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Here's Why Investing in Kinsale (KNSL) is a Prudent Move Now

Kinsale Capital KNSL has been gaining momentum on the back of high retention rates, growth in investment portfolio, and strong underwriting results.

Growth Projections

The Zacks Consensus Estimate for 2021 and 2022 earnings per share is pegged at $4.72 and $5.62, indicating year-over-year increases of 49.3% and 19%, respectively.

Estimate Revision

The Zacks Consensus Estimate for 2021 and 2022 has moved 9.5% and 10.4% north, respectively, in the past 60 days, reflecting analysts’ optimism.

Earnings Surprise History

Kinsale Capital surpassed estimates in three of the last four reported quarters and missed in one, with the average beat being 11.9%.

Zacks Rank & Price Performance

Shares of this Zacks Rank #2 (Buy) property and casualty insurer have gained 2.6% quarter to date, outperforming the industry’s increase of 0.3%. We expect the company’s policy to ramp up its growth profile and capital position, and drive shares higher.


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Return on Equity (ROE)

The company’s ROE for the trailing 12 months is 15.6%, better than the industry average of 5.7%, reflecting the company’s efficiency in utilizing shareholders’ fund.

Business Tailwinds

Given higher submission activity from brokers across most lines of business, higher rates on bound accounts, favorable market conditions, and high retention rates arising from contract renewals, Kinsale Capital’s premium income is expected to improve in the near term.

The Excess and Surplus Lines insurance segment, which offers property and casualty (P&C) insurance products, continues to witness rapid growth owing to dislocation in the overall property and casualty market. Premium growth is expected to continue throughout the remainder of 2021.

Continued growth in the investment portfolio should drive investment income.
Riding on a unique business strategy that focuses on small account E&S market, control over underwriting operation, and technology-enabled low costs, Kinsale’s growth rate is likely to increase in the long run.

Higher premium growth from a strong underwriting environment, continued rate increases, and higher net favorable development of loss reserves from prior accident years are likely to fuel the underwriting income of the insurer, which soared 77% in the first half of 2021. The combined ratio in the second quarter was well ahead of the guidance of mid-80s.

Lower net commissions incurred as a percentage of earned premiums, lower other underwriting expenses, and higher earned premiums are likely to aid the company in lowering the expense ratio.

Higher premium volume, the timing of claim payments, and reinsurance recoveries are likely to drive the net cash provided by operating activities. Over the last two years, net cash provided by operating activities more than doubled. It increased 47% in the first half of 2021.

Kinsale Capital has raised its dividend at a five-year (2016-2021) CAGR of 17.1% and currently yields 0.3%, making the stock an attractive pick for yield-seeking investors.

The property and casualty insurer has an impressive Growth Score of B. This style score helps analyze the growth prospects of a company.

Other Stocks to Consider

Some other top-ranked property and casualty insurers are American Financial Group, Inc. AFG, Everest Re Group, Ltd. RE, and Cincinnati Financial Corporation CINF, each carrying a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The bottom line of American Financial surpassed estimates in each of the last four quarters, the average being 52.82%.

Everest Re’s earnings surpassed estimates in two of the last four quarters and missed in the other two, the average beat being 20.33%.

Cincinnati Financial’s earnings surpassed estimates in three of the last four quarters and missed in the other one, the average being 36.01%.


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Cincinnati Financial Corporation (CINF): Free Stock Analysis Report
 
Everest Re Group, Ltd. (RE): Free Stock Analysis Report
 
American Financial Group, Inc. (AFG): Free Stock Analysis Report
 
Kinsale Capital Group, Inc. (KNSL): Free Stock Analysis Report
 
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