Kinsale Capital (KNSL) Stock Rises 57% YTD: Should You Buy?
Kinsale Capital KNSL shares have gained 56.8% year to date (YTD), outperforming the industry’s increase of 11.6%. The Finance sector has risen 5.3% and the Zacks S&P 500 index gained 17.2% in the said time frame. With a market capitalization of $9.5 billion, the average volume of shares traded in the last three months was 0.2 million.
Focus on the excess and supply (E&S) market, prudent underwriting, lower expense ratio, growth in the investment portfolio and effective capital deployment continue to drive this Zacks Rank #2 (Buy) insurer.
The insurer’s earnings have increased 44.1% in the past five years, better than the industry average of 17.1%. KNSL has a solid surprise history, beating earnings estimates in the last 11 reported quarters.
Kinsale Capital has a VGM Score of B. This helps to identify stocks with the most attractive value, growth and momentum. Back-tested results have shown that stocks with a VGM Score of A or B combined with a Zacks Rank #1 (Strong Buy) or 2 offer better returns.
Kinsale Capital’s ROE for the trailing 12 months is 29.1%, comparing favorably with the industry’s 6.7%, reflecting the company’s efficiency in utilizing shareholders’ funds. This insurer targets mid-teens ROE over the long term.
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Will the Bull Run Continue?
The Zacks Consensus Estimate for Kinsale Capital’s 2023 earnings is pegged at $11.56 per share, indicating a 48.2% increase from the year-ago reported figure of 48.3% higher revenues of $1.2 billion. The consensus estimate for 2024 earnings is pegged at $14.12 per share, indicating a 22.2% increase from the year-ago reported figure of 25.9% higher revenues of $1.5 billion. It has a Growth Score of B. We expect 2025 bottom line to witness a three-year CAGR of 22.4%.
An established presence across the E&S market of the United States and high retention rates arising from contract renewals should continue to drive premiums. KNSL expects 2023 to be the sixth calendar year in a row with double-digit industry-wide E&S premium growth. We expect 2025 net written premiums to witness a three-year CAGR of 19.7%. Notably, KNSL noted the E&S market has witnessed significant growth and generated better underwriting results than the broader P&C industry.
Kinsale Capital is well-poised to deliver improved margins and lower loss ratios, banking on a heightened focus on the E&S market across the United States. The insurer targets clients with small-sized and medium-sized accounts with better pricing and less prone to competition. Kinsale Capital estimates low double-digit rate increases across the book of business.
Kinsale Capital remains well-poised to benefit due to continued market dislocation, aiding improved submission flows and better pricing decisions.
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.
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.
Banking on operational excellence, the insurer has increased dividends since 2017 at a seven-year CAGR (2016-2023) of 13.7%.
Other Stocks to Consider
Some other top-ranked stocks from the same space are Arch Capital Group ACGL, Axis Capital Holdings AXS and ProAssurance PRA. Each of these companies presently sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Arch Capital’s earnings surpassed estimates in all the last four quarters, the average beat being 26.83%. The stock has gained 2.9% quarter to date.
The Zacks Consensus Estimate for ACGL’s 2023 and 2024 earnings indicates a 38.2% and 10.4% year-over-year increase, respectively. The expected long-term earnings growth is 10%. The consensus estimate for 2023 and 2024 moved up 2.3% and 2.5%, respectively, in the last 30 days.
Axis Capital delivered a trailing four-quarter average earnings surprise of 9.75%. YTD, the stock has gained 3.7%.
The Zacks Consensus Estimate for AXS’ 2023 and 2024 earnings indicates a 44.8% and 10.7% year-over-year increase, respectively. The expected long-term earnings growth is 5%. The consensus estimate for AXS’s 2023 and 2024 earnings has moved up 2.8% and 1.5%, respectively, in the past 30 days.
ProAssurance’s earnings surpassed estimates in two of the last four quarters while missed in the other two. YTD, the stock has gained 19.8%.
The Zacks Consensus Estimate for PRA’s 2024 earnings implies a year-over-year rise of 143.5%. The consensus estimate for PRA’s 2023 and 2024 earnings has moved up 25.9% and 2.5%, respectively, in the past 30 days.
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Axis Capital Holdings Limited (AXS) : Free Stock Analysis Report
ProAssurance Corporation (PRA) : Free Stock Analysis Report
Arch Capital Group Ltd. (ACGL) : Free Stock Analysis Report
Kinsale Capital Group, Inc. (KNSL) : Free Stock Analysis Report
