We came across a bullish thesis on Kinsale Capital Group, Inc. (KNSL) on Substack by Felix. In this article, we will summarize the bulls’ thesis on KNSL. Kinsale Capital Group, Inc. (KNSL)’s share was trading at $434.60 as of April 29th. KNSL’s trailing and forward P/E were 25.02 and 24.88 respectively according to Yahoo Finance.
An experienced property and casualty insurance agent at a client’s home, explaining the benefits of the company’s homeowners’ insurance policies.
Kinsale Capital operates in the highly specialized Excess and Surplus (E&S) insurance market, which provides coverage for risks that traditional insurers typically avoid—ranging from wildfire-zone homes to drone delivery startups. Unlike standard insurers, E&S carriers like Kinsale can customize policies and charge higher premiums, reflecting the complexity of the risks they underwrite. This niche positioning has allowed Kinsale to grow rapidly and profitably, driven by strong underwriting performance and disciplined risk selection.
Kinsale generates the majority of its revenue—73%—from net earned premiums, which reached $1.35 billion in 2024, up from $1.07 billion in 2023. This growth reflects both an expanding customer base and Kinsale’s deep expertise in assessing and pricing complex risks. Underwriting income, which comprises 17% of revenue, also climbed significantly, hitting $326 million in 2024 from $270 million the year prior, highlighting Kinsale’s core strength in writing profitable insurance. Notably, the company’s 2024 combined ratio—a key insurance profitability metric—stood at just 76.4%, well below the industry norm of 90-95%. This exceptional figure results from a 55.8% loss ratio and a 20.6% expense ratio, showcasing Kinsale’s underwriting discipline and operational efficiency.
Investment income, which accounts for 8% of total revenue, adds another layer of strength. With a $4 billion investment portfolio—equal to roughly 50% of Kinsale’s market cap—the company has strategically allocated assets across investment-grade corporate bonds (50.5%), asset-backed securities (18.6%), RMBS (11.4%), CMBS (5.2%), equities (10.1%), and other instruments (4.2%). This portfolio not only supports claim liquidity but also adds to profitability, generating $150 million in income in 2024, up from $102 million in 2023. Though exposed to interest rate and market risks, this diversified mix complements underwriting profits and offers long-term earnings resilience.
Fee income, though smaller at 2% of revenue ($34 million in 2024), provides additional diversification and stability. Collectively, Kinsale’s revenue streams—driven by high-margin underwriting and stable investment returns—underscore a business model that doesn’t rely on investment performance alone to be profitable, unlike many peers.
Add Comment