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Kinsale Capital Group, Inc. (KNSL) Down 10.2% Since Last Earnings Report: Can It Rebound?

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It has been about a month since the last earnings report for Kinsale Capital Group, Inc. (KNSL). Shares have lost about 10.2% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Kinsale Capital Group, Inc. due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Kinsale Capital Q4 Earnings & Revenues Top Estimates

Kinsale Capital Group reported fourth-quarter 2020 net operating earnings of $1.14 per share, which beat the Zacks Consensus Estimate by 48%. Moreover, the bottom line increased 80.9% year over year.

The company’s results benefited from higher premiums and improved underwriting income, offset by increased costs.

Full-Year Highlights

For 2020, Kinsale Capital delivered net operating income of $3.16 per share, which beat the Zacks Consensus Estimate by 13.3%. Moreover, the bottom line improved 31.1% year over year. Total operating revenues of $456.3 million beat the consensus mark by 2.9% and also increased 44.6% year over year.               

Operational Update

Total revenues in the fourth quarter were $139 million, which grew 49.5% year over year. The upside can primarily be attributed to higher premiums, improved net investment income and other income. The top line also beat the consensus mark by 13.9%.
             
Gross written premiums increased 33.7% year over year to $149.9 million, primarily driven by higher submission activity and premium rates on bound accounts. Net investment income grew 17.1% year over year to nearly $6.5 million, courtesy of growth in investment portfolio balance generated from the investment of operating funds since Dec 31, 2019 and from proceeds from equity offerings.

Total expenses in the quarter under review climbed 35.4% year over year to $96.5 million owing to higher losses and loss adjustment expenses, and underwriting, acquisition and insurance expenses and other expenses.

Kinsale Capital recorded underwriting income of $21.6 million, up 88.1% year over year, largely due to premium growth quarter over quarter and higher favorable development on loss reserves from prior accident years. The upside was partly offset by higher catastrophe losses in the fourth quarter of 2020 compared with the prior-year period. Combined ratio improved 450 basis points (bps) to 81.6%.

Expense ratio improved 120 bps to 22.8% in the fourth quarter. Also, loss ratio improved 330 bps to 58.8% in the quarter under review.

Financial Update

Kinsale Capital exited the fourth quarter with cash and cash equivalents of $77 million, down 23.2% over the level at 2019 end. As of Dec 31, 2020, credit facility of $42.6 million increased nearly three-fold year over year from 2019-end level. Stockholders’ equity of $576.2 million at the end of the quarter increased 41.9% year over year. Annualized operating return on equity expanded 460 bps year over year to 19% in the quarter.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates revision. The consensus estimate has shifted 8.42% due to these changes.

VGM Scores

Currently, Kinsale Capital Group, Inc. has a nice Growth Score of B, a grade with the same score on the momentum front. However, the stock was allocated a grade of F on the value side, putting it in the lowest quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Kinsale Capital Group, Inc. has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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