Back to top

Image: Bigstock

Reasons Why Kinsale Capital (KNSL) Stock is a Solid Pick Now

Read MoreHide Full Article

Kinsale Capital (KNSL - Free Report) has been gaining momentum on the back of high retention rates and strong underwriting results.

Growth Projections

The Zacks Consensus Estimate for 2021 and 2022 earnings per share is pegged at $4 and $5, indicating year-over-year increases of 26.5% and 25%, respectively.

Estimate Revision

The Zacks Consensus Estimate for 2021 moved 4.7% north in the past 60 days, reflecting analysts’ optimism.

Earnings Surprise History

Kinsale Capital surpassed estimates in three of the last four reported quarters, with the average beat being 9.88%.

Style Score

It has an impressive Growth Score of B. This style score helps analyze 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 (Buy) are the best investment options.

Zacks Rank & Price Performance

Shares of this Zacks Rank #2 property and casualty insurer have gained 61.6% in a year’s time, outperforming the industry’s increase of 34.2%. We expect the company’s policy to ramp up its growth profile and capital position and drive shares higher.

Return on Equity (ROE)

The company’s ROE for the trailing 12 months is 14.7%, better than the industry average of 5.6%, reflecting the company’s efficiency in utilizing shareholders’ fund.

Business Tailwinds

By virtue of higher submission activity from brokers across most lines of business and higher rates on bound accounts, favorable market conditions, continued market dislocation, and high retention rates arising from contract renewals, the property and casualty insurer’s premium income is expected to improve in the near term.

Moreover, higher net earned premiums are likely to aid the company in limiting expense ratio.

The insurer’s proprietary technology platform coupled with low-cost operation drives a high level of efficiency, accuracy and speed in underwriting and quoting process. This in turn aid the company in undertaking cost-control initiatives, which in turn should lower expense ratio.

Kinsale Capital intends to develop a new segment, insurtech underwriting in a bid to capitalize on new distribution sources in the space. This is a natural fit and will enable it to further capitalize on technology. It also aims to expand its offerings in the new commercial auto segment, aviation segment as well as the new entertainment segment.

Considering growth in investment portfolio balance generated from excess operating funds and proceeds from equity offerings, investment income is expected to improve despite the current low interest rate environment.

Growth in the business, higher net favorable development of loss reserves for prior accident years, and lower catastrophe losses should benefit underwriting profitability. The combined ratio in 2020 was consistent with the guidance of mid-80s.

Notably, Kinsale Capital’s dividend payments have witnessed a CAGR of 17.1% in the past five years (2016-2021) and currently yield 0.2%, making the stock an attractive pick for yield- seeking investors.

Other Stocks to Consider

Some other top-ranked stocks in the insurance space include Alleghany , Cincinnati Financial Corporation (CINF - Free Report) and First American Financial Corporation (FAF - Free Report) , each carrying a Zacks Rank #2. 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%.

Cincinnati Financial surpassed earnings estimates in two of the last four quarters, with the average surprise being 4.10%.

First American Financial’s bottom line surpassed estimates in three of the last four quarters and missed in one, the average beat being 15.86%.

More Stock News: This Is Bigger than the iPhone!

It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 77 billion devices by 2025, creating a $1.3 trillion market.

Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 4 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2022.

Click here for the 4 trades >>

Published in