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Here's Why You Should Add Kinsale Capital (KNSL) to Your Kitty

·4 min read

Kinsale Capital Group, Inc.’s KNSL focus on the excess and supply (E&S) Market, prudent underwriting. lower expense ratio, growth in the investment portfolio and effective capital deployment along with favorable growth estimates make it a good investment choice.

KNSL has a decent surprise history, having surpassed estimates in the last five quarters.

Zacks Rank & Price Performance

Kinsale Capital currently sports a Zacks Rank #1 (Strong Buy). In the past month, the stock has gained 10.2%, outperforming the industry and the Finance sector’s respective increase of 8.2% and 1%. The Zacks S&P 500 composite has gained 2% over the same period.

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Growth Projections

The Zacks Consensus Estimate for 2022 earnings is pegged at $6.62, up 15.3% on 28.8% higher revenues of $772.9 million. The consensus estimate for 2023 earnings is pegged at $7.62, up 15% on 17% higher revenues of $904.2 million.

KNSL has a Growth Score of A. This style score analyzes the growth prospects of a company. Back-tested results have shown that stocks with a Growth Score of A or B combined with a Zacks Rank #1 (Strong Buy) or #2 offers better returns.

Return on Equity (ROE)

Kinsale Capital’s ROE for the trailing 12 months is 20.6%, comparing favorably with the industry’s 5.6%, reflecting the company’s efficiency in utilizing shareholders’ fund. The company targets mid-teens ROE over the long term.

Estimate Revision

The Zacks Consensus Estimate for 2022 and 2023 earnings has moved 3.8% and 3.5% north, respectively in the past 30 days, reflecting analyst optimism.

Business Tailwinds

Kinsale is well poised to deliver improved margins and lower loss ratios banking on intensified focus on the E&S market across the United States. The insurer targets clients with small- and medium-sized accounts, which have better pricing and are less prone to competition. Kinsale estimates low double-digit rate increases across the book of business.

Kinsale remains well poised to benefit due to continued market dislocation as it has resulted in improved submission flows and better pricing decisions.

Given the rise in interest rate, investment of the excess operating funds is likely to result in a robust investment portfolio.

Boasting the best combination of high growth and low combined ratio among its peers, KNSL targets a combined ratio in the mid-80s range over the long term.

Kinsale should continue to generate an improved expense ratio, given its proprietary technology platform, which is likely to provide it a competitive edge over other industry players as well as scalability in business. Kinsale Capital believes an expense ratio in the low-to-mid 20s to be rational

Impressive Dividend History

Banking on operational excellence, the insurer has increased dividend since 2017 at a five-year CAGR (2016-2022) of 14.6%.

Other Stocks to Consider

Some other top-ranked stocks from the finance sector are United Fire Group, Inc. UFCS, Berkshire Hathaway Inc. (BRK.B) and Cincinnati Financial Corporation CINF. United Fire currently sports a Zacks Rank #1, whereas Berkshire Hathaway and Cincinnati Financial carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

United Fire’s earnings surpassed estimates in each of the last four quarters, the average earnings surprise being 275.45%. In the past year, UFCS stock has declined 14.5%.

The Zacks Consensus Estimate for UFCS’ 2022 and 2023 earnings has moved 122.2% and 76.9% north, respectively, in the past 60 days.

Berkshire’s earnings surpassed estimates in three of the last four quarters, missed in one, the average beat being 11.86%. In the past year, BRK.B has rallied 37.3%.

The Zacks Consensus Estimate for Berkshire’s 2022 earnings has moved 2.3% north, in the past 30 days.

The bottom line of Cincinnati Financial surpassed earnings estimates in each of the last four quarters, the average being 38.48%. In the past year, the insurer has rallied 24.2%.

The Zacks Consensus Estimate for Cincinnati Financial’s 2022 and 2023 earnings has moved 5.7% and 5.5% north, respectively, in the past 60 days.


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