


	KINSALE CAPITAL GROUP, INC.
		(Exact name of registrant as specified in its charter)
Delaware			98-0664337
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification Number)



2221 Edward Holland Drive
~~Suite 600~~
	~~Richmond,~~	~~Virginia~~	~~23230~~
~~(Address of principal executive offices)~~			~~(Zip Code)~~

Suite 600

Richmond, Virginia 23230

(Address of principal executive offices, including zip code)

(804) 289-1300

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the ~~Act~~Act:



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01	KNSL	~~NASDAQ~~Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer ☐

Non-accelerated filer ☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Number of shares of the registrant's common stock outstanding at July ~~30, 2019: 21,370,825~~24, 2020: 22,303,443

Table of Contents

KINSALE CAPITAL GROUP, INC.

TABLE OF CONTENTS

Page

PART I. FINANCIAL INFORMATION

~~Page~~

~~PART I. FINANCIAL INFORMATION~~

Item 1.

Financial Statements

Consolidated Balance Sheets ~~(Unaudited)~~ at June 30, ~~2019~~2020 (Unaudited) and December 31, ~~2018~~2019

Consolidated Statements of Income and Comprehensive Income (Unaudited) for the Three and Six Months Ended June 30, ~~2019~~2020 and ~~2018~~2019

Consolidated Statements of Changes in Stockholders' Equity (Unaudited) for the Three and Six Months Ended June 30, ~~2019~~2020 and ~~2018~~2019

Condensed Consolidated Statements of Cash Flows (Unaudited) for the Six Months Ended June 30, ~~2019~~2020 and ~~2018~~2019

Notes to Condensed Consolidated Financial Statements (Unaudited)

Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

2324

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

4044

Item 4.

Controls and Procedures

4044

PART II. OTHER INFORMATION

Item 1.

Item 1A.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

Item 6.

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include any statement that does not directly relate to historical or current fact. These statements may discuss, among others, our future financial performance, our business prospects and strategy, our anticipated financial position, liquidity and capital, dividends and general market and industry conditions. You can identify forward-looking statements by words such as "anticipates," "estimates," "expects," "intends," "plans," "predicts," "projects," "believes," "seeks," "outlook," "future," "will," "would," "should," "could," "may," "can have" and similar terms. Forward-looking statements are based on management’s current expectations and assumptions about future events, which are subject to uncertainties, risks and changes in circumstances that are difficult to predict. These statements are only predictions and are not guarantees of future performance. Actual results may differ materially from those contemplated by a forward-looking statement. Factors that may cause such differences include, without limitation:

•the possibility that our loss reserves may be inadequate to cover our actual losses, which could have a material adverse effect on our financial condition, results of operations and cash flows;

•the inherent uncertainty of models resulting in actual losses that are materially different than our estimates;

•adverse economic factors, including recession, inflation, periods of high unemployment or lower economic activity resulting in the sale of fewer policies than expected or an increase in frequency or severity of claims and premium defaults or both, affecting our growth and profitability;

•a decline in our financial strength rating adversely affecting the amount of business we write;

•the potential loss of one or more key executives or an inability to attract and retain qualified personnel adversely affecting our results of operations;

•our reliance on a select group of brokers;

•the failure of any of the loss limitations or exclusions we employ, or change in other claims or coverage issues, having a material adverse effect on our financial condition or results of operations;

•the performance of our investment portfolio adversely affecting our financial results;

•the changing market conditions of our excess and surplus lines ("E&S") insurance operations, as well as the cyclical nature of our business, affecting our financial performance;

•extensive regulation adversely affecting our ability to achieve our business objectives or the failure to comply with these regulations adversely affecting our financial condition and results of operations;

•the ability to pay dividends being dependent on our ability to obtain cash dividends or other permitted payments from our insurance subsidiary;

•being forced to sell investments to meet our liquidity requirements;

•the inability to obtain reinsurance coverage at reasonable prices and on terms that adequately protect us;

•our employees taking excessive risks;

•the possibility that severe weather conditions, catastrophes, pandemics and ~~other catastrophes~~similar events may ~~result in an increase in the number~~adversely affect our business, results of operations and ~~amount~~financial condition;

Table of ~~claims filed against us;~~Contents

•the inability to manage our growth effectively;

•the intense competition for business in our industry;

•the effects of litigation having an adverse effect on our business;

•the failure to maintain effective internal controls in accordance with the Sarbanes-Oxley of 2002 (the "Sarbanes-Oxley Act"); and

•the other risks and uncertainties discussed in Part I, Item 1A of the Annual Report on Form 10-K for the year ended December 31, ~~2018.~~

2019.

Forward-looking statements speak only as of the date on which they are made. Except as expressly required under federal securities laws or the rules and regulations of the Securities and Exchange Commission ("SEC"), we do not assume any obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. You should not place undue reliance on forward-looking statements. All forward-looking statements attributable to us are expressly qualified by these cautionary statements.

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

KINSALE CAPITAL GROUP, INC. AND SUBSIDIARIES

Consolidated Balance Sheets (Unaudited)


	June 30, 2020		December 31, 2019
	(in thousands, except share and per share data)
Assets
Investments:
Fixed-maturity securities available for sale, at fair value (amortized cost: $856,136 in 2020; $714,817 in 2019)	$	893,364	$	729,532
Equity securities, at fair value (cost: $96,178 in 2020 $64,245 in 2019)	107,905		78,294

Total investments	1,001,269		807,826
Cash and cash equivalents	62,976		100,408
Investment income due and accrued	6,174		4,743
Premiums receivable, net	50,866		34,483
Reinsurance recoverables	73,123		72,574
Ceded unearned premiums	19,399		16,118
Deferred policy acquisition costs, net of ceding commissions	28,942		23,564
Intangible assets	3,538		3,538
Deferred income tax asset, net	—		3,374
Other assets	43,061		23,922
Total assets	$	1,289,348	$	1,090,550

Liabilities and Stockholders' Equity
Liabilities:
Reserves for unpaid losses and loss adjustment expenses	$	525,801	$	460,058
Unearned premiums	229,599		187,374
Payable to reinsurers	14,407		7,151
Accounts payable and accrued expenses	9,936		12,366
Credit facility	33,107		16,744
Deferred income tax liability, net	61		—
Other liabilities	20,323		977
Total liabilities	833,234		684,670

Stockholders’ equity:
Common stock, $0.01 par value, 400,000,000 shares authorized, 22,302,943 and 22,205,665 shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively	223		222
Additional paid-in capital	230,265		229,229
Retained earnings	194,323		162,911
Accumulated other comprehensive income	31,303		13,518
Total stockholders’ equity	456,114		405,880
Total liabilities and stockholders’ equity	$	1,289,348	$	1,090,550

June 30,
2019 December 31,
2018
(in thousands, except share and per share data)
Assets
Investments:
Fixed-maturity securities available for sale, at fair value (amortized cost: $577,183 in 2019; $514,237 in 2018)
$ 590,077
$ 510,251
Equity securities, at fair value (cost: $56,447 in 2019 $56,051 in 2018) 65,910
57,711
Total investments 655,987
567,962
Cash and cash equivalents 78,131
75,089
Investment income due and accrued 3,972
3,783
Premiums receivable, net 34,150
24,253
Reinsurance recoverables 65,937
56,788
Ceded unearned premiums 17,397
16,072
Deferred policy acquisition costs, net of ceding commissions 18,652
14,801
Intangible assets 3,538
3,538
Deferred income tax asset, net 6,068
7,176
Other assets 10,974
3,601
Total assets $ 894,806
$ 773,063

Liabilities and Stockholders' Equity
Liabilities:
Reserves for unpaid losses and loss adjustment expenses $ 407,433
$ 369,152
Unearned premiums 157,752
128,250
Payable to reinsurers 6,769
4,565
Accounts payable and accrued expenses 7,655
7,090
Other liabilities 7,290
20
Total liabilities 586,899
509,077

Stockholders’ equity:
Common stock, $0.01 par value, 400,000,000 shares authorized, 21,356,399 and 21,241,504 shares issued and outstanding at June 30, 2019 and December 31, 2018, respectively 214
212
Additional paid-in capital 159,986
158,485
Retained earnings 135,628
106,545
Accumulated other comprehensive income (loss) 12,079
(1,256 )
Total stockholders’ equity 307,907
263,986
Total liabilities and stockholders’ equity $ 894,806
$ 773,063

See accompanying notes to condensed consolidated financial statements.

Table of Contents

KINSALE CAPITAL GROUP, INC. AND SUBSIDIARIES

Consolidated Statements of Income and Comprehensive Income (Unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
	(in thousands, except per share data)
Revenues:
Gross written premiums	$	134,091	$	94,947	$	258,127	$	179,573
Ceded written premiums	(16,484)		(12,260)		(32,467)		(23,819)
Net written premiums	117,607		82,687		225,660		155,754
Change in unearned premiums	(20,650)		(16,600)		(38,942)		(28,176)
Net earned premiums	96,957		66,087		186,718		127,578
Net investment income	6,645		4,806		12,605		9,321
Change in the fair value of equity securities	13,839		1,909		(2,322)		7,804
Net realized investment gains (losses)	253		(235)		1,029		45
Other income	13		5		23		9
Total revenues	117,707		72,572		198,053		144,757

Expenses:
Losses and loss adjustment expenses	58,304		39,579		112,037		73,311
Underwriting, acquisition and insurance expenses	22,961		16,437		44,544		32,053
Other expenses	—		21		—		57
Total expenses	81,265		56,037		156,581		105,421
Income before income taxes	36,442		16,535		41,472		39,336
Total income tax expense	6,180		2,768		6,124		6,849
Net income	30,262		13,767		35,348		32,487
Other comprehensive income:
Change in unrealized gains on available-for-sale investments, net of taxes of $7,180 and $4,728 in 2020 and $1,743 and $3,544 in 2019	27,008		6,555		17,785		13,335
Total comprehensive income	$	57,270	$	20,322	$	53,133	$	45,822

Three Months Ended June 30, Six Months Ended June 30,
2019 2018 2019 2018
(in thousands, except per share data)
Revenues:
Gross written premiums $ 94,947
$ 69,981
$ 179,573
$ 133,828
Ceded written premiums (12,260 ) (9,090 ) (23,819 ) (17,846 )
Net written premiums 82,687
60,891
155,754
115,982
Change in unearned premiums (16,600 ) (9,998 ) (28,176 ) (17,028 )
Net earned premiums 66,087
50,893
127,578
98,954
Net investment income 4,806
3,782
9,321
7,011
Net unrealized gains (losses) on equity securities 1,909
94
7,804
(1,185 )
Net realized (losses) gains on investments (235 ) 174
45
286
Other income 5
4
9
7
Total revenues 72,572
54,947
144,757
105,073

Expenses:
Losses and loss adjustment expenses 39,579
29,967
73,311
58,866
Underwriting, acquisition and insurance expenses 16,437
12,519
32,053
24,917
Other expenses 21
—
57
14
Total expenses 56,037
42,486
105,421
83,797
Income before income taxes 16,535
12,461
39,336
21,276
Total income tax expense 2,768
2,349
6,849
3,877
Net income 13,767
10,112
32,487
17,399
Other comprehensive income (loss):
Change in unrealized gains (losses) on available-for-sale investments, net of taxes of $1,743 and $3,544 in 2019 and $(270) and $(1,561) in 2018 6,555
(1,016 ) 13,335
(5,872 )
Total comprehensive income $ 20,322
$ 9,096
$ 45,822
$ 11,527


Earnings per share:
Basic	$	1.37	$	0.65	$	1.60	$	1.53
Diluted	$	1.33	$	0.63	$	1.56	$	1.49

Weighted-average shares outstanding:
Basic	22,153		21,210		22,131		21,190
Diluted	22,707		21,832		22,694		21,803

Earnings per share:
Basic $ 0.65
$ 0.48
$ 1.53
$ 0.83
Diluted $ 0.63
$ 0.47
$ 1.49
$ 0.80

Weighted-average shares outstanding:
Basic 21,210
21,070
21,190
21,058
Diluted 21,832
21,666
21,803
21,648

See accompanying notes to condensed consolidated financial statements.

Table of Contents

KINSALE CAPITAL GROUP, INC. AND SUBSIDIARIES

Consolidated Statements of Changes in Stockholders' Equity (Unaudited)


	Shares of Common Stock	Common Stock		Additional Paid-in Capital		Retained Earnings		Accumu- lated Other Compre- hensive Income		Total Stock- holders' Equity
	(in thousands)
Balance at December 31, 2019	22,206	$	222	$	229,229	$	162,911	$	13,518	$	405,880
Adoption of new accounting standard for credit losses, net	—	—		—		78		—		78
Issuance of common stock under stock-based compensation plan	48	1		701		—		—		702
Stock-based compensation expense	—	—		812		—		—		812
Dividends declared ($0.09 per share)	—	—		—		(2,001)		—		(2,001)
Other comprehensive loss, net of tax	—	—		—		—		(9,223)		(9,223)
Net income	—	—		—		5,086		—		5,086
Balance at March 31, 2020	22,254	223		230,742		166,074		4,295		401,334
Issuance of common stock under stock-based compensation plan	61	—		395		—		—		395
Stock-based compensation expense	—	—		931		—		—		931
Restricted shares withheld for taxes	(12)	—		(1,803)		—		—		(1,803)
Dividends declared ($0.09 per share)	—	—		—		(2,013)		—		(2,013)
Other comprehensive income, net of tax	—	—		—				27,008		27,008
Net income	—	—		—		30,262		—		30,262
Balance at June 30, 2020	22,303	$	223	$	230,265	$	194,323	$	31,303	$	456,114


	Shares of Common Stock		Common Stock		Additional Paid-in Capital			Retained Earnings			Accumu- lated Other Compre- hensive Income (Loss)			Total Stock- holders' Equity
	(in thousands)
Balance at December 31, 2018	21,242		$	212	$	158,485		$	106,545		$	(1,256	)	263,986			Balance at December 31, 2018	21,242	$	212	$	158,485	$	106,545	$	(1,256)	$	263,986
Issuance of common stock under stock-based compensation plan	43		1		597			—			—			598			Issuance of common stock under stock-based compensation plan	43	1		597		—		—		598
Stock-based compensation expense	—		—		507			—			—			507			Stock-based compensation expense	—	—		507		—		—		507
Dividends declared ($0.08 per share)	—		—		—			(1,702		)	—			(1,702		)	Dividends declared ($0.08 per share)	—	—		—		(1,702)		—		(1,702)
Other comprehensive income, net of tax	—		—		—			—			6,780			6,780			Other comprehensive income, net of tax	—	—		—		—		6,780		6,780
Net income	—		—		—			18,720			—			18,720			Net income	—	—		—		18,720		—		18,720
Balance at March 31, 2019	21,285		213		159,589			123,563			5,524			288,889			Balance at March 31, 2019	21,285	213		159,589		123,563		5,524		288,889
Issuance of common stock under stock-based compensation plan	78		1		393			—			—			394			Issuance of common stock under stock-based compensation plan	78	1		393		—		—		394
Stock-based compensation expense	—		—		621			—			—			621			Stock-based compensation expense	—	—		621		—		—		621
Restricted shares withheld for taxes	(7	)	—		(617		)	—			—			(617		)	Restricted shares withheld for taxes	(7)	—		(617)		—		—		(617)
Dividends declared ($0.08 per share)	—		—		—			(1,702		)	—			(1,702		)	Dividends declared ($0.08 per share)	—	—		—		(1,702)		—		(1,702)
Other comprehensive income, net of tax	—		—		—			—			6,555			6,555			Other comprehensive income, net of tax	—	—		—		—		6,555		6,555
Net income	—		—		—			13,767			—			13,767			Net income	—	—		—		13,767		—		13,767
Balance at June 30, 2019	21,356		$	214	$	159,986		$	135,628		$	12,079		$	307,907		Balance at June 30, 2019	21,356	$	214	$	159,986	$	135,628	$	12,079	$	307,907

Balance at December 31, 2017	21,036		$	210	$	155,082		$	73,502		$	9,395		$	238,189
Cumulative effect adjustment - unrealized gains on equity securities, net of tax	—		—		—			6,490			(6,490		)	—
Balance at December 31, 2017, as adjusted	21,036		210		155,082			79,992			2,905			238,189
Reclassification of tax effect of TCJA	—		—		—			(1,308		)	1,308			—
Issuance of common stock under stock-based compensation plan	36		—		545			—			—			545
Stock-based compensation expense	—		—		158			—			—			158
Dividends declared ($0.07 per share)	—		—		—			(1,473		)	—			(1,473		)
Other comprehensive loss, net of tax	—		—		—			—			(4,856		)	(4,856		)
Net income	—		—		—			7,287			—			7,287
Balance at March 31, 2018	21,072		210		155,785			84,498			(643		)	239,850
Issuance of common stock under stock-based compensation plan	97		1		78			—			—			79
Stock-based compensation expense	—		—		401			—			—			401
Dividends declared ($0.07 per share)	—		—		—			(1,481		)	—			(1,481		)
Other comprehensive loss, net of tax	—		—		—			—			(1,016		)	(1,016		)
Net income	—		—		—			10,112			—			10,112
Balance at June 30, 2018	21,169		$	211	$	156,264		$	93,129		$	(1,659	)	$	247,945

See accompanying notes to condensed consolidated financial statements.

Table of Contents

KINSALE CAPITAL GROUP, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows (Unaudited)


	Six Months Ended June 30,
	2020		2019
	(in thousands)
Operating activities:
Net cash provided by operating activities	$	132,587	$	71,292

Investing activities:
Purchase of property and equipment	(20,113)		(5,999)
Sale of property and equipment	4,999		—

Purchases – fixed-maturity securities	(231,112)		(115,356)
Purchases – equity securities	(31,985)		(3,593)
Sales – fixed-maturity securities	54,525		31,441
Sales – equity securities	—		2,869
Maturities and calls – fixed-maturity securities	42,079		25,699
Net cash used in investing activities	(181,607)		(64,939)

Financing activities:

Proceeds from credit facility	16,300		—
Debt issuance costs	—		(284)
Payroll taxes withheld and remitted on share-based payments	(1,803)		(617)
Proceeds from stock options exercised	1,097		991
Dividends paid	(4,006)		(3,401)
Net cash provided by (used in) financing activities	11,588		(3,311)
Net change in cash and cash equivalents	(37,432)		3,042
Cash and cash equivalents at beginning of year	100,408		75,089
Cash and cash equivalents at end of period	$	62,976	$	78,131

Six Months Ended June 30,
2019 2018
(in thousands)
Operating activities:
Net cash provided by operating activities $ 71,292
$ 50,423

Investing activities:
Purchase of property and equipment (5,999 ) (458 )
Purchases – fixed-maturity securities (115,356 ) (110,023 )
Purchases – equity securities (3,593 ) (7,199 )
Sales – fixed-maturity securities 31,441
3,913
Sales – equity securities 2,869
1,910
Maturities and calls – fixed-maturity securities 25,699
61,681
Net cash used in investing activities (64,939 ) (50,176 )

Financing activities:
Debt issuance costs (284 ) —
Payroll taxes withheld and remitted on share-based payments

(617 ) —
Proceeds from stock options exercised 991
624
Dividends paid (3,401 ) (2,948 )
Net cash used in financing activities (3,311 ) (2,324 )
Net change in cash and cash equivalents 3,042
(2,077 )
Cash and cash equivalents at beginning of year 75,089
81,747
Cash and cash equivalents at end of period $ 78,131
$ 79,670

See accompanying notes to condensed consolidated financial statements.

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KINSALE CAPITAL GROUP, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

1. Summary of significant accounting policies

Basis of presentation

The accompanying condensed consolidated financial statements and notes have been prepared in accordance with U.S. generally accepted accounting principles ("U.S. GAAP") for interim financial information and do not contain all of the information and footnotes required by U.S. GAAP for complete financial statements. For a more complete description of ~~the Company’s~~Kinsale Capital Group, Inc. and its wholly owned subsidiaries' (the "Company") business and accounting policies, these condensed consolidated interim financial statements should be read in conjunction with the audited consolidated financial statements of ~~Kinsale Capital Group, Inc. and its wholly owned subsidiaries (the "Company")~~the Company included in the Annual Report on Form 10-K for the year ended December 31, ~~2018.~~2019. In the opinion of management, all adjustments necessary for a fair presentation of the condensed consolidated financial statements have been included. Such adjustments consist only of normal recurring items. All significant intercompany balances and transactions have been eliminated in consolidation. Interim results are not necessarily indicative of results of operations for the full year.

Use of estimates

The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Management periodically reviews its estimates and assumptions.

Recently adopted accounting pronouncements

~~ASU 2016-02, Leases (Topic 842)~~

~~In February 2016, the FASB issued ASU 2016-02, "Leases (Topic 842)" to improve the financial reporting of leasing transactions. Under this ASU, lessees will recognize a right-of-use~~Accounting Standards Update ("~~ROU"~~ASU") asset and corresponding liability on the balance sheet for all leases, except for leases covering a period of 12 months or less. The lessee’s income statement treatment for leases will vary depending on the nature and classification of the lease. Effective January 1, 2019, the Company adopted this ASU and recorded a ROU asset and corresponding lease liability of approximately $0.9 million. The ROU and operating lease liability are included in "other assets" and "other liabilities," respectively, in the accompanying consolidated balance sheet.

The Company elected the package of practical expedients permitted under the adoption of the new standard, which allowed the Company to account for existing leases under their current classification, as well as omit any new costs classified as initial direct costs, under the new standard. This election kept the existing agreements as operating leases. The Company also elected the practical expedient allowing an accounting policy election by class of underlying asset, to account for separate lease and nonlease components as a single lease component. In addition, the Company has implemented the necessary internal controls relating to the adoption of the standard.

~~ASU 2017-08, Premium Amortization on Purchased Callable Debt Securities~~

In March 2017, the FASB issued ASU 2017-08, "Premium Amortization on Purchased Callable Debt Securities," which shortens the amortization period of the premium for certain callable debt securities, from the contractual maturity date to the earliest call date. Effective January 1, 2019, the Company adopted ASU 2017-08 using a

~~modified retrospective approach. The adoption of ASU 2017-08 did not have a material impact on the Company's financial statements.~~

~~Prospective accounting pronouncements~~

~~ASU~~ 2016-13, Financial Instruments – Credit Losses (Topic 326)

InOn June 16, 2016, the ~~FASB~~Financial Accounting Standards Board ("FASB") issued ASU 2016-13, "Financial Instruments –- Credit Losses (Topic 326)" to provide more useful information about the expected credit losses on financial instruments. ~~Current GAAP delays the recognition of credit losses until it is probable a loss has been incurred.~~ The update ~~will require~~requires a financial asset measured at amortized cost to be presented at the net amount expected to be collected by means of an allowance for credit losses that runs through net income. Credit losses relating to available-for-sale debt securities ~~will~~must also be recorded through an allowance for credit losses. However, the amendments ~~would~~ limit the amount of the allowance to the amount by which fair value is below amortized cost. The measurement of credit losses on available-for-sale securities is similar under ~~current~~previous GAAP, but the update requires the use of the allowance account through which amounts can be reversed, rather than through an irreversible write-down. ~~This~~The FASB has issued additional ASUs on Topic 326 that do not change the core principle of the guidance in ASU ~~is effective for annual and interim reporting periods beginning after December 15, 2019. Early adoption is permitted beginning after December 15, 2018. Upon adoption,~~2016-13 but clarify certain aspects of it.

Effective January 1, 2020, the ~~update will be applied~~Company adopted this ASU using the modified-retrospective approach and recorded a cumulative effect adjustment to beginning retained earnings. The adoption of this ASU resulted in the recognition of an allowance for credit loss related to the Company’s reinsurance recoverables. However, since the Company enters into contracts with reinsurers that have A.M. Best ratings of “A” (Excellent) or better, the allowance was not material to the Company’s consolidated financial statements.

ASU 2018-15, Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract

On August 29, 2018, the FASB issued new guidance on a customer's accounting for implementation, set-up and other up-front costs incurred in a cloud computing arrangement hosted by ~~which~~the vendor. The new guidance requires an

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entity to determine the stage of a ~~cumulative-effect adjustment will be made~~project that the implementation activity relates to ~~retained earnings as~~and the nature of the ~~beginning~~associated costs in order to determine whether those costs should be expensed as incurred or capitalized. The new guidance also requires the entity to amortize the capitalized implementation costs as an expense over the term of the ~~first reporting period presented.~~hosting arrangement. Effective January 1, 2020, the Company adopted ASU 2018-15 using a modified-retrospective approach. The ~~Company is currently evaluating~~adoption of ASU 2018-15 did not have a material impact on the ~~impact of the adoption on its consolidated~~Company's financial statements.

There are no other prospective accounting standards which, upon their effective date, would have a material impact on the Company's consolidated financial statements.

2. Investments

Available-for-sale investments

The following tables summarize the available-for-sale investments at June 30, ~~2019~~2020 and December 31, ~~2018:~~2019:


	June 30, 2020
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
	(in thousands)
Fixed maturities:
U.S. Treasury securities and obligations of U.S. government agencies	$	1,130	$	—	$	(17)	$	1,113
Obligations of states, municipalities and political subdivisions	178,620		11,939		(15)		190,544
Corporate and other securities	277,485		17,968		(1,120)		294,333
Commercial mortgage and asset-backed securities	261,734		6,916		(2,763)		265,887
Residential mortgage-backed securities	137,167		4,500		(180)		141,487
Total available-for-sale investments	$	856,136	$	41,323	$	(4,095)	$	893,364

June 30, 2019
Amortized Cost Gross Unrealized Holding Gains Gross Unrealized Holding Losses Estimated Fair Value
(in thousands)
Fixed maturities:
U.S. Treasury securities and obligations of U.S. government agencies $ 110
$ 3
$ —
$ 113
Obligations of states, municipalities and political subdivisions 125,619
6,344
(2 ) 131,961
Corporate and other securities 125,873
3,572
(229 ) 129,216
Commercial mortgage and asset-backed securities 175,355
2,995
(485 ) 177,865
Residential mortgage-backed securities 150,226
1,626
(930 ) 150,922
Total available-for-sale investments $ 577,183
$ 14,540
$ (1,646 ) $ 590,077


	December 31, 2019
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
	(in thousands)
Fixed maturities:
U.S. Treasury securities and obligations of U.S. government agencies	$	110	$	2	$	—	$	112
Obligations of states, municipalities and political subdivisions	166,312		7,542		(961)		172,893
Corporate and other securities	180,287		4,736		(255)		184,768
Commercial mortgage and asset-backed securities	195,750		2,930		(710)		197,970
Residential mortgage-backed securities	172,358		1,819		(388)		173,789
Total available-for-sale investments	$	714,817	$	17,029	$	(2,314)	$	729,532

December 31, 2018
Amortized Cost Gross Unrealized Holding Gains Gross Unrealized Holding Losses Estimated Fair Value
(in thousands)
Fixed maturities:
U.S. Treasury securities and obligations of U.S. government agencies $ 610
$ 2
$ (1 ) $ 611
Obligations of states, municipalities and political subdivisions 153,884
2,010
(1,294 ) 154,600
Corporate and other securities 97,889
264
(1,401 ) 96,752
Commercial mortgage and asset-backed securities 151,137
252
(1,522 ) 149,867
Residential mortgage-backed securities 110,717
354
(2,650 ) 108,421
Total available-for-sale investments $ 514,237
$ 2,882
$ (6,868 ) $ 510,251

Available-for-sale securities in a loss position

The Company regularly reviews all its available-for-sale investments with unrealized losses to assess whether the decline in the ~~securities’~~ fair value is deemed to be ~~an other-than-temporary impairment ("OTTI").~~a credit loss. The Company considers a number of factors in completing its ~~OTTI~~

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review ~~including the length~~ of ~~time and~~credit losses, including the extent to which a security's fair value has been below cost and the financial condition of an issuer. In addition to specific issuer information, the Company also evaluates the current market and interest rate environment. Generally, a change in a security’s value caused by a change in the market or interest rate environment does not constitute ~~an OTTI, but rather~~ a ~~temporary decline in fair value.~~credit loss.

For fixed-maturity securities, the Company also considers whether it intends to sell the security or if it is more likely than not that it will be required to sell the security before recovery and the ability to recover all amounts outstanding when contractually due. When assessing whether it intends to sell a fixed-maturity security or if it is likely to be required to sell a fixed-maturity security before recovery of its amortized cost, the Company evaluates facts and circumstances including, but not limited to, decisions to reposition the investment portfolio, potential sales of investments to meet cash flow needs and potential sales of investments to capitalize on favorable pricing.

For fixed-maturity securities where a decline in fair value is ~~considered to be other-than-temporary~~below the amortized cost basis and the Company intends to sell the security, or it is more likely than not that the Company will be required to sell the security before recovery of its amortized cost, an impairment is recognized in net income based on the fair value of the security at the time of assessment, resulting in a new cost basis for the security. IfFor fixed-maturity securities that the ~~decline in fair value of a fixed-maturity security below its amortized cost is considered~~Company has the intent and ability to ~~be other-than-temporary based upon other considerations,~~hold, the Company compares the estimated present value of the cash flows expected to be collected to the amortized cost of the security. The extent to which the estimated present value of the cash flows expected to be collected is less than the amortized cost of the security represents the credit-related portion of the ~~OTTI,~~impairment, which is recognized in net income ~~resulting in a new cost basis~~through an allowance for ~~the security.~~credit losses. Any remaining decline in fair value represents the noncredit portion of the ~~OTTI,~~impairment, which is recognized in other comprehensive income. Beginning on January 1, 2020, credit losses are recognized through an allowance account. See Note 1 - Recently adopted accounting pronouncements - ASU 2016-13, Financial Instruments – Credit Losses (Topic 326) for additional information.

The Company reports investment income due and accrued separately from fixed-maturity securities, available for sale, and has elected not to measure an allowance for credit losses for investment income due and accrued. Investment income due and accrued is written off through net realized gains (losses) on investments at the time the issuer of the bond defaults or is expected to default on payments.

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The following tables summarize gross unrealized losses and estimated fair value for available-for-sale investments by length of time that the securities have continuously been in an unrealized loss position:


	June 30, 2020
	Less than 12 Months						12 Months or Longer						Total
	Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses
	(in thousands)
Fixed maturities:
U.S. Treasury securities and obligations of U.S. government agencies	$	573	$	(17)	$	—	$	—	$	573	$	(17)
Obligations of states, municipalities and political subdivisions	2,007		(15)		—		—		2,007		(15)
Corporate and other securities	32,899		(1,120)		—		—		32,899		(1,120)
Commercial mortgage and asset-backed securities	86,355		(1,912)		23,256		(851)		109,611		(2,763)
Residential mortgage-backed securities	12,716		(162)		276		(18)		12,992		(180)
Total available-for-sale investments	$	134,550	$	(3,226)	$	23,532	$	(869)	$	158,082	$	(4,095)

June 30, 2019
Less than 12 Months 12 Months or Longer Total
Estimated Fair Value Gross Unrealized Holding Losses Estimated Fair Value Gross Unrealized Holding Losses Estimated Fair Value Gross Unrealized Holding Losses
(in thousands)
Fixed maturities:
Obligations of states, municipalities and political subdivisions $ —
$ —
$ 1,425
$ (2 ) $ 1,425
$ (2 )
Corporate and other securities 9,716
(29 ) 5,359
(200 ) 15,075
(229 )
Commercial mortgage and asset-backed securities 41,047
(195 ) 32,809
(290 ) 73,856
(485 )
Residential mortgage-backed securities 5,059
(8 ) 53,187
(922 ) 58,246
(930 )
Total available-for-sale investments $ 55,822
$ (232 ) $ 92,780
$ (1,414 ) $ 148,602
$ (1,646 )

Table of ~~$2.8 million.~~Contents

The following table summarizes the loss ratios for the six months ended June 30, ~~2019~~2020 and ~~2018:~~2019:


	Six Months Ended June 30,
	2020						2019
($ in thousands)	Losses and Loss Adjustment Expenses		% of Earned Premiums		Losses and Loss Adjustment Expenses		% of Earned Premiums
Loss ratio:
Current accident year before catastrophe losses	$	118,201	63.3	%	$	80,458	63.1	%
Current year catastrophe losses	461		0.2	%	669		0.5	%
Effect of prior year development	(6,625)		(3.5)	%	(7,816)		(6.1)	%
Total	$	112,037	60.0	%	$	73,311	57.5	%

Six Months Ended June 30,
2019 2018
($ in thousands) Losses and Loss Adjustment Expenses % of Earned Premiums Losses and Loss Adjustment Expenses % of Earned Premiums
Loss ratio:
Current accident year before catastrophe losses $ 80,458
63.1 % $ 62,233
62.9 %
Current year catastrophe losses 669
0.5 % 156
0.2 %
Effect of prior year development (7,816 ) (6.1 )% (3,523 ) (3.6 )%
Total $ 73,311
57.5 % $ 58,866
59.5 %

Expense ratio

The following table summarizes the components of the expense ratio for the six months ended June 30, ~~2019~~2020 and ~~2018:~~2019:


	Six Months Ended June 30,
	2020						2019
($ in thousands)	Underwriting Expenses		% of Earned Premiums		Underwriting Expenses		% of Earned Premiums

Commissions incurred:
Direct	$	31,483	16.9	%	$	22,061	17.3	%
Ceding	(6,646)		(3.6)	%	(6,052)		(4.7)	%
Net commissions incurred	24,837		13.3	%	16,009		12.6	%
Other underwriting expenses	19,707		10.6	%	16,044		12.5	%
Underwriting, acquisition and insurance expenses	$	44,544	23.9	%	$	32,053	25.1	%

Six Months Ended June 30,
2019 2018
($ in thousands) Underwriting Expenses % of Earned Premiums Underwriting Expenses % of Earned Premiums

Commissions incurred:
Direct $ 22,061
17.3 % $ 17,135
17.3 %
Ceding (6,052 ) (4.7 )% (4,908 ) (4.9 )%
Net commissions incurred 16,009
12.6 % 12,227
12.4 %
Other underwriting expenses 16,044
12.5 % 12,690
12.8 %
Underwriting, acquisition and insurance expenses $ 32,053
25.1 % $ 24,917
25.2 %

The expense ratio was 23.9% for the six months ended June 30, 2020 compared to 25.1% for the six months ended June 30, ~~2019 compared to 25.2% for the six months ended June 30, 2018.~~2019. The decrease in the ~~other underwriting~~ expense ratio ~~for the six months ended June 30, 2019 compared~~was due to ~~the same period last year reflected the benefit of~~ higher net earned premiums without a proportional increase in ~~total~~the amount of other underwriting expenses ~~resulting from~~as a result of management's focus on controlling costs. This decrease was offset in part by higher net commissions incurred as a percentage of earned premiums period over period, which was largely due to an increase in the retention on our reinsurance treaties and resulted in relatively lower ceded premiums and associated commissions for the six months ended June 30, 2020. Direct commissions paid as a percent of gross written premiums was 14.6% for both the six months ended June 30, ~~2019~~2020 and ~~14.7%~~2019.

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Investing results

The following table summarizes net investment income, change in the fair value of equity securities and net realized investment gains for the six months ended June 30, ~~2018.~~2020 and 2019:

~~Investing results~~


	Six Months Ended June 30,
($ in thousands)	2020		2019		Change		% Change

Interest from fixed-maturity securities	$	11,693	$	8,439	$	3,254	38.6	%
Dividends from equity securities	1,454		1,087		367		33.8	%
Other	261		401		(140)		(34.9)	%
Gross investment income	13,408		9,927		3,481		35.1	%
Investment expenses	(803)		(606)		(197)		32.5	%
Net investment income	12,605		9,321		3,284		35.2	%
Change in fair value of equity securities	(2,322)		7,804		(10,126)		NM
Net realized gains on investments	1,029		45		984		NM


Total	$	11,312	$	17,170	$	(5,858)	(34.1)	%

NM - Percentage change not meaningful.

Our net investment income increased by ~~32.9%~~35.2% to $12.6 million for the six months ended June 30, 2020 from $9.3 million for the six months ended June 30, ~~2019 from $7.0 million for the six months ended June 30, 2018.~~2019. This increase in the first six months of ~~2019~~2020 compared to the same period last year was primarily due to growth in our investment portfolio balance generated from the investment of excess operating funds since June 30, ~~2018~~2019 and proceeds from ~~higher~~our equity offering in the third quarter of 2019. This increase was offset in part by lower gross investment ~~returns.~~

~~The following table summarizes net investment income and net realized and unrealized investment gains and losses for~~returns in the ~~six months ended June 30, 2019 and 2018:~~

Six Months Ended June 30,
($ in thousands) 2019 2018 Change % Change

Interest from fixed-maturity securities $ 8,439
$ 6,168
$ 2,271
36.8 %
Dividends from equity securities 1,087
924
163
17.6 %
Other 401
477
(76 ) (15.9 )%
Gross investment income 9,927
7,569
2,358
31.2 %
Investment expenses (606 ) (558 ) (48 ) 8.6 %
Net investment income 9,321
7,011
2,310
32.9 %
Net unrealized gains (losses) on equity securities 7,804
(1,185 ) 8,989
(758.6 )%
Net realized gains on investments 45
286
(241 ) (84.3 )%
Total $ 17,170
$ 6,112
$ 11,058
180.9 %

first half of 2020 compared to the first half of 2019. Our fixed-maturity investment portfolio, excluding cash equivalents and unrealized gains and losses, had an annualized gross investment return of 3.0% for the six months ended June 30, 2020, compared to 3.2% for the six months ended June 30, ~~2019, compared~~2019. The decrease in annualized gross investment returns was due to ~~2.9% for the six months ended~~a lower interest rate environment since June 30, ~~2018.~~2019.

During the first half of 2020, the change in fair value of equity securities was comprised of unrealized losses related to preferred stock of $1.5 million and ETF securities of $0.8 million. Fair values of ETF securities declined by $13.1 million during the first quarter of 2020, driven by the disruption in the financial markets associated with the COVID-19 pandemic, and rebounded sharply during the second quarter of 2020. During the first half of 2019, the change in fair value of equity securities was comprised of unrealized gains related to ETF securities of $5.9 million and preferred stock of $1.9 million. The unrealized gains related to ETF securities during the first half of 2019 reflected increased volatility in the financial markets during that time period

We perform quarterly reviews of all available-for-sale securities within our investment portfolio to determine whether ~~any other-than-temporary impairment has occurred.~~the decline in the securities' fair value is deemed to be a credit loss. Management concluded that there were no credit losses (previously known as other-than-temporary ~~impairments~~impairments) from available-for-sale investments for the six months ended June 30, ~~2019~~2020 or ~~2018.~~2019.

Income tax expense

Our income tax expense was $6.1 million for the six months ended June 30, 2020 compared to $6.8 million for the six months ended June 30, ~~2019 compared to $3.9 million~~2019. Our effective tax rate was 14.8% for the six months ended June 30, ~~2018. Our effective tax rate was approximately~~2020 compared to 17.4% for the six months ended June 30, ~~2019 compared to 18.2% for the six months ended June 30, 2018.~~2019. The effective tax ~~rates were~~rate was lower than the federal statutory rate of 21% primarily due to the tax benefits from ~~the exercise~~stock-based compensation and tax-exempt investment income.

Table of ~~stock options and from income generated by certain tax-advantaged investments.~~Contents

Return on equity

Our annualized return on equity was 16.4% for the six months ended June 30, 2020 compared to 22.7% for the six months ended June 30, ~~2019 compared to 14.3%~~2019. Our annualized operating return on equity was 16.9% for the six months ended June 30, ~~2018. Our annualized operating return on equity was~~2020 compared to 18.4% for the six months ended June 30, ~~2019 compared to 14.9% for the six months ended June 30, 2018.~~2019. The ~~increase~~decrease in annualized operating return on equity for the six months ended June 30, ~~2019~~2020 compared to the prior-year period was due largely to ~~a number~~the proceeds received from our equity offering in the third quarter of ~~factors, including premium growth, higher overall returns on the investment portfolio and higher favorable development on loss reserves from prior accident years.~~2019.

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 Company, which is domiciled in Arkansas. Accordingly, we may receive cash

through (1) loans from banks and other third parties, (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 Company 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 Company 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.

In August 2019, we filed a universal shelf registration statement with the SEC that expires in 2022. We can use this shelf registration to issue an unspecified amount of debt securities, 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.

Management believes that the Company has sufficient liquidity available both in Kinsale and in its insurance subsidiary, Kinsale Insurance Company, as well as in its other operating subsidiaries, to meet its operating cash needs and obligations and committed capital expenditures for the next 12 months.

In January 2019, we purchased land for $2.5 million in Henrico County, Virginia for the development of a new corporate headquarters and we are currently targeting a third quarter 2020 completion date. The project is estimated to cost approximately $50 million to $55 million, substantially all of which we expect will be capitalized. We expect to fund the project through a combination of existing cash flows from operations and debt financing. In May 2019, we entered in to a Credit Agreement (the “Credit Agreement”) which provides for a 5-year senior unsecured revolving credit facility of $50 million (the “Credit Facility”). As of June 30, 2019, there were no outstanding balances under the Credit Facility. See "—~~Liquidity and Capital Resources, Credit agreement" below for further details regarding this financing.~~

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 insurance brokers, as well as to pay for ongoing operating expenses such as salaries, ~~rent~~consulting services and taxes. As described under "—Reinsurance" below, we use reinsurance to manage the risk that we take related to the issuance of 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 six months ended June 30, ~~2019~~2020 and ~~2018~~2019 were:


	Six Months Ended June 30,
	2020		2019
	(in thousands)
Cash and cash equivalents provided by (used in):
Operating activities	$	132,587	$	71,292
Investing activities	(181,607)		(64,939)
Financing activities	11,588		(3,311)
Change in cash and cash equivalents	$	(37,432)	$	3,042

Six Months Ended June 30,
2019 2018
(in thousands)
Cash and cash equivalents provided by (used in):
Operating activities $ 71,292
$ 50,423
Investing activities (64,939 ) (50,176 )
Financing activities (3,311 ) (2,324 )
Change in cash and cash equivalents $ 3,042
$ (2,077 )

Net cash provided by operating activities was approximately ~~$71.3~~$132.6 million for the six months ended June 30, ~~2019,~~2020, compared to ~~$50.4~~$71.3 million for the same period in ~~2018.~~2019. This increase was largely driven by higher premium volume, the timing of claim payments and reinsurance recoveries, ~~and~~offset in part by changes in operating assets and liabilities.

Net cash used in investing activities was $181.6 million for the six months ended June 30, 2020, compared to $64.9 million for the six months ended June 30, ~~2019, compared to $50.2~~2019. Net cash used in investing activities during the first six months of 2020 included purchases of fixed-maturity securities of $231.1 million, ~~for~~which in part reflected the deployment of cash equivalents held at December 31, 2019. Purchases of fixed-maturity securities were comprised primarily of corporate bonds, asset- and mortgage-backed securities, and municipal securities. During the first six months of 2020, we received proceeds of $54.5 million from sales of fixed-maturity securities, largely corporate bonds, and $42.1 million from redemptions of asset- and mortgage-backed securities and corporate bonds. For the six months ended June 30, ~~2018.~~ 2020, purchases of ETFs and non-redeemable preferred stock were $26.2 million and $5.8 million, respectively. Net cash used in investing activities included net purchases of property and equipment of $15.1 million, primarily related to the development of our new corporate headquarters, previously disclosed.

Net cash used in investing activities during the first six months of 2019 reflected purchases of ~~fixed-maturity~~fixed-income securities of $115.4 million, comprised of ~~asset~~asset- and mortgage-backed securities and corporate bonds. During the first six months of 2019, we received proceeds of $31.4 million from sales of fixed-maturity securities, principally municipal bonds, and $25.7 million from redemptions of corporate bonds and ~~asset~~asset- and mortgage-backed securities. During the six months ended June 30, 2019, purchases and sales of non-redeemable preferred stocks were $2.1 million and $2.9 million, respectively, and purchases of ETFs were $1.5 million. In addition, net cash used in investing activities included the purchase of property and equipment offor $6.0 million mostly related to the development of our new corporate ~~headquarters, discussed previously.~~

Cash used in investing activities during the first six months of 2018 reflected purchases of fixed-income securities of $110.0 million, principally corporate bonds and asset-backed securities. In addition, we purchased $7.2 million of equity securities during the first six months of 2018, principally exchange traded funds (ETFs). During the first half of 2018, we received proceeds of $65.6 million from maturities and sales of fixed-maturity securities and $1.9 million from the sale of an intermediate-term bond ETF and preferred stocks.headquarters.

During the first six months of June 30, ~~2019~~2020, we drew down $16.3 million on our Credit Facility, which was used to fund the construction of our new headquarter facilities. In addition, during the first six months of June 30, 2020, cash used in financing activities reflected dividends paid of ~~$0.08~~$0.18 per common share, or ~~$3.4~~$4.0 million in aggregate. During the first six months of June 30, ~~2018,~~2019, cash used in financing activities primarily reflected dividends paid of ~~$0.07~~$0.16 per common share, or ~~$2.9~~$3.4 million in aggregate. ~~Net proceeds~~Proceeds received from our equity compensation plans were ~~$0.4~~$1.1 million, offset by payroll taxes withheld and ~~$0.6~~remitted on restricted stock awards of $1.8 million for the six months ended June 30, ~~2019~~2020. ~~and 2018, respectively. In addition, debt issuance costs related to~~Net proceeds from equity compensation totaled $0.4 million for the ~~credit facility previously discussed were $0.3 million.~~six months ended June 30, 2019.

Credit agreement

OnIn May ~~28,~~ 2019, ~~the Company~~we entered into a Credit Agreement that provided ~~the Company~~us with a $50 million Credit ~~Facility.~~Facility and an uncommitted accordion feature that permits us to increase the commitments by an additional $30 million. The Credit

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Facility has a maturity of May 28, 2024. Borrowings under the Credit Facility will be used to fund construction of ~~the Company’s~~our new headquarters and may also be used for working capital and general corporate purposes. Interest rates on borrowings are based on prevailing interest rates and the applicable margin, as described in the Credit Agreement. As of June 30, ~~2019,~~2020, there ~~were no~~was $33.1 million outstanding ~~balances~~ under the Credit ~~Facility.~~Facility, net of debt issuance costs.

Reinsurance

We enter into reinsurance contracts primarily to limit our exposure to potential large losses. Reinsurance involves an insurance company transferring ("ceding") a portion of its exposure on a risk to another insurer, the reinsurer. The reinsurer assumes the exposure in return for a portion of the premium. Our reinsurance is primarily contracted under quota-share reinsurance contracts and excess of loss contracts. 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. Under 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.

We use facultative reinsurance coverage on a limited basis. Facultative coverage refers to a reinsurance contract on individual risks as opposed to a group or class of business. It is used for a variety of reasons, including supplementing the limits provided by the treaty coverage or covering risks or perils excluded from treaty reinsurance.

We renew our reinsurance treaties annually. During each renewal cycle, there are a number of factors we consider when determining our reinsurance coverage, including (1) plans to change the underlying insurance coverage we offer, (2) trends in loss activity, (3) the level of our capital and surplus, (4) changes in our risk appetite and (5) the cost and availability of reinsurance coverage.

To manage our natural catastrophe exposure, we use computer models to analyze the risk of severe losses. We measure exposure to these losses in terms of probable maximum loss ("PML"), which is an estimate of the amount of loss we would expect to meet or exceed once in a given number of years (referred to as the return period). When managing our catastrophe exposure, we focus on the 100 year and the 250 year return periods. Effective with the June 1, 2020 renewal, we entered into a new personal insurance quota share treaty. We used model results previously noted to stress test the completeness of our program and determined that over 70% of the modelled losses from catastrophes costing over $10 million came from our personal insurance business. We determined that utilizing a personal lines quota share treaty combined with a catastrophe treaty was a more efficient and cost effective way to manage the total loss exposure on our property coverages.

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The following is a summary of our significant reinsurance programs as of June 30, ~~2019~~2020:

Line of Business Covered

Company Policy Limit

Reinsurance Coverage

Company Retention

Property - per risk (1)

Up to $10.0 million per risk

$8.0 million excess of $2.0 million

$2.0 million per occurrence

Property - personal insurance (2)

N/A

50% up to $47.5 million per catastrophe

50% of all personal property losses

Property - catastrophe ~~(1)~~(3)

N/A

$~~77.5~~45.0 million excess of ~~$7.5~~$10.0 million

$~~7.5~~10.0 million per catastrophe

Primary casualty ~~(2)~~(4)

Up to $10.0 million per occurrence

$8.0 million excess of $2.0 million

$2.0 million per occurrence

Excess casualty ~~(3)~~(5)

Up to $10.0 million per occurrence

Variable quota share

$2.0 million per occurrence except as described in note ~~(3)~~(5) below

~~(1)~~

Our property catastrophe reinsurance reduces the financial impact of a catastrophe event involving multiple claims and policyholders. 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 $155 million and is in addition to the per-occurrence coverage provided by our facultative and other treaty coverages.


~~(2)~~	~~Reinsurance is not applicable to any individual policy with a per occurrence limit of $2.0 million or less.~~

~~(3)~~

(1) Our property per-risk reinsurance reduces the financial impact of a large loss on a single commercial property or inland marine policy. This treaty includes a reinstatement provision which requires us to pay reinstatement premiums after a loss has occurred in order to preserve coverage.

(2) Our personal insurance quota share reinsurance reduces the financial impact of property losses on our personal insurance policies.

(3) Our property catastrophe reinsurance reduces the financial impact of a catastrophe event involving multiple claims and policyholders. 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 $90 million and is in addition to the per-occurrence coverage provided by our facultative and treaty coverages.

(4) Reinsurance is not applicable to any individual policy with a per occurrence limit of $2.0 million or less.

(5) For policies with a per occurrence limit higher than $2.0 million, the quota-share ceding percentage varies such that the retention is always $2.0 million or less. For example, for a $4.0 million limit excess policy, our retention would be 50%, whereas for a $10.0 million limit excess policy, our retention would be 20%. For policies for which we also write an underlying primary limit, the retention on the primary and excess policy combined would not exceed $2.0 million.

At each renewal, we consider any plans to change the underlying insurance coverage we offer, as well as updated loss activity, the level of our capital and surplus, changes in our risk appetite and the cost and availability of reinsurance treaties.

Reinsurance contracts do not relieve us from our obligations to policyholders. Failure of the reinsurer to honor its obligations could result in losses to us, and if such an event occurred, we would establish an allowance for those amounts considered uncollectible. In formulating our reinsurance programs, we are selective in our choice of reinsurers and we consider numerous factors, the most important of which are the financial stability of the reinsurer, its history of responding to claims and its overall reputation. In an effort to minimize our exposure to the insolvency of our reinsurers, we review the financial condition of each reinsurer annually. In addition, we continually monitor for rating downgrades involving any of our reinsurers. At June 30, ~~2019,~~2020, all reinsurance contracts that our insurance subsidiary was a party to were with companies with A.M. Best ratings of "A" (Excellent) or better. As of June 30, ~~2019,~~2020, we have never had a loss for uncollectible reinsurance.

Ratings

Kinsale Insurance Company has a financial strength rating of ~~"A-"~~"A" (Excellent) with a ~~positive~~stable outlook from A.M. Best. A.M. Best assigns 16 ratings to insurance companies, which currently range from "A++" (Superior) to "F" (In

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Liquidation). ~~"A-"~~"A" (Excellent) is the ~~fourth~~third highest rating issued by A.M. Best. The ~~"A-"~~"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.

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-"~~"A" (Excellent) rating obtained by Kinsale Insurance Company is consistent with our business plan and allows us to actively pursue relationships with the agents and brokers identified in our marketing plan.

Financial condition

Stockholders' equity

At June 30, ~~2019,~~2020, total stockholders' equity was ~~$307.9~~$456.1 million and tangible stockholders' equity was ~~$305.1~~$453.3 million, compared to total stockholders' equity of ~~$264.0~~$405.9 million and tangible stockholders' equity ~~$261.2~~$403.1 million at December 31, ~~2018.~~2019. The increases in both total and tangible stockholders' equity over the prior year-end balances were primarily due to profits generated during the period, ~~an increase in unrealized gains~~higher fair values on our available-for-sale investments, net of taxes, and activity related to stock-based compensation ~~plans,~~plans. These increases were offset in part by the payment of dividends.

Tangible stockholders’ equity is a non-GAAP financial measure. We define tangible stockholders’ equity as total 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 June 30, ~~2019~~2020 and December 31, ~~2018,~~2019, reconciles to tangible stockholders' equity as follows:


	June 30, 2020		December 31, 2019
	(in thousands)
Stockholders' equity	$	456,114	$	405,880
Less: intangible assets, net of deferred taxes	2,795		2,795
Tangible stockholders' equity	$	453,319	$	403,085

June 30, 2019 December 31, 2018
(in thousands)
Stockholders' equity $ 307,907
$ 263,986
Less: intangible assets, net of deferred taxes 2,795
2,795
Tangible stockholders' equity $ 305,112
$ 261,191

Investment portfolio

At June 30, ~~2019,~~2020, our cash and invested assetsof $1.1 billion ~~of $734.1 million~~ consisted of fixed-maturity securities, equity securities and cash and cash ~~equivalents and equity securities.~~equivalents. At June 30, ~~2019,~~2020, the majority of the investment portfolio was comprised of fixed-maturity securities of ~~$590.1~~$893.4 million that were classified as available-for-sale. Available-for-sale investments are carried at fair value with unrealized gains and losses on these securities, net of applicable taxes, reported as a separate component of accumulated other comprehensive income. At June 30, ~~2019,~~2020, we also held ~~$78.1 million of cash and cash equivalents and $65.9~~$107.9 million of equity securities, which were comprised of ETFs and non-redeemable preferred ~~stock.~~ stock, and $63.0 million of cash and cash equivalents.

Our fixed-maturity securities, including cash equivalents, had a weighted average duration of ~~3.9~~4.6 years at June 30, ~~2019~~2020 and 4.3 years at December 31, ~~2018~~2019 and an average rating of ~~"AA"~~"AA-" at June 30, ~~2019~~2020 and "AA" at December 31, ~~2018.~~2019.

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At June 30, ~~2019~~2020 and December 31, ~~2018,~~2019, the amortized cost and fair value on fixed-maturity securities were as follows:


	June 30, 2020										December 31, 2019
	Amortized Cost		Estimated Fair Value		% of Total Fair Value		Amortized Cost		Estimated Fair Value		% of Total Fair Value
	($ in thousands)
Fixed-maturity securities:
U.S. Treasury securities and obligations of U.S. government agencies	$	1,130	$	1,113	0.1	%	$	110	$	112	—	%
Obligations of states, municipalities and political subdivisions	178,620		190,544		21.3	%	166,312		172,893		23.7	%
Corporate and other securities	277,485		294,333		33.0	%	180,287		184,768		25.4	%
Commercial mortgage and asset-backed securities	261,734		265,887		29.8	%	195,750		197,970		27.1	%
Residential mortgage-backed securities	137,167		141,487		15.8	%	172,358		173,789		23.8	%
Total fixed-maturity securities	$	856,136	$	893,364	100.0	%	$	714,817	$	729,532	100.0	%

June 30, 2019 December 31, 2018
Amortized Cost Estimated Fair Value % of Total Fair Value Amortized Cost Estimated Fair Value % of Total Fair Value
($ in thousands)
Fixed-maturity securities:
U.S. Treasury securities and obligations of U.S. government agencies $ 110
$ 113
— % $ 610
$ 611
0.1 %
Obligations of states, municipalities and political subdivisions 125,619
131,961
22.4 % 153,884
154,600
30.3 %
Corporate and other securities 125,873
129,216
21.9 % 97,889
96,752
19.0 %
Asset-backed securities 175,355
177,865
30.1 % 151,137
149,867
29.4 %
Residential mortgage-backed securities 150,226
150,922
25.6 % 110,717
108,421
21.2 %
Total fixed-maturity securities $ 577,183
$ 590,077
100.0 % $ 514,237
$ 510,251
100.0 %

The table below summarizes the credit quality of our fixed-maturity securities at June 30, ~~2019~~2020 and December 31, ~~2018,~~2019, as rated by Standard & Poor’s Financial Services, LLC ("Standard & Poor's"):


	June 30, 2020						December 31, 2019
Standard & Poor’s or Equivalent Designation	Estimated Fair Value		% of Total		Estimated Fair Value		% of Total
	($ in thousands)
AAA	$	260,398	29.2	%	$	213,174	29.2	%
AA	271,026		30.3	%	259,873		35.6	%
A	206,171		23.1	%	176,338		24.2	%
BBB	132,181		14.8	%	74,872		10.3	%
Below BBB and unrated	23,588		2.6	%	5,275		0.7	%
Total	$	893,364	100.0	%	$	729,532	100.0	%

June 30, 2019 December 31, 2018
Standard & Poor’s or Equivalent Designation Estimated Fair Value % of Total Estimated Fair Value % of Total
($ in thousands)
AAA $ 180,920
30.7 % $ 133,028
26.1 %
AA 205,877
34.9 % 199,026
39.0 %
A 120,307
20.3 % 108,972
21.3 %
BBB 77,738
13.2 % 61,037
12.0 %
Below BBB and unrated 5,235
0.9 % 8,188
1.6 %
Total $ 590,077
100.0 % $ 510,251
100.0 %

The amortized cost and fair value of our fixed-maturity securities summarized by contractual maturity as of June 30, ~~2019~~2020 and December 31, ~~2018,~~2019, were as follows:


	June 30, 2020										December 31, 2019
	Amortized Cost		Estimated Fair Value		% of Total Fair Value		Amortized Cost		Estimated Fair Value		% of Total Fair Value
	($ in thousands)
Due in one year or less	$	11,926	$	12,047	1.3	%	$	9,940	$	9,990	1.4	%
Due after one year through five years	114,967		122,401		13.7	%	115,480		118,611		16.3	%
Due after five years through ten years	142,571		152,692		17.1	%	79,235		82,314		11.3	%
Due after ten years	187,771		198,850		22.3	%	142,054		146,858		20.1	%
Commercial mortgage and asset-backed securities	261,734		265,887		29.8	%	195,750		197,970		27.1	%
Residential mortgage-backed securities	137,167		141,487		15.8	%	172,358		173,789		23.8	%
Total fixed maturities	$	856,136	$	893,364	100.0	%	$	714,817	$	729,532	100.0	%

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June 30, 2019 December 31, 2018

Amortized
Cost
Estimated Fair Value % of Total Fair Value Amortized
Cost Estimated Fair Value % of Total Fair Value
($ in thousands)
Due in one year or less $ 3,914
$ 3,922
0.7 % $ 10,283
$ 10,252
2.0 %
Due after one year through five years 95,702
98,079
16.6 % 67,670
67,426
13.2 %
Due after five years through ten years 50,116
52,709
8.9 % 55,725
56,235
11.0 %
Due after ten years 101,870
106,580
18.1 % 118,705
118,050
23.1 %
Asset-backed securities 175,355
177,865
30.1 % 151,137
149,867
29.4 %
Residential mortgage-backed securities 150,226
150,922
25.6 % 110,717
108,421
21.3 %
Total fixed maturities $ 577,183
$ 590,077
100.0 % $ 514,237
$ 510,251
100.0 %

Actual maturities may differ from contractual maturities because some borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

As of June 30, ~~2019, approximately 6.3%~~2020, 7.5% of our total cash and investments were invested in ETFs. At June 30, ~~2019~~2020 and December 31, ~~2018,~~2019, our ETF balances were comprised of the following funds:


	June 30, 2020						December 31, 2019
Fund	Fair Value		% of Total		Fair Value		% of Total
	($ in thousands)
Domestic stock market fund	$	51,666	64.7	%	$	42,873	78.7	%
Dividend yield equity fund	28,152		35.3	%	11,590		21.3	%


Total	$	79,818	100.0	%	$	54,463	100.0	%

June 30, 2019 December 31, 2018
Fund Fair Value % of Total Fair Value % of Total
($ in thousands)
Domestic stock market fund $ 23,613
50.9 % $ 19,899
51.0 %
Dividend yield equity fund 10,624
22.9 % 9,344
24.0 %
Foreign stock market fund 10,011
21.6 % 8,817
22.6 %
Small-cap index 2,148
4.6 % 927
2.4 %
Total $ 46,396
100.0 % $ 38,987
100.0 %

As of June 30, ~~2019, approximately 2.7%~~2020, 2.6% of our total cash and investments were invested in non-redeemable preferred stock. A summary of these securities by industry segment is shown below as of June 30, ~~2019~~2020 and December 31, ~~2018~~2019:


	June 30, 2020						December 31, 2019
Industry	Fair Value		% of Total		Fair Value		% of Total
	($ in thousands)
Financial	$	24,815	88.3	%	$	20,369	85.5	%
Utilities	2,880		10.3	%	2,992		12.5	%
Industrials and other	392		1.4	%	470		2.0	%
Total	$	28,087	100.0	%	$	23,831	100.0	%

June 30, 2019 December 31, 2018
Industry Fair Value % of Total Fair Value % of Total
($ in thousands)
Financial $ 15,665
80.3 % $ 14,618
78.1 %
Utilities 2,785
14.3 % 2,734
14.6 %
Industrials and other 1,064
5.4 % 1,372
7.3 %
Total $ 19,514
100.0 % $ 18,724
100.0 %

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 high-grade securities. The fair value of our restricted assets was~~$6.9~~ $6.9 million at both June 30, ~~2019~~2020 and December 31, ~~2018.~~2019.

Off-balance sheet arrangements

We do not have any material off-balance sheet arrangements at June 30, ~~2019.~~2020.

Reconciliation of non-GAAP financial measures

Reconciliation of underwriting income

Underwriting income is defined as net income excluding net investment income, the net ~~unrealized gains and losses on~~change in the fair value of equity securities, net realized gains and losses on investments, other income, other expenses and income tax expense. The Company uses underwriting income as an internal performance measure in the management of its operations because the Company believes it gives management and users of the Company's financial information useful insight into the Company's results of operations and 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.

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Net income for the three and six months ended June 30, ~~2019~~2020 and ~~2018,~~2019, reconciles to underwriting income as follows:


	Three Months Ended June 30,						Six Months Ended June 30,							Three Months Ended June 30,						Six Months Ended June 30,
(in thousands)	2019			2018			2019			2018			(in thousands)	2020		2019		2020		2019

Net income	$	13,767		$	10,112		$	32,487		$	17,399		Net income	$	30,262	$	13,767	$	35,348	$	32,487
Income tax expense	2,768			2,349			6,849			3,877			Income tax expense	6,180		2,768		6,124		6,849
Income before income taxes	16,535			12,461			39,336			21,276			Income before income taxes	36,442		16,535		41,472		39,336
Other expenses	21			—			57			14			Other expenses	—		21		—		57
Net investment income	(4,806		)	(3,782		)	(9,321		)	(7,011		)	Net investment income	(6,645)		(4,806)		(12,605)		(9,321)
Net unrealized (gains) losses on equity securities	(1,909		)	(94		)	(7,804		)	1,185
Net realized losses (gains) on investments	235			(174		)	(45		)	(286		)
Change in the fair value of equity securities													Change in the fair value of equity securities	(13,839)		(1,909)		2,322		(7,804)
Net realized (gains) losses on investments													Net realized (gains) losses on investments	(253)		235		(1,029)		(45)
Other income	(5		)	(4		)	(9		)	(7		)	Other income	(13)		(5)		(23)		(9)
Underwriting income	$	10,071		$	8,407		$	22,214		$	15,171		Underwriting income	$	15,692	$	10,071	$	30,137	$	22,214


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
	(in thousands)
Balance, beginning of period	$	26,005	$	16,314	$	23,564	$	14,801
Policy acquisition costs deferred:
Direct commissions	19,496		13,880		37,574		26,243
Ceding commissions	(3,891)		(3,258)		(7,763)		(6,514)
Other underwriting and policy acquisition costs	1,282		849		2,469		1,814
Policy acquisition costs deferred	16,887		11,471		32,280		21,543
Amortization of net policy acquisition costs	(13,950)		(9,133)		(26,902)		(17,692)
Balance, end of period	$	28,942	$	18,652	$	28,942	$	18,652



	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
	(in thousands)
Balance, beginning of period	$	16,314		$	12,768		$	14,801		$	11,775
Policy acquisition costs deferred:
Direct commissions	13,880			10,298			26,243			19,675
Ceding commissions	(3,258		)	(2,609		)	(6,514		)	(5,150		)
Other underwriting and policy acquisition costs	849			694			1,814			1,503
Policy acquisition costs deferred	11,471			8,383			21,543			16,028
Amortization of net policy acquisition costs	(9,133		)	(7,028		)	(17,692		)	(13,680		)
Balance, end of period	$	18,652		$	14,123		$	18,652		$	14,123


	June 30, 2020		December 31, 2019
	(in thousands)
Equipment	$	2,444	$	2,353
Software	3,733		2,356
Furniture and fixtures	1,699		1,025
Leasehold improvements	984		984
Construction in progress - corporate headquarters	37,803		19,789
	46,663		26,507
Accumulated depreciation	(4,273)		(3,873)
Total property and equipment, net	$	42,390	$	22,634


	For the Six Months Ended June 30, 2020
	Number of Shares	Weighted Average Grant Date Fair Value per Share
Non-vested outstanding at the beginning of the period	122,723	$	67.01
Granted	41,217	$	145.46
Vested	(41,010)	$	63.86
Forfeited	(559)	$	68.13
Non-vested outstanding at the end of the period	122,371	$	94.48



	For the Six Months Ended June 30, 2019
	Number of Shares		Weighted Average Grant Date Fair Value per Share
Non-vested outstanding at the beginning of the period	92,465		$	52.98
Granted	62,015		$	80.59
Vested	(27,628	)	$	51.53
Forfeited	(1,677	)	$	53.60
Non-vested outstanding at the end of the period	125,175		$	66.97



☒			Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934



☐			Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934



	June 30, 2019		December 31, 2018
	(in thousands, except share and per share data)
Assets
Investments:
Fixed-maturity securities available for sale, at fair value (amortized cost: $577,183 in 2019; $514,237 in 2018)	$	590,077	$	510,251
Equity securities, at fair value (cost: $56,447 in 2019 $56,051 in 2018)	65,910		57,711
Total investments	655,987		567,962
Cash and cash equivalents	78,131		75,089
Investment income due and accrued	3,972		3,783
Premiums receivable, net	34,150		24,253
Reinsurance recoverables	65,937		56,788
Ceded unearned premiums	17,397		16,072
Deferred policy acquisition costs, net of ceding commissions	18,652		14,801
Intangible assets	3,538		3,538
Deferred income tax asset, net	6,068		7,176
Other assets	10,974		3,601
Total assets	$	894,806	$	773,063

Liabilities and Stockholders' Equity
Liabilities:
Reserves for unpaid losses and loss adjustment expenses	$	407,433	$	369,152
Unearned premiums	157,752		128,250
Payable to reinsurers	6,769		4,565
Accounts payable and accrued expenses	7,655		7,090
Other liabilities	7,290		20
Total liabilities	586,899		509,077

Stockholders’ equity:
Common stock, $0.01 par value, 400,000,000 shares authorized, 21,356,399 and 21,241,504 shares issued and outstanding at June 30, 2019 and December 31, 2018, respectively	214		212
Additional paid-in capital	159,986		158,485
Retained earnings	135,628		106,545
Accumulated other comprehensive income (loss)	12,079		(1,256		)
Total stockholders’ equity	307,907		263,986
Total liabilities and stockholders’ equity	$	894,806	$	773,063



	June 30, 2019
	Amortized Cost		Gross Unrealized Holding Gains		Gross Unrealized Holding Losses			Estimated Fair Value
	(in thousands)
Fixed maturities:
U.S. Treasury securities and obligations of U.S. government agencies	$	110	$	3	$	—		$	113
Obligations of states, municipalities and political subdivisions	125,619		6,344		(2		)	131,961
Corporate and other securities	125,873		3,572		(229		)	129,216
Commercial mortgage and asset-backed securities	175,355		2,995		(485		)	177,865
Residential mortgage-backed securities	150,226		1,626		(930		)	150,922
Total available-for-sale investments	$	577,183	$	14,540	$	(1,646	)	$	590,077



	December 31, 2018
	Amortized Cost		Gross Unrealized Holding Gains		Gross Unrealized Holding Losses			Estimated Fair Value
	(in thousands)
Fixed maturities:
U.S. Treasury securities and obligations of U.S. government agencies	$	610	$	2	$	(1	)	$	611
Obligations of states, municipalities and political subdivisions	153,884		2,010		(1,294		)	154,600
Corporate and other securities	97,889		264		(1,401		)	96,752
Commercial mortgage and asset-backed securities	151,137		252		(1,522		)	149,867
Residential mortgage-backed securities	110,717		354		(2,650		)	108,421
Total available-for-sale investments	$	514,237	$	2,882	$	(6,868	)	$	510,251


	June 30, 2020
	Amortized		Estimated
	Cost		Fair Value
	(in thousands)
Due in one year or less	$	11,926	$	12,047
Due after one year through five years	114,967		122,401
Due after five years through ten years	142,571		152,692
Due after ten years	187,771		198,850
Commercial mortgage and asset-backed securities	261,734		265,887
Residential mortgage-backed securities	137,167		141,487
Total fixed-maturity securities	$	856,136	$	893,364


	June 30, 2020
	Level 1		Level 2		Level 3		Total
	(in thousands)
Assets
Fixed maturities:
U.S. Treasury securities and obligations of U.S. government agencies	$	1,113	$	—	$	—	$	1,113
Obligations of states, municipalities and political subdivisions	—		190,544		—		190,544
Corporate and other securities	—		294,333		—		294,333
Commercial mortgage and asset-backed securities	—		265,887		—		265,887
Residential mortgage-backed securities	—		141,487		—		141,487
Total fixed-maturity securities	1,113		892,251		—		893,364

Equity securities:
Exchange traded funds	79,818		—		—		79,818
Nonredeemable preferred stock	—		28,087		—		28,087
Total equity securities	79,818		28,087		—		107,905

Total	$	80,931	$	920,338	$	—	$	1,001,269



Risk-free rate of return	1.26	%
Dividend yield	1.25	%
Expected share price volatility⁽¹⁾	18.50	%
Expected life in years⁽²⁾	6.3 years


^{(1)⁽²⁾Expected life was calculated using the simplified method, which was an average of the contractual term of the option and its ordinary vesting period, as the Company did not have sufficient historical data for determining the expected term of our stock option awards. 18 Table of Contents}	~~Expected volatility was based on the Company’s competitors within the industry.~~


⁽²⁾	Expected life was calculated using the simplified method, which was an average of the contractual term of the option and its ordinary vesting period, as the Company did not have sufficient historical data for determining the expected term of our stock option awards.


	Number of Shares	Weighted-average exercise price		Weighted-average remaining years of contractual term	Aggregate intrinsic value (in thousands)
Outstanding at January 1, 2020	614,345	$	16.00
Granted	—	—
Forfeited	(234)	16.00
Exercised	(68,586)	16.00
Outstanding at June 30, 2020	545,525	$	16.00	6.1	$	75,943
Exercisable at June 30, 2020	325,028	$	16.00	6.1	$	45,247


	June 30
	2020		2019
	(in thousands)
Gross reserves for unpaid losses and loss adjustment expenses, beginning of year	$	460,058	$	369,152
Less: reinsurance recoverable on unpaid losses	69,792		55,389
Adoption of new accounting standard for credit losses	(282)		—
Net reserves for unpaid losses and loss adjustment expenses, beginning of year	390,548		313,763
Incurred losses and loss adjustment expenses:
Current year	118,662		81,127
Prior years	(6,625)		(7,816)
Total net losses and loss adjustment expenses incurred	112,037		73,311

Payments:
Current year	3,245		5,530
Prior years	42,259		36,100
Total payments	45,504		41,630
Net reserves for unpaid losses and loss adjustment expenses, end of period	457,081		345,444
Reinsurance recoverable on unpaid losses	68,720		61,989
Gross reserves for unpaid losses and loss adjustment expenses, end of period	$	525,801	$	407,433



	June 30,
	2019			2018
	(in thousands)
Net reserves for unpaid losses and loss adjustment expenses, beginning of year	$	313,763		$	267,493
Incurred losses and loss adjustment expenses:
Current year	81,127			62,389
Prior years	(7,816		)	(3,523		)
Total net losses and loss adjustment expenses incurred	73,311			58,866

Payments:
Current year	5,530			1,858
Prior years	36,100			33,309
Total payments	41,630			35,167
Net reserves for unpaid losses and loss adjustment expenses, end of period	345,444			291,192
Reinsurance recoverable on unpaid losses	61,989			53,373
Gross reserves for unpaid losses and loss adjustment expenses, end of period	$	407,433		$	344,565



Exhibit Number						Description
31.1						Certification of principal executive officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2						Certification of principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1*						Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2*						Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS **						XBRL Instance Document
101.SCH						XBRL Taxonomy Extension Schema Document
101.CAL						XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF						XBRL Taxonomy Extension Definition Linkbase Document
101.LAB						XBRL Taxonomy Extension Label Linkbase Document
101.PRE						XBRL Taxonomy Extension Presentation Linkbase Document
104						Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)



	KINSALE CAPITAL GROUP, INC.
Date: ~~August 1, 2019~~July 30, 2020		By:	/s/ Michael P. Kehoe
			Michael P. Kehoe President and Chief Executive Officer

Date: ~~August 1, 2019~~July 30, 2020		By:	/s/ Bryan P. Petrucelli
			Bryan P. Petrucelli ~~Senior~~Executive Vice President, Chief Financial Officer and Treasurer