: Well, you know, we don't forecast that, but if you said that's what you're going to do, I wouldn't, I don't think we'd take issue. Fair enough, thank you, www.kinsale.com. And we will take follow-up questions from Mike Zaremsky with BMO. Your line is open. Hey, thanks. Real quick. I know you gave us some nuggets on the expense ratio, pushes and pulls, and the preparer marks, so I guess we can just use that to think through the forward 24 numbers, unless you wanted to kind of maybe hold our hands a little bit more and help us think through how much of this is going to run right into the coming quarters. Yeah, I mean, I don't think we can say any more than we did. Take a look at the annual expense ratio, and that should be a pretty good guide for you.
Mike Zaremski: It's going to run rate.
Mike Zaremski: Enter into the coming quarters.
Mike Zaremski: Yes.
Speaker Change: I don't think we can say anymore than we did.
Speaker Change: Look at the annual yes. So if you take a look at the annual expense ratio that should be a pretty good guide for you.
Speaker Change: Okay. That's all I had thank you helpful.
Speaker Change: Thanks, Brian.
Publishing Zhang: And we will take follow up questions from publishing Zhang with Jpmorgan. Your line is open.
Zhang: Hey, I thought I'd just throw in one more on reserve so recognizing that the overall resurface or just good maybe this one is for Mike I think in the basket callouts pressure in specific lines, if I remember correctly it was in.
Zhang: In construction right.
Zhang: I was wondering if you could provide perspective on sort of where.
Zhang: Recognizing that the overall.
Zhang: Because in a good spot, but are there lines of business or a class where.
Mike Zaremsky: Okay, that's all I had. Thank you.
Zhang: You are probably aware, Chris and others.
Publishing Zone: All right. And we will take follow-up questions from Publishing Zone with J.P. Morgan. Your line is open.
Chris: Well, what's unique to construction Pablo is the fact that it's one of our longer tail lines of business.
Chris: Specifically our component.
Michael P. Kehoe: I think in the past you called out pressure in specific lines, if I remember correctly. I was wondering if you could provide perspective on sort of where, you know, acknowledging that the Revolt book is in a good spot, but are there lines of business or class? You know, you're probably more at risk than... Well, what's unique to construction Pablo is the fact that it's one of our longer tail lines of business, specifically a component of the construction business, which we call construction defects. They're typically water intrusion claims. Sometimes the water intrusion is so slow that the property owner isn't even aware of it for a number of years, and by the time it's discovered...
Chris: The construction business, which we call construction defect.
Chris: They're typically water intrusion claims.
Chris: Sometimes the water intrusion is so slow that.
Chris: Property owner isn't even aware of it for a number of years and by the time it's discovered.
Chris: It could be.
Chris: And extensive.
Chris: Renovation of $1 million claim and as clients can come in late $5 7 million.
Chris: Nine years later, sometimes.
California, I think is a 10 year statute of repose Southern Colorado, maybe.
Chris: Maybe like seven years.
Chris: Other states like Virginia, I think its one year. So it varies a little bit depending on where you are but.
Chris: The long tail nature of that business.
Chris: Combined with I think we hit 9% inflation a couple of years ago.
Michael P. Kehoe: It could be, you know, you know, an extensive renovation, a million dollar claim. And those claims can come in late five, seven, 9 years later sometimes. California, I think, has a 10-year statute of repose. I think Colorado, maybe... I think it's one year, so it varies a little bit depending on where you are.
Chris: That inflation hit labor costs it had.
Chris: <unk>.
Chris: Building supply costs. So there was there was definitely an impact on the construction book at can sale.
Chris: <unk>.
Speaker Change: Does that answer your question.
Speaker Change: Yep.
Speaker Change: I was wondering aside from construction are there any other lines or a class where you start to see.
Speaker Change: Not major issues, but sir.
Speaker Change: These like I guess latent issues emerging artists.
Speaker Change: Trucks are off like top of mind for you and the rest for the rest of the lines are.
Michael P. Kehoe: The long-tail nature of that business, combined with, I think we hit 9% inflation a couple years ago. You know, that inflation hit labor costs, it hit, you know, building supply costs, so, you know, there was definitely an impact on the construction book at Kinsale. Do you think that answers your question? Yes, and I was wondering, aside from construction, are there any other lines or paths where you sort of see, you know, not major issues, but sort of...
Speaker Change: Broadly okay.
Speaker Change: Yes, I would say construction is probably the most material.
Speaker Change: It's a big part of our business.
Speaker Change: So that kind of stands out to me.
Speaker Change: In general our book of business is performing at a really attractive level. That's why we're publishing these kind of results not just in the fourth quarter, but.
Speaker Change: For the last several years those results are a reflection on a high performing business.
Michael P. Kehoe: These are like, I guess, latent issues emerging, or it's constructed sort of like, a pop of mind for you and the rest of the lines, you know, broadly. I would say construction is probably the most material, you know; it's a big part of our business. So that kind of stands out to me.
Speaker Change: Even in the face of a lot of conservatism in our reserving.
Speaker Change: And so even the construction business is generating a healthy return for us it's just.
Speaker Change: Some of those claims have developed a little bit later than maybe we originally anticipated.
Speaker Change: Okay, Yeah that makes sense, Mike Thank you.
Speaker Change: Okay.
Michael P. Kehoe: I mean, in general, our book of business is performing at a really attractive level. That's why we're publishing these kind of results, not just in the fourth quarter, but... For the last several years, those results are a reflection of a highly performing business, even in the face of a lot of conservatism in the reserve. And so even the construction business is generating a healthy return for us. It's just that, you know, some of those claims have developed a little bit later than maybe we originally anticipated.
Speaker Change: And we have no further questions at this time I will now turn the call back to Mr. Michael Kaye Hill for closing remarks.
Speaker Change: Okay, well, thank you operator, and thanks, everybody for joining us today, and we look forward to speaking with everybody again here very soon have a great day.
Speaker Change: And ladies and gentlemen, this concludes today's call and we thank you for your participation you may now disconnect.
Speaker Change: [music].
Speaker Change: Okay.
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Michael P. Kehoe: Okay, yep, that makes sense, Mike. Thank you, www.kinsale.com, and we have no further questions at this time. I will now turn the call back to Mr. Michael Kehoe for closing remarks. Okay. Well, thank you, operator, and thank everybody for joining us today. And we look forward to speaking with everybody again here very soon. Have a great day. And, ladies and gentlemen, this concludes today's call, and we thank you for your participation. You may now disconnect.
Speaker Change: Sure.
Speaker Change: Yes.
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Speaker Change: Yes.
Speaker Change: [music].
Yeah.
Yes.
Speaker Change: [music].
Speaker Change: Okay.