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Kinsale Capital (KNSL) Up 26.2% in a Year: More Room to Run?

Shares of Kinsale Capital Group, Inc. KNSL have gained 26.2% in a year, outperforming the industry's rise of 9.4%. The Finance sector has lost 0.8% and the Zacks S&P 500 composite has gained 10.5% in the same period. With a market capitalization of $8.2 billion, the average volume of shares traded in the last three months was 0.1 million.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

The rally was largely driven by a focus on the excess and supply (E&S) market, prudent underwriting, an improvement in the investment portfolio, effective capital deployment and an optimistic growth estimate.

This Zacks Rank #2 (Buy) property and casualty insurer has a solid track record of beating earnings estimates in each of the last four quarters, the average being 14.25%.

KNSL has a VGM Score of B. VGM Score helps identify stocks with the most attractive value, best growth and the most promising momentum. Back-tested results show that stocks with a VGM Score of A or B, when combined with a Zacks Rank #1 (Strong Buy) or 2, offer the best opportunities in the value investing space.

Will the Bull Run Continue?

The Zacks Consensus Estimate for Kinsale Capital’s 2023 earnings is pegged at $11.96 per share, indicating a 53.3% increase from the year-ago reported figure on 47.5% higher revenues of $1.21 billion. The consensus estimate for 2024 earnings is pegged at $14.53 per share, indicating a 21.5% increase from the year-ago reported figure on 25.4% higher revenues of $1.51 billion.

Kinsale Capital’s premium should continue to benefit from its established presence across the E&S market of the United States, improved submission flows and high retention rates arising from contract renewals. KNSL anticipates 2023 to be the sixth calendar year in a row with double-digit industry-wide E&S premium growth.

The insurer targets clients with small and medium-sized accounts with better pricing and less prone to competition and estimates low double-digit rate increases across the book of business.

Given an improving rate environment, investment of the excess operating funds should help it build a robust investment portfolio.

Kinsale Capital enjoys 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. The insurer noted that the E&S market has witnessed significant growth and generated better underwriting results than the broader P&C industry.

A proprietary technology platform, which is likely to provide it with a competitive edge over other industry players and scalability in business, should help KNSL generate an improved expense ratio.

The insurer’s annualized operating return on equity was 32.1% for the nine months ended Sep 30, 2023, which expanded 780 basis points year over year. The rise was attributable largely to continued profitable growth from continuing favorable market conditions and rate increases. For the long term, it even targets to maintain operating return on equity in the mid-teens range.

Banking on operational excellence, KNSL has increased dividends since 2017 at a seven-year CAGR (2016-2023) of 13.7%.

The Zacks Consensus Estimate for KNSL’s 2023 and 2024 earnings has moved 2.7% and 1.7% north, respectively, in the past 30 days, reflecting analysts’ optimism.

Kinsale Capital has an impressive Growth Score of A. This style score helps analyze the growth prospects of a company.

Other Stocks to Consider

Some other top-ranked stocks from the property and casualty insurance industry are Cincinnati Financial Corporation CINF, Mercury General Corporation MCY and W.R. Berkley Corporation WRB. While Cincinnati Financial and Mercury General sport a Zacks Rank #1, W.R. Berkley carries a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Cincinnati Financial surpassed earnings in three of the last four quarters and missed in one, the average being 38.33%. In the past year, the insurer has lost 10%.

The Zacks Consensus Estimate for CINF’s 2023 and 2024 earnings has moved 2.6% and 0.3% north, respectively, in the past seven days, reflecting analysts’ optimism.

Mercury General beat estimates in two of the last four quarters and missed in the other two, the average being 2,833.05%. In the past year, the insurer has lost 3.1%.

The Zacks Consensus Estimate for MCY’s 2023 and 2024 earnings per share indicates a year-over-year increase of 65.2% and 343.7%, respectively.

W.R. Berkley beat estimates in three of the last four quarters and missed in one, the average being 4.35%. In the past year, the insurer has lost 3.4%.

The Zacks Consensus Estimate for WRB’s 2023 and 2024 earnings per share is pegged at $4.74 and $5.70, indicating a year-over-year increase of 8.2% and 20.1%, respectively.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

W.R. Berkley Corporation (WRB) : Free Stock Analysis Report

Cincinnati Financial Corporation (CINF) : Free Stock Analysis Report

Mercury General Corporation (MCY) : Free Stock Analysis Report

Kinsale Capital Group, Inc. (KNSL) : Free Stock Analysis Report

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