Why did the shares of Kinsale Capital insurance company rise in price?
The insurance company Kinsale Capital Group Inc. (KNSL) has risen by more than 44% over the past 12 months, more than the average growth rate in the insurance industry over the same time. At the auction on August 30, the KNSL stock was worth $261.85. The peculiarity of Kinsale Capital Group is that it operates in the market of insurance of elusive risks, paying particular attention to the policies of extraordinary and supplementary insurance (E&S). This type of insurance covers risks that are by conventional types of policies. Kinsale Capital Group works in construction, product quality responsibility, and professional responsibility.
As a rule, the company compiles individual policies with a higher profit margin and a lower loss ratio, which allows it to exceed the industry averages. In particular, the combined coefficient of Kinsale Capital Group (a measure of the effectiveness of insurance companies) in the last few years was 82%. In comparison, it is about 99% in the broader insurance industry. Note that the combined coefficient shows the ratio of total expenses and losses on claims to accepted premiums. A coefficient below 100% means that the company writes good policies; the lower the indicator, the better.
Since going public in 2016, Kinsale Capital Group’s total revenue has grown at an average annual rate of 40%, and net profit has grown at 33%. Growth continued in 2022 as Kinsale Capital Group increased net subscribed premiums by 47% year-on-year. Thanks to this, the company reported an impressive combined ratio of 77.8%. Considering that working in a specific E&S market, Kinsale Capital Group faces much less fierce competition. In contrast, the broader insurance market has been in a difficult position for over a decade. But since inflationary pressure on business persists, the demand for E&S policies will remain high, which provides Kinsale Capital Group with a favorable market environment.
