Over the past six months, Kinsale Capital Group’s shares (currently trading at $368.56) have posted a disappointing 9.1% loss, well below the S&P 500’s 11.7% gain. This might have investors contemplating their next move.
Given the weaker price action, is this a buying opportunity for KNSL? Find out in our full research report, it’s free.
Why Is Kinsale Capital Group a Good Business?
Founded in 2009 during the aftermath of the financial crisis when many insurers were retreating from riskier markets, Kinsale Capital Group (NYSE: KNSL) is an insurance company that specializes in writing policies for hard-to-place, unusual, or high-risk businesses that standard insurers typically avoid.
1. Net Premiums Earned Skyrocket, Fueling Growth Opportunities
When insurers sell policies, they protect themselves from extremely large losses or an outsized accumulation of losses with reinsurance (insurance for insurance companies). Net premiums earned are therefore net of what’s ceded to reinsurers as a risk mitigation and transfer strategy.
Kinsale Capital Group’s net premiums earned has grown at a 16.3% annualized rate over the last two years, much better than the broader insurance industry.
2. Outstanding Long-Term EPS Growth
We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.
Kinsale Capital Group’s EPS grew at 40.6% compounded annual growth rate over the last five years, higher than its 29.3% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.
3. Growing BVPS Reflects Strong Asset Base
In the insurance industry, book value per share (BVPS) provides a clear picture of shareholder value, as it represents the total equity backing a company’s insurance operations and growth initiatives.
Kinsale Capital Group’s BVPS increased by 26.5% annually over the last five years, and growth has recently accelerated as BVPS grew at an incredible 28.6% annual clip over the past two years (from $53.99 to $89.34 per share).
Final Judgment
These are just a few reasons why we think Kinsale Capital Group is an elite insurance company. After the recent drawdown, the stock trades at 3.9× forward P/B (or $368.56 per share). Is now a good time to initiate a position? See for yourself in our comprehensive research report, it’s free.
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