Kinsale grows GWP 36% in Q1 as rate increases stay in low-teens

Kinsale Capital Group has reported a 48.1 percent increase in operating earnings and 36.2 percent growth in gross written premiums in the first quarter year on year, although the excess and surplus lines specialist saw submissions growth slow when compared with the fourth quarter.

Kinsale reported net operating earnings for the first quarter of $25.5mn, compared with $17.2mn for the first quarter of 2020.

The Richmond, Virginia-based insurer focuses on small to medium-sized accounts in the E&S market.

Gross written premiums grew 36.2 percent to $168.9mn in Q1 2021 compared with the first quarter of 2020. The company said this was driven by higher submission activity from brokers and increased rates.

Underwriting income was $24.6mn in this year’s first quarter, resulting in a combined ratio of 80.0 percent. This compared with underwriting income of $14.4mn and a combined ratio of 83.9 percent in Q1 2020.

The increase in underwriting income was due to premium growth from a positive underwriting environment, continued rate increases and higher net favourable development of loss reserves.

Favourable reserve development of $7.1mn in this year’s first quarter improved the combined ratio by 5.7 points, compared with figures of $3.0mn and 3.3 points in Q1 2020.

On an earnings call, president and CEO Michael Kehoe commented: “Kinsale results are also benefiting from continued dislocation in the market.

“We are still seeing some carriers working through the process of correcting problems within their books of business. Some programs are being cancelled, capacity withdrawn or standard business being pushed into the nonstandard market, et cetera.

“This process has been going on for the last two years or so, and we expect it to continue for the duration of 2021 and possibly longer.”

Chief operating officer Brian Haney said that Kinisale’s submission growth was in the mid-teens in the first quarter, down from the high teens in the fourth quarter.

“But we saw a resurgence late in the quarter as some Covid restrictions were loosened, and that resurgence has continued into the early second quarter, giving us a good sense of optimism for the full year as respect to submission and premium growth and general market opportunity,” Haney said.

The executive commented that Kinsale is continuing to push rates up in response to market conditions.

“We see rates being up in the low teens range in the aggregate during the first quarter, generally consistent with the fourth quarter,” Haney said. “Keep in mind, unlike many of our competitors, we are raising rates to further improve margins, not to correct former poor decisions or to rectify money-losing books of business.”

The executive added that Kinsale’s bottom line will also benefit from the insurer tightening terms and conditions.