Kinsale Capital Group, Inc. (KNSL)

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the accompanying notes included elsewhere in this Annual Report. The discussion and analysis below include certain forward-looking statements that are subject to risks, uncertainties and other factors described in "Risk Factors" that could cause actual results to differ materially from those expressed in, or implied by, those forward-looking statements. See "Forward-Looking Statements."

Year ended December 31, 2023 compared to year ended December 31, 2022

For a comparison of years ended December 31, 2023 and December 2022, see “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our annual report on Form 10-K for the fiscal year ended December 31, 2023, which was filed with the SEC on February 23, 2024.

Overview

Founded in 2009, we are an established and growing specialty insurance company. We focus exclusively on the E&S market in the U.S., where we use our underwriting expertise to write coverages for hard-to-place, small- to medium-sized business risks and personal lines risks. We sell these insurance products in all 50 states, the District of Columbia, the Commonwealth of Puerto Rico and the U.S. Virgin Islands primarily through a network of independent insurance brokers. We have an experienced and cohesive management team that has an average of over 30 years of relevant experience.

We have one reportable segment, our Excess and Surplus Lines Insurance segment, which offers P&C insurance products through the E&S market. In 2024, the percentage breakdown of our gross written premiums was 67.4% casualty and 32.6% property. Our commercial lines offerings and homeowner's coverage in the personal lines market represented 97.4% and 2.6% of our gross written premiums, respectively. Refer to Note 15 to the consolidated financial statements for gross written premiums by underwriting division.

Our goal is to deliver long-term value for our stockholders by growing our business and generating attractive returns. We seek to accomplish this by generating consistent and strong underwriting profits while managing our capital prudently. We believe that we have built a company that is entrepreneurial and highly efficient, using our proprietary technology platform and leveraging the expertise of our highly-experienced employees in our daily operations. We believe our systems and technology are at the digital forefront of the insurance industry, allowing us to quickly collect and analyze data, thereby improving our ability to manage our business and reducing response times for our customers. We believe that we have differentiated ourselves from our competitors by effectively leveraging technology, vigilantly controlling expenses and maintaining control over our underwriting and claims management.

Components of Our Results of Operations

Gross written premiums

Gross written premiums are the amounts received or to be received for insurance policies written or assumed by us during a specific period of time without reduction for policy acquisition costs, reinsurance costs or other deductions. The volume of our gross written premiums in any given period is generally influenced by:

•New business submissions;

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•Conversion of new business submissions into policies;

•Renewals of existing policies; and

•Average size and premium rate of bound policies.

We earn insurance premiums on a pro rata basis over the term of the policy. Our insurance policies generally have a term of one year. Net earned premiums represent the earned portion of our gross written premiums, less that portion of our gross written premiums that is ceded to third-party reinsurers under our reinsurance agreements.

Ceded written premiums

Ceded written premiums are the amount of gross written premiums ceded to reinsurers. We enter into reinsurance contracts to limit our exposure to potential large losses. Ceded written premiums are earned over the reinsurance contract period in proportion to the period of risk covered. The volume of our ceded written premiums is impacted by the level of our gross written premiums and any decision we make to increase or decrease retention levels.

Fee income

Fee income includes policy fees charged to insureds and is recognized in earnings when the related premium is written. Policy fees are a flat charge to insureds and fee income is impacted primarily by the volume of business we write.

Losses and loss adjustment expenses

Losses and loss adjustment expenses are a function of the amount and type of insurance contracts we write and the loss experience associated with the underlying coverage. In general, our losses and loss adjustment expenses are affected by:

•Frequency of claims associated with the particular types of insurance contracts that we write;

•Trends in the average size of losses incurred on a particular type of business;

•Mix of business written by us;

•Changes in the legal or regulatory environment related to the business we write;

•Trends in legal defense costs;

•Wage inflation;

•Social inflation;

•Inflation in material costs, and

•Inflation in medical costs.

Losses and loss adjustment expenses are based on an actuarial analysis of the estimated losses, including losses incurred during the period and changes in estimates from prior periods. Losses and loss adjustment expenses may be paid out over a period of years.

Underwriting, acquisition and insurance expenses

Underwriting, acquisition and insurance expenses include policy acquisition costs and other underwriting expenses. Policy acquisition costs are principally comprised of the commissions we pay our brokers, net of ceding commissions we receive on business ceded under certain reinsurance contracts. Policy acquisition costs also include deferred underwriting expenses that are directly related to the successful acquisition of policies. The amortization of

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such policy acquisition costs is charged to expense in proportion to premium earned over the policy life. Other underwriting expenses represent the general and administrative expenses of our insurance business such as employment costs, telecommunication and technology costs, and legal and auditing fees.

Net investment income

Net investment income is an important component of our results of operations. We earn investment income on our portfolio of cash and invested assets. Our cash and invested assets are primarily comprised of fixed-maturity securities, and may also include equity securities, investments in real estate, cash equivalents, and short-term investments. The principal factors that influence the level of net investment income are the size of our investment portfolio and the yield on that portfolio. As measured by amortized cost (which excludes changes in fair value), the size of our investment portfolio is mainly a function of our invested equity capital combined with premiums we receive from our insureds less payments on policyholder claims. Net investment income also includes rental income and depreciation expense from our real estate investment property.

Change in fair value of equity securities

Change in fair value of equity securities consists of two components: (1) the reversal of the gain or loss recognized in previous periods on equity securities sold and (2) the change in unrealized gain or loss resulting from mark-to-market adjustments on equity securities still held.

Net realized investment gains (losses)

Net realized investment gains (losses) are a function of the difference between the amount received by us on the sale of a security and the security's amortized cost.

Income tax expense

Currently, substantially all of our income tax expense is comprised of federal income taxes. Our insurance subsidiary, Kinsale Insurance, is not subject to income taxes in the states in which it operates; however, our non-insurance subsidiaries are subject to state income taxes but have not generated any material taxable income to date. The amount of income tax expense or benefit recorded in future periods will depend on the jurisdictions in which we operate and the tax laws and regulations in effect.

Key metrics

We discuss certain key metrics, described below, which we believe provide useful information about our business and the operational factors underlying our financial performance.

Underwriting income is a non-GAAP financial measure. We define underwriting income as net income, excluding net investment income, net change in the fair value of equity securities, net realized investment gains and losses, change in allowance for credit losses on investments, interest expense, other income, other expenses and income tax expense. See "—Reconciliation of Non-GAAP Financial Measures" for a reconciliation of net income in accordance with GAAP to underwriting income.

Net operating earnings is a non-GAAP financial measure. We define net operating earnings as net income excluding the net change in the fair value of equity securities, after taxes, net realized investment gains and losses, after taxes and change in allowance for credit losses on investments, after taxes. See "—Reconciliation of Non-GAAP Financial Measures" for a reconciliation of net income in accordance with GAAP to net operating earnings.

Loss ratio, expressed as a percentage, is the ratio of losses and loss adjustment expenses to the sum of net earned premiums and fee income.

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Expense ratio, expressed as a percentage, is the ratio of underwriting, acquisition and insurance expenses to the sum of net earned premiums and fee income.

Combined ratio is the sum of the loss ratio and the expense ratio as presented. A combined ratio under 100% indicates an underwriting profit. A combined ratio over 100% indicates an underwriting loss.

Return on equity is net income as a percentage of average beginning and ending total stockholders’ equity during the period.

Operating return on equity is a non-GAAP financial measure. We define operating return on equity as net operating earnings expressed as a percentage of average beginning and ending stockholders’ equity during the period. See "—Reconciliation of Non-GAAP Financial Measures" for a reconciliation of net income in accordance with GAAP to net operating earnings.

Net retention ratio is the ratio of net written premiums to gross written premiums.

Gross investment return is investment income from fixed-maturity and equity securities (and short-term investments, if any), before any deductions for fees and expenses, expressed as a percentage of the average beginning and ending book values of those investments during the period.

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Results of Operations

Year ended December 31, 2024 compared to year ended December 31, 2023

The following table summarizes our results of operations for the years ended December 31, 2024 and 2023:

NM - Percentage change is not meaningful

(1) Underwriting income is a non-GAAP financial measure. See "—Reconciliation of Non-GAAP Financial Measures" for a reconciliation of net income in accordance with GAAP to underwriting income.

(2) Net operating earnings and operating return on equity are non-GAAP financial measures. Net operating earnings is defined as net income excluding the net change in the fair value of equity securities, after taxes, net realized investment gains and losses, after taxes, and change in allowance for credit losses on investments, after taxes. Operating return on equity is defined as net operating earnings expressed as a percentage of average beginning and ending total stockholders’ equity during the period. See "—Reconciliation of Non-GAAP Financial Measures" for a reconciliation of net income in accordance with GAAP to net operating earnings.

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(3) The combined ratio is the sum of the loss ratio and expense ratio as presented. Calculations of each component may not add due to rounding.

Net income was $414.8 million for the year ended December 31, 2024 compared to $308.1 million for the year ended December 31, 2023, an increase of $106.8 million, or 34.6%. The increase in net income in 2024 over 2023 was primarily due to a combination of continued profitable growth and strong investing results including higher investment income and higher unrealized gains on equity investments.

Underwriting income was $325.9 million for the year ended December 31, 2024 compared to $270.4 million for the year ended December 31, 2023, an increase of $55.5 million, or 20.5%. The increase in underwriting income was primarily due to continued growth in the business offset in part by higher catastrophe losses. The corresponding combined ratios were 76.4% for the year ended December 31, 2024 compared to 75.4% for the year ended December 31, 2023.

Premiums

Gross written premiums were $1.9 billion for the year ended December 31, 2024 compared to $1.6 billion for the year ended December 31, 2023, an increase of $301.5 million, or 19.2%. The increase in gross written premiums for the year ended December 31, 2024 was primarily due to higher submission activity from brokers and a favorable, yet increasingly competitive, pricing environment. The average premium per policy written by us was $15,100 in 2024 compared to $15,200 in 2023. Excluding our personal insurance division, which has relatively low premiums per policy written, the average premium per policy written was $15,900 in 2024 compared to $16,400 in 2023. Gross written premiums increased across substantially all of our underwriting divisions for the year ended December 31, 2024 and were most notable in the following lines of business:

•General Casualty, which represented approximately 9.0% of our gross written premiums in 2024, increased by $50.4 million, or 42.5%, for the year ended December 31, 2024;

•Excess Casualty, which represented approximately 13.1% of our gross written premiums in 2024, increased by $51.1 million, or 26.3%, for the year ended December 31, 2024;

•Small Business Casualty, which represented approximately 10.5% of our gross written premiums in 2024, increased by $21.5 million, or 12.4%, for the year ended December 31, 2024;

•Commercial Property, which represented approximately 24.4% of our gross written premiums in 2024, increased by $44.2 million, or 10.7%, for the year ended December 31, 2024 and

•Construction, which represented approximately 7.8% of our gross written premiums in 2024, increased by $10.4 million, or 7.6%, for the year ended December 31, 2024.

Net written premiums increased by $212.7 million, or 16.8%, to $1.5 billion for the year ended December 31, 2024 from $1.3 billion for the year ended December 31, 2023. The increase in net written premiums was largely due to higher gross written premiums for the year ended December 31, 2024. Our net retention ratio was 79.0% for the year ended December 31, 2024 compared to 80.6% for the year ended December 31, 2023. The decrease in the net retention ratio was primarily due to a higher cession rate on the commercial property quota share treaty effective with the June 2023 renewal, offset in part by an increase in our retention on our casualty treaty effective with the June 2024 renewal.

Net earned premiums were $1.4 billion for the year ended December 31, 2024 compared to $1.1 billion for the year ended December 31, 2023, an increase of $277.9 million, or 25.9%. As previously discussed, the increase was due to growth in gross written premiums in 2024 compared to 2023.

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Loss ratio

The following table summarizes the effect of the factors indicated above on the loss ratios for the years ended December 31, 2024 and 2023:

Our loss ratio was 55.8% for the year ended December 31, 2024 compared to 54.6% for the year ended December 31, 2023. The increase in the loss ratio for the year ended December 31, 2024 was due primarily to higher catastrophe losses incurred during the period and lower relative net favorable development of loss reserves from prior accident years. During the year ended December 31, 2024, current year incurred losses and loss adjustment expenses included $25.5 million of net catastrophe losses primarily attributable to Hurricanes Milton, Helene and Francine and tornadoes in the Midwest.

During the year ended December 31, 2024, prior accident years developed favorably by $37.7 million, of which $57.6 million was attributable to the 2021 through 2023 accident years due to lower emergence of reported losses than expected across most lines of business. This favorable development was offset in part by adverse development primarily from the 2017 through 2019 accident years due to construction defect claims that are more exposed to inflation, from the 2020 accident year due to a large property claim and more conservative actuarial assumptions in the 2021 through 2023 accident years for lines of business exposed to construction liability.

During the year ended December 31, 2023, prior accident years developed favorably by $35.8 million, of which $49.0 million was attributable to the 2021 and 2022 accident years due to lower emergence of reported losses than expected across most lines of business. This favorable development was offset in part by adverse development largely from the 2017 through 2019 accident years due to construction defect claims that are more exposed to inflation.

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Expense ratio

The following table summarizes the components of the expense ratio for the years ended December 31, 2024 and 2023:

The expense ratio was 20.6% for the year ended December 31, 2024 compared to 20.8% for the year ended December 31, 2023. The decrease in the expense ratio was primarily due to lower relative net commissions as a result of higher ceding commissions earned under the commercial property quota share treaty as a result of commercial property premium growth. Direct commissions paid as a percent of gross written premiums was 14.7% and 14.5% for the years ended December 31, 2024 and 2023, respectively.

Investing results

The following table summarizes the components of net investment income, change in the fair value of equity securities, net realized investment gains and change in allowance for credit losses on investments for the years ended December 31, 2024 and 2023:

Our net investment income increased by 46.9% to $150.3 million for the year ended December 31, 2024 from $102.3 million for the year ended December 31, 2023, primarily due to growth in our investment portfolio largely generated from the investment of strong operating cash flows and higher interest rates relative to the prior year period.

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The weighted average duration of our investment portfolio, including cash equivalents, was 3.0 years and 2.8 years at December 31, 2024 and 2023, respectively. Our investment portfolio, excluding cash equivalents and unrealized gains and losses, had a gross investment return of 4.4% as of December 31, 2024, compared to 4.0% as of December 31, 2023.

During the year ended December 31, 2024, the change in the fair value of equity securities of $43.4 million included appreciation of common stocks, ETFs and non-redeemable preferred stocks of $23.7 million, $16.1 million and $3.6 million, respectively, generally consistent with the changes in the broader U.S. stock market.

During the year ended December 31, 2023, the change in the fair value of equity securities of $15.3 million included changes in unrealized gains related to ETFs and common stocks of $12.8 million and unrealized gains related to non-redeemable preferred stock of $2.5 million. The change in the fair value of ETFs and common stocks during 2023 primarily reflected changes in the broader U.S. stock market.

We perform quarterly reviews of all available-for-sale securities within our investment portfolio to determine whether the decline in a security's fair value is deemed to be a credit loss. Based on our review, we recorded a reduction to credit loss expense of $0.5 million for the year ended December 31, 2024 compared to credit loss expense of $0.2 million for the year ended December 31, 2023. See Note 2 of the notes to the consolidated financial statements for further information regarding credit losses.

Income tax expense

Our effective tax rate was approximately 19.4% for the year ended December 31, 2024 compared to 19.8% for the year ended December 31, 2023. The effective tax rate was lower than the federal statutory rate of 21% primarily due to the tax benefits from stock-based compensation, including stock options exercised, and tax-exempt investment income.

Return on equity

Our return on equity was 32.3% for the year ended December 31, 2024 compared to 33.6% for the year ended December 31, 2023. Operating return on equity was 29.2% for 2024, a decrease from 31.8% for 2023. The decrease in operating return on equity was due primarily to higher average stockholders' equity as a result of continued profitable growth.

Liquidity and Capital Resources

Sources and uses of funds

We are organized as a Delaware holding company with our operations primarily conducted by our wholly-owned insurance subsidiary, Kinsale Insurance, which is domiciled in Arkansas. Accordingly, Kinsale primarily receives cash through (1) loans from banks, (2) issuance of equity and debt securities, (3) corporate service fees from our insurance subsidiary, (4) payments from our subsidiaries pursuant to our consolidated tax allocation agreement and other transactions and (5) dividends from our insurance subsidiary. We may use the proceeds from these sources to contribute funds to Kinsale Insurance in order to support premium growth, reduce our reliance on reinsurance, pay dividends and taxes, repurchase shares and for other business purposes.

We receive corporate service fees from Kinsale Insurance to reimburse us for most of the operating expenses that we incur. Reimbursement of expenses through corporate service fees is based on the actual costs that we expect to incur with no mark-up above our expected costs.

We file a consolidated federal income tax return with our subsidiaries, and under our corporate tax allocation agreement, each participant is charged or refunded taxes according to the amount that the participant would have paid or received had it filed on a separate return basis with the Internal Revenue Service.

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State insurance laws restrict the ability of Kinsale Insurance to declare stockholder dividends without prior regulatory approval. State insurance regulators require insurance companies to maintain specified levels of statutory capital and surplus. The maximum dividend distribution Kinsale Insurance may make absent the approval or non-disapproval of the insurance regulatory authority in Arkansas is limited by Arkansas law to the greater of (1) 10% of policyholder surplus as of December 31 of the previous year, or (2) net income, not including realized capital gains, for the previous calendar year. The Arkansas statute also requires that dividends and other distributions be paid out of positive unassigned surplus without prior approval. The maximum amount of dividends Kinsale Insurance can pay us during 2025 without regulatory approval is $351.9 million. Insurance regulators have broad powers to ensure that statutory surplus remains at adequate levels, and there is no assurance that dividends of the maximum amount calculated under any applicable formula would be permitted. In the future, state insurance regulatory authorities that have jurisdiction over the payment of dividends by Kinsale Insurance may adopt statutory provisions more restrictive than those currently in effect. Kinsale Insurance paid $47.0 million of dividends to us during 2024. See also "Risk Factors — Risks Related to Our Business and Our Industry — Because we are a holding company and substantially all of our operations are conducted by our insurance subsidiary, our ability to pay dividends depends on our ability to obtain cash dividends or other permitted payments from our insurance subsidiary."

As of December 31, 2024, our holding company had $12.3 million in cash and investments, compared to $17.1 million as of December 31, 2023.

Management believes there is sufficient liquidity available at the holding company and in its insurance subsidiary, Kinsale Insurance, as well as in its other operating subsidiaries, to meet its operating cash needs and obligations for the next 12 months.

Real Estate

In December of 2022, we acquired real estate property adjacent to our current headquarters for $76.6 million. The property is comprised of two office buildings totaling over 580,000 square feet and a parking deck situated on approximately 29 acres of land. During 2023, we sold one office building and the parking deck for approximately $62.0 million in cash, net of seller’s costs, and determined we would occupy the remaining building for future expansion of our operations. Upon this determination, we reclassified the carrying value of the building to property and equipment within other assets on the consolidated balance sheet. The building is currently under development for the Company's future headquarters and is expected to be completed during the fourth quarter of 2025. Capital expenditures related to the renovation of the building may be funded through draw downs on our Credit Facility. The remaining $15.0 million presented on the consolidated balance sheet represents the portion of remaining real estate assets held for investment purposes.

Debt

In July 2022, we entered into a Note Purchase and Private Shelf Agreement (the "Note Purchase Agreement"), which provides for the issuance of senior promissory notes with an aggregate principal amount of up to $150.0 million. In September 2023, we entered into an amendment to the Note Purchase Agreement, which increased the authorized aggregate principal amount of senior promissory notes that may be issued thereunder to $200.0 million.

Pursuant to the Note Purchase Agreement, on July 22, 2022 we issued $125.0 million aggregate principal amount of 5.15% senior promissory notes (the "Series A Notes") and on September 18, 2023 we issued a $50.0 million aggregate principal amount 6.21% senior promissory note (the "Series B Note"), the proceeds of which were used to fund surplus at Kinsale Insurance, refinance indebtedness and for general corporate purposes. See Note 11 for further information regarding the Note Purchase Agreement.

In July 2022, we entered into an Amended and Restated Credit Agreement, which extended the maturity date to July 22, 2027, and increased the aggregate commitment to $100.0 million, with the option to increase the aggregate

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commitment by $30.0 million, subject to certain conditions. Borrowings under the Amended and Restated Credit Agreement may be used for general corporate purposes (which may include, without limitation, to fund future growth, to finance working capital needs, to fund capital expenditures, and to refinance, redeem or repay indebtedness). See Note 11 for further information regarding the Amended and Restated Credit Agreement.

Shelf registration

In August 2022, we filed a universal shelf registration statement with the SEC that expires in 2025. We can use this shelf registration to issue an unspecified amount of common stock, preferred stock, depositary shares and warrants. The specific terms of any securities we issue under this registration statement will be provided in the applicable prospectus supplements.

In November 2022, we completed an underwritten public offering and sold and issued 155,000 shares of our common stock at a price of $308.30 per share, to the underwriter. We received net proceeds from the offering of $47.5 million, which was used for general corporate purposes, including to fund organic growth.

Share repurchase program

In October 2024, our Board of Directors authorized a share repurchase program authorizing the repurchase of up to $100.0 million of our common stock. The shares may be repurchased from time to time in open market purchases, privately-negotiated transactions, block purchases, accelerated share repurchase agreements or a combination of methods and pursuant to safe harbors provided by Rule 10b-18 and Rule 10b5-1 under the Securities Exchange Act of 1934. The timing, manner, price and amount of any repurchases under the share repurchase program will be determined by us in our discretion. The stock repurchase program does not require us to repurchase any specific number of shares, and may be modified, suspended or terminated at any time. At December 31, 2024, the Company had $90.0 million of capacity remaining under its share repurchase program.

Cash flows

Our most significant source of cash is from premiums received from our insureds, which, for most policies, we receive at the beginning of the coverage period. Our most significant cash outflow is for claims that arise when a policyholder incurs an insured loss. Because the payment of claims occurs after the receipt of the premium, often years later, we invest the cash in various investment securities that earn interest and dividends. We also use cash to pay commissions to brokers, as well as to pay for ongoing operating expenses such as salaries, consulting services and taxes. As described under "—Reinsurance" below, we use reinsurance to manage the risk that we take on our policies. We cede, or pay out, part of the premiums we receive to our reinsurers and collect cash back when losses subject to our reinsurance coverage are paid.

The timing of our cash flows from operating activities can vary among periods due to the timing by which payments are made or received. Some of our payments and receipts, including loss settlements and subsequent reinsurance receipts, can be significant, so their timing can influence cash flows from operating activities in any given period. Management believes that cash receipts from premiums, proceeds from investment sales and redemptions and investment income are sufficient to cover cash outflows in the foreseeable future.

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Our cash flows for the years ended December 31, 2024 and 2023 were:

We have historically generated positive operating cash flows allowing our cash and invested assets to grow. The increase in cash provided by operating activities in 2024 compared to 2023 was due primarily to growth in business and the timing of claim payments and reinsurance recoveries.

For the year ended December 31, 2024, net cash used in investing activities of $960.1 million reflected growth in our business operations. For the year ended December 31, 2024, funds from operations were used to purchase fixed-maturity securities, particularly corporate bonds and asset- and mortgage-backed securities of $1.6 billion, and to a lesser extent, municipal bonds of $3.7 million and sovereigns of $0.8 million. During 2024, we received proceeds of $289.4 million from sales of fixed-maturity securities, largely corporate bonds and mortgage- and asset-backed securities and $452.4 million from redemptions of asset- and mortgage-backed securities and corporate and municipal bonds. For the year ended December 31, 2024, purchases of equity securities of $156.5 million primarily consisted of common stocks and, to a lesser extent, ETFs. Proceeds from sales of equity securities of $34.4 million consisted of primarily ETFs and common stocks and, to a lesser extent, calls of non-redeemable preferred stock.

For the year ended December 31, 2023, net cash used in investing activities was $860.9 million. For the year ended December 31, 2023, funds from operations were used to purchase fixed-maturity securities, particularly corporate bonds and asset- and mortgage-backed securities of $1.3 billion, and to a lesser extent, sovereigns and government agency bonds of $26.3 million and municipal bonds of $4.9 million. During 2023, we received proceeds of $245.6 million from sales of fixed-maturity securities, largely corporate bonds and mortgage- and asset-backed securities and $176.5 million from redemptions of asset- and mortgage-backed securities and corporate bonds. For the year ended December 31, 2023, purchases of equity securities of $86.6 million primarily consisted of common stocks. Proceeds from sales of equity securities of $30.6 million consisted of primarily ETFs and common stocks. In addition, net sales of short-term investments of $36.7 million consisted of U.S. Treasuries, government agency and corporate bonds. Net cash used in investing activities also included proceeds of $62.0 million from the sale of a portion of our real estate investment property in the third quarter of 2023.

For the year ended December 31, 2024, net cash used in financing activities was $29.7 million and reflected dividends of $0.60 per common share, or $13.9 million in the aggregate and share repurchases of $10.0 million. Payroll taxes withheld and remitted on restricted stock awards were $7.0 million, offset in part by proceeds received from our equity compensation plan of $1.3 million.

For the year ended December 31, 2023, net cash used in financing activities was $28.5 million and reflected proceeds of $50.0 million from the issuance of the Series B Note on September 18, 2023. Proceeds from the sale of our real estate investment were used to pay down $62.0 million from our Credit Facility. Financing activities also reflected dividends of $0.56 per common share, or $13.0 million in the aggregate. Proceeds received from our equity compensation plan were $0.9 million, offset by payroll taxes withheld and remitted on restricted stock awards of $4.3 million for the year ended December 31, 2023.

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Reinsurance

We enter into reinsurance contracts to limit our exposure to potential large losses. Our reinsurance is primarily contracted under quota-share reinsurance treaties and excess of loss treaties. In quota-share reinsurance, the reinsurer agrees to assume a specified percentage of the ceding company's losses arising out of a defined class of business in exchange for a corresponding percentage of premiums, net of a ceding commission. In excess of loss reinsurance, the reinsurer agrees to assume all or a portion of the ceding company's losses, in excess of a specified amount. In excess of loss reinsurance, the premium payable to the reinsurer is negotiated by the parties based on their assessment of the amount of risk being ceded to the reinsurer because the reinsurer does not share proportionately in the ceding company's losses.

For the year ended December 31, 2024, property insurance represented 32.6% of our gross written premiums. When we write property insurance, we buy reinsurance to significantly mitigate our risk to large losses. We use sophisticated computer models to analyze the risk of severe losses from weather-related events and earthquakes. We measure exposure to these catastrophe losses in terms of PML, which is an estimate of what level of loss we would expect to experience in a windstorm or earthquake event occurring once in every 100 or 250 years. We manage this PML by purchasing catastrophe reinsurance coverage. Effective June 1, 2024, we purchased catastrophe reinsurance coverage of $175.0 million per event in excess of our $60.0 million per event retention. Our property catastrophe reinsurance includes a reinstatement provision which requires us to pay reinstatement premiums after a loss has occurred in order to preserve coverage. Including the reinstatement provision, the maximum aggregate loss recovery limit is $350.0 million and is in addition to the coverage provided by our other property reinsurance.

Reinsurance contracts do not relieve us from our obligations to policyholders. Failure of the reinsurer to honor its obligation could result in losses to us, and therefore, we established an allowance for credit risk based on historical analysis of credit losses for highly rated companies in the insurance industry. The Company evaluates the financial condition of its reinsurers and monitors concentration of credit risk arising from its exposure to individual reinsurers. As of December 31, 2024, Kinsale Insurance has only contracted with reinsurers with A.M. Best financial strength ratings of "A-" (Excellent) or better. At December 31, 2024, the net reinsurance receivable, defined as the sum of paid and unpaid reinsurance recoverables, ceded unearned premiums less reinsurance payables, from five reinsurers represented 62.2% of the total balance. At December 31, 2024, we recorded an allowance for credit losses of $0.9 million related to our reinsurance balances.

Ratings

Kinsale Insurance has a financial strength rating of "A" (Excellent) from A.M. Best. A.M. Best assigns ratings to insurance companies, which currently range from "A++" (Superior) to "F" (In Liquidation). "A" (Excellent) is the third highest rating issued by A.M. Best. The "A" (Excellent) rating is assigned to insurers that have, in A.M. Best's opinion, an excellent ability to meet their ongoing obligations to policyholders. This rating is intended to provide an independent opinion of an insurer's ability to meet its obligation to policyholders and is not an evaluation directed at investors. See also "Risk Factors — Risks Related to Our Business and Our Industry — A decline in our financial strength rating may adversely affect the amount of business we write."

The financial strength ratings assigned by A.M. Best have an impact on the ability of the insurance companies to attract and retain agents and brokers and on the risk profiles of the submissions for insurance that the insurance companies receive. The "A" (Excellent) rating obtained by Kinsale Insurance is consistent with our business plan and allows us to actively pursue relationships with the agents and brokers identified in our marketing plan.

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Contractual obligations and commitments

Reserves for losses and loss adjustment expenses

Reserves for losses and loss adjustment expenses represent our best estimate of the ultimate cost of settling reported and unreported claims and related expenses. The estimation of loss and loss expense reserves is based on various complex and subjective judgments. Actual losses and settlement expenses paid may deviate, perhaps substantially, from the reserve estimates reflected in our consolidated financial statements. Similarly, the timing for payment of our estimated losses is not fixed and is not determinable on an individual or aggregate basis due to the uncertainty inherent in the process of estimating such payments.

See Note 7 of the notes to the consolidated financial statements and "—Critical Accounting Estimates" for a discussion of estimates and assumptions related to the reserves for unpaid losses and loss adjustment expenses.

Reinsurance balances recoverable on reserves for losses and loss adjustment expenses are reported separately as assets, instead of being netted with the related liabilities, since reinsurance does not discharge us of our liability to policyholders. The method for determining reinsurance recoverables for unpaid losses and loss adjustment expenses involves reviewing actuarial estimates of gross unpaid losses and loss adjustment expenses to determine the Company's ability to cede unpaid losses and loss adjustment expenses under the Company's existing reinsurance contracts.

See Note 8 to the consolidated financial statements and "—Critical Accounting Estimates" for a discussion of reinsurance recoverables.

Debt

As of December 31, 2024, we had $125.0 million of 5.15% Series A Senior Notes outstanding. Principal payments are required annually beginning on July 22, 2030 in equal installments of $25.0 million through July 22, 2034, the maturity date. Interest accrues quarterly and is payable in arrears.

As of December 31, 2024, we had $50.0 million of the 6.21% Series B Senior Note outstanding. Principal payments are required annually beginning on July 22, 2030 in equal installments of $10.0 million through July 22, 2034, the maturity date. Interest accrues quarterly and is payable in arrears.

As of December 31, 2024, we had $11.0 million outstanding under the Amended and Restated Credit Agreement, which has a maturity of July 22, 2027. Interest on the outstanding amounts is based on 3-month Adjusted Term SOFR plus a margin of 1.625%. Interest accrues over the term of the interest rate and is payable in arrears.

See Note 11 to the consolidated financial statements for further details regarding our debt obligations.

Real estate construction costs

We are currently renovating an existing office building for our new corporate headquarters and have entered into an agreement under which we have incurred obligations relating to the renovation. We expect the construction costs to be approximately $59.0 million and are currently targeting a fourth quarter 2025 completion date. At December 31, 2024 we incurred approximately $19.5 million of construction costs toward the project. Our contractual obligations include payments which will become due under the construction agreement and project development.

Financial Condition

Stockholders' equity

At December 31, 2024, total stockholders' equity and tangible stockholders' equity were $1.5 billion, compared to total stockholders' equity and tangible equity of $1.1 billion at December 31, 2023. The increase in both total

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stockholders' equity and tangible stockholders' equity in 2024 compared to 2023 was primarily due to profits generated during the period and net activity related to stock-based compensation plans. These increases were offset in part by dividends declared during 2024, share repurchases and an increase in unrealized losses on available-for-sale investments, net of taxes. Tangible stockholders’ equity is a non-GAAP financial measure. See "—Reconciliation of Non-GAAP Financial Measures" for a reconciliation of stockholders' equity in accordance with GAAP to tangible stockholders' equity.

See Note 9 to the consolidated financial statements for further details regarding our stock-based compensation plans.

Dividend declarations

On February 12, 2024, the Company’s Board of Directors declared a cash dividend of $0.15 per share of common stock. This dividend was paid on March 13, 2024 to all stockholders of record on February 27, 2024.

On May 15, 2024, the Company’s Board of Directors declared a cash dividend of $0.15 per share of common stock. This dividend was paid on June 13, 2024 to all stockholders of record on May 31, 2024.

On August 14, 2024, the Company’s Board of Directors declared a cash dividend of $0.15 per share of common stock. This dividend was paid on September 12, 2024 to all stockholders of record on August 29, 2024.

On November 13, 2024, the Company’s Board of Directors declared a cash dividend of $0.15 per share of common stock. This dividend was paid on December 13, 2024 to all stockholders of record on November 29, 2024.

On February 10, 2025, the Company’s Board of Directors declared a cash dividend of $0.17 per share of common stock. This dividend is payable on March 13, 2025 to all stockholders of record on February 27, 2025.

Investment portfolio

At December 31, 2024, our cash and invested assets of $4.1 billion consisted of fixed-maturity securities, cash and cash equivalents, equity securities, short-term investments and real estate investments. At December 31, 2024, the majority of the investment portfolio was comprised of fixed-maturity securities of $3.5 billion that were classified as available-for-sale. Available-for-sale investments are carried at fair value with unrealized gains and losses on those securities, net of applicable taxes, reported as a separate component of accumulated other comprehensive income. At December 31, 2024, we also held $398.4 million of equity securities, which were comprised of common stocks, ETFs and non-redeemable preferred stock, $113.2 million of cash and cash equivalents, $15.0 million of real estate investments and $3.7 million of short-term investments. Our fixed-maturity securities, including cash equivalents, had a weighted average duration of 3.0 years and an average rating of "AA-" at December 31, 2024. Our investment portfolio, excluding cash equivalents and real estate investments, had a gross investment return of 4.4% as of December 31, 2024, compared to 4.0% as of December 31, 2023.

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At December 31, 2024, the amortized cost and estimated fair value of our fixed-maturity, equity, and short-term investments were as follows:

The table below summarizes the credit quality of our fixed-maturity securities as of December 31, 2024, as rated by Standard & Poor’s Financial Services, LLC ("Standard & Poor's") or equivalent designation:

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The amortized cost and estimated fair value of our available-for-sale investments in fixed-maturity securities summarized by contractual maturity as of December 31, 2024, were as follows:

Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties, and the lenders may have the right to put the securities back to the borrower.

Restricted investments

In order to conduct business in certain states, we are required to maintain letters of credit or assets on deposit to support state-mandated insurance regulatory requirements and to comply with certain third-party agreements. Assets held on deposit or in trust accounts are primarily in the form of cash or certain high-grade securities. The fair value of our restricted assets was $3.7 million and $5.8 million at December 31, 2024 and 2023, respectively.

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Reconciliation of Non-GAAP Financial Measures

Reconciliation of underwriting income

Underwriting income is a non-GAAP financial measure that we believe is useful in evaluating our underwriting performance without regard to investment income. Underwriting income is defined as net income excluding net investment income, the net change in the fair value of equity securities, net realized investment gains and losses, change in allowance for credit losses on investments, interest expense, other expenses, other income and income tax expense. We use underwriting income as an internal performance measure in the management of our operations because we believe it gives us and users of our financial information useful insight into our results of operations and our underlying business performance. Underwriting income should not be viewed as a substitute for net income calculated in accordance with GAAP, and other companies may define underwriting income differently.

Net income for the years ended December 31, 2024 and 2023 reconciles to underwriting income as follows:

(1) Other expenses are corporate expenses not allocated to our insurance operations.

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Reconciliation of net operating earnings

Net operating earnings is defined as net income excluding the effects of the net change in the fair value of equity securities, after taxes, net realized investment gains and losses, after taxes, and the change in allowance for credit losses on investments, after taxes. Management believes the exclusion of these items provides a useful comparison of the Company's underlying business performance from period to period. Net operating earnings and percentages or calculations using net operating earnings (e.g., operating return on equity) are non-GAAP financial measures. Net operating earnings should not be viewed as a substitute for net income calculated in accordance with GAAP, and other companies may define net operating earnings differently.

Net income for the years ended December 31, 2024 and 2023 reconciles to net operating earnings as follows:

(1) Income taxes on adjustments to reconcile net income to net operating earnings use an effective tax rate of 21%.

(2) Average equity is computed by adding the total stockholders' equity as of the date indicated to the prior year-end total and dividing by two.

(3) Return on equity is net income expressed as a percentage of average beginning and ending stockholders’ equity during the period.

(4) Operating return on equity is net operating earnings expressed as a percentage of average beginning and ending stockholders’ equity during the period.

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Reconciliation of tangible stockholders' equity

Tangible stockholders’ equity is a non-GAAP financial measure. We define tangible stockholders’ equity as stockholders’ equity less intangible assets, net of deferred taxes. Our definition of tangible stockholders’ equity may not be comparable to that of other companies, and it should not be viewed as a substitute for stockholders’ equity calculated in accordance with GAAP. We use tangible stockholders' equity internally to evaluate the strength of our balance sheet and to compare returns relative to this measure.

Stockholders' equity at December 31, 2024 and 2023 reconciles to tangible stockholders' equity as follows:

Critical Accounting Estimates

We identified the accounting estimates which are critical to the understanding of our financial position and results of operations. Critical accounting estimates are defined as those estimates that are both important to the portrayal of our financial condition and results of operations and require us to exercise significant judgment. We use significant judgment concerning future results and developments in applying these critical accounting estimates and in preparing our consolidated financial statements. These judgments and estimates affect our reported amounts of assets, liabilities, revenues and expenses and the disclosure of our material contingent assets and liabilities, if any. Actual results may differ materially from the estimates and assumptions used in preparing the consolidated financial statements. We evaluate our estimates regularly using information that we believe to be relevant. For a detailed discussion of our accounting policies, see the "Notes to Consolidated Financial Statements" included in this Annual Report on Form 10-K.

Reserves for unpaid losses and loss adjustment expenses

The reserves for unpaid losses and loss adjustment expenses are the largest and most complex estimate in our consolidated balance sheet. The reserves for unpaid losses and loss adjustment expenses represent our estimated ultimate cost of all unreported and reported but unpaid insured claims and the cost to adjust these claims that have occurred as of or before the consolidated balance sheet date. We estimate the reserves using individual case-basis valuations of reported claims and statistical analyses. The estimates are based on our historical data, industry data, and our analysis of future trends in loss severity, loss frequency, and other factors such as inflation. We regularly review our estimates and adjust them as necessary as experience develops or as new information becomes known to us. Such adjustments are included in current operations. Additionally, during the loss settlement period, it often becomes necessary to refine and adjust the estimates of liability on a claim. Even after such adjustments, ultimate liability may be higher or lower than the revised estimates. Accordingly, the ultimate settlement of losses and the related loss adjustment expenses may vary significantly from the estimate included in our consolidated financial statements.

We categorize our reserves for unpaid losses and loss adjustment expenses into two types: case reserves and reserves for incurred but not reported losses ("IBNR"). Our gross reserves for losses and loss adjustment expenses at December 31, 2024 were $2.3 billion, and of this amount, 90.4% related to IBNR. Our reserves for losses and loss adjustment expenses, net of reinsurance, at December 31, 2024 were $2.0 billion, and of this amount, 90.0% related to IBNR. A 5% change in net IBNR reserves would equate to a $88.4 million change in the reserve for losses and

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loss adjustment expenses at such date, as well as a $69.8 million change in net income, a 4.7% change in both stockholders' equity and tangible stockholders' equity, in each case at or for the year ended December 31, 2024.

The following tables summarize our reserves for unpaid losses and loss adjustment expenses, on a gross basis and net of reinsurance, at December 31, 2024 and 2023:

Case reserves are established for individual claims that have been reported to us. We are notified of losses by our insureds or their brokers. Based on the information provided, we establish case reserves by estimating the ultimate losses from the claim, including defense costs associated with the ultimate settlement of the claim. Our claims department personnel use their knowledge of the specific claim along with advice from internal and external experts, including underwriters and legal counsel, to estimate the expected ultimate losses. During the life cycle of a particular claim, as more information becomes available, we may revise our estimate of the ultimate value of the claim either upward or downward. The amount of the individual claim reserve is based on the most recent information available.

Methodology

IBNR reserves are determined using actuarial methods to estimate losses that have occurred but have not yet been reported to us. We use several actuarial methods to arrive at our IBNR reserve estimates for each line of business. These methods estimate the reserves based on a variety of information including initial expected loss ratios, loss development patterns, paid losses, reported losses, claim counts and price indices. We use industry and peer-group data, in addition to our own data, as a basis for selecting our loss development patterns.

We reserve for large catastrophes after an event has occurred. Shortly after an occurrence, we review insured locations exposed to the event, modeled losses for our portfolio, and industry loss estimates for the event. We also consider frequency and severity from early claims reports to determine an appropriate reserve for the catastrophe. These reserves are reviewed frequently to reflect actual reported losses and changes to our estimates are made to reflect the new information.

Our Reserve Committee consists of our Chief Actuary and other select members of senior management. The Reserve Committee meets quarterly to review the actuarial recommendations made by the Chief Actuary. In establishing the actuarial recommendation for the reserves for losses and loss adjustment expenses, our actuary estimates an initial expected ultimate loss ratio for each line of business by accident year. Input from our underwriting and claims departments, including premium pricing assumptions and historical experience, is considered by our actuary in estimating the initial expected loss ratios. During each quarter, the Reserve Committee

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reviews the emergence of actual losses relative to expectations by line of business to assess whether the assumptions used in the reserving process continue to form a reasonable basis for the projection of liabilities for those product lines. Our reserving methodology uses a loss reserving model that calculates a point estimate for our ultimate losses. Although we believe that our assumptions and methodology are reasonable, our ultimate payments may vary, potentially materially, from the estimates we have made.

In addition, we retain an independent actuary annually to review our estimate of reserves. The independent actuary is not involved in the establishment and recording of our loss reserve. The actuarial consulting firm prepares its own estimate of unpaid loss and loss adjustment expenses, and we compare its estimate to the reserves for losses and loss adjustment expenses reviewed and approved by the Reserve Committee to gain additional comfort on the adequacy of those reserves.

While we believe that loss reserves at December 31, 2024 are adequate, new information, events, or circumstances may result in ultimate losses that are materially greater or less than our estimates. As previously noted, there are many factors that may cause reserves to increase or decrease, particularly those related to catastrophe losses and long-tailed lines of business.

Key assumptions

Expected loss ratios are a key assumption in estimates of ultimate losses for business at an early stage of development. A higher expected loss ratio results in a higher ultimate loss estimate, and vice versa. Estimated loss development patterns are another significant assumption in estimating loss reserves. Accelerating a loss development pattern results in lower ultimate losses, as the estimated proportion of losses already incurred would be higher. We utilize industry benchmarks and peer group data to supplement our own data when estimating loss development patterns.

Each of the impacts described below is estimated individually, without consideration for any correlation among key indicators or among lines of business. Therefore, it would be inappropriate to take each of the amounts described below and add them together to estimate volatility for our reserves in total. For any one reserving line of business, the estimated variation in reserves due to changes in key indicators is a reasonable estimate of possible variation that may occur in the future. The variation discussed is not meant to be a worst-case scenario and, therefore, it is possible that future variation may be greater than the amounts shown below.

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The impact of reasonably likely changes in the two key assumptions used to estimate net loss reserves at December 31, 2024 is as follows:

Reserve development

The amount by which estimated losses differ from those originally reported for a period is known as "development." Development is unfavorable when the losses ultimately settle for more than the amount reserved or subsequent estimates indicate a basis for reserve increases on unresolved claims. Development is favorable when losses ultimately settle for less than the amount reserved or subsequent estimates indicate a basis for reducing loss reserves on unresolved claims. We reflect favorable or unfavorable development of loss reserves in the results of operations in the period the estimates are changed. Refer to Note 7 to the consolidated financial statements for discussion on our reserve development for the years ended December 31, 2024 and 2023.

Fair value measurements

Like other accounting estimates, fair value measurements may be based on subjective information and generally involve uncertainty and judgment. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Market participants are assumed to be independent, knowledgeable, able and willing to transact an exchange and not acting under duress. Fair value hierarchy disclosures are based on the quality of inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Adjustments to transaction prices or quoted market prices may be required in illiquid or disorderly markets in order to estimate fair value. The three levels of the fair value hierarchy are described below:

Level 1 - Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities traded in active markets.

Level 2 - Inputs to the valuation methodology include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability and market-corroborated inputs.

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Level 3 - Inputs to the valuation methodology are unobservable for the asset or liability and are significant to the fair value measurement.

When the inputs used to measure fair value fall within different levels of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement in its entirety. Thus, a Level 3 fair value measurement may include inputs that are observable (Level 1 and 2) and unobservable (Level 3). The use of valuation methodologies may require a significant amount of judgment. During periods of financial market disruption, including periods of rapidly widening credit spreads or illiquidity, it may be difficult to value certain of our securities if trading becomes less frequent or market data becomes less observable. We review the fair value hierarchy classifications on a quarterly basis. Changes in the observability of valuation inputs may result in a reclassification for certain financial assets and liabilities.

Fair values of financial instruments in our investment portfolio are estimated using unadjusted prices obtained by our investment accounting vendor from nationally recognized third-party pricing services, where available. For securities where we are unable to obtain fair values from a pricing service or broker, fair values are estimated using information obtained from our investment accounting vendor. We perform several procedures to ascertain the reasonableness of investment values included in the consolidated financial statements at December 31, 2024, including (1) obtaining and reviewing the internal control report from our investment accounting vendor that obtains fair values from third party pricing services, (2) discussing with our investment accounting vendor its process for reviewing and validating pricing obtained from outside pricing services and (3) reviewing the security pricing received from our investment accounting vendor and monitoring changes in unrealized gains and losses at the individual security level.

Investment securities are subject to fluctuations in fair value due to changes in issuer-specific circumstances, such as credit rating, and changes in industry-specific circumstances, such as movements in credit spreads based on the market’s perception of industry risks. In addition, fixed maturities are subject to fluctuations in fair value due to changes in interest rates. As a result of these potential fluctuations, it is possible to have significant unrealized gains or losses on a security.

Reinsurance

We enter into reinsurance contracts to limit our exposure to potential large losses. Reinsurance refers to an arrangement in which a company called a reinsurer agrees in a contract (often referred to as a treaty) to assume specified risks written by an insurance company (known as a ceding company) by paying the insurance company all or a portion of the insurance company's losses arising under specified classes of insurance policies in return for a share in premiums.

Reinsurance recoverables recorded on insurance losses ceded under reinsurance contracts are subject to judgments and uncertainties similar to those involved in estimating gross loss reserves. In addition to these uncertainties, our reinsurance recoverables may prove uncollectible if the reinsurers are unable or unwilling to perform under the reinsurance contracts. In establishing our reinsurance allowance for credit losses, we evaluate the financial condition of our reinsurers and monitor concentration of credit risk arising from our exposure to individual reinsurers. To determine if an allowance is necessary, we consider, among other factors, published financial information, reports from rating agencies, payment history, collateral held and our legal right to offset balances recoverable against balances we may owe. Our reinsurance allowance for credit losses is subject to uncertainty and volatility due to the time lag involved in collecting amounts recoverable from reinsurers. Over the period of time that losses occur, reinsurers are billed and amounts are ultimately collected, economic conditions, as well as the operational and financial performance of particular reinsurers may change and these changes may affect the reinsurers’ willingness and ability to meet their contractual obligations to us. It is difficult to fully evaluate the impact of major catastrophic events on the financial stability of reinsurers, as well as the access to capital that reinsurers may have when such

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events occur. The ceding of insurance does not legally discharge us from our primary liability for the full amount of the policies, and we will be required to pay the loss and bear the collection risk if any reinsurer fails to meet its obligations under the reinsurance contracts. We target reinsurers with A.M. Best financial strength ratings of "A-" (Excellent) or better. Based on our evaluation of the factors discussed above, the allowance for credit losses related to reinsurance balances was $0.9 million at December 31, 2024.

Recent Accounting Pronouncements

Refer to Note 1 – "Summary of significant accounting policies" of the Notes to Consolidated Financial Statements for further discussion.

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Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the accompanying notes included elsewhere in this Annual Report. The discussion and analysis below include certain forward-looking statements that are subject to risks, uncertainties and other factors described in "Risk Factors" that could cause actual results to differ materially from those expressed in, or implied by, those forward-looking statements. See "Forward-Looking Statements."

Year ended December 31, 2022 compared to year ended December 31, 2021

For a comparison of years ended December 31, 2022 and December 2021, see “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our annual report on Form 10-K for the fiscal year ended December 31, 2022, which was filed with the SEC on February 24, 2023.

Overview

Founded in 2009, we are an established and growing specialty insurance company. We focus exclusively on the E&S market in the U.S., where we use our underwriting expertise to write coverages for hard-to-place, small- to medium-sized business risks and personal lines risks. We market and sell these insurance products in all 50 states, the District of Columbia, the Commonwealth of Puerto Rico and the U.S. Virgin Islands primarily through a network of independent insurance brokers. We have an experienced and cohesive management team that has an average of over 30 years of relevant experience. Many of our employees and members of our management team have also worked together for decades at other E&S insurance companies.

We have one reportable segment, our Excess and Surplus Lines Insurance segment, which offers P&C insurance products through the E&S market. In 2023, the percentage breakdown of our gross written premiums was 67.3% casualty and 32.7% property. Our commercial lines offerings include commercial property, excess casualty, small business casualty, construction, general casualty, allied health, products liability, small business property, life sciences, entertainment, energy, professional liability, management liability, environmental, excess professional, health care, public entity, commercial auto, inland marine, aviation, ocean marine, product recall, and railroad. We also write homeowners' coverage in the personal lines market, which in aggregate represented 2.5% of our gross written premiums in 2023.

Our goal is to deliver long-term value for our stockholders by growing our business and generating attractive returns. We seek to accomplish this by generating consistent and strong underwriting profits while managing our capital prudently. We believe that we have built a company that is entrepreneurial and highly efficient, using our proprietary technology platform and leveraging the expertise of our highly-experienced employees in our daily operations. We believe our systems and technology are at the digital forefront of the insurance industry, allowing us to quickly collect and analyze data, thereby improving our ability to manage our business and reducing response times for our customers. We believe that we have differentiated ourselves from our competitors by effectively leveraging technology, vigilantly controlling expenses and maintaining control over our underwriting and claims management.

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Components of Our Results of Operations

Gross written premiums

Gross written premiums are the amounts received or to be received for insurance policies written or assumed by us during a specific period of time without reduction for policy acquisition costs, reinsurance costs or other deductions. The volume of our gross written premiums in any given period is generally influenced by:

•New business submissions;

•Conversion of new business submissions into policies;

•Renewals of existing policies; and

•Average size and premium rate of bound policies.

We earn insurance premiums on a pro rata basis over the term of the policy. Our insurance policies generally have a term of one year. Net earned premiums represent the earned portion of our gross written premiums, less that portion of our gross written premiums that is ceded to third-party reinsurers under our reinsurance agreements.

Ceded written premiums

Ceded written premiums are the amount of gross written premiums ceded to reinsurers. We enter into reinsurance contracts to limit our exposure to potential large losses. Ceded written premiums are earned over the reinsurance contract period in proportion to the period of risk covered. The volume of our ceded written premiums is impacted by the level of our gross written premiums and any decision we make to increase or decrease retention levels.

Fee income

Fee income includes policy fees charged to insureds and is recognized in earnings when the related premium is written. Policy fees are a flat charge to insureds and fee income is impacted primarily by the volume of business we write. In the period ended June 30, 2023, we reclassified policy fees to fee income. Historically, these fees were presented as a reduction to underwriting, acquisition and insurance expenses. We modified the definitions of the loss and expense ratios to include fee income in the denominator of each ratio. We have reclassified prior periods' results to conform to the current period's presentation. See Note 17 of the notes to the consolidated financial statements for further information regarding fee income.

Losses and loss adjustment expenses

Losses and loss adjustment expenses are a function of the amount and type of insurance contracts we write and the loss experience associated with the underlying coverage. In general, our losses and loss adjustment expenses are affected by:

•Frequency of claims associated with the particular types of insurance contracts that we write;

•Trends in the average size of losses incurred on a particular type of business;

•Mix of business written by us;

•Changes in the legal or regulatory environment related to the business we write;

•Trends in legal defense costs;

•Wage inflation;

•Social inflation;

•Inflation in material costs, and

•Inflation in medical costs.

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Losses and loss adjustment expenses are based on an actuarial analysis of the estimated losses, including losses incurred during the period and changes in estimates from prior periods. Losses and loss adjustment expenses may be paid out over a period of years.

Underwriting, acquisition and insurance expenses

Underwriting, acquisition and insurance expenses include policy acquisition costs and other underwriting expenses. Policy acquisition costs are principally comprised of the commissions we pay our brokers, net of ceding commissions we receive on business ceded under certain reinsurance contracts. Policy acquisition costs also include deferred underwriting expenses that are directly related to the successful acquisition of policies. The amortization of such policy acquisition costs is charged to expense in proportion to premium earned over the policy life. Other underwriting expenses represent the general and administrative expenses of our insurance business such as employment costs, telecommunication and technology costs, and legal and auditing fees.

Net investment income

Net investment income is an important component of our results of operations. We earn investment income on our portfolio of cash and invested assets. Our cash and invested assets are primarily comprised of fixed-maturity securities, and may also include equity securities, investments in real estate, cash equivalents, and short-term investments. The principal factors that influence the level of net investment income are the size of our investment portfolio and the yield on that portfolio. As measured by amortized cost (which excludes changes in fair value), the size of our investment portfolio is mainly a function of our invested equity capital combined with premiums we receive from our insureds less payments on policyholder claims. Net investment income also includes rental income and depreciation expense from our real estate investment property.

Change in fair value of equity securities

Change in fair value of equity securities consists of two components: (1) the reversal of the gain or loss recognized in previous periods on equity securities sold and (2) the change in unrealized gain or loss resulting from mark-to-market adjustments on equity securities still held.

Net realized investment gains (losses)

Net realized investment gains (losses) are a function of the difference between the amount received by us on the sale of a security and the security's amortized cost.

Income tax expense

Currently, substantially all of our income tax expense is comprised of federal income taxes. Our insurance subsidiary, Kinsale Insurance, is not subject to income taxes in the states in which it operates; however, our non-insurance subsidiaries are subject to state income taxes but have not generated any material taxable income to date. The amount of income tax expense or benefit recorded in future periods will depend on the jurisdictions in which we operate and the tax laws and regulations in effect.

Key metrics

We discuss certain key metrics, described below, which we believe provide useful information about our business and the operational factors underlying our financial performance.

Underwriting income is a non-GAAP financial measure. We define underwriting income as net income, excluding net investment income, net change in the fair value of equity securities, net realized investment gains and losses, change in allowance for credit losses on investments, interest expense, other income, other expenses and income tax

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expense. See "—Reconciliation of Non-GAAP Financial Measures" for a reconciliation of net income in accordance with GAAP to underwriting income.

Net operating earnings is a non-GAAP financial measure. We define net operating earnings as net income excluding the net change in the fair value of equity securities, after taxes, net realized investment gains and losses, after taxes and change in allowance for credit losses on investments, after taxes. See "—Reconciliation of Non-GAAP Financial Measures" for a reconciliation of net income in accordance with GAAP to net operating earnings.

Loss ratio, expressed as a percentage, is the ratio of losses and loss adjustment expenses to the sum of net earned premiums and fee income.

Expense ratio, expressed as a percentage, is the ratio of underwriting, acquisition and insurance expenses to the sum of net earned premiums and fee income.

Combined ratio is the sum of the loss ratio and the expense ratio as presented. A combined ratio under 100% indicates an underwriting profit. A combined ratio over 100% indicates an underwriting loss.

Return on equity is net income as a percentage of average beginning and ending total stockholders’ equity during the period.

Operating return on equity is a non-GAAP financial measure. We define operating return on equity as net operating earnings expressed as a percentage of average beginning and ending stockholders’ equity during the period. See "—Reconciliation of Non-GAAP Financial Measures" for a reconciliation of net income in accordance with GAAP to net operating earnings.

Net retention ratio is the ratio of net written premiums to gross written premiums.

Gross investment return is investment income from fixed-maturity and equity securities (and short-term investments, if any), before any deductions for fees and expenses, expressed as a percentage of the average beginning and ending book values of those investments during the period.

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Results of Operations

Year ended December 31, 2023 compared to year ended December 31, 2022

The following table summarizes our results of operations for the years ended December 31, 2023 and 2022:

NM - Percentage change is not meaningful

(1) Underwriting income is a non-GAAP financial measure. See "—Reconciliation of Non-GAAP Financial Measures" for a reconciliation of net income in accordance with GAAP to underwriting income.

(2) Net operating earnings and operating return on equity are non-GAAP financial measures. Net operating earnings is defined as net income excluding the net change in the fair value of equity securities, after taxes, net realized investment gains and losses, after taxes, and change in allowance for credit losses on investments, after taxes. Operating return on equity is defined as net operating earnings expressed as a percentage of average beginning and ending total stockholders’ equity during the period. See "—Reconciliation of Non-GAAP Financial Measures" for a reconciliation of net income in accordance with GAAP to net operating earnings.

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(3) The combined ratio is the sum of the loss ratio and expense ratio as presented. Calculations of each component may not add due to rounding.

Net income was $308.1 million for the year ended December 31, 2023 compared to $159.1 million for the year ended December 31, 2022, an increase of $149.0 million, or 93.6%. The increase in net income in 2023 over 2022 was primarily due to a combination of continued profitable growth, an increase in investment income driven by higher investment balances and higher interest rates and higher returns on equity investments.

Underwriting income was $270.4 million for the year ended December 31, 2023 compared to $175.5 million for the year ended December 31, 2022, an increase of $94.9 million, or 54.1%. The increase in underwriting income was primarily due to a combination of premium growth, rate increases, favorable loss experience and lower net commissions. The corresponding combined ratios were 75.4% for the year ended December 31, 2023 compared to 78.5% for the year ended December 31, 2022.

Premiums

Gross written premiums were $1.6 billion for the year ended December 31, 2023 compared to $1.1 billion for the year ended December 31, 2022, an increase of $466.7 million, or 42.3%. The increase in gross written premiums for the year ended December 31, 2023 was primarily due to higher submission activity from brokers and higher rates across most lines of business, resulting from continued favorable conditions in the E&S market. The average premium per policy written by us was $15,200 in 2023 compared to $12,400 in 2022. Excluding our personal insurance division, which has relatively low premiums per policy written, the average premium per policy written was $16,400 in 2023 compared to $14,700 in 2022. The increase in the average premium per policy written was due to changes in the mix of business and higher rates on bound accounts during 2023 compared to the prior year. Gross written premiums increased across substantially all of our underwriting divisions for the year ended December 31, 2023 and were most notable in the following lines of business:

•Commercial Property, which represented approximately 26.3% of our gross written premiums in 2023, increased by $230.5 million, or 127.0%, for the year ended December 31, 2023;

•General Casualty, which represented approximately 7.5% of our gross written premiums in 2023, increased by $49.0 million, or 70.2%, for the year ended December 31, 2023;

•Excess Casualty, which represented approximately 12.4% of our gross written premiums in 2023, increased by $46.6 million, or 31.6%, for the year ended December 31, 2023;

•Small Business Casualty, which represented approximately 11.1% of our gross written premiums in 2023, increased by $24.7 million, or 16.5%, for the year ended December 31, 2023 and

•Construction, which represented approximately 8.8% of our gross written premiums in 2023, increased by $15.4 million, or 12.5%, for the year ended December 31, 2023.

Net written premiums increased by $327.8 million, or 35.0%, to $1.3 billion for the year ended December 31, 2023 from $936.8 million for the year ended December 31, 2022. The increase in net written premiums was largely due to higher gross written premiums for the year ended December 31, 2023. Our net retention ratio was 80.6% for the year ended December 31, 2023 compared to 85.0% for the year ended December 31, 2022. The decrease in the net retention ratio was primarily due to higher premiums ceded under the commercial property quota share and excess casualty variable quota share reinsurance treaties as a result of growth in our property and excess casualty lines and a higher cession rate on the commercial property quota share effective with the June 2023 renewal.

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Net earned premiums were $1.1 billion for the year ended December 31, 2023 compared to $794.1 million for the year ended December 31, 2022, an increase of $278.4 million, or 35.1%. As previously discussed, the increase was due to growth in gross written premiums in 2023 compared to 2022.

Loss ratio

Our loss ratio was 54.6% for the year ended December 31, 2023 compared to 56.3% for the year ended December 31, 2022. The decrease in the loss ratio for the year ended December 31, 2023 was due primarily to lower catastrophe losses incurred during the period, offset in part by lower relative net favorable development of loss reserves from prior accident years. During the year ended December 31, 2022, current year incurred losses and loss adjustment expenses included $26.6 million of net catastrophe losses primarily attributable to Hurricane Ian.

During the year ended December 31, 2023, prior accident years developed favorably by $35.8 million, of which $49.0 million was attributable to the 2021 and 2022 accident years due to lower emergence of reported losses than expected across most lines of business. This favorable development was offset in part by adverse development largely from the 2017 through 2019 accident years due to long-tailed property damage claims within the construction-related primary casualty business that are more exposed to the increase in inflation.

During the year ended December 31, 2022, loss reserves for prior accident years developed favorably by $35.9 million, of which $41.8 million was attributable to the 2020 and 2021 accident years due to lower emergence of reported losses than expected across most lines of business. This favorable development was offset in part by adverse development largely from the 2016 and 2018 accident years due to routine variability in reported losses and modest adjustments in actuarial assumptions.

On an inception-to-date basis as of December 31, 2023, all accident years have developed favorably, with the exception of the 2011 accident year.

The following table summarizes the effect of the factors indicated above on the loss ratios for the years ended December 31, 2023 and 2022:

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Expense ratio

The following table summarizes the components of the expense ratio for the years ended December 31, 2023 and 2022:

The expense ratio was 20.8% for the year ended December 31, 2023 compared to 22.2% for the year ended December 31, 2022. The decrease in the expense ratio was primarily due to lower relative net commissions due to higher ceding commissions earned under the commercial property quota share treaty as a result of commercial property premium growth and a higher cession rate on the commercial property quota share treaty effective June 2023. Direct commissions paid as a percent of gross written premiums was 14.5% and 14.6% for the years ended December 31, 2023 and 2022, respectively.

Investing results

Our net investment income increased by 99.6% to $102.3 million for the year ended December 31, 2023 from $51.3 million for the year ended December 31, 2022, primarily due to growth in our investment portfolio largely generated from the investment of strong operating cash flows and higher interest rates relative to the prior year period.

The following table summarizes the components of net investment income, change in the fair value of equity securities, net realized investment gains and change in allowance for credit losses on investments for the years ended December 31, 2023 and 2022:

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The weighted average duration of our investment portfolio, including cash equivalents, was 2.8 years and 3.5 years at December 31, 2023 and 2022, respectively. Our investment portfolio, excluding cash equivalents and unrealized gains and losses, had a gross investment return of 4.0% as of December 31, 2023, compared to 3.0% as of December 31, 2022.

During the year ended December 31, 2023, the increase in the fair value of equity securities of $15.3 million was comprised of unrealized gains related to ETFs and common stocks of $12.8 million and unrealized gains related to non-redeemable preferred stock of $2.5 million. The change in the fair value of ETFs and common stocks during 2023 primarily reflected changes in the broader U.S. stock market.

During the year ended December 31, 2022, the decrease in the fair value of equity securities of $(27.7) million was comprised of higher unrealized losses related to ETF securities of $(19.6) million and higher unrealized losses related to non-redeemable preferred stock of $(8.1) million. The decrease in the fair value of our ETF and common stock portfolio reflected lower valuations in the broader U.S. stock market during the period. The change in unrealized losses during 2022 attributable to non-redeemable preferred stock reflected a higher interest rate environment.

We perform quarterly reviews of all available-for-sale securities within our investment portfolio to determine whether the decline in a security's fair value is deemed to be a credit loss. Based on our review, we recorded credit loss expense of $0.2 million and $0.4 million for the year ended December 31, 2023 and 2022, respectively. See Note 2 of the notes to the consolidated financial statements for further information regarding credit losses.

Income tax expense

Our effective tax rate was approximately 19.8% for the year ended December 31, 2023 compared to 18.6% for the year ended December 31, 2022. The effective tax rate was lower than the federal statutory rate of 21% primarily due to the tax benefits from stock-based compensation and tax-exempt investment income.

Return on equity

Our return on equity was 33.6% for the year ended December 31, 2023 compared to 22.0% for the year ended December 31, 2022. Operating return on equity was 31.8% for 2023, an increase from 25.0% for 2022. The increase in operating return on equity was attributable largely to continued profitable growth from continuing favorable market conditions and rate increases.

Liquidity and Capital Resources

Sources and uses of funds

We are organized as a Delaware holding company with our operations primarily conducted by our wholly-owned insurance subsidiary, Kinsale Insurance, which is domiciled in Arkansas. Accordingly, Kinsale may receive cash through (1) loans from banks, (2) issuance of equity and debt securities, (3) corporate service fees from our insurance subsidiary, (4) payments from our subsidiaries pursuant to our consolidated tax allocation agreement and other transactions and (5) dividends from our insurance subsidiary. We may use the proceeds from these sources to contribute funds to Kinsale Insurance in order to support premium growth, reduce our reliance on reinsurance, pay dividends and taxes and for other business purposes.

We receive corporate service fees from Kinsale Insurance to reimburse us for most of the operating expenses that we incur. Reimbursement of expenses through corporate service fees is based on the actual costs that we expect to incur with no mark-up above our expected costs.

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We file a consolidated federal income tax return with our subsidiaries, and under our corporate tax allocation agreement, each participant is charged or refunded taxes according to the amount that the participant would have paid or received had it filed on a separate return basis with the Internal Revenue Service.

State insurance laws restrict the ability of Kinsale Insurance to declare stockholder dividends without prior regulatory approval. State insurance regulators require insurance companies to maintain specified levels of statutory capital and surplus. The maximum dividend distribution Kinsale Insurance may make absent the approval or non-disapproval of the insurance regulatory authority in Arkansas is limited by Arkansas law to the greater of (1) 10% of policyholder surplus as of December 31 of the previous year, or (2) net income, not including realized capital gains, for the previous calendar year. The Arkansas statute also requires that dividends and other distributions be paid out of positive unassigned surplus without prior approval. The maximum amount of dividends Kinsale Insurance can pay us during 2024 without regulatory approval is $257.3 million. Insurance regulators have broad powers to ensure that statutory surplus remains at adequate levels, and there is no assurance that dividends of the maximum amount calculated under any applicable formula would be permitted. In the future, state insurance regulatory authorities that have jurisdiction over the payment of dividends by Kinsale Insurance may adopt statutory provisions more restrictive than those currently in effect. Kinsale Insurance did not pay dividends to us during 2023. See also "Risk Factors — Risks Related to Our Business and Our Industry — Because we are a holding company and substantially all of our operations are conducted by our insurance subsidiary, our ability to pay dividends depends on our ability to obtain cash dividends or other permitted payments from our insurance subsidiary."

As of December 31, 2023, our holding company had $17.1 million in cash and investments, compared to $34.8 million as of December 31, 2022.

Management believes there is sufficient liquidity available at the holding company and in its insurance subsidiary, Kinsale Insurance, as well as in its other operating subsidiaries, to meet its operating cash needs and obligations for the next 12 months.

Real Estate Investment

In December of 2022, we acquired real estate property adjacent to our current headquarters for $76.6 million. The property is comprised of two office buildings totaling over 580,000 square feet and a parking deck situated on approximately 29 acres of land. During 2023, we sold one office building and the parking deck for approximately $62.0 million in cash, net of seller’s costs, and determined we would occupy the remaining building for future expansion of our operations. Upon this determination, we reclassified the carrying value of the building to property and equipment within other assets on the consolidated balance sheet. We have plans for future capital expenditures related to the renovation of the building that we plan to fund through draw downs on our Credit Facility. The remaining $14.8 million presented on the consolidated balance sheet represents the portion of remaining real estate assets held for investment purposes.

Debt

In July 2022, we entered into a Note Purchase and Private Shelf Agreement (the "Note Purchase Agreement"), which provides for the issuance of senior promissory notes with an aggregate principal amount of up to $150.0 million. In September 2023, we entered into an amendment to the Note Purchase Agreement, which increased the authorized aggregate principal amount of senior promissory notes that may be issued thereunder to $200.0 million.

Pursuant to the Note Purchase Agreement, on July 22, 2022 we issued $125.0 million aggregate principal amount of 5.15% senior promissory notes (the "Series A Notes") and on September 18, 2023 we issued a $50.0 million aggregate principal amount 6.21% senior promissory note (the "Series B Note"), the proceeds of which were used to fund surplus at Kinsale Insurance, refinance indebtedness and for general corporate purposes. See Note 11 for further information regarding the Note Purchase Agreement.

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In July 2022, we entered into an Amended and Restated Credit Agreement, which extended the maturity date to July 22, 2027, and increased the aggregate commitment to $100.0 million, with the option to increase the aggregate commitment by $30.0 million, subject to certain conditions. Borrowings under the Amended and Restated Credit Agreement may be used for general corporate purposes (which may include, without limitation, to fund future growth, to finance working capital needs, to fund capital expenditures, and to refinance, redeem or repay indebtedness). See Note 11 for further information regarding the Amended and Restated Credit Agreement.

Shelf registration

In August 2022, we filed a universal shelf registration statement with the SEC that expires in 2025. We can use this shelf registration to issue an unspecified amount of common stock, preferred stock, depositary shares and warrants. The specific terms of any securities we issue under this registration statement will be provided in the applicable prospectus supplements.

In November 2022, we completed an underwritten public offering and sold and issued 155,000 shares of our common stock at a price of $308.30 per share, to the underwriter. We received net proceeds from the offering of $47.5 million, which was used for general corporate purposes, including to fund organic growth.

Cash flows

Our most significant source of cash is from premiums received from our insureds, which, for most policies, we receive at the beginning of the coverage period. Our most significant cash outflow is for claims that arise when a policyholder incurs an insured loss. Because the payment of claims occurs after the receipt of the premium, often years later, we invest the cash in various investment securities that earn interest and dividends. We also use cash to pay commissions to brokers, as well as to pay for ongoing operating expenses such as salaries, consulting services and taxes. As described under "—Reinsurance" below, we use reinsurance to manage the risk that we take on our policies. We cede, or pay out, part of the premiums we receive to our reinsurers and collect cash back when losses subject to our reinsurance coverage are paid.

The timing of our cash flows from operating activities can vary among periods due to the timing by which payments are made or received. Some of our payments and receipts, including loss settlements and subsequent reinsurance receipts, can be significant, so their timing can influence cash flows from operating activities in any given period. Management believes that cash receipts from premiums, proceeds from investment sales and redemptions and investment income are sufficient to cover cash outflows in the foreseeable future.

Our cash flows for the years ended December 31, 2023 and 2022 were:

We have historically generated positive operating cash flows allowing our cash and invested assets to grow. The increase in cash provided by operating activities in 2023 compared to 2022 was due primarily to growth in business and the timing of claim payments and reinsurance recoveries.

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For the year ended December 31, 2023, net cash used in investing activities of $860.9 million reflected growth in our business operations. For the year ended December 31, 2023, funds from operations were used to purchase fixed-maturity securities, particularly corporate bonds and asset- and mortgage-backed securities of $1.3 billion, and to a lesser extent, sovereigns and government agency bonds of $26.3 million and municipal bonds of $4.9 million. During 2023, we received proceeds of $245.6 million from sales of fixed-maturity securities, largely corporate bonds and mortgage- and asset-backed securities and $176.5 million from redemptions of asset- and mortgage-backed securities and corporate bonds. For the year ended December 31, 2023, purchases of equity securities of $86.6 million primarily consisted of common stocks. Proceeds from sales of equity securities of $30.6 million consisted of primarily ETFs and common stocks. In addition, net sales of short-term investments of $36.7 million consisted of U.S. Treasuries, government agency and corporate bonds. Net cash used in investing activities also included proceeds of $62.0 million from the sale of a portion of our real estate investment property in the third quarter of 2023.

For the year ended December 31, 2022, net cash used in investing activities was $708.6 million. For the year ended December 31, 2022, funds from operations were used to purchase fixed-maturity securities, particularly corporate bonds and asset- and mortgage-backed securities of $713.2 million, and to a lesser extent, municipal bonds of $22.2 million and sovereigns of $16.0 million. During 2022, we received proceeds of $63.1 million from sales of fixed-maturity securities, largely corporate bonds and mortgage- and asset-backed securities and $110.4 million from redemptions of asset- and mortgage-backed securities and corporate bonds. For the year ended December 31, 2022, purchases of common stocks and ETFs were $10.0 million and $1.5 million, respectively. In addition, net purchases of short-term investments of $40.6 million consisted of U.S. Treasuries and corporate bonds. Net cash used in investing activities also included the purchase of a real estate investment property for $76.6 million in December of 2022 and property and equipment of $6.9 million.

For the year ended December 31, 2023, net cash used in financing activities was $28.5 million and reflected proceeds of $50.0 million from the issuance of the Series B Note on September 18, 2023. Proceeds from the sale of our real estate investment were used to pay down $62.0 million from our Credit Facility. Financing activities also reflected dividends of $0.56 per common share, or $13.0 million in the aggregate. Payroll taxes withheld and remitted on restricted stock awards were $4.3 million, offset in part by proceeds received from our equity compensation plans of $0.9 million.

For the year ended December 31, 2022, net cash provided by financing activities was $186.0 million and reflected proceeds of $125.0 million from the issuance of the Series A Notes on July 22, 2022, a portion of which were used to pay off the outstanding loans of $43.0 million under the Amended and Restated Credit Agreement on July 25, 2022, and proceeds of $47.5 million from our equity offering in November 2022. In December 2022, we drew down $73.0 million from our revolving credit facility to finance the purchase of our real estate investment property. Financing activities also reflected dividends of $0.52 per common share, or $11.9 million in the aggregate. Proceeds received from our equity compensation plans were $1.1 million, offset by payroll taxes withheld and remitted on restricted stock awards of $3.3 million for the year ended December 31, 2022.

Reinsurance

We enter into reinsurance contracts to limit our exposure to potential large losses. Our reinsurance is primarily contracted under quota-share reinsurance treaties and excess of loss treaties. In quota-share reinsurance, the reinsurer agrees to assume a specified percentage of the ceding company's losses arising out of a defined class of business in exchange for a corresponding percentage of premiums, net of a ceding commission. In excess of loss reinsurance, the reinsurer agrees to assume all or a portion of the ceding company's losses, in excess of a specified amount. In excess of loss reinsurance, the premium payable to the reinsurer is negotiated by the parties based on their assessment of the amount of risk being ceded to the reinsurer because the reinsurer does not share proportionately in the ceding company's losses.

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For the year ended December 31, 2023, property insurance represented 32.7% of our gross written premiums. When we write property insurance, we buy reinsurance to significantly mitigate our risk to large losses. We use sophisticated computer models to analyze the risk of severe losses from weather-related events and earthquakes. We measure exposure to these catastrophe losses in terms of PML, which is an estimate of what level of loss we would expect to experience in a windstorm or earthquake event occurring once in every 100 or 250 years. We manage this PML by purchasing catastrophe reinsurance coverage. Effective June 1, 2023, we purchased catastrophe reinsurance coverage of $127.5 million per event in excess of our $47.5 million per event retention. Our property catastrophe reinsurance includes a reinstatement provision which requires us to pay reinstatement premiums after a loss has occurred in order to preserve coverage. Including the reinstatement provision, the maximum aggregate loss recovery limit is $255.0 million and is in addition to the coverage provided by our other property reinsurance.

Reinsurance contracts do not relieve us from our obligations to policyholders. Failure of the reinsurer to honor its obligation could result in losses to us, and therefore, we established an allowance for credit risk based on historical analysis of credit losses for highly rated companies in the insurance industry. The Company evaluates the financial condition of its reinsurers and monitors concentration of credit risk arising from its exposure to individual reinsurers. As of December 31, 2023, Kinsale Insurance has only contracted with reinsurers with A.M. Best financial strength ratings of "A-" (Excellent) or better. At December 31, 2023, the net reinsurance receivable, defined as the sum of paid and unpaid reinsurance recoverables, ceded unearned premiums less reinsurance payables, from five reinsurers represented 67.7% of the total balance. At December 31, 2023, we recorded an allowance for credit losses of $0.7 million related to our reinsurance balances.

Ratings

Kinsale Insurance has a financial strength rating of "A" (Excellent) from A.M. Best. A.M. Best assigns ratings to insurance companies, which currently range from "A++" (Superior) to "F" (In Liquidation). "A" (Excellent) is the third highest rating issued by A.M. Best. The "A" (Excellent) rating is assigned to insurers that have, in A.M. Best's opinion, an excellent ability to meet their ongoing obligations to policyholders. This rating is intended to provide an independent opinion of an insurer's ability to meet its obligation to policyholders and is not an evaluation directed at investors. See also "Risk Factors — Risks Related to Our Business and Our Industry — A decline in our financial strength rating may adversely affect the amount of business we write."

The financial strength ratings assigned by A.M. Best have an impact on the ability of the insurance companies to attract and retain agents and brokers and on the risk profiles of the submissions for insurance that the insurance companies receive. The "A" (Excellent) rating obtained by Kinsale Insurance is consistent with our business plan and allows us to actively pursue relationships with the agents and brokers identified in our marketing plan.

Contractual obligations and commitments

Reserves for losses and loss adjustment expenses

Reserves for losses and loss adjustment expenses represent our best estimate of the ultimate cost of settling reported and unreported claims and related expenses. The estimation of loss and loss expense reserves is based on various complex and subjective judgments. Actual losses and settlement expenses paid may deviate, perhaps substantially, from the reserve estimates reflected in our consolidated financial statements. Similarly, the timing for payment of our estimated losses is not fixed and is not determinable on an individual or aggregate basis due to the uncertainty inherent in the process of estimating such payments.

See Note 7 of the notes to the consolidated financial statements and "—Critical Accounting Estimates" for a discussion of estimates and assumptions related to the reserves for unpaid losses and loss adjustment expenses.

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Reinsurance balances recoverable on reserves for losses and loss adjustment expenses are reported separately as assets, instead of being netted with the related liabilities, since reinsurance does not discharge us of our liability to policyholders. The method for determining reinsurance recoverables for unpaid losses and loss adjustment expenses involves reviewing actuarial estimates of gross unpaid losses and loss adjustment expenses to determine the Company's ability to cede unpaid losses and loss adjustment expenses under the Company's existing reinsurance contracts.

See Note 8 to the consolidated financial statements and "—Critical Accounting Estimates" for a discussion of reinsurance recoverables.

Debt

As of December 31, 2023, we had $125.0 million of 5.15% Series A Senior Notes outstanding. Principal payments are required annually beginning on July 22, 2030 in equal installments of $25.0 million through July 22, 2034, the maturity date. Interest accrues quarterly and is payable in arrears.

As of December 31, 2023, we had $50.0 million of the 6.21% Series B Senior Note outstanding. Principal payments are required annually beginning on July 22, 2030 in equal installments of $10.0 million through July 22, 2034, the maturity date. Interest accrues quarterly and is payable in arrears.

As of December 31, 2023, we had $11.0 million outstanding under the Amended and Restated Credit Agreement, which has a maturity of July 22, 2027. Interest on the outstanding amounts is based on 3-month Adjusted Term SOFR plus a margin of 1.625%. Interest accrues over the term of the interest rate and is payable in arrears.

See Note 11 to the consolidated financial statements for further details regarding our debt obligations.

Financial Condition

Stockholders' equity

At December 31, 2023, total stockholders' equity and tangible stockholders' equity were $1.1 billion, compared to total stockholders' equity of $745.4 million and tangible stockholders' equity of $742.7 million at December 31, 2022. The increase in both total stockholders' equity and tangible stockholders' equity in 2023 compared to 2022 was primarily due to profits generated during the period, a decrease in unrealized losses on available-for-sale investments, net of taxes and net activity related to stock-based compensation plans. These increases were offset in part by dividends declared during 2023. Tangible stockholders’ equity is a non-GAAP financial measure. See "—Reconciliation of Non-GAAP Financial Measures" for a reconciliation of stockholders' equity in accordance with GAAP to tangible stockholders' equity.

See Note 9 to the consolidated financial statements for further details regarding our stock-based compensation plans.

Dividend declarations

On February 15, 2023, the Company’s Board of Directors declared a cash dividend of $0.14 per share of common stock. This dividend was paid on March 13, 2023 to all stockholders of record on February 28, 2023.

On May 15, 2023, the Company’s Board of Directors declared a cash dividend of $0.14 per share of common stock. This dividend was paid on June 13, 2023 to all stockholders of record on May 31, 2023.

On August 16, 2023, the Company’s Board of Directors declared a cash dividend of $0.14 per share of common stock. This dividend was paid on September 12, 2023 to all stockholders of record on August 29, 2023.

On November 15, 2023, the Company’s Board of Directors declared a cash dividend of $0.14 per share of common stock. This dividend was paid on December 13, 2023 to all stockholders of record on November 29, 2023.

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On February 12, 2024, the Company’s Board of Directors declared a cash dividend of $0.15 per share of common stock. This dividend is payable on March 13, 2024 to all stockholders of record on February 27, 2024.

Investment portfolio

At December 31, 2023, our cash and invested assets of $3.1 billion consisted of fixed-maturity securities, cash and cash equivalents, equity securities, short-term investments and real estate investments. At December 31, 2023, the majority of the investment portfolio was comprised of fixed-maturity securities of $2.7 billion that were classified as available-for-sale. Available-for-sale investments are carried at fair value with unrealized gains and losses on those securities, net of applicable taxes, reported as a separate component of accumulated other comprehensive income. At December 31, 2023, we also held $234.8 million of equity securities, which were comprised of ETFs, common stocks and non-redeemable preferred stock, $126.7 million of cash and cash equivalents, $14.8 million of real estate investments and $5.6 million of short-term investments. Our fixed-maturity securities, including cash equivalents, had a weighted average duration of 2.8 years and an average rating of "AA-" at December 31, 2023. Our investment portfolio, excluding cash equivalents and real estate investments, had a gross investment return of 4.0% as of December 31, 2023, compared to 3.0% as of December 31, 2022.

At December 31, 2023, the amortized cost and estimated fair value of our fixed-maturity, equity, and short-term investments were as follows:

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The table below summarizes the credit quality of our fixed-maturity securities as of December 31, 2023, as rated by Standard & Poor’s Financial Services, LLC ("Standard & Poor's") or equivalent designation:

The amortized cost and estimated fair value of our available-for-sale investments in fixed-maturity securities summarized by contractual maturity as of December 31, 2023, were as follows:

Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties, and the lenders may have the right to put the securities back to the borrower.

Restricted investments

In order to conduct business in certain states, we are required to maintain letters of credit or assets on deposit to support state-mandated insurance regulatory requirements and to comply with certain third-party agreements. Assets held on deposit or in trust accounts are primarily in the form of cash or certain high-grade securities. The fair value of our restricted assets was $5.8 million and $5.9 million at December 31, 2023 and 2022, respectively.

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Reconciliation of Non-GAAP Financial Measures

Reconciliation of underwriting income

Underwriting income is a non-GAAP financial measure that we believe is useful in evaluating our underwriting performance without regard to investment income. Underwriting income is defined as net income excluding net investment income, the net change in the fair value of equity securities, net realized investment gains and losses, change in allowance for credit losses on investments, interest expense, other expenses, other income and income tax expense. We use underwriting income as an internal performance measure in the management of our operations because we believe it gives us and users of our financial information useful insight into our results of operations and our underlying business performance. Underwriting income should not be viewed as a substitute for net income calculated in accordance with GAAP, and other companies may define underwriting income differently.

Net income for the years ended December 31, 2023 and 2022 reconciles to underwriting income as follows:

(1) Other expenses are corporate expenses not allocated to our insurance operations.

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Reconciliation of net operating earnings

Net operating earnings is defined as net income excluding the effects of the net change in the fair value of equity securities, after taxes, net realized investment gains and losses, after taxes, and the change in allowance for credit losses on investments, after taxes. Management believes the exclusion of these items provides a useful comparison of the Company's underlying business performance from period to period. Net operating earnings and percentages or calculations using net operating earnings (e.g., operating return on equity) are non-GAAP financial measures. Net operating earnings should not be viewed as a substitute for net income calculated in accordance with GAAP, and other companies may define net operating earnings differently.

Net income for the years ended December 31, 2023 and 2022 reconciles to net operating earnings as follows:

(1) Income taxes on adjustments to reconcile net income to net operating earnings use an effective tax rate of 21%.

(2) Average equity is computed by adding the total stockholders' equity as of the date indicated to the prior year-end total and dividing by two.

(3) Return on equity is net income expressed as a percentage of average beginning and ending stockholders’ equity during the period.

(4) Operating return on equity is net operating earnings expressed as a percentage of average beginning and ending stockholders’ equity during the period.

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Reconciliation of tangible stockholders' equity

Tangible stockholders’ equity is a non-GAAP financial measure. We define tangible stockholders’ equity as stockholders’ equity less intangible assets, net of deferred taxes. Our definition of tangible stockholders’ equity may not be comparable to that of other companies, and it should not be viewed as a substitute for stockholders’ equity calculated in accordance with GAAP. We use tangible stockholders' equity internally to evaluate the strength of our balance sheet and to compare returns relative to this measure.

Stockholders' equity at December 31, 2023 and 2022 reconciles to tangible stockholders' equity as follows:

Critical Accounting Estimates

We identified the accounting estimates which are critical to the understanding of our financial position and results of operations. Critical accounting estimates are defined as those estimates that are both important to the portrayal of our financial condition and results of operations and require us to exercise significant judgment. We use significant judgment concerning future results and developments in applying these critical accounting estimates and in preparing our consolidated financial statements. These judgments and estimates affect our reported amounts of assets, liabilities, revenues and expenses and the disclosure of our material contingent assets and liabilities, if any. Actual results may differ materially from the estimates and assumptions used in preparing the consolidated financial statements. We evaluate our estimates regularly using information that we believe to be relevant. For a detailed discussion of our accounting policies, see the "Notes to Consolidated Financial Statements" included in this Annual Report on Form 10-K.

Reserves for unpaid losses and loss adjustment expenses

The reserves for unpaid losses and loss adjustment expenses are the largest and most complex estimate in our consolidated balance sheet. The reserves for unpaid losses and loss adjustment expenses represent our estimated ultimate cost of all unreported and reported but unpaid insured claims and the cost to adjust these losses that have occurred as of or before the consolidated balance sheet date. As a relatively new company, our historical loss experience is limited. We estimate the reserves using individual case-basis valuations of reported claims and statistical analyses. Those estimates are based on our historical information, industry information and our estimates of future trends in variable factors such as loss severity, loss frequency and other factors such as inflation. We regularly review our estimates and adjust them as necessary as experience develops or as new information becomes known to us. Such adjustments are included in current operations. Additionally, during the loss settlement period, it often becomes necessary to refine and adjust the estimates of liability on a claim either upward or downward. Even after such adjustments, ultimate liability may exceed or be less than the revised estimates. Accordingly, the ultimate settlement of losses and the related loss adjustment expenses may vary significantly from the estimate included in our consolidated financial statements.

We categorize our reserves for unpaid losses and loss adjustment expenses into two types: case reserves and reserves for incurred but not reported losses ("IBNR"). Our gross reserves for losses and loss adjustment expenses at December 31, 2023 were $1.7 billion, and of this amount, 90.4% related to IBNR. Our reserves for losses and loss adjustment expenses, net of reinsurance, at December 31, 2023 were $1.5 billion, and of this amount, 90.5% related

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to IBNR. A 5% change in net IBNR reserves would equate to a $65.7 million change in the reserve for losses and loss adjustment expenses at such date, as well as a $51.9 million change in net income, a 4.8% change in both stockholders' equity and tangible stockholders' equity, in each case at or for the year ended December 31, 2023.

The following tables summarize our reserves for unpaid losses and loss adjustment expenses, on a gross basis and net of reinsurance, at December 31, 2023 and 2022: