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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, 2021
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
98-0664337
(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer
Identification Number)
2035 Maywill Street
Suite 100
Richmond, Virginia 23230
(Address of principal executive offices, including zip code)
(804) 289-1300
(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.01KNSLNasdaq Global Select Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒   No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes       No  ☒
Number of shares of the registrant's common stock outstanding at April 23, 2021: 22,812,216


Table of Contents
KINSALE CAPITAL GROUP, INC.
TABLE OF CONTENTS
Page
PART I. FINANCIAL INFORMATION
Item 1.
Item 2.
Item 3.
Item 4.
PART II. OTHER INFORMATION
Item 1.
Item 1A.
Item 2.
Item 6.
1

Table of Contents

Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include any statement that does not directly relate to historical or current fact. These statements may discuss, among others, our future financial performance, our business prospects and strategy, our anticipated financial position, liquidity and capital, dividends and general market and industry conditions. You can identify forward-looking statements by words such as "anticipates," "estimates," "expects," "intends," "plans," "predicts," "projects," "believes," "seeks," "outlook," "future," "will," "would," "should," "could," "may," "can have" and similar terms. Forward-looking statements are based on management’s current expectations and assumptions about future events, which are subject to uncertainties, risks and changes in circumstances that are difficult to predict. These statements are only predictions and are not guarantees of future performance. Actual results may differ materially from those contemplated by a forward-looking statement. Factors that may cause such differences include, without limitation:
the possibility that our loss reserves may be inadequate to cover our actual losses, which could have a material adverse effect on our financial condition, results of operations and cash flows;
the inherent uncertainty of models resulting in actual losses that are materially different than our estimates;
the failure of any of the loss limitations or exclusions we employ, or change in other claims or coverage issues, having a material adverse effect on our financial condition or results of operations;
the inability to obtain reinsurance coverage at reasonable prices and on terms that adequately protect us;
the possibility that severe weather conditions and other catastrophes may result in an increase in the number and amount of claims filed against us;
adverse economic factors, including recession, inflation, periods of high unemployment or lower economic activity resulting in the sale of fewer policies than expected or an increase in frequency or severity of claims and premium defaults or both, affecting our growth and profitability;
a decline in our financial strength rating adversely affecting the amount of business we write;
the potential loss of one or more key executives or an inability to attract and retain qualified personnel adversely affecting our results of operations;
our reliance on a select group of brokers;
the changing market conditions of our excess and surplus lines ("E&S") insurance operations, as well as the cyclical nature of our business, affecting our financial performance;
our employees taking excessive risks;
the intense competition for business in our industry;
the effects of litigation having an adverse effect on our business;
the performance of our investment portfolio adversely affecting our financial results;
the ability to pay dividends being dependent on our ability to obtain cash dividends or other permitted payments from our insurance subsidiary;
being forced to sell investments to meet our liquidity requirements;
2

Table of Contents
extensive regulation adversely affecting our ability to achieve our business objectives or the failure to comply with these regulations adversely affecting our financial condition and results of operations;
the other risks and uncertainties discussed in Part I, Item 1A of the Annual Report on Form 10-K for the year ended December 31, 2020.
Forward-looking statements speak only as of the date on which they are made. Except as expressly required under federal securities laws or the rules and regulations of the Securities and Exchange Commission ("SEC"), we do not assume any obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. You should not place undue reliance on forward-looking statements. All forward-looking statements attributable to us are expressly qualified by these cautionary statements.

3

Table of Contents
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
KINSALE CAPITAL GROUP, INC. AND SUBSIDIARIES
Consolidated Balance Sheets (Unaudited)
March 31,
2021
December 31,
2020
(in thousands, except share and per share data)
Assets
Investments:
Fixed-maturity securities, available for sale, at fair value (amortized cost: $1,074,618 2021; $1,031,817 2020)
$1,099,763 $1,081,800 
Equity securities, at fair value (cost: $102,041 2021; $98,758 2020)
140,036 129,662 
Total investments1,239,799 1,211,462 
Cash and cash equivalents132,535 77,093 
Investment income due and accrued6,639 6,637 
Premiums receivable, net55,212 48,641 
Reinsurance recoverables96,191 93,215 
Ceded unearned premiums26,854 24,265 
Deferred policy acquisition costs, net of ceding commissions34,741 31,912 
Intangible assets3,538 3,538 
Deferred income tax asset, net608  
Other assets49,221 50,133 
Total assets$1,645,338 $1,546,896 
Liabilities and Stockholders' Equity
Liabilities:
Reserves for unpaid losses and loss adjustment expenses$688,773 $636,013 
Unearned premiums284,832 260,986 
Payable to reinsurers15,010 12,672 
Accounts payable and accrued expenses6,502 13,651 
Credit facility42,601 42,570 
Deferred income tax liability, net 4,648 
Other liabilities20,054 118 
Total liabilities1,057,772 970,658 
Stockholders’ equity:
Common stock, $0.01 par value, 400,000,000 shares authorized, 22,811,929 and 22,757,251 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively
228 228 
Additional paid-in capital292,690 291,315 
Retained earnings272,890 243,315 
Accumulated other comprehensive income 21,758 41,380 
Total stockholders’ equity587,566 576,238 
Total liabilities and stockholders’ equity$1,645,338 $1,546,896 
See accompanying notes to condensed consolidated financial statements.
4

Table of Contents
KINSALE CAPITAL GROUP, INC. AND SUBSIDIARIES
Consolidated Statements of Income and Comprehensive Income (Loss) (Unaudited)
Three Months Ended March 31,
20212020
(in thousands, except per share data)
Revenues:
Gross written premiums$168,876 $124,036 
Ceded written premiums(24,578)(15,983)
Net written premiums144,298 108,053 
Change in unearned premiums(21,257)(18,292)
Net earned premiums123,041 89,761 
Net investment income6,942 5,960 
Change in the fair value of equity securities
7,091 (16,161)
Net realized investment gains1,198 776 
Other income11 10 
Total revenues138,283 80,346 
Expenses:
Losses and loss adjustment expenses70,260 53,733 
Underwriting, acquisition and insurance expenses28,136 21,583 
Other expenses448  
Total expenses98,844 75,316 
Income before income taxes39,439 5,030 
Total income tax expense (benefit)7,360 (56)
Net income32,079 5,086 
Other comprehensive income (loss):
Change in net unrealized gains on available-for-sale investments, net of taxes(19,622)(9,223)
Total comprehensive income (loss)$12,457 $(4,137)
Earnings per share:
Basic$1.42 $0.23 
Diluted$1.39 $0.22 
Weighted-average shares outstanding:
Basic22,665 22,109 
Diluted23,069 22,678 

See accompanying notes to condensed consolidated financial statements.
5

Table of Contents
KINSALE CAPITAL GROUP, INC. AND SUBSIDIARIES
Consolidated Statements of Changes in Stockholders' Equity (Unaudited)
Shares of Common StockCommon StockAdditional Paid-in CapitalRetained EarningsAccumu-
lated
 Other
Compre-
hensive
Income
Total
Stock-
holders' Equity
(in thousands, except per share data)
Balance at December 31, 202022,757 $228 $291,315 $243,315 $41,380 $576,238 
Issuance of common stock under stock-based compensation plan
55  339 — — 339 
Stock-based compensation expense
— — 1,036 — — 1,036 
Dividends declared ($0.11 per share)
— — — (2,504)— (2,504)
Other comprehensive loss, net of tax— — — — (19,622)(19,622)
Net income— — — 32,079 — 32,079 
Balance at March 31, 202122,812 $228 $292,690 $272,890 $21,758 $587,566 
Balance at December 31, 201922,206 $222 $229,229 $162,911 $13,518 $405,880 
Adoption of new accounting standard for credit losses, net
— — — 78 — 78 
Issuance of common stock under stock-based compensation plan
48 1 701 — — 702 
Stock-based compensation expense
— — 812 — — 812 
Dividends declared ($0.09 per share)
— — — (2,001)— (2,001)
Other comprehensive loss, net of tax— — — — (9,223)(9,223)
Net income— — — 5,086 — 5,086 
Balance at March 31, 202022,254 $223 $230,742 $166,074 $4,295 $401,334 

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,
20212020
(in thousands)
Operating activities:
Net cash provided by operating activities$91,322 $59,683 
Investing activities:
Purchase of property and equipment(1,282)(9,264)
Sale of property and equipment 4,999 
Purchases – fixed-maturity securities(105,010)(146,963)
Purchases – equity securities(3,282)(13,443)
Sales – fixed-maturity securities30,797 31,641 
Maturities and calls – fixed-maturity securities45,053 19,482 
Net cash used in investing activities(33,724)(113,548)
Financing activities:
Proceeds from credit facility 7,300 
Proceeds from stock options exercised339 702 
Dividends paid(2,495)(1,991)
Net cash (used in) provided by financing activities(2,156)6,011 
Net change in cash and cash equivalents55,442 (47,854)
Cash and cash equivalents at beginning of year77,093 100,408 
Cash and cash equivalents at end of period$132,535 $52,554 
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 Kinsale Capital Group, Inc. and its wholly owned subsidiaries' (the "Company") business and accounting policies, these condensed consolidated interim financial statements should be read in conjunction with the audited consolidated financial statements of the Company included in the Annual Report on Form 10-K for the year ended December 31, 2020. 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
Accounting Standard Update ("ASU") 2019-12, Income Taxes - Simplifying the Accounting for Income Taxes
In December 2019, the Financial Accounting Standards Board ("FASB") issued updated guidance for the accounting for income taxes. The updated guidance is intended to simplify the accounting for income taxes by removing several exceptions contained in existing guidance and amending other existing guidance to simplify several other income tax accounting matters. Effective January 1, 2021, the Company adopted ASU 2019-12, which did not have a material impact on the Company's condensed consolidated financial statements.
There are no prospective accounting standards which, upon their effective date, would have a material impact on the Company's condensed consolidated financial statements.






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2.     Investments
Available-for-sale investments
The following tables summarize the available-for-sale investments at March 31, 2021 and December 31, 2020:
March 31, 2021
Amortized CostGross Unrealized GainsGross Unrealized LossesEstimated Fair Value
(in thousands)
Fixed maturities:
Obligations of states, municipalities and political subdivisions
$205,744 $10,349 $(1,730)$214,363 
Corporate and other securities333,572 12,682 (3,428)342,826 
Asset-backed securities255,544 3,951 (70)259,425 
Commercial mortgage-backed securities62,519 2,537 (230)64,826 
Residential mortgage-backed securities
217,239 3,562 (2,478)218,323 
Total fixed-maturity investments$1,074,618 $33,081 $(7,936)$1,099,763 

December 31, 2020
Amortized CostGross Unrealized GainsGross Unrealized LossesEstimated Fair Value
(in thousands)
Fixed maturities:
Obligations of states, municipalities and political subdivisions
$216,181 $14,792 $(67)$230,906 
Corporate and other securities294,854 21,840 (86)316,608 
Asset-backed securities236,813 4,230 (382)240,661 
Commercial mortgage-backed securities66,110 4,886 (27)70,969 
Residential mortgage-backed securities
217,859 4,938 (141)222,656 
Total fixed-maturity investments$1,031,817 $50,686 $(703)$1,081,800 

Available-for-sale securities in a loss position
The Company regularly reviews all its available-for-sale investments with unrealized losses to assess whether the decline in the fair value is deemed to be a credit loss. The Company considers a number of factors in completing its review of credit losses, including the extent to which a security's fair value has been below cost and the financial condition of an issuer. In addition to specific issuer information, the Company also evaluates the current market and interest rate environment. Generally, a change in a security’s value caused by a change in the market or interest rate environment does not constitute a credit loss.
For fixed-maturity securities, the Company also considers whether it intends to sell the security or, if it is more likely than not that it will be required to sell the security before recovery, and its ability to recover all amounts outstanding when contractually due. When assessing whether it intends to sell a fixed-maturity security or, if it is likely to be required to sell a fixed-maturity security before recovery of its amortized cost, the Company evaluates facts and circumstances including, but not limited to, decisions to reposition the investment portfolio, potential sales of investments to meet cash flow needs and potential sales of investments to capitalize on favorable pricing.
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For fixed-maturity securities where a decline in fair value is below the amortized cost basis and the Company intends to sell the security, or it is more likely than not that the Company will be required to sell the security before recovery of its amortized cost, an impairment is recognized in net income based on the fair value of the security at the time of assessment. For fixed-maturity securities that the Company does not intend to sell or for which it is more likely than not that the Company would not be required to sell before recovery of its amortized cost, 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 impairment, which is recognized in net income through an allowance for credit losses. Any remaining decline in fair value represents the noncredit portion of the impairment, which is recognized in other comprehensive income.
The Company reports investment income due and accrued separately from available-for-sale investments and has elected not to measure an allowance for credit losses for investment income due and accrued. Investment income due and accrued is written off through net realized gains (losses) on investments at the time the issuer of the bond defaults or is expected to default on payments.
The following tables summarize gross unrealized losses and estimated fair value for available-for-sale investments by length of time that the securities have continuously been in an unrealized loss position:
March 31, 2021
Less than 12 Months12 Months or LongerTotal
Estimated Fair ValueGross Unrealized LossesEstimated Fair ValueGross Unrealized LossesEstimated Fair ValueGross Unrealized Losses
(in thousands)
Fixed maturities:
Obligations of states, municipalities and political subdivisions
$38,432 $(1,730)$ $ $38,432 $(1,730)
Corporate and other securities
114,920 (3,428)  114,920 (3,428)
Asset-backed securities25,069 (16)17,373 (54)42,442 (70)
Commercial mortgage-backed securities9,556 (230)  9,556 (230)
Residential mortgage-backed securities
113,150 (2,423)5,543 (55)118,693 (2,478)
Total fixed-maturity investments$301,127 $(7,827)$22,916 $(109)$324,043 $(7,936)

At March 31, 2021, the Company held 167 fixed-maturity securities in an unrealized loss position with a total estimated fair value of $324.0 million and gross unrealized losses of $7.9 million. Of these securities, 11 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 a credit loss has occurred. Based on the Company's review as of March 31, 2021, unrealized losses were caused by interest rate changes or other market factors and were not credit-specific issues. At March 31, 2021, 78.3% 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. For the three months ended March 31, 2021, the Company concluded that there were no credit losses from fixed-maturity securities with unrealized losses.
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December 31, 2020
Less than 12 Months
12 Months or Longer
Total
Estimated Fair Value
Gross Unrealized Losses
Estimated Fair Value
Gross Unrealized Losses
Estimated Fair Value
Gross Unrealized Losses
(in thousands)
Fixed maturities:
Obligations of states, municipalities and political subdivisions
$6,412 $(67)$ $ $6,412 $(67)
Corporate and other securities
3,829 (86)  3,829 (86)
Asset-backed securities57,750 (149)23,825 (233)81,575 (382)
Commercial mortgage-backed securities4,971 (27)  4,971 (27)
Residential mortgage-backed securities
46,869 (129)266 (12)47,135 (141)
Total fixed-maturity investments$119,831 $(458)$24,091 $(245)$143,922 $(703)

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, 2021 are summarized, by contractual maturity, as follows:
March 31, 2021
AmortizedEstimated
CostFair Value
(in thousands)
Due in one year or less$11,278 $11,466 
Due after one year through five years124,996 131,847 
Due after five years through ten years171,090 177,032 
Due after ten years231,952 236,844 
Asset-backed securities255,544 259,425 
Commercial mortgage-backed securities62,519 64,826 
Residential mortgage-backed securities217,239 218,323 
Total fixed-maturity securities $1,074,618 $1,099,763 

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.



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Net investment income
The following table presents the components of net investment income for the three months ended March 31, 2021 and 2020:
Three Months Ended March 31,
20212020
(in thousands)
Interest:
Taxable bonds$5,729 $4,611 
Tax exempt municipal bonds885 915 
Cash equivalents and short-term investments
1 250 
Dividends on equity securities869 575 
Gross investment income7,484 6,351 
Investment expenses(542)(391)
Net investment income$6,942 $5,960 

Realized investment gains and losses
The following table presents realized investment gains and losses for the three months ended March 31, 2021 and 2020:
Three Months Ended March 31,
20212020
(in thousands)
Fixed-maturity securities:
Realized gains$1,199 $787 
Realized losses(1)(23)
Net realized gains from fixed-maturity securities1,198 764 
Realized gains from the sales of short-term investments 12 
Net realized investment gains$1,198 $776 

Change in net unrealized gains on fixed-maturity securities
For the three months ended March 31, 2021 and 2020, the changes in net unrealized gains for fixed-maturity securities were decreases of $24.8 million and $11.7 million, respectively.
Insurance – statutory deposits
The Company had invested assets with a carrying value of $6.8 million and $6.9 million on deposit with state regulatory authorities at March 31, 2021 and December 31, 2020, respectively.
Payable for investments purchased
The Company recorded a payable for investments purchased, not yet settled, of $13.6 million at March 31, 2021. The payable balance was included in the "other liabilities" line item of the consolidated balance sheet.
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3.     Fair value measurements
Fair value is 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 or paid to transfer a liability 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.
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 accounting vendor from nationally recognized third-party pricing services, where available. Values for U.S. Treasury and exchange traded funds are generally based on Level 1 inputs which use quoted prices in active markets for identical assets. For other fixed-maturity securities and preferred stock, the pricing vendors use a pricing methodology involving the market approach, including pricing models which use prices and relevant market information regarding a particular security or securities with similar characteristics to establish a valuation. The estimates of fair value of these investments are included in the amounts disclosed as Level 2. For those investments where significant inputs are unobservable, the Company's investment accounting vendor obtains valuations from pricing vendors or brokers using the market approach and income approach valuation techniques and are disclosed as Level 3.
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 accounting vendor that assess fair values from third party pricing services, 2) discussing with the Company's investment accounting vendor its process for reviewing and validating pricing obtained from third party pricing services and 3) reviewing the security pricing received from the Company's investment accounting vendor and monitoring changes in unrealized gains and losses at the individual security level. 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.
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The following tables present the balances of assets measured at fair value on a recurring basis as of March 31, 2021 and December 31, 2020, by level within the fair value hierarchy.
March 31, 2021
Level 1Level 2Level 3Total
(in thousands)
Assets
Fixed maturities:
Obligations of states, municipalities and political subdivisions
$ $214,363 $ $214,363 
Corporate and other securities 342,826  342,826 
Asset-backed securities 259,425  259,425 
Commercial mortgage-backed securities 64,826  64,826 
Residential mortgage-backed securities 218,323  218,323 
Total fixed-maturity securities 1,099,763  1,099,763 
Equity securities:
Exchange traded funds106,014   106,014 
Nonredeemable preferred stock 34,022  34,022 
Total equity securities106,014 34,022  140,036 
Total$106,014 $1,133,785 $ $1,239,799 

December 31, 2020
Level 1Level 2Level 3Total
(in thousands)
Assets
Fixed maturities:
Obligations of states, municipalities and political subdivisions
$ $230,906 $ $230,906 
Corporate and other securities 316,608  316,608 
Asset-backed securities 240,661  240,661 
Commercial mortgage-backed securities 70,969  70,969 
Residential mortgage-backed securities 222,656  222,656 
Total fixed-maturity securities 1,081,800  1,081,800 
Equity securities:
Exchange traded funds98,050   98,050 
Nonredeemable preferred stock 31,612  31,612 
Total equity securities98,050 31,612  129,662 
Total$98,050 $1,113,412 $ $1,211,462 

There were no assets or liabilities measured at fair value on a nonrecurring basis as of March 31, 2021 or December 31, 2020.
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The carrying value of cash equivalents approximates its fair value at March 31, 2021 and December 31, 2020, due to the short-term maturities of these assets. In addition, the estimated fair value of the Credit Facility approximated its carrying value as of March 31, 2021 and December 31, 2020. See Note 12 for further information regarding the Credit Facility.

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, 2021 and 2020:
Three Months Ended March 31,
20212020
(in thousands)
Balance, beginning of period$31,912 $23,564 
Policy acquisition costs deferred:
Direct commissions
24,650 18,078 
Ceding commissions(6,204)(3,872)
Other underwriting and policy acquisition costs1,368 1,187 
Policy acquisition costs deferred19,814 15,393 
Amortization of net policy acquisition costs
(16,985)(12,952)
Balance, end of period$34,741 $26,005 

Amortization of net policy acquisition costs is included in the line item "Underwriting, acquisition and insurance expenses" in the accompanying consolidated statements of income and comprehensive income (loss).
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5.     Property and equipment, net
Property and equipment are included in "other assets" in the accompanying consolidated balance sheets and consists of the following:
March 31, 2021December 31, 2020
(in thousands)
Building$31,770 $31,675 
Parking deck5,072 5,072 
Land3,068 3,068 
Equipment2,861 2,770 
Software5,393 4,815 
Furniture and fixtures1,778 1,731 
Land improvements317 317 
Construction in progress - corporate headquarters253  
50,512 49,448 
Accumulated depreciation(3,763)(3,262)
Total property and equipment, net$46,749 $46,186 

During the first quarter of 2020, the Company sold a portion of both its land and parking deck for approximately $6.5 million to a real estate developer for the development of an apartment building. As of March 31, 2021, the Company had received $5.0 million of the proceeds from the sale and is expected to receive the remaining $1.5 million upon completion of the apartment building. This receivable is included in "other assets" on the accompanying consolidated balance sheet.

6.     Underwriting, acquisition and insurance expenses
Underwriting, acquisition and insurance expenses for the three months ended March 31, 2021 and 2020 consist of the following:
Three Months Ended March 31,
20212020
(in thousands)
Underwriting, acquisition and insurance expenses incurred:
Direct commissions$21,165 $15,142 
Ceding commissions(5,355)(3,183)
Other operating expenses12,326 9,624 
Total$28,136 $21,583 

Other operating expenses within underwriting, acquisition and insurance expenses include salaries, bonus and employee benefits expenses of $11.3 million and $8.8 million for the three months ended March 31, 2021 and 2020, respectively.

7.    Stock-based compensation
On July 27, 2016, the Kinsale Capital Group, Inc. 2016 Omnibus Incentive Plan (the "2016 Incentive Plan") became effective. The 2016 Incentive Plan, which is administered by the Compensation, Nominating and Corporate
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Governance Committee of the Company’s Board of Directors, provides for grants of stock options, restricted stock, restricted stock units and other stock-based awards to officers, employees, directors, independent contractors and consultants. The number of shares of common stock available for issuance under the 2016 Incentive Plan may not exceed 2,073,832.
The total compensation cost that has been charged against income for share-based compensation arrangements was $1.0 million and $0.8 million for the three months ended March 31, 2021 and 2020, respectively.
Restricted Stock Awards
During the three months ended March 31, 2021, the Company granted restricted stock awards under the 2016 Incentive Plan. The restricted stock awards were valued on the date of grant and will vest over a period of 1 to 4 years. The fair value of restricted stock awards was determined based on the closing trading price of the Company’s shares on the grant date or, if no shares were traded on the grant date, the last preceding date for which there was a sale of shares. Except for restrictions placed on the transferability of restricted stock, holders of unvested restricted stock have full stockholder’s rights, including voting rights and the right to receive dividends. Unvested shares of restricted stock awards and accrued dividends, if any, are forfeited upon the termination of service to or employment with the Company.
A summary of restricted stock activity under the 2016 Incentive Plan for the three months ended March 31, 2021 is as follows:
For the Three Months Ended
March 31, 2021
Number of SharesWeighted Average Grant Date Fair Value per Share
Non-vested outstanding at the beginning of the period108,392 $97.40 
Granted35,870 $185.00 
Vested(4,428)$101.66 
Forfeited(2,406)$148.60 
Non-vested outstanding at the end of the period137,428 $119.22 

The weighted average grant-date fair value of the Company's restricted stock awards granted during the three months ended March 31, 2021 and 2020 was $185.00 and $101.66, respectively. The fair value of restricted stock awards that vested during the three months ended March 31, 2021 and 2020 was $0.9 million and $0.7 million, respectively. As of March 31, 2021, the Company had $13.5 million of total unrecognized stock-based compensation expense expected to be charged to earnings over a weighted-average period of 3.1 years.
Stock Options
On July 27, 2016, the Board of Directors approved, and the Company granted, 1,036,916 stock options with an exercise price equal to the initial public offering price of $16.00 per share and a weighted-average grant-date fair value of $2.71 per share. The options have a maximum contractual term of 10 years and vested in 4 equal annual installments following the date of the grant.

The value of the options granted was estimated at the date of grant using the Black-Scholes pricing model using the following assumptions:
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Risk-free rate of return1.26 %
Dividend yield1.25 %
Expected share price volatility(1)
18.50 %
Expected life in years(2)
6.3 years
(1)     Expected volatility was based on the Company’s competitors within the industry.
(2)     Expected life was calculated using the simplified method, which was an average of the contractual term of the option and its ordinary vesting period, as the Company did not have sufficient historical data for determining the expected term of our stock option awards.
A summary of option activity as of March 31, 2021, and changes during the period then ended is presented below:
Number of SharesWeighted-average exercise priceWeighted-average remaining years of contractual termAggregate intrinsic value (in thousands)
Outstanding at January 1, 2021387,738 $16.00 
Granted  
Forfeited 16.00 
Exercised(21,214)16.00 
Outstanding at March 31, 2021366,524 $16.00 5.3$54,539 
Exercisable at March 31, 2021366,524 $16.00 5.3$54,539 

The total intrinsic value of options exercised was $3.6 million and $4.6 million during the three months ended March 31, 2021 and 2020, respectively. 
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8.    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 condensed consolidated financial statements:
Three Months Ended March 31,
20212020
(in thousands, except per share data)
Net income$32,079 $5,086 
Weighted average common shares outstanding - basic22,665 22,109 
Effect of potential dilutive securities:
Conversion of stock options343 508 
Conversion of restricted stock
61 61 
Weighted average common shares outstanding - diluted23,069 22,678 
Earnings per common share:
Basic$1.42 $0.23 
Diluted$1.39 $0.22 

There were 33 thousand anti-dilutive stock awards for the three months ended March 31, 2021. There were no anti-dilutive stock awards for the three months ended March 31, 2020.

9. Income taxes
The Company uses the estimated annual effective tax rate method for calculating its tax provision in interim periods, which represents the Company's best estimate of the effective tax rate expected for the full year. The estimated annual effective tax rate typically differs from the U.S. statutory tax rate primarily as a result of tax-exempt investment income and any discrete items recognized during the period. The Company's effective tax rates were 18.7% and (1.1)% for the three months ended March 31, 2021 and 2020, respectively. For the three months ended March 31, 2021, the effective tax rate was lower than the federal statutory rate of 21% primarily due to the tax benefits from stock-based compensation and tax-exempt investment income. For the three months ended March 31, 2020, the effective tax rate was lower than the federal statutory rate of 21% primarily due to the tax benefits from stock options exercised and tax-exempt investment income in relation to pretax income. Pretax income was lower in the first quarter of 2020 from the decrease in the fair value of the Company's equity investment portfolio.


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10.     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,
20212020
(in thousands)
Gross reserves for unpaid losses and loss adjustment expenses, beginning of year
$636,013 $460,058 
Less: reinsurance recoverable on unpaid losses
83,730 69,792 
Adoption of accounting standard for credit losses (282)
Net reserves for unpaid losses and loss adjustment expenses, beginning of year
552,283 390,548 
Incurred losses and loss adjustment expenses:
Current year77,333 56,742 
Prior years(7,073)(3,009)
Total net losses and loss adjustment expenses incurred70,260 53,733 
Payments:
Current year1,018 777 
Prior years27,571 21,270 
Total payments28,589 22,047 
Net reserves for unpaid losses and loss adjustment expenses, end of period
593,954 422,234 
Reinsurance recoverable on unpaid losses94,819 69,099 
Gross reserves for unpaid losses and loss adjustment expenses, end of period
$688,773 $491,333 

During the three months ended March 31, 2021, the reserves for unpaid losses and loss adjustment expenses held at December 31, 2020 developed favorably by $7.1 million. The favorable development was primarily attributable to the 2020 accident year of $9.5 million, which resulted from reported losses emerging at a lower level than expected across most statutory lines of business.
During the three months ended March 31, 2020, the reserves for unpaid losses and loss adjustment expenses held at December 31, 2019 developed favorably by $3.0 million across substantially all accident years, which resulted from reported losses emerging at a lower level than expected across most statutory lines of business.
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11.     Reinsurance
The following table summarizes the effect of reinsurance on premiums written and earned for the three months ended March 31, 2021 and 2020:
Three Months Ended March 31,
20212020
(in thousands)
Premiums written:
Direct$168,876 $124,036 
Assumed  
Ceded(24,578)(15,983)
Net written$144,298 $108,053 
Premiums earned:
Direct$145,031 $103,734 
Assumed 15 
Ceded(21,990)(13,988)
Net earned$123,041 $89,761 

The following table summ