Good day ladies and gentlemen and welcome to the Q2 2017 Kinsale Capital Group Inc. Earnings Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference may be recorded. Before we get started let me remind everyone that due the course of the teleconference Kinsale management may make comments that reflect their intentions, believes and expectation for the future. As always, these forward looking statements are subject to certain risk factors which could cause actual results to differ materially. These risk factors are listed in the company's various SEC filings including the 2016 Annual Report on Form 10-K which should be reviewed carefully. The company has furnished a Form 8-K with the Securities and Exchange Commission that contains a press release announcing its second quarter results. Kinsale management may make reference during the call to underwriting income which is a non-GAAP financial measure or financial result. Kinsale's underwriting income represents pretax profitability of the company's insurance operations. The Form 8-K and press release are available at the company's website at www.kinsalecapitalgroup.com. I will now turn the conference over to Kinsale's President and CEO, Mr. Michael Kehoe. Please go ahead sir.

Thank you operator. Good morning everybody. I'm Mike Kehoe, CEO of Kinsale. Joining me today on the call are Bryan Petrucelli, Chief Financial Officer of Kinsale and Brian Haney, Chief Operating Officer. After a brief introduction by me, Bryan Petrucelli will provide some detail on the financial results for the quarter and following Bryan, Brian Haney will provide some further detail on Kinsale's underwriting operation and the broader marketplace in which we compete. Last night, Kinsale reported favorable results for the second quarter. Some of the highlights of the quarter include the following; net income of $8.5 million, annualized ROE of 15.4%, a combined ratio of 75.2%, underwriting profit of $10.7 million and premium growth of 15.3%. As a recap, Kinsale's strategy is to combine disciplined underwriting and claim handling with a low cost operation. The strategy we believe is an endgame winner every time. Kinsale's expenses run between 20% and 40% below many of our competitors. Kinsale writes exclusively in the excess and surplus lines market, where historically returns have been higher compared to the broader standard market. Unlike all of our competitors, we don't delegate underwriting or claim authority to outside parties. We maintain absolute control over both the underwriting and the claims in order to drive better results. And finally, we work very hard to maintain an owner operator business culture where most of our employees and all of our senior managers are heavily invested in the company, which creates an unusual and powerful alignment of interest between employees and stockholders. In sum, the Kinsale model provides a powerful competitive advantage that should allow us to deliver on both our profit and our growth goals over time even in a competitive market like we find ourselves in today. And with that, Bryan Petrucelli I'll turn it over to you.

Thanks Mike. As Mike noted, we continue to deliver strong earnings in the second quarter and first half of 2017 as a result of solid premium growth, favorable loss development and diligent expense management. As a reminder, the company's goal is to consistently generate a mid-80s or lower combined ratio and to produce a return on equity in the mid-teens over the long-term. We reported net income of $8.5 million for the second quarter of 2017, representing an increase of 40.3% over the second quarter of 2016. The company generated underwriting income of $10.7 million and a combined ratio of 5.2%, an increase of 36.4% from the second quarter of 2016. Underwriting income in the second quarter of 2017 benefited from $3.8 million of net favorable prior year loss reserve development, annualized ROE was 15.4% for the quarter and 13.5% for the first half of 2017, up from 11.8% in Q1 and in line with our expectations as we continue to absorb the new capital from last year's IPO. Gross written premiums were $57.8 million representing a 15.3% increase over the second quarter of 2016. Year-to-date written premiums have increased 18.7% over last year. Premium growth continues to be generated from an overall increase in underwriting activity across most lines of business and most notable in our small business, construction, energy, product liability and personal insurance divisions. No significant changes on the investment side, approximately 90% of the total investments are in fixed income securities with an AA average credit rating and a weighted average duration of approximately 3.4 years. Investment income increased by 33.7% over the second quarter of 2016 as a result of continued growth in the investment portfolio. Gross investment returns continue to be in the low 2% range. For the second quarter, basic and diluted EPS was $0.41 and $0.40 per share respectively compared to $0.30 and $0.29 per share respectively and in Q1 this year. With that I'll pass it over to Brian Haney.

Thanks Bryan. Overall the market continues to be very competitive. In many spots we are seeing overly aggressive competition and that creates an obstacle for us because we aren't willing to lose money just to grow. On the other hand, there are still pockets of dislocation and opportunity for us so we can always find some new business to write. The improving economy has also helped both in terms of more revenues for our insurance as well as more businesses to insure. The 15.3% growth rate in the second quarter was below the pace in the first quarter but above the pace from last year and generally consistent with the growth rate we've seen in submissions. The submission growth rate for the quarter was in the high teens, which gives us optimism about our growth prospects going forward. Most of our 17 divisions grew year-over-year. We have begun our annual rate reviews of each division and have made several adjustments to our technical rates. The net effect of the technical rate changes would average out to a rate increase somewhere in the low-single digits. As a reminder, we have a different focus than many of our competitors. First, we are 100% ENFs; also we focus on smaller accounts and accounts that are hard to place. Unlike the vast majority of our competitors, we never outsource underwriting our clients' decisions to third parties. In particular, we don't write and have never written programs. Another area where we are different is that we have a very cautious approach to commercial auto. We could write a lot more of this if we thought the rates were where they needed to be but we don't think that's the case at the moment. We'll continue to keep an eye on that market but at this point our exposure to commercial auto is still very limited. In general, we are very happy with our growth rate, in particular because we are growing in spite of market conditions not because of them and because we are growing while maintaining our underwriting discipline. But whatever the growth rate is in a particular quarter, we feel optimistic because over the long run, our expense ratio advantage is going to drive business to us. The buyer wants a low price and competitors that are burdened with high expenses can't provide that at least not over the long run because they need high prices to cover their heavy expense loads. Some companies we compete against have expense ratios 40% or higher. Our expense ratio is more than a third lower than that. This means we can give the buyer a lower price and still produces a superior return. And with that I'll turn it back over to Mike.

Thanks Brian. Operator we're now ready to take questions.

[Operator Instructions] And our first question comes from the line of Mark Hughes from SunTrust. Your line is now open.

Your expense ratio really dropped down pretty nicely on a sequential basis. Anything unusual in that or is that just leverage, efficiency, et cetera.

Good morning Mark, this is Mike Kehoe. We're pleased to see the drop; you recall we are at a 27.9 in Q1 down to a 24.4 in Q2. I think a big part of that kind of goes back to some seasonality in expenses if you will kind of push the first quarter number up a little bit higher than we would have liked. I think there's also in that number a lot of management focus on managing the number as aggressively as we can and I think the growth in the earned premium is also helping a little bit, as we achieved some modest economies of scale, but I think it's best to focus on the six month number. There's a little bit more stability in that and we were at 26.1, which I think compares favorably to the year-end number from 2016, which was 26.5.

Is that 26.1 a good number for Q3, Q4 considering seasonality in those quarters?

I think so.

And then the submission flow, high teens in the quarter. Could you kind of break that out? How much of it is kind of expanded net, more distribution, what do you think the underlying growth is in terms of the submission count in E&S, that seems like a strong number?

This is Brian Haney. While we don't - I would say, most of is just continued marketing efforts and just organic growth. We're still a small company, so we're still getting some benefit from more people knowing who we are and we are getting some benefit from appointing new agents, we're getting some benefit from new products, we're getting some benefit from geographic expansion in our Aspera unit. So I would say, each of those is probably incrementally kicking in a few points.

And then of course growth in the E&S market in general, Mark, I think you've done some analysis pointing out six months growth rates in the E&S segment versus the standard market and clearly, we're benefiting from that as well.

[Operator Instructions] And our next question comes from the line of Adam Klauber from William Blair. Your line is now open.

For the quarter, the accident year loss ratio really took a nice dip down and I know that's going to move quarter-to-quarter. It's not a walk step, but still is down 700 basis points from first quarter. Just any color on that would be helpful.

Adam, it's Bryan. Nothing really is there other than just losses coming in lower than expected. I think, well, a couple of points of variability in that current accident year, loss ratio is probably well within what we'd expect from quarter-to-quarter, but nothing specific that we can point to.

So just normal quarterly volatility. I guess how is your - I know you've grown Aspera, how is your appetite for property, how big is property as a percent of your overall book right now?

Property continues to be kind of mid to upper single digits. We write property in a couple of different areas. We got a commercial property unit, we've got an Inland Marine unit we started about a year and a half ago and of course we have our personal lines division, which is predominantly southeastern property. But we see it as a good opportunity. There's some volatility that goes with the business that's cat oriented, and of course we manage the catastrophe exposure very carefully in terms of the quality of the data we collect, the limits on concentration in any given area, the amount of reinsurance we buy, the monthly modeling of that portfolio. So we like the cat business. We're mindful of the volatility and we manage it fairly conservatively.

Right. A lot of other companies in this quarter had some storm related losses. Did you have any tailwind type storm losses or I mean your numbers are fairly strong, but did any of that filter through into the numbers?

This is Brian Haney. Yeah. We had negligible property cat losses in the quarter.

And topline has been, gross premium written has been very strong in the first half. But having said that, have you added any new teams recently or would you likely add any new teams by the end of the year?

We haven't added any new teams. Brian Haney?

Oh, I was going to say the same thing. We haven't added any new teams and I'm not sure that we're - there is any new teams in the immediate future.

Thank you. And we do have a follow-up question from the line of Mark Hughes from SunTrust. Your line is now open.

The low single digit rate increase I think, as I got aggregate across the book, is that enough to keep up with loss inflation?

This is Brian Haney. We would estimate loss trends probably somewhere in the 2% to 3% range and between the rate increases and just exposure trend, we think we're probably right at less cost trend. If we're below it, we're only - where it's a very small amount.

Any commentary on just emergence of losses in the book, any change there, any reason to think, any inflation or is it kind of steady as she goes compared to your historical experience.

We haven't seen anything unusual or out of - inconsistent with what we've seen in previous quarters.

Thank you. And our next question comes from the line of Mark Dwelle from RBC Capital Markets. Your line is now open.

Good morning. I apologize if you may have covered this at all, because I did miss the very beginning of the call. I was trying to get a sense, obviously, your growth in the quarter was pretty good. As we listened to other conference calls, we've heard about a lot of fairly competitive market conditions. I'm just trying to get the sense, so are you seeing any different competitors, are you seeing guys who normally write larger come down into your smaller space? Just trying to get a sense of what some of those dynamics might look like?

Yeah. This is Brian Haney. No. Go ahead, Mike. Sorry.

I was going to start by just saying it's a fairly common dynamic that there can be an ambiguous line between where the standard market ends and the E&S market begins, right? And that's typically defined by your standard company, because they underwrite more aggressively in terms of price, they tend to offer broader coverage and so that tension between the two markets, that never goes away and of course in a highly competitive period in the insurance cycle, that's going to be a little bit more pronounced than not. So I'd say that's a pretty standard part of the dynamic. The program market where carriers delegate underwriting authority, a lot of times, those programs tend to be fairly aggressive in how they price risk. So we find that to be tough competition. There's constantly new markets coming in to battle for business, but as Brian Haney said earlier, there's also programs that fade away and it creates pockets of this location. To me, that business is normal, but - business as usual, but it is fairly competitive marketplace at the moment. Brian, did you want to add to that?

Yeah. I would just add that the names of the people that are coming and going change every quarter, but the overall level of churn I think is pretty much the same as we've seen in the last few quarters.

So you're not really seeing anything that is a building headwind to kind of continued growth in the areas that you like to be and it's, you don't see a wall starting to emerge, it's just - it's a crowded field and you're fighting your way through the line as best you can?

That's fair.

Thank you. And I'm showing no further questions over the phone lines at this time. I'd like to turn the call back over to Michael Kehoe for closing remarks.

Okay. Thank you, operator. I just want to quickly acknowledge all the employees of Kinsale. I think it's true that the number one thing that distinguishes Kinsale or any company from its competition is the quality of the people and the effort that they put forth every day. So just quick acknowledgment to the employees. And thank you for joining us today and we look forward to speaking with you in a few months at the end of the next quarter. Have a good day.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program and you may now disconnect. Everyone have a great day.