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Kinsale Capital (KNSL) Up 98.8% in a Year: More Room to Run?

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Shares of Kinsale Capital (KNSL - Free Report) have gained 98.8% in a year against the industry's decline of 2.4%. The Zacks S&P 500 composite increased 18.1% in the said time frame. With a market capitalization of $4.5 billion, average volume of shares traded in the last three months was 0.2 million.


The Zacks Consensus Estimate for 2021 earnings per share is pegged at $3.77, indicating a rise of 36.1% from the year-earlier reported number.

Can It Retain the Momentum?

Kinsale’s business continues to perform well. The combination of disciplined and highly controlled underwriting combined with technology driven low costs, and a focus on the Excess and Surplus Lines Insurance market is driving its profitability and growth.

Given growth in investment portfolio and higher investment balances resulting from growth in the business, investment income is expected to improve despite current low interest rate environment. The metric increased at a four-year (2015-2019) CAGR of 37.4%.

Kinsale’s growth rate is being enhanced by continued dislocation within the property and casualty (P&C) market. Kinsale’s new business submissions and premium is growing at strong double-digit rates, and such extraordinary growth is expected to continue through 2021.

The E&S market has seen significant growth and generated better underwriting results than the broader P&C industry. This segment of the P&C market has been experiencing rapid growth due to dislocation in the overall property and casualty market and management expects premium growth to continue through 2020. Dislocation in the E&S market creates additional opportunities.

Exclusive focus on the E&S market and high levels of service, including its ability to quote, underwrite and bind insurance policies in a timely manner, enable the insurer to better serve the brokers and position it to profitably increase market share.

The property and casualty insurer’s combined ratio is the lowest among its specialty insurer peers. It has achieved leading growth among peers. Also, it enters into reinsurance contracts primarily to limit its exposure to potential large losses.

Higher net earned premiums and lower variable compensation costs are likely to aid the company in limiting the expense ratio.

It has raised its dividend at a four-year (2016-2020) CAGR of 15.8% and currently yields 0.2%.

Furthermore, return on equity (ROE), reflecting the company’s efficient utilization of its shareholders’ funds to generate earnings, has been increasing in the past several years. Its trailing twelve months ROE of 13.4% betters the industry average of 5.6%.

Kinsale currently carries a Zacks Rank #3 (Hold).

Stocks to Consider

Some better-ranked players in the property and casualty industry are Alleghany (Y - Free Report) , Fidelity National Financial (FNF - Free Report) and The Allstate Corporation (ALL - Free Report) , each carrying a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Alleghany’s bottom line surpassed estimates in two of the last four quarters and missed in the other two, the average beat being 34.08%.

Fidelity National Financial surpassed earnings estimates in each of the last four quarters, the average surprise being 30.48%.

The Allstate surpassed estimates in each of the last four quarters and missed in the other one, the average beat being 38.59%.

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