Kinsale Capital Group, Inc. (KNSL) Q4 2020 Earnings Call Transcript

Image source: The Motley Fool.

Kinsale Capital Group, Inc. (KNSL 0.24%)
Q4 2020 Earnings Call
Feb 19, 2021, 9:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by and welcome to the Q4 2020 Kinsale Capital Group, Inc Earnings Conference Call. [Operator Instructions]

Before we get started, let me remind everyone that through the course of the teleconference, Kinsale's management may make comments that reflect their intentions, beliefs and expectations 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 2020 quarterly reports on Form 10-Q and the 2019 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 the press release announcing its fourth quarter results.

Kinsale's management may also reference certain non-GAAP financial measures in the call today. A reconciliation of GAAP to these measures can be found in the press release, which is available at the Company's website at www.kinsalecapitalgroup.com.

I'll now turn the conference over to Kinsale's President and CEO, Mr. Michael Kehoe. Please go ahead, sir.

Michael P. Kehoe -- Chief Executive Officer

Thank you, operator.

Good morning, everyone, and thank you for joining us on our call today. With me are Bryan Petrucelli, Kinsale's CFO; and Brian Haney, Kinsale's COO. We were -- we will follow our usual format this morning. I'll handle an introduction and then Bryan Petrucelli will follow with a financial report and then Brian Haney with an operating report, after which we'll take questions.

Last night, Kinsale reported operating earnings of $1.14 per diluted share for the fourth quarter of 2020, up over 83% of the fourth quarter of 2019. Gross written premiums were up almost 34% for the quarter. The Company posted an 86.7% combined ratio and a 14.7% annualized operating return on equity for the full year of 2020, consistent with our guidance of a mid-80s combined ratio and mid-teens operating return and notwithstanding the heightened cat activity in the third quarter.

Kinsale's performing at a high level due to its unique business model. To recap briefly, Kinsale controls its own underwriting in lieu of contracting it out to third parties. It focuses on the E&S market and it operates with a significant technology-enabled expense advantage. The combination of disciplined underwriting with low costs is a winner every time. The ongoing dislocation within the broad P&C market and the E&S market, specifically, is adding a tailwind to our efforts for the time being, allowing us to raise rates by double digits and grow the top line by 42% for the full year 2020. Once the market normalizes, perhaps sometime in the next year or so, Kinsale remains well positioned to continue to generate strong returns and to take market share. The only significant change we expect will be a slower growth rate, perhaps in the low double-digit range.

For both the fourth quarter and for much of 2020, Kinsale saw a lower level of reported losses than we anticipated. We believe this slowdown in loss activity is largely due to the slowdown or the shutdown of courts around the country due to the pandemic. As we stated on our third quarter conference call, we continue to reserve as though this slowdown in losses is temporary and that there will be a catch-up period in the future. Should the slowdown in losses be at least in part permanent, we would expect a benefit in the future in the form of additional reserve redundancy.

From an operational standpoint, 95% of our employees successfully moved back to our one office here in Richmond, Virginia, early in the fourth quarter. For our business, this arrangement is superior to remote working. It allows us to maintain better communication to onboard and train new employees, to maintain a high level of productivity and to continue to provide superior customer service to our brokers around the country.

In sum, we are positive about the results from the fourth quarter and are optimistic about our opportunity for 2021 and beyond.

And I'll now turn the call over to Bryan Petrucelli.

Bryan P. Petrucelli -- Chief Financial Officer

Thanks, Mike.

The results for the fourth quarter were strong and driven by continued solid premium growth, favorable loss experience and disciplined expense management. We reported net income of $38.2 million for the fourth quarter of 2020, representing an increase of almost 114% when compared to $17.9 million last year and due primarily to approximately $10 million increase in underwriting income and $11.5 million increase in investment returns. Net operating earnings, which excludes the volatility from equity investment gains and losses, increased by 84% to $26 million, up from $14 million in the fourth quarter of 2019.

The Company generated underwriting income of $21.6 million and a combined ratio of 81.6% for the quarter compared to $11.5 million and 86.1% last year. The combined ratio for the fourth quarter of 2020 included 3.1 points from net favorable prior year loss reserve development compared to 1.3 points last year. Our effective income tax rate for the full year of 2020 was 11.9% compared to 16.7% last year and lower primarily to larger discrete tax benefits related to stock options exercised during the year. Annualized operating return on equity was 19% for the quarter and a little less than 15% for the year, and as Mike mentioned, in line with our mid-teens guidance. Gross written premiums were approximately $150 million for the quarter, representing a 34% increase over last year, due primarily to continued market dislocation and the superior service standards that Mike touched on previously. Brian Haney will cover some specifics relative to the market conditions here in a bit.

On the investment side, net investment increased -- net investment income increased by 17% over the fourth quarter last year, up to $6.5 million from $5.5 million as a result of continued growth in the investment portfolio. Annualized gross investment returns, excluding cash and cash equivalents, was 2.9% for the year compared to 3.1% in 2019. Diluted operating earnings per share was $1.14 per share for the quarter compared to $0.63 per share last year.

And with that, I'll pass it over to Brian Haney.

Brian D. Haney -- Chief Operating Officer

Thanks, Bryan.

As mentioned earlier, premium grew 34% in the fourth quarter. Growth is still strong and the market is trending in a favorable direction. We are still seeing growth across the board, but growth was particularly strong in our allied health, management liability, inland marine and life sciences areas. As we discussed last quarter, the overall economy is still being affected by COVID-related restrictions. The significant uptick in COVID cases in the fourth quarter led many states to reimpose restrictions, particularly California and New York, which are two of our bigger states. With the vaccine rollout and the rapid drop in cases we've seen across the country in January and February, I fully expect that those restrictions will be loosened and we should see the release of some pent-up economic activity, which should provide us with an additional tailwind.

Submission growth was in the high teens in the fourth quarter, down somewhat from the mid-20s in the third quarter. It should be -- some of this is due to the ongoing effects of the lockdown. However, binder growth remained strong in the mid-20s. We continued to look to improve our efficiency and customer service, and this allowed us to bind a higher percentage of the accounts we see, while maintaining underwriting and pricing discipline. We also continued to incrementally expand the product line. One new segment we are developing is InsureTech underwriting which looks to capitalize on new distribution sources in the insured tech space. This is a natural fit for us as it allows us to further exploit the advantages we have in technology. We are also expanding our offerings in our new commercial auto segment, our aviation segment as well as our -- as expanding our new entertainment segment [Technical Issues] the low teens range in the aggregate during the quarter even beyond getting pure rate at exciting terms and conditions which should contribute even more to the bottom line.

And with that, I'll hand it back over to Mike.

Michael P. Kehoe -- Chief Executive Officer

Thank you, Brian.

Operator, we're now ready for any questions that come in.

Questions and Answers:

Operator

[Operator Instructions] And our first question comes from the line of Jeff Schmitt with William Blair. Go ahead, please. Your line is open.

Jeff Schmitt -- William Blair -- Analyst

Hi, good morning. I was just wondering how submission activity is looking so far just in the first couple of months here of 2021. And given the comparisons are going to be tougher this year, are you seeing that slowdown?

Michael P. Kehoe -- Chief Executive Officer

Yeah, I mean, normally we kind of like to focus on the quarter we just concluded. We're kind of early days in Q1, but I would say probably not a material departure from Q4.

Jeff Schmitt -- William Blair -- Analyst

Okay. And then, the underlying loss ratio, it sounds like it was down a little bit on -- you referenced court activity being down just during the pandemic. And I guess with just thinking about that differential in rates versus loss cost trends, it's pretty -- it's pretty large there. Do you expect that to come down quite a bit more?

Michael P. Kehoe -- Chief Executive Officer

Jeff, we think the -- the best way to look at the accident year loss ratio is over the course of the year versus the quarter, and I think if you look at the press release, we went from a 62.1% ex-cat accident year loss ratio in 2019 to drop to 61.5%. A couple of things I would like to reiterate in terms of loss reserving is, number one, we strive to be very cautious and conservative. It is a -- really a fundamental part of our management strategy is to post reserves that are likely to develop favorably over time. The other thing is that, hey, we are getting some significant rate increases and have been for some time. That's obviously allowing us to expand our margins. Some of that I think you see in that in that 0.6 point lowering of the accident year loss ratio. Some of it is showing up in more conservatism in the loss reserves. But clearly there's a lot of companies that have been coming out with adverse development lately, and obviously we're striving to make sure that we're not -- we're not ever going to be in that camp.

Jeff Schmitt -- William Blair -- Analyst

Right, right, and that's what I meant on that annual basis. That differential so large, it just seem -- it seems like -- yeah, like you said, you're being conservative there. Okay, that's all I have. Thanks.

Michael P. Kehoe -- Chief Executive Officer

You bet.

Operator

Our next question comes from the line of Mark Hughes with Truist. Go ahead, please. Your line is open.

Mark Hughes -- Truist -- Analyst

Yeah, thanks. Good morning.

Michael P. Kehoe -- Chief Executive Officer

Good morning, Mark.

Mark Hughes -- Truist -- Analyst

What were those brand new submission references for Q4 versus Q3? I didn't pick that up. What did you say?

Brian D. Haney -- Chief Operating Officer

We were in the -- especially brokerage [Phonetic] in the mid -- I'm sorry, at the upper teens in fourth quarter and mid-20s in the third quarter.

Mark Hughes -- Truist -- Analyst

Okay. And then the courts being closed, what has that meant in terms of development on older claims? Has that slowed it down, no impact? What's the -- what's the effect of that?

Michael P. Kehoe -- Chief Executive Officer

Mark, this is Mike. We actually -- and I think this is true across the industry -- we only try a small percentage of our cases go to trial to be resolved. But the slowdown in the court system -- the court system, a lot of times acts as a catalyst for mandatory settlement conferences, mediations and the like. So the fact that a lot of courts have been closed now either in whole or in part for almost a year has clearly impacted kind of the claims system overall. And we've seen that in this drop-off in reported losses. It involves the 2020 accident year and some of the prior years as well. I think the question is, as I commented earlier, hey, is there a bounce back where you go through a catch-up period as the courts reopen or, hey, maybe just some accidents never took place because of changes in people's behavior given the lockdown across the economy. And so we just want to reassure our investors that, hey, we always take a conservative approach. We're assuming that those losses are going to bounce back. So we've reserved. There is no -- there is no slowdown. And then, hey, if there's good news down the road, that will be -- that will be fun to announce.

Mark Hughes -- Truist -- Analyst

And then how do you feel about the kind of cycle where we sit now? I think you said perhaps sometime in the next year or so when things normalize, I think you've been pretty consistent above your timeline. How do you feel about it today?

Michael P. Kehoe -- Chief Executive Officer

I think we feel -- we haven't changed our minds, right? I mean, we grew at almost 34% in Q4. That's an extraordinary growth rate. At some point, that's going to obviously normalize. There's a lot of new capital coming into the industry. But as you see from a lot of these announcements of other companies around the industry, there is a lot of distress out there that people are trying to work through, and it just takes some time. So at some point, the new capital overwhelms the distress and you get a more normalized, competitive market. We feel pretty optimistic about 2021. Beyond that, it gets fairly stuck I guess.

Mark Hughes -- Truist -- Analyst

Yeah, yeah. How about the -- from an expense ratio standpoint, up a little bit sequentially this quarter. But obviously you're getting very good top line growth and getting leverage. How do you think that shapes out in 2021?

Bryan P. Petrucelli -- Chief Financial Officer

Mark, it's Bryan Petrucelli. I think from an expense ratio standpoint, I wouldn't expect much of a change. Obviously, with premium growth, you do get some economies of scale, but I wouldn't expect any significant deviation from what you're seeing. It's always going to bounce around a little bit from quarter to quarter, but I think -- I think if you look at what we've done over the past year, that's a pretty good guide.

Mark Hughes -- Truist -- Analyst

I think one more if I might. Just anything on the cat losses this quarter? Clearly, Q3 was much larger, but in Q4 you had cat losses that were higher than your norm. Anything about the geography, your lines of business where you were effective there? Any changes you might have made given the experience in the second half of 2020?

Michael P. Kehoe -- Chief Executive Officer

Mark, it's Mike. We hadn't changed our strategy around natural catastrophe risk. We like the business. We approach it in a conservative fashion. In terms of -- did you ask about the first quarter activity?

Mark Hughes -- Truist -- Analyst

No, no. I was just sort of curious about -- well, if you want to say something about Q1, I'm all years. I was thinking about the Q4 rather than Q3, whether there was any different complexion to the cat losses.

Michael P. Kehoe -- Chief Executive Officer

No, no. It's a similar strategy. We're very conservative in how we manage the risk because it's quite volatile. Historically, the margins have been pretty compelling, right? So we're trying to balance the return prospects with -- making sure we manage the volatility appropriately. So really no changes. Obviously, there was a couple of straggler storms in Q4, Delta and Zeta, I think. And so -- I think that's where you see a little bit of a cat activity there in the -- in the financial statements.

Mark Hughes -- Truist -- Analyst

Thank you very much.

Michael P. Kehoe -- Chief Executive Officer

You bet.

Operator

Our next question comes from the line of Matt Carletti with JMP. Go ahead, please. Your line is open.

Matt Carletti -- JMP Securities -- Analyst

Hey, thanks. Good morning. Jeff and Mark covered most of what I had, but, Mike, I was hoping I could ask you to expand on a comment you had there in your answer to one of the prior questions, referencing kind of new capital coming into the market [Technical Issues] space broadly. Can you -- can you give us a little more color on what you are seeing kind of in your pocket of E&S market being a bit smaller limit, and obviously you guys leveraging your quick broker service and technology and so forth. Is it -- is it elsewhere in E&S? Are you seeing it directly?

Michael P. Kehoe -- Chief Executive Officer

I would say, we're really not seeing any kind of dramatic impact in the market as of today, right. So when we talk about new capital, it's mostly things we're reading about in the trade press where different competitors or new companies are raising billions of dollars, some of which will go into the reinsurance market, some of it clearly will end up in the E&S market. And eventually, hey, new competition shifts the balance between supply and demand, and inevitably it'll affect us mostly in terms of the growth rate. But as of today, I think you're hearing continued strength of optimism.

Matt Carletti -- JMP Securities -- Analyst

Great. Thank you.

Operator

Our next question comes from the line of Colin Ducharme with Sterling Capital. Go ahead, please. Your line is open.

Colin Ducharme -- Sterling Capital -- Analyst

Hi, good morning. Thanks for the question and I appreciate the solid results in Q4 here. Just a couple of quick housekeeping items upfront. Mike, I was interested in your headquarter update there; 95% of employees on-site. That sounds great. Can you give us a little color in terms of the advantages that that now gives you? I inferred a little kind of speed to market there, but maybe if you could just offer some color on what hindrances you were facing in a remote environment and now what you -- advantages gain in the in-person environment today versus where some of your peers in a remote space might still be facing? And then I've got a couple of follow-ups.

Michael P. Kehoe -- Chief Executive Officer

Okay. I would say first of all, when the pandemic struck, probably 90 plus percent of our employees were working remotely. We clearly had the flexibility in terms of our system and what not to accommodate that. It's just that we're a company that's in a period of rapid growth. So as you can expect, we're hiring on a regular basis: underwriters, claims examiners. We've expanded dramatically I think our IT shop over the course of the last year or so. And so, hey, part of that onboarding of new employees is training, right, because you hire some employees that are new to the industry, but a lot of it is getting employees familiar with our business culture, how we operate. And it's very challenging to do that when everybody is working by themselves.

And so, hey, it made sense for eight or 10 months, if you will, to have people working remotely, and I think we've worked hard to make sure people remain productive, but it also made sense to move people back to the arrangement we have today. There's probably about a 5% cohort of employees for a variety of medical reasons and the like that are continuing to work remotely and that works fine, but in general, we're big believers in having the team here in one location where the training, the onboarding, the communication is at its best. I would say Kinsale, far and away, maintains the best service standards with our brokers. I mean, I hear that constantly. We turn quotes around very quickly. We ask a lot of our employees. I think we tend to pay better than our competitors here in town as a consequence. And I think that's a -- it's a material part of our success as a business, providing a good customer service experience to our brokers. So having people back in the office, I think long-term, facilitates that as well.

Colin Ducharme -- Sterling Capital -- Analyst

Okay. Thanks. And then in terms of pricing, if you could offer some color regarding the relative pricing position Kinsale is now seeing in the market versus peers. And so, we've seen from other peers who have already reported and also in trade press continued rate increases elsewhere. I don't know if you're experiencing and improved pricing umbrella as peers have continued to kind of push rates up. And so, if you've got some anecdotal color or perhaps more quantitatively on a bind to quote percentage, how that differential has trended through time, what's the relative positioning, how has that trended for Kinsale.

Brian D. Haney -- Chief Operating Officer

Yeah, this is Brian Haney. So we are seeing still an acceleration. I think that is gradual, and that's been going on for a long time now. In the fourth quarter, it continued despite all the other stuff going on. I would say, generally, we look at industry commentary or industry surveys [Indecipherable] What we're seeing is consistent with them. I think to the extent that we're getting better volumes of submit numbers, it's through better customer service or from that angle rather than a more -- adopting a more competitive posture with regards to rates. So, as the industry is pushing up rates, we are pushing up rates, and then making up with productivity and efficiency.

Colin Ducharme -- Sterling Capital -- Analyst

Okay. Thanks. And then just cleaning up last couple of items here, kind of more forward-looking just -- in thinking about how to properly kind of view the next 12 or so months. If you could comment on the Midwest weather events. I'm assuming it's down the -- down the middle of the fairway in terms of exposures and how you think of the in-force book. And then, perhaps longer-term, when we start to think about ICO data beginning to improve and domestic recovery taking hold, if you could just talk about embedded potential within your in-force book. And what I'm trying to articulate here is, as you go through and do perhaps policy audits with SMBs with which you have exposure, to the extent they are experiencing a snap back in revenues and perhaps your exposure units are greater than you -- initially underwrote at binding, is there a chance in your in-force book that you've got an embedded rate tailwind that can take hold as the economy recovers. I hope I'm articulating that well. Thank you.

Michael P. Kehoe -- Chief Executive Officer

This is Mike. I'll start. The Midwest cat. I think you're referencing, kind of the -- the cold wave and the power disruption in Texas. There are some industry headlines, there're some trade press articles saying that the industry loss could parallel Hurricane Harvey from a number of years ago, which clearly, it looks like it will. I would say it should be much less material for Kinsale. We don't expect an enormous flow of claims from that. I'm sure there'll be some, but it shouldn't be that material for us. And then in terms of the impact of economic growth on our book, Brian?

Brian D. Haney -- Chief Operating Officer

I think you're absolutely spot-on, Colin. I think that there is some [Indecipherable] talked about is going to result in, at some point down the road, increased audits and then increased revenue and exposure at renewals. So there's some growth we're going to get just from, let's say, a contractor who maybe had his sales go down 25% during the pandemic and it got back up 25% or 30%, whatever. I mean, there should always be some growth that we get just by the exposure growth as most of our exposure bases are growing to revenue like items.

Colin Ducharme -- Sterling Capital -- Analyst

Thank you.

Operator

Our next question comes from the line of Scott Heleniak with RBC Capital Markets. Go ahead, please. Your line is open.

Scott Heleniak -- RBC Capital Markets -- Analyst

Yes, good morning. I wonder if you could talk about the -- you mentioned some product offering expansion, aviation -- product -- commercial auto, entertainment. I wonder if you could comment a little more on that and how that's going to impact your growth rate in terms of -- is that -- you're going to be able to maintain the --your kind of the similar growth rate that you saw maybe not necessarily in the -- the past few quarters, but maybe in the fourth quarter, somewhere in the 20%, 30% growth rate or more and how much of that is going to be through new product expansion or distribution expansion.

Brian D. Haney -- Chief Operating Officer

Yeah. I would say that when any new product offerings or any product expansions are all very incremental. We're not trying to corner the market on anything. So I wouldn't expect new products right out the gate to really affect growth rate kind of in the near term. It's really for the long term we're setting it up if we want to be able to compete down the road, but these things take off slowly and that -- we're completely OK with that. So what I'll -- the short answer is, if you're looking for it to [Indecipherable] then I don't think aviation or entertainment or any of these segments are going to materially move the needle. Years down road, probably they will.

Scott Heleniak -- RBC Capital Markets -- Analyst

Okay. It's fair. And then, you highlighted really -- so pretty much all, you've taken the opportunity to just, in terms of the terms and conditions and how that's helped your margins [Technical Issues] how that's -- how that's sort of benefited you.

Brian D. Haney -- Chief Operating Officer

Yeah, I would say, definitely, we have restricted our use of higher limits. So basically, it's -- I mean [Indecipherable] follow with maybe $5 million or $2.5 million, definitely adding self-limits. Where we have exclusions, we're tightening the [Indecipherable] stricter and then we're just adding the exclusions because we can.

Michael P. Kehoe -- Chief Executive Officer

And then other areas might be more frequent use of deductibles. We have two principal coverage triggers we use. The occurrence trigger is broader than the claims made. Not to get too technical here on an investor call, but we're pushing the more restrictive of the two, which gives us more certainty over the development of claims in the long haul. But there's a lot of things that in a more favorable market environment we're able to negotiate terms that are a little bit more favorable to us as the risk payer.

Scott Heleniak -- RBC Capital Markets -- Analyst

Okay. That's good detail. And then the last one I have was just on the -- the net premium retention ratio so that premiums as a percent of gross written premiums. So it was up a little bit year-over-year in the first half of '20 and down a little bit year-over-year in second half '20. Any sense of where that might fall for 2021 and any expectations that we'll see any shifts in reinsurance treaties that might impact that for the year?

Bryan P. Petrucelli -- Chief Financial Officer

Well, I think what you're seeing really is the mix of business is going to drive that. So we've had a tremendous increase in our commercial property book, in our excess casualty book that is subject to reinsurance. So I think we're seeing retentions react to that. I think going forward, it's always going to bounce around a little bit depending on our mix of business, but I think if you -- if you use where we are here in the fourth quarter for a guide for the next six months or a year is probably a probably as good as you -- probably a good guide.

Scott Heleniak -- RBC Capital Markets -- Analyst

Okay. Thanks for the answers. Best of luck.

Operator

Our next question comes from the line of Casey Alexander with Compass Point. Go ahead, please. Your line is open.

Casey Alexander -- Compass Point. -- Analyst

Yeah, hi. Good morning. And thanks for taking my question. Most of my questions have been asked and answered, but I would ask, Bryan. Bryan, do you have a reasonable tax rate to go going forward to use for modeling purposes?

Bryan P. Petrucelli -- Chief Financial Officer

Yeah. So obviously we're a 21% statutory tax payer. And when we -- when we went public in 2016, we issued our options at that point. The last tranche of it was vested this year. So I would expect to see fewer of those key exercise going forward. There are -- there are still a fair amount outstanding, but you shouldn't see as much of an impact going forward as you got here in the fourth quarter. I think for our guide, long-term, 17.5% to 18% is probably a good guide.

All right. Thank you. That's my only remaining question. So thanks for taking my question.

Operator

[Operator Instructions] Our next question comes from the line of Ron Bobman with Capital Returns. Go ahead, please. Your line is open.

Ronald David Bobman -- Capital Returns Management -- Analyst

Hi. Thanks. And congrats on the continued fabulous results. Almost all the questions I had in mind were asked, but I would be curious. Mike, you talked about the current weather and losses and the conversation about it being a little bit sized in the Harvey neighborhood, and I imagine that that you're speaking to Kinsale's exposure to being not all that significant, I guess, because your book is principally -- predominantly a casualty book. But I was wondering if I could sort of tap your knowledge. For those companies that write E&S property, is E&S property sort of -- would you sort of say like exposed to this event as admitted property or would be an E&S property rider be a little bit less exposed, whether it be because of coverage terms or deductibles, would you hazard to guess as to sort of the relative vulnerability to this event for that type of rider? And again, I know that you guys dominate your book with casualty business and thus the modest or insignificant exposure that you referenced.

Michael P. Kehoe -- Chief Executive Officer

Yeah. I think for the industry it's significant. I think it's significant for the admitted companies and the E&S companies. You've got coastal exposure along the Gulf, you've got hale as a big issue in the Dallas area, lot of E&S homeowners is written up there, and then Texas is a -- it's a big E&S state anyway, right. So there's plenty of E&S exposure. I just think for Kinsale, it's early days, we don't know definitively, but I suspect whatever the problem is for the industry, it's going to be considerably lighter for us at Kinsale just because of our strategy.

Ronald David Bobman -- Capital Returns Management -- Analyst

Okay. The only thing I'd add is, Mike, you said that if -- when the courts reopen and the plumbing sort of gets unclogged that if the losses don't come in, it will be fun to report that good news. Having put up an 81% combined, I would think that it'd be plenty of fun reporting today these results. So congrats. But I don't know -- maybe it's funner -- will be funner if that happen. But outstanding -- outstanding operation and report -- results.

Michael P. Kehoe -- Chief Executive Officer

Thanks, Ron. Appreciate it.

Operator

Our next question comes from the line of Heather Takahashi with Thrivent. Go ahead, please. Your line is open.

Heather Takahashi -- Thrivent Asset Management -- Analyst

Hi guys.

Michael P. Kehoe -- Chief Executive Officer

Good morning, Heather.

Heather Takahashi -- Thrivent Asset Management -- Analyst

Good morning. A couple of question. You mentioned in your opening remarks that you would have been hit by the closures in New York and California in terms of the premium growth in the quarter. Do you have a sense of what it would have been very, very roughly if it hadn't been for the COVID lockdowns?

Brian D. Haney -- Chief Operating Officer

No, not really. I mean, I can just tell you that we write a lot of construction business and we write a lot of premises related business and those would have been the two most affected, but it would be tough to -- I mean, it's definitely had a material impact [Indecipherable].

Heather Takahashi -- Thrivent Asset Management -- Analyst

Okay. Okay. Good. Okay. And then another question. You mentioned that you're expanding into InsureTech underwriting. Could you talk a bit more about that?

Brian D. Haney -- Chief Operating Officer

Yeah. So there's a lot of new entities that are not traditional brokers, but really sort of fulfill the role of distribution, and [Indecipherable] InsureTech are really technology companies. And we're creating a unit whose job is to distribute through the sources just where we were distributed through the wholesale. And really the reason we created a separate unit for it is because it's going to happen to be a different set of processes, much more tech-intensive, much lighter human touch, but basically the same type of business, still E&S, still small and medium-sized accounts, still controlling the underwriting and pricing. It's just through a different funnel.

Heather Takahashi -- Thrivent Asset Management -- Analyst

Okay. So just the distribution is different.

Brian D. Haney -- Chief Operating Officer

Yeah. Same business through a different distribution channel.

Heather Takahashi -- Thrivent Asset Management -- Analyst

Got it. Great. Thank you.

Michael P. Kehoe -- Chief Executive Officer

Thanks, Heather.

Operator

And there are no further questions at this time, I'd like to turn the call back over to Mr. Kehoe.

Michael P. Kehoe -- Chief Executive Officer

Okay. Well, I just want to thank everybody for participating today. And we look forward to speaking with you again here at the end of the first quarter. Have a great day.

Operator

[Operator Closing Remarks]

Duration: 39 minutes

Call participants:

Michael P. Kehoe -- Chief Executive Officer

Bryan P. Petrucelli -- Chief Financial Officer

Brian D. Haney -- Chief Operating Officer

Jeff Schmitt -- William Blair -- Analyst

Mark Hughes -- Truist -- Analyst

Matt Carletti -- JMP Securities -- Analyst

Colin Ducharme -- Sterling Capital -- Analyst

Scott Heleniak -- RBC Capital Markets -- Analyst

Casey Alexander -- Compass Point. -- Analyst

Ronald David Bobman -- Capital Returns Management -- Analyst

Heather Takahashi -- Thrivent Asset Management -- Analyst

More KNSL analysis

All earnings call transcripts