Kinsale Capital Group's Q3 2025 Earnings Call: Contradictions Emerge on Competitive Growth, Pricing Dynamics, and Underwriting Expense Ratio

Date of Call: October 24, 2025

Financials Results

• EPS: $5.21 per diluted share, up 24% YOY (Q3 2024: $4.20)

Guidance:

• Expect Commercial Property rate declines to moderate going forward.
• Long-term growth target of roughly 10%–20% annualized over the cycle.
• Expense ratio expected to gradually decline over time via technology/productivity gains.
• Reinsurance retention and ceded-premium profile expected to remain near current levels absent material mix changes.
• No change planned to compensation model; continue focus on low-cost, controlled underwriting.

Business Commentary:

• Strong Operating Performance:
• Kinsale Capital Group reported a 24% increase in operating earnings per share for Q3 2025, with gross written premium growing by 8.4% compared to the third quarter of 2024.

• The growth was driven by a combination of disciplined underwriting, a low-cost business model, and the company's efficiency in providing competitive policy terms to customers.

• Property Market Stabilization:

• The Commercial Property division experienced an 8% drop in premiums in Q3, compared to a 17% drop in the previous quarter, indicating a stabilization in rate declines.

• This trend is attributed to reaching an inflection point where the rate of decline is abating, suggesting that rates may moderate going forward.

• Technology and Operational Efficiency:

• Kinsale emphasized the importance of technology as a core competency, enhancing its product line and driving automation across various business processes.

• The company's enterprise system and AI tools are contributing to its cost advantage, which helps it maintain margins in a competitive market.

• Management Changes and Transition:

• Brian Haney was elected to the Board of Directors and will retire, but will continue as a Senior Adviser to the company.
• Stuart Winston was promoted to Executive Vice President and Chief Underwriting Officer, reflecting the company's strong underwriting results and expectations for future growth.

Sentiment Analysis:

Overall Tone: Positive

• Management highlighted operating EPS up 24%, a 74.9% combined ratio, net earned premium growth of 17.8%, book value per share up 25.8% since year-end 2024, and float growth to $3.0B — all cited as evidence of strong performance and durable competitive advantage.

Q&A:

• Question from Jian Huang (Morgan Stanley): Outside of Commercial Property, where are future opportunities and areas to pull back?
  Response: Management: Growth opportunities across Transportation, Agribusiness, Casualty, high-value Homeowners/Personal Lines; will pursue selectively.

• Question from Jian Huang (Morgan Stanley): Can you give color on technology innovation and AI adoption?
  Response: Management: Undertaking a full rewrite ('target state architecture') of the enterprise system and using AI to drive automation, enabling continued cost advantage.

• Question from Michael Phillips (Oppenheimer): Any change in assumptions for construction liability affecting the loss pick?
  Response: Management: No specific change noted; reserve reviews are complex but overall losses continue to come in below expectations.

• Question from Michael Phillips (Oppenheimer): Thoughts on Excess Casualty growth and loss trends?
  Response: Management (Stuart): Good opportunities remain; rates holding strong where Kinsale participates (lead/first $10M), with some pressure at very high attachment points.

• Question from Michael Zaremski (BMO): Color on Casualty marketplace, pricing and MGA competition?
  Response: Management: Casualty varies by division; moderate competition overall with strong pockets (Excess Casualty, Social Services, Allied Health); MGAs remain competitive.

• Question from Michael Zaremski (BMO): Is Casualty becoming less competitive or will competition keep impacting growth?
  Response: Management: Market remains competitive; growth normalized from prior 40% to current high single digits; view long-term growth target of 10%–20% over the cycle.

• Question from Michael Zaremski (BMO): Consider changing to profit-share commissions to brokers in competitive times?
  Response: Management: No; they will not adopt profit-commission/delegated underwriting models and will retain centralized underwriting control.

• Question from Mark Hughes (Truist): Why was current accident-year loss ratio up a bit — mix or competition?
  Response: Management: Attributed to normal variability; overall loss performance remains favorable and reserving remains cautious.

• Question from Mark Hughes (Truist): Are ceded premium (~17%) and expense ratio (~21%) reasonable starting points for coming quarters?
  Response: Management (Bryan): Yes, current levels are a reasonable guide, though mix may cause modest variability.

• Question from Mark Hughes (Truist): Is faster growth in coastal states material or indicative of mix shift?
  Response: Management: Don't read too much into short-term state tax data; no meaningful change in geographic mix reported.

• Question from Andrew Andersen (Jefferies): Have you rethought lines you previously avoided (e.g., D&O, trucking)?
  Response: Management: Expanded into homeowners, agribusiness, aviation, ocean marine and will consider small fleet auto selectively — always on their terms to preserve margins.

• Question from Andrew Andersen (Jefferies): Could net commission ratio revert to prior 12%–13% levels?
  Response: Management (Bryan): Current ~10.7% is best guide post-reinsurance change; it could move with mix but uncertain.

• Question from Andrew Kligerman (TD Cowen): What was the mix of the $10M (3.7 points) reserve release — short-tail vs casualty?
  Response: Management: Most recent releases have been disproportionately in short-tail (first-party/property) lines.

• Question from Andrew Kligerman (TD Cowen): Are there more micro/start-up competitors/MGAs than 3 years ago?
  Response: Management: Yes — materially more competition including many new MGAs and multiple fronting companies; capital influx into the space.

• Question from Andrew Kligerman (TD Cowen): Can you quantify property rate changes from Q2 to now?
  Response: Management (Haney): No exact figures; believes rate declines moved from double-digits down in Q2 to high-single-digits now — an inflection toward normalization.

• Question from Ryan Tunis (Cantor Fitzgerald): Are you seeing loss-ratio pressure from property lines?
  Response: Management: No — property outperformed and drove reserve redundancy; caution remains on long-tail casualty where uncertainty persists.

• Question from Ryan Tunis (Cantor Fitzgerald): Is Q3 improvement in pricing merely seasonal mix?
  Response: Management: Clarified that pricing hasn't improved — declines are slowing (deterioration at a slower rate), reflecting an inflection not just seasonality.

• Question from Joseph Tumillo (BofA): Excluding Commercial Property, has submission growth remained steady?
  Response: Management (Brian): Submission growth excluding Commercial Property is approximately 9%.

• Question from Joseph Tumillo (BofA): Why did share repurchases step up this quarter?
  Response: Management: Opportunistic use of excess capital from strong ROE and slower growth; repurchases and small dividend may continue to grow.

• Question from Pablo Singzon (JPMorgan): With slower premium growth, how will underwriting expenses be managed?
  Response: Management: Expect gradual decline in other underwriting expenses over time through productivity and technology — not a sudden change.

• Question from Pablo Singzon (JPMorgan): Would you trade expense advantage for higher premiums/underwriting income?
  Response: Management: No; they will not deliberately increase costs to chase volume — focus remains on efficiency and protecting margins.

• Question from Pablo Singzon (JPMorgan): Could reinsurance retention increase again over next couple years?
  Response: Management (Bryan/Mike): Current retention is the best guide now; retention has changed historically and could shift with mix, but no specific plan announced.

• Question from Casey Alexander (Compass Point): Concern about alternative capital entering property in 2026 and irrational pricing?
  Response: Management (Brian): Acknowledged possibility but noted Q3 commentary refers to current market dynamics; uncertain and will monitor.

Contradiction Point 1

Competitive Environment and Growth Opportunities

It involves differing perspectives on the competitive landscape and growth opportunities, which are crucial for investor expectations and strategic planning.

What future growth opportunities exist outside Commercial Property amid slowing growth? - Jian Huang(Morgan Stanley)

2025Q3: There's opportunity across the whole book, especially in Transportation, Agribusiness, Casualty, Property-related lines, and Personal Lines. These segments present growth opportunities. - Brian Haney(COO)

Can you clarify the positive gap between expected profitability and technical pricing in the commercial property business? How far can prices fall before the market sees a bottom? - Pablo Augusto Serrano Singzon(JPMorgan Chase & Co)

2025Q2: We think that's a really healthy number that showcases the competitiveness of our model. We're optimistic but also realistic that near term, we've got some headwinds with competition. - Michael Patrick Kehoe(CEO)

Contradiction Point 2

Pricing Environment and Market Dynamics

It involves differing views on the pricing environment and market dynamics, which are critical for strategic decision-making and financial forecasting.

Is the improved pricing environment seasonal or more sustainable? - Ryan Tunis(Cantor Fitzgerald)

2025Q3: It's not seasonal. The rate decline is stabilizing due to market dynamics. Rates can't go down indefinitely. - Brian Haney(COO)

What is driving the mixed but positive pricing trend in casualty? Which segments are contributing to this mix? What are the pricing trends in the excess casualty book? - Michael Wayne Phillips(Oppenheimer & Co Inc)

2025Q2: We're also seeing some pressure at the higher end of the excess casualty business because there's just a lot of excess capital flowing into the market and a lot of competition in that area. - Stuart Winston(COO)

Contradiction Point 3

Underwriting Expense Ratio

It involves differing expectations for the underwriting expense ratio, which is a crucial metric for assessing operational efficiency and cost management.

How do you expect underwriting expenses to evolve over the next one to two years? - Pablo Singzon(JPMorgan)

2025Q3: We focus on efficiency. Expenses will gradually decline over time with productivity gains. - Michael Patrick Kehoe(CEO)

Is 8% OpEx a good near-term run rate, and should we consider 17% for the session ratio? - Andrew E. Andersen(Jefferies LLC)

2025Q2: I don't have a number to give you, but you can just judgmentally expect it to maybe go down a bit. - Michael Patrick Kehoe(CEO)

Contradiction Point 4

Casualty Market Competition and Underwriting Strategy

It involves changes in the company's assessment of the competitive landscape and its underwriting strategy, which are crucial for understanding their growth and profitability prospects.

What is the current state of the Casualty market, and is competition decreasing? - Michael Zaremski (BMO Capital Markets)

2025Q3: We're in a competitive period with growth rates varying by division. Our growth potential is estimated at 10% to 20% over the cycle. We maintain a cost advantage and continue to take market share from higher-cost competitors. - Michael Kehoe(CEO)

Are there any casualty treaties expiring in June that could impact growth? - Michael Phillips (Oppenheimer)

2025Q1: We have adjusted our retentions many times in the past. We might take a little more net, balancing profitability with volatility. - Michael Kehoe(CEO)

Contradiction Point 5

Rate Environment and Market Dynamics

It involves differing perspectives on the rate environment and market dynamics, which are crucial for understanding the company's growth and pricing strategies.

Is the improved pricing environment seasonal or sustainable? - Ryan Tunis (Cantor Fitzgerald)

2025Q3: The rate decline is stabilizing due to market dynamics. - Brian Haney(COO)

How should we interpret the improvement in the core accident year loss ratio? - Scott Heleniak (RBC Capital Markets)

2024Q4: We believe the first half of the year, that we've got rate increases, and the second half of the year, we're certainly going to be facing rate pressure. - Michael Kehoe(CEO)