☒ | Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended March 31, 2017 |
☐ | Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from _______ to _______ |
KINSALE CAPITAL GROUP, INC. (Exact name of registrant as specified in its charter) | ||
Delaware (State or other jurisdiction of incorporation or organization) | 98-0664337 (I.R.S. Employer Identification Number) |
2221 Edward Holland Drive, Suite 600 Richmond, VA 23230 | ||
(Address of principal executive offices) | ||
(804) 289-1300 | ||
(Registrant's telephone number, including area code) |
Large accelerated filer ☐ | Accelerated filer ☐ | Non-accelerated filer ☒ (Do not check if a smaller reporting company) | Smaller reporting company ☐ | Emerging growth company ☒ |
Page | |||
PART I. FINANCIAL INFORMATION | |||
Item 1. | |||
Item 2. | |||
Item 3. | |||
Item 4. | |||
PART II. OTHER INFORMATION | |||
Item 1. | |||
Item IA. | |||
Item 2. | |||
Item 6. | |||
March 31, 2017 | December 31, 2016 | |||||||
(in thousands, except share and per share data) | ||||||||
Assets | ||||||||
Investments: | ||||||||
Fixed maturity securities available-for-sale, at fair value (amortized cost: $399,331 in 2017; $413,526 in 2016) | $ | 397,757 | $ | 411,223 | ||||
Equity securities available-for-sale, at fair value (cost: $17,465 in 2017; $14,350 in 2016) | 22,410 | 18,374 | ||||||
Total investments | 420,167 | 429,597 | ||||||
Cash and cash equivalents | 75,556 | 50,752 | ||||||
Investment income due and accrued | 2,500 | 2,293 | ||||||
Premiums receivable, net | 18,696 | 16,984 | ||||||
Receivable from reinsurers | — | 8,567 | ||||||
Reinsurance recoverables | 40,649 | 70,317 | ||||||
Ceded unearned premiums | 14,183 | 13,512 | ||||||
Deferred policy acquisition costs, net of ceding commissions | 10,501 | 10,150 | ||||||
Intangible assets | 3,538 | 3,538 | ||||||
Deferred income tax asset, net | 6,653 | 6,605 | ||||||
Other assets | 2,012 | 2,074 | ||||||
Total assets | $ | 594,455 | $ | 614,389 | ||||
Liabilities and Stockholders' Equity | ||||||||
Liabilities: | ||||||||
Reserves for unpaid losses and loss adjustment expenses | $ | 273,001 | $ | 264,801 | ||||
Unearned premiums | 93,744 | 89,344 | ||||||
Payable to reinsurers | 3,316 | 4,090 | ||||||
Funds held for reinsurers | — | 36,497 | ||||||
Accounts payable and accrued expenses | 3,399 | 8,752 | ||||||
Other liabilities | 4,524 | 691 | ||||||
Total liabilities | 377,984 | 404,175 | ||||||
Stockholders’ equity: | ||||||||
Common stock, $0.01 par value, 400,000,000 shares authorized, 20,968,707 shares issued and outstanding at March 31, 2017 and December 31, 2016 | 210 | 210 | ||||||
Additional paid-in capital | 153,514 | 153,353 | ||||||
Retained earnings | 58,663 | 53,640 | ||||||
Accumulated other comprehensive income | 4,084 | 3,011 | ||||||
Stockholders’ equity | 216,471 | 210,214 | ||||||
Total liabilities and stockholders’ equity | $ | 594,455 | $ | 614,389 |
Three Months Ended March 31, | ||||||||
2017 | 2016 | |||||||
(in thousands, except per share data) | ||||||||
Revenues: | ||||||||
Gross written premiums | $ | 52,862 | $ | 43,082 | ||||
Ceded written premiums | (8,700 | ) | 4,713 | |||||
Net written premiums | 44,162 | 47,795 | ||||||
Change in unearned premiums | (3,729 | ) | (17,198 | ) | ||||
Net earned premiums | 40,433 | 30,597 | ||||||
Net investment income | 2,286 | 1,676 | ||||||
Net realized investment (losses) gains | (32 | ) | 387 | |||||
Other income | — | 58 | ||||||
Total revenues | 42,687 | 32,718 | ||||||
Expenses: | ||||||||
Losses and loss adjustment expenses | 22,107 | 18,121 | ||||||
Underwriting, acquisition and insurance expenses | 11,294 | 6,248 | ||||||
Other expenses | — | 460 | ||||||
Total expenses | 33,401 | 24,829 | ||||||
Income before income taxes | 9,286 | 7,889 | ||||||
Total income tax expense | 3,005 | 2,632 | ||||||
Net income | 6,281 | 5,257 | ||||||
Other comprehensive income: | ||||||||
Change in unrealized gains, net of taxes of $577 in 2017 and $1,145 in 2016 | 1,073 | 2,126 | ||||||
Total comprehensive income | $ | 7,354 | $ | 7,383 |
Earnings per share - basic: | ||||||||
Common stock | $ | 0.30 | $ | — | ||||
Common stock - Class A | $ | — | $ | 0.37 | ||||
Common stock - Class B | $ | — | $ | 0.07 | ||||
Earnings per share - diluted: | ||||||||
Common stock | $ | 0.29 | $ | — | ||||
Common stock - Class A | $ | — | $ | 0.37 | ||||
Common stock - Class B | $ | — | $ | 0.07 | ||||
Weighted-average shares outstanding - basic: | ||||||||
Common stock | 20,969 | — | ||||||
Common stock - Class A | — | 13,803 | ||||||
Common stock - Class B | — | 1,531 | ||||||
Weighted-average shares outstanding - diluted: | ||||||||
Common stock | 21,389 | — | ||||||
Common stock - Class A | — | 13,803 | ||||||
Common stock - Class B | — | 1,538 |
Shares of Class A Common Stock | Shares of Class B Common Stock | Shares of Common Stock | Class A Common Stock | Class B Common Stock | Common Stock | Additional Paid-in Capital | Retained Earnings | Accumu- lated Other Compre- hensive Income | Total Stock- holders' Equity | ||||||||||||||||||||||||||||
(in thousands) | |||||||||||||||||||||||||||||||||||||
Balance at December 31, 2015 | 13,803 | 1,514 | — | $ | 1 | $ | — | $ | — | $ | 80,229 | $ | 29,570 | $ | 3,651 | $ | 113,451 | ||||||||||||||||||||
Stock-based compensation | — | 21 | — | — | — | — | 7 | — | — | 7 | |||||||||||||||||||||||||||
Other comprehensive income, net of tax | — | — | — | — | — | — | — | — | 2,126 | 2,126 | |||||||||||||||||||||||||||
Net income | — | — | — | — | — | — | — | 5,257 | — | 5,257 | |||||||||||||||||||||||||||
Balance at March 31, 2016 | 13,803 | 1,535 | — | $ | 1 | $ | — | $ | — | $ | 80,236 | $ | 34,827 | $ | 5,777 | $ | 120,841 | ||||||||||||||||||||
Balance at December 31, 2016 | — | — | 20,969 | $ | — | $ | — | $ | 210 | $ | 153,353 | $ | 53,640 | $ | 3,011 | $ | 210,214 | ||||||||||||||||||||
Stock-based compensation | — | — | — | — | — | — | 161 | — | — | 161 | |||||||||||||||||||||||||||
Dividends | — | — | — | — | — | — | — | (1,258 | ) | — | (1,258 | ) | |||||||||||||||||||||||||
Other comprehensive income, net of tax | — | — | — | — | — | — | — | — | 1,073 | 1,073 | |||||||||||||||||||||||||||
Net income | — | — | — | — | — | — | — | 6,281 | — | 6,281 | |||||||||||||||||||||||||||
Balance at March 31, 2017 | — | — | 20,969 | $ | — | $ | — | $ | 210 | $ | 153,514 | $ | 58,663 | $ | 4,084 | $ | 216,471 |
Three Months Ended March 31, | ||||||||
2017 | 2016 | |||||||
(in thousands) | ||||||||
Operating activities: | ||||||||
Net cash provided by operating activities | $ | 15,447 | $ | 16,169 | ||||
Investing activities: | ||||||||
Purchase of property and equipment | (31 | ) | (122 | ) | ||||
Change in short-term investments, net | — | (7,684 | ) | |||||
Securities available-for-sale: | ||||||||
Purchases – fixed maturity securities | (6,147 | ) | (24,039 | ) | ||||
Purchases – equity securities | (3,114 | ) | (2,084 | ) | ||||
Sales – fixed maturity securities | 718 | 9,328 | ||||||
Maturities and calls – fixed maturity securities | 19,198 | 9,901 | ||||||
Net cash provided by (used in) investing activities | 10,624 | (14,700 | ) | |||||
Financing activities: | ||||||||
Dividends paid | (1,258 | ) | — | |||||
Payments on capital lease | (9 | ) | (33 | ) | ||||
Net cash used in financing activities | (1,267 | ) | (33 | ) | ||||
Net change in cash and cash equivalents | 24,804 | 1,436 | ||||||
Cash and cash equivalents at beginning of year | 50,752 | 24,544 | ||||||
Cash and cash equivalents at end of period | $ | 75,556 | $ | 25,980 |
March 31, 2017 | ||||||||||||||||
Amortized Cost | Gross Unrealized Holding Gains | Gross Unrealized Holding Losses | Estimated Fair Value | |||||||||||||
(in thousands) | ||||||||||||||||
Fixed maturities: | ||||||||||||||||
U.S. Treasury securities and obligations of U.S. government agencies | $ | 12,106 | $ | 6 | $ | (22 | ) | $ | 12,090 | |||||||
Obligations of states, municipalities and political subdivisions | 128,662 | 1,756 | (2,574 | ) | 127,844 | |||||||||||
Corporate and other securities | 107,713 | 560 | (154 | ) | 108,119 | |||||||||||
Asset-backed securities | 68,965 | 241 | (218 | ) | 68,988 | |||||||||||
Residential mortgage-backed securities | 81,885 | 554 | (1,723 | ) | 80,716 | |||||||||||
Total fixed maturities | 399,331 | 3,117 | (4,691 | ) | 397,757 | |||||||||||
Equity securities: | ||||||||||||||||
Exchange traded funds | 17,465 | 4,952 | (7 | ) | 22,410 | |||||||||||
Total available-for-sale investments | $ | 416,796 | $ | 8,069 | $ | (4,698 | ) | $ | 420,167 |
December 31, 2016 | ||||||||||||||||
Amortized Cost | Gross Unrealized Holding Gains | Gross Unrealized Holding Losses | Estimated Fair Value | |||||||||||||
(in thousands) | ||||||||||||||||
Fixed maturities: | ||||||||||||||||
U.S. Treasury securities and obligations of U.S. government agencies | $ | 12,106 | $ | 8 | $ | (16 | ) | $ | 12,098 | |||||||
Obligations of states, municipalities and political subdivisions | 124,728 | 1,470 | (2,960 | ) | 123,238 | |||||||||||
Corporate and other securities | 118,473 | 550 | (233 | ) | 118,790 | |||||||||||
Asset-backed securities | 73,317 | 241 | (264 | ) | 73,294 | |||||||||||
Residential mortgage-backed securities | 84,902 | 585 | (1,684 | ) | 83,803 | |||||||||||
Total fixed maturities | 413,526 | 2,854 | (5,157 | ) | 411,223 | |||||||||||
Equity securities: | ||||||||||||||||
Exchange traded funds | 14,350 | 4,026 | (2 | ) | 18,374 | |||||||||||
Total available-for-sale investments | $ | 427,876 | $ | 6,880 | $ | (5,159 | ) | $ | 429,597 |
March 31, 2017 | ||||||||||||||||||||||||
Less than 12 Months | 12 Months or Longer | Total | ||||||||||||||||||||||
Estimated Fair Value | Gross Unrealized Holding Losses | Estimated Fair Value | Gross Unrealized Holding Losses | Estimated Fair Value | Gross Unrealized Holding Losses | |||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||
Fixed maturities: | ||||||||||||||||||||||||
U.S. Treasury securities and obligations of U.S. government agencies | $ | 11,975 | $ | (22 | ) | $ | — | $ | — | $ | 11,975 | $ | (22 | ) | ||||||||||
Obligations of states, municipalities and political subdivisions | 63,280 | (2,517 | ) | 3,214 | (57 | ) | 66,494 | (2,574 | ) | |||||||||||||||
Corporate and other securities | 41,345 | (114 | ) | 6,962 | (40 | ) | 48,307 | (154 | ) | |||||||||||||||
Asset-backed securities | 13,408 | (194 | ) | 7,267 | (24 | ) | 20,675 | (218 | ) | |||||||||||||||
Residential mortgage-backed securities | 63,050 | (1,443 | ) | 7,279 | (280 | ) | 70,329 | (1,723 | ) | |||||||||||||||
Total fixed maturities | 193,058 | (4,290 | ) | 24,722 | (401 | ) | 217,780 | (4,691 | ) | |||||||||||||||
Equity securities: | ||||||||||||||||||||||||
Exchange traded funds | 1,013 | (7 | ) | — | — | 1,013 | (7 | ) | ||||||||||||||||
Total | $ | 194,071 | $ | (4,297 | ) | $ | 24,722 | $ | (401 | ) | $ | 218,793 | $ | (4,698 | ) |
December 31, 2016 | ||||||||||||||||||||||||
Less than 12 Months | 12 Months or Longer | Total | ||||||||||||||||||||||
Estimated Fair Value | Gross Unrealized Holding Losses | Estimated Fair Value | Gross Unrealized Holding Losses | Estimated Fair Value | Gross Unrealized Holding Losses | |||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||
Fixed maturities: | ||||||||||||||||||||||||
U.S. Treasury securities and obligations of U.S. government agencies | $ | 8,980 | $ | (16 | ) | $ | — | $ | — | $ | 8,980 | $ | (16 | ) | ||||||||||
Obligations of states, municipalities and political subdivisions | 70,727 | (2,960 | ) | — | — | 70,727 | (2,960 | ) | ||||||||||||||||
Corporate and other securities | 50,274 | (145 | ) | 12,375 | (88 | ) | 62,649 | (233 | ) | |||||||||||||||
Asset-backed securities | 14,750 | (232 | ) | 9,961 | (32 | ) | 24,711 | (264 | ) | |||||||||||||||
Residential mortgage-backed securities | 65,439 | (1,403 | ) | 7,186 | (281 | ) | 72,625 | (1,684 | ) | |||||||||||||||
Total fixed maturities | 210,170 | (4,756 | ) | 29,522 | (401 | ) | 239,692 | (5,157 | ) | |||||||||||||||
Equity securities: | ||||||||||||||||||||||||
Exchange traded funds | 388 | (2 | ) | — | — | 388 | (2 | ) | ||||||||||||||||
Total | $ | 210,558 | $ | (4,758 | ) | $ | 29,522 | $ | (401 | ) | $ | 240,080 | $ | (5,159 | ) |
March 31, 2017 | ||||||||
Amortized | Estimated | |||||||
Cost | Fair Value | |||||||
(in thousands) | ||||||||
Due in one year or less | $ | 67,053 | $ | 67,053 | ||||
Due after one year through five years | 56,664 | 57,157 | ||||||
Due after five years through ten years | 24,556 | 25,124 | ||||||
Due after ten years | 100,208 | 98,719 | ||||||
Asset-backed securities | 68,965 | 68,988 | ||||||
Residential mortgage-backed securities | 81,885 | 80,716 | ||||||
Total fixed maturities | $ | 399,331 | $ | 397,757 |
Three Months Ended March 31, | ||||||||
2017 | 2016 | |||||||
(in thousands) | ||||||||
Interest: | ||||||||
Taxable bonds | $ | 1,537 | $ | 1,389 | ||||
Municipal bonds (tax exempt) | 794 | 406 | ||||||
Cash, cash equivalents, and short-term investments | 87 | 8 | ||||||
Dividends on equity securities | 110 | 84 | ||||||
Gross investment income | 2,528 | 1,887 | ||||||
Investment expenses | (242 | ) | (211 | ) | ||||
Net investment income | $ | 2,286 | $ | 1,676 |
Three Months Ended March 31, | ||||||||
2017 | 2016 | |||||||
(in thousands) | ||||||||
Realized gains: | ||||||||
Sales of fixed maturities | $ | — | $ | 387 | ||||
Total realized gains | — | 387 | ||||||
Realized losses: | ||||||||
Sales of fixed maturities | (32 | ) | — | |||||
Total realized losses | (32 | ) | — | |||||
Net investment (losses) gains | $ | (32 | ) | $ | 387 |
Three Months Ended March 31, | ||||||||
2017 | 2016 | |||||||
(in thousands) | ||||||||
Change in net unrealized gains (losses): | ||||||||
Fixed maturities | $ | 729 | $ | 2,930 | ||||
Equity securities | 921 | 341 | ||||||
Net increase | $ | 1,650 | $ | 3,271 |
March 31, 2017 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
(in thousands) | ||||||||||||||||
Assets | ||||||||||||||||
Fixed maturities: | ||||||||||||||||
U.S. Treasury securities and obligations of U.S. government agencies | $ | 12,090 | $ | — | $ | — | $ | 12,090 | ||||||||
Obligations of states, municipalities and political subdivisions | — | 127,844 | — | 127,844 | ||||||||||||
Corporate and other securities | — | 108,119 | — | 108,119 | ||||||||||||
Asset-backed securities | — | 68,988 | — | 68,988 | ||||||||||||
Residential mortgage-backed securities | — | 80,716 | — | 80,716 | ||||||||||||
Total fixed maturities | 12,090 | 385,667 | — | 397,757 | ||||||||||||
Equity securities: | ||||||||||||||||
Exchange traded funds | 22,410 | — | — | 22,410 | ||||||||||||
Total | $ | 34,500 | $ | 385,667 | $ | — | $ | 420,167 |
December 31, 2016 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
(in thousands) | ||||||||||||||||
Assets | ||||||||||||||||
Fixed maturities: | ||||||||||||||||
U.S. Treasury securities and obligations of U.S. government agencies | $ | 12,098 | $ | — | $ | — | $ | 12,098 | ||||||||
Obligations of states, municipalities and political subdivisions | — | 123,238 | — | 123,238 | ||||||||||||
Corporate and other securities | — | 118,790 | — | 118,790 | ||||||||||||
Asset-backed securities | — | 73,294 | — | 73,294 | ||||||||||||
Residential mortgage-backed securities | — | 83,803 | — | 83,803 | ||||||||||||
Total fixed maturities | 12,098 | 399,125 | — | 411,223 | ||||||||||||
Equity securities: | ||||||||||||||||
Exchange traded funds | 18,374 | — | — | 18,374 | ||||||||||||
Total | $ | 30,472 | $ | 399,125 | $ | — | $ | 429,597 |
Three Months Ended March 31, | ||||||||
2017 | 2016 | |||||||
(in thousands) | ||||||||
Balance, beginning of period | $ | 10,150 | $ | (1,696 | ) | |||
Policy acquisition costs deferred: | ||||||||
Direct commissions | 7,880 | 6,400 | ||||||
Ceding commissions | (2,591 | ) | 2,791 | |||||
Other underwriting and policy acquisition costs | 761 | 726 | ||||||
Policy acquisition costs deferred | 6,050 | 9,917 | ||||||
Amortization of net policy acquisition costs | (5,699 | ) | (2,916 | ) | ||||
Balance, end of period | $ | 10,501 | $ | 5,305 |
Three Months Ended March 31, | ||||||||
2017 | 2016 | |||||||
(in thousands) | ||||||||
Underwriting, acquisition and insurance expenses incurred: | ||||||||
Gross commissions | $ | 7,149 | $ | 6,406 | ||||
Ceding commissions | (2,346 | ) | (5,408 | ) | ||||
Other operating expenses | 6,491 | 5,250 | ||||||
Total | $ | 11,294 | $ | 6,248 |
Three Months Ended March 31, | ||||||||
2017 | 2016 | |||||||
(in thousands, except per share data) | ||||||||
Earnings allocable to common stockholders | $ | 6,281 | $ | — | ||||
Earnings allocable to Class A stockholders | $ | — | $ | 5,154 | ||||
Earnings allocable to Class B stockholders | $ | — | $ | 103 | ||||
Basic earnings per share: | ||||||||
Common stock | $ | 0.30 | $ | — | ||||
Class A common stock | $ | — | $ | 0.37 | ||||
Class B common stock | $ | — | $ | 0.07 | ||||
Diluted earnings per share: | ||||||||
Common stock | $ | 0.29 | $ | — | ||||
Class A common stock | $ | — | $ | 0.37 | ||||
Class B common stock | $ | — | $ | 0.07 | ||||
Basic weighted average shares outstanding: | ||||||||
Common stock | 20,969 | — | ||||||
Class A common stock | — | 13,803 | ||||||
Class B common stock | — | 1,531 | ||||||
Dilutive effect of shares issued under stock compensation arrangements: | ||||||||
Common stock - stock options | 420 | — | ||||||
Class B common stock - unvested restricted stock grants | — | 7 | ||||||
Diluted weighted average shares outstanding: | ||||||||
Common stock | 21,389 | — | ||||||
Class A common stock | — | 13,803 | ||||||
Class B common stock | — | 1,538 |
March 31, | ||||||||
2017 | 2016 | |||||||
(in thousands) | ||||||||
Net reserves for unpaid losses and loss adjustment expenses, beginning of year | $ | 194,602 | $ | 124,126 | ||||
Commutation of MLQS | 27,929 | 24,296 | ||||||
Adjusted net reserves for losses and loss adjustment expenses, beginning of year | 222,531 | 148,422 | ||||||
Incurred losses and loss adjustment expenses: | ||||||||
Current year | 27,211 | 20,844 | ||||||
Prior years | (5,104 | ) | (2,723 | ) | ||||
Total net losses and loss adjustment expenses incurred | 22,107 | 18,121 | ||||||
Payments: | ||||||||
Current year | 333 | 290 | ||||||
Prior years | 11,566 | 5,133 | ||||||
Total payments | 11,899 | 5,423 | ||||||
Net reserves for unpaid losses and loss adjustment expenses, end of period | 232,739 | 161,120 | ||||||
Reinsurance recoverable on unpaid losses | 40,262 | 74,157 | ||||||
Gross reserves for unpaid losses and loss adjustment expenses, end of period | $ | 273,001 | $ | 235,277 |
Three Months Ended March 31, | ||||||||
2017 | 2016 | |||||||
(in thousands) | ||||||||
Written: | ||||||||
Direct | $ | 52,862 | $ | 42,990 | ||||
Assumed | — | 92 | ||||||
Ceded | (8,700 | ) | 4,713 | |||||
Net written | $ | 44,162 | $ | 47,795 | ||||
Earned: | ||||||||
Direct | $ | 48,462 | $ | 43,093 | ||||
Assumed | — | 32 | ||||||
Ceded | (8,029 | ) | (12,528 | ) | ||||
Net earned | $ | 40,433 | $ | 30,597 |
Three Months Ended March 31, | ||||||||
2017 | 2016 | |||||||
(in thousands) | ||||||||
Unrealized gains arising during the period, before income taxes | $ | 1,618 | $ | 3,658 | ||||
Income taxes | (566 | ) | (1,280 | ) | ||||
Unrealized gains arising during the period, net of income taxes | 1,052 | 2,378 | ||||||
Less reclassification adjustment: | ||||||||
Net realized investment gains (losses) | (32 | ) | 387 | |||||
Income taxes | 11 | (135 | ) | |||||
Reclassification adjustment included in net income | (21 | ) | 252 | |||||
Other comprehensive income | $ | 1,073 | $ | 2,126 |
Three Months Ended March 31, 2017 | Three Months Ended March 31, 2016 | |||||||||||||||||||||||
($ in thousands) | Including Quota Share | Effect of Quota Share | Excluding Quota Share | Including Quota Share | Effect of Quota Share | Excluding Quota Share | ||||||||||||||||||
Gross written premiums | $ | 52,862 | $ | — | $ | 52,862 | $ | 43,082 | $ | — | $ | 43,082 | ||||||||||||
Ceded written premiums | (8,700 | ) | — | (8,700 | ) | 4,713 | 11,589 | (6,876 | ) | |||||||||||||||
Net written premiums | $ | 44,162 | $ | — | $ | 44,162 | $ | 47,795 | $ | 11,589 | $ | 36,206 | ||||||||||||
Net retention (1) | 83.5 | % | 83.5 | % | 110.9 | % | 84.0 | % | ||||||||||||||||
Net earned premiums | $ | 40,433 | $ | — | $ | 40,433 | $ | 30,597 | $ | (5,432 | ) | $ | 36,029 | |||||||||||
Losses and loss adjustment expenses | (22,107 | ) | — | (22,107 | ) | (18,121 | ) | 1,810 | (19,931 | ) | ||||||||||||||
Underwriting, acquisition and insurance expenses | (11,294 | ) | — | (11,294 | ) | (6,248 | ) | 3,405 | (9,653 | ) | ||||||||||||||
Underwriting income (2) | $ | 7,032 | $ | — | $ | 7,032 | $ | 6,228 | $ | (217 | ) | $ | 6,445 | |||||||||||
Loss ratio | 54.7 | % | — | % | — | 59.2 | % | 33.3 | % | — | ||||||||||||||
Expense ratio | 27.9 | % | — | % | — | 20.4 | % | 62.7 | % | — | ||||||||||||||
Combined ratio | 82.6 | % | — | % | — | 79.6 | % | 96.0 | % | — | ||||||||||||||
Adjusted loss ratio (3) | — | — | 54.7 | % | — | — | 55.3 | % | ||||||||||||||||
Adjusted expense ratio (3) | — | — | 27.9 | % | — | — | 26.8 | % | ||||||||||||||||
Adjusted combined ratio (3) | — | — | 82.6 | % | — | — | 82.1 | % |
• | New business submissions; |
• | Binding of new business submissions into policies; |
• | Renewals of existing policies; and |
• | Average size and premium rate of new and existing policies. |
• | Frequency of claims associated with the particular types of insurance contracts that we write; |
• | Trends in the average size of losses incurred on a particular type of business; |
• | Mix of business written by us; |
• | Changes in the legal or regulatory environment related to the business we write; |
• | Trends in legal defense costs; |
• | Wage inflation; and |
• | Inflation in medical costs. |
Three Months Ended March 31, | |||||||||||||||
($ in thousands) | 2017 | 2016 | Change | Percent | |||||||||||
Gross written premiums | $ | 52,862 | $ | 43,082 | $ | 9,780 | 22.7 | % | |||||||
Ceded written premiums | (8,700 | ) | 4,713 | (13,413 | ) | (284.6 | )% | ||||||||
Net written premiums | $ | 44,162 | $ | 47,795 | $ | (3,633 | ) | (7.6 | )% | ||||||
Net earned premiums | $ | 40,433 | $ | 30,597 | $ | 9,836 | 32.1 | % | |||||||
Losses and loss adjustment expenses | 22,107 | 18,121 | 3,986 | 22.0 | % | ||||||||||
Underwriting, acquisition and insurance expenses | 11,294 | 6,248 | 5,046 | 80.8 | % | ||||||||||
Underwriting income (1) | 7,032 | 6,228 | 804 | 12.9 | % | ||||||||||
Other expenses, net | — | (402 | ) | 402 | (100.0 | )% | |||||||||
Net investment income | 2,286 | 1,676 | 610 | 36.4 | % | ||||||||||
Net investment gains | (32 | ) | 387 | (419 | ) | (108.3 | )% | ||||||||
Income before taxes | 9,286 | 7,889 | 1,397 | 17.7 | % | ||||||||||
Income tax expense | 3,005 | 2,632 | 373 | 14.2 | |||||||||||
Net income | $ | 6,281 | $ | 5,257 | $ | 1,024 | 19.5 | % | |||||||
Return on equity | 11.8 | % | 18.0 | % | |||||||||||
Loss ratio | 54.7 | % | 59.2 | % | |||||||||||
Expense ratio | 27.9 | % | 20.4 | % | |||||||||||
Combined ratio | 82.6 | % | 79.6 | % |
Three Months Ended March 31, | ||||||||||||||
2017 | 2016 | |||||||||||||
($ in thousands) | Losses and loss adjustment expenses | % of Earned Premiums | Losses and loss adjustment expenses | % of Earned Premiums | ||||||||||
Loss ratio: | ||||||||||||||
Current accident year | $ | 27,211 | 67.3 | % | $ | 20,844 | 68.1 | % | ||||||
Effect of prior year development | (5,104 | ) | (12.6 | ) | (2,723 | ) | (8.9 | ) | ||||||
$ | 22,107 | 54.7 | % | $ | 18,121 | 59.2 | % |
Three Months Ended March 31, | ||||||||||||||
2017 | 2016 | |||||||||||||
($ in thousands) | Losses and loss adjustment expenses | % of Earned Premiums | Losses and loss adjustment expenses | % of Earned Premiums | ||||||||||
Adjusted loss ratio: | ||||||||||||||
Current accident year | $ | 27,211 | 67.3 | % | $ | 24,060 | 66.8 | % | ||||||
Effect of prior year development | (5,104 | ) | (12.6 | ) | (4,129 | ) | (11.5 | ) | ||||||
$ | 22,107 | 54.7 | % | $ | 19,931 | 55.3 | % |
Three Months Ended March 31, | ||||||||||||||
2017 | 2016 | |||||||||||||
($ in thousands) | Underwriting Expenses | % of Earned Premiums | Underwriting Expenses | % of Earned Premiums | ||||||||||
Commissions incurred: | ||||||||||||||
Direct | $ | 7,149 | 17.7 | % | $ | 6,406 | 20.9 | % | ||||||
Ceding - MLQS | — | — | % | (3,405 | ) | (11.1 | )% | |||||||
Ceding - other | (2,346 | ) | (5.8 | )% | (2,003 | ) | (6.5 | )% | ||||||
Net commissions incurred | 4,803 | 11.9 | % | 998 | 3.3 | % | ||||||||
Other underwriting expenses | 6,491 | 16.0 | % | 5,250 | 17.1 | % | ||||||||
Underwriting, acquisition, and insurance expenses | $ | 11,294 | 27.9 | % | $ | 6,248 | 20.4 | % |
Three Months Ended March 31, | |||||||||||||||
($ in thousands) | 2017 | 2016 | Change | % Change | |||||||||||
Interest from fixed-maturity securities | $ | 2,331 | 1,795 | $ | 536 | 29.9 | % | ||||||||
Dividends on equity securities | 110 | 84 | 26 | 31.0 | |||||||||||
Other | 87 | 8 | 79 | 987.5 | |||||||||||
Gross investment income | 2,528 | 1,887 | 641 | 34.0 | |||||||||||
Investment expenses | (242 | ) | (211 | ) | (31 | ) | 14.7 | ||||||||
Net investment income | 2,286 | 1,676 | 610 | 36.4 | % | ||||||||||
Net capital (losses) gains | (32 | ) | 387 | (419 | ) | (108.3 | )% | ||||||||
Total | $ | 2,254 | $ | 2,063 | $ | 191 | 9.3 | % |
Three Months Ended March 31, | ||||||||
2017 | 2016 | |||||||
(in thousands) | ||||||||
Cash and cash equivalents provided by (used in): | ||||||||
Operating activities | $ | 15,447 | $ | 16,169 | ||||
Investing activities | 10,624 | (14,700 | ) | |||||
Financing activities | (1,267 | ) | (33 | ) | ||||
Change in cash and cash equivalents | $ | 24,804 | $ | 1,436 |
Line of Business Covered | Company Policy Limit | Reinsurance Coverage | Company Retention | |||
Property | Up to $5.0 million per risk | $4.0 million excess of $1.0 million | $1.0 million per risk | |||
Property - catastrophe (1) | Up to $5.0 million per occurrence | $40.0 million excess of $5.0 million | $5.0 million per occurrence | |||
Excess casualty (2) | Up to $5.0 million per occurrence | Variable quota share | $750,000 per occurrence except as described in note (2) below |
(1) | Our property catastrophe reinsurance reduces the financial impact of a catastrophe event involving multiple claims and policyholders. Our property catastrophe reinsurance includes a reinstatement provision which requires us to pay reinstatement premiums after a loss has occurred in order to preserve coverage. Including the reinstatement provision, the maximum aggregate loss recovery limit is $80 million and is in addition to the per-occurrence coverage provided by our facultative and other treaty coverages. |
(2) | Reinsurance is not applicable to any individual policy with a per occurrence limit of less than $1.0 million. For policies with a per occurrence limit of $1.0 million or higher, the quota share ceding percentage varies such that the retention is always $750,000. For example, for a $1.0 million limit excess policy, our retention would be 75%, whereas for a $5.0 million limit excess policy, our retention would be 15%. For policies for which we also write an underlying primary limit, the retention on the combined primary and excess policy would not exceed $1,175,000. |
March 31, 2017 | December 31, 2016 | |||||||
| (in thousands) | |||||||
Stockholders' equity | $ | 216,471 | $ | 210,214 | ||||
Less: intangible assets, net of deferred taxes | 2,300 | 2,300 | ||||||
Tangible stockholders' equity | $ | 214,171 | $ | 207,914 |
March 31, 2017 | December 31, 2016 | |||||||||||||||||||||
Amortized Cost | Estimated Fair Value | % of Total Fair Value | Amortized Cost | Estimated Fair Value | % of Total Fair Value | |||||||||||||||||
(in thousands) | ||||||||||||||||||||||
Fixed maturities: | ||||||||||||||||||||||
U.S. Treasury securities and obligations of U.S. government agencies | $ | 12,106 | $ | 12,090 | 2.9 | % | $ | 12,106 | $ | 12,098 | 2.8 | % | ||||||||||
Obligations of states, municipalities and political subdivisions | 128,662 | 127,844 | 30.4 | % | 124,728 | 123,238 | 28.7 | % | ||||||||||||||
Corporate and other securities | 107,713 | 108,119 | 25.8 | % | 118,473 | 118,790 | 27.6 | % | ||||||||||||||
Asset-backed securities | 68,965 | 68,988 | 16.4 | % | 73,317 | 73,294 | 17.1 | % | ||||||||||||||
Residential mortgage-backed securities | 81,885 | 80,716 | 19.2 | % | 84,902 | 83,803 | 19.5 | % | ||||||||||||||
Total fixed maturities | 399,331 | 397,757 | 94.7 | % | 413,526 | 411,223 | 95.7 | % | ||||||||||||||
Equity securities: | ||||||||||||||||||||||
Exchange traded funds | 17,465 | 22,410 | 5.3 | % | 14,350 | 18,374 | 4.3 | % | ||||||||||||||
Total investments available for sale | $ | 416,796 | $ | 420,167 | 100.0 | % | $ | 427,876 | $ | 429,597 | 100.0 | % |
March 31, 2017 | December 31, 2016 | |||||||||||||
Standard & Poor’s or Equivalent Designation | Fair Value | % of Total | Estimated Fair Value | % of Total | ||||||||||
| (in thousands) | |||||||||||||
AAA | $ | 72,117 | 18.1 | % | $ | 77,192 | 18.8 | % | ||||||
AA | 171,163 | 43.1 | % | 169,864 | 41.3 | % | ||||||||
A | 122,984 | 30.9 | % | 133,587 | 32.5 | % | ||||||||
BBB | 24,595 | 6.2 | % | 25,143 | 6.1 | % | ||||||||
Below BBB and unrated | 6,898 | 1.7 | % | 5,437 | 1.3 | % | ||||||||
Total | $ | 397,757 | 100.0 | % | $ | 411,223 | 100.0 | % |
March 31, 2017 | December 31, 2016 | |||||||||||||||||||||
Amortized Cost | Estimated Fair Value | % of Fair Value | Amortized Cost | Estimated Fair Value | % of Fair Value | |||||||||||||||||
(in thousands) | ||||||||||||||||||||||
Due in one year or less | $ | 67,053 | $ | 67,053 | 16.9 | % | $ | 54,222 | $ | 54,232 | 13.2 | % | ||||||||||
Due after one year through five years | 56,664 | 57,157 | 14.4 | % | 77,714 | 77,928 | 18.9 | % | ||||||||||||||
Due after five years through ten years | 24,556 | 25,124 | 6.3 | % | 24,881 | 25,435 | 6.2 | % | ||||||||||||||
Due after ten years | 100,208 | 98,719 | 24.8 | % | 98,490 | 96,531 | 23.5 | % | ||||||||||||||
Asset-backed securities | 68,965 | 68,988 | 17.3 | % | 73,317 | 73,294 | 17.8 | % | ||||||||||||||
Residential mortgage-backed securities | 81,885 | 80,716 | 20.3 | % | 84,902 | 83,803 | 20.4 | % | ||||||||||||||
Total fixed maturities | $ | 399,331 | $ | 397,757 | 100.0 | % | $ | 413,526 | $ | 411,223 | 100.0 | % |
Three Months Ended March 31, | ||||||||
(in thousands) | 2017 | 2016 | ||||||
Net income | $ | 6,281 | $ | 5,257 | ||||
Income tax expense | 3,005 | 2,632 | ||||||
Other expenses | — | 460 | ||||||
Net investment income | (2,286 | ) | (1,676 | ) | ||||
Net realized investment losses (gains) | 32 | (387 | ) | |||||
Other income | — | (58 | ) | |||||
Underwriting income | $ | 7,032 | $ | 6,228 |
KINSALE CAPITAL GROUP, INC. | ||
Date: May 4, 2017 | By: | /s/ Michael P. Kehoe |
Michael P. Kehoe President and Chief Executive Officer | ||
Date: May 4, 2017 | By: | /s/ Bryan P. Petrucelli |
Bryan P. Petrucelli Senior Vice President, Chief Financial Officer and Treasurer |
Exhibit Number | Description | |
31.1 | Certification of principal executive officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
31.2 | Certification of principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
32.1* | Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
32.2* | Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
101.INS** | XBRL Instance Document | |
101.SCH** | XBRL Taxonomy Extension Schema Document | |
101.CAL** | XBRL Taxonomy Extension Calculation Linkbase Document | |
101.DEF** | XBRL Taxonomy Extension Definition Linkbase Document | |
101.LAB** | XBRL Taxonomy Extension Label Linkbase Document | |
101.PRE** | XBRL Taxonomy Extension Presentation Linkbase Document |
1. | I have reviewed this quarterly report on Form 10-Q of Kinsale Capital Group, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
c. | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
May 4, 2017 | /s/ Michael P. Kehoe | |
Michael P. Kehoe | ||
President and Chief Executive Officer | ||
(Principal Executive Officer) |
1. | I have reviewed this quarterly report on Form 10-Q of Kinsale Capital Group, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
c. | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
May 4, 2017 | /s/ Bryan P. Petrucelli | |
Bryan P. Petrucelli | ||
Senior Vice President, Chief Financial Officer and Treasurer | ||
(Principal Financial Officer) |
1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
May 4, 2017 | /s/ Michael P. Kehoe | |
Michael P. Kehoe | ||
President and Chief Executive Officer | ||
(Principal Executive Officer) |
1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
May 4, 2017 | /s/ Bryan P. Petrucelli | |
Bryan P. Petrucelli | ||
Senior Vice President, Chief Financial Officer and Treasurer | ||
(Principal Financial Officer) |
Document and Entity Information Document - shares |
3 Months Ended | |
---|---|---|
Mar. 31, 2017 |
May 01, 2017 |
|
Document and Entity Information [Abstract] | ||
Entity Registrant Name | Kinsale Capital Group, Inc. | |
Entity Central Index Key | 0001669162 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Non-accelerated Filer | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2017 | |
Document Fiscal Year Focus | 2017 | |
Document Fiscal Period Focus | Q1 | |
Amendment Flag | false | |
Entity Common Stock, Shares Outstanding | 20,968,707 | |
Entity Well-known Seasoned Issuer | No | |
Entity Voluntary Filers | No | |
Entity Current Reporting Status | Yes |
Consolidated Balance Sheet (Unaudited) (Parenthetical) (Parentheticals) - USD ($) $ in Thousands |
Mar. 31, 2017 |
Dec. 31, 2016 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Fixed maturity securities available-for-sale, amortized cost | $ 399,331 | $ 413,526 |
Equity securities available-for-sale, cost | $ 17,465 | $ 14,350 |
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized (in shares) | 400,000,000 | 400,000,000 |
Common stock, shares issued (in shares) | 20,968,707 | 20,968,707 |
Common stock, shares outstanding (in shares) | 20,968,707 | 20,968,707 |
Consolidated Statements of Income and Comprehensive Income (Unaudited) (Parenthetical) (Parentheticals) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2017 |
Mar. 31, 2016 |
|
Income Statement [Abstract] | ||
Income taxes on net unrealized gains (losses) | $ 577 | $ 1,145 |
Consolidated Statements of Changes in Stockholders' Equity (Unaudited) - USD ($) $ in Thousands |
Total |
Additional Paid-in Capital [Member] |
Retained Earnings [Member] |
Accumulated Other Comprehensive Income [Member] |
Class A Common Stock [Member] |
Class A Common Stock [Member]
Common Stock [Member]
|
Class B Common Stock [Member] |
Class B Common Stock [Member]
Common Stock [Member]
|
Common Stock [Member] |
Common Stock [Member]
Common Stock [Member]
|
---|---|---|---|---|---|---|---|---|---|---|
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||||
Balance, shares | 13,803,000 | 1,514,000 | 0 | |||||||
Stock-based compensation (shares) | 21,000 | |||||||||
Balance at Dec. 31, 2015 | $ 113,451 | $ 80,229 | $ 29,570 | $ 3,651 | $ 1 | $ 0 | $ 0 | |||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||||
Stock-based compensation | 7 | 7 | ||||||||
Other comprehensive income, net of tax | 2,126 | 2,126 | ||||||||
Net income | 5,257 | 5,257 | $ 0 | |||||||
Balance at Mar. 31, 2016 | $ 120,841 | 80,236 | 34,827 | 5,777 | 1 | 0 | 0 | |||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||||
Balance, shares | 13,803,000 | 1,535,000 | 0 | |||||||
Balance, shares | 20,968,707 | 0 | 0 | 20,969,000 | ||||||
Balance at Dec. 31, 2016 | $ 210,214 | 153,353 | 53,640 | 3,011 | 0 | 0 | 210 | |||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||||
Stock-based compensation | 161 | 161 | ||||||||
Dividends | (1,258) | (1,258) | ||||||||
Other comprehensive income, net of tax | 1,073 | 1,073 | ||||||||
Net income | 6,281 | 6,281 | $ 6,281 | |||||||
Balance at Mar. 31, 2017 | $ 216,471 | $ 153,514 | $ 58,663 | $ 4,084 | $ 0 | $ 0 | $ 210 | |||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||||
Balance, shares | 20,968,707 | 0 | 0 | 20,969,000 |
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2017 |
Mar. 31, 2016 |
|
Operating Activities | ||
Net cash provided by operating activities | $ 15,447 | $ 16,169 |
Investing Activities | ||
Purchase of property and equipment | (31) | (122) |
Change in short-term investments, net | 0 | (7,684) |
Securities available-for-sale | ||
Purchases – fixed maturity securities | (6,147) | (24,039) |
Purchases – equity securities | (3,114) | (2,084) |
Sales – fixed maturity securities | 718 | 9,328 |
Maturities and calls – fixed maturity securities | 19,198 | 9,901 |
Net cash provided by (used in) investing activities | 10,624 | (14,700) |
Financing Activities | ||
Dividends paid | (1,258) | 0 |
Payments on capital lease | (9) | (33) |
Net cash used in financing activities | (1,267) | (33) |
Net change in cash and cash equivalents | 24,804 | 1,436 |
Cash and cash equivalents at beginning of year | 50,752 | 24,544 |
Cash and cash equivalents at end of period | $ 75,556 | $ 25,980 |
Significant Accounting Policies |
3 Months Ended |
---|---|
Mar. 31, 2017 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | Summary of significant accounting policies Basis of presentation The accompanying condensed consolidated financial statements and notes have been prepared in accordance with U.S. generally accepted accounting principles ("U.S. GAAP") for interim financial information and do not contain all of the information and footnotes required by U.S. GAAP for complete financial statements. For a more complete description of the Company’s business and accounting policies, these condensed consolidated interim financial statements should be read in conjunction with the 2016 audited consolidated financial statements of Kinsale Capital Group, Inc. and its wholly owned subsidiaries (the "Company") included in the Annual Report on Form 10-K. In the opinion of management, all adjustments necessary for a fair presentation of the condensed consolidated financial statements have been included. Such adjustments consist only of normal recurring items. All significant intercompany balances and transactions have been eliminated in consolidation. Interim results are not necessarily indicative of results of operations for the full year. Use of estimates The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Management periodically reviews its estimates and assumptions. Prospective accounting pronouncements ASU 2016-01, Financial Instruments - Overall: Recognition and Measurement of Financial Assets and Financial Liabilities In January 2016, the FASB issued ASU 2016-01, "Financial Instruments – Overall: Recognition and Measurement of Financial Assets and Financial Liabilities," which requires equity investments to be measured at fair value with changes in fair value recognized in net income, requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes, requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset, and eliminates the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost. The amendments in this ASU are effective for public companies for annual reporting periods beginning after December 15, 2017, including interim periods within those fiscal years. The Company is currently evaluating the impact of the adoption of this ASU on its consolidated financial statements, which may introduce additional volatility in the Company's results of operations. ASU 2016-02, Leases (Topic 842) In February 2016, the FASB issued ASU 2016-02, "Leases (Topic 842)" to improve the financial reporting of leasing transactions. Under this ASU, lessees will recognize a right-of-use asset and corresponding liability on the balance sheet for all leases, except for leases covering a period of fewer than 12 months. The liability is to be initially measured at the present value of the future minimum lease payments taking into account renewal options if applicable plus initial incremental direct costs such as commissions. The minimum payments are discounted using the rate implicit in the lease or, if not known, the lessee’s incremental borrowing rate at the inception of the lease. The lessee’s income statement treatment for leases will vary depending on the nature of what is being leased. A financing type lease is present when, among other matters, the asset is being leased for a substantial portion of its economic life or has an end-of-term title transfer or a bargain purchase option as in today’s practice. The payment of the liability set up for such leases will be apportioned between interest and principal; the right-of use asset will be generally amortized on a straight-line basis. If the lease does not qualify as a financing type lease, it will be accounted for on the income statement as rent on a straight-line basis. This ASU is effective for annual and interim reporting periods beginning after December 15, 2018. Early adoption is permitted. The Company is currently evaluating the impact of the adoption on its consolidated financial statements. ASU 2016-13, Financial Instruments – Credit Losses (Topic 326) On June 16, 2016, the FASB issued ASU 2016-13, "Financial Instruments – Credit Losses (Topic 326)" to provide more useful information about the expected credit losses on financial instruments. Current GAAP delays the recognition of credit losses until it is probable a loss has been incurred. The update will require a financial asset measured at amortized cost to be presented at the net amount expected to be collected by means of an allowance for credit losses that runs through net income. Credit losses relating to available-for-sale debt securities will also be recorded through an allowance for credit losses. However, the amendments would limit the amount of the allowance to the amount by which fair value is below amortized cost. The measurement of credit losses on available-for-sale securities is similar under current GAAP, but the update requires the use of the allowance account through which amounts can be reversed, rather than through an irreversible write-down. This ASU is effective for annual and interim reporting periods beginning after December 15, 2019. Early adoption is permitted beginning after December 15, 2018. Upon adoption, the update will be applied using the modified-retrospective approach, by which a cumulative-effect adjustment will be made to retained earnings as of the beginning of the first reporting period presented. The Company is currently evaluating the impact of the adoption on its consolidated financial statements. ASU 2017-08, Premium Amortization on Purchased Callable Debt Securities On March 30, 2017, the FASB issued ASU 2017-08, "Premium Amortization on Purchased Callable Debt Securities," which shortens the amortization period of the premium for certain callable debt securities, from the contractual maturity date to the earliest call date. This ASU is effective in fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted, including in an interim period. Upon adoption, the update will applied on a modified retrospective basis, with a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period presented. The Company is currently evaluating the impact of the adoption on its consolidated financial statements. There are no other prospective accounting standards which, upon their effective date, would have a material impact on the Company's consolidated financial statements. |
Investments |
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Investments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments | Investments Available-for-sale investments The following tables summarize the Company’s available-for-sale investments at March 31, 2017 and December 31, 2016:
Available-for-sale securities in a loss position The Company regularly reviews all securities with unrealized losses to assess whether the decline in the securities’ fair value is deemed to be an other-than-temporary impairment ("OTTI"). The Company considers a number of factors in completing its OTTI review, including the length of time and the extent to which fair value has been below cost and the financial condition of an issuer. In addition to specific issuer information, the Company also evaluates the current market and interest rate environment. Generally, a change in a security’s value caused by a change in the market or interest rate environment does not constitute an OTTI, but rather a temporary decline in market value. For fixed maturities, the Company considers whether it intends to sell the security or if it is more likely than not that it will be required to sell the security before recovery, the credit quality of the issuer and the ability to recover all amounts outstanding when contractually due. When assessing whether it intends to sell a fixed maturity or if it is likely to be required to sell a fixed maturity before recovery of its amortized cost, the Company evaluates facts and circumstances including, but not limited to, decisions to reposition the investment portfolio, potential sales of investments to meet cash flow needs and potential sales of investments to capitalize on favorable pricing. For equity securities, the Company considers the near-term prospects of an issuer and its ability and intent to hold the security for a period of time sufficient to allow for anticipated recovery. For fixed maturities where a decline in fair value is considered to be other-than-temporary and the Company intends to sell the security, or it is more likely than not that the Company will be required to sell the security before recovery of its amortized cost, an impairment is recognized in net income based on the fair value of the security at the time of assessment, resulting in a new cost basis for the security. If the decline in fair value of a fixed maturity security below its amortized cost is considered to be other-than-temporary based upon other considerations, the Company compares the estimated present value of the cash flows expected to be collected to the amortized cost of the security. The extent to which the estimated present value of the cash flows expected to be collected is less than the amortized cost of the security represents the credit-related portion of the OTTI, which is recognized in net income, resulting in a new cost basis for the security. Any remaining decline in fair value represents the noncredit portion of the OTTI, which is recognized in other comprehensive income (loss). For equity securities, a decline in fair value that is considered to be other-than-temporary is recognized in net income based on the fair value of the security at the time of assessment, resulting in a new cost basis for the security. The following tables summarize gross unrealized losses and fair value for available-for-sale securities by length of time that the securities have continuously been in an unrealized loss position:
At March 31, 2017, the Company held 210 fixed maturity securities with a total estimated fair value of $217.8 million and gross unrealized losses of $4.7 million. Of these securities, 21 were in a continuous unrealized loss position for greater than one year. As discussed above, the Company regularly reviews all securities within its investment portfolio to determine whether any impairment has occurred. Unrealized losses were caused by interest rate changes or other market factors and were not credit specific issues. At March 31, 2017, 92.1% of the Company’s fixed maturity securities were rated "A-" or better and made expected coupon payments under the contractual terms of the securities. At March 31, 2017, the Company held three exchange traded funds ("ETFs") in its equity portfolio with a total estimated fair value of $1.0 million and gross unrealized losses of $7 thousand. None of these securities were in a continuous unrealized loss position for greater than one year. Management concluded that there were no other-than-temporary impairments from fixed maturity or equity securities with unrealized losses for the three months ended March 31, 2017.
At December 31, 2016, the Company held 231 fixed maturity securities with a total estimated fair value of $239.7 million and gross unrealized losses of $5.2 million. Of those securities, 24 were in a continuous unrealized loss position for greater than one year. Unrealized losses were caused by interest rate changes or other market factors and were not credit specific issues. At December 31, 2016, 92.6% of the Company’s fixed maturity securities were rated "A-" or better and made expected coupon payments under the contractual terms of the securities. Based on its review, the Company concluded that none of the fixed maturity securities with an unrealized loss at December 31, 2016 experienced an other-than-temporary impairment. Within its equity portfolio, the Company holds an ETF with exposure across developed and emerging non-U.S. equity markets around the world. This ETF had been in an unrealized loss position for greater than one year and, management concluded based upon its review, it was other-than-temporarily impaired. The Company recognized an impairment loss of $0.3 million on this fund for the year ended December 31, 2016. Contractual maturities of available-for-sale fixed maturity securities The amortized cost and estimated fair value of available-for-sale fixed maturity securities at March 31, 2017 are summarized, by contractual maturity, as follows:
Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties, and the lenders may have the right to put the securities back to the borrower. Net investment income The following table presents the components of net investment income:
Realized investment gains and losses The following table presents realized investment gains and losses for the three months ended March 31, 2017 and 2016:
Change in net unrealized gains (losses) on investments The following table presents the change in available-for-sale net unrealized gains (losses) by investment type for the three months ended March 31, 2017 and 2016:
Insurance – statutory deposits The Company had invested assets with a carrying value of $7.0 million on deposit with state regulatory authorities at March 31, 2017 and December 31, 2016. Payable for investments purchased The Company recorded a payable for investments purchased, not yet settled, of $0.8 million at March 31, 2017 and $0.6 million at December 31, 2016. The payable balances were included in the "other liabilities" line item of the balance sheet and treated as a non-cash transaction for purposes of cash flow presentation. |
Fair Value Measurements |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurements | Fair value measurements Fair value was estimated for each class of financial instrument for which it was practical to estimate fair value. Fair value is defined as the price in the principal market that would be received for an asset to facilitate an orderly transaction between market participants on the measurement date. Market participants are assumed to be independent, knowledgeable, able and willing to transact an exchange and not acting under duress. Fair value hierarchy disclosures are based on the quality of inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Adjustments to transaction prices or quoted market prices may be required in illiquid or disorderly markets in order to estimate fair value. The three levels of the fair value hierarchy are defined as follows: Level 1 - Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities traded in active markets. Level 2 - Inputs to the valuation methodology include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability and market-corroborated inputs. Level 3 - Inputs to the valuation methodology are unobservable for the asset or liability and are significant to the fair value measurement. Fair values of the Company's investment portfolio are estimated using unadjusted prices obtained by its investment manager from third party pricing services, where available. For securities where the Company is unable to obtain fair values from a pricing service or broker, fair values are estimated using information obtained from the Company's investment manager. Management performs several procedures to ascertain the reasonableness of investment values included in the condensed consolidated financial statements including 1) obtaining and reviewing internal control reports from the Company's investment manager that obtain fair values from third party pricing services, 2) discussing with the Company's investment manager its process for reviewing and validating pricing obtained from outside pricing services and 3) reviewing the security pricing received from the Company's investment manager and monitoring changes in unrealized gains and losses. The Company has evaluated the various types of securities in its investment portfolio to determine an appropriate fair value hierarchy level based upon trading activity and the observability of market inputs. The following tables present the balances of assets measured at fair value on a recurring basis as of March 31, 2017 and December 31, 2016, by level within the fair value hierarchy.
There were no transfers into or out of Level 1 and Level 2 during the three months ended March 31, 2017. There were no assets or liabilities measured at fair value on a nonrecurring basis as of March 31, 2017 and December 31, 2016. Due to the relatively short-term nature of cash and cash equivalents, receivables and payables, their carrying amounts are reasonable estimates of fair value. |
Deferred Policy Acquisition Costs |
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Deferred Policy Acquisition Costs Disclosures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Deferred Policy Acquisition Costs | Deferred policy acquisition costs The following table presents the amounts of policy acquisition costs deferred and amortized for the three months ended March 31, 2017 and 2016:
For the three months ended March 31, 2016, the deferred ceding commissions were affected by the change in the ceding percentage under the Company's multi-line quota share reinsurance treaty ("MLQS"). See Note 8 for further details regarding the MLQS. |
Underwriting, Acquisition and Insurance Expenses |
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Underwriting, Acquisition and Insurance Expenses [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Underwriting, acquisition and insurance expenses | Underwriting, acquisition and insurance expenses Underwriting, acquisition and insurance expenses for the three months ended March 31, 2017 and 2016 consist of the following:
Other operating expenses within underwriting, acquisition and insurance expenses include salaries, bonus and employee benefits expenses of $5.0 million and $4.5 million for the three months ended March 31, 2017 and 2016, respectively. |
Earnings Per Share |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share | Earnings per share The following represents a reconciliation of the numerator and denominator of the basic and diluted earnings per share computations contained in the consolidated financial statements:
Prior to the reclassification of common stock on July 28, 2016, all of the earnings of the Company were allocated to Class A and Class B common stock and earnings per share was calculated using the two-class method. Under the two-class method, earnings attributable to Class A and Class B common stockholders were determined by allocating undistributed earnings to each class of stock. The undistributed earnings attributable to common stockholders were allocated based on the contractual participation rights of the Class A common stock and Class B common stock as if those earnings for the period had been distributed. Earnings attributable to Class A common stockholders equaled the sum of dividends at the rate per annum of 12% compounding annually during the period ("Accruing Dividends") plus seventy-five percent of any remaining assets of the Company available for distribution to its stockholders in the event of a liquidation, dissolution, winding up or sale of the Company after payment of the Accruing Dividends ("Residual Proceeds"). Earnings attributable to Class B common stockholders equaled twenty-five percent of the Residual Proceeds. After the reclassification of common stock on July 28, 2016, all of the earnings of the Company were attributable to the single class of common stock. Basic earnings per share for each class of common stock was computed by dividing the earnings attributable to the common stockholders by the weighted average number of shares of each respective class of common stock outstanding during the period. Diluted earnings per share attributable to each class of common stock was computed by dividing earnings attributable to common stockholders by the weighted average shares outstanding for each respective class of common stock outstanding during the period, including potentially dilutive shares of common stock for the period determined using the treasury stock method. There were no potentially dilutive shares attributable to Class A common stockholders for the three months ended March 31, 2016. For purposes of the diluted earnings per share attributable to Class B common stockholders calculation, unvested restricted grants of common stock were considered to be potentially dilutive shares of common stock. There were no material anti-dilutive Class B shares for the three months ended March 31, 2016. There were no anti-dilutive stock options for the three months ended March 31, 2017. |
Reserves for Unpaid Losses and Loss Adjustment Expenses |
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Liability for Unpaid Claims and Claims Adjustment Expense, Activity in Liability [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reserves for Unpaid Losses and Loss Adjustment Expenses | Reserves for unpaid losses and loss adjustment expenses The following table presents a reconciliation of consolidated beginning and ending reserves for unpaid losses and loss adjustment expenses:
During the three months ended March 31, 2017, the reserves for unpaid losses and loss adjustment expenses held at December 31, 2016 developed favorably by $5.1 million. The favorable development was primarily attributable to the 2016 accident year of $3.3 million and the 2015 accident year of $2.5 million, which were due to reported losses emerging at a lower level than expected. The favorable development was offset in part by adverse development of $0.9 million for the 2013 accident year. During the three months ended March 31, 2016, the reserves for unpaid losses and loss adjustment expenses held at December 31, 2015 developed favorably by $2.7 million. The favorable development was attributable primarily to the 2015 accident year of $1.7 million and the 2014 accident year of $0.8 million, which were due to reported losses emerging at a lower level than expected. See Note 8 for further details regarding the commutation of the MLQS. |
Reinsurance |
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Reinsurance Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reinsurance | Reinsurance The following table summarizes the effect of reinsurance on premiums written and earned for the three months ended March 31, 2017 and 2016:
Incurred losses and loss adjustment expenses were net of reinsurance (ceded incurred losses and loss adjustment expenses) of $2.4 million and $4.4 million for the three months ended March 31, 2017 and 2016, respectively. At March 31, 2017, reinsurance recoverables on paid and unpaid losses were $0.3 million and $40.3 million, respectively. At December 31, 2016, reinsurance recoverables on paid and unpaid losses were and $0.1 million and $70.2 million, respectively. Multi-line quota share reinsurance Historically, the Company participated in a MLQS treaty that transferred a proportion of the risk related to certain lines of business written by its subsidiary, Kinsale Insurance Company, an Arkansas insurance company ("Kinsale Insurance"), to third-party reinsurers in exchange for a proportion of the direct written premiums on that business. The MLQS was subject to annual renewal and, in accordance with the terms of the MLQS, the Company could adjust the amount of business ceded on a quarterly basis. Under the terms of the MLQS covering the period January 1, 2016 to December 31, 2016 (the "2016 MLQS"), Kinsale Insurance received a provisional ceding commission equal to 41% of ceded written premiums and paid a reinsurance margin equal to 4% of ceded written premium. The 2016 MLQS included a sliding scale commission provision that adjusted the ceding commissions within a range of 25% to 41% based on the loss experience of the business ceded. Effective January 1, 2016, the Company reduced the ceding percentage from 40% as of December 31, 2015 to 15%. The change in the ceding percentage reduced ceded written premiums by $17.0 million at January 1, 2016, with a corresponding reduction to ceded unearned premiums. As a result of the successful completion of the initial public offering ("IPO") in August 2016, the Company terminated and commuted the 2016 MLQS on October 1, 2016. Effective January 1, 2016, the Company commuted the MLQS covering the period January 1, 2014 to December 31, 2014 (the "2014 MLQS"). The commutation reduced reinsurance recoverables on unpaid losses and receivable from reinsurers by $34.2 million at January 1, 2016, with a corresponding reduction to funds held for reinsurers. Effective January 1, 2017, the Company commuted the MLQS covering the period January 1, 2015 to December 31, 2015 (the "2015 MLQS"). The commutation reduced reinsurance recoverables on unpaid losses and receivable from reinsurers by approximately $36.5 million, with a corresponding reduction to funds held for reinsurers. The Company did not renew the MLQS for the 2017 calendar year and there are no remaining MLQS balances outstanding as of January 1, 2017. The commutations did not have any effect on the Company's results of operations or cash flows for the applicable periods. |
Other Comprehensive Income |
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Other Comprehensive Income (Loss), Net of Tax [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Comprehensive Income | Other comprehensive income The following table summarizes the components of other comprehensive income for the three months ended March 31, 2017 and 2016:
The sale of an available-for-sale security results in amounts being reclassified from accumulated other comprehensive income to realized gains or losses in current period earnings. The related tax effect of the reclassification adjustment is recorded in income tax expense in current period earnings. See Note 2 for additional information. |
Significant Accounting Policies (Policies) |
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Accounting Policies [Abstract] | |
Basis of Presentation | Basis of presentation The accompanying condensed consolidated financial statements and notes have been prepared in accordance with U.S. generally accepted accounting principles ("U.S. GAAP") for interim financial information and do not contain all of the information and footnotes required by U.S. GAAP for complete financial statements. For a more complete description of the Company’s business and accounting policies, these condensed consolidated interim financial statements should be read in conjunction with the 2016 audited consolidated financial statements of Kinsale Capital Group, Inc. and its wholly owned subsidiaries (the "Company") included in the Annual Report on Form 10-K. In the opinion of management, all adjustments necessary for a fair presentation of the condensed consolidated financial statements have been included. Such adjustments consist only of normal recurring items. All significant intercompany balances and transactions have been eliminated in consolidation. Interim results are not necessarily indicative of results of operations for the full year. |
Use of Estimates | Use of estimates The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Management periodically reviews its estimates and assumptions. |
Prospective Accounting Pronouncements | Prospective accounting pronouncements ASU 2016-01, Financial Instruments - Overall: Recognition and Measurement of Financial Assets and Financial Liabilities In January 2016, the FASB issued ASU 2016-01, "Financial Instruments – Overall: Recognition and Measurement of Financial Assets and Financial Liabilities," which requires equity investments to be measured at fair value with changes in fair value recognized in net income, requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes, requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset, and eliminates the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost. The amendments in this ASU are effective for public companies for annual reporting periods beginning after December 15, 2017, including interim periods within those fiscal years. The Company is currently evaluating the impact of the adoption of this ASU on its consolidated financial statements, which may introduce additional volatility in the Company's results of operations. ASU 2016-02, Leases (Topic 842) In February 2016, the FASB issued ASU 2016-02, "Leases (Topic 842)" to improve the financial reporting of leasing transactions. Under this ASU, lessees will recognize a right-of-use asset and corresponding liability on the balance sheet for all leases, except for leases covering a period of fewer than 12 months. The liability is to be initially measured at the present value of the future minimum lease payments taking into account renewal options if applicable plus initial incremental direct costs such as commissions. The minimum payments are discounted using the rate implicit in the lease or, if not known, the lessee’s incremental borrowing rate at the inception of the lease. The lessee’s income statement treatment for leases will vary depending on the nature of what is being leased. A financing type lease is present when, among other matters, the asset is being leased for a substantial portion of its economic life or has an end-of-term title transfer or a bargain purchase option as in today’s practice. The payment of the liability set up for such leases will be apportioned between interest and principal; the right-of use asset will be generally amortized on a straight-line basis. If the lease does not qualify as a financing type lease, it will be accounted for on the income statement as rent on a straight-line basis. This ASU is effective for annual and interim reporting periods beginning after December 15, 2018. Early adoption is permitted. The Company is currently evaluating the impact of the adoption on its consolidated financial statements. ASU 2016-13, Financial Instruments – Credit Losses (Topic 326) On June 16, 2016, the FASB issued ASU 2016-13, "Financial Instruments – Credit Losses (Topic 326)" to provide more useful information about the expected credit losses on financial instruments. Current GAAP delays the recognition of credit losses until it is probable a loss has been incurred. The update will require a financial asset measured at amortized cost to be presented at the net amount expected to be collected by means of an allowance for credit losses that runs through net income. Credit losses relating to available-for-sale debt securities will also be recorded through an allowance for credit losses. However, the amendments would limit the amount of the allowance to the amount by which fair value is below amortized cost. The measurement of credit losses on available-for-sale securities is similar under current GAAP, but the update requires the use of the allowance account through which amounts can be reversed, rather than through an irreversible write-down. This ASU is effective for annual and interim reporting periods beginning after December 15, 2019. Early adoption is permitted beginning after December 15, 2018. Upon adoption, the update will be applied using the modified-retrospective approach, by which a cumulative-effect adjustment will be made to retained earnings as of the beginning of the first reporting period presented. The Company is currently evaluating the impact of the adoption on its consolidated financial statements. ASU 2017-08, Premium Amortization on Purchased Callable Debt Securities On March 30, 2017, the FASB issued ASU 2017-08, "Premium Amortization on Purchased Callable Debt Securities," which shortens the amortization period of the premium for certain callable debt securities, from the contractual maturity date to the earliest call date. This ASU is effective in fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted, including in an interim period. Upon adoption, the update will applied on a modified retrospective basis, with a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period presented. The Company is currently evaluating the impact of the adoption on its consolidated financial statements. There are no other prospective accounting standards which, upon their effective date, would have a material impact on the Company's consolidated financial statements. |
Investments (Tables) |
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Investments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Available-for-sale Investments | The following tables summarize the Company’s available-for-sale investments at March 31, 2017 and December 31, 2016:
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Available-for-sale Securities in a Loss Position | The following tables summarize gross unrealized losses and fair value for available-for-sale securities by length of time that the securities have continuously been in an unrealized loss position:
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Contractual Maturities of Available-for-sale Fixed Maturity Securities | The amortized cost and estimated fair value of available-for-sale fixed maturity securities at March 31, 2017 are summarized, by contractual maturity, as follows:
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Net Investment Income | The following table presents the components of net investment income:
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Realized Gain (Loss) on Investments | The following table presents realized investment gains and losses for the three months ended March 31, 2017 and 2016:
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Change in Unrealized Gains (Losses) on Investments | The following table presents the change in available-for-sale net unrealized gains (losses) by investment type for the three months ended March 31, 2017 and 2016:
|
Fair Value Measurements (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Assets Measured at Fair Value on a Recurring Basis | The following tables present the balances of assets measured at fair value on a recurring basis as of March 31, 2017 and December 31, 2016, by level within the fair value hierarchy.
|
Deferred Policy Acquisition Costs (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Deferred Policy Acquisition Costs Disclosures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Deferred Policy Acquisition Costs | The following table presents the amounts of policy acquisition costs deferred and amortized for the three months ended March 31, 2017 and 2016:
|
(Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Underwriting, Acquisition and Insurance Expenses [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Underwriting, acquisition and insurance expenses | Underwriting, acquisition and insurance expenses for the three months ended March 31, 2017 and 2016 consist of the following:
|
Earnings Per Share (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share | The following represents a reconciliation of the numerator and denominator of the basic and diluted earnings per share computations contained in the consolidated financial statements:
|
Reserves for Unpaid Losses and Loss Adjustment Expenses (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Liability for Unpaid Claims and Claims Adjustment Expense, Activity in Liability [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Unpaid Losses and Loss Adjustment Expenses |
|
Reinsurance (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reinsurance Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Effects of Reinsurance | The following table summarizes the effect of reinsurance on premiums written and earned for the three months ended March 31, 2017 and 2016:
|
Other Comprehensive Income (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Comprehensive Income (Loss), Net of Tax [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Comprehensive Income (Loss) | The following table summarizes the components of other comprehensive income for the three months ended March 31, 2017 and 2016:
|
Investments Net Investment Income (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2017 |
Mar. 31, 2016 |
|
Components of Net Investment Income [Abstract] | ||
Taxable bonds | $ 1,537 | $ 1,389 |
Municipal bonds, tax exempt | 794 | 406 |
Cash, cash equivalents, and short-term investments | 87 | 8 |
Dividends on equity securities | 110 | 84 |
Gross investment income | 2,528 | 1,887 |
Investment expenses | (242) | (211) |
Net investment income | $ 2,286 | $ 1,676 |
Investments Realized Gains (Losses) (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2017 |
Mar. 31, 2016 |
|
Realized Gains [Abstract] | ||
Sales of fixed maturities | $ 0 | $ 387 |
Total realized gains | 0 | 387 |
Realized Losses [Abstract] | ||
Sales of fixed maturities | (32) | 0 |
Total realized losses | (32) | 0 |
Net investment gains (losses) | $ (32) | $ 387 |
Investments Unrealized Gain (Loss) on Investments (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2017 |
Mar. 31, 2016 |
|
Schedule of Available-for-sale Securities [Line Items] | ||
Change in net unrealized gains (losses) | $ 1,650 | $ 3,271 |
Fixed maturities [Member] | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Change in net unrealized gains (losses) | 729 | 2,930 |
Exchange traded funds | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Change in net unrealized gains (losses) | $ 921 | $ 341 |
Investments Investment Narrative (Details) - USD ($) $ in Millions |
Mar. 31, 2017 |
Dec. 31, 2016 |
---|---|---|
Investments, Debt and Equity Securities [Abstract] | ||
Bonds on deposits with state regulatory authorities | $ 7.0 | $ 7.0 |
Payable for investments purchased | $ 0.8 | $ 0.6 |
Deferred Policy Acquisition Costs (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2017 |
Mar. 31, 2016 |
|
Movement Analysis of Deferred Policy Acquisition Costs [Roll Forward] | ||
Balance, beginning of period | $ (1,696) | |
Balance, beginning of period | $ 10,150 | |
Policy acquisition costs deferred: | ||
Direct commissions deferred | 7,880 | 6,400 |
Ceding commissions deferred | (2,591) | 2,791 |
Other underwriting and policy acquisition costs | 761 | 726 |
Policy acquisition costs deferred | 6,050 | 9,917 |
Amortization of net policy acquisition costs | (5,699) | (2,916) |
Balance, end of period | $ 10,501 | $ 5,305 |
(Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2017 |
Mar. 31, 2016 |
|
Underwriting, Acquisition and Insurance Expenses [Abstract] | ||
Gross commissions | $ 7,149 | $ 6,406 |
Ceding commissions | (2,346) | (5,408) |
Other operating expenses | 6,491 | 5,250 |
Underwriting, acquisition, and insurance expenses | 11,294 | 6,248 |
Salaries, bonuses and employee benefits | $ 5,000 | $ 4,500 |
Earnings Per Share Narrative (Details) - shares |
3 Months Ended | |
---|---|---|
Mar. 31, 2017 |
Mar. 31, 2016 |
|
Class A Common Stock [Member] | ||
Class of Stock [Line Items] | ||
Common stock, Dividend rate | 12.00% | |
Residual Proceeds | 75.00% | |
Antidilutive securities | 0 | |
Class B Common Stock [Member] | ||
Class of Stock [Line Items] | ||
Residual Proceeds | 25.00% | |
Restricted stock [Member] | Class B Common Stock [Member] | ||
Class of Stock [Line Items] | ||
Antidilutive securities | 0 | |
Stock option [Member] | ||
Class of Stock [Line Items] | ||
Antidilutive securities | 0 |
Reserves for Unpaid Losses and Loss Adjustment Expenses (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2017 |
Mar. 31, 2016 |
|
Liability for Unpaid Claims and Claims Adjustment Expense [Roll Forward] | ||
Net reserves for unpaid losses and loss adjustment expenses, beginning of year | $ 194,602 | $ 124,126 |
Commutations of MLQS | 27,929 | 24,296 |
Adjusted net reserves for losses and loss adjustment expenses, beginning of year | 222,531 | 148,422 |
Incurred losses and loss adjustment expenses: | ||
Current year | 27,211 | 20,844 |
Prior years | (5,104) | (2,723) |
Total net losses and loss adjustment expenses incurred | 22,107 | 18,121 |
Payments: | ||
Current year | 333 | 290 |
Prior years | 11,566 | 5,133 |
Total payments | 11,899 | 5,423 |
Net reserves for unpaid losses and loss adjustment expenses, end of period | 232,739 | 161,120 |
Reinsurance recoverable on unpaid losses | 40,262 | 74,157 |
Gross reserves for unpaid losses and loss adjustment expenses, end of period | $ 273,001 | $ 235,277 |
Reserves for Unpaid Losses and Loss Adjustment Expenses Reserves for Unpaid Losses and Loss Adjustment Expenses Narrative (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2017 |
Mar. 31, 2016 |
|
Claims Development [Line Items] | ||
Adverse (favorable) development on prior year loss reserves | $ (5,104) | $ (2,723) |
Accident Year 2016 [Member] | ||
Claims Development [Line Items] | ||
Adverse (favorable) development on prior year loss reserves | (3,300) | |
Accident Year 2015 [Member] | ||
Claims Development [Line Items] | ||
Adverse (favorable) development on prior year loss reserves | (2,500) | (1,700) |
Accident Year 2013 [Member] | ||
Claims Development [Line Items] | ||
Adverse (favorable) development on prior year loss reserves | $ 900 | |
Accident Year 2014 [Member] | ||
Claims Development [Line Items] | ||
Adverse (favorable) development on prior year loss reserves | $ (800) |
Reinsurance (Details) - USD ($) $ in Thousands |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2017 |
Mar. 31, 2016 |
Dec. 31, 2016 |
|
Premiums Written, Net [Abstract] | |||
Direct written premiums | $ 52,862 | $ 42,990 | |
Assumed written premiums | 0 | 92 | |
Ceded written premiums | (8,700) | 4,713 | |
Net written premiums | 44,162 | 47,795 | |
Premiums Earned, Net [Abstract] | |||
Direct earned premiums | 48,462 | 43,093 | |
Assumed earned premiums | 0 | 32 | |
Ceded earned premiums | (8,029) | (12,528) | |
Net earned premiums | 40,433 | 30,597 | |
Ceded incurred losses and loss adjustment expenses | 2,400 | $ 4,400 | |
Reinsurance recoverables on paid losses | 300 | $ 100 | |
Reinsurance recoverables on unpaid losses | $ 40,300 | $ 70,200 |
Reinsurance Multi-line Quota Share Reinsurance (Details) - USD ($) $ in Millions |
3 Months Ended | 12 Months Ended | |||
---|---|---|---|---|---|
Mar. 31, 2016 |
Dec. 31, 2016 |
Dec. 31, 2015 |
Jan. 01, 2017 |
Jan. 01, 2016 |
|
Multi Line Quota Share Treaty - 2015 [Member] | |||||
Reinsurance Retention Policy [Line Items] | |||||
Ceding percentage | 40.00% | ||||
Effect of commutation | $ 36.5 | ||||
Multi Line Quota Share Treaty - 2016 [Member] | |||||
Reinsurance Retention Policy [Line Items] | |||||
Provisional ceding commission rate | 41.00% | ||||
Reinsurance margin | 4.00% | ||||
Ceding percentage | 15.00% | ||||
Effect of change in ceding rate | $ 17.0 | ||||
Multi Line Quota Share Treaty - 2016 [Member] | Minimum [Member] | |||||
Reinsurance Retention Policy [Line Items] | |||||
Sliding scale commission | 25.00% | ||||
Multi Line Quota Share Treaty - 2016 [Member] | Maximum [Member] | |||||
Reinsurance Retention Policy [Line Items] | |||||
Sliding scale commission | 41.00% | ||||
Multi Line Quota Share Treaty - 2014 [Member] | |||||
Reinsurance Retention Policy [Line Items] | |||||
Effect of commutation | $ 34.2 |
Other Comprehensive Income (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2017 |
Mar. 31, 2016 |
|
Other Comprehensive Income (Loss), Net of Tax [Abstract] | ||
Unrealized gains arising during the period, before income taxes | $ 1,618 | $ 3,658 |
Income taxes | (566) | (1,280) |
Unrealized gains arising during the period, net of income tax | 1,052 | 2,378 |
Less reclassification adjustment [Abstract] | ||
Net realized investment gains (losses) | (32) | 387 |
Income taxes | 11 | (135) |
Reclassification adjustment included in net income | (21) | 252 |
Other comprehensive income | $ 1,073 | $ 2,126 |
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