Company: KNSL
Filing Date: 2025-04-24
Form Type: 10-Q
Source: 0001669162-25-000027
Chunk: 87

Company: Kinsale Capital Group, Inc.
Filing Date: 2025-04-24
Form: 10-Q
Item: Item 8
Chunk 87
---
 2024 primarily reflected higher valuations in the broader U.S. stock market.

Net realized investment gains were $0.5 million and $3.9 million for the three months ended March 31, 2025 and 2024, respectively and were primarily related to sales of common stocks and ETFs due to opportunistic repositioning of our equity portfolio.

We perform quarterly reviews of all available-for-sale securities within our investment portfolio to determine whether the decline in a security's fair value is deemed to be a credit loss. Based on our review, we recorded credit loss expense of less than $0.1 million for the three months ended March 31, 2025. 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 20.6% for the three months ended March 31, 2025 compared to 14.6% for the three months ended March 31, 2024. 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 from tax-exempt investment income. The effective tax rate was higher for the three months ended March 31, 2025 compared to the same period in 2024 due primarily to a lower volume of stock option exercises.

Return on equity

Our annualized return on equity was 23.3% for the three months ended March 31, 2025 compared to 35.1% for the three months ended March 31, 2024. Our annualized operating return on equity was 22.5% for the three months ended March 31, 2025 compared to 28.9% for the three months ended March 31, 2024. The decrease in annualized operating return on equity for the three months ended March 31, 2025 compared to the prior period was due primarily to higher average stockholders' equity and higher net catastrophe losses primarily related to the Palisades Fire. Average stockholder's equity increased as a result of profitable growth and an increase in the fair value of our fixed income portfolio.

Liquidity and Capital Resources

Sources and uses of funds

We are organized as a Delaware holding company with our operations primarily conducted by our wholly-owned insurance subsidiary, Kinsale Insurance Company, which is domiciled in Arkansas. Accordingly, we primarily receive cash through (1) loans from banks and other third parties