Kinsale Capital Group, Inc.

Before we get started, let me remind everyone that through the course of the teleconference, King Sales 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 values SEC filings, including the 2020 annual report on Form 10-K, which should be reviewed carefully. The company has furnished a Form 8-K with the Securities and Exchange Commission that contains the press release announcing its second quarter results. Keen Sales Management may also reference certain non-GAAP financial measures in the call today. A reconciliation of GAAP to this measure can be found in the press release which is available at the company's website at www.kinsalecapitalgroup.com. I will now turn the conference over to Kingsale's President and CEO, Mr. Michael Kehoe. Please go ahead, sir.

Thank you, Operator, and good morning, everyone. We appreciate your joining us on the call today. Brian Petrucelli, Kingsale's Chief Financial Officer, and Brian Haney, Chief Operating Officer, are with me as well. After each of us make a few comments, we will then take any questions you may have. Can sales operating earnings for the second quarter 2021 were $1.28 per diluted share, an increase of 52% from the second quarter of 2020? Gross rent and premium was up over 45% for the quarter. The company posted a 79.5% combined ratio. and an 18.2% annualized operating return on equity for the first six months of 2021. These numbers are well ahead of our guidance of a mid-80s combined ratio and mid-teens operating return on equity. ConSales results were driven by our unique business strategy that combines focus on the small account E&S market, control over our underwriting operation, and technology-enabled low-costs. but they are also driven, especially the 45% growth rate in the second quarter, from the continued favorable market conditions within the ENF segment. 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. Brian Haney will offer some additional commentary on this topic here in a moment. We are optimistic about market conditions for the balance of the year and perhaps next year as well. Regarding capital levels, the company is well situated currently, and we don't expect to need any additional capital this year, even with the strong growth rate. To the extent that we do need additional capital next year, we would expect to use debt in lieu of equity capital. I'll now turn the call over to Brian Petrucelli.

Thanks, Mike. The results for the second quarter continue to be strong and driven by solid premium growth, favorable loss experience, and disciplined expense management. We reported net income of $35.6 million for the second quarter of 2021, representing an increase of 17.8% when compared to $30.2 million last year, and due primarily to higher-earned premium and net favorable loss reserve development. Net operating earnings increased by 54% to $29.4 million, up from $19 million in the second quarter of 2020. The company generated underwriting income of $28.7 million and a combined ratio of 79.2% for the quarter, compared to $15.7 million and 83.8% last year, with improvements to both the loss and expense ratios. The combined ratio for the second quarter of 2021 included 6.6 points from NIF favorable prior year loss reserve development and 2.1 points from CAT losses compared to 3.7 points of favorable loss reserve development and negligible CAT losses last year. The CAT losses this quarter were primarily related to development on losses from a couple of the Texas winter storms. Our current accident year loss ratio, exclusive of CAT losses, decreased slightly in recognition of ongoing favorable pricing trends that Mike previously touched on. We expect there will always be some variability in our quarterly expense ratio, and our 21.7% expense ratio for this quarter continues to benefit from some economies of scale, given that our earned premiums are growing faster than our operating expenses, and from slightly lower relative net commissions as a result of a shift in the mix of business to lines, that are subject to reinsurance and where we receive seating commissions. Our effective income tax rate for the quarter was 18.5% compared to 14.8% last year, and higher due to lower tax benefits from stock compensation activity this quarter. Annualized operating return on equity was 18.2% for the first six months of this year, and again, as Mike stated, ahead of our mid-teens guidance. Gross written premiums were approximately $194 million for the quarter, representing a 45% increase over last year due to the favorable market conditions that Mike mentioned and also our superior service standards. On the investment side, net investment income increased by 11.8% over the second quarter of last year, up to $7.4 million from $6.6 million last year as a result of continued growth in our investment portfolio. Annualized gross investment returns, excluding cash and cash equivalents, was 2.6% for the year so far compared to 3% last year. Diluted operating earnings per share was $1.28 per share for the quarter compared to $0.84 per share last year.