Kinsale Capital Up 112% in a Year: What's Behind the Surge?
Kinsale Capital Group, Inc.’s KNSL shares have gained 112.1% in a year compared with the industry and the Zacks S&P 500 composite’s growth of 0.6% and 16.4%, respectively. With market capitalization of $4.3 billion, average volume of shares traded in the last three months was 0.2 million.
The company continues to benefit from continued focus on the excess and surplus lines (E&S) market, lower expense ratios and strong underwriting results. It delivered a trailing four-quarter earnings surprise of 7.99%, on average.
Kinsale Capital’s trailing 12-month return on equity (ROE) of 15.3% is higher than the industry’s ROE of 6.5%. This highlights the company’s ability to utilize its shareholders’ funds.
Why Should it Retain the Momentum
Kinsale Capital is likely to benefit from its intensified focus on the E&S market across the United States, which has generated better premiums than the broader property & casualty (P&C) insurance industry. Continued dislocation within the broader P&C industry and the company’s exposure to those lines of business that have relatively lower risks should position it well for growth.
Moreover, this P&C insurer, which carries a Zacks Rank #2 (Buy), is likely to gain from high premiums, which has been benefiting from high retention rates courtesy of contract renewals.
Continued growth in the company’s investment portfolio due to investment of its excess operating funds should continue to boost net investment income despite the prevailing lower interest rates.
Furthermore, addition of a proprietary technology platform has enabled efficient handling of underwriting and claims operations by Kinsale Capital. This platform backed by technology upgradation is likely to aid the company in undertaking cost-control initiatives, which in turn will lower expense ratio as it has done for the past few years.
Additionally, strong channel of independent insurance brokers and better pricing decisions are likely to favor the company’s underwriting results. It boasts of the lowest combined ratio among its specialty insurer peers and aims to maintain the same in the mid-80s range in the long term.
The company also has various reinsurance contracts to limit its exposure to potential losses.
Notably, the Zacks Consensus Estimate for 2020 and 2021 earnings per share are pegged at $3.27 and $3.73, indicating an improvement of 35.7% and 14.3%, respectively, from the year-ago quarter.
We believe these solid fundamentals are likely to sustain the company’s existing momentum in the days ahead.
Other Stocks to Consider
Some other top-ranked stocks in the insurance space include Fidelity National Financial, Inc. FNF, First American Financial Corporation FAF and Primerica, Inc. PRI. While Fidelity National sports a Zacks Rank #1 (Strong Buy), First American and Primerica carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Fidelity National provides title insurance, escrow and other title-related services, and transaction services to the real estate and mortgage industries. It beat estimates in each of the trailing four quarters, the average surprise being 32.13%.
First American serves homebuyers and sellers, real estate professionals, loan originators and servicers and others involved in residential and commercial property transactions with products and services specific to their needs. It beat estimates in each of the trailing four quarters, the average surprise being 20.84%.
Primerica assists its clients in meeting their needs for term life insurance, mutual funds, variable annuities and other financial products. It has a trailing four-quarter earnings surprise of 7.24%, on average.
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