Kinsale Capital KNSL shares have gained 73% year to date against the industry's decline of 11.2%. The Zacks S&P 500 composite has risen 0.5% in the said time frame. With market capitalization of $3.8 billion, average volume of shares traded in the last three months was 0.1 million.
The company benefits from its continued focus on the excess and surplus lines (E&S) market, lower expense ratios and strong underwriting results.
The Zacks Consensus Estimate has moved up 9% for 2020 and 14.8% for 2021 over the past 60 days, reflecting analyst optimism.
Will the Bull Run Continue?
Kinsale Capital‘s heightened focus on the E&S market across the United States has generated better premiums than the broader property & casualty (P&C) insurance industry. Continued dislocation within the broader P&C industry along with the company’s exposure to those lines of business that have relatively lower risks position it well for growth.
Its premiums should benefit from high retention rates, courtesy of contract renewals. Net investment income should benefit from investment of its excess operating funds.
The addition of a proprietary technology platform has enabled efficient handling of underwriting and claims operations. This platform backed by technology upgrades is likely to aid the company in undertaking cost-control initiatives, which in turn should lower expense ratio.
Prudent pricing along with a strong channel of independent insurance brokers should aid underwriting profitability. This Zacks Rank #2 (Buy) insurer boasts the lowest combined ratio among its specialty insurer peers and expects combined ratio in mid-80s range in the long term. The company also has various reinsurance contracts to limit its exposure to potential losses.
The Zacks Consensus Estimate for 2020 indicates year-over-year increase of 35.7% on 34.5% higher revenues. The consensus estimate for 2021 indicates year-over-year increase of 14.3% on 26.3% higher revenues.
The company has an impressive Growth Score of B. This style score analyzes the growth prospects of a company. Back-tested results show that stocks with a Growth Score of A or B combined with a Zacks Rank #1 (Strong Buy) or #2 are the best investment options.
Kinsale Capital’s trailing 12-month return on equity (ROE) of 15.3% is higher than the industry’s ROE of 6.2%, reflecting the company’s ability to utilize its shareholders’ funds efficiently.
It has increased dividend since 2017 at a four-year CAGR (2016-2020) of 15.8%. These make the stock an attractive pick for yield seeking investors. However, its dividend payout ratio of 12.1 compares unfavorably with the industry average of 12.4.
Other Stocks to Consider
Some other top-ranked companies in the insurance industry are Donegal Group DGICA, Markel Corporation MKL and Fidelity National Financial FNF, each carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Donegal Group delivered an earnings surprise of 134.62% in the last-reported quarter.
Markel came up with an earnings surprise of 57.01% in the last-reported quarter.
Fidelity National delivered an earnings surprise of 53.52% in the last-reported quarter.
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Fidelity National Financial, Inc. (FNF) : Free Stock Analysis Report
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Kinsale Capital Group, Inc. (KNSL) : Free Stock Analysis Report
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