Kinsale Capital Group (NYSE: KNSL) held its fourth-quarter 2024earnings conference callon February 14, 2025. The specialty insurer delivered operating earnings-per-share growth of 19.4% and gross written premium growth of 12.2% compared to the fourth quarter of 2023. Here are three areas of note for investors focused on Kinsale's long-term prospects.
Durable Business Model Continues to Deliver Exceptional Returns
Kinsale's focus on small excess and surplus (E&S) accounts and technological advantages creates a business model with ongoing strong profitability.
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We posted a combined ratio of 73.4% and a full-year 2024 operating return on equity of 29%. These results largely flow from the Kinsale business strategy of small E&S account focus, absolute control over our underwriting and claim handling processes, best-in-class service levels and risk appetite that we provide our brokers and technology-driven low cost.
-- Michael Patrick Kehoe, Chairman of the Board & CEO
Trading Margin for Growth in Select High-Performing Lines
Management is strategically reducing pricing in ultra-profitable segments to drive higher growth while maintaining industry-leading profitability.
We are being more aggressive in pricing in some select areas because the margins are so high that the trade-off between a lower rate and more growth is worthwhile. Keep in mind, our 29% operating ROE [return on equity] would imply that half of our book is producing margins above that. So by trading away some of that excess profitability on some specific lines of business, we can drive better growth and maximize wealth creation for our stockholders over time.
-- Brian Donald Haney, President & COO
Kinsale operates from a position of strength with high margins that provide flexibility to adjust pricing while maintaining profitability well above their target levels.
Consistent Product Expansion Strategy Continues with Agribusiness Launch
The company continues its methodical approach to expanding product offerings, most recently entering the agribusiness market.
Part of Kinsale's growth over the years has been due to a regular expansion of our product lines into adjacent markets. Most recently, we created a new agribusiness underwriting unit that focuses on opportunities in the farm, ranch and related spaces. This is part of our ongoing effort to gradually expand our product line so that we can offer solutions for all tough-to-place E&S accounts across the U.S., no matter what coverage or sector of the economy.
-- Brian Donald Haney, President & COO
With 26 distinct underwriting divisions now in place, Kinsale's methodical product expansion provides incremental growth opportunities while maintaining underwriting discipline in new markets.
Looking Ahead
Kinsale's management maintains an optimistic outlook despite increasing competition, emphasizing their advantages in the E&S market.
Overall, we remain optimistic. The results are good, our growth prospects are good. And as the low-cost provider in our space, we have a durable competitive advantage that should allow us to continually gradually take market share from our higher-expense competitors while continuing to deliver strong returns and build wealth for our investors.
-- Brian Donald Haney, President & COO
Kehoe noted that the company is "investing heavily in technology, automation, data and analytics to drive further gains in the years ahead. Progress in these areas should allow us to gradually and continually improve our expense ratio, our customer service and the accuracy and competitiveness of our underwriting, all to the benefit of our profitability and growth." Management remains focused on balancing profitability with growth to maximize shareholder value.
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David Kretzmann has positions in Kinsale Capital Group. The Motley Fool has positions in and recommends Kinsale Capital Group. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
