Kinsale Capital Group Sustains Strong Profitability Amidst Market Volatility
The first quarter of 2025 has been a remarkable period for Kinsale Capital Group, with the company maintaining its reputation for strong profitability despite facing significant market challenges. In a conference call on April 1st, Chairman and CEO Michael Kehoe outlined the company's impressive results, which include a 6% increase in operating earnings per share and an 8% growth in gross written premium over the same period last year.
Notably, Kinsale's combined ratio for the quarter stood at 82%, with a net favorable prior-year loss reserve development of 3.9 points contributing to this result. This is a testament to the company's conservative risk management approach and disciplined underwriting model, which enables it to balance margin in its business with inherent volatility.
One notable exception was the Commercial Property division, which saw an 18% decrease in premium due to intense competition from standard companies and rate declines of about 20%. While margins are still strong in this business, Kinsale expects to write less premium compared to the prior year for the near term. However, if we exclude this division from the calculation, direct written premium grew by an impressive 16.7%.
Personal lines and small commercial property teams at Kinsale continued to grow at double-digit rates, a trend that is expected to persist in the coming quarters. The company's E&S market remained steady, albeit with increased competition, which will likely impact growth in the near term.
Kinsale's CFO, Bryan Petrucelli, highlighted the company's net operating earnings increase of 6%, despite the impact of California wildfires on its results. The combined ratio of 82.1% for the quarter included 3.9 points from net favorable prior-year loss reserve development compared to 2.7 points last year and 6 points in cat losses this year, primarily due to the California wildfires.
On a more positive note, Kinsale's investment portfolio generated strong returns, with net investment income increasing by 33.1% over last year. The annualized gross return was 4.3%, consistent with last year, while new money yields continue to average in the low 5% range and book yields around 4.5%. This bodes well for continued investment income benefits as the company moves forward.
Overall, Kinsale Capital Group's Q1 results demonstrate its resilience and ability to navigate challenging market conditions while maintaining strong profitability. The company's commitment to conservative risk management, disciplined underwriting, and robust reinsurance programs will likely continue to serve it well in the coming quarters.
