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KNSL or RNR: Which Property & Casualty Insurer Has an Edge?
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The Zacks Property and Casualty Insurance industry is well-placed, given better pricing, prudent underwriting, increased exposure, an improving rate environment and a solid capital position. With the ongoing economic expansion, insurers remain well-poised for growth. However, an active catastrophe environment could weigh on the upside.
The industry has gained 12.2% in the past year compared with the Zacks S&P 500 Composite’s increase of 16.8% and the Finance sector’s 8.3% growth.
Image Source: Zacks Investment Research
Here, we focus on two property and casualty insurers, namely Kinsale Capital Group, Inc. (KNSL - Free Report) and RenaissanceRe Holdings Ltd. (RNR - Free Report) .
Kinsale Capital, with a market capitalization of $8 billion and a specialty insurance company, provides property and casualty insurance products in the United States. RenaissanceRe, with a market capitalization of $10.9 billion, provides reinsurance and insurance products in the United States and internationally. KNSL and RNR carry a Zacks Rank #2 (Buy) each at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Global commercial insurance prices rose 3% in the third quarter of 2023, per Marsh Global Insurance Market Index. This marked the 24th consecutive quarter of composite price increases. Per reports on the Insurance Portal, financial and professional lines, as well as cyber, remained soft. However, property insurance prices increased. Improvement in pricing drives premiums and thus makes claims payment convenient.
The P&C insurance industry remains exposed to catastrophe loss stemming from natural disasters, which drag down underwriting profit. Per Swiss Re, natural catastrophe insured losses are expected to exceed $100 billion in 2023. This marked the fourth consecutive year and the sixth year since 2017 that the insurance industry has witnessed huge losses.
Exposure growth, improved pricing, prudent underwriting, favorable reserve development and a sturdy capital position will help absorb catastrophe losses. Also, the frequent occurrences of natural disasters should accelerate the policy renewal rate.
With four rate hikes already in 2023, investment income is likely to have improved, as insurers are the beneficiaries of a rising rate environment. The Fed had raised its key interest rate by 0.25% and reached a target range of 5.25% to 5.5%, which marked the highest level in 22 years. An improving rate environment is a boon for insurers, especially long-tail insurers. Also, investment income is an important component of insurers’ top line.
While a solid policyholders’ surplus will help the P&C insurance industry absorb losses, a sturdy capital level continues to aid the P&C insurers in pursuing strategic mergers and acquisitions, investing in growth initiatives, engaging in share buybacks and increasing dividends or paying out special dividends.
Players are investing heavily in technology in a bid to drive efficiency, enhance cybersecurity, upgrade policy administration and claims systems and expand automation capabilities across their organizations.
Let’s delve deeper into specific parameters to ascertain which P&C insurer is better positioned at the moment.
Price Performance
Kinsale Capital has gained 20.1% in the past year, outperforming RenaissanceRe’s rise of 10.5% and the industry’s increase of 12.2%.
Image Source: Zacks Investment Research
Return on Equity (ROE)
Kinsale Capital, with a return on equity of 31.16%, exceeds RenaissanceRe’s ROE of 26.69% and the industry average of 7.15%.
Image Source: Zacks Investment Research
Valuation
The price-to-book (P/B) value is the best multiple used for valuing insurers. Compared with Kinsale Capital’s P/B ratio of 8.75, RenaissanceRe is cheaper, with a reading of 1.56. The P&C insurance industry’s P/B ratio is 1.45.
Image Source: Zacks Investment Research
Debt-to-Capital
RenaissanceRe’s debt-to-capital ratio of 19.88 is higher than Kinsale Capital’s reading of 16.59 as well as the industry average of 19.36. Therefore, KNSL has an advantage over RNR on this front.
Image Source: Zacks Investment Research
Earnings Surprise History
Kinsale Capital outpaced expectations in each of the last seven reported quarters. RenaissanceRe surpassed estimates in five of the last seven reported quarters.
VGM Score
VGM Score rates each stock on its combined weighted styles, helping to identify those with the most attractive value, best growth and most promising momentum. RenaissanceRe has a VGM Score of A, while KNSL has a VGM Score of B. Thus, RNR is better placed.
Growth Projection
Earnings growth and stock price gains often indicate a company’s strong prospects.
The Zacks Consensus Estimate for RenaissanceRe’s 2023 earnings implies a year-over-year increase of 364.38%, while that of Kinsale Capital suggests a year-over-year rise of 54.62%.
Therefore, RNR is at an advantage on this front.
Revenue Estimates
The Zacks Consensus Estimate for Kinsale Capital’s 2023 revenues implies a year-over-year increase of 47.3%, while that of RenaissanceRe suggests a year-over-year rise of 14.8%.
Therefore, KNSL is at an advantage on this front.
Combined Ratio
Kinsale Capital’s combined ratio was 76.7% in the first nine months of 2023, whereas that of RenaissanceRe was 78.8% in the said time frame. Thus, the combined ratio of KNSL was better than RNR.
Dividend Yield
RenaissanceRe’s dividend yield of 0.73% is better than Kinsale Capital’s dividend yield of 0.16%. Thus, RNR has an advantage over KNSL on this front.
Image Source: Zacks Investment Research
To Conclude
Our comparative analysis shows that Kinsale Capital is better positioned than RenaissanceRe with respect to price performance, leverage, return on equity, revenue estimates, combined ratio and earnings surprise history. Meanwhile, RenaissanceRe scores higher in terms of dividend yield, growth projection, valuation and VGM Score. With the scale significantly tilted toward KNSL, the stock appears to be better poised.
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KNSL or RNR: Which Property & Casualty Insurer Has an Edge?
The Zacks Property and Casualty Insurance industry is well-placed, given better pricing, prudent underwriting, increased exposure, an improving rate environment and a solid capital position. With the ongoing economic expansion, insurers remain well-poised for growth. However, an active catastrophe environment could weigh on the upside.
The industry has gained 12.2% in the past year compared with the Zacks S&P 500 Composite’s increase of 16.8% and the Finance sector’s 8.3% growth.
Image Source: Zacks Investment Research
Here, we focus on two property and casualty insurers, namely Kinsale Capital Group, Inc. (KNSL - Free Report) and RenaissanceRe Holdings Ltd. (RNR - Free Report) .
Kinsale Capital, with a market capitalization of $8 billion and a specialty insurance company, provides property and casualty insurance products in the United States. RenaissanceRe, with a market capitalization of $10.9 billion, provides reinsurance and insurance products in the United States and internationally. KNSL and RNR carry a Zacks Rank #2 (Buy) each at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Global commercial insurance prices rose 3% in the third quarter of 2023, per Marsh Global Insurance Market Index. This marked the 24th consecutive quarter of composite price increases. Per reports on the Insurance Portal, financial and professional lines, as well as cyber, remained soft. However, property insurance prices increased. Improvement in pricing drives premiums and thus makes claims payment convenient.
The P&C insurance industry remains exposed to catastrophe loss stemming from natural disasters, which drag down underwriting profit. Per Swiss Re, natural catastrophe insured losses are expected to exceed $100 billion in 2023. This marked the fourth consecutive year and the sixth year since 2017 that the insurance industry has witnessed huge losses.
Exposure growth, improved pricing, prudent underwriting, favorable reserve development and a sturdy capital position will help absorb catastrophe losses. Also, the frequent occurrences of natural disasters should accelerate the policy renewal rate.
With four rate hikes already in 2023, investment income is likely to have improved, as insurers are the beneficiaries of a rising rate environment. The Fed had raised its key interest rate by 0.25% and reached a target range of 5.25% to 5.5%, which marked the highest level in 22 years. An improving rate environment is a boon for insurers, especially long-tail insurers. Also, investment income is an important component of insurers’ top line.
While a solid policyholders’ surplus will help the P&C insurance industry absorb losses, a sturdy capital level continues to aid the P&C insurers in pursuing strategic mergers and acquisitions, investing in growth initiatives, engaging in share buybacks and increasing dividends or paying out special dividends.
Players are investing heavily in technology in a bid to drive efficiency, enhance cybersecurity, upgrade policy administration and claims systems and expand automation capabilities across their organizations.
Let’s delve deeper into specific parameters to ascertain which P&C insurer is better positioned at the moment.
Price Performance
Kinsale Capital has gained 20.1% in the past year, outperforming RenaissanceRe’s rise of 10.5% and the industry’s increase of 12.2%.
Image Source: Zacks Investment Research
Return on Equity (ROE)
Kinsale Capital, with a return on equity of 31.16%, exceeds RenaissanceRe’s ROE of 26.69% and the industry average of 7.15%.
Image Source: Zacks Investment Research
Valuation
The price-to-book (P/B) value is the best multiple used for valuing insurers. Compared with Kinsale Capital’s P/B ratio of 8.75, RenaissanceRe is cheaper, with a reading of 1.56. The P&C insurance industry’s P/B ratio is 1.45.
Image Source: Zacks Investment Research
Debt-to-Capital
RenaissanceRe’s debt-to-capital ratio of 19.88 is higher than Kinsale Capital’s reading of 16.59 as well as the industry average of 19.36. Therefore, KNSL has an advantage over RNR on this front.
Image Source: Zacks Investment Research
Earnings Surprise History
Kinsale Capital outpaced expectations in each of the last seven reported quarters. RenaissanceRe surpassed estimates in five of the last seven reported quarters.
VGM Score
VGM Score rates each stock on its combined weighted styles, helping to identify those with the most attractive value, best growth and most promising momentum. RenaissanceRe has a VGM Score of A, while KNSL has a VGM Score of B. Thus, RNR is better placed.
Growth Projection
Earnings growth and stock price gains often indicate a company’s strong prospects.
The Zacks Consensus Estimate for RenaissanceRe’s 2023 earnings implies a year-over-year increase of 364.38%, while that of Kinsale Capital suggests a year-over-year rise of 54.62%.
Therefore, RNR is at an advantage on this front.
Revenue Estimates
The Zacks Consensus Estimate for Kinsale Capital’s 2023 revenues implies a year-over-year increase of 47.3%, while that of RenaissanceRe suggests a year-over-year rise of 14.8%.
Therefore, KNSL is at an advantage on this front.
Combined Ratio
Kinsale Capital’s combined ratio was 76.7% in the first nine months of 2023, whereas that of RenaissanceRe was 78.8% in the said time frame. Thus, the combined ratio of KNSL was better than RNR.
Dividend Yield
RenaissanceRe’s dividend yield of 0.73% is better than Kinsale Capital’s dividend yield of 0.16%. Thus, RNR has an advantage over KNSL on this front.
Image Source: Zacks Investment Research
To Conclude
Our comparative analysis shows that Kinsale Capital is better positioned than RenaissanceRe with respect to price performance, leverage, return on equity, revenue estimates, combined ratio and earnings surprise history. Meanwhile, RenaissanceRe scores higher in terms of dividend yield, growth projection, valuation and VGM Score. With the scale significantly tilted toward KNSL, the stock appears to be better poised.