Company: KNSL
Filing Date: 2025-02-21
Form Type: 10-K
Source: 0001669162-25-000010
Chunk: 87

Company: Kinsale Capital Group, Inc.
Filing Date: 2025-02-21
Form: 10-K
Item: Item 7
Chunk 87
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 a reduction to credit loss expense of $0.5 million for the year ended December 31, 2024 compared to credit loss expense of $0.2 million for the year ended December 31, 2023. See Note 2 of the notes to the consolidated financial statements for further information regarding credit losses.

Income tax expense

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

Return on equity

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

Liquidity and Capital Resources

Sources and uses of funds

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

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

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

48

State insurance laws restrict