Prepared remarks
And welcome to the Second Quarter 2026 Kinsale Capital Group, Inc. Earnings Conference Call. After today's prepared remarks, we will host a question-and-answer session. If you would like to ask a question, please press *1 to raise your hand. To withdraw your question, press *1 again. 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 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 second 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.kinsalecapitalgroup.com. I will now turn the conference over to Kinsale's Chairman, President, and Chief Executive Officer, Mr. Michael Patrick Kehoe. Please go ahead, sir.
Thank you, operator, and good morning, everyone. Today, I am joined by Bryan Petrucelli, our Chief Financial Officer; Stuart Winston, our Chief Underwriting Officer; and Salmaan K. Allibhai, our Chief Analytics and Technology Officer. In the second quarter 2026, Kinsale's diluted operating earnings per share increased by 15.9% over the second quarter 2025, generating an annualized operating return on equity of 24.4%. Gross written premium was down 5%, net written premium was down 1.4%, and net earned premium was up 8.9% for the quarter. Kinsale's combined ratio was 75.5% for the quarter. E&S market conditions in the second quarter continued to be competitive and largely consistent with conditions in the first quarter. The level of competition and our growth rate continue to vary from one market segment to another. Continuing the trend from the last few quarters, our commercial property division, where we write larger layered property accounts, is where competition is most intense and where you are seeing material rate declines combined with expanding coverage.
It is definitely a buyer's market. As a consequence, we are writing a shrinking volume of business in that specific market. Excluding the commercial property division, Kinsale had growth in gross written premium of 3.7% for the quarter and 4.8% for the first half of the year. Given that 60% of the commercial property division premium was written in the first half of last year, the year-over-year growth comparison becomes modestly easier the next two quarters of 2026. As we always do, in today's competitive market, we prioritize profitability over growth. When competition in the market is intense, it is not unusual to see some competitors underpricing risk, and that is a common occurrence in today's market. Notwithstanding the state of the market, we are working hard to grow our business through product enhancements and new products, geographic expansion of some product lines, new broker appointments, robust marketing efforts, and improved customer service.
Stuart Winston will offer further detail and commentary on the market environment and our efforts to drive growth in a moment. In addition to working harder, we are also using analytics and technology to work smarter. Kinsale has made technology a core competency of our business since our founding 17 years ago. We own our custom-built enterprise system. We do not have legacy applications dating back decades. We are driving system enhancements and automation at the fastest pace in our company's history. Additionally, analysis of our own data and data that we acquire allows us to continually refine our underwriting and pricing models, thereby driving exceptional loss ratios even in a competitive market and even with a conservative approach to loss reserving. Salmaan Allibhai will provide some additional detail on our efforts in this area shortly. And finally, we continue to use excess capital to buy back our own stock.
Last night, we announced an expansion of our buyback authorization to include an additional $250 million, bringing our current authorization to $337 million. Given the competitive advantages of the Kinsale business model around underwriting accuracy, data and analytics, and technology, combined with the enormous cost advantage we have over every single competitor, Kinsale shares represent a good value at today's price — a very good value. With that, I will turn the call over to Bryan Petrucelli.
Thanks, Mike. The business continues to generate strong profitability, even in this period of heightened competitiveness that Mike just noted. Net income and net operating earnings increased by 31.1% and 13.3%, respectively, year over year for the quarter. The 75.5% 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 1.3 points in catastrophe losses this year compared to less than 1 point in the second quarter of last year. We produced a 21.7% expense ratio for the quarter compared to 20.7% last year. The other underwriting expense portion of this ratio, which is the best measure of the operational efficiency of the business, was 10.3% for the quarter compared to 10.6% in the second quarter of 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, but a higher net commission ratio is more than offset by greater underwriting and investment income. On the investment side, net investment income increased by 19.9% in the second 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 unearned premium — grew to $3.4 billion at June 30, up from $3.1 billion at the end of 2025. Annualized gross return was 4.5% for the first half of 2026, compared to 4.3% last year. New money yields are averaging around 5.25% with an average duration of 4.5 years on the company's fixed maturity investment portfolio. And lastly, diluted operating earnings per share continue to improve and were $5.54 per share for the quarter compared to $4.78 per share for the second quarter of 2025. With that, I will pass it over to Stuart.
Thanks, Bryan. The soft E&S market continued in the second quarter, but it still offers opportunities for growth. Growth driven by compromising profit margins is easy to manufacture, but costly to unwind. Because of this, our approach to soft markets like commercial property, construction, or certain professional lines is not to chase the market down but to continue to price business in a way that meets our return thresholds and to be opportunistic where it makes sense. And where favorable conditions exist, we will lean into them. Areas like excess casualty, commercial auto, entertainment, environmental, agribusiness casualty, and energy all had favorable underwriting conditions during the quarter and all saw meaningful growth. Overall, new business submission growth increased 6% in the second quarter, a similar rate to the first quarter of 2026. We continue to see a decline in new business submissions in the commercial property division that handles large shared and layered deals.
Excluding the commercial property division, new business submissions were up 8% for the quarter, and over half of our divisions are seeing submission growth in the double digits. As I mentioned last quarter, we continue to see strong momentum across the business, especially in the small-to-medium enterprise segment where we are most focused. With an average premium of approximately $12,000, our platform is built around smaller accounts, and that part of the market remained active in the quarter. Submissions, quotes, and binders all increased for the company, with the most meaningful growth coming from accounts with premiums of $25,000 and below. We believe that consistency highlights the durability of our model across all market environments. 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 AmWINS Pricing Index, which showed a decrease of 5.9% compared to a 3.3% decrease in Q1 of 2026.
While we continue to see strong rate pressure on commercial property, other lines like commercial auto, excess casualty, and entertainment present opportunities for meaningful rate increases. Distribution and product expansion remain key drivers of growth. On the product side, we have rolled out nine new product offerings or enhancements across various underwriting groups so far this year, with five more set to launch imminently and another ten in the pipeline. This pace reflects the depth of our appetite and our ability to move quickly when we see opportunity. We have also made meaningful progress on distribution, appointing 24 new wholesale brokers to the Kinsale platform and 176 new retail brokers to Aspera, our in-house broker through which we distribute most of our personal lines products. With new offerings in our homeowners line, Aspera continues to expand both as a product line and geographic footprint, extending our reach into personal lines markets where we see long-term demand.
Underpinning all of this is our ongoing focus on operational efficiency. Workflow improvements, utilizing AI, and other technology upgrades across our underwriting functions have allowed us to maintain our service standards and, in many areas, improve them, ensuring that growth does not come at the expense of the execution our brokers and insureds expect from us, all the while staying disciplined in managing returns. Staying disciplined on price and terms means that there will be business that we choose not to write, and we are comfortable with that. The long-term health of the portfolio matters more than any individual account. That mindset is embedded in how we evaluate every risk that comes through the door. When the market softens and competitors begin to stretch on terms and conditions to hold on to accounts, we are going to stay disciplined to our underwriting standards. If we lose accounts due to competition, whether it is pricing or terms that no longer meet our profitability threshold, we view that as the model working as intended.
We will not sacrifice profitability for the sake of top-line growth. We will continue to leverage our low-cost advantage over our competition to write profitable business in the softening market, focus on small-to-medium-sized risk where we still see strong market opportunity, and be opportunistic when large deals come our way. With that, I will hand it over to Salmaan.
Thanks, Stuart. As Mike noted earlier, we continue to use analytics and technology to drive profitability and efficiency in the business. Several months ago, we brought the two functions together as a single team. Both have been core competencies from day one, and now they are working more efficiently from the same strategic roadmap. In a more competitive part of the cycle, the importance of analytics and actuarial functions increases dramatically. Every day, we are working to get better at segmenting and pricing risk by adding to our ever-expanding third-party data repository and utilizing more sophisticated statistical and machine-learning algorithms to identify the characteristics that drive loss. We have been able to do this well over the years because we have all 17 years of our company's data in one database. This data-driven approach gives us an advantage in balancing profitability with growth.
On the technology front, we are working hard to drive efficiency and automation across our business processes. One of our greatest advantages is that we do not have legacy software dating back decades. This means our team is primarily focused on innovation and developing new capabilities as opposed to maintaining outdated systems. When it comes to AI, we continue to see meaningful benefits via increased productivity and new capabilities. Every associate in the company has an enterprise license for two of the leading frontier models. Our analytics, technology, underwriting, and claims teams are all using AI daily to improve the way we work, employing dozens of skills, bots, and agentic tools. We have built AI functionality into our proprietary underwriting worksheets, and those efforts are accelerating. We also have a team of analytics and technology professionals working directly with folks in the business to develop additional custom AI solutions.
Artificial intelligence is changing the way we work for the better. It is improving productivity, customer service, and accuracy across our business and doing so at a rapid pace. We are confident that the technology lead Kinsale has built over our competitors is growing even larger. With that, I will hand it back over to Mike.
Thanks, Salmaan. Operator, we are now ready for any questions in the queue.
Questions and answers
We will now begin the question-and-answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press *1 to raise your hand. To withdraw your question, press *1 again. We ask that you pick up your handset when asking to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. The first question comes from the line of Pablo Singzon with JPMorgan. Your line is now open. Please go ahead.
Thank you. Good morning, everyone. The current-year accident loss ratio improved from 2Q 2025, which I think is a bit different from what many other commercial insurers are reporting. So I was hoping you could please talk through the key factors that drove that. Was it lower non-property losses mix, changes in loss picks, and so on?
Pablo, this is Salmaan. Yes, I would reiterate that losses for the quarter came in below expectations, as they have for the last few quarters. There is really nothing out of the ordinary; it is just normal variability and mix of business. The loss ratio is a composite of a dozen statutory lines of business. I would reiterate that our reserves are as conservative as they have ever been in our company's history.
Got it. Thanks, Salmaan. And then my second question, just on the reinsurance and ceding commission rate. I think the commission rate has actually been going up for you over the past couple of years. I was wondering if you expect the same this year after the renewals. Thanks.
Pablo, this is Bryan. I would say if you look at what we had here in the second quarter it is a pretty good indication, I think, of where we are going forward. You could see a slight uptick in that going forward. We renewed our reinsurance treaties on June 1, so there is only one month of effect of the new treaty in the quarter. The loss ratio in general may have a slight uptick in commissions. We could get some efficiency gains on the operating side given the AI activities that we talked about previously. So I think if you look in aggregate, the second quarter expense ratio should be a good measure for you going forward.
Understood. Thank you.
The second question is from Hristian Getsov with Wells Fargo. Go ahead. Your line is open.
Hi. Good morning. My first question is on E&S casualty. Just given that segment is softening a bit, GWP was up 3% versus up 4% in the first quarter. How much are ROEs compressing in the line, assuming your views on loss trends — high single digits to low double digits — have not changed?
Well, we manage everything to a 20% ROE or greater, and I think most of our product lines are probably running ahead of that. We are at about a 24.4% annualized operating return on equity for the quarter.
So there is always a give and take where you are trying to balance profit and growth. Got it. And then for my second question, given the softer market, and you have been pretty protective of your commissions or ratios to brokers I guess, how are you thinking about broker commissions on a go-forward basis? Typically, brokers like to up their commissions in a softer market, and it seems like maybe they are placing more business with the admitted side given the economics are a bit better on that front. How are you guys thinking about changes there?
Hristian, brokers are critical to our success. Obviously, they are looking to maximize their economics, and that makes sense. There is some tension between the wholesalers that we distribute most of our business through and their retail clients in terms of how they split the gross commission. The customer is focused on lower-cost insurance, so you always have some tension across the spectrum. In a soft market, when rates have drifted down, that puts pressure on everybody, so I think it is a normal tension in the business. I would say we offer our brokers the best customer service in the industry. I do not think there is anybody even close to Kinsale's quote ratio and response time. We also offer the broadest risk appetite; we are a go-to market for very hard-to-place accounts. Between that and competition in the market, as Stuart mentioned earlier, we continue to grow our business, especially when you set aside that one commercial property division, which is going through a unique correction. So we are confident in our model while acknowledging the tension in the market.
Next question is from Daniel Cohen with BMO. Go ahead. Your line is open.
Morning. Thanks. Maybe just focusing on the commercial property side. Does Kinsale view this second quarter as maybe the trough there? Given some larger players are pulling out, is the view that property pricing can maybe become less negative in 2027, or could Kinsale get back on some of these larger shared placements next year as others continue to pull back?
It is Stuart Winston. There is no telling where it's going to go in 2027. We still are hearing that a lot of large competitors are pulling out, but there still is pressure from various MGAs and London markets. A lot of traditional markets are still heavy in the layered and shared deals, putting up larger limits and stretch primaries. So it is still squeezing and still competitive. Our role now is to keep our pricing as close to technical and meet our return thresholds. If we shrink because of it, it is what it is in that division.
That makes sense. And then maybe focusing on the 3.7% growth figure, excluding the large-account property: what is driving that acceleration? Is it pricing, or are you seeing some business starting to return to the admitted market? And what would need to change for that number to start to inflect in the future?
Like I said in my comments, there is heavy competition from long-tail lines and London is starting to creep into some other liability occurrence long-tail lines, depressing pricing across the market for construction lines of business. We are starting to see more competition around general casualty-type business. But there are pockets of opportunity that we can grow, and we are going to lean into those.
Are you seeing any of that business return to the admitted market at this time or no?
There is some flow to the admitted market, but it is not pervasive.
Next question is from Andrew Andersen with Jefferies. Please go ahead. Your line is now open.
Hey. Good morning. You had mentioned in the press release that there was an increase in inbound accounts. That was new language added. Could you talk about how much of that increase in inbound accounts is coming from broker engagement you have been working on versus more competitive pricing?
It is a little bit of both. We are doing a good job with our idle broker initiative to reengage brokers that have slipped off over the years, and we are seeing an increase of flow from them. Our hit ratios stayed roughly the same for renewals and new business, and with the growth in submissions, we are just seeing more accounts bind.
Andrew, part of why we put that in there is to explain some of where our confidence in our business model comes from. We wrote a ton of business in that commercial property division as that market went into a crisis. The crisis is over and rates are coming down dramatically, but the underlying business — although we are growing at a slower clip — the business model is still working quite well.
Some carriers have been pointing to maybe some incremental improvement in claims emergence and loss cost trends, even if they are not declaring victory on social inflation. What is your current view of the inflation and casualty loss trend landscape?
This is Salmaan. For casualty loss cost trends, we would say mid-single digits, and it varies by line of business. Because we write smaller accounts and lower limits, I think we have been less exposed to social inflation than some other carriers. So we are not seeing a whole lot of it.
Okay. And maybe just a clarification: when you were explaining the accident-year loss ratio earlier, you mentioned normal variability and some lower losses. Was that entirely on short-tail property business?
I think it is across the board, but the short-tail lines of business have been performing especially well for us.
Andrew, we are being a little more conservative as we have for a couple of years in slowing down the release of IBNR in the longer-tail occurrence business and allowing it to flow out a little bit more quickly in the short-tail lines, where there is more certainty around ultimate loss ratios.
Thank you.
Next question is from Mark Hughes with Truist. Please go ahead. Your line is open.
Thanks. Good morning. I wanted to revisit property pricing and the property cycle. Any granularity you can provide around what you saw in 2Q versus 1Q? The data seems to point to incremental softening in 2Q. I'm trying to understand when or if we can get to a point of some kind of equilibrium and whether that might stabilize at a lower level. Any thoughts would be helpful.
Mark, eventually we are going to get to some equilibrium. Catastrophe losses in particular can be intermittent and unpredictable, but they do happen. Being disciplined in how we price that business combined with a disciplined risk management protocol around concentration gives us confidence in what we are doing in that space. We do not have insight into when exactly that equilibrium will occur, but we are confident in our underwriting approach and capital management.
If you look at specialized areas like agribusiness property, we are seeing growth there; that is a more stable market. Our small-business property is definitely more stable than large shared and layered deals and has been much more consistent over the last year and a half to two years. Inland marine — we are starting to see a little more competition in inland marine, but that division has five product buckets. There is no telling where the market will go; people are starting to get to the floor of their pricing for property, but there is still pressure from London.
You touched on the current accident-year number, which was quite good in the quarter. I think property has been more profitable than casualty historically, but mix has been changing. What should we think about the underlying current accident-year loss ratio given the mix shift out of property into casualty? Should it drift up, or is this level sustainable?
Mark, it's hard to say. It could drift up over time. As I mentioned earlier, losses are coming in below our expectations, and we feel good about where we are booking the loss ratios right now. We also feel very good about the conservatism in our IBNR reserves, which is a positive indicator for future loss ratio performance.
One final question if I may: the buyback authorization is a meaningful number this quarter. As you think about it going forward, if you maintain moderate top-line growth, is buyback something you will continue to lean into, or how should we think about pacing?
Mark, we are going to continue to lean into buybacks. Recall that about a year and a bit ago we had a $100 million authorization that we exhausted, then a $250 million authorization, and we have roughly $80 million left of that, plus this new $250 million authorization. Buybacks are our principal capital allocation strategy. We pay a small dividend, but as growth accelerates in the future, growth will be our first priority. In this interim phase where growth is somewhat limited, we think buybacks are a wise use of capital given our confidence in the business model and future profitability and price appreciation.
Next question is from Daniel Cohen with BMO. Please go ahead. Your line is open.
Thanks for taking me back in. Maybe on the product expansion that you mentioned in your prepared remarks: how has that contributed to growth over the past year or so and what is the potential growth uplift going forward from those new products?
When we roll out new products and enhancements, we do it at a crawl-walk-run pace. We never want to jump in feet first and grow like a weed in a market. New products are creating growth — they are driving submissions and new premium — but it will be slow growth initially. As the market turns, we will ramp up and then go from there.
Operator, it looks like that is the end of the questions.
Yes. There are no further questions at this time. We have reached the end of our Q&A. I will now turn the call back to Michael Patrick Kehoe.
Okay. Well, thanks, everybody, for participating. I want to thank all the Kinsale employees for their tremendous effort in driving these good results and we look forward to speaking with everybody again at the end of the next quarter. Have a great day.