Before we get started, let me remind everyone that through the course of the teleconference, Kintel'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 2025 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 first quarter results. Kinsale's 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.kincelcapitalgroup.com. I will now turn the conference over to Kincel's Chairman, President, and CEO, Mr. Michael Keough. Please go ahead, sir.
Thank you, Operator, and good morning, everyone. Today I'm joined by Brian Petroselli, our Chief Financial Officer, Stuart Winston, our Chief Underwriting Officer, and Salman Alibay, our chief actuary and head of our data and analytics team. In the first quarter of 2026, Kinsale's diluted operating earnings per share increased by 37.7% over the first quarter of 2025, generating an annualized operating return on equity of 24%. Gross written premium was down half of 1%, but net written premium grew by 5.6% for the quarter as our business lines with the least reinsurance participation continue to show positive top-line growth. Consale's combined ratio was 77.4%. E&S market conditions in the first quarter continued to be competitive, with the level of competition and our growth rate varying from one market segment to another. We added additional disclosure to our 10-Q this quarter with gross written premium detailed by underwriting division in the first quarter of 2026 and 2025. This quarterly disclosure complements the annual disclosure of premium by underwriting division in our 10-K and provides some insight into market conditions and growth prospects at a more granular level. And continuing the trend from the last few quarters, much of the headwind to our growth emanates from our large commercial property division where we write larger layered property accounts and where there is an abundance of competition and falling rates. Excluding the commercial property division, Kinsale's growth in gross written premium was 6% for the first quarter. The investment thesis in Kinsale has always started with our disciplined underwriting and low-cost business model. By maintaining control over our underwriting operation and never outsourcing it to third parties, we drive a more accurate and more profitable underwriting process while offering our brokers the best customer service and the broadest risk appetite in the ENS market. Likewise, our 17-year commitment to making technology and analytics a core competency allows us to operate a smarter business with a tremendous cost advantage over every competitor in the market, no exceptions. And in this competitive period of the insurance cycle, the Kinsale model continues to succeed. In the first quarter, new business submissions were up 6% new business quotes were up 8% and new business bind orders were up 9% we are seeing the largest headwind to growth among larger accounts particularly within our commercial property division it's on the larger premium accounts where the competition is most intense hence our continued focus on smaller transactions where margins continue to be robust. You can see this smaller account trend in our average policy premium for the quarter. It was $12,200 per policy down from $14,200 in the first quarter of 2025. Finally, we continue to work on technology innovation, including extensive use of AI models to drive automation in our business process especially underwriting and claim handling and throughout our software development and analytics teams this innovation is a pretty improving efficiency customer service accuracy and data collection across our business and we have begun incorporating various AI agents into our enterprise system with the talent of our technology professionals and our bespoke enterprise system and the lack of any legacy
software we are well positioned to expand our tech lead to the benefit of both profitability and growth and with that I'll turn the call over to Brian Petroselli thanks Mike as Mike just noted the profitability the business continues to be strong, with net income and net operating earnings increasing by 26.1% and 36.3%, respectively, quarter of a quarter. The 77.4% combined ratio for the quarter included 4.5 points from net favorable prior year loss reserve development, compared to 3.9 points last year, with less than a point in CAT losses this year compared to six points in Q1 last year. Gross written premium decreased by a half point for the quarter, while net written premium grew by 5.6 percent. And as Mike mentioned, the growth in net written premium was higher than gross as the lesser reinsured lines continue to grow at a nice clip. We produced a 21.1 percent expense ratio for the quarter compared to 20 percent last year. The other underwriting expense portion of the ratio, which is the best measure of the operational efficiency of the business, was 10.3 percent for the quarter compared to 10.5 percent in Q1 2025. The overall expense ratio increase is attributable to a higher net commission ratio, resulting from higher reinsurance retentions. The larger retention provides a positive economic trade for the company, with a higher net commission ratio being more than offset by greater underwriting and investment income. On the investment side, net investment income increased by 26.5% for the first quarter over last year as a result of continued growth in the investment portfolio generated from strong operating cash flows. Kinsale's float, mostly unpaid losses and un-earned premium grew to $3.3 billion at March 31 from $3.1 billion at the end of 2025. The annual gross return was 4.5% for the quarter compared to 4.3% last year. New money yields are averaging around 5% with an average duration slightly above four years on the company's fixed maturity investment portfolio.
And lastly, diluted earnings per share continues to improve and was five dollars and eleven cents per share for the quarter compared to three dollars and seventy one cents per share for the first quarter 2025 and with that I'll pass it over to Stuart Brian there's plenty of competition in the ENS market there's also opportunity and it's also a market in constant transition areas like large shared and layered placements in commercial property certain professional lines management liability and public entity all continue to experience strong competition and headwinds to growth. Recently, we have noticed more aggressive competition in some long tail lines like construction over the last quarter as well. There are also strong areas of opportunity with favorable growth prospects within the E&S market. Within the overall property market, our small business property, inland marine, agribusiness property, and personal insurance divisions all experience favorable underwriting conditions and strong growth in the quarter. Within casualty, our agribusiness casualty, allied health, general casualty, health care, entertainment, and products liability divisions saw favorable markets and growth in the quarter as well. We also continue to drive growth through new product offerings and product expansions, robust marketing efforts, new broker appointments, and continually improving service standards combined with the broadest risk appetite in the business. As Mike mentioned, overall new business submission growth increased 6% in the first quarter, a similar rate to the fourth quarter of 2025. We continue to see a decline in new business submissions in the commercial property division that handles large shared and layered deals, and excluding the commercial property division, new business submissions were up 9% for the quarter. While our lines of business are experiencing varying levels of competition and pricing pressure, the combined pricing trend for Kinsale is in line with the Amwin's Pricing Index, which showed a rate decrease of 3.3% compared to a 2.7% decrease in the fourth quarter of 2025. Although large commercial property placements continue to experience strong rate pressure, other property lines like small business property and in the marine, and casualty lines like commercial auto, excess casualty, and general casualty present opportunities for meaningful rate increases. We continue to have a high level of confidence in our model and its ability to perform throughout all parts of the market cycle. The foundation of that confidence is our underwriting discipline, our market responsiveness, our low costs, and maintaining the flexibility to adapt to changing conditions. What is especially encouraging is that the business continues to show very good momentum. For small to medium-sized risks, submissions are up, quotes are up, and binders are up. That tells us the market is responding well to what we offer, and that our value proposition continues to resonate with brokers and insurers. In a hard market, our model allows us to lean into opportunity. In a soft market, it gives us the discipline to stay selective and focus on business that meets our return thresholds and to exploit our low-cost advantage over our competition. We do not need a specific market environment to perform well the model is designed to adapt and we believe that adaptability is a real competitive advantage so when we look ahead we feel good about where we are we feel good about the opportunities for profit and growth and we remain very confident in the long-term strength and durability of the platform and with that i'll hand it back over to mike thanks steward operator we're now ready for any questions in the queue at this time if you would like to ask a question, press star followed by the number one on your telephone keypad.
Again, that's star followed by the number one. We'll pause for a moment to compile the Q&A roster. Your first question comes from Dan Cohen with BMO Capital Markets.
Hey, morning. Thanks. Just first on the new disclosure of the new business quotes and the new bind orders, just maybe expand on how that's trended year over year and quarter over quarter. I understand, Stuart, you said this was up. I'm just wondering if you could quantify that. How should we be thinking about this KPI relative to submission growth?
Dan, this is Mike. I would say we've had requests from people over the years for a little bit more granular disclosure, so we're providing it. The more granular, the more volatile those numbers are. so I wouldn't overthink how important it is that in a 90-day period something's up or down. But, you know, across the 25 divisions, I think you can see what we're talking about, which is overall we're in a competitive market, but there's plenty of opportunities in some places. In other places, there's a lot more competition, and we're going to grow a little bit more slowly.
Thanks. And then maybe just given the material expense ratio advantage and the best-in-class returns today, Just wondering, is Kinset willing to deteriorate some of its accident-year loss ratio for higher growth in the year term? Is that a part of the equation at this point?
Listen, we always manage all of our product lines to a low-20s return on equity or greater. And, you know, we're constantly adjusting pricing in both directions based on our understanding of the relative profitability of a given line. So that's just a normal part of managing an insurance company. You know, but our ROE for the quarter was 24 percent. So I wouldn't expect a meaningful deterioration from that, no. Your next question is from Christian Getzoff with Wells Fargo.
Hi, good morning. My first question is on the accident year loss ratio. So I think it was much better than people expected up 40 bips year over year. But is there anything one off you'd like to highlight maybe in favorable non-cat weather? Or how should we think about the accident year loss ratio movement from here just given more mixed shift towards casualty and just loss trend versus rate in lines away from property?
Hey, this is Solomon. There's nothing out of the ordinary, no one-time adjustments to the accident year loss ratio. I'll just remind you that, you know, throughout the course of the year, there is a little bit of seasonality when it comes to that current accident year loss ratio. And so, you know, typically the first quarter is a little bit higher than the other quarters, but nothing out of the ordinary to report.
Got it. And then just given the new disclosure, I was surprised to see ENS homeowners decline 22% in the quarter.
Was that driven by increased competition or was it something more uh timing related yeah it's uh the high value this is stewart the high value market is experiencing some increased competition um and we're uh the layer the limits that we're offering are tend to be lower so it's the average premium is dropping a little bit we're still showing i think good good growth in our uh personal insurance division which is obviously also a homeowner's book.
Gotcha. And then if I could just sneak one more, I know your reinsurance renewal is coming up and you guys increased retentions last year, but how are you guys thinking about it for this year, just given the below average forecasted hurricane season, but also counterbalancing that with just the lower cost of reinsurance?
Yeah, this is Mike. We look at reinsurance retentions, limits, et cetera, every year. we've obviously increased our retention many times over the 17 years in business and so obviously we'll look at it again this year but can't really commit at this moment to how the you know the the treaties will be placed i'll just note it's a 6-1 you know renewal date thank you your next question is from andrew anderson with jeffries Hey, good morning.
On the casualty side, Mike, maybe you could just talk a bit about how competitive behavior has been changing over the past six months, whether that's from MGAs or admitted carriers, and on the flip side, maybe where it's been more stable than we would expect.
Andrew, I would just say, in general, we're looking at a competitive market. I think Stuart highlighted at the underwriting division level where we're seeing – I would look at the growth rate as a proxy for how competitive things are. The faster we're growing, the more opportunities we're finding. Stuart, I think you commented about the increase in competition on the long-tail lines.
We're starting to see a lot of competition from fronts and MGAs and new companies on long-tail lines, specifically in construction over the last four to five months. So it's ramping up pretty aggressively there, but there's still premises liabilities strong for us. Anything related to auto, we're seeing meaningful opportunities there.
And maybe one other thing, just to reiterate, is that it's a different market when you're looking at larger transactions than when you're looking at smaller. And hence, you know, we've always focused predominantly on, you know, small to medium-sized accounts. And in a more competitive market, you know, we always feel like that's a great safe harbor for Kinsale.
Got it. And that kind of ties into this question, but the submission growth seems pretty similar quarter over quarter, but down from where it was maybe a year or so ago. How much of the slowdown of the submissions would you kind of characterize as demand-driven versus some pullback on just a rational pricing? And perhaps you could also update us on some initiatives to expand broker relationships or the penetration with the existing brokers and how that could help top line as we go through the year.
You know, in terms of the submission growth, again, we've always looked at that as a little bit of a leading indicator, maybe not a perfect one. But the, you know, ex-commercial property, the fact that our submissions were up, I think, 9% for the quarter. You know, we look at that as an attractive growth rate. You know, if you had to characterize it, it's a competitive market, but reasonably steady, and we're excited about the growth prospects. There is a little bit of this shift from, you know, where larger accounts are under more competitive stress. So that has the near-term impact of, if you will, Well, you know, it has a depressing effect on the growth rate, but only until some of those accounts transition off the books, and then, you know, we see more of a normalization. But in terms of new broker appointments, you know, we're always looking for, you know, top quality brokers to trade with, and, you know, that's a dynamic market. We're principally a wholesale distribution model. If there are changes in the marketplace and an experienced team of brokers who want to start a new shop, we're typically quite supportive of that.
Thank you.
Your next question is from Pablo Stingson with J.P. Morgan.
Mike, thanks for the disclosure and submission, Gura. Are you noticing any change in retention or is the delta between gross premium and submission mostly pricing exposure as well as a mixed impact from large commercial property?
Yeah, Pablo, this is Stuart. New business hit ratios and renewal hit ratios have been consistent quarter to quarter for a long time. So no big change there.
Okay, thanks, Stuart. And then maybe a broader question. So small business, ENS, and even an admitted site has historically been challenging to break into, and some of your larger competitors have said that technology might enable them to be more competitive with smaller customers. Are you seeing any evidence of that emerging in the market today?
You know, no. You know, obviously technology has always been an enormous priority for Kinsale. We talk about it in terms of making technology a core competency of our business 17 years ago when we started the company alongside of underwriting and claim handling, and I think that's providing some pretty powerful benefits. I think you can use our expense ratio in part as a proxy for the lead we have over competitors in terms of technology. technology. We like to think we're going to be able to adapt new technologies that are coming out, whether it's software and hardware or whether it's AI models. We think we can adapt that and incorporate those innovations into our business more quickly because of the skill of our tech professionals, because of the fact that we don't have legacy software going back 20, 30, 40 years. We don't have thousands of legacy applications to maintain. I think our competitors would have to speak to their own positions on that issue, but we feel like we're in a good spot.
Thank you.
Your next question is from Mark Hughes with Truist.
Yeah, thank you. Good morning. On the property front, where do we stand in terms of And the sequential change in competition or pricing, you know, the question is, has it reset at the lower level, and now you're just kind of running through that, and eventually you'll hit the easier comp, or is it continuing to drift to the downside?
Yeah, we don't really have any good news to report there. I would say the easier comps, just like last year, will be in the second half of the year. Because we've always had a little bit of a disproportionate percentage of that commercial property volume in the first six months of the calendar year.
And then the expense advantage, I think you had kind of touched on this earlier, that your focus is going to be on managing the low 20s ROE, but you've talked about using the expense advantage. Would you say that essentially you're using that to the degree that's appropriate at this point, that you're not going to be pushing more or using the expense advantage to grow the top line? Is that something you've already deployed, so to speak, to the extent that you choose to?
Mark, I think the way I'd characterize it is, you know, we're always estimating our loss cost. Some lines of business we write are short tail, you know, like the property cat exposed business. It's heavily dependent near term on the weather. You know, the fire peril on a property book is a little bit more statistically predictable. You know, we write short, medium, and long-tail casualty, you know, that those things are impacted by different things like changes in tort law and inflation. And, you know, so, yeah, we're always thinking about our expense advantage. We also think about our underwriting advantage, controlling our own underwriting, having a more accurate process. we think about the tremendous amount of work we've done in terms of analytics constantly figuring out smarter ways to segment and price risk I think that's an advantage you know but then on top of that we've got a tort system that's not a hundred percent predictable right there's the law of large numbers we've got accurate ways to to reserve for future claims but there's you never know definitively the cost of goods sold and so hence the conservative reserving you know we've got a 17-year track record of those reserves developing favorably on a gap basis but yeah all those things go into the mix and we think it puts us in a great position to not only generate best in class returns, but to continue to grow the business. We are ambitious. We do want to grow, but we subordinate the growth, if we have to, to profitability. But I think the message on this call is that even in a highly competitive market, we're finding lots of ways to grow. Admittedly, the gross written premium number being down half of 1% for the quarter might seem to contradict that. But when you consider all the commentary we're making around large accounts being under more stress in a lot of ways the book is just shifting or transitioning to a little bit more of a smaller average premium and we're fine with that the profitability in that business is top is top-notch so you know long term we we're confident we're going to continue to grow and take market share but certainly never at the expense of you know an attractive level of profitability.
And then just out of curiosity, how's the equity portfolio performing?
It's performing well. I think if you look back over, so keep in mind, we're about two-thirds actively managed equities and one-third passive, principally the S&P 500. I think since late 2022, we've we've lagged the S&P but we've more or less matched our benchmark which is the Vanguard VYM the high dividend ETF and and you know lagging the S&P is mostly related to the fact that we've got a little bit less of a weighting toward tech it's not that we're big but not big believers in technology it's just that we're a little bit more of a value at orientation very good thank you Okay.
Again, if you would like to ask a question, press star followed by the number one on your telephone keypad. Your next question comes from Roland Mayer with RBC Capital Markets.
Hi, good morning. I appreciate the new disclosures on the growth rates by unit. I was just wondering on the commercial property, it looks like it was $65 million of premium in the first quarter in 375 billion last year what portion of that is actually in the large property category you're you're talking about the competition we don't have we don't have a specific breakout but the the average premium in that division i think is somewhere between 30 and 40 000 per policy that commercial role that commercial property uh division that that is the large shared layered division.
So everything else is handled. Small properties broke out separately. So commercial properties is a standalone division for the large shared layered deals.
Yeah. And if you look at that division, Roland, if you looked at that, like, say, a year or two ago, I think the average premium might have been, you know, north of $50,000. So you can see where, hey, we're either losing some of those larger accounts, or maybe we're participating higher in the schedule where there's less risk, so hence less premium. It's a variety of factors, but definitely a trend towards smaller accounts where, again, we're very confident around the margin in that business.
Okay, perfect. Thank you. And then I wanted to ask, you had mentioned the low 20s target for ROEs. And I guess with the amount of capital coming into the space and seemingly going after lower return targets, do you think it'll normalize back to your market, or do you think you might long-term need to come down into the high teams at some point?
I think with a better underwriting model and a cost advantage that's so significant, it's hard to believe that it exists. no, we're confident in a low 20s return on equity. We kind of look at it, if you will, as like a spread over the risk-free rate, which is admittedly slightly, you know, if you look, use the 10-year treasury, that's a little bit below 5%, but just generally speaking, you know, we're about 15 percentage points above the risk-free rate.
That's very helpful. Thank you so much.
Your next question is from Pablo Singson with J.P. Morgan.
Hi, thanks for taking my follow-up. Mike, the submission and growth rate you provided, do you have a sense of how that compares to the overall market or maybe the sub-segment of E&S where you compete in, right? I just want to get a sense of first, like, sort of where the macro is trending, and I guess more importantly, how you are, you know, running against it. Thanks.
Yeah, Pablo, we don't have any specific information for the overall market. But I would say in general, you know, brokers do a great job working hard for their clients. Their clients want low-cost, broad coverage, so they typically canvass the market to make sure they're getting the best terms and conditions for their customer. So I assume there's some commonality to the stats we have versus what our competitors have.
But we don't really know that. got it thanks mike your next question is from mark hughes with truest yeah thank you you talked about more competition and construction how are you seeing the volume of opportunities have you seen any kind of slow down or delay in construction activity um mark this is stewart uh we haven't seen any delay but we don't also focus on large project specific policies for the most part.
I think you will see that in certain areas out west and in the northeast for wraps that projects are being delayed a little bit, but that's not really where we focus on in the construction book.
And then in the general casualty, the growth was still pretty strong, double digits at, what, 11 or 12 percent. How did that compare to the fourth quarter? I think for all of last year you were up in the low 20s i'm just sort of curious sequentially what you've seen on this general casualty book what mark we don't have those stats to to provide today but we do have in the k you've got the um you know uh by underwriting division gross written premium for the year and it's a you know three-year look back yeah yeah exactly okay and then uh Brian, on the cash flow, the cash from operations up 8 percent, should we think, is that going to track along with net written perhaps, or how would you think about the cash flow dynamic playing out this year? What are the guideposts we should keep an eye on in terms of the free cash? Obviously, it's helping to drive investment income, so I'm just sort of curious any thoughts there.
I think that's a good way to look at it, Mark, trending it with net written premium.
Yeah. All right. Thanks, Mark.
There are no further questions at this time. I'll now turn the call back over to Mr. Keogh for closing remarks.
All right. Well, I just want to thank everybody for participating, and hopefully you get a sense of our optimism, and hope everybody has a great day. ladies and gentlemen this concludes today's conference call thank you for participating you may now disconnect