|
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X
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Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended June 30, 2016
|
|
Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from _______ to _______
|
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|
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KINSALE CAPITAL GROUP, INC.
(Exact name of registrant as specified in its charter)
|
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|
|
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Delaware
(State or other jurisdiction of
incorporation or organization)
|
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98-0664337
(I.R.S. Employer
Identification Number)
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2221 Edward Holland Drive, Suite 600
Richmond, VA 23230
|
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(Address of principal executive offices)
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(804) 289-1300
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(Registrant's telephone number, including area code)
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Large accelerated filer
¨
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Accelerated filer
¨
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Non-accelerated filer
x
(Do not check if a smaller reporting company)
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Smaller reporting company
¨
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Page
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PART I. FINANCIAL INFORMATION
|
|
|
|
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Item 1.
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Financial Statements
|
|
|
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Consolidated Balance Sheets as of June 30, 2016 and December 31, 2015
|
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Consolidated Statements of Income and Comprehensive Income for the Three and Six Months Ended June 30, 2016 and 2015
|
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Consolidated Statements of Changes in Stockholders' Equity for the Six Months Ended June 30, 2016 and 2015
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Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2016 and 2015
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Notes to Condensed Consolidated Financial Statements
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Item 2.
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Management's Discussion and Analysis of Financial Condition and Results of Operations
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Item 3.
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Quantitative and Qualitative Disclosures About Market Risk
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Item 4.
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Controls and Procedures
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PART II. OTHER INFORMATION
|
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|
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|
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Item 1.
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Legal Proceedings
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|
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Item IA.
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Risk Factors
|
|
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Item 2.
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Unregistered Sales of Equity Securities and Use of Proceeds
|
|
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Item 6.
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Exhibits
|
|
|
|
|
|
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Signatures
|
|
||
|
|
|
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Exhibit Index
|
|
|
|
June 30,
2016 |
|
December 31,
2015 |
||||
|
|
(in thousands, except share and per share data)
|
||||||
Assets
|
|
|
|
|
||||
Investments:
|
|
|
|
|
||||
Fixed maturity securities available-for-sale, at fair value (amortized cost: $370,758 in 2016; $326,953 in 2015)
|
|
$
|
378,423
|
|
|
$
|
327,602
|
|
Equity securities available-for-sale, at fair value (cost: $14,386 in 2016; $12,184 in 2015)
|
|
17,143
|
|
|
14,240
|
|
||
Short-term investments
|
|
6,653
|
|
|
2,299
|
|
||
Total investments
|
|
402,219
|
|
|
344,141
|
|
||
Cash and cash equivalents
|
|
22,236
|
|
|
24,544
|
|
||
Investment income due and accrued
|
|
1,897
|
|
|
1,844
|
|
||
Premiums receivable, net
|
|
16,667
|
|
|
15,550
|
|
||
Receivable from reinsurers
|
|
5,219
|
|
|
11,928
|
|
||
Reinsurance recoverables
|
|
75,542
|
|
|
95,670
|
|
||
Ceded unearned premiums
|
|
23,421
|
|
|
39,329
|
|
||
Deferred policy acquisition costs, net of ceding commissions
|
|
5,515
|
|
|
—
|
|
||
Intangible assets
|
|
3,538
|
|
|
3,538
|
|
||
Deferred income tax asset, net
|
|
4,601
|
|
|
6,822
|
|
||
Other assets
|
|
2,737
|
|
|
1,912
|
|
||
Total assets
|
|
$
|
563,592
|
|
|
$
|
545,278
|
|
|
|
|
|
|
||||
Liabilities and Stockholders' Equity
|
|
|
|
|
||||
Liabilities:
|
|
|
|
|
||||
Reserves for unpaid losses and loss adjustment expenses
|
|
$
|
245,210
|
|
|
$
|
219,629
|
|
Unearned premiums
|
|
86,881
|
|
|
81,713
|
|
||
Payable to reinsurers
|
|
4,135
|
|
|
3,833
|
|
||
Funds held for reinsurers
|
|
49,887
|
|
|
87,206
|
|
||
Accounts payable and accrued expenses
|
|
4,870
|
|
|
7,410
|
|
||
Deferred policy acquisition costs, net of ceding commissions
|
|
—
|
|
|
1,696
|
|
||
Note payable
|
|
29,683
|
|
|
29,603
|
|
||
Other liabilities
|
|
13,101
|
|
|
737
|
|
||
Total liabilities
|
|
433,767
|
|
|
431,827
|
|
||
Commitments and contingencies
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
|
|
(in thousands, except share and per share data)
|
||||||||||||||
Revenues:
|
|
|
|
|
|
|
|
|
||||||||
Gross written premiums
|
|
$
|
50,107
|
|
|
$
|
45,112
|
|
|
$
|
93,189
|
|
|
$
|
86,042
|
|
Ceded written premiums
|
|
(14,446
|
)
|
|
(26,274
|
)
|
|
(9,733
|
)
|
|
(50,218
|
)
|
||||
Net written premiums
|
|
35,661
|
|
|
18,838
|
|
|
83,456
|
|
|
35,824
|
|
||||
Change in unearned premiums
|
|
(3,878
|
)
|
|
(1,822
|
)
|
|
(21,076
|
)
|
|
(2,367
|
)
|
||||
Net earned premiums
|
|
31,783
|
|
|
17,016
|
|
|
62,380
|
|
|
33,457
|
|
||||
Net investment income
|
|
1,819
|
|
|
1,377
|
|
|
3,495
|
|
|
2,591
|
|
||||
Net realized investment (losses) gains
|
|
(4
|
)
|
|
8
|
|
|
383
|
|
|
16
|
|
||||
Other income
|
|
78
|
|
|
191
|
|
|
136
|
|
|
315
|
|
||||
Total revenues
|
|
33,676
|
|
|
18,592
|
|
|
66,394
|
|
|
36,379
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Expenses:
|
|
|
|
|
|
|
|
|
||||||||
Losses and loss adjustment expenses
|
|
17,456
|
|
|
8,061
|
|
|
35,577
|
|
|
17,279
|
|
||||
Underwriting, acquisition and insurance expenses
|
|
6,481
|
|
|
31
|
|
|
12,729
|
|
|
362
|
|
||||
Other expenses
|
|
486
|
|
|
517
|
|
|
946
|
|
|
1,013
|
|
||||
Total expenses
|
|
24,423
|
|
|
8,609
|
|
|
49,252
|
|
|
18,654
|
|
||||
Income before income taxes
|
|
9,253
|
|
|
9,983
|
|
|
17,142
|
|
|
17,725
|
|
||||
Total income tax expense
|
|
3,196
|
|
|
3,374
|
|
|
5,828
|
|
|
6,000
|
|
||||
Net income
|
|
$
|
6,057
|
|
|
$
|
6,609
|
|
|
$
|
11,314
|
|
|
$
|
11,725
|
|
|
|
|
|
|
|
|
|
|
||||||||
Other comprehensive income:
|
|
|
|
|
|
|
|
|
||||||||
Unrealized gains (losses), net of taxes of $1,557 and $2,702 in 2016 and $(1,060) and $(653) in 2015
|
|
2,890
|
|
|
(1,970
|
)
|
|
5,016
|
|
|
(1,213
|
)
|
||||
Total comprehensive income
|
|
$
|
8,947
|
|
|
$
|
4,639
|
|
|
$
|
16,330
|
|
|
$
|
10,512
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
|
|
(in thousands, except share and per share data)
|
||||||||||||||
Earnings per share:
|
|
|
|
|
|
|
|
|
||||||||
Basic - Class A
|
|
$
|
0.42
|
|
|
$
|
0.44
|
|
|
$
|
0.79
|
|
|
$
|
0.80
|
|
Diluted - Class A
|
|
$
|
0.42
|
|
|
$
|
0.44
|
|
|
$
|
0.79
|
|
|
$
|
0.80
|
|
|
|
|
|
|
|
|
|
|
||||||||
Weighted-average common shares outstanding:
|
|
|
|
|
|
|
|
|
||||||||
Basic - Class A
|
|
13,803,183
|
|
|
13,795,530
|
|
|
13,803,183
|
|
|
13,795,530
|
|
||||
Diluted - Class A
|
|
13,803,183
|
|
|
13,795,530
|
|
|
13,803,183
|
|
|
13,795,530
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Earnings per share:
|
|
|
|
|
|
|
|
|
||||||||
Basic - Class B
|
|
$
|
0.19
|
|
|
$
|
0.42
|
|
|
$
|
0.26
|
|
|
$
|
0.57
|
|
Diluted - Class B
|
|
$
|
0.18
|
|
|
$
|
0.42
|
|
|
$
|
0.25
|
|
|
$
|
0.56
|
|
|
|
|
|
|
|
|
|
|
||||||||
Weighted-average common shares outstanding:
|
|
|
|
|
|
|
|
|
||||||||
Basic - Class B
|
|
1,583,470
|
|
|
1,359,183
|
|
|
1,557,089
|
|
|
1,331,881
|
|
||||
Diluted - Class B
|
|
1,665,936
|
|
|
1,369,738
|
|
|
1,649,971
|
|
|
1,350,411
|
|
|
|
Class A Common Stock
|
|
Class B Common Stock
|
|
Additional Paid-in Capital
|
|
Retained Earnings
|
|
Accumulated
Other
Compre-
hensive
Income
|
|
Total
Stock-
holders' Equity
|
||||||||||||
|
|
(in thousands)
|
||||||||||||||||||||||
Balance at December 31, 2014
|
|
$
|
1
|
|
|
$
|
—
|
|
|
$
|
80,074
|
|
|
$
|
7,297
|
|
|
$
|
5,214
|
|
|
$
|
92,586
|
|
Restricted stock grants
|
|
—
|
|
|
—
|
|
|
50
|
|
|
—
|
|
|
—
|
|
|
50
|
|
||||||
Other comprehensive loss, net of tax
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,213
|
)
|
|
(1,213
|
)
|
||||||
Net income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
11,725
|
|
|
—
|
|
|
11,725
|
|
||||||
Balance at June 30, 2015
|
|
$
|
1
|
|
|
$
|
—
|
|
|
$
|
80,124
|
|
|
$
|
19,022
|
|
|
$
|
4,001
|
|
|
$
|
103,148
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Balance at December 31, 2015
|
|
$
|
1
|
|
|
$
|
—
|
|
|
$
|
80,229
|
|
|
$
|
29,570
|
|
|
$
|
3,651
|
|
|
$
|
113,451
|
|
Restricted stock grants
|
|
—
|
|
|
—
|
|
|
44
|
|
|
—
|
|
|
—
|
|
|
44
|
|
||||||
Other comprehensive income, net of tax
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5,016
|
|
|
5,016
|
|
||||||
Net income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
11,314
|
|
|
—
|
|
|
11,314
|
|
||||||
Balance at June 30, 2016
|
|
$
|
1
|
|
|
$
|
—
|
|
|
$
|
80,273
|
|
|
$
|
40,884
|
|
|
$
|
8,667
|
|
|
$
|
129,825
|
|
|
|
Six Months Ended June 30,
|
||||||
|
|
2016
|
|
2015
|
||||
|
|
(in thousands)
|
||||||
Operating activities:
|
|
|
|
|
||||
Net cash provided by operating activities
|
|
$
|
36,480
|
|
|
$
|
34,524
|
|
|
|
|
|
|
||||
Investing activities:
|
|
|
|
|
||||
Purchase of property and equipment
|
|
(236
|
)
|
|
(92
|
)
|
||
Change in short-term investments, net
|
|
(4,354
|
)
|
|
1,960
|
|
||
Securities available-for-sale:
|
|
|
|
|
||||
Purchases – fixed maturity securities
|
|
(64,207
|
)
|
|
(66,472
|
)
|
||
Purchases – equity securities
|
|
(2,202
|
)
|
|
(81
|
)
|
||
Sales – fixed maturity securities
|
|
13,055
|
|
|
4,002
|
|
||
Maturities and calls – fixed maturity securities
|
|
19,223
|
|
|
21,345
|
|
||
Net cash used in investing activities
|
|
(38,721
|
)
|
|
(39,338
|
)
|
||
|
|
|
|
|
||||
Financing activities:
|
|
|
|
|
||||
Payments on capital lease
|
|
(67
|
)
|
|
(53
|
)
|
||
Net cash used in financing activities
|
|
(67
|
)
|
|
(53
|
)
|
||
Net change in cash and cash equivalents
|
|
(2,308
|
)
|
|
(4,867
|
)
|
||
Cash and cash equivalents at beginning of year
|
|
24,544
|
|
|
23,958
|
|
||
Cash and cash equivalents at end of period
|
|
$
|
22,236
|
|
|
$
|
19,091
|
|
•
|
net incurred and paid claims development information by accident year for the number of years for which claims incurred typically remain outstanding, but need not exceed 10 years;
|
•
|
a reconciliation of incurred and paid claims development information to the aggregate carrying amount of the liability for unpaid claims and claim adjustment expenses, with separate disclosure of reinsurance recoverable on unpaid claims for each period presented in the statement of financial position;
|
•
|
for each accident year presented, the total of incurred-but-not-reported liabilities plus expected development on reported claims included in the liability for unpaid claims and claim adjustment expenses;
|
•
|
for each accident year presented, quantitative information about claim frequency accompanied by a qualitative description of methodologies used for determining claim frequency information; and
|
•
|
for all claims, the average annual percentage payout of incurred claims by age.
|
|
|
June 30, 2016
|
||||||||||||||
|
|
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
|
|
$
|
12,410
|
|
|
$
|
65
|
|
|
$
|
—
|
|
|
$
|
12,475
|
|
Obligations of states, municipalities and political subdivisions
|
|
62,488
|
|
|
4,619
|
|
|
(141
|
)
|
|
66,966
|
|
||||
Corporate and other securities
|
|
131,482
|
|
|
1,295
|
|
|
(258
|
)
|
|
132,519
|
|
||||
Asset-backed securities
|
|
72,148
|
|
|
801
|
|
|
(136
|
)
|
|
72,813
|
|
||||
Residential mortgage-backed securities
|
|
92,230
|
|
|
1,479
|
|
|
(59
|
)
|
|
93,650
|
|
||||
Total fixed maturities
|
|
370,758
|
|
|
8,259
|
|
|
(594
|
)
|
|
378,423
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Equity securities:
|
|
|
|
|
|
|
|
|
||||||||
Exchange traded funds
|
|
14,386
|
|
|
3,117
|
|
|
(360
|
)
|
|
17,143
|
|
||||
Total available-for-sale investments
|
|
$
|
385,144
|
|
|
$
|
11,376
|
|
|
$
|
(954
|
)
|
|
$
|
395,566
|
|
|
|
December 31, 2015
|
||||||||||||||
|
|
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
|
|
$
|
3,422
|
|
|
$
|
13
|
|
|
$
|
(2
|
)
|
|
$
|
3,433
|
|
Obligations of states, municipalities and political subdivisions
|
|
69,997
|
|
|
2,562
|
|
|
(46
|
)
|
|
72,513
|
|
||||
Corporate and other securities
|
|
130,758
|
|
|
306
|
|
|
(1,543
|
)
|
|
129,521
|
|
||||
Asset-backed securities
|
|
58,680
|
|
|
58
|
|
|
(431
|
)
|
|
58,307
|
|
||||
Residential mortgage-backed securities
|
|
64,096
|
|
|
760
|
|
|
(1,028
|
)
|
|
63,828
|
|
||||
Total fixed maturities
|
|
326,953
|
|
|
3,699
|
|
|
(3,050
|
)
|
|
327,602
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Equity securities:
|
|
|
|
|
|
|
|
|
||||||||
Exchange traded funds
|
|
12,184
|
|
|
2,392
|
|
|
(336
|
)
|
|
14,240
|
|
||||
Total available-for-sale investments
|
|
$
|
339,137
|
|
|
$
|
6,091
|
|
|
$
|
(3,386
|
)
|
|
$
|
341,842
|
|
|
|
June 30, 2016
|
||||||||||||||||||||||
|
|
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
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Obligations of states, municipalities and political subdivisions
|
|
4,385
|
|
|
(80
|
)
|
|
2,536
|
|
|
(61
|
)
|
|
6,921
|
|
|
(141
|
)
|
||||||
Corporate and other securities
|
|
17,882
|
|
|
(39
|
)
|
|
15,559
|
|
|
(219
|
)
|
|
33,441
|
|
|
(258
|
)
|
||||||
Asset-backed securities
|
|
7,815
|
|
|
(6
|
)
|
|
15,076
|
|
|
(130
|
)
|
|
22,891
|
|
|
(136
|
)
|
||||||
Residential mortgage-backed securities
|
|
4,949
|
|
|
(20
|
)
|
|
9,178
|
|
|
(39
|
)
|
|
14,127
|
|
|
(59
|
)
|
||||||
Total fixed maturities
|
|
35,031
|
|
|
(145
|
)
|
|
42,349
|
|
|
(449
|
)
|
|
77,380
|
|
|
(594
|
)
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Equity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Exchange traded funds
|
|
1,209
|
|
|
(103
|
)
|
|
1,592
|
|
|
(257
|
)
|
|
2,801
|
|
|
(360
|
)
|
||||||
Total
|
|
$
|
36,240
|
|
|
$
|
(248
|
)
|
|
$
|
43,941
|
|
|
$
|
(706
|
)
|
|
$
|
80,181
|
|
|
$
|
(954
|
)
|
|
|
December 31, 2015
|
||||||||||||||||||||||
|
|
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
|
|
$
|
2,999
|
|
|
$
|
(2
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,999
|
|
|
$
|
(2
|
)
|
Obligations of states, municipalities and political subdivisions
|
|
844
|
|
|
(2
|
)
|
|
2,550
|
|
|
(44
|
)
|
|
3,394
|
|
|
(46
|
)
|
||||||
Corporate and other securities
|
|
89,334
|
|
|
(1,515
|
)
|
|
6,978
|
|
|
(28
|
)
|
|
96,312
|
|
|
(1,543
|
)
|
||||||
Asset-backed securities
|
|
30,002
|
|
|
(209
|
)
|
|
13,070
|
|
|
(222
|
)
|
|
43,072
|
|
|
(431
|
)
|
||||||
Residential mortgage-backed securities
|
|
30,243
|
|
|
(434
|
)
|
|
16,072
|
|
|
(594
|
)
|
|
46,315
|
|
|
(1,028
|
)
|
||||||
Total fixed maturities
|
|
153,422
|
|
|
(2,162
|
)
|
|
38,670
|
|
|
(888
|
)
|
|
192,092
|
|
|
(3,050
|
)
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Equity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Exchange traded funds
|
|
3,256
|
|
|
(331
|
)
|
|
26
|
|
|
(5
|
)
|
|
3,282
|
|
|
(336
|
)
|
||||||
Total
|
|
$
|
156,678
|
|
|
$
|
(2,493
|
)
|
|
$
|
38,696
|
|
|
$
|
(893
|
)
|
|
$
|
195,374
|
|
|
$
|
(3,386
|
)
|
|
|
Amortized
|
|
Estimated
|
||||
|
|
Cost
|
|
Fair Value
|
||||
|
|
(in thousands)
|
||||||
Due in one year or less
|
|
$
|
36,817
|
|
|
$
|
36,855
|
|
Due after one year through five years
|
|
104,397
|
|
|
105,535
|
|
||
Due after five years through ten years
|
|
24,932
|
|
|
26,280
|
|
||
Due after ten years
|
|
40,234
|
|
|
43,290
|
|
||
Asset-backed securities
|
|
72,148
|
|
|
72,813
|
|
||
Residential mortgage-backed securities
|
|
92,230
|
|
|
93,650
|
|
||
Total fixed maturities
|
|
$
|
370,758
|
|
|
$
|
378,423
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
|
|
(in thousands)
|
||||||||||||||
Interest:
|
|
|
|
|
|
|
|
|
||||||||
Municipal bonds (tax exempt)
|
|
$
|
1,524
|
|
|
$
|
1,144
|
|
|
$
|
2,913
|
|
|
$
|
2,084
|
|
Taxable bonds
|
|
375
|
|
|
313
|
|
|
781
|
|
|
694
|
|
||||
Cash, cash equivalents, and short-term investments
|
|
12
|
|
|
2
|
|
|
20
|
|
|
4
|
|
||||
Dividends on equity securities
|
|
118
|
|
|
106
|
|
|
202
|
|
|
180
|
|
||||
Gross investment income
|
|
2,029
|
|
|
1,565
|
|
|
3,916
|
|
|
2,962
|
|
||||
Investment expenses
|
|
(210
|
)
|
|
(188
|
)
|
|
(421
|
)
|
|
(371
|
)
|
||||
Net investment income
|
|
$
|
1,819
|
|
|
$
|
1,377
|
|
|
$
|
3,495
|
|
|
$
|
2,591
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
|
|
(in thousands)
|
||||||||||||||
Change in net unrealized gains (losses):
|
|
|
|
|
|
|
|
|
||||||||
Fixed maturities
|
|
$
|
4,087
|
|
|
$
|
(2,915
|
)
|
|
$
|
7,016
|
|
|
$
|
(1,923
|
)
|
Equity securities
|
|
360
|
|
|
(115
|
)
|
|
701
|
|
|
57
|
|
||||
Net increase (decrease)
|
|
$
|
4,447
|
|
|
$
|
(3,030
|
)
|
|
$
|
7,717
|
|
|
$
|
(1,866
|
)
|
|
|
June 30, 2016
|
||||||||||||||
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||
|
|
(in thousands)
|
||||||||||||||
Assets
|
|
|
|
|
|
|
|
|
||||||||
Fixed maturities:
|
|
|
|
|
|
|
|
|
||||||||
U.S. Treasury securities and obligations of U.S. government agencies
|
|
$
|
12,475
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
12,475
|
|
Obligations of states, municipalities and political subdivisions
|
|
—
|
|
|
66,966
|
|
|
—
|
|
|
66,966
|
|
||||
Corporate and other securities
|
|
—
|
|
|
132,519
|
|
|
—
|
|
|
132,519
|
|
||||
Asset-backed securities
|
|
—
|
|
|
72,813
|
|
|
—
|
|
|
72,813
|
|
||||
Residential mortgage-backed securities
|
|
—
|
|
|
93,650
|
|
|
—
|
|
|
93,650
|
|
||||
Total fixed maturities
|
|
12,475
|
|
|
365,948
|
|
|
—
|
|
|
378,423
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Equity securities:
|
|
|
|
|
|
|
|
|
||||||||
Exchange traded funds
|
|
17,143
|
|
|
—
|
|
|
—
|
|
|
17,143
|
|
||||
Short-term investments
|
|
—
|
|
|
6,653
|
|
|
—
|
|
|
6,653
|
|
||||
Total
|
|
$
|
29,618
|
|
|
$
|
372,601
|
|
|
$
|
—
|
|
|
$
|
402,219
|
|
|
|
December 31, 2015
|
||||||||||||||
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||
|
|
(in thousands)
|
||||||||||||||
Assets
|
|
|
|
|
|
|
|
|
||||||||
Fixed maturities:
|
|
|
|
|
|
|
|
|
||||||||
U.S. Treasury securities and obligations of U.S. government agencies
|
|
$
|
3,433
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3,433
|
|
Obligations of states, municipalities and political subdivisions
|
|
—
|
|
|
72,513
|
|
|
—
|
|
|
72,513
|
|
||||
Corporate and other securities
|
|
—
|
|
|
129,521
|
|
|
—
|
|
|
129,521
|
|
||||
Asset-backed securities
|
|
—
|
|
|
58,307
|
|
|
—
|
|
|
58,307
|
|
||||
Residential mortgage-backed securities
|
|
—
|
|
|
63,828
|
|
|
—
|
|
|
63,828
|
|
||||
Total fixed maturities
|
|
3,433
|
|
|
324,169
|
|
|
—
|
|
|
327,602
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Equity securities:
|
|
|
|
|
|
|
|
|
||||||||
Exchange traded funds
|
|
14,240
|
|
|
—
|
|
|
—
|
|
|
14,240
|
|
||||
Short-term investments
|
|
—
|
|
|
2,299
|
|
|
—
|
|
|
2,299
|
|
||||
Total
|
|
$
|
17,673
|
|
|
$
|
326,468
|
|
|
$
|
—
|
|
|
$
|
344,141
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
|
|
(in thousands)
|
||||||||||||||
Balance, beginning of period
|
|
$
|
5,305
|
|
|
$
|
(3,821
|
)
|
|
$
|
(1,696
|
)
|
|
$
|
(3,762
|
)
|
Policy acquisition costs deferred:
|
|
|
|
|
|
|
|
|
||||||||
Direct commissions
|
|
7,448
|
|
|
6,687
|
|
|
13,848
|
|
|
12,769
|
|
||||
Ceding commissions
|
|
(4,995
|
)
|
|
(9,831
|
)
|
|
(2,204
|
)
|
|
(18,738
|
)
|
||||
Other underwriting and policy acquisition costs
|
|
700
|
|
|
822
|
|
|
1,426
|
|
|
1,601
|
|
||||
Policy acquisition costs deferred
|
|
3,153
|
|
|
(2,322
|
)
|
|
13,070
|
|
|
(4,368
|
)
|
||||
Amortization of net policy acquisition costs
|
|
(2,943
|
)
|
|
2,093
|
|
|
(5,859
|
)
|
|
4,080
|
|
||||
Balance, end of period
|
|
$
|
5,515
|
|
|
$
|
(4,050
|
)
|
|
$
|
5,515
|
|
|
$
|
(4,050
|
)
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
|
|
(in thousands)
|
||||||||||||||
Underwriting, acquisition and insurance expenses incurred:
|
|
|
|
|
|
|
|
|
||||||||
Gross commissions
|
|
$
|
6,668
|
|
|
$
|
6,085
|
|
|
$
|
13,074
|
|
|
$
|
12,048
|
|
Ceding commissions
|
|
(5,218
|
)
|
|
(10,817
|
)
|
|
(10,626
|
)
|
|
(20,897
|
)
|
||||
Other operating expenses
|
|
5,031
|
|
|
4,763
|
|
|
10,281
|
|
|
9,211
|
|
||||
Total
|
|
$
|
6,481
|
|
|
$
|
31
|
|
|
$
|
12,729
|
|
|
$
|
362
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
|
|
(in thousands, except share and per share data)
|
||||||||||||||
Earnings per share - Class A stockholders:
|
|
|
|
|
|
|
|
|
||||||||
Numerator for earnings per share:
|
|
|
|
|
|
|
|
|
||||||||
Net income
|
|
$
|
6,057
|
|
|
$
|
6,609
|
|
|
$
|
11,314
|
|
|
$
|
11,725
|
|
Less: net income attributable to Class B stockholders
|
|
303
|
|
|
571
|
|
|
405
|
|
|
754
|
|
||||
Net income attributable to Class A stockholders
|
|
$
|
5,754
|
|
|
$
|
6,038
|
|
|
$
|
10,909
|
|
|
$
|
10,971
|
|
|
|
|
|
|
|
|
|
|
||||||||
Denominator for earnings per share:
|
|
|
|
|
|
|
|
|
||||||||
Weighted average shares outstanding - basic
|
|
13,803,183
|
|
|
13,795,530
|
|
|
13,803,183
|
|
|
13,795,530
|
|
||||
Weighted average shares outstanding - diluted
|
|
13,803,183
|
|
|
13,795,530
|
|
|
13,803,183
|
|
|
13,795,530
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Earnings per Class A common share - basic
|
|
$
|
0.42
|
|
|
$
|
0.44
|
|
|
$
|
0.79
|
|
|
$
|
0.80
|
|
Earnings per Class A common share - diluted
|
|
$
|
0.42
|
|
|
$
|
0.44
|
|
|
$
|
0.79
|
|
|
$
|
0.80
|
|
|
|
|
|
|
|
|
|
|
||||||||
Earnings per share - Class B stockholders:
|
|
|
|
|
|
|
|
|
||||||||
Numerator for earnings per share:
|
|
|
|
|
|
|
|
|
||||||||
Net income attributable to Class B stockholders
|
|
$
|
303
|
|
|
$
|
571
|
|
|
$
|
405
|
|
|
$
|
754
|
|
|
|
|
|
|
|
|
|
|
||||||||
Denominator for earnings per share:
|
|
|
|
|
|
|
|
|
||||||||
Weighted average shares outstanding - basic
|
|
1,583,470
|
|
|
1,359,183
|
|
|
1,557,089
|
|
|
1,331,881
|
|
||||
Unvested restricted stock grants
|
|
82,466
|
|
|
10,555
|
|
|
92,882
|
|
|
18,530
|
|
||||
Weighted average shares outstanding - diluted
|
|
1,665,936
|
|
|
1,369,738
|
|
|
1,649,971
|
|
|
1,350,411
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Earnings per Class B common share - basic
|
|
$
|
0.19
|
|
|
$
|
0.42
|
|
|
$
|
0.26
|
|
|
$
|
0.57
|
|
Earnings per Class B common share - diluted
|
|
$
|
0.18
|
|
|
$
|
0.42
|
|
|
$
|
0.25
|
|
|
$
|
0.56
|
|
|
|
June 30,
|
||||||
|
|
2016
|
|
2015
|
||||
|
|
(in thousands)
|
||||||
Net reserves for unpaid losses and loss adjustment expenses, beginning of year
|
|
$
|
124,126
|
|
|
$
|
91,970
|
|
Commutation of MLQS
|
|
24,296
|
|
|
8,587
|
|
||
Adjusted net reserves for losses and loss adjustment expenses, beginning of year
|
|
148,422
|
|
|
100,557
|
|
||
Incurred losses and loss adjustment expenses:
|
|
|
|
|
||||
Current year
|
|
40,984
|
|
|
24,094
|
|
||
Prior years
|
|
(5,407
|
)
|
|
(6,815
|
)
|
||
Total net losses and loss adjustment expenses incurred
|
|
35,577
|
|
|
17,279
|
|
||
|
|
|
|
|
||||
Payments:
|
|
|
|
|
||||
Current year
|
|
1,078
|
|
|
605
|
|
||
Prior years
|
|
13,026
|
|
|
9,237
|
|
||
Total payments
|
|
14,104
|
|
|
9,842
|
|
||
Net reserves for unpaid losses and loss adjustment expenses, end of period
|
|
169,895
|
|
|
107,994
|
|
||
Reinsurance recoverable on unpaid losses
|
|
75,315
|
|
|
77,848
|
|
||
Gross reserves for unpaid losses and loss adjustment expenses, end of period
|
|
$
|
245,210
|
|
|
$
|
185,842
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
|
|
(in thousands)
|
||||||||||||||
Written:
|
|
|
|
|
|
|
|
|
||||||||
Direct
|
|
$
|
50,161
|
|
|
$
|
45,075
|
|
|
$
|
93,151
|
|
|
$
|
85,898
|
|
Assumed
|
|
(54
|
)
|
|
37
|
|
|
38
|
|
|
144
|
|
||||
Ceded
|
|
(14,446
|
)
|
|
(26,274
|
)
|
|
(9,733
|
)
|
|
(50,218
|
)
|
||||
Net written
|
|
$
|
35,661
|
|
|
$
|
18,838
|
|
|
$
|
83,456
|
|
|
$
|
35,824
|
|
|
|
|
|
|
|
|
|
|
||||||||
Earned:
|
|
|
|
|
|
|
|
|
||||||||
Direct
|
|
$
|
44,895
|
|
|
$
|
41,129
|
|
|
$
|
87,987
|
|
|
$
|
81,205
|
|
Assumed
|
|
2
|
|
|
37
|
|
|
34
|
|
|
75
|
|
||||
Ceded
|
|
(13,114
|
)
|
|
(24,150
|
)
|
|
(25,641
|
)
|
|
(47,823
|
)
|
||||
Net earned
|
|
$
|
31,783
|
|
|
$
|
17,016
|
|
|
$
|
62,380
|
|
|
$
|
33,457
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
|
|
(in thousands)
|
||||||||||||||
Unrealized gains (losses) arising during the period, before income taxes
|
|
$
|
4,421
|
|
|
$
|
(3,022
|
)
|
|
$
|
8,079
|
|
|
$
|
(1,850
|
)
|
Income taxes
|
|
(1,548
|
)
|
|
1,057
|
|
|
(2,828
|
)
|
|
647
|
|
||||
Unrealized gains (losses) arising during the period, net of income taxes
|
|
2,873
|
|
|
(1,965
|
)
|
|
5,251
|
|
|
(1,203
|
)
|
||||
Less reclassification adjustment:
|
|
|
|
|
|
|
|
|
||||||||
Net realized investment gains (losses)
|
|
(26
|
)
|
|
8
|
|
|
361
|
|
|
16
|
|
||||
Income taxes
|
|
9
|
|
|
(3
|
)
|
|
(126
|
)
|
|
(6
|
)
|
||||
Reclassification adjustment included in net income
|
|
(17
|
)
|
|
5
|
|
|
235
|
|
|
10
|
|
||||
Other comprehensive income (loss)
|
|
$
|
2,890
|
|
|
$
|
(1,970
|
)
|
|
$
|
5,016
|
|
|
$
|
(1,213
|
)
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
|
|
(in thousands)
|
||||||||||||||
Commercial:
|
|
|
|
|
|
|
|
|
||||||||
Construction
|
|
$
|
12,053
|
|
|
$
|
9,528
|
|
|
$
|
21,305
|
|
|
$
|
17,640
|
|
Small Business
|
|
6,896
|
|
|
5,042
|
|
|
13,328
|
|
|
9,328
|
|
||||
Professional Liability
|
|
4,040
|
|
|
3,936
|
|
|
7,985
|
|
|
8,212
|
|
||||
Excess Casualty
|
|
4,858
|
|
|
4,465
|
|
|
8,503
|
|
|
8,305
|
|
||||
Energy
|
|
3,515
|
|
|
4,227
|
|
|
7,159
|
|
|
8,615
|
|
||||
General Casualty
|
|
4,771
|
|
|
5,269
|
|
|
7,857
|
|
|
10,269
|
|
||||
Life Sciences
|
|
3,015
|
|
|
3,167
|
|
|
5,874
|
|
|
5,728
|
|
||||
Allied Health
|
|
2,271
|
|
|
1,924
|
|
|
4,397
|
|
|
3,955
|
|
||||
Products Liability
|
|
2,779
|
|
|
2,876
|
|
|
4,870
|
|
|
4,943
|
|
||||
Healthcare
|
|
1,275
|
|
|
1,287
|
|
|
3,152
|
|
|
3,179
|
|
||||
Commercial Property
|
|
1,268
|
|
|
1,873
|
|
|
2,386
|
|
|
3,397
|
|
||||
Management Liability
|
|
531
|
|
|
—
|
|
|
1,148
|
|
|
—
|
|
||||
Inland Marine
|
|
245
|
|
|
—
|
|
|
631
|
|
|
—
|
|
||||
Environmental
|
|
428
|
|
|
245
|
|
|
756
|
|
|
376
|
|
||||
Public Entity
|
|
—
|
|
|
—
|
|
|
223
|
|
|
—
|
|
||||
Commercial Insurance
|
|
105
|
|
|
—
|
|
|
215
|
|
|
—
|
|
||||
Total commercial
|
|
48,050
|
|
|
43,839
|
|
|
89,789
|
|
|
83,947
|
|
||||
Personal:
|
|
|
|
|
|
|
|
|
||||||||
Personal insurance
|
|
2,057
|
|
|
1,273
|
|
|
3,400
|
|
|
2,095
|
|
||||
Total
|
|
$
|
50,107
|
|
|
$
|
45,112
|
|
|
$
|
93,189
|
|
|
$
|
86,042
|
|
•
|
the number of shares of common stock equal to the amount of accrued and unpaid dividends based on a reclassification date of July 28, 2016, or
$90.3 million
, divided by the initial public offering price of
$16.00
per share, plus
|
•
|
the number of shares of common stock equal to a conversion ratio of
0.65485975
, calculated on the IPO price of
$16.00
per share.
|
|
|
Three Months Ended June 30, 2016
|
|
Three Months Ended June 30, 2015
|
||||||||||||||||||||
($ in thousands)
|
|
Including
Quota Share |
|
Effect of
Quota Share |
|
Excluding Quota Share
|
|
Including
Quota Share |
|
Effect of
Quota Share |
|
Excluding Quota Share
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Gross written premiums
|
|
$
|
50,107
|
|
|
$
|
—
|
|
|
$
|
50,107
|
|
|
$
|
45,112
|
|
|
$
|
—
|
|
|
$
|
45,112
|
|
Ceded written premiums
|
|
(14,446
|
)
|
|
(6,363
|
)
|
|
(8,083
|
)
|
|
(26,274
|
)
|
|
(18,706
|
)
|
|
(7,568
|
)
|
||||||
Net written premiums
|
|
$
|
35,661
|
|
|
$
|
(6,363
|
)
|
|
$
|
42,024
|
|
|
$
|
18,838
|
|
|
$
|
(18,706
|
)
|
|
$
|
37,544
|
|
Net retention
(1)
|
|
71.2
|
%
|
|
|
|
83.9
|
%
|
|
41.8
|
%
|
|
|
|
83.2
|
%
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Net earned premiums
|
|
$
|
31,783
|
|
|
$
|
(5,692
|
)
|
|
$
|
37,475
|
|
|
$
|
17,016
|
|
|
$
|
(17,291
|
)
|
|
$
|
34,307
|
|
Losses and loss adjustment expenses
|
|
(17,456
|
)
|
|
2,385
|
|
|
(19,841
|
)
|
|
(8,061
|
)
|
|
7,654
|
|
|
(15,715
|
)
|
||||||
Underwriting, acquisition and insurance expenses
|
|
(6,481
|
)
|
|
3,080
|
|
|
(9,561
|
)
|
|
(31
|
)
|
|
8,945
|
|
|
(8,976
|
)
|
||||||
Underwriting income
(2)
|
|
$
|
7,846
|
|
|
$
|
(227
|
)
|
|
$
|
8,073
|
|
|
$
|
8,924
|
|
|
$
|
(692
|
)
|
|
$
|
9,616
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Loss ratio
|
|
54.9
|
%
|
|
41.9
|
%
|
|
—
|
|
|
47.4
|
%
|
|
44.3
|
%
|
|
—
|
|
||||||
Expense ratio
|
|
20.4
|
%
|
|
54.1
|
%
|
|
—
|
|
|
0.2
|
%
|
|
51.7
|
%
|
|
—
|
|
||||||
Combined ratio
|
|
75.3
|
%
|
|
96.0
|
%
|
|
—
|
|
|
47.6
|
%
|
|
96.0
|
%
|
|
—
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Adjusted loss ratio
(3)
|
|
—
|
|
|
—
|
|
|
52.9
|
%
|
|
—
|
|
|
—
|
|
|
45.8
|
%
|
||||||
Adjusted expense ratio
(3)
|
|
—
|
|
|
—
|
|
|
25.5
|
%
|
|
—
|
|
|
—
|
|
|
26.2
|
%
|
||||||
Adjusted combined ratio
(3)
|
|
—
|
|
|
—
|
|
|
78.4
|
%
|
|
—
|
|
|
—
|
|
|
72.0
|
%
|
|
|
Six Months Ended June 30, 2016
|
|
Six Months Ended June 30, 2015
|
||||||||||||||||||||
($ in thousands)
|
|
Including
Quota Share |
|
Effect of
Quota Share |
|
Excluding Quota Share
|
|
Including
Quota Share |
|
Effect of
Quota Share |
|
Excluding Quota Share
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Gross written premiums
|
|
$
|
93,189
|
|
|
$
|
—
|
|
|
$
|
93,189
|
|
|
$
|
86,042
|
|
|
$
|
—
|
|
|
$
|
86,042
|
|
Ceded written premiums
|
|
(9,733
|
)
|
|
5,226
|
|
|
(14,959
|
)
|
|
(50,218
|
)
|
|
(35,910
|
)
|
|
(14,308
|
)
|
||||||
Net written premiums
|
|
$
|
83,456
|
|
|
$
|
5,226
|
|
|
$
|
78,230
|
|
|
$
|
35,824
|
|
|
$
|
(35,910
|
)
|
|
$
|
71,734
|
|
Net retention
(1)
|
|
89.6
|
%
|
|
|
|
83.9
|
%
|
|
41.6
|
%
|
|
|
|
83.4
|
%
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Net earned premiums
|
|
$
|
62,380
|
|
|
$
|
(11,124
|
)
|
|
$
|
73,504
|
|
|
$
|
33,457
|
|
|
$
|
(33,994
|
)
|
|
$
|
67,451
|
|
Losses and loss adjustment expenses
|
|
(35,577
|
)
|
|
4,195
|
|
|
(39,772
|
)
|
|
(17,279
|
)
|
|
15,475
|
|
|
(32,754
|
)
|
||||||
Underwriting, acquisition and insurance expenses
|
|
(12,729
|
)
|
|
6,485
|
|
|
(19,214
|
)
|
|
(362
|
)
|
|
17,159
|
|
|
(17,521
|
)
|
||||||
Underwriting income
(2)
|
|
$
|
14,074
|
|
|
$
|
(444
|
)
|
|
$
|
14,518
|
|
|
$
|
15,816
|
|
|
$
|
(1,360
|
)
|
|
$
|
17,176
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Loss ratio
|
|
57.0
|
%
|
|
37.7
|
%
|
|
—
|
|
|
51.6
|
%
|
|
45.5
|
%
|
|
—
|
|
||||||
Expense ratio
|
|
20.4
|
%
|
|
58.3
|
%
|
|
—
|
|
|
1.1
|
%
|
|
50.5
|
%
|
|
—
|
|
||||||
Combined ratio
|
|
77.4
|
%
|
|
96.0
|
%
|
|
—
|
|
|
52.7
|
%
|
|
96.0
|
%
|
|
—
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Adjusted loss ratio
(3)
|
|
—
|
|
|
—
|
|
|
54.1
|
%
|
|
—
|
|
|
—
|
|
|
48.6
|
%
|
||||||
Adjusted expense ratio
(3)
|
|
—
|
|
|
—
|
|
|
26.1
|
%
|
|
—
|
|
|
—
|
|
|
26.0
|
%
|
||||||
Adjusted combined ratio
(3)
|
|
—
|
|
|
—
|
|
|
80.2
|
%
|
|
—
|
|
|
—
|
|
|
74.6
|
%
|
•
|
New business submissions;
|
•
|
Binding of new business submissions into policies;
|
•
|
Renewals of existing policies; and
|
•
|
Average size and premium rate of new and existing policies.
|
•
|
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.
|
|
|
Three Months Ended June 30,
|
||||||||||
($ in thousands)
|
|
2016
|
|
2015
|
|
Change
|
||||||
|
|
|
|
|
|
|
||||||
Gross written premiums
|
|
$
|
50,107
|
|
|
$
|
45,112
|
|
|
$
|
4,995
|
|
Ceded written premiums
|
|
(14,446
|
)
|
|
(26,274
|
)
|
|
11,828
|
|
|||
Net written premiums
|
|
$
|
35,661
|
|
|
$
|
18,838
|
|
|
$
|
16,823
|
|
|
|
|
|
|
|
|
||||||
Net earned premiums
|
|
$
|
31,783
|
|
|
$
|
17,016
|
|
|
$
|
14,767
|
|
Losses and loss adjustment expenses
|
|
17,456
|
|
|
8,061
|
|
|
9,395
|
|
|||
Underwriting, acquisition and insurance expenses
|
|
6,481
|
|
|
31
|
|
|
6,450
|
|
|||
Underwriting income
(1)
|
|
7,846
|
|
|
8,924
|
|
|
(1,078
|
)
|
|||
Other expenses, net
|
|
(408
|
)
|
|
(326
|
)
|
|
(82
|
)
|
|||
Net investment income
|
|
1,819
|
|
|
1,377
|
|
|
442
|
|
|||
Net investment gains
|
|
(4
|
)
|
|
8
|
|
|
(12
|
)
|
|||
Income before taxes
|
|
9,253
|
|
|
9,983
|
|
|
(730
|
)
|
|||
Income tax expense
|
|
3,196
|
|
|
3,374
|
|
|
(178
|
)
|
|||
Net income
|
|
$
|
6,057
|
|
|
$
|
6,609
|
|
|
$
|
(552
|
)
|
|
|
|
|
|
|
|
||||||
Return on equity
|
|
19.3
|
%
|
|
26.2
|
%
|
|
|
||||
|
|
|
|
|
|
|
||||||
Loss ratio
|
|
54.9
|
%
|
|
47.4
|
%
|
|
|
||||
Expense ratio
|
|
20.4
|
%
|
|
0.2
|
%
|
|
|
||||
Combined ratio
|
|
75.3
|
%
|
|
47.6
|
%
|
|
|
|
|
Three Months Ended June 30,
|
||||||||||||
|
|
2016
|
|
2015
|
||||||||||
($ in thousands)
|
|
Losses and loss adjustment expenses
|
|
% of Earned Premiums
|
|
Losses and loss adjustment expenses
|
|
% of Earned Premiums
|
||||||
Loss ratio:
|
|
|
|
|
|
|
|
|
||||||
Current accident year
|
|
$
|
20,140
|
|
|
63.3
|
%
|
|
$
|
11,286
|
|
|
66.3
|
%
|
Effect of prior year development
|
|
(2,684
|
)
|
|
(8.4
|
)
|
|
(3,225
|
)
|
|
(18.9
|
)
|
||
|
|
$
|
17,456
|
|
|
54.9
|
%
|
|
$
|
8,061
|
|
|
47.4
|
%
|
|
|
Three Months Ended June 30,
|
||||||||||||
|
|
2016
|
|
2015
|
||||||||||
($ in thousands)
|
|
Losses and loss adjustment expenses
|
|
% of Earned Premiums
|
|
Losses and loss adjustment expenses
|
|
% of Earned Premiums
|
||||||
Adjusted loss ratio:
|
|
|
|
|
|
|
|
|
||||||
Current accident year
|
|
$
|
23,287
|
|
|
62.1
|
%
|
|
$
|
20,926
|
|
|
61.0
|
%
|
Effect of prior year development
|
|
(3,446
|
)
|
|
(9.2
|
)
|
|
(5,211
|
)
|
|
(15.2
|
)
|
||
|
|
$
|
19,841
|
|
|
52.9
|
%
|
|
$
|
15,715
|
|
|
45.8
|
%
|
|
|
Three Months Ended June 30,
|
||||||||||||
|
|
2016
|
|
2015
|
||||||||||
($ in thousands)
|
|
Underwriting Expenses
|
|
% of Earned Premiums
|
|
Underwriting Expenses
|
|
% of Earned Premiums
|
||||||
Commissions incurred:
|
|
|
|
|
|
|
|
|
||||||
Direct
|
|
$
|
6,668
|
|
|
21.0
|
%
|
|
$
|
6,085
|
|
|
35.8
|
%
|
Ceding - MLQS
|
|
(3,080
|
)
|
|
(9.7
|
)%
|
|
(8,945
|
)
|
|
(52.6
|
)%
|
||
Ceding - other
|
|
(2,138
|
)
|
|
(6.7
|
)%
|
|
(1,872
|
)
|
|
(11.0
|
)%
|
||
Net commissions incurred
|
|
1,450
|
|
|
4.6
|
%
|
|
(4,732
|
)
|
|
(27.8
|
)%
|
||
Other underwriting expenses
|
|
5,031
|
|
|
15.8
|
%
|
|
4,763
|
|
|
28.0
|
%
|
||
Underwriting, acquisition, and insurance expenses
|
|
$
|
6,481
|
|
|
20.4
|
%
|
|
$
|
31
|
|
|
0.2
|
%
|
|
|
Three Months Ended June 30,
|
||||||||||
($ in thousands)
|
|
2016
|
|
2015
|
|
Change
|
||||||
|
|
|
|
|
|
|
||||||
Net investment income
|
|
$
|
1,819
|
|
|
1,377
|
|
|
$
|
442
|
|
|
Net realized investment (losses) gains
|
|
(4
|
)
|
|
8
|
|
|
(12
|
)
|
|||
Total
|
|
$
|
1,815
|
|
|
$
|
1,385
|
|
|
$
|
430
|
|
|
|
Six Months Ended June 30,
|
||||||||||
($ in thousands)
|
|
2016
|
|
2015
|
|
Change
|
||||||
|
|
|
|
|
|
|
||||||
Gross written premiums
|
|
$
|
93,189
|
|
|
$
|
86,042
|
|
|
$
|
7,147
|
|
Ceded written premiums
|
|
(9,733
|
)
|
|
(50,218
|
)
|
|
40,485
|
|
|||
Net written premiums
|
|
$
|
83,456
|
|
|
$
|
35,824
|
|
|
$
|
47,632
|
|
|
|
|
|
|
|
|
||||||
Net earned premiums
|
|
$
|
62,380
|
|
|
$
|
33,457
|
|
|
$
|
28,923
|
|
Losses and loss adjustment expenses
|
|
35,577
|
|
|
17,279
|
|
|
18,298
|
|
|||
Underwriting, acquisition and insurance expenses
|
|
12,729
|
|
|
362
|
|
|
12,367
|
|
|||
Underwriting income
(1)
|
|
14,074
|
|
|
15,816
|
|
|
(1,742
|
)
|
|||
Other expenses, net
|
|
(810
|
)
|
|
(698
|
)
|
|
(112
|
)
|
|||
Net investment income
|
|
3,495
|
|
|
2,591
|
|
|
904
|
|
|||
Net investment gains
|
|
383
|
|
|
16
|
|
|
367
|
|
|||
Income before taxes
|
|
17,142
|
|
|
17,725
|
|
|
(583
|
)
|
|||
Income tax expense
|
|
5,828
|
|
|
6,000
|
|
|
(172
|
)
|
|||
Net income
|
|
$
|
11,314
|
|
|
$
|
11,725
|
|
|
$
|
(411
|
)
|
|
|
|
|
|
|
|
||||||
Return on equity
|
|
18.6
|
%
|
|
24.0
|
%
|
|
|
||||
|
|
|
|
|
|
|
||||||
Loss ratio
|
|
57.0
|
%
|
|
51.6
|
%
|
|
|
||||
Expense ratio
|
|
20.4
|
%
|
|
1.1
|
%
|
|
|
||||
Combined ratio
|
|
77.4
|
%
|
|
52.7
|
%
|
|
|
|
|
Six Months Ended June 30,
|
||||||||||||
|
|
2016
|
|
2015
|
||||||||||
($ in thousands)
|
|
Losses and loss adjustment expenses
|
|
% of Earned Premiums
|
|
Losses and loss adjustment expenses
|
|
% of Earned Premiums
|
||||||
Loss ratio:
|
|
|
|
|
|
|
|
|
||||||
Current accident year
|
|
$
|
40,984
|
|
|
65.7
|
%
|
|
$
|
24,094
|
|
|
72.0
|
%
|
Effect of prior year development
|
|
(5,407
|
)
|
|
(8.7
|
)
|
|
(6,815
|
)
|
|
(20.4
|
)
|
||
|
|
$
|
35,577
|
|
|
57.0
|
%
|
|
$
|
17,279
|
|
|
51.6
|
%
|
|
|
Six Months Ended June 30,
|
||||||||||||
|
|
2016
|
|
2015
|
||||||||||
($ in thousands)
|
|
Losses and loss adjustment expenses
|
|
% of Earned Premiums
|
|
Losses and loss adjustment expenses
|
|
% of Earned Premiums
|
||||||
Adjusted loss ratio:
|
|
|
|
|
|
|
|
|
||||||
Current accident year
|
|
$
|
47,347
|
|
|
64.4
|
%
|
|
$
|
43,172
|
|
|
64.0
|
%
|
Effect of prior year development
|
|
(7,575
|
)
|
|
(10.3
|
)
|
|
(10,418
|
)
|
|
(15.4
|
)
|
||
|
|
$
|
39,772
|
|
|
54.1
|
%
|
|
$
|
32,754
|
|
|
48.6
|
%
|
|
|
Six Months Ended June 30,
|
||||||||||||
|
|
2016
|
|
2015
|
||||||||||
($ in thousands)
|
|
Underwriting Expenses
|
|
% of Earned Premiums
|
|
Underwriting Expenses
|
|
% of Earned Premiums
|
||||||
Commissions incurred:
|
|
|
|
|
|
|
|
|
||||||
Direct
|
|
$
|
13,074
|
|
|
20.9
|
%
|
|
$
|
12,048
|
|
|
36.0
|
%
|
Ceding - MLQS
|
|
(6,485
|
)
|
|
(10.4
|
)%
|
|
(17,159
|
)
|
|
(51.3
|
)%
|
||
Ceding - other
|
|
(4,141
|
)
|
|
(6.6
|
)%
|
|
(3,738
|
)
|
|
(11.1
|
)%
|
||
Net commissions incurred
|
|
2,448
|
|
|
3.9
|
%
|
|
(8,849
|
)
|
|
(26.4
|
)%
|
||
Other underwriting expenses
|
|
10,281
|
|
|
16.5
|
%
|
|
9,211
|
|
|
27.5
|
%
|
||
Underwriting, acquisition, and insurance expenses
|
|
$
|
12,729
|
|
|
20.4
|
%
|
|
$
|
362
|
|
|
1.1
|
%
|
|
|
Six Months Ended June 30,
|
||||||||||
($ in thousands)
|
|
2016
|
|
2015
|
|
Change
|
||||||
|
|
|
|
|
|
|
||||||
Net investment income
|
|
$
|
3,495
|
|
|
2,591
|
|
|
$
|
904
|
|
|
Net realized investment gains
|
|
383
|
|
|
16
|
|
|
367
|
|
|||
Total
|
|
$
|
3,878
|
|
|
$
|
2,607
|
|
|
$
|
1,271
|
|
|
|
Six Months Ended June 30,
|
||||||
|
|
2016
|
|
2015
|
||||
|
|
(in thousands)
|
||||||
Cash and cash equivalents provided by (used in):
|
|
|
|
|
||||
Operating activities
|
|
$
|
36,480
|
|
|
$
|
34,524
|
|
Investing activities
|
|
(38,721
|
)
|
|
(39,338
|
)
|
||
Financing activities
|
|
(67
|
)
|
|
(53
|
)
|
||
Change in cash and cash equivalents
|
|
$
|
(2,308
|
)
|
|
$
|
(4,867
|
)
|
Line of Business Covered
|
|
Company Policy Limit
|
|
Reinsurance Coverage
|
|
Company Retention
|
Property
|
|
Up to $5.0 million per risk
|
|
$4.0 million excess of $1.0 million
|
|
$1.0 million per risk
|
Property - catastrophe (1)
|
|
Up to $5.0 million per occurrence
|
|
$40.0 million excess of $5.0 million
|
|
$5.0 million per occurrence
|
Excess casualty (2)
|
|
Up to $5.0 million per occurrence
|
|
Variable quota share
|
|
$750,000 per occurrence except as described in note (2) 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 $80 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 less than $1.0 million. For policies with a per occurrence limit of $1.0 million or higher, the quota share ceding percentage varies such that the retention is always $750,000. For example, for a $1.0 million limit excess policy, our retention would be 75%, whereas for a $5.0 million limit excess policy, our retention would be 15%. For policies for which we also write an underlying primary limit, the retention on the excess policy will never exceed $1,175,000.
|
|
|
June 30, 2016
|
|
December 31, 2015
|
||||
|
|
(in thousands)
|
||||||
Tangible stockholders' equity
|
|
$
|
127,525
|
|
|
$
|
111,151
|
|
Intangible assets, net of deferred taxes
|
|
2,300
|
|
|
2,300
|
|
||
Stockholders' equity
|
|
$
|
129,825
|
|
|
$
|
113,451
|
|
•
|
the number of shares of common stock equal to the amount of accrued and unpaid dividends based on a reclassification date of July 28, 2016, or $90.3 million, divided by the initial public offering price of $16.00 per share, plus
|
•
|
the number of shares of common stock equal to a conversion ratio of 0.65485975, calculated on the IPO price of $16.00 per share.
|
|
|
June 30, 2016
|
|
December 31, 2015
|
||||||||||||||||||
|
|
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
|
|
$
|
12,410
|
|
|
$
|
12,475
|
|
|
3.2
|
%
|
|
$
|
3,422
|
|
|
$
|
3,433
|
|
|
1.0
|
%
|
Obligations of states, municipalities and political subdivisions
|
|
62,488
|
|
|
66,966
|
|
|
16.9
|
%
|
|
69,997
|
|
|
72,513
|
|
|
21.2
|
%
|
||||
Corporate and other securities
|
|
131,482
|
|
|
132,519
|
|
|
33.5
|
%
|
|
130,758
|
|
|
129,521
|
|
|
37.9
|
%
|
||||
Asset-backed securities
|
|
72,148
|
|
|
72,813
|
|
|
18.4
|
%
|
|
58,680
|
|
|
58,307
|
|
|
17.0
|
%
|
||||
Residential mortgage-backed securities
|
|
92,230
|
|
|
93,650
|
|
|
23.7
|
%
|
|
64,096
|
|
|
63,828
|
|
|
18.7
|
%
|
||||
Total fixed maturities
|
|
370,758
|
|
|
378,423
|
|
|
95.7
|
%
|
|
326,953
|
|
|
327,602
|
|
|
95.8
|
%
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Equity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Exchange traded funds
|
|
14,386
|
|
|
17,143
|
|
|
4.3
|
%
|
|
12,184
|
|
|
14,240
|
|
|
4.2
|
%
|
||||
Total investments available for sale
|
|
$
|
385,144
|
|
|
$
|
395,566
|
|
|
100.0
|
%
|
|
$
|
339,137
|
|
|
$
|
341,842
|
|
|
100.0
|
%
|
|
|
June 30, 2016
|
|
December 31, 2015
|
||||||||||
Standard & Poor’s or Equivalent Designation
|
|
Fair Value
|
|
% of Total
|
|
Estimated Fair Value
|
|
% of Total
|
||||||
|
|
(in thousands)
|
||||||||||||
AAA
|
|
$
|
61,742
|
|
|
16.3
|
%
|
|
$
|
59,263
|
|
|
18.1
|
%
|
AA
|
|
163,693
|
|
|
43.3
|
%
|
|
122,154
|
|
|
37.3
|
%
|
||
A
|
|
114,298
|
|
|
30.2
|
%
|
|
107,218
|
|
|
32.7
|
%
|
||
BBB
|
|
32,777
|
|
|
8.7
|
%
|
|
35,164
|
|
|
10.7
|
%
|
||
BB
|
|
3,050
|
|
|
0.8
|
%
|
|
1,006
|
|
|
0.3
|
%
|
||
Below BB and unrated
|
|
2,863
|
|
|
0.7
|
%
|
|
2,797
|
|
|
0.9
|
%
|
||
Total
|
|
$
|
378,423
|
|
|
100.0
|
%
|
|
$
|
327,602
|
|
|
100.0
|
%
|
|
|
June 30, 2016
|
|
December 31, 2015
|
||||||||||||||||||
|
|
Amortized
Cost
|
|
Estimated Fair Value
|
|
% of Fair Value
|
|
Amortized
Cost |
|
Estimated Fair Value
|
|
% of Fair Value
|
||||||||||
|
|
(in thousands)
|
||||||||||||||||||||
Due in one year or less
|
|
$
|
36,817
|
|
|
$
|
36,855
|
|
|
9.7
|
%
|
|
$
|
19,723
|
|
|
$
|
19,709
|
|
|
6.0
|
%
|
Due after one year through five years
|
|
104,397
|
|
|
105,535
|
|
|
27.9
|
%
|
|
111,059
|
|
|
110,733
|
|
|
33.8
|
%
|
||||
Due after five years through ten years
|
|
24,932
|
|
|
26,280
|
|
|
6.9
|
%
|
|
27,383
|
|
|
27,335
|
|
|
8.3
|
%
|
||||
Due after ten years
|
|
40,234
|
|
|
43,290
|
|
|
11.4
|
%
|
|
46,012
|
|
|
47,690
|
|
|
14.6
|
%
|
||||
Asset-backed securities
|
|
72,148
|
|
|
72,813
|
|
|
19.2
|
%
|
|
58,680
|
|
|
58,307
|
|
|
17.8
|
%
|
||||
Residential mortgage-backed securities
|
|
92,230
|
|
|
93,650
|
|
|
24.7
|
%
|
|
64,096
|
|
|
63,828
|
|
|
19.5
|
%
|
||||
Total fixed maturities
|
|
$
|
370,758
|
|
|
$
|
378,423
|
|
|
100.0
|
%
|
|
$
|
326,953
|
|
|
$
|
327,602
|
|
|
100.0
|
%
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
(in thousands)
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
Underwriting income
|
|
$
|
7,846
|
|
|
$
|
8,924
|
|
|
$
|
14,074
|
|
|
$
|
15,816
|
|
Net investment income
|
|
1,819
|
|
|
1,377
|
|
|
3,495
|
|
|
2,591
|
|
||||
Net investment gains
|
|
(4
|
)
|
|
8
|
|
|
383
|
|
|
16
|
|
||||
Other income
|
|
78
|
|
|
191
|
|
|
136
|
|
|
315
|
|
||||
Other expenses
|
|
(486
|
)
|
|
(517
|
)
|
|
(946
|
)
|
|
(1,013
|
)
|
||||
Income before income taxes
|
|
9,253
|
|
|
9,983
|
|
|
17,142
|
|
|
17,725
|
|
||||
Income tax expense
|
|
3,196
|
|
|
3,374
|
|
|
5,828
|
|
|
6,000
|
|
||||
Net income
|
|
$
|
6,057
|
|
|
$
|
6,609
|
|
|
$
|
11,314
|
|
|
$
|
11,725
|
|
•
|
claims inflation, which is the sustained increase in cost of raw materials, labor, medical services and other components of claims cost;
|
•
|
claims development patterns by line of business and by "claims made" versus "occurrence" policies;
|
•
|
legislative activity;
|
•
|
social and economic patterns; and
|
•
|
litigation and regulatory trends.
|
•
|
When we write "occurrence" policies, we are obligated to pay covered claims, up to the contractually agreed amount, for any covered loss that occurs while the policy is in force. Accordingly, claims may arise many years after a policy has lapsed. Approximately 77.6% of our net casualty loss reserves were associated with "occurrence" policies as of June 30, 2016.
|
•
|
Even when a claim is received (irrespective of whether the policy is a "claims made" or "occurrence" basis form), it may take considerable time to fully appreciate the extent of the covered loss suffered by the insured and, consequently, estimates of loss associated with specific claims can increase over time.
|
•
|
New theories of liability are enforced retroactively from time to time by courts. See also "—The failure of any of the loss limitations or exclusions we employ, or changes in other claims or coverage issues, could have a material adverse effect on our financial condition or results of operations."
|
•
|
Volatility in the financial markets, economic events and other external factors may result in an increase in the number of claims and severity of the claims reported. In addition, elevated inflationary conditions would, among other things, cause loss costs to increase. See also "—Adverse economic factors, including recession, inflation, periods of high unemployment or lower economic activity could result in the sale of fewer policies than expected or an increase in frequency or severity of claims and premium defaults or both, which, in turn, could affect our growth and profitability."
|
•
|
If claims were to become more frequent, even if we had no liability for those claims, the cost of evaluating such potential claims could escalate beyond the amount of the reserves we have established. As we enter new lines of business, or as a result of new theories of claims, we may encounter an increase in claims frequency and greater claims handling costs than we had anticipated.
|
•
|
The models do not address all the possible hazard characteristics of a catastrophe peril (e.g., the precise path and wind speed of a hurricane);
|
•
|
The models may not accurately reflect the true frequency of events;
|
•
|
The models may not accurately reflect a risk’s vulnerability or susceptibility to damage for a given event characteristic;
|
•
|
The models may not accurately represent loss potential to insurance or reinsurance contract coverage limits, terms and conditions; and
|
•
|
The models may not accurately reflect the impact on the economy of the area affected or the financial, judicial, political, or regulatory impact on insurance claim payments during or following a catastrophe event.
|
•
|
if we change our business practices from our organizational business plan in a manner that no longer supports A.M. Best’s rating;
|
•
|
if unfavorable financial, regulatory or market trends affect us, including excess market capacity;
|
•
|
if our losses exceed our loss reserves;
|
•
|
if we have unresolved issues with government regulators;
|
•
|
if we are unable to retain our senior management or other key personnel;
|
•
|
if our investment portfolio incurs significant losses; or
|
•
|
if A.M. Best alters its capital adequacy assessment methodology in a manner that would adversely affect our rating.
|
•
|
causing our current and future brokers and insureds to choose other, more highly-rated competitors;
|
•
|
increasing the cost or reducing the availability of reinsurance to us;
|
•
|
severely limiting or preventing us from writing new and renewal insurance contracts; or
|
•
|
giving our lenders under our credit agreement the right to accelerate our debt.
|
•
|
Asbestos liability applied to manufacturers of products and contractors who installed those products.
|
•
|
Apportionment of liability arising from subsidence claims assigned to subcontractors who may have been involved in mundane tasks (such as installing sheetrock in a home).
|
•
|
Court decisions, such as the 1995 Montrose decision in California, that read policy exclusions narrowly so as to expand coverage, thereby requiring insurers to create and write new exclusions.
|
•
|
An increase in capital-raising by companies in our lines of business, which could result in new entrants to our markets and an excess of capital in the industry;
|
•
|
The deregulation of commercial insurance lines in certain states and the possibility of federal regulatory reform of the insurance industry, which could increase competition from standard carriers; and
|
•
|
Changing practices caused by the internet, including shifts in the way in which E&S insurance is purchased. We currently depend largely on the wholesale distribution model. If the wholesale distribution model were to be significantly altered by changes in the way E&S insurance were marketed, including, but not limited to, through use of the internet, it could have a material adverse effect on our premiums, underwriting results and profits.
|
•
|
collect and properly analyze a substantial volume of data from our insureds;
|
•
|
develop, test and apply appropriate actuarial projections and ratings formulas;
|
•
|
closely monitor and timely recognize changes in trends; and
|
•
|
project both frequency and severity of our insureds’ losses with reasonable accuracy.
|
•
|
insufficient or unreliable data;
|
•
|
incorrect or incomplete analysis of available data;
|
•
|
uncertainties generally inherent in estimates and assumptions;
|
•
|
our failure to implement appropriate actuarial projections and ratings formulas or other pricing methodologies;
|
•
|
regulatory constraints on rate increases;
|
•
|
our failure to accurately estimate investment yields and the duration of our liability for loss and loss adjustment expenses; and
|
•
|
unanticipated court decisions, legislation or regulatory action.
|
|
|
KINSALE CAPITAL GROUP, INC.
|
Date: September 7, 2016
|
By:
|
/s/ Michael P. Kehoe
|
|
|
Michael P. Kehoe
President and Chief Executive Officer |
|
|
|
Date: September 7, 2016
|
By:
|
/s/ Bryan P. Petrucelli
|
|
|
Bryan P. Petrucelli
Senior Vice President and Chief Financial Officer |
Exhibit
Number
|
|
Description
|
3.1
|
|
Amended and Restated Certificate of Incorporation of Kinsale Capital Group, Inc.
|
3.2
|
|
Amended and Restated By-Laws of Kinsale Capital Group, Inc.
|
4.1
|
|
Specimen common stock certificate
|
10.1
|
|
Amended and Restated Loan and Security Agreement, dated as of June 28, 2016, among Kinsale Capital Group, Inc., as borrower, Kinsale Management, Inc. and Aspera Insurance Services, Inc., as loan guarantors, and The PrivateBank and Trust Company, as lender
|
10.2
|
|
Amended and Restated Registration Rights Agreement, dated as of August 2, 2016, among Kinsale Capital Group, Inc., Moelis Capital Partners Opportunity Fund I, LP, Moelis Capital Partners Opportunity Fund I-A, LP, Virginia Capital Private Equity, LP, M.P. Kehoe, LLC and the other stockholders party thereto
|
10.3
|
|
Director Nomination Agreement, dated as of July 28, 2012, between Moelis Capital Partners Opportunity Fund I, LP and Moelis Capital Partners Opportunity Fund I-A, LP and Kinsale Capital Group, Inc.
|
10.4+
|
|
Kinsale Capital Group, Inc. 2016 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.4 to Amendment No. 1 to the Registration Statement on Form S-1, filed with the SEC on July 18, 2016)
|
10.5a+
|
|
Form of Stock Option Grant Notice and Award Agreement (Employee) (incorporated by reference to Exhibit 10.5a to Amendment No. 1 to the Registration Statement on Form S-1, filed with the SEC on July 18, 2016)
|
10.5b+
|
|
Form of Stock Option Grant Notice and Award Agreement (Director) (incorporated by reference to Exhibit 10.5b to Amendment No. 1 to the Registration Statement on Form S-1, filed with the SEC on July 18, 2016)
|
10.6+
|
|
Kinsale Capital Group, Inc. (as successor to Kinsale Capital Group, Ltd.) 2010 Stock Incentive Plan (incorporated by reference to Exhibit 10.7 to the Registration Statement on Form S-1, filed with the SEC on July 1, 2016)
|
10.7
|
|
Employment and Arbitration Agreement, dated as of June 4, 2009 among Kinsale Management, Inc. and Michael P. Kehoe (incorporated by reference to Exhibit 10.7 to the Registration Statement on Form S-1, filed with the SEC on July 1, 2016)
|
10.8
|
|
Form of Indemnification Agreement between Kinsale Capital Group, Inc. and each of its directors and executive officers (incorporated by reference to Exhibit 10.8 to Amendment No. 1 to the Registration Statement on Form S-1, filed with the SEC on July 18, 2016)
|
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
|
(1)
|
The name of the Corporation is Kinsale Capital Group, Inc.
|
(2)
|
The name under which the Corporation was originally incorporated in the State of Delaware following its domestication from the Islands of Bermuda was Kinsale Capital Group Bermuda, Ltd. with the Certificate of Domestication of Non-United States Corporation and the original Certificate of Incorporation filed with the Secretary of State of the State of Delaware on September 5, 2014. The original Certificate of Incorporation was amended on September 5, 2014 by filing a certificate of ownership and merger with the Secretary of State of the State of Delaware, pursuant to which the Corporation changed its name to Kinsale Capital Group, Inc.
|
(3)
|
In lieu of a meeting of the Board of Directors of the Corporation (the “
Board of Directors
”), the Board of Directors has, by unanimous written consent dated July 15, 2016, authorized the amendment and restatement of the Corporation’s original Certificate of Incorporation as set forth herein in accordance with the provisions of Sections 141(f), 242 and 245 of the General Corporation Law of the State of Delaware (the “
DGCL
”). In lieu of a meeting of such stockholders of the Corporation, the holders of the Corporation’s Class A Common Stock and holders of the Corporation’s Class B Common Stock have, by written consent dated July 18, 2016, approved the amendment and restatement of the Corporation’s original Certificate of Incorporation as set forth herein in accordance with the provisions of Section 228 of the DGCL, and such consents have been filed with the minutes of the proceedings of stockholders of the Corporation.
|
(4)
|
This Amended and Restated Certificate of Incorporation restates and integrates and further amends the original Certificate of Incorporation, as heretofore amended and supplemented.
|
(5)
|
The effective time of this Amended and Restated Certificate of Incorporation is 6:00 a.m. ET on July 28, 2016.
|
(a)
|
Authorized Capital Stock
. The total number of shares of stock which the Corporation shall have authority to issue is 500,000,000 of which the Corporation shall have authority to issue 400,000,000 shares of common stock, each having a par value of one cent ($0.01) per share (the “
Common Stock
”), and 100,000,000 shares of preferred stock, each having a par value of one cent ($0.01) per share (the “
Preferred Stock
”).
|
(b)
|
Common Stock
. The powers, preferences and rights, and the qualifications, limitations and restrictions, of the Common Stock are as follows:
|
(1)
|
Each holder of record of shares of Common Stock shall be entitled to one vote for each share of Common Stock held on all matters submitted to a vote of stockholders of the Corporation on which holders of Common Stock are entitled to vote.
|
(2)
|
The holders of shares of Common Stock shall not have cumulative voting rights (as defined in Section 214 of the DGCL).
|
(3)
|
Subject to the rights of the holders of Preferred Stock, and subject to any other provisions of this Amended and Restated Certificate of Incorporation, as it may be amended from time to time, holders of shares of Common Stock shall be entitled to receive such dividends and other distributions in cash, stock or property of the Corporation if, as and when declared thereon by the Board of Directors from time
|
(4)
|
In the event of any liquidation, dissolution or winding-up of the Corporation, whether voluntary or involuntary, after payment or provision for the payment of the debt and liabilities of the Corporation and subject to the prior payment in full of the preferential amounts, if any, to which any series of Preferred Stock may be entitled, the holders of shares of Common Stock shall be entitled to receive the assets and funds of the Corporation remaining for distribution in proportion to the number of shares held by them, respectively.
|
(5)
|
No holder of shares of Common Stock shall be entitled to preemptive or subscription rights.
|
(c)
|
Preferred Stock
. The Board of Directors is expressly authorized to provide for the issuance of all or any shares of the Preferred Stock in one or more classes or series, and to fix for each such class or series such voting powers, full or limited, or no voting powers, and such distinctive designations, preferences and relative, participating, optional or other special rights and such qualifications, limitations or restrictions thereof, as shall be stated and expressed in the resolution or resolutions adopted by the Board of Directors providing for the issuance of such class or series and as may be permitted by the DGCL, including, without limitation, the authority to provide that any such class or series may be (i) subject to redemption at such time or times and at such price or prices; (ii) entitled to receive dividends (which may be cumulative or non-cumulative) at such rates, on such conditions, and at such times, and payable in preference to, or in such relation to, the dividends payable on any other class or classes of stock or any other series of stock; (iii) entitled to such rights upon any liquidation, dissolution or winding-up, whether voluntary or involuntary, of the Corporation; or (iv) convertible into, or exchangeable for, shares of any other class or classes of stock, or shares of any other series of the same class of stock, of the Corporation at such price or prices or at such rates of exchange and with such adjustments; all as may be stated in such resolution or resolutions.
|
(d)
|
Reclassification of Class A Common Stock
. Immediately upon the effective time of this Amended and Restated Certificate of Incorporation, each one (1) share of the Corporation’s Class A Common Voting Shares, par value $0.0001 per share (the “
Class A Common Stock
”), issued and outstanding
|
(e)
|
Reclassification of Class B Common Stock
. Immediately upon the effective time of this Amended and Restated Certificate of Incorporation, each one (1) share of the Corporation’s Class B Common Non-Voting Shares, par value $0.0001 per share (the “
Class B Common Stock
”), issued and outstanding immediately prior to the effective time of this Amended and Restated Certificate of Incorporation shall automatically be reclassified as and converted into 0.72095061 validly issued, fully paid and nonassessable shares of Common Stock, without any action by the holder thereof or by the Corporation (the “
Class B Reclassification
”). No fractional shares shall be issued in connection with the Class B Reclassification and, in lieu thereof, any holder who would hold a fractional share of Common Stock shall be entitled to receive cash for such holder’s fractional share based upon the initial public offering price of the Corporation’s Common Stock.
|
(f)
|
Surrender and Issuance of New Certificates
. After the Class A Reclassification and the Class B Reclassification, each certificate that prior to (i) the Class A Reclassification represented shares of Class A Common Stock (“
Old Class A Certificates
”) and (ii) the Class B Reclassification represented shares of Class B Common Stock (“
Old Class B Certificates
”) shall thereafter represent that number of shares of Common Stock into which the shares of Class A Common Stock represented by the Old Class A Certificates or the shares of Class B Common Stock represented by the Old Class B Certificates shall have been reclassified as a result of the Class A Reclassification or the Class B Reclassification, respectively. Upon surrender at the office of the Corporation or its transfer agent of Old Class A Certificates or Old Class B Certificates in such holder’s name, or upon notifying the Corporation or its transfer agent that such certificates have been lost, stolen or destroyed and executing an agreement satisfactory to the Corporation to indemnify the Corporation from any loss incurred by it in connection with such certificates, such holder will be entitled to receive,
|
(g)
|
No Charge to Holders
. The issuance of book-entry interests or certificates for shares of Common Stock upon the Class A Reclassification or the Class B Reclassification shall be made without charge to the holders of such shares for any issuance tax in respect thereof or other cost incurred by the Corporation in connection with such Class A Reclassification or Class B Reclassification and the related issuance of shares of Common Stock. Upon the Class A Reclassification or Class B Reclassification, the Corporation shall take all such actions as are necessary in order to ensure that the shares of Common Stock issued in the Class A Reclassification or Class B Reclassification shall be validly issued, fully paid and nonassessable, free and clear of all taxes, liens, charges and encumbrances with respect to the issuance thereof.
|
(h)
|
Power to Sell and Purchase Shares
. Subject to the requirements of applicable law, the Corporation shall have the power to issue and sell all or any part of any shares of any class of stock herein or hereafter authorized to such persons, and for such consideration, as the Board of Directors shall from time to time, in its discretion, determine, whether or not greater consideration could be received upon the issue or sale of the same number of shares of another class or of shares of another series of such class, and as otherwise permitted by law. Subject to the requirements of applicable law, the Corporation shall have the power to purchase any shares of any class of stock herein or hereafter authorized from such persons, and for such consideration, as the Board of Directors shall from time to time, in its discretion, determine, whether or not less consideration could be paid upon the purchase of the same number of shares of another class or of shares of another series of such class, and as otherwise permitted by law.
|
(a)
|
The business and affairs of the Corporation shall be managed by, or under the direction of, the Board of Directors. In addition to the powers and authority expressly conferred upon the Board of Directors by applicable law, this Amended and Restated Certificate of Incorporation or the Amended and Restated By-Laws of the Corporation (as amended from time to time, the “
By-Laws
”), the directors are hereby empowered to exercise all such powers and do all such acts and things as may be exercised or done by the Corporation, subject to the provisions of the DGCL and this Amended and Restated Certificate of Incorporation.
|
(b)
|
The number of directors of the Corporation shall be fixed from time to time exclusively by resolution of the Board of Directors.
|
(c)
|
The directors shall be divided into three classes, designated Class I, Class II and Class III. Each class shall consist, as nearly as may be possible, of one-third of the total number of directors constituting the entire Board of Directors. The initial division of the Board of Directors into classes shall be made by the decision of the affirmative vote of a majority of the entire Board of Directors. The term of the initial Class I directors shall terminate on the date of the 2017 annual meeting of stockholders; the term of the initial Class II directors shall terminate on the date of the 2018 annual meeting of stockholders; and the term of the initial Class III directors shall terminate on the date of the 2019 annual meeting of stockholders. Each director in each class shall hold office until his or her successor is duly elected and qualified or until his or her earlier death, resignation or removal. At each succeeding annual meeting of stockholders beginning in 2017, successors to the class of directors whose term expires at that annual meeting shall be elected to hold office for a term expiring at the annual meeting of stockholders to be held in the third year following the year of their election, with each director in each such class to hold office until his or her successor is duly elected and qualified or until his or her earlier death, resignation or removal. If the number of directors is changed, any increase or decrease shall be apportioned among the classes so as to maintain the number of directors in each class as nearly equal as possible, but in no case will a decrease in the number of directors shorten the term of any incumbent director.
|
(d)
|
Subject to the terms of any one or more classes or series of Preferred Stock then outstanding, any vacancy on the Board of Directors that results from (i) removal of a director, (ii) an increase in the number of directors or (iii) death, resignation, disqualification or any other cause, will be filled solely by the affirmative vote of a majority of the remaining directors then in office, even if less than a quorum remains, including by a sole remaining director. Any director of any class elected to fill a vacancy resulting from an increase in the number of directors of such class shall hold office for a term that shall coincide with the remaining term of that class. Any director elected to fill a vacancy not resulting from an increase in the number of directors shall have the same remaining term as that of his or her predecessor. The right of stockholders to fill vacancies on the Board of Directors is hereby specifically denied.
|
(e)
|
Notwithstanding the foregoing, the election, term, removal and filling of vacancies with respect to directors, if any, elected separately by the holders of one or more classes or series of Preferred Stock shall not be governed by this Article FIFTH, but rather shall be as provided for in the resolutions adopted by the Board of Directors creating and establishing such class or series of Preferred Stock.
|
(a)
|
To the fullest extent permitted by applicable law (including, without limitation, Section 122(17) of the DGCL (or any successor provision)), the Corporation, on behalf of itself and its subsidiaries, renounces any interest or expectancy of the Corporation and its subsidiaries in, or in being offered an opportunity to participate in, business opportunities that are from time to time presented to the Sponsor Holder or any of its officers, directors, employees, agents, shareholders, members, partners, principals, affiliates (other than the Corporation and its subsidiaries) and
|
(b)
|
The Specified Parties shall have no duty to refrain from (i) engaging directly or indirectly in the same or similar business activities or lines of business as the Corporation or any of its subsidiaries or (ii) otherwise competing with the Corporation or any of its subsidiaries.
|
(c)
|
In addition to and notwithstanding the foregoing provisions of this Article THIRTEENTH, a corporate opportunity shall not be deemed to belong to the Corporation if it is a business opportunity that the Corporation is not financially able or contractually permitted or legally able to undertake, or that is, from its nature, not in the line of the Corporation’s business or is of no practical advantage to it or that is one in which the Corporation has no interest or reasonable expectancy.
|
(d)
|
No alteration, amendment or repeal of this Article THIRTEENTH (including the adoption of any provision of this Amended and Restated Certificate of Incorporation inconsistent with this Article THIRTEENTH)
|
(e)
|
Any person or entity purchasing or otherwise acquiring any interest in the shares of capital stock of the Corporation shall be deemed to have notice of and consented to the provisions of this Article THIRTEENTH.
|
|
|
|
|
Page
|
|
Article I Offices
|
|
1
|
|
||
Section 1.
|
|
Registered Office
|
|
1
|
|
Section 2.
|
|
Other Offices
|
|
1
|
|
Article II Meetings Of Stockholders
|
|
1
|
|
||
Section 1.
|
|
Place of Meetings
|
|
1
|
|
Section 2.
|
|
Annual Meetings
|
|
1
|
|
Section 3.
|
|
Special Meetings
|
|
2
|
|
Section 4.
|
|
Nature of Business at Meetings of Stockholders
|
|
2
|
|
Section 5.
|
|
Nomination of Directors
|
|
6
|
|
Section 6.
|
|
Notice
|
|
11
|
|
Section 7.
|
|
Adjournments
|
|
11
|
|
Section 8.
|
|
Quorum
|
|
12
|
|
Section 9.
|
|
Voting
|
|
12
|
|
Section 10.
|
|
Proxies
|
|
13
|
|
Section 11.
|
|
List of Stockholders Entitled to Vote
|
|
14
|
|
Section 12.
|
|
Record Date
|
|
15
|
|
Section 13.
|
|
Stock Ledger
|
|
16
|
|
Section 14.
|
|
Conduct of Meetings
|
|
16
|
|
Section 15.
|
|
Inspectors of Election
|
|
17
|
|
Section 16.
|
|
No Consent of Stockholders in Lieu of Meeting
|
|
18
|
|
Article III Directors
|
|
18
|
|
||
Section 1.
|
|
Number, Classification, Election and Term of Office
|
|
18
|
|
Section 2.
|
|
Vacancies
|
|
18
|
|
Section 3.
|
|
Duties and Powers
|
|
18
|
|
Section 4.
|
|
Meetings
|
|
18
|
|
Section 5.
|
|
Organization
|
|
19
|
|
Section 6.
|
|
Resignations and Removals of Directors
|
|
20
|
|
Section 7.
|
|
Quorum
|
|
20
|
|
Section 8.
|
|
Actions of the Board of Directors by Written Consent
|
|
21
|
|
Section 9.
|
|
Meetings by Means of Conference Telephone
|
|
21
|
|
Section 10.
|
|
Committees
|
|
21
|
|
Section 11.
|
|
Compensation
|
|
22
|
|
Section 12.
|
|
Interested Directors
|
|
22
|
|
Article IV Officers
|
|
23
|
|
||
Section 1.
|
|
General
|
|
23
|
|
Section 2.
|
|
Election
|
|
24
|
|
Section 3.
|
|
Voting Securities Owned by the Corporation
|
|
24
|
|
Section 4.
|
|
Chairman of the Board of Directors
|
|
24
|
|
Section 5.
|
|
President
|
|
25
|
|
Section 6.
|
|
Vice Presidents
|
|
25
|
|
Section 7.
|
|
Secretary
|
|
26
|
|
Section 8.
|
|
Treasurer
|
|
27
|
|
Section 9.
|
|
Assistant Secretaries
|
|
27
|
|
Section 10.
|
|
Assistant Treasurers
|
|
28
|
|
Section 11.
|
|
Other Officers
|
|
28
|
|
Article V Stock
|
|
28
|
|
||
Section 1.
|
|
Form Shares of Stock
|
|
28
|
|
Section 2.
|
|
Signatures
|
|
29
|
|
Section 3.
|
|
Lost Certificates
|
|
29
|
|
Section 4.
|
|
Transfers
|
|
30
|
|
Section 5.
|
|
Dividend Record Date
|
|
30
|
|
Section 6.
|
|
Record Owners
|
|
31
|
|
Section 7.
|
|
Transfer and Registry Agents
|
|
31
|
|
Article VI Notices
|
|
31
|
|
||
Section 1.
|
|
Notices
|
|
31
|
|
Section 2.
|
|
Waivers of Notice
|
|
32
|
|
Article VII General Provisions
|
|
33
|
|
||
Section 1.
|
|
Dividends
|
|
33
|
|
Section 2.
|
|
Disbursements
|
|
33
|
|
Section 3.
|
|
Fiscal Year
|
|
33
|
|
Section 4.
|
|
Corporate Seal
|
|
34
|
|
Article VIII Indemnification
|
|
34
|
|
||
Section 1.
|
|
Power to Indemnify in Actions, Suits or Proceedings Other than Those by or in the Right of the Corporation
|
|
34
|
|
Section 2.
|
|
Power to Indemnify in Actions, Suits or Proceedings by or in the Right of the Corporation
|
|
35
|
|
Section 3.
|
|
Authorization of Indemnification
|
|
35
|
|
Section 4.
|
|
Good Faith Defined
|
|
36
|
|
Section 5.
|
|
Indemnification by a Court
|
|
37
|
|
Section 6.
|
|
Expenses Payable in Advance
|
|
37
|
|
Section 7.
|
|
Nonexclusivity of Indemnification and Advancement of Expenses
|
|
38
|
|
Section 8.
|
|
Insurance
|
|
38
|
|
Section 9.
|
|
Certain Definitions.
|
|
39
|
|
Section 10.
|
|
Survival of Indemnification and Advancement of Expenses
|
|
40
|
|
Section 11.
|
|
Limitation on Indemnification
|
|
40
|
|
Section 12.
|
|
Indemnification of Employees and Agents
|
|
40
|
|
Section 13.
|
|
Indemnification Priority
|
|
40
|
|
Article IX Amendments
|
|
43
|
|
||
Section 1.
|
|
Amendments
|
|
43
|
|
Section 2.
|
|
Entire Board of Directors
|
|
43
|
|
|
|
|
|
|
|
ARTICLE 1
|
|
DEFINITIONS
|
|
|
|
|
1.1
|
Definitions
|
|
1
|
|
|
1.2
|
Other Interpretive Provisions
|
|
14
|
|
ARTICLE 2
|
|
COMMITMENTS OF LENDER; EVIDENCING OF LOANS
|
|
14
|
|
|
2.1
|
Commitments
|
|
14
|
|
|
2.2
|
Notes
|
|
14
|
|
|
2.3
|
Recordkeeping
|
|
15
|
|
ARTICLE 3
|
|
INTEREST
|
|
15
|
|
|
3.1
|
Interest Rates
|
|
15
|
|
|
3.2
|
Interest Payment Dates
|
|
15
|
|
|
3.3
|
Setting and Notice of LIBOR Rates
|
|
15
|
|
|
3.4
|
Computation of Interest
|
|
15
|
|
ARTICLE 4
|
|
PREPAYMENTS
|
|
15
|
|
|
4.1
|
Prepayments
|
|
15
|
|
|
4.2
|
Manner of Prepayments
|
|
16
|
|
|
4.3
|
Repayments
|
|
16
|
|
ARTICLE 5
|
|
MAKING AND PRORATION OF PAYMENTS; SETOFF; TAXES
|
|
17
|
|
|
5.1
|
Making of Payments
|
|
17
|
|
|
5.2
|
Application of Certain Payments
|
|
17
|
|
|
5.3
|
Due Date
|
|
17
|
|
|
5.4
|
Setoff
|
|
17
|
|
|
5.5
|
Taxes
|
|
17
|
|
ARTICLE 6
|
|
INCREASED COSTS; SPECIAL PROVISIONS FOR TERM LOAN
|
|
19
|
|
|
6.1
|
Increased Costs
|
|
19
|
|
|
6.2
|
Basis for Determining Interest Rate Inadequate or Unfair
|
|
20
|
|
|
6.3
|
Changes in Law Rendering the Term Loan Unlawful
|
|
20
|
|
|
6.4
|
Funding Losses
|
|
21
|
|
|
6.5
|
Right of Lender to Fund through Other Offices
|
|
21
|
|
|
6.6
|
Discretion of Lender as to Manner of Funding
|
|
21
|
|
|
6.7
|
Mitigation of Circumstances
|
|
21
|
|
|
6.8
|
Conclusiveness of Statements; Survival of Provisions
|
|
21
|
|
ARTICLE 7
|
|
COLLATERAL AND COLLATERAL ADMINISTRATION
|
|
22
|
|
|
7.1
|
Grant
|
|
22
|
|
|
7.2
|
Certain Matters Relating to Receivables
|
|
22
|
|
|
7.3
|
Communications with Obligors; Loan Parties Remain Liable
|
|
23
|
|
|
7.4
|
Investment Property
|
|
23
|
|
|
7.5
|
Proceeds to be Turned Over to Lender
|
|
24
|
|
|
7.6
|
Application of Proceeds
|
|
24
|
|
|
7.7
|
Code and Other Remedies
|
|
25
|
|
|
7.8
|
Pledged Equity
|
|
26
|
|
|
7.9
|
Waiver; Deficiency
|
|
27
|
|
|
7.10
|
Lender’s Appointment as Attorney-in-Fact, etc
|
|
27
|
|
|
7.11
|
Duty of Lender
|
|
28
|
|
|
7.12
|
Acknowledgements
|
|
29
|
|
|
7.13
|
Additional Parties
|
|
29
|
|
|
7.14
|
Releases
|
|
29
|
|
|
7.15
|
Obligations and Liens Absolute and Unconditional
|
|
29
|
|
|
7.16
|
Reinstatement
|
|
30
|
|
ARTICLE 8
|
|
REPRESENTATIONS AND WARRANTIES
|
|
30
|
|
|
8.1
|
Organization
|
|
30
|
|
|
8.2
|
Authorization; No Conflict
|
|
30
|
|
|
8.3
|
Validity and Binding Nature
|
|
31
|
|
|
8.4
|
Financial Condition
|
|
31
|
|
|
8.5
|
No Material Adverse Change
|
|
31
|
|
|
8.6
|
Litigation and Contingent Liabilities
|
|
31
|
|
|
8.7
|
Ownership of Properties; Liens
|
|
31
|
|
|
8.8
|
Equity Ownership; Subsidiaries
|
|
31
|
|
|
8.9
|
Pension Plans
|
|
31
|
|
|
8.10
|
Investment Company Act
|
|
32
|
|
|
8.11
|
Compliance with Laws
|
|
32
|
|
|
8.12
|
Regulation U
|
|
32
|
|
|
8.13
|
Licensed Insurance Company
|
|
32
|
|
|
8.14
|
Taxes
|
|
32
|
|
|
8.15
|
Solvency, etc
|
|
33
|
|
|
8.16
|
Insurance
|
|
33
|
|
|
8.17
|
Information
|
|
33
|
|
|
8.18
|
Labor Matters
|
|
33
|
|
|
8.19
|
Anti-Terrorism Laws
|
|
34
|
|
|
8.20
|
No Default
|
|
34
|
|
|
8.21
|
Subordinated Debt
|
|
34
|
|
|
8.22
|
Perfected First Priority Liens
|
|
34
|
|
|
8.23
|
Loan Party Information
|
|
34
|
|
|
8.24
|
Certain Property
|
|
35
|
|
|
8.25
|
Investment Property
|
|
35
|
|
|
8.26
|
Intellectual Property
|
|
35
|
|
|
8.27
|
Right to Use Intellectual Property
|
|
35
|
|
ARTICLE 9
|
|
AFFIRMATIVE COVENANTS
|
|
35
|
|
|
9.1
|
Reports, Certificates and Other Information
|
|
35
|
|
|
9.2
|
Books, Records and Inspections
|
|
38
|
|
|
9.3
|
Maintenance of Property; Insurance
|
|
38
|
|
|
9.4
|
Compliance with Laws; Payment of Taxes and Liabilities
|
|
39
|
|
|
9.5
|
Licensed Insurance Provider
|
|
39
|
|
|
9.6
|
Maintenance of Existence, etc
|
|
39
|
|
|
9.7
|
Employee Benefit Plans
|
|
39
|
|
|
9.8
|
Further Assurances
|
|
40
|
|
|
9.9
|
Deposit Accounts
|
|
41
|
|
|
9.10
|
Delivery of Instruments, Certificated Securities and Chattel Paper
|
|
41
|
|
|
9.11
|
Maintenance of Perfected Security Interest; Further Documentation
|
|
41
|
|
|
9.12
|
Investment Property
|
|
42
|
|
|
9.13
|
Intellectual Property
|
|
43
|
|
|
9.14
|
Other Matters
|
|
44
|
|
|
9.15
|
A.M. Best Co. Rating
|
|
45
|
|
ARTICLE 10
|
|
NEGATIVE COVENANTS
|
|
45
|
|
|
10.1
|
Debt
|
|
45
|
|
|
10.2
|
Liens
|
|
46
|
|
|
10.3
|
Operating Leases
|
|
48
|
|
|
10.4
|
Restricted Payments
|
|
48
|
|
|
10.5
|
Mergers, Consolidations, Sales
|
|
48
|
|
|
10.6
|
Modification of Organizational Documents
|
|
49
|
|
|
10.7
|
Transactions with Affiliates
|
|
49
|
|
|
10.8
|
Inconsistent Agreements
|
|
49
|
|
|
10.9
|
Business Activities; Issuance of Equity
|
|
49
|
|
|
10.10
|
Investments
|
|
50
|
|
|
10.11
|
Restriction of Amendments to Certain Documents
|
|
51
|
|
|
10.12
|
Fiscal Year
|
|
51
|
|
|
10.13
|
Financial Covenants
|
|
51
|
|
ARTICLE 11
|
|
EFFECTIVENESS; CONDITIONS OF CLOSING, ETC
|
|
51
|
|
|
11.1
|
Agreement and Note
|
|
51
|
|
|
11.2
|
Authorization Documents
|
|
51
|
|
|
11.3
|
Consents and Approvals
|
|
52
|
|
|
11.4
|
Delivery of Pledged Collateral
|
|
52
|
|
|
11.5
|
Subordination Agreements
|
|
52
|
|
|
11.6
|
Insurance
|
|
52
|
|
|
11.7
|
Payment of Fees
|
|
52
|
|
|
11.8
|
Financial Statements
|
|
52
|
|
|
11.9
|
Reserves
|
|
52
|
|
|
11.10
|
Search Results
|
|
52
|
|
|
11.11
|
Filings, Registrations and Recordings
|
|
52
|
|
|
11.12
|
Representations and Warranties
|
|
53
|
|
|
11.13
|
Other
|
|
53
|
|
ARTICLE 12
|
|
EVENTS OF DEFAULT AND THEIR EFFECT
|
|
53
|
|
|
12.1
|
Events of Default
|
|
53
|
|
|
12.2
|
Effect of Event of Default. If:
|
|
55
|
|
ARTICLE 13
|
|
GENERAL
|
|
55
|
|
|
13.1
|
Marshalling; Waiver; Amendments
|
|
55
|
|
|
13.2
|
Confirmations
|
|
55
|
|
ARTICLE 2
|
COMMITMENTS OF LENDER; EVIDENCING OF LOANS.
|
ARTICLE 3
|
INTEREST.
|
ARTICLE 4
|
PREPAYMENTS.
|
ARTICLE 5
|
MAKING AND PRORATION OF PAYMENTS; SETOFF; TAXES.
|
ARTICLE 6
|
INCREASED COSTS; SPECIAL PROVISIONS FOR TERM LOAN.
|
ARTICLE 7
|
COLLATERAL AND COLLATERAL ADMINISTRATION.
|
ARTICLE 8
|
REPRESENTATIONS AND WARRANTIES.
|
ARTICLE 9
|
AFFIRMATIVE COVENANTS.
|
ARTICLE 10
|
NEGATIVE COVENANTS
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ARTICLE 11
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EFFECTIVENESS; CONDITIONS OF CLOSING, ETC.
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ARTICLE 13
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GENERAL.
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ARTICLE 14
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LOAN GUARANTY.
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KINSALE CAPITAL GROUP, INC.
, as Borrower
By:
/s/ Michael P. Kehoe
Name:
Michael P. Kehoe
Title:
CEO
KINSALE MANAGEMENT, INC.
, as Loan Guarantor
By:
/s/ Michael P. Kehoe
Name:
Michael P. Kehoe
Title:
CEO
ASPERA INSURANCE SERVICES, INC
., as Loan Guarantor
By:
/s/ Michael P. Kehoe
Name:
Michael P. Kehoe
Title:
CEO
THE PRIVATEBANK AND TRUST COMPANY
, as Lender
By:
/s/ Austin G. Love
Name:
Austin G. Love
Title:
Associate Managing Director
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To the Lender
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The PrivateBank and Trust Company
120 South LaSalle Street
Chicago, Illinois 60603
Attention: Andrew C. Haak, Managing Director
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With a copy of notices sent to Lender sent to:
(
provided such copy shall not constitute notice
)
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Freeborn & Peters LLP
311 South Wacker Drive, Suite 3000
Chicago, Illinois 60606
Attention: Anthony J. Zeoli, Esq.
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To Borrower
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Kinsale Capital Group, Inc.
2221 Edward Holland Drive, Suite 600
Richmond, Virginia 23230
Attention: Michael P. Kehoe
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To The Loan Guarantors
:
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Kinsale Management, Inc.;
Aspera Insurance Services, Inc.
c/o Kinsale Capital Group, Inc.
2221 Edward Holland Drive, Suite 600
Richmond, Virginia 23230
Attention: Michael P. Kehoe
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With a copy of notices sent to Borrower and/or Loan Guarantors to:
(
provided such copy shall not constitute notice
)
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Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square,
New York 10036-6522
Attention: Dwight S. Yoo, Esq.
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Loan Party/Subsidiary
Kinsale Capital Group, Inc.
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Authorized Capital
18,333,333 shares of Common Stock, $0.0001 par value per share, of which 15,000,000 shares are designated as Class A Common Voting Shares and 3,333,333 are designated as Class B Common Non-Voting Shares
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Issued and Outstanding Shares
13,803,183 Class A Shares
1,538,836 Class B Shares
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Owner
Not Applicable
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Kinsale Management, Inc.
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10,000 authorized shares, par value $0.01
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100
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100% by Kinsale Capital Group, Inc.
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Kinsale Insurance Company
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5,000,000 authorized shares, par value $1.00
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3,750,000
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100% by Kinsale Capital Group, Inc.
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Aspera Insurance Services, Inc.
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5,000 authorized shares, par value $0.01
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100
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100% by Kinsale Capital Group, Inc.
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1.
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The Investments described in in the Investment Schedules.
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2.
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The inter-company obligations contemplated by that certain Management Services Agreement dated as of February 5, 2010 by and between Kinsale Management, Inc. and Kinsale Insurance Company.
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3.
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The inter-company obligations contemplated by that certain Management Services Agreement dated as of April 22, 2014 by and between Kinsale Management, Inc. and Aspera Insurance Services, Inc.
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4.
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The inter-company obligations contemplated by that certain Amended and Restated Tax Sharing & Allocation Agreement dated as of April 22, 2014 among Kinsale Capital Group, Inc., Kinsale Management, Inc., Kinsale Insurance Company and Aspera Insurance Services, Inc.
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I.
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Reports
. Enclosed herewith is a copy of the
[annual audited/quarterly]
report of Borrower and its consolidated Subsidiaries as at _____________, ____ (the “
Computation Date
”), which report fairly presents in all material respects the financial condition and results of operations
[(subject to the absence of footnotes and to normal year-end adjustments)]
of Borrower and its consolidated Subsidiaries as of the Computation Date and has been prepared in accordance with GAAP consistently applied.
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II.
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Financial Tests
. Borrower hereby certifies and warrants to you that the following is a true and correct computation as at the Computation Date of the following ratios and/or financial restrictions contained in the Loan Agreement:
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A.
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Section 10.13.1 - Minimum Risk Based Capital
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1.
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Risk Based Capital Ratio
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for Kinsale Insurance as of
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December 31, 20__
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________%
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2.
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Minimum Required
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350%
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3.
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Met
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Yes/No
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B.
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Section 10.13.2 - Statutory Surplus
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1.
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Statutory Surplus for Kinsale
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Insurance as of March 31, 2016
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________
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2.
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90% of Item 1
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________
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3.
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Statutory Net Income
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for Kinsale Insurance
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from April 1, 2016 to
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the Computation Date
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_________
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4.
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50% of Item 3
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_________
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5.
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Minimum Statutory Surplus
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(Item 2,
plus
Item 4)
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_________
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6.
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Statutory Surplus as of Computation Date
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_________
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7.
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Met
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Yes/No
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C.
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Section 10.13.3 - Total Debt to Capital Ratio
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1.
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Total Debt of Borrower
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and its consolidated Subsidiaries
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as of the Computation Date
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$_________
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2.
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Net Worth of Borrower
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and its consolidated Subsidiaries
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plus
Item 1
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$_________
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3.
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Ratio of (1) to (2)
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___ to ___
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4.
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Maximum allowed
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1.00 to 2.50
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5.
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Met
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Yes/No
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D.
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Section 10.13.4 -Net Worth
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1.
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Net Worth of Borrower
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and its consolidated subsidiaries
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as of March 31, 2016
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_________
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2.
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85% of Item 1
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_________
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3.
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Net Earnings as from April 1, 2016
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to the Computation Date
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_________
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4.
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50% of Item 3
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_________
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5.
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Minimum Net Worth (Item 2,
plus
Item 4)
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$_________
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6.
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Net Worth as of the Computation Date
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$_________
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7.
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Met
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Yes/No
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Page
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1.
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Certain Definitions
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2
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2.
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Demand Registrations
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3
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3.
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Piggyback Registrations
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6
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4.
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S-3 Registration
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8
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5.
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Lock-Up Agreements
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8
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6.
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Registration Procedures
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9
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7.
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Registration Expenses
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14
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8.
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Indemnification
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15
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9.
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Participation in Underwritten Registrations
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18
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10.
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Expenses
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18
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11.
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Aggregation of Stock
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18
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12.
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Entire Agreement
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18
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13.
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Governing Law; Venue; Service of Process
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18
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14.
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Successors and Assignees; Assignment
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19
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15.
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Notices
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19
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16.
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Modifications; No Implied Waiver
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20
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17.
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Severability
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20
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18.
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Headings
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20
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19.
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Counterparts
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20
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20.
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Construction; Interpretation
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21
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21.
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No Inconsistent Agreement
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21
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22.
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No Joint Venture, Etc.
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21
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23.
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Specific Performance
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21
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24.
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Securities Law Acknowledgment
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21
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Schedule 1
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Virginia Capital Purchasers
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Schedule 2
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Other Purchasers
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1.
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Certain Definitions
.
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(a)
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Right to Request Registration
. At any time or from time to time following the date hereof, (i) Shareholders representing a majority of the then outstanding Registrable Securities may request in writing and require that the Company register under the Securities Act all or part of their Registrable Securities (a "
Majority Demand Registration
") and (ii) Moelis may request in writing and require that the Company register under the Securities Act all or part of its Registrable Securities (a "
Moelis Demand Registration
" and, together with a Majority Demand Registration, a "
Demand Registration
"). Promptly after its receipt of any such request for Demand Registration, the Company shall give written notice of such request to all other Shareholders holding Registrable Securities and shall, subject to the provisions of Section 2(c) hereof, include in such registration all such Registrable Securities with respect to which the Company has received written requests for inclusion therein within fifteen (15) days after the receipt of the Company's written notice, except in the case of a
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(b)
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Priority on Demand Registrations
. Subject to the provisions of this Section 2, the Company shall not include in any Demand Registration any securities other than Registrable Securities without: (i) in the case of a Majority Demand Registration, the written consent of the Shareholders representing at least a majority of the Registrable Securities to be included in such registration or (ii) in the case of a Moelis Demand Registration, the written consent of Moelis; and, if such Demand Registration is an underwritten offering, without the consent of the managing underwriter(s). If the managing underwriter(s) of the requested Demand Registration advise the Company, the Shareholders representing at least a majority of the Registrable Securities proposed to be registered (in the case of a Majority Demand Registration) and Moelis (in the case of a Moelis Demand Registration), as applicable, in writing that in their opinion the number of Registrable Securities proposed to be included in any such registration exceeds the largest number of securities that can be expected to be sold in such offering and/or that the number of Registrable Securities proposed to be included in any such registration would have an adverse effect on the offering, including the price per share at which the Company's equity securities can be sold in such offering, the Company shall include in such registration only the number of Registrable Securities that in the opinion of such managing underwriter(s) can be sold without adversely affecting the offering;
provided
,
however
, that the number of shares of Registrable Securities to be sold in such underwriting shall not be reduced unless all other securities are first entirely excluded from the underwriting. If the number of Registrable Securities that can be sold is less than the number of Registrable Securities proposed to be registered, the number of Registrable Securities to be so sold shall be allocated pro rata among the Shareholders of Registrable Securities that desire to participate in such registration on the basis of the amount of Registrable Securities beneficially owned by such Shareholders. If the number of shares that the Shareholder(s) are allowed to include in a Demand Registration is less than 75% of the number of Registrable Securities that such Shareholder(s) requested to be included in such Demand Registration due to a reduction by the Company pursuant to the provisions of this Section 2(b), such Demand Registration shall not be counted for purposes of the limitations to three registrations set forth in the second and fourth sentences of Section 2(c) of this Agreement for the Shareholder(s).
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(c)
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Restrictions on Demand Registrations
. The Company shall not be obligated to effect more than one (1) Majority Demand Registration within any (i) twelve
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(d)
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Selection of Underwriters
. If any of the Registrable Securities covered by a Majority Demand Registration is to be sold in an underwritten offering, the managing underwriter(s) to administer the offering shall be selected by Shareholders representing a majority of the Registrable Securities participating in such offering, subject to the approval of the Company, which approval shall not be unreasonably withheld or delayed. If any of the Registrable Securities covered
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(e)
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Effective Period of Demand Registrations
. If Moelis or any Shareholder(s) request(s) a Demand Registration pursuant to Section 2(a) above, such Demand Registration shall not be deemed to have been effected unless such Demand Registration has been effective for a period equal to ninety (90) days (or three hundred (300) days in the case of a shelf S-3 Registration Statement) from the date on which the SEC declares such Demand Registration effective (or if such Demand Registration is not effective during any period within such ninety (90) days (or three hundred (300) days in the case of a shelf S-3 Registration Statement), such ninety (90)-day (or three hundred (300)-day in the case of a shelf S-3 Registration Statement) period shall be extended by the number of days during such period when such Demand Registration is not effective), or such shorter period which shall terminate when all of the Registrable Securities covered by such Demand Registration have been sold pursuant to such Demand Registration or otherwise disposed of by Moelis or such Shareholder(s). If the Company shall withdraw any Demand Registration pursuant to Section 2(c) (a "
Withdrawn Demand Registration
"), the Shareholders of the Registrable Securities remaining unsold and originally covered by such Withdrawn Demand Registration shall be entitled to a replacement Demand Registration which (subject to the provisions of this Section 2) the Company shall use its reasonable best efforts to keep effective for a period commencing on the effective date of such Demand Registration and ending on the earlier to occur of the date (i) which is ninety (90) days (or three hundred (300) days in the case of a shelf S-3 Registration Statement) from the effective date of such Demand Registration and (ii) on which all of the Registrable Securities covered by such Demand Registration have been sold or otherwise disposed of by Moelis or such Shareholder(s). Each such additional Demand Registration otherwise shall be subject to all of the provisions of this Agreement.
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(a)
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Right to Piggyback
. At any time or from time to time following the date of this Agreement, whenever the Company proposes to register any equity securities under the Securities Act (other than a Registration Statement (i) relating to shares issuable upon exercise of employee share options or in connection with any employee benefit, equity incentive or similar plan of the Company or (ii) in connection with any merger, consolidation, business combination, scheme of arrangement or amalgamation by the Company or any Affiliate of the Company or the acquisition by the Company or any such Affiliate of the shares or the assets of any other Person or other registration statement on Form S-4 (clauses (i) and (ii) are referred to as "
Permitted Offerings
")) for purposes of a Public Offering of
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(b)
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Priority on Primary Registrations
. If a Piggyback Registration is an underwritten primary registration on behalf of the Company, and the managing underwriter(s) advise the Company in writing that in their opinion the number of securities requested to be included in such registration exceeds the largest number that can be sold in such offering and/or that the number of Registrable Securities proposed to be included in any such registration would have an adverse effect on the offering, including the price per share at which the Company's equity securities can be sold in such offering, the Company shall include in such registration (i) first, the securities the Company proposes to sell, (ii) second, the Registrable Securities requested to be included therein by the Shareholders, pro rata among the Shareholders of such Registrable Securities on the basis of the number of Registrable Securities requested to be registered by such Shareholders and (iii) third, other securities requested to be included in such registration pro rata among the holders of such securities on the basis of the number of shares requested to be registered by such holders or as such holders may otherwise agree in writing.
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(c)
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Priority on Secondary Registrations
. If a Piggyback Registration is an underwritten secondary registration on behalf of a holder of the Company's securities other than Registrable Securities, and the managing underwriter(s) advise the Company in writing that in their opinion the number of securities requested to be included in such registration exceeds the largest number that can be sold in such offering and/or that the number of Registrable Securities proposed to be included in any such registration would have an adverse effect on the offering, including the price per share at which the Company's equity securities can be sold in such offering, the Company shall include in such registration (i) first, the securities requested to be included therein by the holders requesting such registration, together with the Registrable Securities requested to be included therein by the Shareholders, pro rata among (A) the holders of securities requesting such registration and (B) the Shareholders of such Registrable Securities, in each case, on the basis of the number of Registrable Securities requested to be registered by such Shareholders or holders of securities, as applicable, (ii) second, securities the Company proposes to sell and (iii) third, other securities requested to be included in such registration pro rata among the
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(d)
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Selection of Underwriters
. If any Piggyback Registration is a primary underwritten offering, the Company shall have the right to select the managing underwriter(s) to administer any such offering.
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(e)
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Other Jurisdictions
. If the Company at any time proposes to effect a Public Offering in a jurisdiction other than the United States of any of its shares or any options, warrants or other rights to acquire, or securities convertible into or exchangeable for, its shares (other than a Public Offering relating to a Permitted Offering), the Company and the Shareholders will have the rights and be subject to the obligations agreed in this Section 3 to the extent and where applicable.
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(a)
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Each Shareholder agrees, for the benefit of the managing underwriter(s), not to effect any sale or distribution, including any private placement or any sale pursuant to Rule 144 under the Securities Act of any Registrable Securities, and not to effect any such sale or distribution of any other equity security of the Company or of any security convertible or redeemable into or exchangeable or exercisable for any equity security of the Company during the five (5) days prior to, and during a period not to exceed ninety (90) days following an offering that occurs within eighteen (18) months following the date hereof, after the effective
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(b)
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The Company agrees (i) that if any registration of Registrable Securities shall be in connection with an underwritten offering, not to effect any public sale or distribution of any of its equity securities or of any security convertible or redeemable into or exchangeable or exercisable for any equity security of the Company (other than any such sale or distribution of such securities in connection with any Permitted Offering) during the five (5) days prior to, and during a period not to exceed ninety (90) days following an offering that occurs within eighteen (18) months following the date hereof, after the effective date of any Registration Statement filed pursuant to this Agreement in connection with an underwritten offering, without the consent of the managing underwriter(s) of such offering and (ii) that any agreement entered into after the date hereof pursuant to which the Company issues or agrees to issue any privately placed shares of Common Stock or equity securities convertible into shares of Common Stock shall contain a provision under which the holders of such securities agree not to effect any public sale or distribution of any such securities during the period and in the manner referred to in the foregoing clause (i), including any private placement and any sale pursuant to Rule 144 under the Securities Act, except as part of such registration, if permitted, or substantially similar provisions
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(a)
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Whenever the Shareholders request that any Registrable Securities be registered with the SEC pursuant to this Agreement, the Company shall use its reasonable best efforts to effect the registration and the sale of such Registrable Securities in accordance with the intended methods of disposition thereof, and pursuant thereto the Company shall:
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(i)
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prepare and file with the SEC a Registration Statement with respect to such Registrable Securities as soon as practicable, but in any event within sixty (60) days of written request from a Shareholder, and use its reasonable best efforts to cause such Registration Statement to become effective as soon as practicable thereafter; and before filing a Registration Statement or Prospectus or any amendments or supplements thereto, furnish to the Shareholders of Registrable Securities covered by such
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(ii)
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prepare and file with the SEC such amendments and supplements to such Registration Statement and the Prospectus used in connection therewith as may be necessary to keep such Registration Statement effective for a period of not less than ninety (90) days (or three hundred (300) days in the case of a shelf S-3 Registration Statement), in the case of a Demand Registration, or such shorter period as is necessary to complete the distribution of the securities covered by such Registration Statement and comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such Registration Statement during such period in accordance with the intended methods of disposition by the sellers thereof set forth in such Registration Statement;
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(iii)
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furnish the number of copies of such Registration Statement and the Prospectus included in such Registration Statement (including each preliminary Prospectus and each amendment and supplement thereto) as reasonably required by each seller of Registrable Securities under such Registration Statement, and such other documents as each seller may reasonably request in writing in order to facilitate the disposition of Registrable Securities owned by each seller;
provided
,
however
, that the Company shall have no obligation to furnish copies of a final prospectus if the conditions of Rule 172(c) under the Securities Act are satisfied by the Company;
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(iv)
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use its reasonable best efforts to register or qualify such Registrable Securities under such other securities or "blue sky" laws of such jurisdictions as any seller reasonably requests in writing and do any and all other acts and things that may be reasonably necessary or advisable to enable such seller to consummate the disposition in such jurisdictions of the Registrable Securities owned by such seller;
provided
that
the Company will not be required to (A) qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this clause (iv), (B) subject itself to taxation in any such jurisdiction or (C) consent to general service of process in any such jurisdiction;
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(v)
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promptly notify each seller of such Registrable Securities, at any time when a Prospectus relating thereto is required to be delivered under the Securities Act, of the occurrence of any event as a result of which the Prospectus included in such Registration Statement contains an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, and, at the request of any such seller, the Company shall prepare a supplement to such Prospectus so that, as thereafter delivered to the purchasers of such Registrable Securities, such Prospectus shall not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading;
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(vi)
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in the case of an underwritten offering, enter into such customary agreements (including underwriting agreements in customary form and containing customary indemnification provisions in favor of the underwriters) and take all such other actions as the Shareholders representing a majority of the Registrable Securities being sold or the underwriters reasonably request in order to expedite or facilitate the disposition of such Registrable Securities (including making members of senior management of the Company reasonably available to participate in, and cause them to reasonably cooperate with the underwriters in connection with, "road-show" and other customary marketing activities ) and cause to be delivered to the underwriters and the sellers, if any, opinions of counsel to the Company in customary form, covering such matters as are customarily covered by opinions for an underwritten offering as the underwriters may reasonably request and addressed to the underwriters and the sellers;
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(vii)
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make available for inspection by a seller of Registrable Securities pursuant to a Registration Statement hereunder, any underwriter participating in any disposition pursuant to such Registration Statement, and any attorney, accountant or other agent retained on behalf of such seller or underwriter, all material financial and other records, material corporate documents and material properties of the Company, and cause the Company's officers, directors, employees and independent accountants to supply all information reasonably requested by any such seller representative, underwriter, attorney, accountant or agent in connection with such Registration Statement;
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(viii)
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use its reasonable best efforts to cause all such Registrable Securities to be listed or quoted on each securities exchange or automated interdealer quotation system on which securities of the same class issued by the Company are then listed or quoted;
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(ix)
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provide a transfer agent and registrar for all such Registrable Securities not later than the effective date of such Registration Statement;
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(x)
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if requested, cause to be delivered, immediately prior to the effectiveness of the Registration Statement (and, in the case of an underwritten offering, at the time of delivery of any Registrable Securities sold pursuant thereto), letters from the Company's independent certified public accountants (and the independent certified public accountants for any other acquired company or business whose financial statements are required to be included in such Registration Statement in accordance with the applicable requirements of Regulation S-X) addressed to the underwriters stating that such accountants are independent public accountants or an independent registered public accounting firm within the meaning of the Securities Act and the applicable rules and regulations adopted by the SEC thereunder and, to the extent applicable, the PCAOB, and otherwise in customary form and covering such financial and accounting matters as are customarily covered by letters of the independent certified public accountants delivered in connection with primary or secondary underwritten offerings, as the case may be;
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(xi)
|
make generally available to Shareholders a consolidated earnings statement (which need not be audited) for the twelve (12) months beginning after the effective date of a Registration Statement as soon as reasonably practicable after the end of such period, which earnings statement shall satisfy the requirements of an earnings statement under Section 11(a) of the Securities Act;
|
(xii)
|
promptly notify each seller of Registrable Securities and the underwriter or underwriters, if any:
|
(1)
|
when the Registration Statement, any pre-effective amendment, the Prospectus or any Prospectus supplement or post-effective amendment to the Registration Statement has been filed and, with respect to the Registration Statement or any post-effective amendment, when the same has become effective;
|
(2)
|
of any written request by the SEC for amendments or supplements to the Registration Statement or Prospectus;
|
(3)
|
of the notification to the Company by the SEC of its initiation of any proceeding with respect to the issuance by the SEC of any stop order suspending the effectiveness of the Registration Statement; and
|
(4)
|
of the receipt by the Company of any notification with respect to the suspension of the qualification of any Registrable Securities for
|
(xiii)
|
use its reasonable best efforts to obtain as soon as practicable the lifting of any stop order that might be issued suspending the effectiveness of such Registration Statement.
|
(b)
|
The Company shall make available to each Shareholder whose Registrable Securities is included in a Registration Statement (i) promptly after the same is prepared and publicly distributed, filed with the SEC, or received by the Company, one (1) copy of each Registration Statement and any amendment thereto and each Preliminary Prospectus and Prospectus and each supplement thereto. The Company will promptly notify each such Shareholder by facsimile of the effectiveness of each Registration Statement or any post-effective amendment. The Company will promptly respond to any and all comments received from the SEC, with a view towards causing each Registration Statement or any amendment thereto to be declared effective by the SEC as soon as practicable and shall file an acceleration request as soon as practicable following the resolution or clearance of all SEC comments or, if applicable, following notification by the SEC that any such Registration Statement or any amendment thereto will not be subject to review.
|
(c)
|
At all times after the Company has filed a Registration Statement with the SEC pursuant to the requirements of either the Securities Act or the Exchange Act, the Company shall file all reports required to be filed by it under the Securities Act and the Exchange Act and the rules and regulations adopted by the SEC thereunder, all to the extent required to enable such Shareholders to be eligible to sell Registrable Securities pursuant to Rule 144 under the Securities Act.
|
(d)
|
The Company may require each seller of Registrable Securities as to which any registration is being effected to furnish to the Company any information regarding such seller and the distribution of such securities as the Company may from time to time reasonably request in writing in connection with such registration. The Company's obligations to a Shareholder under this Agreement shall be subject to the compliance by such Shareholder with the terms and conditions applicable to such Shareholder under this Agreement.
|
(e)
|
Each seller of Registrable Securities agrees that, upon written notice by the Company of the happening of any event as a result of which the Prospectus included in such Registration Statement contains an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, such seller will forthwith discontinue disposition of Registrable Securities for a reasonable length of time not to exceed sixty (60) days until such seller is advised in writing by the Company that the use of the Prospectus may be resumed and is furnished with a supplemented Prospectus as
|
(a)
|
All expenses incident to the Company's performance of or compliance with this Agreement, including, all registration and filing fees, fees and expenses of compliance with securities or "blue sky" laws, listing application fees, printing expenses, transfer agent's and registrar's fees, costs of distributing Prospectuses in preliminary and final form as well as any supplements thereto, and fees and disbursements of counsel for the Company and all independent certified public accountants and other Persons retained by the Company (all such expenses being herein called "
Registration Expenses
") (but not including any underwriting discounts or commissions or transfer taxes attributable to the sale or disposition of Registrable Securities), shall be borne by the Company. In addition, the Company shall pay its internal expenses (including all salaries and expenses of its officers and employees performing legal or accounting duties), the expense of any annual audit or quarterly review, the expense of any liability insurance and the expenses and fees for listing or quoting the securities to be registered on each securities exchange or automated interdealer quotation system on which they are to be listed or quoted.
|
(b)
|
In connection with each Demand Registration, S-3 Registration or Piggyback Registration initiated hereunder, the Company shall reimburse the Shareholders covered by such registration or sale for the reasonable fees and disbursements of one (1) law firm to represent all Shareholders participating in such registration or sale chosen by: (i) in the case of a Majority Demand Registration, the Shareholders holding a majority of the Registrable Securities included in such registration or sale; or (ii) in the case of a Moelis Demand Registration or an S-3 Registration initiated by Moelis, Moelis.
|
(c)
|
The obligation of the Company to bear the Registration Expenses and to reimburse the Shareholders for the expenses described in Section 7(b) hereof shall apply irrespective of whether a registration, once properly demanded, if applicable, becomes effective, is withdrawn or suspended, is converted to another form of registration and irrespective of when any of the foregoing shall occur;
provided
,
however
, that Registration Expenses and the fees and disbursements reimbursed by the Company under Section 7(b) hereof for any Registration Statement withdrawn solely at the request of a Shareholder(s) (unless withdrawn following postponement of filing by the Company in accordance with Section 2(c)(A) or Section 2(c)(B) hereof or due to adverse market conditions) or any supplements or amendments to a Registration Statement or Prospectus resulting from a misstatement furnished to or on behalf of the Company by or on behalf of a Shareholder shall be borne by such Shareholder;
provided
that
, for the avoidance of doubt, if a Registration Statement is withdrawn solely at the request of a Shareholder due to adverse market conditions, such Registration Statement shall count as a Demand Registration for purposes of Section 2(c) hereof.
|
(a)
|
In connection with any Registration Statement in which a Shareholder of Registrable Securities is participating, the Company shall in consideration of the agreements of the Shareholders contained herein, the Company shall agree that in the event of any registration under the Securities Act pursuant to this Agreement, the Company shall indemnify and hold harmless, to the fullest extent permitted by applicable law, each Shareholder, and the respective directors, officers, members, general partners, limited partners, employees, agents and representatives of each Shareholder, each Person who controls each such Shareholder (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act) and the directors, officers, members, general partners, limited partners, employees, agents and representatives of each such controlling Person (collectively, the "
Shareholder Indemnified Persons
") from and against any and all losses, claims, damages, liabilities (joint or several), costs (including attorney's fees and disbursements), and expenses, including amounts paid in settlement (collectively, "
Losses
"), without duplication, (i) in connection with, arising out of or based upon any untrue or alleged untrue statement of a material fact contained in any Registration Statement, Prospectus or Preliminary Prospectus or any amendment thereof or supplement thereto or any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein (in the case of a Prospectus, in light of the circumstances under which they were made) not misleading, except (A) to the extent that such untrue statement or alleged untrue statement or omission or alleged omission has been made in reliance upon and in conformity with information furnished in writing to or on behalf of the Company by or on behalf of such Shareholder expressly for use therein, (B) if it was caused by the Shareholder's failure to deliver to the Shareholder's immediate purchaser a copy of the Registration Statement,
|
(b)
|
In connection with any Registration Statement in which a Shareholder is participating, each such Shareholder shall indemnify and hold harmless, to the fullest extent permitted by applicable law, the Company, and the respective directors, officers, members, general partners, limited partners, employees, agents and representatives of the Company, each Person who controls the Company and (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act) and the directors, officers, members, general partners, limited partners, employees, agents and representatives of each such controlling Person (collectively, the "
Company Indemnified Persons
") from and against any and all Losses, without duplication, in connection with, arising out of or based upon (i) any untrue or alleged untrue statement of a material fact contained in the Registration Statement, Preliminary Prospectus or Prospectus or any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein (in the case of a Prospectus, in light of the circumstances under which they were made) not misleading, but only to the extent that such untrue statement or alleged untrue statement or omission or alleged omission has been made in reliance upon and in conformity with information furnished in writing to the Company by or on behalf of such Shareholder expressly for use therein, (ii) such Shareholder's failure to deliver to its immediate purchaser a copy of the Registration Statement, Preliminary Prospectus or Prospectus (if the same was required by applicable law to be so delivered by such Shareholder) after the Company has furnished the Shareholder with a sufficient number of copies of the same or (iii) offers or sales by the Shareholder "by means of" (as defined in Rule 159A under the Securities Act) a "free writing prospectus" (as defined in Rule 405 under the Securities Act ) that was not authorized in writing by the Company;
provided
,
however
, that the obligation to indemnify and hold harmless shall be several, not joint and several, among such Shareholders and the liability of each such Shareholder shall be in proportion to and limited to the gross proceeds received by such Shareholder from the sale of Registrable Securities pursuant to such Registration Statement. Such Shareholder shall reimburse each such Company Indemnified Person for any out-of-pocket legal or any other expenses actually and reasonably incurred by it in connection with investigating or defending such Losses.
|
(c)
|
Each Indemnified Person shall give prompt written notice to the party or parties from which indemnity is sought (the "
Indemnifying Party
") of the commencement of any action or proceeding (including any governmental investigation) (collectively, a "
Proceeding
") with respect to which such Indemnified Person seeks indemnification or contribution pursuant hereto;
provided
,
however
, that the failure so to notify the Indemnifying Party shall not relieve the Indemnifying Party from any obligation or liability hereunder, except to the extent the Indemnifying Party was prejudiced by such failure. The Indemnifying Party shall have the right, exercisable by giving written notice to an Indemnified Person within twenty (20) days after receipt of written notice from such Indemnified Person of such Proceeding, to assume, at the Indemnifying Party's expense, the defense of such Proceeding, with counsel reasonably satisfactory to such Indemnified Person and shall pay as incurred the fees and disbursements of such counsel related to such Proceeding;
provided
,
however
, that an Indemnified Person or Indemnified Persons (if more than one Indemnified Person is named any Proceeding) shall have the right to employ separate counsel in any such Proceeding and to participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of the Indemnified Person or Indemnified Persons. Whether or not such defense is assumed by the Indemnifying Party, such Indemnifying Party or Indemnified Person or Indemnified Persons will not be subject to any obligation or liability for any settlement made without its or their written consent, which settlement shall include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Person an irrevocable release from all liability in respect of such claim or litigation.
|
(d)
|
The indemnification provided for under this Agreement shall remain in full force and effect regardless of any investigation made by or on behalf of the Indemnified Person and shall survive the transfer of Registrable Securities.
|
(e)
|
If the indemnification provided for in this Section 8 is unavailable to an Indemnified Person or is insufficient to hold such Indemnified Person harmless for any Losses in respect to which this Section 8 would otherwise apply by its terms, then, in lieu of the amount paid or payable under Section 8(a) or Section 8(b) hereof, as applicable, the Indemnifying Party and the Indemnified Person, shall contribute to the aggregate Losses (i) in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party on the one hand, and the Indemnified Person on the other hand, with respect to the statements or omissions which resulted in such Losses, as well as any other relevant equitable considerations. The relative fault of the Indemnifying Party on the one hand, and the Indemnified Person on the other hand, shall be determined by reference to, among other things, whether the untrue statement or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by or on behalf of the Indemnifying Party or by or on behalf of the Indemnified Person, and by the parties' relative intent, knowledge, access to
|
1.
|
Virginia Capital Private Equity, LP
|
2.
|
Hunter Goodwin
|
3.
|
Private Advisors Coinvestment Fund, LP
|
4.
|
SFM Opportunities III, LP
|
5.
|
Sunity International Limited
|
6.
|
MGAW, L.L.C.
|
7.
|
Thomas G. Johnson, Jr.
|
8.
|
CS Vosmik, Trustee of the CS Vosmik Amended and Restated Revocable Trust Agreement, Dated as of June 30, 2006
|
9.
|
West End Investment Venture, LLC
|
10.
|
Allan Gerald Donn TOD Susan Berman Donn
|
11.
|
Walker Chapman Simmons
|
12.
|
William E. Rachels, Jr.
|
13.
|
DEFCON 1, LLC
|
14.
|
Matthew L. Austin
|
15.
|
Margin of Safety, LLC (c/o Frederick L. Russell, Jr.)
|
16.
|
Scott Stevens
|
17.
|
Charles G. Hartung
|
18.
|
Petra T. Hartung
|
19.
|
Gregory J. Rochlin
|
20.
|
Willowleaf Capital, LLC
|
21.
|
BlackSmith Limited Partnership, LLC
|
1.
|
Ella G Valentine Children's Trust dated 6-29-1987, JG Valentine, EM Valentine Jr & SV Ellington ttees
|
2.
|
E. Massie Valentine Living Trust
|
3.
|
Janney Montgomery Scott LLC custodian FBO John W. Maloney IRA
|
4.
|
Paul D. Koonce
|
5.
|
Thomas Rafferty
|
6.
|
Malcolm Parks
|
7.
|
William F. Shumadine, Jr.
|
8.
|
Jay Tini
|
9.
|
Richard B. Fleischhacker
|
10.
|
Brian F. and Suzanne S. Pitkin
|
11.
|
Anne Marie Rafferty-DiPierro
|
12.
|
Yael Levin and Scott Sheldon
|
13.
|
David A. and Kimberly L. Hulcher
|
14.
|
Student Assurance Services, Inc.
|
15.
|
John Davenport
|
16.
|
Sungjin Lee
|
17.
|
Brian D. and Elizabeth T. Haney
|
18.
|
M.P. Kehoe, LLC
|
19.
|
Marilyn F Kehoe Revocable Trust dated 5-8-2006, Michael P Kehoe Trustee
|
20.
|
William J. Kenney
|
21.
|
Pamela A. Kenney
|
22.
|
RBC Capital Markets Custodian FBO William J. Kenney IRA
|
23.
|
Edward Desch
|
24.
|
Bryan and Ann Marie Petrucelli
|
25.
|
MP Kehoe Revocable Grantor Trust
|
26.
|
Robert Neal
|
27.
|
Ann Marie and Scott L. Marson
|
28.
|
Stuart Samuel and Melissa B. Gaines Samuel
|
29.
|
Janney Montgomery Scott LLC Custodian FBO Ann T. Burgess IRA
|
30.
|
Clayton Rhoades
|
31.
|
John Shumadine
|
32.
|
Philip E. and Ann L. Stephens
|
33.
|
Robert Lippincott
|
34.
|
Jim Ritchie
|
35.
|
Steven Bensinger
|
36.
|
Mark Fuller
|
By:
|
/s/ Bryan P. Petrucelli
|
||
|
Name:
|
|
Bryan P Petrucelli
|
|
Title:
|
|
Senior Vice President, Treasurer and
|
|
|
|
Chief Financial Officer
|
MOELIS CAPITAL PARTNERS OPPORTUNITY FUND I, L.P.
|
|||
By:
|
Moelis Capital Partners Opportunity
|
||
|
Fund I LLC, its General Partner
|
||
|
|
|
|
By:
|
Moelis Capital Partners LLC,
|
||
|
its Managing Member
|
||
|
|
|
|
By:
|
/s/ Christopher Ryan
|
||
|
Name:
|
|
Christopher Ryan
|
|
Title:
|
|
Managing Director
|
MOELIS CAPITAL PARTNERS OPPORTUNITY FUND I-A, L.P.
|
|||
By:
|
Moelis Capital Partners Opportunity
|
||
|
Fund I LLC, its General Partner
|
||
|
|
|
|
By:
|
Moelis Capital Partners LLC,
|
||
|
its Managing Member
|
||
|
|
|
|
By:
|
/s/ Christopher Ryan
|
||
|
Name:
|
|
Christopher Ryan
|
|
Title:
|
|
Managing Director
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Kinsale Capital Group, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
c.
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
5.
|
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
September 7, 2016
|
|
/s/ Michael P. Kehoe
|
|
|
Michael P. Kehoe
|
|
|
President and Chief Executive Officer
|
|
|
(Principal Executive Officer)
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Kinsale Capital Group, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
c.
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
5.
|
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
September 7, 2016
|
|
/s/ Bryan P. Petrucelli
|
|
|
Bryan P. Petrucelli
|
|
|
Senior Vice President and Chief Financial Officer
|
|
|
(Principal Financial Officer)
|
1.
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
2.
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
September 7, 2016
|
|
/s/ Michael P. Kehoe
|
|
|
Michael P. Kehoe
|
|
|
President and Chief Executive Officer
|
|
|
(Principal Executive Officer)
|
1.
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
2.
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
September 7, 2016
|
|
/s/ Bryan P. Petrucelli
|
|
|
Bryan P. Petrucelli
|
|
|
Senior Vice President and Chief Financial Officer
|
|
|
(Principal Financial Officer)
|