Shares of Kinsale Capital Group, Inc. KNSL have rallied 41.4% year to date (YTD), outperforming the industry’s 31% growth. The insurer also outperformed the Zacks S&P 500 composite and the Finance sector’s return of 25.9% and 21.6%, respectively, YTD. With a market capitalization of $11.03 billion, the average volume of shares traded in the last three months was 0.1 million. 

KNSL Outperforms Industry, Sector & S&P YTD

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The rally was largely driven by a focus on the excess and supply (E&S) market, prudent underwriting, lower expense ratio, growth in the investment portfolio, solid growth projections and effective capital deployment.

This property and casualty insurer has a solid track record of beating earnings estimates in each of the last four quarters, the average being 9.41%.

KNSL Trading Above 50-Day and 200-Day Moving Average

This Zacks Rank #3 (Hold) insurance broker closed at $473.78 on Thursday, above its 50-day and 200-day simple moving average (SMA) of $458.05 and $442.20, respectively, indicating solid upward momentum. SMA is a widely used technical analysis tool to predict future price trends by analyzing historical price data.

Optimistic Analyst Sentiment for KNSL

Four of the seven analysts covering the stock have raised estimates for 2024 and 2025 over the past 30 days. Thus, the Zacks Consensus Estimate for 2024 and 2025 moved 1.3% and 0.1% north, respectively, in the last 30 days, reflecting analyst optimism.

Growth Projection for KNSL

The Zacks Consensus Estimate for Kinsale Capital’s 2024 earnings per share indicates an increase of 24.1% from the year-ago reported number. The consensus estimate for revenues is pegged at $1.59 billion, implying a year-over-year improvement of 30.4%.

The consensus estimate for 2025 earnings per share and revenues indicates an increase of 17% and 16.1%, respectively, from the corresponding 2024 estimates.

Earnings have grown 45.7% in the past five years, better than the industry average of 11.4%. The expected long-term earnings growth rate is 15%, outperforming the industry average of 11.3%. KNSL has an impressive Growth Score of B. This style score helps analyze the growth prospects of a company.

Will the Bull Run Continue?

Premiums should continue to improve, given the company’s strong presence across the E&S market in the United States and high retention rates stemming from contract renewals. Management noted that the E&S market has witnessed significant growth and generated better underwriting results than the broader P&C industry. It remains well-poised to benefit from continued market dislocation, aiding improved submission flows and better pricing decisions.

KNSL’s solid market presence helped it deliver improved margins and lower loss ratios. The insurer targets clients with small-sized and medium-sized accounts with better pricing and less prone to competition. Management estimates low double-digit rate increases across the book of business.

Kinsale Capital enjoys the best combination of high growth and low combined ratio among its peers. It targets a combined ratio in the mid-80s range over the long term. Also, KNSL is well-poised to generate an improved expense ratio given its proprietary technology platform, which is likely to provide it with a competitive edge over other industry players and scalability in business.

Investment of excess operating funds at higher rates in an improved rate environment should drive investment results. Notably, its free cash flow conversion has remained more than 85% over the last many quarters, reflecting its solid earnings.

The insurer has increased dividends since 2017 at a seven-year (2017-2024) CAGR of 12%, riding on the strength of operational excellence that supports a solid capital position.

KNSL’s Favorable Return on Capital

Return on equity in the trailing 12 months was 28.8%, better than the industry average of 7.5%. This highlights the company’s efficiency in utilizing shareholders’ funds. 

Also, the return on invested capital (ROIC) has been increasing over the last few quarters as the company raised its capital investment over the same time frame, reflecting KNSL’s efficiency in utilizing funds to generate income. ROIC in the trailing 12 months was 24.5%, better than the industry average of 5.7%.

Key Picks

Investors interested in the property and casualty insurance industry may look at some better-ranked players like First American Financial Corporation FAF, Mercury General Corporation MCY and The Travelers Companies, Inc. TRV. While First American and Mercury General sport a Zacks Rank #1 (Strong Buy) each, The Travelers carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for First American’s 2024 and 2025 earnings indicates 5% and 32.1% year-over-year growth, respectively. In the year-to-date period, shares of FAF have gained 0.6%.

The Zacks Consensus Estimate for 2024 and 2025 earnings has moved 2.5% and 4.3% north, respectively, in the past 30 days.

Mercury General's bottom line outpaced estimates in each of the trailing four quarters, the average surprise being 694.28%. In the year-to-date period, shares of MCY have rallied 96.7%.

The Zacks Consensus Estimate for 2024 and 2025 earnings has moved 2,016.67% and 8.66% north, respectively, in the past 30 days.

The Travelers' bottom line outpaced estimates in three of the trailing four quarters and missed in one, the average surprise being 25.40%. In the year-to-date period, shares of TRV have gained 34.6%.

The Zacks Consensus Estimate for 2024 and 2025 earnings has moved 9.1% and 1.2% north, respectively, in the past 30 days, reflecting analysts’ optimism.

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