10-Q 1 knsl-20220331.htm 10-Q knsl-20220331
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended March 31, 2022
Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from _______ to _______

Commission File Number: 001-37848
KINSALE CAPITAL GROUP, INC.
(Exact name of registrant as specified in its charter)

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

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

Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.01 per shareKNSLNew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒   No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes       No  ☒
Number of shares of the registrant's common stock outstanding at April 22, 2022: 22,908,023


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

Table of Contents

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

Table of Contents
extensive regulation adversely affecting our ability to achieve our business objectives or the failure to comply with these regulations adversely affecting our financial condition and results of operations;
the other risks and uncertainties discussed in Part I, Item 1A of the Annual Report on Form 10-K for the year ended December 31, 2021.
Forward-looking statements speak only as of the date on which they are made. Except as expressly required under federal securities laws or the rules and regulations of the Securities and Exchange Commission ("SEC"), we do not assume any obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. You should not place undue reliance on forward-looking statements. All forward-looking statements attributable to us are expressly qualified by these cautionary statements.

3

Table of Contents
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
KINSALE CAPITAL GROUP, INC. AND SUBSIDIARIES
Consolidated Balance Sheets (Unaudited)
March 31,
2022
December 31,
2021
(in thousands, except share and per share data)
Assets
Investments:
Fixed-maturity securities, available for sale, at fair value (amortized cost: $1,521,792 2022; $1,371,519 2021)
$1,461,415 $1,392,066 
Equity securities, at fair value (cost: $117,609 2022; $118,895 2021)
163,574 172,611 
Short-term investments825  
Total investments1,625,814 1,564,677 
Cash and cash equivalents104,158 121,040 
Investment income due and accrued8,225 7,658 
Premiums receivable, net86,397 71,004 
Reinsurance recoverables, net129,287 122,970 
Ceded unearned premiums35,628 33,679 
Deferred policy acquisition costs, net of ceding commissions47,483 41,968 
Intangible assets3,538 3,538 
Deferred income tax asset, net22,314 2,109 
Other assets51,711 57,012 
Total assets$2,114,555 $2,025,655 
Liabilities and Stockholders' Equity
Liabilities:
Reserves for unpaid losses and loss adjustment expenses$957,575 $881,344 
Unearned premiums387,615 347,730 
Payable to reinsurers16,080 16,112 
Accounts payable and accrued expenses8,913 23,250 
Credit facility42,727 42,696 
Other liabilities36,075 15,188 
Total liabilities1,448,985 1,326,320 
Stockholders’ equity:
Common stock, $0.01 par value, 400,000,000 shares authorized, 22,907,548 and 22,834,377 shares issued and outstanding at March 31, 2022 and December 31, 2021 respectively
229 228 
Additional paid-in capital296,390 295,040 
Retained earnings414,756 385,942 
Accumulated other comprehensive (loss) income (45,805)18,125 
Total stockholders’ equity665,570 699,335 
Total liabilities and stockholders’ equity$2,114,555 $2,025,655 
See accompanying notes to condensed consolidated financial statements.
4

Table of Contents
KINSALE CAPITAL GROUP, INC. AND SUBSIDIARIES
Consolidated Statements of Income and Comprehensive Income (Unaudited)
Three Months Ended March 31,
20222021
(in thousands, except per share data)
Revenues:
Gross written premiums$245,513 $168,876 
Ceded written premiums(29,015)(24,578)
Net written premiums216,498 144,298 
Change in unearned premiums(37,936)(21,257)
Net earned premiums178,562 123,041 
Net investment income9,088 6,942 
Change in the fair value of equity securities
(7,751)7,091 
Net realized investment gains295 1,198 
Other income124 11 
Total revenues180,318 138,283 
Expenses:
Losses and loss adjustment expenses102,505 70,260 
Underwriting, acquisition and insurance expenses38,545 28,136 
Other expenses396 448 
Total expenses141,446 98,844 
Income before income taxes38,872 39,439 
Total income tax expense 7,081 7,360 
Net income31,791 32,079 
Other comprehensive (loss) income:
Change in net unrealized losses on available-for-sale investments, net of taxes(63,930)(19,622)
Total comprehensive (loss) income$(32,139)$12,457 
Earnings per share:
Basic$1.40 $1.42 
Diluted$1.38 $1.39 
Weighted-average shares outstanding:
Basic22,753 22,665 
Diluted23,093 23,069 

See accompanying notes to condensed consolidated financial statements.
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KINSALE CAPITAL GROUP, INC. AND SUBSIDIARIES
Consolidated Statements of Changes in Stockholders' Equity (Unaudited)
Shares of Common StockCommon StockAdditional Paid-in CapitalRetained EarningsAccumu-
lated
 Other
Compre-
hensive
Income (Loss)
Total
Stock-
holders' Equity
(in thousands, except per share data)
Balance at December 31, 202122,834 $228 $295,040 $385,942 $18,125 $699,335 
Issuance of common stock under stock-based compensation plan
76 1 377 — — 378 
Stock-based compensation expense
— — 1,489 — — 1,489 
Restricted shares withheld for taxes(2)— (516)— — (516)
Dividends declared ($0.13 per share)
— — — (2,977)— (2,977)
Other comprehensive loss, net of tax— — — — (63,930)(63,930)
Net income— — — 31,791 — 31,791 
Balance at March 31, 202222,908 $229 $296,390 $414,756 $(45,805)$665,570 
Balance at December 31, 202022,757 $228 $291,315 $243,315 $41,380 $576,238 
Issuance of common stock under stock-based compensation plan
55  339 — — 339 
Stock-based compensation expense
— — 1,036 — — 1,036 
Dividends declared ($0.11 per share)
— — — (2,504)— (2,504)
Other comprehensive loss, net of tax— — — — (19,622)(19,622)
Net income— — — 32,079 — 32,079 
Balance at March 31, 202122,812 $228 $292,690 $272,890 $21,758 $587,566 

See accompanying notes to condensed consolidated financial statements.

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KINSALE CAPITAL GROUP, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (Unaudited)
Three Months Ended March 31,
20222021
(in thousands)
Operating activities:
Net cash provided by operating activities$121,929 $91,322 
Investing activities:
Purchase of property and equipment(703)(1,282)
Change in short-term investments, net(840) 
Purchases – fixed-maturity securities(226,496)(105,010)
Purchases – equity securities(487)(3,282)
Sales – fixed-maturity securities54,238 30,797 
Sales – equity securities1,625  
Maturities and calls – fixed-maturity securities36,953 45,053 
Net cash used in investing activities(135,710)(33,724)
Financing activities:
Payroll taxes withheld and remitted on share-based payments(516) 
Proceeds from stock options exercised378 339 
Dividends paid(2,963)(2,495)
Net cash used in financing activities(3,101)(2,156)
Net change in cash and cash equivalents(16,882)55,442 
Cash and cash equivalents at beginning of year121,040 77,093 
Cash and cash equivalents at end of period$104,158 $132,535 
See accompanying notes to condensed consolidated financial statements.

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KINSALE CAPITAL GROUP, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)

1.    Summary of Significant Accounting Policies
Basis of presentation
The unaudited condensed consolidated financial statements and notes have been prepared in accordance with U.S. generally accepted accounting principles ("U.S. GAAP") for interim financial information and do not contain all of the information and footnotes required by U.S. GAAP for complete financial statements. As such, these unaudited condensed consolidated interim financial statements should be read in conjunction with the audited consolidated financial statements of Kinsale Capital Group, Inc. and its subsidiaries ("the Company") included in the Annual Report on Form 10-K for the year ended December 31, 2021. In the opinion of management, all adjustments necessary for a fair presentation of the condensed consolidated financial statements have been included. Such adjustments consist only of normal recurring items. All significant intercompany balances and transactions have been eliminated in consolidation. Interim results are not necessarily indicative of results of operations for the full year.
Use of estimates
The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Prospective accounting pronouncements
There are no prospective accounting standards which, upon their effective date, would have a material impact on the Company's condensed consolidated financial statements.
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2.     Investments
Available-for-sale investments
The following tables summarize the available-for-sale investments at March 31, 2022 and December 31, 2021:
March 31, 2022
Amortized CostGross Unrealized GainsGross Unrealized LossesEstimated Fair Value
(in thousands)
Fixed maturities:
U.S. Treasury securities and obligations of U.S. government agencies
$14,544 $ $(560)$13,984 
Obligations of states, municipalities and political subdivisions
222,054 2,611 (6,906)217,759 
Corporate and other securities557,822 2,312 (31,048)529,086 
Asset-backed securities275,052 789 (2,183)273,658 
Residential mortgage-backed securities
381,691 332 (23,988)358,035 
Commercial mortgage-backed securities70,629 126 (1,862)68,893 
Total fixed-maturity investments$1,521,792 $6,170 $(66,547)$1,461,415 

December 31, 2021
Amortized CostGross Unrealized GainsGross Unrealized LossesEstimated Fair Value
(in thousands)
Fixed maturities:
U.S. Treasury securities and obligations of U.S. government agencies
$6,936 $ $(89)$6,847 
Obligations of states, municipalities and political subdivisions
216,375 12,139 (469)228,045 
Corporate and other securities450,594 11,714 (3,821)458,487 
Asset-backed securities299,810 2,217 (252)301,775 
Residential mortgage-backed securities
340,804 1,804 (4,923)337,685 
Commercial mortgage-backed securities57,000 2,433 (206)59,227 
Total fixed-maturity investments$1,371,519 $30,307 $(9,760)$1,392,066 
Available-for-sale securities in a loss position
The Company regularly reviews all its available-for-sale investments with unrealized losses to assess whether the decline in the fair value is deemed to be a credit loss. The Company considers a number of factors in completing its review of credit losses, including the extent to which a security's fair value has been below cost and the financial condition of an issuer. In addition to specific issuer information, the Company also evaluates the current market and interest rate environment. Generally, a decline in a security’s value caused by a change in the market or interest rate environment does not constitute a credit loss.
For fixed-maturity securities, the Company also considers whether it intends to sell the security or, if it is more likely than not that it will be required to sell the security before recovery, and its ability to recover all amounts outstanding when contractually due. When assessing whether it intends to sell a fixed-maturity security or, if it is
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likely to be required to sell a fixed-maturity security before recovery of its amortized cost, the Company evaluates facts and circumstances including, but not limited to, decisions to reposition the investment portfolio, potential sales of investments to meet cash flow needs and potential sales of investments to capitalize on favorable pricing.
For fixed-maturity securities where a decline in fair value is below the amortized cost basis and the Company intends to sell the security, or it is more likely than not that the Company will be required to sell the security before recovery of its amortized cost, an impairment is recognized in net income based on the fair value of the security at the time of assessment. For fixed-maturity securities that the Company does not intend to sell or for which it is more likely than not that the Company would not be required to sell before recovery of its amortized cost, the Company compares the estimated present value of the cash flows expected to be collected to the amortized cost of the security. The extent to which the estimated present value of the cash flows expected to be collected is less than the amortized cost of the security represents the credit-related portion of the impairment, which is recognized in net income through an allowance for credit losses. Any remaining decline in fair value represents the noncredit portion of the impairment, which is recognized in other comprehensive income.
The Company reports investment income due and accrued separately from available-for-sale investments and has elected not to measure an allowance for credit losses for investment income due and accrued. Investment income due and accrued is written off through earnings at the time the issuer of the bond defaults or is expected to default on payments.
The following tables summarize gross unrealized losses and estimated fair value for available-for-sale investments by length of time that the securities have continuously been in an unrealized loss position:
March 31, 2022
Less than 12 Months12 Months or LongerTotal
Estimated Fair ValueGross Unrealized LossesEstimated Fair ValueGross Unrealized LossesEstimated Fair ValueGross Unrealized Losses
(in thousands)
Fixed maturities:
U.S. Treasury securities and obligations of the U.S. government agencies$13,984 $(560)$ $ $13,984 $(560)
Obligations of states, municipalities and political subdivisions
87,590 (6,590)1,709 (316)89,299 (6,906)
Corporate and other securities
414,688 (28,493)16,100 (2,555)430,788 (31,048)
Asset-backed securities207,664 (2,088)5,788 (95)213,452 (2,183)
Residential mortgage-backed securities
284,332 (17,784)58,926 (6,204)343,258 (23,988)
Commercial mortgage-backed securities60,731 (1,697)1,672 (165)62,403 (1,862)
Total fixed-maturity investments$1,068,989 $(57,212)$84,195 $(9,335)$1,153,184 $(66,547)

At March 31, 2022, the Company held 600 fixed-maturity securities in an unrealized loss position with a total estimated fair value of $1.2 billion and gross unrealized losses of $66.5 million. Of these securities, 35 were in a continuous unrealized loss position for greater than one year. As discussed above, the Company regularly reviews all fixed-maturity securities within its investment portfolio to determine whether a credit loss has occurred. Based on the Company's review as of March 31, 2022, unrealized losses were caused by interest rate changes or other market factors and were not credit-specific issues. At March 31, 2022, 80.8% of the Company’s fixed-maturity securities
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were rated "A-" or better and all of the Company’s fixed-maturity securities made expected coupon payments under the contractual terms of the securities. For the three months ended March 31, 2022, the Company concluded that there were no credit losses from fixed-maturity securities with unrealized losses.
December 31, 2021
Less than 12 Months
12 Months or Longer
Total
Estimated Fair Value
Gross Unrealized Losses
Estimated Fair Value
Gross Unrealized Losses
Estimated Fair Value
Gross Unrealized Losses
(in thousands)
Fixed maturities:
U.S. Treasury securities and obligations of U.S. government agencies
$6,847 $(89)$ $ $6,847 $(89)
Obligations of states, municipalities and political subdivisions
23,870 (469)  23,870 (469)
Corporate and other securities
188,522 (3,718)1,092 (103)189,614 (3,821)
Asset-backed securities136,669 (204)4,452 (48)141,121 (252)
Residential mortgage-backed securities
260,251 (4,329)17,968 (594)278,219 (4,923)
Commercial mortgage-backed securities10,773 (206)  10,773 (206)
Total fixed-maturity investments$626,932 $(9,015)$23,512 $(745)$650,444 $(9,760)

Contractual maturities of available-for-sale fixed-maturity securities
The amortized cost and estimated fair value of available-for-sale fixed-maturity securities at March 31, 2022 are summarized, by contractual maturity, as follows:
March 31, 2022
AmortizedEstimated
CostFair Value
(in thousands)
Due in one year or less$7,749 $7,766 
Due after one year through five years258,045 251,927 
Due after five years through ten years244,902 233,059 
Due after ten years283,724 268,077 
Asset-backed securities275,052 273,658 
Residential mortgage-backed securities381,691 358,035 
Commercial mortgage-backed securities70,629 68,893 
Total fixed-maturity securities $1,521,792 $1,461,415 

Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties, and the lenders may have the right to put the securities back to the borrower.
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Net investment income
The following table presents the components of net investment income for the three months ended March 31, 2022 and 2021:
Three Months Ended March 31,
20222021
(in thousands)
Interest:
Taxable bonds$7,795 $5,729 
Tax exempt municipal bonds857 885 
Cash equivalents and short-term investments19 1 
Dividends on equity securities1,030 869 
Gross investment income9,701 7,484 
Investment expenses(613)(542)
Net investment income$9,088 $6,942 

Realized investment gains and losses
The following table presents realized investment gains and losses for the three months ended March 31, 2022 and 2021:
Three Months Ended March 31,
20222021
(in thousands)
Fixed-maturity securities:
Realized gains$842 $1,199 
Realized losses(365)(1)
Net realized gains from fixed-maturity securities477 1,198 
Equity securities:
Realized losses(148) 
Net realized losses from equity securities(148) 
Realized losses from the sales of short-term investments(34) 
Net realized investment gains$295 $1,198 

Change in net unrealized losses on fixed-maturity securities
For the three months ended March 31, 2022 and 2021, the changes in net unrealized losses for fixed-maturity securities were $80.9 million and $24.8 million, respectively.
Insurance – statutory deposits
The Company had invested assets with a fair value of $6.5 million and $6.7 million on deposit with state regulatory authorities at March 31, 2022 and December 31, 2021, respectively.
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Payable for investments purchased
The Company recorded a payable for investments purchased, not yet settled, of $30.7 million and $15.0 million at March 31, 2022 and December 31, 2021, respectively. The payable balance was included in the "other liabilities" line item of the consolidated balance sheet.
3.     Fair Value Measurements
Fair value is estimated for each class of financial instrument based on the framework established in the fair value accounting guidance. Fair value is defined as the price in the principal market that would be received for an asset or paid to transfer a liability to facilitate an orderly transaction between market participants on the measurement date. Market participants are assumed to be independent, knowledgeable, able and willing to transact an exchange and not acting under duress. Fair value hierarchy disclosures are based on the quality of inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Adjustments to transaction prices or quoted market prices may be required in illiquid or disorderly markets in order to estimate fair value.
The three levels of the fair value hierarchy are defined as follows:
Level 1 - Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities traded in active markets.
Level 2 - Inputs to the valuation methodology include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability and market-corroborated inputs.
Level 3 - Inputs to the valuation methodology are unobservable for the asset or liability and are significant to the fair value measurement.
Fair values of the Company's investment portfolio are estimated using unadjusted prices obtained by its investment accounting vendor from nationally recognized third-party pricing services, where available. Values for U.S. Treasuries and exchange traded funds are generally based on Level 1 inputs, which use quoted prices in active markets for identical assets. For other fixed-maturity securities and non-redeemable preferred stock, the pricing vendors use a pricing methodology involving the market approach, including pricing models which use prices and relevant market information regarding a particular security or securities with similar characteristics to establish a valuation. The estimates of fair value of these investments are included in the amounts disclosed as Level 2. For those investments where significant inputs are unobservable, the Company's investment accounting vendor obtains valuations from pricing vendors or brokers using the market approach and income approach valuation techniques and are disclosed as Level 3.
Management performs several procedures to ascertain the reasonableness of investment values included in the condensed consolidated financial statements, including 1) obtaining and reviewing internal control reports from the Company's investment accounting vendor that assess fair values from third party pricing services, 2) discussing with the Company's investment accounting vendor its process for reviewing and validating pricing obtained from third party pricing services and 3) reviewing the security pricing received from the Company's investment accounting vendor and monitoring changes in unrealized gains and losses at the individual security level. The Company has evaluated the various types of securities in its investment portfolio to determine an appropriate fair value hierarchy level based upon trading activity and the observability of market inputs.
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The following tables present the balances of assets measured at fair value on a recurring basis as of March 31, 2022 and December 31, 2021, by level within the fair value hierarchy:
March 31, 2022
Level 1Level 2Level 3Total
(in thousands)
Assets
Fixed maturities:
U.S. Treasury securities and obligations of U.S. government agencies$13,984 $ $ $13,984 
Obligations of states, municipalities and political subdivisions
 217,759  217,759 
Corporate and other securities 529,086  529,086 
Asset-backed securities 273,658  273,658 
Residential mortgage-backed securities 358,035  358,035 
Commercial mortgage-backed securities 68,893  68,893 
Total fixed-maturity securities13,984 1,447,431  1,461,415 
Equity securities:
Exchange traded funds119,288   119,288 
Non-redeemable preferred stock 44,286  44,286 
Total equity securities119,288 44,286  163,574 
Short-term investments 825  825 
Total$133,272 $1,492,542 $ $1,625,814 

December 31, 2021
Level 1Level 2Level 3Total
(in thousands)
Assets
Fixed maturities:
U.S. Treasury securities and obligations of U.S. government agencies
$6,847 $ $ $6,847 
Obligations of states, municipalities and political subdivisions
 228,045  228,045 
Corporate and other securities 458,487  458,487 
Asset-backed securities 301,775  301,775 
Residential mortgage-backed securities 337,685  337,685 
Commercial mortgage-backed securities 59,227  59,227 
Total fixed-maturity securities6,847 1,385,219  1,392,066 
Equity securities:
Exchange traded funds123,389   123,389 
Non-redeemable preferred stock 49,222  49,222 
Total equity securities123,389 49,222  172,611 
Total$130,236 $1,434,441 $ $1,564,677 
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There were no assets or liabilities measured at fair value on a nonrecurring basis as of March 31, 2022 or December 31, 2021.

The Company holds cash equivalents that are managed as part of its investment portfolio and, due to the short-term maturities of these assets, the carrying value of these investments approximates fair value. The Company held cash equivalents of $29.9 million and $44.7 million at March 31, 2022 and December 31, 2021, respectively. In addition, the estimated fair value of the Credit Facility approximated its carrying value as of March 31, 2022 and December 31, 2021. See Note 12 for further information regarding the Credit Facility.

4.     Deferred Policy Acquisition Costs
The following table presents the amounts of policy acquisition costs deferred and amortized for the three months ended March 31, 2022 and 2021:
Three Months Ended March 31,
20222021
(in thousands)
Balance, beginning of period$41,968 $31,912 
Policy acquisition costs deferred:
Direct commissions35,860 24,650 
Ceding commissions(8,545)(6,204)
Other underwriting and policy acquisition costs1,988 1,368 
Policy acquisition costs deferred29,303 19,814 
Amortization of net policy acquisition costs
(23,788)(16,985)
Balance, end of period$47,483 $34,741 

Amortization of net policy acquisition costs is included in the line item "Underwriting, acquisition and insurance expenses" in the accompanying consolidated statements of income and comprehensive income.
5.     Property and Equipment, Net
Property and equipment are included in "other assets" in the accompanying consolidated balance sheets and consist of the following:
March 31, 2022December 31, 2021
(in thousands)
Building$33,101 $33,101 
Parking deck5,072 5,072 
Land3,068 3,068 
Equipment3,205 3,143 
Software8,487 7,849 
Furniture and fixtures2,161 2,158 
Land improvements474 474 
55,568 54,865 
Accumulated depreciation(6,223)(5,570)
Total property and equipment, net$49,345 $49,295 
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6.     Underwriting, Acquisition and Insurance Expenses
Underwriting, acquisition and insurance expenses for the three months ended March 31, 2022 and 2021 consist of the following:
Three Months Ended March 31,
20222021
(in thousands)
Underwriting, acquisition and insurance expenses incurred:
Direct commissions$29,951 $21,165 
Ceding commissions(7,829)(5,355)
Other operating expenses16,423 12,326 
Total$38,545 $28,136 

Other operating expenses within underwriting, acquisition and insurance expenses include salaries, bonus and employee benefits expenses of $15.0 million and $11.3 million for the three months ended March 31, 2022 and 2021, respectively.

7.    Stock-based Compensation
On July 27, 2016, the Kinsale Capital Group, Inc. 2016 Omnibus Incentive Plan (the "2016 Incentive Plan") became effective. The 2016 Incentive Plan, which is administered by the Compensation, Nominating and Corporate Governance Committee of the Company’s Board of Directors, provides for grants of stock options, restricted stock, restricted stock units and other stock-based awards to officers, employees, directors, independent contractors and consultants. The number of shares of common stock available for issuance under the 2016 Incentive Plan may not exceed 2,073,832.
The total compensation cost that has been charged against income for share-based compensation arrangements was $1.5 million and $1.0 million for the three months ended March 31, 2022 and 2021, respectively.
Restricted Stock Awards
During the three months ended March 31, 2022, the Company granted restricted stock awards under the 2016 Incentive Plan. The restricted stock awards were valued on the date of grant and will vest over a period of 1 to 4 years corresponding to the anniversary date of the grants. The fair value of restricted stock awards was determined based on the closing trading price of the Company’s shares on the grant date or, if no shares were traded on the grant date, the last preceding date for which there was a sale of shares. Except for restrictions placed on the transferability of restricted stock, holders of unvested restricted stock have full stockholder’s rights, including voting rights and the right to receive dividends. Unvested shares of restricted stock awards and accrued dividends, if any, are forfeited upon the termination of service to or employment with the Company.
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A summary of restricted stock activity under the 2016 Incentive Plan for the three months ended March 31, 2022 is as follows:
For the Three Months Ended
March 31, 2022
Number of SharesWeighted Average Grant Date Fair Value per Share
Non-vested outstanding at the beginning of the period95,984 $131.94 
Granted52,863 $211.86 
Vested(10,696)$188.46 
Forfeited(833)$171.33 
Non-vested outstanding at the end of the period137,318 $158.07 

Employees surrender shares to pay for withholding tax obligations resulting from any vesting of restricted stock awards. During the three months ended March 31, 2022, shares withheld for taxes in connection with the vesting of restricted stock awards totaled 2,459.
The weighted average grant-date fair value per share of the Company's restricted stock awards granted during the three months ended March 31, 2022 and 2021 was $211.86 and $185.00, respectively. The fair value of restricted stock awards that vested during the three months ended March 31, 2022 and 2021 was $2.3 million and $0.9 million, respectively. As of March 31, 2022, the Company had $18.7 million of total unrecognized stock-based compensation expense expected to be charged to earnings over a weighted-average period of 3.2 years.
Stock Options
On July 27, 2016, the Board of Directors approved, and the Company granted, 1,036,916 stock options with an exercise price equal to the initial public offering price of $16.00 per share and a weighted-average grant-date fair value of $2.71 per share. The options have a maximum contractual term of 10 years and vested in 4 equal annual installments following the date of the grant.
The value of the options granted was estimated at the date of grant using the Black-Scholes pricing model using the following assumptions:
Risk-free rate of return1.26 %
Dividend yield1.25 %
Expected share price volatility(1)
18.50 %
Expected life in years(2)
6.3 years
(1)     Expected volatility was based on the Company’s competitors within the industry.
(2)     Expected life was calculated using the simplified method, which was an average of the contractual term of the option and its ordinary vesting period, as the Company did not have sufficient historical data for determining the expected term of our stock option awards.
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A summary of option activity as of March 31, 2022, and changes during the period then ended is presented below:
Number of SharesWeighted-Average Exercise PriceWeighted-Average Remaining Years of Contractual TermAggregate Intrinsic Value (in thousands)
Outstanding at January 1, 2022325,433 $16.00 
Granted  
Forfeited  
Exercised(23,600)16.00 
Outstanding at March 31, 2022
301,833 $16.00 4.3$63,995 
Exercisable at March 31, 2022
301,833 $16.00 4.3$63,995 

The total intrinsic value of options exercised was $4.5 million and $3.6 million during the three months ended March 31, 2022 and 2021, respectively. 
8.    Earnings Per Share
The following represents a reconciliation of the numerator and denominator of the basic and diluted earnings per share computations contained in the condensed consolidated financial statements:
Three Months Ended March 31,
20222021
(in thousands, except per share data)
Net income$31,791 $32,079 
Weighted average common shares outstanding - basic22,753 22,665 
Effect of potential dilutive securities:
Conversion of stock options291 343 
Conversion of restricted stock
49 61 
Weighted average common shares outstanding - diluted23,093 23,069 
Earnings per common share:
Basic$1.40 $1.42 
Diluted$1.38 $1.39