Kinsale Capital Group, Inc. - Quarter Report: 2018 March (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q



☒	Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended March 31, 2018



☐	Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from _______ to _______

Commission File Number: 001-37848




	KINSALE CAPITAL GROUP, INC. (Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization)		98-0664337 (I.R.S. Employer Identification Number)



	2221 Edward Holland Drive, Suite 600 Richmond, VA 23230
	(Address of principal executive offices)
	(804) 289-1300
	(Registrant's telephone number, including area code)

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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post 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 ☐ (Do not check if a smaller reporting company)	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 7(a)(2)(B) of the Securities 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 shares outstanding at April 27, 2018: 21,072,452

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KINSALE CAPITAL GROUP, INC.

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		Page
PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements	2
	Consolidated Balance Sheets (Unaudited) at March 31, 2018 and December 31, 2017	2
	Consolidated Statements of Income and Comprehensive Income (Unaudited) for the Three Months Ended March 31, 2018 and 2017	3
	Consolidated Statements of Changes in Stockholders' Equity (Unaudited) for the Three Months Ended March 31, 2018 and 2017	4
	Condensed Consolidated Statements of Cash Flows (Unaudited) for the Three Months Ended March 31, 2018 and 2017	5
	Notes to Condensed Consolidated Financial Statements (Unaudited)	6
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	32
Item 4.	Controls and Procedures	32

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	33
Item 1A.	Risk Factors	33
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	33
Item 6.	Exhibits	33
	Signatures	34

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

KINSALE CAPITAL GROUP, INC. AND SUBSIDIARIES

Consolidated Balance Sheets (Unaudited)



	March 31, 2018			December 31, 2017
	(in thousands, except share and per share data)
Assets
Investments:
Fixed-maturity securities available for sale, at fair value (amortized cost: $465,744 in 2018; $422,255 in 2017)	$	462,534		$	425,191
Equity securities, at fair value (cost: $48,129 in 2018; $45,916 in 2017)	55,065			54,132
Total investments	517,599			479,323
Cash and cash equivalents	56,659			81,747
Investment income due and accrued	3,200			3,077
Premiums receivable, net	22,892			19,787
Reinsurance recoverables	50,742			49,593
Ceded unearned premiums	14,081			13,858
Deferred policy acquisition costs, net of ceding commissions	12,768			11,775
Intangible assets	3,538			3,538
Deferred income tax asset, net	4,201			2,492
Other assets	2,087			2,659
Total assets	$	687,767		$	667,849

Liabilities and Stockholders' Equity
Liabilities:
Reserves for unpaid losses and loss adjustment expenses	$	328,209		$	315,717
Unearned premiums	110,364			103,110
Payable to reinsurers	3,244			3,226
Accounts payable and accrued expenses	3,170			6,519
Other liabilities	2,930			1,088
Total liabilities	447,917			429,660

Stockholders’ equity:
Common stock, $0.01 par value, 400,000,000 shares authorized, 21,072,152 and 21,036,087 shares issued and outstanding at March 31, 2018 and December 31, 2017, respectively	210			210
Additional paid-in capital	155,785			155,082
Retained earnings	84,498			73,502
Accumulated other comprehensive (loss) income	(643		)	9,395
Total stockholders’ equity	239,850			238,189
Total liabilities and stockholders’ equity	$	687,767		$	667,849

See accompanying notes to condensed consolidated financial statements.

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KINSALE CAPITAL GROUP, INC. AND SUBSIDIARIES

Consolidated Statements of Income and Comprehensive Income (Unaudited)



	Three Months Ended March 31,
	2018			2017
	(in thousands, except per share data)
Revenues:
Gross written premiums	$	63,847		$	52,862
Ceded written premiums	(8,756		)	(8,700		)
Net written premiums	55,091			44,162
Change in unearned premiums	(7,030		)	(3,729		)
Net earned premiums	48,061			40,433
Net investment income	3,229			2,286
Net unrealized losses on equity securities	(1,279		)	—
Net realized gains (losses) on investments	112			(32		)
Other income	3			—
Total revenues	50,126			42,687

Expenses:
Losses and loss adjustment expenses	28,899			22,107
Underwriting, acquisition and insurance expenses	12,398			11,294
Other expenses	14			—
Total expenses	41,311			33,401
Income before income taxes	8,815			9,286
Total income tax expense	1,528			3,005
Net income	7,287			6,281
Other comprehensive income:
Change in unrealized (losses) gains on available-for-sale investments, net of taxes of ($1,291) in 2018 and $577 in 2017	(4,856		)	1,073
Total comprehensive income	$	2,431		$	7,354



Earnings per share:
Basic	$	0.35	$	0.30
Diluted	$	0.34	$	0.29

Weighted-average shares outstanding:
Basic	21,045		20,969
Diluted	21,628		21,389

Cash dividends declared per share	$	0.07	$	0.06

See accompanying notes to condensed consolidated financial statements.

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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 (Loss)			Total Stock- holders' Equity
	(in thousands)
Balance at December 31, 2016	20,969	$	210	$	153,353	$	53,640		$	3,011		$	210,214
Stock-based compensation	—	—		161		—			—			161
Dividends	—	—		—		(1,258		)	—			(1,258		)
Other comprehensive income, net of tax	—	—		—		—			1,073			1,073
Net income	—	—		—		6,281			—			6,281
Balance at March 31, 2017	20,969	$	210	$	153,514	$	58,663		$	4,084		$	216,471

Balance at December 31, 2017	21,036	$	210	$	155,082	$	73,502		$	9,395		$	238,189
Cumulative effect adjustment - net 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 effects resulting from the TCJA	—	—		—		(1,308		)	1,308			—
Issuance of common stock under stock-based compensation plan	36	—		545		—			—			545
Stock-based compensation	—	—		158		—			—			158
Dividends	—	—		—		(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

See accompanying notes to condensed consolidated financial statements.

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KINSALE CAPITAL GROUP, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows (Unaudited)



	Three Months Ended March 31,
	2018			2017
	(in thousands)
Operating activities:
Net cash provided by operating activities	$	21,437		$	15,447

Investing activities:
Purchase of property and equipment	(94		)	(31		)
Purchases – fixed maturity securities	(82,587		)	(6,147		)
Purchases – equity securities	(3,168		)	(3,114		)
Sales – fixed maturity securities	3,913			718
Sales – equity securities	982			—
Maturities and calls – fixed maturity securities	35,357			19,198
Net cash (used in) provided by investing activities	(45,597		)	10,624

Financing activities:
Proceeds from stock options exercised	545			—
Dividends paid	(1,473		)	(1,258		)
Payments on capital lease	—			(9		)
Net cash used in financing activities	(928		)	(1,267		)
Net change in cash and cash equivalents	(25,088		)	24,804
Cash and cash equivalents at beginning of year	81,747			50,752
Cash and cash equivalents at end of period	$	56,659		$	75,556

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 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") included in the Annual Report on Form 10-K for the year ended December 31, 2017. 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 2016-01, Financial Instruments - Overall: Recognition and Measurement of Financial Assets and Financial Liabilities

In January 2016, the FASB issued ASU 2016-01, "Financial Instruments – Overall: Recognition and Measurement of Financial Assets and Financial Liabilities," which eliminated the available-for-sale classification for equity investments, required changes in unrealized gains and losses in fair value of equity investments to be recognized in net income, required public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes, required separate presentation of financial assets and financial liabilities by measurement category and form of financial asset, and eliminated the requirement for public business entities to disclose the methods and significant assumptions used to estimate the fair value that was required to be disclosed for financial instruments measured at amortized cost. Effective January 1, 2018, the Company adopted this ASU and recorded a cumulative-effect adjustment, which reclassified unrealized gains of $6.5 million, net of taxes, on equity investments from accumulated other comprehensive income ("AOCI") to retained earnings. Prior periods have not been restated to conform to the current presentation.

ASU 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income

In February 2018, the FASB issued ASU 2018-02, "Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income," which permitted companies to reclassify the disproportionate income tax effects of the Tax Cuts and Jobs Act of 2017 (the "TCJA") on items within AOCI to retained earnings. The FASB refers to these amounts as "stranded tax effects." The guidance is effective for all companies for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted. Effective January 1, 2018, the Company elected to early adopt this ASU and to reclassify the stranded income tax effects for available-

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for-sale securities of $1.3 million from AOCI to retained earnings. Other than those effects related to the TCJA, the Company uses the portfolio approach to release stranded tax effects in AOCI related to its available-for-sale fixed-maturity securities and its available-for-sale equity securities (prior to the adoption of ASU 2016-01). Under this approach, stranded tax effects remaining in AOCI are released only when the entire portfolio of the available-for-sale fixed-maturity securities and available-for-sale equity securities are liquidated, sold or extinguished.

Prospective 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 asset and corresponding liability on the balance sheet for all leases, except for leases covering a period of fewer than 12 months. The liability is to be initially measured at the present value of the future minimum lease payments taking into account renewal options if applicable plus initial incremental direct costs such as commissions. The minimum payments are discounted using the rate implicit in the lease or, if not known, the lessee’s incremental borrowing rate at the inception of the lease. The lessee’s income statement treatment for leases will vary depending on the nature of what is being leased. A financing type lease is present when, among other matters, the asset is being leased for a substantial portion of its economic life or has an end-of-term title transfer or a bargain purchase option as in today’s practice. The payment of the liability set up for such leases will be apportioned between interest and principal; the right-of use asset will be generally amortized on a straight-line basis. If the lease does not qualify as a financing type lease, it will be accounted for on the income statement as rent on a straight-line basis. This ASU is effective for annual and interim reporting periods beginning after December 15, 2018. Early adoption is permitted. The Company is currently evaluating the impact of the adoption on its consolidated financial statements.

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

On June 16, 2016, the 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 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 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 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 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, the update will be applied using the modified-retrospective approach, by which a cumulative-effect adjustment will be made to retained earnings as of the beginning of the first reporting period presented. The Company is currently evaluating the impact of the adoption on its consolidated financial statements.

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

On March 30, 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. This ASU is effective in fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted, including in an interim period. Upon adoption, the update will applied on a modified retrospective basis, with a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period presented. The Company is currently evaluating the impact of the adoption on its consolidated financial statements.

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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 March 31, 2018 and December 31, 2017:



	March 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	$	608	$	2	$	(4	)	$	606
Obligations of states, municipalities and political subdivisions	158,889		1,858		(2,032		)	158,715
Corporate and other securities	93,807		435		(578		)	93,664
Asset-backed securities	123,397		221		(681		)	122,937
Residential mortgage-backed securities	89,043		396		(2,827		)	86,612
Total available-for-sale investments	$	465,744	$	2,912	$	(6,122	)	$	462,534



	December 31, 2017
	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	$	9,108	$	4	$	(14	)	$	9,098
Obligations of states, municipalities and political subdivisions	161,012		3,726		(412		)	164,326
Corporate and other securities	71,224		579		(172		)	71,631
Asset-backed securities	95,223		405		(268		)	95,360
Residential mortgage-backed securities	85,688		466		(1,378		)	84,776
Total fixed-maturity securities	422,255		5,180		(2,244		)	425,191

Equity securities:
Exchange traded funds	26,041		8,339		—			34,380
Nonredeemable preferred stock	19,875		108		(231		)	19,752
Total equity securities	45,916		8,447		(231		)	54,132
Total available-for-sale investments	$	468,171	$	13,627	$	(2,475	)	$	479,323

Available-for-sale securities in a loss position

The Company regularly reviews all available-for-sale securities with unrealized losses to assess whether the decline in the securities’ fair value is deemed to be an other-than-temporary impairment ("OTTI"). The Company considers a number of factors in completing its OTTI review, including the length of time and the extent to which fair value

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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.

For fixed maturities, the Company 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, the credit quality of the issuer and the ability to recover all amounts outstanding when contractually due. When assessing whether it intends to sell a fixed maturity or if it is likely to be required to sell a fixed maturity 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 equity securities prior to the adoption of ASU 2016-01, "Financial Instruments – Overall: Recognition and Measurement of Financial Assets and Financial Liabilities" ("ASU 2016-01"), the Company considered the near-term prospects of an issuer and its ability and intent to hold the security for a period of time sufficient to allow for anticipated recovery.

For fixed maturities where a decline in fair value is considered to be other-than-temporary 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. If the decline in fair value of a fixed maturity security below its amortized cost is considered to be other-than-temporary based upon other considerations, 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, which is recognized in net income, resulting in a new cost basis for the security. Any remaining decline in fair value represents the noncredit portion of the OTTI, which is recognized in other comprehensive income. For equity securities prior to the adoption of ASU 2016-01, a decline in fair value that was considered to be other-than-temporary was 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.

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



	March 31, 2018
	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:
U.S. Treasury securities and obligations of U.S. government agencies	$	—	$	—		$	494	$	(4	)	$	494	$	(4	)
Obligations of states, municipalities and political subdivisions	56,436		(849		)	37,173		(1,183		)	93,609		(2,032		)
Corporate and other securities	50,879		(461		)	10,643		(117		)	61,522		(578		)
Asset-backed securities	41,534		(419		)	10,006		(262		)	51,540		(681		)
Residential mortgage-backed securities	20,500		(304		)	54,166		(2,523		)	74,666		(2,827		)
Total fixed-maturity securities	$	169,349	$	(2,033	)	$	112,482	$	(4,089	)	$	281,831	$	(6,122	)

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At March 31, 2018, the Company held 306 fixed maturity securities in an unrealized loss position with a total estimated fair value of $281.8 million and gross unrealized losses of $6.1 million. Of these securities, 124 were in a continuous unrealized loss position for greater than one year. As discussed above, the Company regularly reviews all fixed-maturity securities within its investment portfolio to determine whether any impairment has occurred. Unrealized losses were caused by interest rate changes or other market factors and were not credit specific issues. At March 31, 2018, 89.5% of the Company’s fixed-maturity securities were rated "A-" or better and all of the Company’s fixed-maturity securities made expected coupon payments under the contractual terms of the securities. Management concluded that there were no other-than-temporary impairments from fixed-maturity securities with unrealized losses for the three months ended March 31, 2018.



	December 31, 2017
	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:
U.S. Treasury securities and obligations of U.S. government agencies	$	3,497	$	(2	)	$	5,488	$	(12	)	$	8,985	$	(14	)
Obligations of states, municipalities and political subdivisions	7,258		(36		)	38,143		(376		)	45,401		(412		)
Corporate and other securities	30,944		(98		)	13,444		(74		)	44,388		(172		)
Asset-backed securities	27,609		(108		)	10,706		(160		)	38,315		(268		)
Residential mortgage-backed securities	9,081		(83		)	57,262		(1,295		)	66,343		(1,378		)
Total fixed-maturity securities	78,389		(327		)	125,043		(1,917		)	203,432		(2,244		)

Equity securities:
Exchange traded funds	130		—			—		—			130		—
Nonredeemable preferred stocks	10,649		(231		)	—		—			10,649		(231		)
Total equity securities	10,779		(231		)	—		—			10,779		(231		)
Total investments available for sale	$	89,168	$	(558	)	$	125,043	$	(1,917	)	$	214,211	$	(2,475	)

At December 31, 2017, the Company held 195 fixed-maturity securities in an unrealized loss position with a total estimated fair value of $203.4 million and gross unrealized losses of $2.2 million. Of those securities, 126 were in a continuous unrealized loss position for greater than one year. Unrealized losses were caused by interest rate changes or other market factors and were not credit specific issues. At December 31, 2017, 91.1% of the Company’s fixed maturity securities were rated "A-" or better and all of the Company’s fixed maturity securities made expected coupon payments under the contractual terms of the securities. At December 31, 2017, the Company held 13 securities in its equity portfolio with a total estimated fair value of $10.8 million and gross unrealized losses of $0.2 million. None of these securities were in a continuous unrealized loss position for greater than one year. Based on its review, the Company concluded that were no other-than-temporary impairments from fixed-maturity or equity securities with unrealized losses for the year ended December 31, 2017.

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Contractual maturities of available-for-sale fixed-maturity securities

The amortized cost and estimated fair value of available-for-sale fixed-maturity securities at March 31, 2018 are summarized, by contractual maturity, as follows:



	March 31, 2018
	Amortized		Estimated
	Cost		Fair Value
	(in thousands)
Due in one year or less	$	33,012	$	32,899
Due after one year through five years	47,430		47,494
Due after five years through ten years	38,633		39,111
Due after ten years	134,229		133,481
Asset-backed securities	123,397		122,937
Residential mortgage-backed securities	89,043		86,612
Total fixed maturities	$	465,744	$	462,534

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.

Net investment income

The following table presents the components of net investment income for the three months ended March 31, 2018 and 2017:



	Three Months Ended March 31,
	2018			2017
	(in thousands)
Interest:
Taxable bonds	$	1,761		$	1,537
Tax exempt municipal bonds	1,085			794
Cash equivalents and short-term investments	260			87
Dividends on equity securities	412			110
Gross investment income	3,518			2,528
Investment expenses	(289		)	(242		)
Net investment income	$	3,229		$	2,286

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Realized investment gains and losses

The following table presents realized investment gains and losses for the three months ended March 31, 2018 and 2017:



	Three Months Ended March 31,
	2018		2017
	(in thousands)
Realized gains:
Sales of fixed maturities	$	55	$	—
Sales of equity securities	57		—
Total realized gains	112		—

Realized losses:
Sales of fixed maturities	—		(32		)
Total realized losses	—		(32		)
Net realized investment gains (losses)	$	112	$	(32	)

Change in net unrealized gains (losses) on investments

For the three months ended March 31, 2018, the change in net unrealized losses for fixed-maturity securities was $6.1 million. For the three months ended March 31, 2017, the change in net unrealized gains for fixed-maturity securities was $0.7 million and the change in net unrealized gains for equity securities was $0.9 million.

Insurance – statutory deposits

The Company had invested assets with a carrying value of $6.9 million and $7.1 million on deposit with state regulatory authorities at March 31, 2018 and December 31, 2017, respectively.

Payable for investments purchased

The Company recorded a payable for investments purchased, not yet settled, of $1.8 million at March 31, 2018 and $1.0 million at December 31, 2017. The payable balances were included in the "other liabilities" line item of the balance sheet and treated as non-cash transactions for purposes of cash flow presentation.

3. Fair value measurements

Fair value was estimated for each class of financial instrument for which it was practical to estimate fair value. Fair value is defined as the price in the principal market that would be received for an asset to facilitate an orderly transaction between market participants on 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.

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The three levels of the fair value hierarchy are defined as follows:

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.

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

Fair values of the Company's investment portfolio are estimated using unadjusted prices obtained by its investment manager from third party pricing services, where available. For securities where the Company is unable to obtain fair values from a pricing service or broker, fair values are estimated using information obtained from the Company's investment manager. Management performs several procedures to ascertain the reasonableness of investment values included in the condensed consolidated financial statements including 1) obtaining and reviewing internal control reports from the Company's investment manager that obtain fair values from third party pricing services, 2) discussing with the Company's investment manager its process for reviewing and validating pricing obtained from outside pricing services and 3) reviewing the security pricing received from the Company's investment manager and monitoring changes in unrealized gains and losses. The Company has evaluated the various types of securities in its investment portfolio to determine an appropriate fair value hierarchy level based upon trading activity and the observability of market inputs.

The following tables present the balances of assets measured at fair value on a recurring basis as of March 31, 2018 and December 31, 2017, by level within the fair value hierarchy.



	March 31, 2018
	Level 1		Level 2		Level 3		Total
	(in thousands)
Assets
Fixed maturities:
U.S. Treasury securities and obligations of U.S. government agencies	$	606	$	—	$	—	$	606
Obligations of states, municipalities and political subdivisions	—		158,715		—		158,715
Corporate and other securities	—		93,664		—		93,664
Asset-backed securities	—		122,937		—		122,937
Residential mortgage-backed securities	—		86,612		—		86,612
Total fixed maturities	606		461,928		—		462,534

Equity securities:
Exchange traded funds	35,939		—		—		35,939
Nonredeemable preferred stock	—		19,126		—		19,126
Total equity securities	35,939		19,126		—		55,065
Total	$	36,545	$	481,054	$	—	$	517,599

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	December 31, 2017
	Level 1		Level 2		Level 3		Total
	(in thousands)
Assets
Fixed maturities:
U.S. Treasury securities and obligations of U.S. government agencies	$	9,098	$	—	$	—	$	9,098
Obligations of states, municipalities and political subdivisions	—		164,326		—		164,326
Corporate and other securities	—		71,631		—		71,631
Asset-backed securities	—		95,360		—		95,360
Residential mortgage-backed securities	—		84,776		—		84,776
Total fixed maturities	9,098		416,093		—		425,191

Equity securities:
Exchange traded funds	34,380		—		—		34,380
Nonredeemable preferred stock	—		19,752		—		19,752
Total equity securities	34,380		19,752		—		54,132
Total	$	43,478	$	435,845	$	—	$	479,323

There were no transfers into or out of Level 1 and Level 2 during the three months ended March 31, 2018. There were no assets or liabilities measured at fair value on a nonrecurring basis as of March 31, 2018 or December 31, 2017.

Due to the relatively short-term nature of cash and cash equivalents, short-term investments, receivables and payables, their carrying amounts are reasonable estimates of fair value.

4. Deferred policy acquisition costs

The following table presents the amounts of policy acquisition costs deferred and amortized for the three months ended March 31, 2018 and 2017:



	Three Months Ended March 31,
	2018			2017
	(in thousands)
Balance, beginning of period	$	11,775		$	10,150
Policy acquisition costs deferred:
Direct commissions	9,377			7,880
Ceding commissions	(2,541		)	(2,591		)
Other underwriting and policy acquisition costs	809			761
Policy acquisition costs deferred	7,645			6,050
Amortization of net policy acquisition costs	(6,652		)	(5,699		)
Balance, end of period	$	12,768		$	10,501

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5. Underwriting, acquisition and insurance expenses

Underwriting, acquisition and insurance expenses for the three months ended March 31, 2018 and 2017 consist of the following:



	Three Months Ended March 31,
	2018			2017
	(in thousands)
Underwriting, acquisition and insurance expenses incurred:
Direct commissions	$	8,379		$	7,149
Ceding commissions	(2,444		)	(2,346		)
Other operating expenses	6,463			6,491
Total	$	12,398		$	11,294

Other operating expenses within underwriting, acquisition and insurance expenses include salaries, bonus and employee benefits expenses of $5.0 million for both the three months ended March 31, 2018 and 2017.

6. Earnings per share

The following represents a reconciliation of the numerator and denominator of the basic and diluted earnings per share computations contained in the consolidated financial statements:



	Three Months Ended March 31,
	2018		2017
	(in thousands, except per share data)
Net income	$	7,287	$	6,281
Weighted average common shares outstanding - basic	21,045		20,969
Effect of potential dilutive securities:
Conversion of stock options	581		420
Conversion of restricted stock	2		—
Weighted average common shares outstanding - diluted	21,628		21,389

Earnings per common share:
Basic	$	0.35	$	0.30
Diluted	$	0.34	$	0.29

There were no anti-dilutive stock options for the three months ended March 31, 2018 and 2017.

7. Income taxes

On December 22, 2017, the President of the United States signed into law the TCJA. The legislation significantly changed U.S. tax law by, among other things, lowering corporate income tax rates from 35% to 21% effective January 1, 2018, and modifying the manner in which property and casualty insurance loss reserves are computed for

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federal income tax purposes. The Company records a deduction for unpaid losses and loss adjustment expenses when computing its taxable income. Prior to the new legislation, the deduction was discounted using interest rates and loss payment patterns prescribed by the U.S. Treasury. The TCJA changed the prescribed interest rates, which are now based on corporate bond yield curves, and extended the applicable time periods for the loss payment pattern period for long-tailed lines of business. Beginning in 2018, a transition rule will spread the adjustments related to pre-effective-date losses and loss adjustment expenses over the next eight years.

U.S. GAAP requires companies to recognize the effect of tax law changes in the period of enactment. The SEC staff issued Staff Accounting Bulletin No. 118 (“SAB 118”) to address the application of U.S. GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the TCJA. The TCJA did not specify the application of certain elements of the legislation and the U.S. Treasury has yet to issue interpretive guidance to specify the loss payment patterns and the corporate bond yield curve under the new law for 2018. The Company recognized provisional tax amounts of $3.5 million related to the transition adjustment for loss discounting, which was included in its components of deferred tax assets and liabilities as part of its consolidated financial statements for the year ended December 31, 2017. The ultimate impact may differ from these provisional amounts due to, among other things, additional analysis, changes in interpretations and assumptions the Company has made, additional regulatory guidance that may be issued, and actions the Company may take as a result of the TCJA. During the three months ended March 31, 2018, there were no changes to these amounts and no measurement period adjustments were recorded. The accounting is expected to be complete when the U.S. Treasury issues further guidance and the Company has completed its calculations.

The Company's effective tax rate was 17.3% for the three months ended March 31, 2018 and 32.4% for the three months ended March 31, 2017. The decrease in the effective tax rate in the first quarter of 2018 compared to the first quarter of 2017 was primarily due to the impact of the TCJA, which lowered the federal corporate tax rate from 35% to 21% starting January 1, 2018, and the recognition of tax benefits related to stock options exercised during the first quarter of 2018.

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8. Reserves for unpaid losses and loss adjustment expenses

The following table presents a reconciliation of consolidated beginning and ending reserves for unpaid losses and loss adjustment expenses:



	March 31,
	2018			2017
	(in thousands)
Net reserves for unpaid losses and loss adjustment expenses, beginning of year	$	267,493		$	194,602
Commutation of MLQS	—			27,929
Adjusted net reserves for losses and loss adjustment expenses, beginning of year	267,493			222,531
Incurred losses and loss adjustment expenses:
Current year	30,183			27,211
Prior years	(1,284		)	(5,104		)
Total net losses and loss adjustment expenses incurred	28,899			22,107

Payments:
Current year	340			333
Prior years	17,516			11,566
Total payments	17,856			11,899
Net reserves for unpaid losses and loss adjustment expenses, end of period	278,536			232,739
Reinsurance recoverable on unpaid losses	49,673			40,262
Gross reserves for unpaid losses and loss adjustment expenses, end of period	$	328,209		$	273,001

During the three months ended March 31, 2018, the reserves for unpaid losses and loss adjustment expenses held at December 31, 2017 developed favorably by $1.3 million. The favorable development was primarily attributable to the 2017 accident year of $2.5 million and the 2016 accident year of $1.2 million, which resulted from reported losses emerging at a lower level than expected. This favorable development was offset in part by adverse development from the 2011 through 2015 accident years of $2.4 million.

During the three months ended March 31, 2017, the reserves for unpaid losses and loss adjustment expenses held at December 31, 2016 developed favorably by $5.1 million. The favorable development was attributable primarily to the 2016 accident year of $3.3 million and the 2015 accident year of $2.5 million, which was due to reported losses emerging at a lower level than expected. The favorable development was offset in part by adverse development of $0.9 million for the 2013 accident year.

Multi-line quota share reinsurance

Effective January 1, 2017, the Company commuted its multi-line quota share treaty ("MLQS") covering the period January 1, 2015 to December 31, 2015, which reduced reinsurance recoverables on unpaid losses by approximately $27.9 million. The commutation did not have any effect on the Company's results of operations or cash flows for the applicable period.

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9. Reinsurance

The following table summarizes the effect of reinsurance on premiums written and earned for the three months ended March 31, 2018 and 2017:



	Three Months Ended March 31,
	2018			2017
	(in thousands)
Written:
Direct	$	63,847		$	52,862
Assumed	—			—
Ceded	(8,756		)	(8,700		)
Net written	$	55,091		$	44,162

Earned:
Direct	$	56,593		$	48,462
Assumed	—			—
Ceded	(8,532		)	(8,029		)
Net earned	$	48,061		$	40,433

Incurred losses and loss adjustment expenses were net of reinsurance (ceded incurred losses and loss adjustment expenses) of $2.9 million and $2.4 million for the three months ended March 31, 2018 and 2017, respectively. At March 31, 2018, reinsurance recoverables on paid and unpaid losses were $1.0 million and $49.7 million, respectively. At December 31, 2017, reinsurance recoverables on paid and unpaid losses were $1.4 million and $48.2 million, respectively.

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10. Other comprehensive (loss) income

The following table summarizes the components of other comprehensive (loss) income for the three months ended March 31, 2018 and 2017:



	Three Months Ended March 31,
	2018			2017
	(in thousands)
Unrealized (losses) gains arising during the period, before income taxes:
Fixed-maturity securities	$	(6,092	)	$	697
Equity securities ⁽¹⁾	—			921
Total unrealized (losses) gains arising during the period, before income taxes	(6,092		)	1,618
Income taxes	1,279			(566		)
Unrealized (losses) gains arising during the period, net of income taxes	(4,813		)	1,052
Less reclassification adjustment:
Net realized gains (losses) on fixed-maturity securities, before income taxes	55			(32		)
Income taxes	(12		)	11
Reclassification adjustment included in net income	43			(21		)
Other comprehensive (loss) income	$	(4,856	)	$	1,073

⁽¹⁾ Adoption of ASU 2016-01, "Financial Instruments – Overall: Recognition and Measurement of Financial Assets and Financial Liabilities," which was effective January 1, 2018, eliminated the available-for-sale classification for equity investments and required changes in unrealized gains and losses in fair value of equity securities to be recognized in net income.

The sale of an available-for-sale fixed-maturity security results in amounts being reclassified from accumulated other comprehensive income to realized gains or losses in current period earnings. The related tax effect of the reclassification adjustment is recorded in income tax expense in current period earnings. See Note 2 for additional information.

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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The discussion and analysis below includes certain forward-looking statements that are subject to risks, uncertainties and other factors described in "Risk Factors" in the Annual Report on Form 10-K for the year ended December 31, 2017. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of many factors.

The results of operations for the three ended March 31, 2018 are not necessarily indicative of the results that may be expected for the full year ended December 31, 2018, or for any other future period. The following discussion should be read in conjunction with the unaudited condensed consolidated financial statements and the notes thereto included in Part I, Item 1 of this Quarterly Report, and in conjunction with our audited consolidated financial statements and the notes thereto included in the Annual Report on Form 10-K for the year ended December 31, 2017.

References to the "Company," "Kinsale," "we," "us," and "our" are to Kinsale Capital Group, Inc. and its subsidiaries, unless the context otherwise requires.

Overview

Founded in 2009, Kinsale is an established and growing specialty insurance company. Kinsale focuses exclusively on the excess and surplus lines ("E&S") market in the U.S., where we use our underwriting expertise to write coverages for hard-to-place small 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 one reportable segment, our Excess and Surplus Lines Insurance segment, which offers property and casualty ("P&C") insurance products through the E&S market. For the first three months of 2018, the percentage breakdown of our gross written premiums was 92.0% casualty and 8.0% property. Our underwriting divisions include construction, small business, general casualty, energy, excess casualty, professional liability, life sciences, product liability, allied health, health care, commercial property, environmental, management liability, inland marine, public entity and commercial insurance. We also write a small amount of homeowners insurance in the personal lines market, which in aggregate represented 3.9% of our gross written premiums in the first three months of 2018.

Components of our results of operations

Gross written premiums

Gross written premiums are the amount 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 a 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 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

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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.

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 cash and cash equivalents, equity securities and short-term investments. The principal factors that influence 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, such as from changes in interest rates), the size of our investment portfolio is mainly a function of our invested equity capital along with premiums we receive from our insureds less payments on policyholder claims.

Net investment gains (losses)

Net 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, unrealized gains and losses on our equity portfolio, as well as any "other-than-temporary" impairments recognized in earnings.

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; 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 that are directly related to the successful acquisition of those policies are deferred. 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 including employment costs, telecommunication and technology costs, the costs of our lease, and legal and auditing fees.

Income tax expense

Currently all of our income tax expense relates to federal income taxes. Kinsale Insurance is generally not subject to income taxes in the states in which it operates; however, our non-insurance subsidiaries are subject to state income taxes. 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.

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Key metrics

We discuss certain key metrics, described below, which 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 pre-tax income, excluding net investment income, net investment gains and losses, and other income and expenses. See "—Reconciliation of non-GAAP financial measures" for a reconciliation of net income to underwriting income in accordance with GAAP.

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

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

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

Return on equity is net income expressed on an annualized basis as a percentage of average beginning and ending stockholders’ equity during the period. Our overall financial goal is to produce a return on equity in the mid-teens or higher over the long-term.

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

Three months ended March 31, 2018 compared to three months ended March 31, 2017

The following table summarizes our results of operations for the three months ended March 31, 2018 and 2017:



	Three Months Ended March 31,
($ in thousands)	2018			2017			Change			% Change

Gross written premiums	$	63,847		$	52,862		$	10,985		20.8	%
Ceded written premiums	(8,756		)	(8,700		)	(56		)	0.6
Net written premiums	$	55,091		$	44,162		$	10,929		24.7	%

Net earned premiums	$	48,061		$	40,433		$	7,628		18.9	%
Losses and loss adjustment expenses	28,899			22,107			6,792			30.7
Underwriting, acquisition and insurance expenses	12,398			11,294			1,104			9.8
Underwriting income ⁽¹⁾	6,764			7,032			(268		)	(3.8	)
Other expenses, net	(11		)	—			(11		)	NM
Net investment income	3,229			2,286			943			41.3
Net unrealized losses on equity securities	(1,279		)	—			(1,279		)	NM
Net realized gains (losses) on investments	112			(32		)	144			NM
Income before taxes	8,815			9,286			(471		)	(5.1	)
Income tax expense	1,528			3,005			(1,477		)	(49.2	)
Net income	$	7,287		$	6,281		$	1,006		16.0	%

Annualized return on equity	12.2		%	11.8		%

Loss ratio	60.1		%	54.7		%
Expense ratio	25.8		%	27.9		%
Combined ratio	85.9		%	82.6		%

NM - Percentage change not meaningful

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

Net income was $7.3 million for the three months ended March 31, 2018 compared to $6.3 million for the three months ended March 31, 2017, an increase of 16.0%. The increase in net income for the first quarter of 2018 over the first quarter of 2017 was due to a lower effective tax rate of 17.3%, resulting from the TCJA and the recognition of tax benefits related to stock options exercised during the first quarter of 2018, and higher net investment income. These factors were offset in part by unrealized losses of $1.3 million related to changes in the fair value of equity investments, which were required to be recognized in net income upon the adoption of a new accounting standard.

Underwriting income was $6.8 million for the three months ended March 31, 2018 compared to $7.0 million for the three months ended March 31, 2017, a decrease of 3.8%. The corresponding combined ratios were 85.9% for the three months ended March 31, 2018 compared to 82.6% for the three months ended March 31, 2017. The decrease in our underwriting income was due to lower net favorable development of loss reserves for prior accident years in the first quarter of 2018 compared to the first quarter of 2017, offset in part by higher premium volume quarter over quarter.

Premiums

Our gross written premiums were $63.8 million for the three months ended March 31, 2018 compared to $52.9 million for the three months ended March 31, 2017, an increase of $11.0 million, or 20.8%. The increase in gross written premiums for the first three months of 2018 over the same period last year was due to increases across most lines of business. The average premium on a policy written was approximately $8,000 in the first three months of 2018 compared to approximately $8,600 in the first three months of 2017. The decrease in the average premium per policy written was due to changes in the mix of business during the first quarter of 2018 compared to the same period last year.

Net written premiums increased by $10.9 million, or 24.7%, to $55.1 million for the three months ended March 31, 2018 from $44.2 million for the three months ended March 31, 2017. The increase in net written premiums for the first three months of 2018 compared to the same period last year was primarily due to higher gross written premiums while ceded premiums remained relatively flat. The net retention ratio was 86.3% for the three months ended March 31, 2018 compared to 83.5% for the three months ended March 31, 2017. The increase in the net retention ratio was due to an increase in our retention on the excess casualty reinsurance treaty effective with the renewal on June 1, 2017 and a change in the mix of business.

Net earned premiums increased by $7.6 million, or 18.9%, to $48.1 million for the three months ended March 31, 2018 from $40.4 million for the three months ended March 31, 2017 due to growth in gross written premiums.

Loss ratio

The loss ratio was 60.1% for the three months ended March 31, 2018 compared to 54.7% for the three months ended March 31, 2017. The increase in the loss ratio for the first three months of 2018 was due to lower net favorable development of loss reserves for prior accident years in the first quarter of 2018 compared to the first quarter of 2017. The decrease in favorable development of loss reserve for prior accident years was offset in part by a lower loss ratio for the current accident year in the first quarter of 2018 compared to the same period in 2017. The decrease in the current accident year loss ratio was due in part to lower reported losses in the first quarter of 2018 compared to the first quarter of 2017.

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The following table summarizes the loss ratios for the three months ended March 31, 2018 and 2017:



	Three Months Ended March 31,
	2018					2017
($ 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	$	30,183		62.8	%	$	27,137		67.1	%
Current year catastrophe losses	—			—		74			0.2
Effect of prior year development	(1,284		)	(2.7	)	(5,104		)	(12.6	)
Total	$	28,899		60.1	%	$	22,107		54.7	%

Expense ratio

The following table summarizes the components of the expense ratio for the three months ended March 31, 2018 and 2017:



	Three Months Ended March 31,
	2018					2017
($ in thousands)	Underwriting Expenses			% of Earned Premiums		Underwriting Expenses			% of Earned Premiums

Commissions incurred:
Direct	$	8,379		17.4	%	$	7,149		17.7	%
Ceding	(2,444		)	(5.1	)	(2,346		)	(5.8	)
Net commissions incurred	5,935			12.3		4,803			11.9
Other underwriting expenses	6,463			13.5		6,491			16.0
Underwriting, acquisition and insurance expenses	$	12,398		25.8	%	$	11,294		27.9	%

The expense ratio was 25.8% for the three months ended March 31, 2018 compared to 27.9% for the three months ended March 31, 2017. The decrease in the expense ratio for the three months ended March 31, 2018 compared to the expense ratio for the same period last year reflected the benefit of higher net earned premiums without a proportional increase in the total amount of other underwriting expenses from management's focus on controlling costs. Direct commissions paid as a percent of gross written premiums was 14.7% for the three months ended March 31, 2018 and 14.8% for the three months ended March 31, 2017.

Combined ratio

Our combined ratio was 85.9% for the three months ended March 31, 2018 compared to 82.6% for the three months ended March 31, 2017.

Investing results

Our net investment income increased by 41.3% to $3.2 million for the three months ended March 31, 2018 from $2.3 million for the three months ended March 31, 2017, primarily due to the increase in our investment portfolio balance from excess operating funds generated since the first quarter of 2017 and a higher gross investment return in the first three months of 2018 compared to the same period last year.

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The following table summarizes net investment income and net realized and unrealized investment gains and losses for the three months ended March 31, 2018 and 2017:



	Three Months Ended March 31,
($ in thousands)	2018			2017			Change			% Change

Interest from fixed-maturity securities	$	2,846		$	2,331		$	515		22.1	%
Dividends from equity securities	412			110			302			274.5
Other	260			87			173			198.9
Gross investment income	3,518			2,528			990			39.2
Investment expenses	(289		)	(242		)	(47		)	19.4
Net investment income	3,229			2,286			943			41.3
Net unrealized losses on equity securities	(1,279		)	—			(1,279		)	NM
Net realized gains (losses) on investments	112			(32		)	144			NM
Net realized and unrealized investment losses	(1,167		)	(32		)	(1,135		)	NM
Total	$	2,062		$	2,254		$	(192	)	(8.5	)%

NM - Percentage change not meaningful

Our investment portfolio, excluding cash equivalents and unrealized gains and losses, had an annualized gross investment return of 2.7% for the three months ended March 31, 2018, compared to 2.3% for the three months ended March 31, 2017. As discussed previously, effective January 1, 2018, we adopted a new accounting standard which required changes in the fair value of equity investments to be recognized in net income. During the first quarter of 2018, we recognized unrealized losses of $1.3 million related to our equity portfolio.

We perform quarterly reviews of all available-for-sale securities within our investment portfolio to determine whether any other-than-temporary impairment has occurred. Management concluded that there were no other-than-temporary impairments from available-for-sale investments for the three months ended March 31, 2018 or 2017.

Income tax expense

Our income tax expense was $1.5 million for the three months ended March 31, 2018 compared to $3.0 million for the three months ended March 31, 2017. Our effective tax rate was approximately 17.3% for the three months ended March 31, 2018 compared to 32.4% for the three months ended March 31, 2017. For the first quarter of 2018, our effective tax rate reflected the Tax Cuts and Jobs Act of 2017, which among other provisions, lowered the federal corporate tax rate from 35% to 21% starting January 1, 2018. The decrease in the effective tax rate for the three months ended March 31, 2018 compared to the prior-year period was also due to the recognition of tax benefits related to stock options exercised during the first quarter of 2018.

Return on equity

Our annualized return on equity was 12.2% for the three months ended March 31, 2018 compared to 11.8% for the three months ended March 31, 2017. The increase in annualized return on equity for the three months ended March 31, 2018 was largely due to the lower income tax rate as a result of the Tax Cuts and Jobs Act of 2017.

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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, 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 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.

Management believes that the Company has sufficient liquidity available both in Kinsale and in its insurance subsidiary, Kinsale Insurance, 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.

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, rent 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 three months ended March 31, 2018 and 2017 were:



	Three Months Ended March 31,
	2018			2017
	(in thousands)
Cash and cash equivalents provided by (used in):
Operating activities	$	21,437		$	15,447
Investing activities	(45,597		)	10,624
Financing activities	(928		)	(1,267		)
Change in cash and cash equivalents	$	(25,088	)	$	24,804

Net cash provided by operating activities was approximately $21.4 million for the three months ended March 31, 2018, compared to $15.4 million for the same period in 2017. This increase was largely driven by premium volume, the timing of claim payments, reinsurance recoveries, and changes in operating assets and liabilities.

Net cash used in investing activities was $45.6 million for the three months ended March 31, 2018, compared to net cash provided by investing activities of $10.6 million for the three months ended March 31, 2017. Net cash used in investing activities during the first quarter of 2018 reflected purchases of fixed-maturity securities of $82.6 million, principally corporate bonds and asset-backed securities, and purchases of equity securities of $3.2 million, principally exchange

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traded funds (ETFs). During the first quarter of 2018, we received proceeds of $39.3 million from maturities and sales of fixed-maturity securities and $0.9 million from the sale of an intermediate-term bond ETF. Cash provided by investing activities during the first quarter of 2017 reflected proceeds received from maturing fixed income securities of $19.2 million, offset in part by selective purchases of fixed income securities, principally municipal bonds of $5.9 million. In addition, we purchased $3.1 million of equity securities during the first quarter of 2017.

During the first three months of 2018, cash used in financing activities primarily reflected dividends paid of $0.07 per common share, or $1.5 million in aggregate. During the first three months of 2017, cash used in financing activities primarily reflected dividends paid of $0.06 per common share, or $1.3 million in aggregate.

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.

The following is a summary of our significant reinsurance programs as of March 31, 2018:



Line of Business Covered	Company Policy Limit	Reinsurance Coverage	Company Retention
Property - per risk	Up to $10.0 million per risk	$9.0 million excess of $1.0 million	$1.0 million per occurrence
Property - catastrophe (1)	N/A	$45.0 million excess of $5.0 million	$5.0 million per catastrophe
Primary casualty (2)	Up to $10.0 million per occurrence	$9.0 million excess of $1.0 million	$1.0 million per occurrence
Excess casualty (3)	Up to $10.0 million per occurrence	Variable quota share	$1.5 million per occurrence except as described in note (3) 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 $90 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 $1.0 million or less.

(3)

For policies with a per occurrence limit higher than $1.0 million, the quota share ceding percentage varies such that the retention is always $1.5 million or less. For example, for a $2.0 million limit excess policy, our retention would be 75%, whereas for a $10.0 million limit excess policy, our retention would be 15%. For policies for which we also write an underlying primary limit, the retention on the primary and excess policy combined would not exceed $1.5 million.

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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 therefore, we establish allowances for 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 March 31, 2018, 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 March 31, 2018, we have never had a loss for uncollectible reinsurance.

Ratings

Kinsale Insurance has a financial strength rating of "A-" (Excellent) from A.M. Best. A.M. Best assigns 16 ratings to insurance companies, which currently range from "A++" (Superior) to "F" (In Liquidation). "A-" (Excellent) is the fourth 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.

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.

Financial condition

Stockholders' equity

At March 31, 2018, total stockholders' equity was $239.9 million and tangible stockholders' equity was $237.1 million, compared to total stockholders' equity of $238.2 million and tangible stockholders' equity $235.4 million at December 31, 2017. The increases in both total and tangible stockholders' equity over the prior year-end balances were primarily due to net income offset in part by an increase in unrealized losses on investments, net of taxes, and payment of dividends.

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 March 31, 2018 and December 31, 2017, reconciles to tangible stockholders' equity as follows:



	March 31, 2018		December 31, 2017
	(in thousands)
Stockholders' equity	$	239,850	$	238,189
Less: intangible assets, net of deferred taxes	2,795		2,795
Tangible stockholders' equity	$	237,055	$	235,394

Investment portfolio

At March 31, 2018, our cash and invested assets of $574.3 million consisted of fixed-maturity securities, cash and cash equivalents and equity securities. At March 31, 2018, the majority of the investment portfolio was comprised of fixed-maturity securities of $462.5 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 March 31, 2018, we also held $56.7 million of cash and cash equivalents

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and $55.1 million of equity securities, which are comprised of ETFs and nonredeemable preferred stock. Effective January 1, 2018, we adopted a new accounting standard ASU 2016-01, "Financial Instruments – Overall: Recognition and Measurement of Financial Assets and Financial Liabilities," which eliminated the available-for-sale classification for equity securities and required changes in unrealized gains and losses in fair value of these investments to be recognized in net income. Our fixed-maturity securities, including cash equivalents, had a weighted average duration of 4.1 years at March 31, 2018 compared to 3.9 years at December 31, 2017 and an average rating of "AA" at March 31, 2018 and December 31, 2017.

At March 31, 2018 and December 31, 2017, the amortized cost and fair value on fixed-maturity securities were as follows:



	March 31, 2018						December 31, 2017
	Amortized Cost		Estimated Fair Value		% of Total Fair Value		Amortized Cost		Estimated Fair Value		% of Total Fair Value
	($ in thousands)
Fixed maturities:
U.S. Treasury securities and obligations of U.S. government agencies	$	608	$	606	0.1	%	$	9,108	$	9,098	2.1	%
Obligations of states, municipalities and political subdivisions	158,889		158,715		34.3	%	161,012		164,326		38.7	%
Corporate and other securities	93,807		93,664		20.3	%	71,224		71,631		16.9	%
Asset-backed securities	123,397		122,937		26.6	%	95,223		95,360		22.4	%
Residential mortgage-backed securities	89,043		86,612		18.7	%	85,688		84,776		19.9	%
Total fixed maturities	$	465,744	$	462,534	100.0	%	$	422,255	$	425,191	100.0	%

The table below summarizes the credit quality of our fixed-maturity securities at March 31, 2018 and December 31, 2017, as rated by Standard & Poor’s Financial Services, LLC ("Standard & Poor's"):



	March 31, 2018				December 31, 2017
Standard & Poor’s or Equivalent Designation	Estimated Fair Value		% of Total		Estimated Fair Value		% of Total
	($ in thousands)
AAA	$	108,747	23.5	%	$	85,199	20.0	%
AA	183,650		39.7	%	190,044		44.7	%
A	121,763		26.3	%	112,129		26.4	%
BBB	39,742		8.6	%	28,715		6.8	%
Below BBB and unrated	8,632		1.9	%	9,104		2.1	%
Total	$	462,534	100.0	%	$	425,191	100.0	%

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The amortized cost and fair value of our available-for-sale investments in fixed maturity securities summarized by contractual maturity as of March 31, 2018 and December 31, 2017, were as follows:



	March 31, 2018						December 31, 2017
	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	$	33,012	$	32,899	7.1	%	$	50,020	$	49,973	11.8	%
Due after one year through five years	47,430		47,494		10.3	%	28,979		29,299		6.9	%
Due after five years through ten years	38,633		39,111		8.5	%	28,733		29,800		7.0	%
Due after ten years	134,229		133,481		28.9	%	133,612		135,983		32.0	%
Asset-backed securities	123,397		122,937		26.5	%	95,223		95,360		22.4	%
Residential mortgage-backed securities	89,043		86,612		18.7	%	85,688		84,776		19.9	%
Total fixed maturities	$	465,744	$	462,534	100.0	%	$	422,255	$	425,191	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 March 31, 2018, approximately 6.3% of our total cash and investments were invested in ETFs, which provide low-cost diversification. At March 31, 2018 and December 31, 2017, our ETF balance was comprised of the following funds:



	March 31, 2018				December 31, 2017
Fund	Fair Value		% of Total		Fair Value		% of Total
	($ in thousands)
Domestic stock market fund	$	17,925	49.9	%	$	16,088	46.8	%
Foreign stock market fund	10,240		28.5	%	9,297		27.0	%
Dividend yield equity fund	7,774		21.6	%	8,010		23.3	%
Intermediate-term corporate bond fund	—		—	%	985		2.9	%
Total	$	35,939	100.0	%	$	34,380	100.0	%

As of March 31, 2018, approximately 3.3% of our total cash and investments were invested in nonredeemable preferred stock. A summary of these securities by industry segment is shown below as of March 31, 2018 and December 31, 2017:



	March 31, 2018				December 31, 2017
Industry	Fair Value		% of Total		Fair Value		% of Total
	($ in thousands)
Financial	$	15,361	80.3	%	$	15,859	80.3	%
Utilities	2,055		10.8	%	2,120		10.7	%
Industrials and other	1,710		8.9	%	1,773		9.0	%
Total	$	19,126	100.0	%	$	19,752	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 million at March 31, 2018 and $7.1 million at December 31, 2017.

Off-balance sheet arrangements

We do not have any material off-balance sheet arrangements at March 31, 2018.

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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 represents the pre-tax profitability of our insurance operations and is derived by subtracting losses and loss adjustment expenses and underwriting, acquisition and insurance expenses from net earned premiums. 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 three months ended March 31, 2018 and 2017, reconciles to underwriting income as follows:



	Three Months Ended March 31,
(in thousands)	2018			2017

Net income	$	7,287		$	6,281
Income tax expense	1,528			3,005
Income before income taxes	8,815			9,286
Other expenses	14			—
Net investment income	(3,229		)	(2,286		)
Net unrealized losses on equity investments	1,279			—
Net realized (gains) losses on investments	(112		)	32
Other income	(3		)	—
Underwriting income	$	6,764		$	7,032

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. 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. Our critical accounting policies and estimates are described in our annual consolidated financial statements and the related notes in our Annual Report on Form 10-K for the year ended December 31, 2017.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

Market risk is the risk of economic losses due to adverse changes in the estimated fair value of a financial instrument as the result of changes in interest rates, equity prices, foreign currency exchange rates and commodity prices. Our primary market risks have been equity price risk associated with investments in equity securities and interest rate risk associated with investments in fixed maturities. We do not have any material exposure to foreign currency exchange rate risk or commodity risk.

There have been no material changes in market risk from the information provided in our Annual Report on Form 10-K for the year ended December 31, 2017.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports we file under the Securities Exchange Act of 1934 (the "Exchange Act") is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO"), as appropriate, to allow timely decisions regarding required financial disclosure.

As of the end of the period covered by this Quarterly Report on Form 10-Q, we carried out an evaluation, under the supervision and with the participation of our management, including our CEO and CFO, of the effectiveness of the design and operation of our disclosure controls and procedures defined under Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based upon this evaluation, our CEO and CFO concluded that our disclosure controls and procedures were effective.

Changes in Internal Controls over Financial Reporting

No changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the quarter ended March 31, 2018 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations on Effectiveness of Controls

The effectiveness of any system of controls and procedures is subject to certain limitations, and, as a result, there can be no assurance that our controls and procedures will detect all errors or fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system will be attained.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

We are party to legal proceedings which arise in the ordinary course of business. We believe that the outcome of such matters, individually and in the aggregate, will not have a material adverse effect on our consolidated financial position.

Item 1A. Risk Factors

There have been no material changes in our risk factors from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2017.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 6. Exhibits



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

* This certification is deemed not filed for purposes of section 18 of the Exchange Act, or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act.

** Furnished with this Quarterly Report. Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933 and are deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934.

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Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



		KINSALE CAPITAL GROUP, INC.
Date: May 3, 2018	By:	/s/ Michael P. Kehoe
		Michael P. Kehoe President and Chief Executive Officer

Date: May 3, 2018	By:	/s/ Bryan P. Petrucelli
		Bryan P. Petrucelli Senior Vice President, Chief Financial Officer and Treasurer