Kinsale sees “steady” E&S submissions growth after Q2 GWP soars 45%

Excess and surplus lines insurer Kinsale Group has reported a 44.7 percent increase in gross written premiums in the second quarter, the result of higher broker submissions and rate increases which it said have not yet started to moderate.

Kinsale’s net operating earnings in the second quarter were $29.4mn, or $1.28 per diluted share, compared to $19.1mn, $0.84 per diluted share, for the second quarter of 2020.

The Richmond, Virginia-based insurer reported 44.7 percent growth in gross written premiums to $194.1mn compared to the $134.1mn in the second quarter of 2020.

Underwriting income of $28.7mn in the second quarter of 2021 compared to $15.7mn in the prior period.

The combined ratio improved to 79.2 percent from 83.8 percent for the same period last year.

“We continue to see steady growth in new business submissions, which we see as a bit of a leading indicator, and we continue to see low double-digit rate increases across the book of business which are positively impacting our margins”

Michael Kehoe, Kinsale president and CEO

Kinsale said the increase in underwriting income was largely due to premium growth from a “strong underwriting environment, continued rate increases and higher net favourable development of loss reserves from prior accident years”.

The increases were partly offset by modest activity in catastrophe losses, largely from development on losses related to winter storms Uri and Viola in Texas.

The company said the profitability and growth for the second quarter reflected a steadily improving economy, favourable E&S market conditions and focus on disciplined underwriting and low costs.

For the first half of the year, gross written premiums were up 40.6 percent to $362.9mn, compared with $258.1mn in the first half of 2020.

Kinsale said that in both the second quarter and first half of this year growth was driven by higher submission activity from brokers and rate increases on bound accounts.

First half underwriting income was $53.3mn, resulting in a combined ratio of 79.5 percent. This compared with underwriting income of $30.1mn and a combined ratio of 83.9 percent for the same period last year.

Kinsale’s share price was trading down over 2 percent as of 2pm ET Friday following the results being released after markets closed on Thursday.

On an earnings call, Kinsale president and CEO Michael Kehoe gave an upbeat assessment of the E&S market.

“We continue to see steady growth in new business submissions, which we see as a bit of a leading indicator, and we continue to see low double-digit rate increases across the book of business which are positively impacting our margins,” he said. “We are optimistic about market conditions for the balance of the year and perhaps next year as well.”

Chief operating officer Brian Haney noted that every one of Kinsale’s divisions grew in the second quarter, led by allied health, excess casualty and commercial property.

“The growth is generally driven by higher submission volume and rate increases as well as robust economic growth, which is driving up premiums,” Haney said. “The reopening of the economy and the strong economic growth is providing us a significant boost. Submission growth was in the upper teens in the second quarter, which represented a rebound from the first quarter.”

Haney said the rate increases in the low teens were generally consistent with the previous two quarters.

“Some data suggest that the industry is past peak rate increases at this point but for whatever reason, perhaps mix of business, we feel that our rate increases have stayed high and not started to ebb,” he said.