Kinsale Capital Group, Inc.

Ladies and gentlemen, thank you for standing by and welcome to Kingsville Capital Group's second quarter 2020 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during that session of the call, you will need to press star one on your telephone. If you require any further assistance, please press star and zero. Before we get started, let me remind everyone that through the course of the teleconference, teams' self-management may make comments that reflect their intentions, beliefs, and expectations for the future. As always, these forward-looking statements are subject to certain risk factors which could cause actual results to differ materially. These risk factors are listed in the company's various SEC filings, including the second quarter 2020 quarterly report on Form 10-Q and the 2019 annual report on Form 10-K. should be reviewed carefully. The company has furnished a form 8K with the Securities and Exchange Commission that contains the press release announcing its second quarter results. King Sales Management may also reference certain non-GAAP financial measures in the call today. A reconciliation of GAAP to these measures can be found in the press release, which is available at the company's website at www.KinselCapitalGroup.com. I will now turn the conference over to Kinsel's President and CEO, Mr. Michael Keel. Please go ahead, sir.

Thank you, Operator. Good morning, everyone, and thank you for joining us on the call today. With me are Brian Petrucelli, Kinsel's CFO, and Brian Heaney, Kinsel's COO. I will begin our presentation, and then Brian Petrucelli will cover the financial performance for the quarter, and then Brian Haney will provide some color on the market and our underwriting operation. Last night, Kinsale reported operating earnings of 84 cents per diluted share for the second quarter of 2020, up 47 percent from the second quarter of 2019. Gross written premium was up 41 percent for the quarter, notwithstanding the disruption of the COVID virus, the company posted an 83.8% combined ratio and a 16.9% annualized operating return on equity for the six months ending June 30, 2020. The ConSale strategy of disciplined and highly controlled underwriting, combined with technology-driven low costs and a focus on the ENS market, is propelling our profitability and growth, and we believe will continue to do so over the long term. In addition to our own business strategy, our growth is being enhanced by a growing level of dislocation within the P&C market. After many years of intense competition, some competitors are experiencing adverse results and are withdrawing capacity, canceling some programs, raising prices, et cetera. We expect this dislocation to continue, thereby allowing Kinsale to grow at an elevated rate, perhaps through 2021. At some point thereafter, we expect the level of dislocation to abate and our growth rate to normalize, perhaps in the low double-digit range. Beyond the accelerated growth, industry dislocation is also allowing Kinsale to raise rates and in some cases restrict coverage to further expand our profit margins. To take full advantage of this market opportunity, there is a possibility Kinsale could raise a modest amount of equity capital before year end. At the end of the first quarter 2020, we noted that we did not expect the COVID-19 virus to have a material impact on Kinsale's profitability or growth. Three months later, we have the exact same position. The temporary drop-off in March in the growth of new business submissions reversed within a couple of weeks, and we have experienced a V-shaped recovery in submission activity and premium. On the claim side, three months ago we noted a small number of claims wherein all policies involved had coverage exclusions that we anticipated would preclude any payout. We are essentially in a similar place today. A small number of claims against policies with coverage defenses in place. We don't see any material impact to either growth or profitability arising from the COVID-19 virus. And now I'll turn the call over to Brian Petruccelli.

Thanks, Mike. The premium growth and the profitability that Mike just mentioned is encouraging. given the less than ideal economic conditions generated by COVID-19 in the second quarter. Just as a reminder, our primary goals as a company are to consistently produce mid-80s combined ratios and mid-teens operating returns on equity. In our second quarter, 83.9% combined ratio and 16.9% annualized operating ROE are right in line with that guidance. We reported net income of $30.3 million for the second quarter of 2020, representing an increase of 120% when compared to $13.8 million last year. Net income this quarter included $13 million or so in pre-tax unrealized gains on our equity investments as the financial markets came back our way and recovered nicely from the significant declines in the first quarter that were driven by the equity market's reaction to COVID-19. Net operating earnings, which excludes the volatility from investment gains and losses, increased by 54% up to $19 million compared to $13.5 million in the second quarter of 2019. The company generated underwriting income of $15.7 million in a combined ratio of 83.8% compared to $10 million and 84.8% last year. The combined ratio for the second quarter of 2020 included 3.7 points from net favorable prior year loss reserve development compared to 2.2 points last year. Our effective income tax rate for the first six months of 2020 was 14.8%, and again, includes discrete tax benefits recognized from the exercise of stock options during the period. Gross written premiums were $134 million, representing a 41% increase over last year, for all the reasons that Mike previously mentioned, including the continued market dislocation and sustained service levels. On the investment side, net investment income increased by 38% over the second quarter last year, up to $6.6 million from $4.8 million last year as a result of continued growth in the investment portfolio. Annualized gross investment returns, excluding cash and cash equivalents, did decrease, however, to 3% from 3.2% last year, just given lower interest rate environment. Diluted operating EPS was 84 cents per share for the quarter compared to 57 cents per share last year. And with that, I'll pass it over to Brian Haney.