Kinsale Capital Group, Inc.

Good morning and welcome everyone to the second quarter 2024 Kinsale Capital Group, Inc. earnings conference call. Today's conference is being recorded. Before we get started, let me remind everyone that through the course of the teleconference, Kinsale's 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 2023 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. Ken 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.kinsalecapitalgroup.com. I will now turn the conference over to Kinsale's chairman and CEO, Mr. Michael Kehoe. Please go ahead, sir.

Thank you. Good morning, everyone. Brian Petrucelli, our CFO, and Brian Haney, our president and COO, are both joining me on the call this morning. In the second quarter... ConSales operating earnings per share increased by 30.2%, and gross written premium grew by 20.9% over the second quarter of 2023. The company posted a combined ratio of 77.7%, and a six-month operating return on equity of 28.8%. ConSales' strategy of focusing on smaller accounts within the E&S market Maintaining absolute control over our underwriting and using technology to manage costs to the lowest level in the industry is driving these results and allows us to both generate best in class returns and take market share from competitors at the same time. It is this business strategy that gives us confidence in our prospects for both profitability and growth in the years ahead in all types of market environments. The overall E&S market in the second quarter was steady and consistent with conditions in the last few quarters. Generally, we continue to see strong growth in new business submission activity, positive overall rate changes across the book of business, and a rational level of competition. Brian Haney will offer some more in-depth commentary on the market here in a moment. The ConSale investment strategy remains conservative. with most of the portfolio allocated to fixed income with a AA minus average rating and a three-year duration. Notwithstanding the conservative approach, we have been gradually increasing our allocation to common stocks over the last couple of quarters. At the end of the second quarter, that allocation was 8% of cash and invested assets, and over the next several quarters, that allocation should grow toward 10%. We renewed our reinsurance program on June 1st. Some of the modest changes to the program included $2.5 million retention on our excess casualty treaty, up from a $2 million retention on the expiring treaty. On our commercial property quota share contract, the seating commission we received from reinsurers increased slightly, reflecting favorable historical results. And on a casualty excess of loss treaty, we increased our retention from 47.5 million to 60 million and purchased some additional limits at the top of the treaty. As we have seen in recent financial reports, some competitors within the P&C industry continue to work through challenges around inadequate loss reserves, exaggerated loss cost trends due to the expanding tort system, and frequency and severity issues involving natural catastrophe losses. The Consale strategy of disciplined underwriting and technology-driven low cost continue to perform well in this environment, and our purposeful conservatism in setting reserves for future losses gives us confidence in the strength of our balance sheet. Our second quarter results were driven in part by another quarter of actual losses being below our expectations. Notwithstanding the favorable quarterly loss experience, we continue to take a cautious approach to reserving to prospectively stay ahead of loss trend and an expanding and sometimes unpredictable tort system. Favorable results and conservatism in reserving for future claims should give ConSale investors confidence in our performance and balance sheet and optimism that our losses will continue to develop favorably over time. And with that, I'll turn the call over to Brian Petrucelli.

Thanks, Mike. Another strong quarter with net income and net operating earnings increasing by 27.2% and 30.2% respectively. The 77.7% combined ratio for the quarter included 2.8 points from net favorable prior year loss reserve development compared to 3.9 points last year, with one point in CAT losses this year compared to a half point in Q2 last year. As Mike mentioned, we continue to take a more cautious approach to releasing reserves. We produced a 21.1% expense ratio in the second quarter and right on top of the 21% last year. The expense ratio continues to benefit from seating commissions generated from the company's casualty and commercial property quota share reinsurance agreements, and from the company's intense focus on managing expenses on a daily basis. On the investment side, net investment income increased by 48.3% in the second quarter over last year as a result of continued growth in the investment portfolio generated from strong operating cash flows and higher interest rates. The annualized gross return was 4.3% for the first half of the year compared to 3.8% last year. Other than the modest increase in the allocation to common stocks that Mike touched on, we haven't made any significant changes to our investment strategy and continue to monitor inflation, interest rates, and related Fed policy commentary and will adjust as circumstances change. New money yields are averaging in the low to mid 5% range, and we have an average duration of three years. And lastly, diluted operating earnings per share continues to improve and was $3.75 per share for the quarter compared to $2.88 per share for the second quarter of 2023. And with that, I'll pass it over to Brian Haney.