☒ | Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended March 31, 2019 |
☐ | 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 ☐ | Smaller reporting company ☐ | Emerging growth company ☐ |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Common Stock, par value $0.01 | KNSL | Nasdaq Global Select Market |
Page | |||
PART I. FINANCIAL INFORMATION | |||
Item 1. | |||
Item 2. | |||
Item 3. | |||
Item 4. | |||
PART II. OTHER INFORMATION | |||
Item 1. | |||
Item 1A. | |||
Item 2. | |||
Item 6. | |||
March 31, 2019 | December 31, 2018 | |||||||
(in thousands, except share and per share data) | ||||||||
Assets | ||||||||
Investments: | ||||||||
Fixed-maturity securities available for sale, at fair value (amortized cost: $536,182 in 2019; $514,237 in 2018) | $ | 540,778 | $ | 510,251 | ||||
Equity securities, at fair value (cost: $56,926 in 2019 $56,051 in 2018) | 64,481 | 57,711 | ||||||
Total investments | 605,259 | 567,962 | ||||||
Cash and cash equivalents | 102,874 | 75,089 | ||||||
Investment income due and accrued | 3,587 | 3,783 | ||||||
Premiums receivable, net | 30,941 | 24,253 | ||||||
Reinsurance recoverables | 59,334 | 56,788 | ||||||
Ceded unearned premiums | 16,987 | 16,072 | ||||||
Deferred policy acquisition costs, net of ceding commissions | 16,314 | 14,801 | ||||||
Intangible assets | 3,538 | 3,538 | ||||||
Deferred income tax asset, net | 6,928 | 7,176 | ||||||
Other assets | 7,111 | 3,601 | ||||||
Total assets | $ | 852,873 | $ | 773,063 | ||||
Liabilities and Stockholders' Equity | ||||||||
Liabilities: | ||||||||
Reserves for unpaid losses and loss adjustment expenses | $ | 385,125 | $ | 369,152 | ||||
Unearned premiums | 140,741 | 128,250 | ||||||
Payable to reinsurers | 5,532 | 4,565 | ||||||
Accounts payable and accrued expenses | 4,840 | 7,090 | ||||||
Other liabilities | 27,746 | 20 | ||||||
Total liabilities | 563,984 | 509,077 | ||||||
Stockholders’ equity: | ||||||||
Common stock, $0.01 par value, 400,000,000 shares authorized, 21,284,527 and 21,241,504 shares issued and outstanding at March 31, 2019 and December 31, 2018, respectively | 213 | 212 | ||||||
Additional paid-in capital | 159,589 | 158,485 | ||||||
Retained earnings | 123,563 | 106,545 | ||||||
Accumulated other comprehensive (loss) income | 5,524 | (1,256 | ) | |||||
Total stockholders’ equity | 288,889 | 263,986 | ||||||
Total liabilities and stockholders’ equity | $ | 852,873 | $ | 773,063 |
Three Months Ended March 31, | ||||||||
2019 | 2018 | |||||||
(in thousands, except per share data) | ||||||||
Revenues: | ||||||||
Gross written premiums | $ | 84,626 | $ | 63,847 | ||||
Ceded written premiums | (11,559 | ) | (8,756 | ) | ||||
Net written premiums | 73,067 | 55,091 | ||||||
Change in unearned premiums | (11,576 | ) | (7,030 | ) | ||||
Net earned premiums | 61,491 | 48,061 | ||||||
Net investment income | 4,515 | 3,229 | ||||||
Net unrealized gains (losses) on equity securities | 5,895 | (1,279 | ) | |||||
Net realized gains on investments | 280 | 112 | ||||||
Other income | 4 | 3 | ||||||
Total revenues | 72,185 | 50,126 | ||||||
Expenses: | ||||||||
Losses and loss adjustment expenses | 33,732 | 28,899 | ||||||
Underwriting, acquisition and insurance expenses | 15,616 | 12,398 | ||||||
Other expenses | 36 | 14 | ||||||
Total expenses | 49,384 | 41,311 | ||||||
Income before income taxes | 22,801 | 8,815 | ||||||
Total income tax expense | 4,081 | 1,528 | ||||||
Net income | 18,720 | 7,287 | ||||||
Other comprehensive income (loss): | ||||||||
Change in unrealized gains (losses) on available-for-sale investments, net of taxes of $1,802 in 2019 and $(1,291) in 2018 | 6,780 | (4,856 | ) | |||||
Total comprehensive income | $ | 25,500 | $ | 2,431 |
Earnings per share: | ||||||||
Basic | $ | 0.88 | $ | 0.35 | ||||
Diluted | $ | 0.86 | $ | 0.34 | ||||
Weighted-average shares outstanding: | ||||||||
Basic | 21,169 | 21,045 | ||||||
Diluted | 21,763 | 21,628 |
Shares of Common Stock | Common Stock | Additional Paid-in Capital | Retained Earnings | Accumu- lated Other Compre- hensive Income (Loss) | Total Stock- holders' Equity | ||||||||||||||||||
(in thousands) | |||||||||||||||||||||||
Balance at December 31, 2017 | 21,036 | $ | 210 | $ | 155,082 | $ | 73,502 | $ | 9,395 | $ | 238,189 | ||||||||||||
Cumulative effect adjustment - unrealized gains on equity securities, net of tax | — | — | — | 6,490 | (6,490 | ) | — | ||||||||||||||||
Balance at December 31, 2017, as adjusted | 21,036 | 210 | 155,082 | 79,992 | 2,905 | 238,189 | |||||||||||||||||
Reclassification of tax effect of TCJA | — | — | — | (1,308 | ) | 1,308 | — | ||||||||||||||||
Issuance of common stock under stock-based compensation plan | 36 | — | 545 | — | — | 545 | |||||||||||||||||
Stock-based compensation | — | — | 158 | — | — | 158 | |||||||||||||||||
Dividends declared ($0.07 per share) | — | — | — | (1,473 | ) | — | (1,473 | ) | |||||||||||||||
Other comprehensive loss, net of tax | — | — | — | — | (4,856 | ) | (4,856 | ) | |||||||||||||||
Net income | — | — | — | 7,287 | — | 7,287 | |||||||||||||||||
Balance at March 31, 2018 | 21,072 | $ | 210 | $ | 155,785 | $ | 84,498 | $ | (643 | ) | $ | 239,850 | |||||||||||
Balance at December 31, 2018 | 21,242 | $ | 212 | $ | 158,485 | $ | 106,545 | $ | (1,256 | ) | $ | 263,986 | |||||||||||
Issuance of common stock under stock-based compensation plan | 43 | 1 | 597 | — | — | 598 | |||||||||||||||||
Stock-based compensation | — | — | 507 | — | — | 507 | |||||||||||||||||
Dividends declared ($0.08 per share) | — | — | — | (1,702 | ) | — | (1,702 | ) | |||||||||||||||
Other comprehensive income, net of tax | — | — | — | — | 6,780 | 6,780 | |||||||||||||||||
Net income | — | — | — | 18,720 | — | 18,720 | |||||||||||||||||
Balance at March 31, 2019 | 21,285 | $ | 213 | $ | 159,589 | $ | 123,563 | $ | 5,524 | $ | 288,889 |
Three Months Ended March 31, | ||||||||
2019 | 2018 | |||||||
(in thousands) | ||||||||
Operating activities: | ||||||||
Net cash provided by operating activities | $ | 33,804 | $ | 21,437 | ||||
Investing activities: | ||||||||
Purchase of property and equipment | (3,925 | ) | (94 | ) | ||||
Purchases – fixed-maturity securities | (43,040 | ) | (82,587 | ) | ||||
Purchases – equity securities | (1,831 | ) | (3,168 | ) | ||||
Sales – fixed-maturity securities | 28,416 | 3,913 | ||||||
Sales – equity securities | 915 | 982 | ||||||
Maturities and calls – fixed-maturity securities | 14,545 | 35,357 | ||||||
Net cash used in investing activities | (4,920 | ) | (45,597 | ) | ||||
Financing activities: | ||||||||
Proceeds from stock options exercised | 597 | 545 | ||||||
Dividends paid | (1,696 | ) | (1,473 | ) | ||||
Net cash used in financing activities | (1,099 | ) | (928 | ) | ||||
Net change in cash and cash equivalents | 27,785 | (25,088 | ) | |||||
Cash and cash equivalents at beginning of year | 75,089 | 81,747 | ||||||
Cash and cash equivalents at end of period | $ | 102,874 | $ | 56,659 |
March 31, 2019 | ||||||||||||||||
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 | $ | 110 | $ | 2 | $ | — | $ | 112 | ||||||||
Obligations of states, municipalities and political subdivisions | 126,050 | 4,164 | (54 | ) | 130,160 | |||||||||||
Corporate and other securities | 108,757 | 1,676 | (310 | ) | 110,123 | |||||||||||
Commercial mortgage and asset-backed securities | 164,341 | 912 | (841 | ) | 164,412 | |||||||||||
Residential mortgage-backed securities | 136,924 | 774 | (1,727 | ) | 135,971 | |||||||||||
Total available-for-sale investments | $ | 536,182 | $ | 7,528 | $ | (2,932 | ) | $ | 540,778 |
December 31, 2018 | ||||||||||||||||
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 | $ | 610 | $ | 2 | $ | (1 | ) | $ | 611 | |||||||
Obligations of states, municipalities and political subdivisions | 153,884 | 2,010 | (1,294 | ) | 154,600 | |||||||||||
Corporate and other securities | 97,889 | 264 | (1,401 | ) | 96,752 | |||||||||||
Commercial mortgage and asset-backed securities | 151,137 | 252 | (1,522 | ) | 149,867 | |||||||||||
Residential mortgage-backed securities | 110,717 | 354 | (2,650 | ) | 108,421 | |||||||||||
Total available-for-sale investments | $ | 514,237 | $ | 2,882 | $ | (6,868 | ) | $ | 510,251 |
March 31, 2019 | ||||||||||||||||||||||||
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: | ||||||||||||||||||||||||
Obligations of states, municipalities and political subdivisions | $ | — | $ | — | $ | 9,756 | $ | (54 | ) | $ | 9,756 | $ | (54 | ) | ||||||||||
Corporate and other securities | 2,313 | (15 | ) | 12,143 | (295 | ) | 14,456 | (310 | ) | |||||||||||||||
Commercial mortgage and asset-backed securities | 60,061 | (532 | ) | 29,952 | (309 | ) | 90,013 | (841 | ) | |||||||||||||||
Residential mortgage-backed securities | 20,391 | (41 | ) | 58,361 | (1,686 | ) | 78,752 | (1,727 | ) | |||||||||||||||
Total available-for-sale investments | $ | 82,765 | $ | (588 | ) | $ | 110,212 | $ | (2,344 | ) | $ | 192,977 | $ | (2,932 | ) |
December 31, 2018 | ||||||||||||||||||||||||
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 | $ | — | $ | — | $ | 499 | $ | (1 | ) | $ | 499 | $ | (1 | ) | ||||||||||
Obligations of states, municipalities and political subdivisions | 42,718 | (440 | ) | 34,326 | (854 | ) | 77,044 | (1,294 | ) | |||||||||||||||
Corporate and other securities | 62,045 | (890 | ) | 12,092 | (511 | ) | 74,137 | (1,401 | ) | |||||||||||||||
Commercial mortgage and asset-backed securities | 93,247 | (1,017 | ) | 25,746 | (505 | ) | 118,993 | (1,522 | ) | |||||||||||||||
Residential mortgage-backed securities | 24,571 | (155 | ) | 55,638 | (2,495 | ) | 80,209 | (2,650 | ) | |||||||||||||||
Total available-for-sale investments | $ | 222,581 | $ | (2,502 | ) | $ | 128,301 | $ | (4,366 | ) | $ | 350,882 | $ | (6,868 | ) |
March 31, 2019 | ||||||||
Amortized | Estimated | |||||||
Cost | Fair Value | |||||||
(in thousands) | ||||||||
Due in one year or less | $ | 4,270 | $ | 4,265 | ||||
Due after one year through five years | 75,192 | 76,142 | ||||||
Due after five years through ten years | 53,708 | 55,609 | ||||||
Due after ten years | 101,747 | 104,379 | ||||||
Commercial mortgage and asset-backed securities | 164,341 | 164,412 | ||||||
Residential mortgage-backed securities | 136,924 | 135,971 | ||||||
Total fixed maturities | $ | 536,182 | $ | 540,778 |
Three Months Ended March 31, | ||||||||
2019 | 2018 | |||||||
(in thousands) | ||||||||
Interest: | ||||||||
Taxable bonds | $ | 3,067 | $ | 1,761 | ||||
Tax exempt municipal bonds | 1,008 | 1,085 | ||||||
Cash equivalents and short-term investments | 245 | 260 | ||||||
Dividends on equity securities | 521 | 412 | ||||||
Gross investment income | 4,841 | 3,518 | ||||||
Investment expenses | (326 | ) | (289 | ) | ||||
Net investment income | $ | 4,515 | $ | 3,229 |
Three Months Ended March 31, | ||||||||
2019 | 2018 | |||||||
(in thousands) | ||||||||
Fixed-maturity securities: | ||||||||
Realized gains | $ | 371 | $ | 55 | ||||
Realized losses | (79 | ) | — | |||||
Net realized gains from fixed-maturity securities | 292 | 55 | ||||||
Equity securities: | ||||||||
Realized gains | 4 | 57 | ||||||
Realized losses | (16 | ) | — | |||||
Net realized (losses) gains from equity securities | (12 | ) | 57 | |||||
Net realized investment gains | $ | 280 | $ | 112 |
March 31, 2019 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
(in thousands) | ||||||||||||||||
Assets | ||||||||||||||||
Fixed maturities: | ||||||||||||||||
U.S. Treasury securities and obligations of U.S. government agencies | $ | 112 | $ | — | $ | — | $ | 112 | ||||||||
Obligations of states, municipalities and political subdivisions | — | 130,160 | — | 130,160 | ||||||||||||
Corporate and other securities | — | 110,123 | — | 110,123 | ||||||||||||
Commercial mortgage and asset-backed securities | — | 164,412 | — | 164,412 | ||||||||||||
Residential mortgage-backed securities | — | 135,971 | — | 135,971 | ||||||||||||
Total fixed maturities | 112 | 540,666 | — | 540,778 | ||||||||||||
Equity securities: | ||||||||||||||||
Exchange traded funds | 43,834 | — | — | 43,834 | ||||||||||||
Nonredeemable preferred stock | — | 20,647 | — | 20,647 | ||||||||||||
Total equity securities | 43,834 | 20,647 | — | 64,481 | ||||||||||||
Total | $ | 43,946 | $ | 561,313 | $ | — | $ | 605,259 |
December 31, 2018 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
(in thousands) | ||||||||||||||||
Assets | ||||||||||||||||
Fixed maturities: | ||||||||||||||||
U.S. Treasury securities and obligations of U.S. government agencies | $ | 611 | $ | — | $ | — | $ | 611 | ||||||||
Obligations of states, municipalities and political subdivisions | — | 154,600 | — | 154,600 | ||||||||||||
Corporate and other securities | — | 96,752 | — | 96,752 | ||||||||||||
Commercial mortgage and asset-backed securities | — | 149,867 | — | 149,867 | ||||||||||||
Residential mortgage-backed securities | — | 108,421 | — | 108,421 | ||||||||||||
Total fixed maturities | 611 | 509,640 | — | 510,251 | ||||||||||||
Equity securities: | ||||||||||||||||
Exchange traded funds | 38,987 | — | — | 38,987 | ||||||||||||
Nonredeemable preferred stock | — | 18,724 | — | 18,724 | ||||||||||||
Total equity securities | 38,987 | 18,724 | — | 57,711 | ||||||||||||
Total | $ | 39,598 | $ | 528,364 | $ | — | $ | 567,962 |
Three Months Ended March 31, | ||||||||
2019 | 2018 | |||||||
(in thousands) | ||||||||
Balance, beginning of period | $ | 14,801 | $ | 11,775 | ||||
Policy acquisition costs deferred: | ||||||||
Direct commissions | 12,363 | 9,377 | ||||||
Ceding commissions | (3,256 | ) | (2,541 | ) | ||||
Other underwriting and policy acquisition costs | 965 | 809 | ||||||
Policy acquisition costs deferred | 10,072 | 7,645 | ||||||
Amortization of net policy acquisition costs | (8,559 | ) | (6,652 | ) | ||||
Balance, end of period | $ | 16,314 | $ | 12,768 |
Three Months Ended March 31, | ||||||||
2019 | 2018 | |||||||
(in thousands) | ||||||||
Underwriting, acquisition and insurance expenses incurred: | ||||||||
Direct commissions | $ | 10,674 | $ | 8,379 | ||||
Ceding commissions | (2,938 | ) | (2,444 | ) | ||||
Other operating expenses | 7,880 | 6,463 | ||||||
Total | $ | 15,616 | $ | 12,398 |
For the Three Months Ended March 31, 2019 | |||||||
Number of Shares | Weighted Average Grant Date Fair Value per Share | ||||||
Non-vested outstanding at the beginning of the period | 92,465 | $ | 52.98 | ||||
Granted | 7,020 | $ | 55.56 | ||||
Vested | (6,666 | ) | $ | 45.00 | |||
Forfeited | (1,305 | ) | $ | 53.60 | |||
Non-vested outstanding at the end of the period | 91,514 | $ | 53.75 |
Risk-free rate of return | 1.26 | % | |
Dividend yield | 1.25 | % | |
Expected share price volatility(1) | 18.50 | % | |
Expected life in years(2) | 6.3 years |
(1) | Expected volatility was based on the Company’s competitors within the industry. |
(2) | Expected life was calculated using the simplified method, which was an average of the contractual term of the option and its ordinary vesting period, as the Company did not have sufficient historical data for determining the expected term of our stock option awards. |
Number of Shares | Weighted-average exercise price | Weighted-average remaining years of contractual term | Aggregate intrinsic value (in thousands) | ||||||||||
Outstanding at January 1, 2019 | 804,303 | $ | 16.00 | ||||||||||
Granted | — | — | |||||||||||
Forfeited | (12,600 | ) | 16.00 | ||||||||||
Exercised | (37,308 | ) | 16.00 | ||||||||||
Outstanding at March 31, 2019 | 754,395 | $ | 16.00 | 7.3 | $ | 39,659 | |||||||
Exercisable at March 31, 2019 | 302,629 | $ | 16.00 | 7.3 | $ | 15,909 |
Three Months Ended March 31, | ||||||||
2019 | 2018 | |||||||
(in thousands, except per share data) | ||||||||
Net income | $ | 18,720 | $ | 7,287 | ||||
Weighted average common shares outstanding - basic | 21,169 | 21,045 | ||||||
Effect of potential dilutive securities: | ||||||||
Conversion of stock options | 568 | 581 | ||||||
Conversion of restricted stock | 26 | 2 | ||||||
Weighted average common shares outstanding - diluted | 21,763 | 21,628 | ||||||
Earnings per common share: | ||||||||
Basic | $ | 0.88 | $ | 0.35 | ||||
Diluted | $ | 0.86 | $ | 0.34 |
March 31, | ||||||||
2019 | 2018 | |||||||
(in thousands) | ||||||||
Net reserves for unpaid losses and loss adjustment expenses, beginning of year | $ | 313,763 | $ | 267,493 | ||||
Incurred losses and loss adjustment expenses: | ||||||||
Current year | 40,128 | 30,183 | ||||||
Prior years | (6,396 | ) | (1,284 | ) | ||||
Total net losses and loss adjustment expenses incurred | 33,732 | 28,899 | ||||||
Payments: | ||||||||
Current year | 2,042 | 340 | ||||||
Prior years | 17,955 | 17,516 | ||||||
Total payments | 19,997 | 17,856 | ||||||
Net reserves for unpaid losses and loss adjustment expenses, end of period | 327,498 | 278,536 | ||||||
Reinsurance recoverable on unpaid losses | 57,627 | 49,673 | ||||||
Gross reserves for unpaid losses and loss adjustment expenses, end of period | $ | 385,125 | $ | 328,209 |
Three Months Ended March 31, | ||||||||
2019 | 2018 | |||||||
(in thousands) | ||||||||
Written: | ||||||||
Direct | $ | 84,563 | $ | 63,847 | ||||
Assumed | 63 | — | ||||||
Ceded | (11,559 | ) | (8,756 | ) | ||||
Net written | $ | 73,067 | $ | 55,091 | ||||
Earned: | ||||||||
Direct | $ | 72,078 | $ | 56,593 | ||||
Assumed | 57 | — | ||||||
Ceded | (10,644 | ) | (8,532 | ) | ||||
Net earned | $ | 61,491 | $ | 48,061 |
Three Months Ended March 31, | ||||||||
2019 | 2018 | |||||||
(in thousands) | ||||||||
Unrealized gains (losses) on fixed-maturity securities arising during the period, before income taxes: | $ | 8,873 | $ | (6,092 | ) | |||
Income taxes | (1,863 | ) | 1,279 | |||||
Unrealized gains (losses) arising during the period, net of income taxes | 7,010 | (4,813 | ) | |||||
Less reclassification adjustment: | ||||||||
Net realized gains on fixed-maturity securities, before income taxes | 292 | 55 | ||||||
Income taxes | (62 | ) | (12 | ) | ||||
Reclassification adjustment included in net income, net of income taxes | 230 | 43 | ||||||
Other comprehensive income (loss) | $ | 6,780 | $ | (4,856 | ) |
• | New business submissions; |
• | Conversion of new business submissions into policies; |
• | Renewals of existing policies; and |
• | Average size and premium rate of bound 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) | 2019 | 2018 | Change | % Change | |||||||||||
Gross written premiums | $ | 84,626 | $ | 63,847 | $ | 20,779 | 32.5 | % | |||||||
Ceded written premiums | (11,559 | ) | (8,756 | ) | (2,803 | ) | 32.0 | % | |||||||
Net written premiums | $ | 73,067 | $ | 55,091 | $ | 17,976 | 32.6 | % | |||||||
Net earned premiums | $ | 61,491 | $ | 48,061 | $ | 13,430 | 27.9 | % | |||||||
Losses and loss adjustment expenses | 33,732 | 28,899 | 4,833 | 16.7 | % | ||||||||||
Underwriting, acquisition and insurance expenses | 15,616 | 12,398 | 3,218 | 26.0 | % | ||||||||||
Underwriting income (1) | 12,143 | 6,764 | 5,379 | 79.5 | % | ||||||||||
Other expenses, net | (32 | ) | (11 | ) | (21 | ) | 190.9 | % | |||||||
Net investment income | 4,515 | 3,229 | 1,286 | 39.8 | % | ||||||||||
Net unrealized gains (losses) on equity securities | 5,895 | (1,279 | ) | 7,174 | (560.9 | )% | |||||||||
Net realized gains on investments | 280 | 112 | 168 | 150.0 | % | ||||||||||
Income before taxes | 22,801 | 8,815 | 13,986 | 158.7 | % | ||||||||||
Income tax expense | 4,081 | 1,528 | 2,553 | 167.1 | % | ||||||||||
Net income | $ | 18,720 | $ | 7,287 | $ | 11,433 | 156.9 | % | |||||||
Annualized return on equity | 27.1 | % | 12.2 | % | |||||||||||
Annualized operating return on equity(2) | 20.0 | % | 13.7 | % | |||||||||||
Loss ratio | 54.9 | % | 60.1 | % | |||||||||||
Expense ratio | 25.4 | % | 25.8 | % | |||||||||||
Combined ratio | 80.3 | % | 85.9 | % |
Three Months Ended March 31, | ||||||||||||||
2019 | 2018 | |||||||||||||
($ in thousands) | Losses and Loss Adjustment Expenses | % of Earned Premiums | Losses and Loss Adjustment Expenses | % of Earned Premiums | ||||||||||
Loss ratio: | ||||||||||||||
Current accident year before catastrophe losses | $ | 40,098 | 65.2 | % | $ | 30,183 | 62.8 | % | ||||||
Current year catastrophe losses | 30 | 0.1 | % | — | — | % | ||||||||
Effect of prior year development | (6,396 | ) | (10.4 | )% | (1,284 | ) | (2.7 | )% | ||||||
Total | $ | 33,732 | 54.9 | % | $ | 28,899 | 60.1 | % |
Three Months Ended March 31, | ||||||||||||||
2019 | 2018 | |||||||||||||
($ in thousands) | Underwriting Expenses | % of Earned Premiums | Underwriting Expenses | % of Earned Premiums | ||||||||||
Commissions incurred: | ||||||||||||||
Direct | $ | 10,674 | 17.4 | % | $ | 8,379 | 17.4 | % | ||||||
Ceding | (2,938 | ) | (4.8 | )% | (2,444 | ) | (5.1 | )% | ||||||
Net commissions incurred | 7,736 | 12.6 | % | 5,935 | 12.3 | % | ||||||||
Other underwriting expenses | 7,880 | 12.8 | % | 6,463 | 13.5 | % | ||||||||
Underwriting, acquisition and insurance expenses | $ | 15,616 | 25.4 | % | $ | 12,398 | 25.8 | % |
Three Months Ended March 31, | |||||||||||||||
($ in thousands) | 2019 | 2018 | Change | % Change | |||||||||||
Interest from fixed-maturity securities | $ | 4,075 | $ | 2,846 | $ | 1,229 | 43.2 | % | |||||||
Dividends from equity securities | 521 | 412 | 109 | 26.5 | % | ||||||||||
Other | 245 | 260 | (15 | ) | (5.8 | )% | |||||||||
Gross investment income | 4,841 | 3,518 | 1,323 | 37.6 | % | ||||||||||
Investment expenses | (326 | ) | (289 | ) | (37 | ) | 12.8 | % | |||||||
Net investment income | 4,515 | 3,229 | 1,286 | 39.8 | % | ||||||||||
Net unrealized gains (losses) on equity securities | 5,895 | (1,279 | ) | 7,174 | (560.9 | )% | |||||||||
Net realized gains on investments | 280 | 112 | 168 | 150.0 | % | ||||||||||
Total | $ | 10,690 | $ | 2,062 | $ | 8,628 | 418.4 | % |
Three Months Ended March 31, | ||||||||
2019 | 2018 | |||||||
(in thousands) | ||||||||
Cash and cash equivalents provided by (used in): | ||||||||
Operating activities | $ | 33,804 | $ | 21,437 | ||||
Investing activities | (4,920 | ) | (45,597 | ) | ||||
Financing activities | (1,099 | ) | (928 | ) | ||||
Change in cash and cash equivalents | $ | 27,785 | $ | (25,088 | ) |
Line of Business Covered | Company Policy Limit | Reinsurance Coverage | Company Retention | |||
Property - per risk | Up to $10.0 million per risk | $9.0 million excess of $1.0 million | $1.0 million per occurrence | |||
Property - catastrophe (1) | N/A | $45.0 million excess of $5.0 million | $5.0 million per catastrophe | |||
Primary casualty (2) | Up to $10.0 million per occurrence | $9.0 million excess of $1.0 million | $1.0 million per occurrence | |||
Excess casualty (3) | Up to $10.0 million per occurrence | Variable quota share | $1.5 million per occurrence except as described in note (3) 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 $90 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 $1.0 million or less. |
(3) | For policies with a per occurrence limit higher than $1.0 million, the quota-share ceding percentage varies such that the retention is always $1.5 million or less. For example, for a $2.0 million limit excess policy, our retention would be 75%, whereas for a $10.0 million limit excess policy, our retention would be 15%. For policies for which we also write an underlying primary limit, the retention on the primary and excess policy combined would not exceed $1.5 million. |
March 31, 2019 | December 31, 2018 | |||||||
(in thousands) | ||||||||
Stockholders' equity | $ | 288,889 | $ | 263,986 | ||||
Less: intangible assets, net of deferred taxes | 2,795 | 2,795 | ||||||
Tangible stockholders' equity | $ | 286,094 | $ | 261,191 |
March 31, 2019 | December 31, 2018 | |||||||||||||||||||||
Amortized Cost | Estimated Fair Value | % of Total Fair Value | Amortized Cost | Estimated Fair Value | % of Total Fair Value | |||||||||||||||||
($ in thousands) | ||||||||||||||||||||||
Fixed-maturity securities: | ||||||||||||||||||||||
U.S. Treasury securities and obligations of U.S. government agencies | $ | 110 | $ | 112 | — | % | $ | 610 | $ | 611 | 0.1 | % | ||||||||||
Obligations of states, municipalities and political subdivisions | 126,050 | 130,160 | 24.1 | % | 153,884 | 154,600 | 30.3 | % | ||||||||||||||
Corporate and other securities | 108,757 | 110,123 | 20.4 | % | 97,889 | 96,752 | 19.0 | % | ||||||||||||||
Asset-backed securities | 164,341 | 164,412 | 30.4 | % | 151,137 | 149,867 | 29.4 | % | ||||||||||||||
Residential mortgage-backed securities | 136,924 | 135,971 | 25.1 | % | 110,717 | 108,421 | 21.2 | % | ||||||||||||||
Total fixed-maturity securities | $ | 536,182 | $ | 540,778 | 100.0 | % | $ | 514,237 | $ | 510,251 | 100.0 | % |
March 31, 2019 | December 31, 2018 | |||||||||||||
Standard & Poor’s or Equivalent Designation | Estimated Fair Value | % of Total | Estimated Fair Value | % of Total | ||||||||||
($ in thousands) | ||||||||||||||
AAA | $ | 149,998 | 27.7 | % | $ | 133,028 | 26.1 | % | ||||||
AA | 207,870 | 38.4 | % | 199,026 | 39.0 | % | ||||||||
A | 104,013 | 19.2 | % | 108,972 | 21.3 | % | ||||||||
BBB | 69,308 | 12.9 | % | 61,037 | 12.0 | % | ||||||||
Below BBB and unrated | 9,589 | 1.8 | % | 8,188 | 1.6 | % | ||||||||
Total | $ | 540,778 | 100.0 | % | $ | 510,251 | 100.0 | % |
March 31, 2019 | December 31, 2018 | |||||||||||||||||||||
Amortized Cost | Estimated Fair Value | % of Total Fair Value | Amortized Cost | Estimated Fair Value | % of Total Fair Value | |||||||||||||||||
($ in thousands) | ||||||||||||||||||||||
Due in one year or less | $ | 4,270 | $ | 4,265 | 0.8 | % | $ | 10,283 | $ | 10,252 | 2.0 | % | ||||||||||
Due after one year through five years | 75,192 | 76,142 | 14.1 | % | 67,670 | 67,426 | 13.2 | % | ||||||||||||||
Due after five years through ten years | 53,708 | 55,609 | 10.3 | % | 55,725 | 56,235 | 11.0 | % | ||||||||||||||
Due after ten years | 101,747 | 104,379 | 19.3 | % | 118,705 | 118,050 | 23.1 | % | ||||||||||||||
Asset-backed securities | 164,341 | 164,412 | 30.4 | % | 151,137 | 149,867 | 29.4 | % | ||||||||||||||
Residential mortgage-backed securities | 136,924 | 135,971 | 25.1 | % | 110,717 | 108,421 | 21.3 | % | ||||||||||||||
Total fixed maturities | $ | 536,182 | $ | 540,778 | 100.0 | % | $ | 514,237 | $ | 510,251 | 100.0 | % |
March 31, 2019 | December 31, 2018 | |||||||||||||
Fund | Fair Value | % of Total | Fair Value | % of Total | ||||||||||
($ in thousands) | ||||||||||||||
Domestic stock market fund | $ | 22,684 | 51.8 | % | $ | 19,899 | 51.0 | % | ||||||
Dividend yield equity fund | 10,341 | 23.6 | % | 9,344 | 24.0 | % | ||||||||
Foreign stock market fund | 9,736 | 22.2 | % | 8,817 | 22.6 | % | ||||||||
Small-cap index | 1,073 | 2.4 | % | 927 | 2.4 | % | ||||||||
Total | $ | 43,834 | 100.0 | % | $ | 38,987 | 100.0 | % |
March 31, 2019 | December 31, 2018 | |||||||||||||
Industry | Fair Value | % of Total | Fair Value | % of Total | ||||||||||
($ in thousands) | ||||||||||||||
Financial | $ | 15,376 | 74.5 | % | $ | 14,618 | 78.1 | % | ||||||
Utilities | 3,635 | 17.6 | % | 2,734 | 14.6 | % | ||||||||
Industrials and other | 1,636 | 7.9 | % | 1,372 | 7.3 | % | ||||||||
Total | $ | 20,647 | 100.0 | % | $ | 18,724 | 100.0 | % |
Three Months Ended March 31, | ||||||||
(in thousands) | 2019 | 2018 | ||||||
Net income | $ | 18,720 | $ | 7,287 | ||||
Income tax expense | 4,081 | 1,528 | ||||||
Income before income taxes | 22,801 | 8,815 | ||||||
Other expenses | 36 | 14 | ||||||
Net investment income | (4,515 | ) | (3,229 | ) | ||||
Net unrealized (gains) losses on equity securities | (5,895 | ) | 1,279 | |||||
Net realized gains on investments | (280 | ) | (112 | ) | ||||
Other income | (4 | ) | (3 | ) | ||||
Underwriting income | $ | 12,143 | $ | 6,764 |
Three Months Ended March 31, | ||||||||
(in thousands) | 2019 | 2018 | ||||||
Net operating earnings: | ||||||||
Net income | $ | 18,720 | $ | 7,287 | ||||
Net unrealized (gains) losses on equity securities, after taxes | (4,657 | ) | 1,010 | |||||
Net realized gains on investments, after taxes | (221 | ) | (88 | ) | ||||
Net operating earnings | $ | 13,842 | $ | 8,209 | ||||
Operating return on equity: | ||||||||
Average equity (1) | $ | 276,438 | $ | 239,020 | ||||
Annualized return on equity (2) | 27.1 | % | 12.2 | % | ||||
Annualized operating return on equity (3) | 20.0 | % | 13.7 | % |
Exhibit Number | Description | |
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 |
KINSALE CAPITAL GROUP, INC. | ||
Date: May 2, 2019 | By: | /s/ Michael P. Kehoe |
Michael P. Kehoe President and Chief Executive Officer | ||
Date: May 2, 2019 | By: | /s/ Bryan P. Petrucelli |
Bryan P. Petrucelli Senior Vice President, Chief Financial Officer and Treasurer |
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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f), 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. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | 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 |
d. | 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 2, 2019 | /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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f), 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. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | 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 |
d. | 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 2, 2019 | /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 2, 2019 | /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 2, 2019 | /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, 2019 |
Apr. 26, 2019 |
|
Document and Entity Information [Abstract] | ||
Entity Registrant Name | Kinsale Capital Group, Inc. | |
Trading Symbol | KNSL | |
Entity Central Index Key | 0001669162 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Large Accelerated Filer | |
Entity Emerging Growth Company | false | |
Entity Small Business | false | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2019 | |
Document Fiscal Year Focus | 2019 | |
Document Fiscal Period Focus | Q1 | |
Amendment Flag | false | |
Entity Common Stock, Shares Outstanding | 21,286,456 |
Consolidated Balance Sheet (Unaudited) (Parentheticals) - USD ($) $ in Thousands |
Mar. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Assets [Abstract] | ||
Fixed-maturity securities available-for-sale - amortized cost | $ 536,182 | $ 514,237 |
Equity securities - cost | $ 56,926 | $ 56,051 |
Stockholders' Equity | ||
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) | 21,284,527 | 21,241,504 |
Common stock, shares outstanding (in shares) | 21,284,527 | 21,241,504 |
Consolidated Statements of Income and Comprehensive Income (Unaudited) (Parentheticals) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Other Comprehensive Income (Loss), Net of Tax, Portion Attributable to Parent [Abstract] | ||
Income taxes on change in unrealized gains (losses) on available-for-sale investments | $ 1,801 | $ (1,291) |
Consolidated Statements of Changes in Stockholders' Equity (Unaudited) (Parentheticals) - $ / shares |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Statement of Stockholders' Equity [Abstract] | ||
Dividends declared, per share | $ 0.08 | $ 0.07 |
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Operating Activities | ||
Net cash provided by operating activities | $ 33,804 | $ 21,437 |
Investing Activities | ||
Purchase of property and equipment | (3,925) | (94) |
Purchases – fixed-maturity securities | (43,040) | (82,587) |
Purchases - equity securities | (1,831) | (3,168) |
Sales – fixed-maturity securities | 28,416 | 3,913 |
Sales - equity securities | 915 | 982 |
Maturities and calls – fixed-maturity securities | 14,545 | 35,357 |
Net cash used in investing activities | (4,920) | (45,597) |
Financing Activities | ||
Proceeds from stock options exercised | 597 | 545 |
Dividends paid | (1,696) | (1,473) |
Net cash used in financing activities | (1,099) | (928) |
Net change in cash and cash equivalents | 27,785 | (25,088) |
Cash and cash equivalents at beginning of year | 75,089 | 81,747 |
Cash and cash equivalents at end of period | $ 102,874 | $ 56,659 |
Summary of Significant Accounting Policies |
3 Months Ended |
---|---|
Mar. 31, 2019 | |
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 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 for the year ended December 31, 2018. 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, the 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. Recently adopted accounting pronouncements 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 ("ROU") asset and corresponding liability on the balance sheet for all leases, except for leases covering a period of 12 months or less. The lessee’s income statement treatment for leases will vary depending on the nature and classification of the lease. Effective January 1, 2019, the Company adopted this ASU and recorded a ROU asset and corresponding lease liability of approximately $0.9 million. The ROU and operating lease liability are included in "other assets" and "other liabilities," respectively, in the accompanying consolidated balance sheet. The Company elected the package of practical expedients permitted under the adoption of the new standard, which allowed the Company to account for existing leases under their current classification, as well as omit any new costs classified as initial direct costs, under the new standard. This election kept the existing agreements as operating leases. The Company also elected the practical expedient allowing an accounting policy election by class of underlying asset, to account for separate lease and nonlease components as a single lease component. In addition, the Company has implemented the necessary internal controls relating to the adoption of the standard. ASU 2017-08, Premium Amortization on Purchased Callable Debt Securities In March 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. Effective January 1, 2019, the Company adopted ASU 2017-08 using a modified retrospective approach. The adoption of ASU 2017-08 did not have a material impact on the Company's financial statements. Prospective accounting pronouncements ASU 2016-13, Financial Instruments – Credit Losses (Topic 326) In June 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. 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 available-for-sale investments at March 31, 2019 and December 31, 2018:
Available-for-sale securities in a loss position The Company regularly reviews all its available-for-sale investments 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 a security's 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 fair value. For fixed-maturity securities, the Company also 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 and the ability to recover all amounts outstanding when contractually due. When assessing whether it intends to sell a fixed-maturity security or if it is likely to be required to sell a fixed-maturity security 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 fixed-maturity securities 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. The following tables summarize gross unrealized losses and fair value for available-for-sale investments by length of time that the securities have continuously been in an unrealized loss position:
At March 31, 2019, the Company held 152 fixed-maturity securities in an unrealized loss position with a total estimated fair value of $193.0 million and gross unrealized losses of $2.9 million. Of these securities, 118 were in a continuous unrealized loss position for greater than one year. As discussed above, the Company regularly reviews all fixed-maturity securities within its investment portfolio to determine whether any other-than-temporary impairment has occurred. Based on the Company's review as of March 31, 2019, unrealized losses were caused by interest rate changes or other market factors and were not credit-specific issues. At March 31, 2019, 85.4% of the Company’s fixed-maturity securities were rated "A-" or better and all of the Company’s fixed-maturity securities made expected coupon payments under the contractual terms of the securities. For the three months ended March 31, 2019, the Company concluded that there were no other-than-temporary impairments from fixed-maturity securities with unrealized losses.
At December 31, 2018, the Company held 317 fixed-maturity securities in an unrealized loss position with a total estimated fair value of $350.9 million and gross unrealized losses of $6.9 million. Of those securities, 158 were in a continuous unrealized loss position for greater than one year. Based on the Company's review as of December 31, 2018, unrealized losses were caused by interest rate changes or other market factors and were not credit-specific issues. At December 31, 2018, 86.4% of the Company’s fixed-maturity securities were rated "A-" or better and all of the Company’s fixed-maturity securities made expected coupon payments under the contractual terms of the securities. For the year ended December 31, 2018, the Company concluded that there were no other-than-temporary impairments from fixed-maturity securities with unrealized losses. 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, 2019 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 for the three months ended March 31, 2019 and 2018:
Realized investment gains and losses The following table presents realized investment gains and losses for the three months ended March 31, 2019 and 2018:
Change in net unrealized gains (losses) on fixed-maturity securities For the three months ended March 31, 2019, the change in net unrealized gains for fixed-maturity securities was $8.6 million. For the three months ended March 31, 2018, the change in net unrealized losses for fixed-maturity securities was $6.1 million. Insurance – statutory deposits The Company had invested assets with a carrying value of $6.9 million on deposit with state regulatory authorities at March 31, 2019 and December 31, 2018. Payable for investments purchased The Company recorded a payable for investments purchased, not yet settled, of $22.1 million at March 31, 2019. The payable balance was 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 obtains 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, 2019 and December 31, 2018, 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, 2019. There were no assets or liabilities measured at fair value on a nonrecurring basis as of March 31, 2019 or December 31, 2018. Due to the relatively short-term nature of cash and cash equivalents, short-term investments, 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, 2019 and 2018:
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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, 2019 and 2018 consist of the following:
Other operating expenses within underwriting, acquisition and insurance expenses include salaries, bonus and employee benefits expenses of $6.8 million and $5.0 million for the three months ended March 31, 2019 and 2018, respectively. |
Stock-based Compensation |
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Disclosure of Compensation Related Costs, Share-based Payments [Text Block] | Stock-based compensation On July 27, 2016, the Kinsale Capital Group, Inc. 2016 Omnibus Incentive Plan (the "2016 Incentive Plan") became effective. The 2016 Incentive Plan, which is administered by the Compensation, Nominating and Corporate Governance Committee of the Company's Board of Directors, provides for grants of stock options, restricted stock, restricted stock units and other stock-based awards to officers, employees, directors, independent contractors and consultants. The number of shares of common stock available for issuance under the 2016 Incentive Plan may not exceed 2,073,832. The total compensation cost that has been charged against income for share-based compensation arrangements was $0.5 million and $0.2 million for the three months ended March 31, 2019 and 2018, respectively. Restricted Stock Awards During the first quarter of 2019, the Company granted restricted stock awards under the 2016 Incentive Plan. The restricted stock awards were valued on the date of grant and will vest over a one-year period. The fair value of restricted stock awards was determined based on the closing trading price of the Company’s shares on the grant date or, if no shares were traded on the grant date, the last preceding date for which there was a sale of shares. Except for restrictions placed on the transferability of restricted stock, holders of unvested restricted stock have full stockholder’s rights, including voting rights and the right to receive dividends. Unvested shares of restricted stock awards and accrued dividends, if any, are forfeited upon the termination of service to or employment with the Company. A summary of all restricted stock activity under the equity compensation plans for the three months ended March 31, 2019 is as follows:
As of March 31, 2019, the Company had $3.9 million of total unrecognized stock-based compensation expense expected to be charged to earnings over a weighted-average period of 3.0 years. Stock Options On July 27, 2016, the Board of Directors approved, and the Company granted, 1,036,916 stock options with an exercise price equal to the Initial Public Offering price of $16.00 per share and a weighted-average grant-date fair value of $2.71 per share. The options have a maximum contractual term of 10 years and vest in 4 equal annual installments following the date of the grant. The value of the options granted was estimated at the date of grant using the Black-Scholes pricing model using the following assumptions:
A summary of option activity as of March 31, 2019, and changes during the period then ended is presented below:
The total intrinsic value of options exercised was $1.9 million and $1.0 million during the three months ended March 31, 2019 and 2018, respectively. As of March 31, 2019, the Company had $0.8 million of total unrecognized stock-based compensation expense expected to be charged to earnings over a weighted-average period of 1.3 years. |
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:
There were no anti-dilutive stock awards for the three months ended March 31, 2019 or 2018. |
Income Taxes |
3 Months Ended |
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Mar. 31, 2019 | |
Income Tax Disclosure [Abstract] | |
Income Tax Disclosure [Text Block] | Income taxes The Company uses the estimated annual effective tax rate method for calculating its tax provision in interim periods, which represents the Company's best estimate of the effective tax rate expected for the full year. The estimated annual effective tax rate typically differs from the U.S. statutory tax rate primarily as a result of tax-exempt investment income and any discrete items recognized during the period. The Company's effective tax rates were 17.9% and 17.3% for the three months ended March 31, 2019 and 2018, respectively. The decrease in the effective tax rate in the first quarter of 2019 and the first quarter of 2018 was primarily due to stock options exercised and tax-exempt interest income relative to pre-tax income. |
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, 2019, the reserves for unpaid losses and loss adjustment expenses held at December 31, 2018 developed favorably by $6.4 million. The favorable development was primarily attributable to the 2015 through 2018 accident years by $6.3 million, which resulted from reported losses emerging at a lower level than expected across most statutory lines of business. During the three months ended March 31, 2018, the reserves for unpaid losses and loss adjustment expenses held at December 31, 2017 developed favorably by $1.3 million. The favorable development was primarily attributable to the 2017 accident year of $2.5 million and the 2016 accident year of $1.2 million, which resulted from reported losses emerging at a lower level than expected. This favorable development was offset in part by adverse development from the 2011 through 2015 accident years of $2.4 million. |
Reinsurance |
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Reinsurance | Reinsurance The following table summarizes the effect of reinsurance on premiums written and earned for the three months ended March 31, 2019 and 2018:
Incurred losses and loss adjustment expenses were net of reinsurance (ceded incurred losses and loss adjustment expenses) of $4.3 million and $2.9 million for the three months ended March 31, 2019 and 2018, respectively. At March 31, 2019, reinsurance recoverables on paid and unpaid losses were $1.7 million and $57.6 million, respectively. At December 31, 2018, reinsurance recoverables on paid and unpaid losses were $1.4 million and $55.4 million, respectively. |
Other Comprehensive (Loss) Income |
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Other Comprehensive Income (Loss), Net of Tax [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Comprehensive Income | Other comprehensive income (loss) The following table summarizes the components of other comprehensive (loss) income for the three months ended March 31, 2019 and 2018:
The sale of an available-for-sale fixed-maturity 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. |
Summary of Significant Accounting Policies (Policies) |
3 Months Ended |
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Mar. 31, 2019 | |
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 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 for the year ended December 31, 2018. 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, the 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. |
Recently Adopted Accounting Pronouncements | Recently adopted accounting pronouncements 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 ("ROU") asset and corresponding liability on the balance sheet for all leases, except for leases covering a period of 12 months or less. The lessee’s income statement treatment for leases will vary depending on the nature and classification of the lease. Effective January 1, 2019, the Company adopted this ASU and recorded a ROU asset and corresponding lease liability of approximately $0.9 million. The ROU and operating lease liability are included in "other assets" and "other liabilities," respectively, in the accompanying consolidated balance sheet. The Company elected the package of practical expedients permitted under the adoption of the new standard, which allowed the Company to account for existing leases under their current classification, as well as omit any new costs classified as initial direct costs, under the new standard. This election kept the existing agreements as operating leases. The Company also elected the practical expedient allowing an accounting policy election by class of underlying asset, to account for separate lease and nonlease components as a single lease component. In addition, the Company has implemented the necessary internal controls relating to the adoption of the standard. ASU 2017-08, Premium Amortization on Purchased Callable Debt Securities In March 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. |
Prospective Accounting Pronouncements | Prospective accounting pronouncements ASU 2016-13, Financial Instruments – Credit Losses (Topic 326) In June 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. 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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Available-for-sale Investments | The following tables summarize the available-for-sale investments at March 31, 2019 and December 31, 2018:
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Available-for-sale Securities in an Unrealized Loss Position |
The following tables summarize gross unrealized losses and fair value for available-for-sale investments 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, 2019 are summarized, by contractual maturity, as follows:
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Net Investment Income | The following table presents the components of net investment income for the three months ended March 31, 2019 and 2018:
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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, 2019 and 2018:
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Fair Value Measurements (Tables) |
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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, 2019 and December 31, 2018, by level within the fair value hierarchy.
|
Deferred Policy Acquisition Costs (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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, 2019 and 2018:
|
Underwriting, Acquisition and Insurance Expenses (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Underwriting, Acquisition and Insurance Expenses [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Underwriting, acquisition and insurance expenses | Underwriting, acquisition and insurance expenses for the three months ended March 31, 2019 and 2018 consist of the following:
|
Stock-based Compensation (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restricted Stock Activity | A summary of all restricted stock activity under the equity compensation plans for the three months ended March 31, 2019 is as follows:
|
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Stock Options Valuation Assumptions | The value of the options granted was estimated at the date of grant using the Black-Scholes pricing model using the following assumptions:
|
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Stock Options Activity | A summary of option activity as of March 31, 2019, and changes during the period then ended is presented below:
|
Earnings Per Share (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Liability for Unpaid Claims and Claims Adjustment Expense, Activity in Liability [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of 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:
|
Reinsurance (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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, 2019 and 2018:
|
Other Comprehensive (Loss) Income (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Comprehensive Income (Loss), Net of Tax [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Comprehensive Income (Loss) | The following table summarizes the components of other comprehensive (loss) income for the three months ended March 31, 2019 and 2018:
|
Summary of Significant Accounting Policies (Details) - Accounting Standards Update 2016-02 [Member] $ in Thousands |
Jan. 01, 2019
USD ($)
|
---|---|
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |
Operating Lease, Liability | $ 900 |
Operating Lease, Right-of-Use Asset | $ 900 |
Investments Available-for-Sale Securities in a Loss Position Narrative (Details) $ in Thousands |
3 Months Ended | 12 Months Ended |
---|---|---|
Mar. 31, 2019
USD ($)
Rate
|
Dec. 31, 2018
USD ($)
Rate
|
|
Debt Securities, Available-for-sale [Line Items] | ||
Number of available-for-sale securities in unrealized loss positions | 152 | 317 |
Total estimated fair value | $ 192,977 | $ 350,882 |
Total gross unrealized holding losses | $ 2,932 | $ 6,868 |
Number of available-for-sale securities in unrealized loss positions, greater than one year | 118 | 158 |
Other-than- temporary impairment losses | $ 0 | $ 0 |
Fixed maturities [Member] | ||
Debt Securities, Available-for-sale [Line Items] | ||
Available-for-sale securities, percentage of securities with ratings of A minus or better | Rate | 85.40% | 86.40% |
Investments Net Investment Income (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Components of Net Investment Income [Abstract] | ||
Taxable bonds | $ 3,067 | $ 1,761 |
Tax exempt municipal bonds | 1,008 | 1,085 |
Cash equivalents and short-term investments | 245 | 260 |
Dividends on equity securities | 521 | 412 |
Gross investment income | 4,841 | 3,518 |
Investment expenses | (326) | (289) |
Net investment income | $ 4,515 | $ 3,229 |
Investments Realized Gains (Losses) (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Debt and Equity Securities, Realized Gain (Loss) [Abstract] | ||
Realized gains, fixed-maturity securities | $ 371 | $ 55 |
Realized losses, fixed-maturity securities | (79) | 0 |
Net realized gains, fixed-maturity securities | 292 | 55 |
Realized gains, equity securities | 4 | 57 |
Realized losses, equity securities | (16) | 0 |
Net realized (losses) gains, equity securities | (12) | 57 |
Net realized investment gains | $ 280 | $ 112 |
Investments Unrealized Gains (Losses) on Investments (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Debt Securities, Available-for-sale [Line Items] | ||
Change in unrealized gains (losses), fixed-maturity securities | $ 8.6 | $ (6.1) |
Investments Investment Narrative (Details) - USD ($) $ in Millions |
Mar. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Investments, Debt and Equity Securities [Abstract] | ||
Assets on deposit with state regulatory authorities | $ 6.9 | $ 6.9 |
Payable for investments purchased | $ 22.1 |
Fair Value Measurements Narrative (Details) - USD ($) $ in Millions |
Mar. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Transfers from Level 1 to Level 2 | $ 0 | |
Transfers from Level 2 to Level 1 | 0 | |
Nonrecurring [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Assets measured at fair value | 0 | $ 0 |
Liabilities measured at fair value | $ 0 | $ 0 |
Deferred Policy Acquisition Costs (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Movement Analysis of Deferred Policy Acquisition Costs [Roll Forward] | ||
Balance, beginning of period | $ 14,801 | $ 11,775 |
Policy acquisition costs deferred: | ||
Direct commissions deferred | 12,363 | 9,377 |
Ceding commissions deferred | (3,256) | (2,541) |
Other underwriting and policy acquisition costs | 965 | 809 |
Policy acquisition costs deferred | 10,072 | 7,645 |
Amortization of net policy acquisition costs | (8,559) | (6,652) |
Balance, end of period | $ 16,314 | $ 12,768 |
Underwriting, Acquisition and Insurance Expenses (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Underwriting, Acquisition and Insurance Expenses [Abstract] | ||
Gross commissions | $ 10,674 | $ 8,379 |
Ceding commissions | (2,938) | (2,444) |
Other operating expenses | 7,880 | 6,463 |
Underwriting, acquisition, and insurance expenses | 15,616 | 12,398 |
Salaries, bonuses and employee benefits | $ 6,800 | $ 5,000 |
Stock-based Compensation Narrative (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Share-based compensation expense | $ 0.5 | $ 0.2 |
2016 Omnibus Incentive Plan [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Number of shares available for issuance | 2,073,832 |
Stock-based Compensation Narrative - Restricted Stock Awards (Details) - Restricted stock [Member] $ in Millions |
3 Months Ended |
---|---|
Mar. 31, 2019
USD ($)
| |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Vesting period | 1 year |
Unrecognized stock-based compensation expense | $ 3.9 |
Compensation cost not yet recognized, period | 3 years |
Stock-based Compensation Restrictive Stock Awards (Details) - Restricted stock [Member] |
3 Months Ended |
---|---|
Mar. 31, 2019
$ / shares
shares
| |
Nonvested Restricted Stock, Number of Shares [Roll Forward] | |
Nonvested outstanding at the beginning of the period, shares | shares | 92,465 |
Granted, shares | shares | 7,020 |
Vested, shares | shares | (6,666) |
Forfeited, shares | shares | (1,305) |
Nonvested outstanding at the end of the period, shares | shares | 91,514 |
Nonvested Restricted Stock, Weighted Average Grant Date Fair Value [Abstract] | |
Nonvested outstanding at the beginning of the period | $ / shares | $ 52.98 |
Granted | $ / shares | 55.56 |
Vested | $ / shares | 45.00 |
Forfeited | $ / shares | 53.60 |
Nonvested outstanding at the end of the period | $ / shares | $ 53.75 |
Stock-based Compensation Narrative - Stock Options (Details) - USD ($) $ / shares in Units, $ in Millions |
3 Months Ended | ||
---|---|---|---|
Jul. 27, 2016 |
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Intrinsic value of options exercised | $ 1.9 | $ 1.0 | |
Weighted average exercise price, granted | $ 0.00 | ||
Compensation not yet recognized | $ 0.8 | ||
Stock option [Member] | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Weighted average exercise price, granted | $ 16.00 | ||
Weighted average grant date fair value | $ 2.71 | ||
Contractual term | 10 years | ||
Vesting period | 4 years | ||
Compensation cost not yet recognized, period | 1 year 3 months |
Earnings Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Earnings Per Share, [Line Items] | ||
Net income | $ 18,720 | $ 7,287 |
Weighted Average Number of Shares Outstanding, Basic [Abstract] | ||
Weighted average shares outstanding - basic | 21,169 | 21,045 |
Weighted Average Number of Shares Outstanding, Diluted [Abstract] | ||
Weighted average shares outstanding - diluted | 21,763 | 21,628 |
Earnings Per Share, Basic [Abstract] | ||
Earnings per share - basic | $ 0.88 | $ 0.35 |
Earnings Per Share, Diluted [Abstract] | ||
Earnings per share - diluted | $ 0.86 | $ 0.34 |
Stock option [Member] | ||
Incremental Weighted Average Shares Attributable to Dilutive Effect [Abstract] | ||
Dilutive effect of shares issued under stock compensation arrangements | 568 | 581 |
Restricted stock [Member] | ||
Incremental Weighted Average Shares Attributable to Dilutive Effect [Abstract] | ||
Dilutive effect of shares issued under stock compensation arrangements | 26 | 2 |
Earnings Per Share Narrative (Details) - shares shares in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Restricted stock [Member] | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Antidilutive securities | 0 | 0 |
Income Taxes (Details) |
3 Months Ended | |
---|---|---|
Mar. 31, 2019
Rate
|
Mar. 31, 2018
Rate
|
|
Income Tax Disclosure [Abstract] | ||
Effective tax rate | 17.90% | 17.30% |
Reserves for Unpaid Losses and Loss Adjustment Expenses (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Liability for Unpaid Claims and Claims Adjustment Expense [Roll Forward] | ||
Net reserves for unpaid losses and loss adjustment expenses, beginning of year | $ 313,763 | $ 267,493 |
Incurred losses and loss adjustment expenses: | ||
Current year | 40,128 | 30,183 |
Prior years | (6,396) | (1,284) |
Total net losses and loss adjustment expenses incurred | 33,732 | 28,899 |
Payments: | ||
Current year | 2,042 | 340 |
Prior years | 17,955 | 17,516 |
Total payments | 19,997 | 17,856 |
Net reserves for unpaid losses and loss adjustment expenses, end of period | 327,498 | 278,536 |
Reinsurance recoverable on unpaid losses | 57,627 | 49,673 |
Gross reserves for unpaid losses and loss adjustment expenses, end of period | $ 385,125 | $ 328,209 |
Reserves for Unpaid Losses and Loss Adjustment Expenses Narrative (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Claims Development [Line Items] | ||
Adverse (favorable) development on prior year loss reserves | $ (6,396) | $ (1,284) |
Accident Year 2015-2018 [Member] | ||
Claims Development [Line Items] | ||
Adverse (favorable) development on prior year loss reserves | $ (6,300) | |
Accident Year 2017 [Member] | ||
Claims Development [Line Items] | ||
Adverse (favorable) development on prior year loss reserves | (2,500) | |
Accident Year 2016 [Member] | ||
Claims Development [Line Items] | ||
Adverse (favorable) development on prior year loss reserves | (1,200) | |
Accident Years 2011 to 2015 [Member] | ||
Claims Development [Line Items] | ||
Adverse (favorable) development on prior year loss reserves | $ 2,400 |
Reinsurance (Details) - USD ($) $ in Thousands |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
Dec. 31, 2018 |
|
Premiums Written, Net [Abstract] | |||
Direct written premiums | $ 84,563 | $ 63,847 | |
Assumed Premiums Written | 63 | 0 | |
Ceded written premiums | (11,559) | (8,756) | |
Net written premiums | 73,067 | 55,091 | |
Premiums Earned, Net [Abstract] | |||
Direct earned premiums | 72,078 | 56,593 | |
Assumed Premiums Earned | 57 | 0 | |
Ceded earned premiums | (10,644) | (8,532) | |
Net earned premiums | 61,491 | 48,061 | |
Ceded incurred losses and loss adjustment expenses | 4,300 | $ 2,900 | |
Reinsurance recoverables on paid losses | 1,700 | $ 1,400 | |
Reinsurance recoverables on unpaid losses | $ 57,600 | $ 55,400 |
Other Comprehensive (Loss) Income (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Other Comprehensive Income (Loss), Net of Tax [Abstract] | ||
Unrealized gains (losses) arising during the period, before income taxes | $ 8,873 | $ (6,092) |
Income Taxes | (1,863) | 1,279 |
Unrealized gains (losses) arising during the period, net of income tax | 7,010 | (4,813) |
Less reclassification adjustment [Abstract] | ||
Net realized investment gains on fixed-maturity securities, before income taxes | 292 | 55 |
Income taxes | (62) | (12) |
Reclassification adjustment included in net income, net of income taxes | 230 | 43 |
Other comprehensive income (loss) | $ 6,780 | $ (4,856) |
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