Shares of Kinsale Capital Group, Inc. KNSL have rallied 41% year to date (YTD), outperforming the industry’s 28.7% growth. The insurer also outperformed the Zacks S&P 500 composite and the Finance sector’s return of 21.9% and 17.1%, respectively, YTD. With a market capitalization of $10.99 billion, the average volume of shares traded in the last three months was 0.1 million.
KNSL Outperforms Industry, Sector, S&P YTD
Image Source: Zacks Investment Research
The rally was largely driven by a focus on the excess and supply (E&S) market, prudent underwriting, lower expense ratio, growth in the investment portfolio, solid growth projections and effective capital deployment.
This property and casualty insurer has a solid track record of beating earnings estimates in each of the last four quarters, the average being 9.28%.
KNSL Trading Above 50-Day Moving Average
This Zacks Rank #3 (Hold) insurance broker closed at $472.29 on Monday, above its 50-day and 200-day simple moving average (SMA) of $468.23 and $434, respectively, indicating solid upward momentum. SMA is a widely used technical analysis tool to predict future price trends by analyzing historical price data.
Optimistic Analyst Sentiment for KNSL
One of the seven analysts covering the stock has raised estimates for 2024 and 2025 over the past 60 days. Thus, the Zacks Consensus Estimate for 2024 and 2025 moved 0.1% and 0.2% north, respectively, in the last 60 days, reflecting analyst optimism.
Growth Projection for KNSL
The Zacks Consensus Estimate for Kinsale Capital’s 2024 earnings per share indicates an increase of 22.4% from the year-ago reported number. The consensus estimate for revenues is pegged at $1.58 billion, implying a year-over-year improvement of 29.7%.
The consensus estimate for 2025 earnings per share and revenues indicates an increase of 18.6% and 19%, respectively, from the corresponding 2024 estimates.
Earnings have grown 45.7% in the past five years, better than the industry average of 11.4%. The expected long-term earnings growth rate is 15%, outperforming the industry average of 11.5%. KNSL has an impressive Growth Score of B. This style score helps analyze the growth prospects of a company.
Will the Bull Run Continue?
Premiums should continue to improve, given the company’s strong presence across the E&S market in the United States and high retention rates stemming from contract renewals. Management noted that the E&S market has witnessed significant growth and generated better underwriting results than the broader P&C industry. It remains well-poised to benefit from continued market dislocation, aiding improved submission flows and better pricing decisions.
KNSL’s solid market presence helped it to deliver improved margins and lower loss ratios. The insurer targets clients with small-sized and medium-sized accounts with better pricing and less prone to competition. Management estimates low double-digit rate increases across the book of business.
Kinsale Capital enjoys the best combination of high growth and low combined ratio among its peers. It targets a combined ratio in the mid-80s range over the long term. Also, KNSL is well-poised to generate an improved expense ratio given its proprietary technology platform, which is likely to provide it with a competitive edge over other industry players and scalability in business.
Investment of excess operating funds at higher rates in an improved rate environment should drive investment results. Notably, its free cash flow conversion has remained more than 85% over the last many quarters, reflecting its solid earnings.
The insurer has increased dividends since 2017 at a seven-year (2017-2024) CAGR of 12%, riding on the strength of operational excellence that supports a solid capital position.
KNSL’s Favorable Return on Capital
Return on equity in the trailing 12 months was 30.3%, better than the industry average of 7.9%. This highlights the company’s efficiency in utilizing shareholders’ funds.
Also, the return on invested capital (ROIC) has been increasing over the last few quarters as the company raised its capital investment over the same time frame, reflecting KNSL’s efficiency in utilizing funds to generate income. ROIC in the trailing 12 months was 25.4%, better than the industry average of 6%.
Key Picks
Investors interested in the property and casualty insurance industry may look at some better-ranked players like Arch Capital Group Ltd. ACGL, NMI Holdings Inc NMIH and The Progressive Corporation PGR, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Arch Capital’s 2024 and 2025 earnings implies year-over-year growth of 6.6% and 3.5%, respectively. It beat earnings estimates in each of the past four quarters, with an average surprise of 28.93%. Year to date, shares of ACGL have gained 49.6%.
The Zacks Consensus Estimate for NMI Holdings’ 2024 and 2025 earnings implies year-over-year growth of 17.1% and 5.6%, respectively. It beat earnings estimates in each of the past four quarters, with an average surprise of 10.15%. Year to date, shares of NMIH have gained 38.1%.
The Zacks Consensus Estimate for Progressive’s 2024 and 2025 earnings implies year-over-year growth of 112.2% and 4.5%, respectively. It beat earnings estimates in each of the past four quarters, with an average surprise of 24.08%. Year to date, shares of PGR have gained 58.1%.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
