Kinsale Capital Group, Inc.

KNSL Details

Kinsale Capital Group, Inc. (NASDAQ: KNSL) operates as a property and casualty insurance company engaged in the excess and surplus markets in the US. KNSL sells its insurance products through a network of independent insurance brokers in all 50 states, the District of Columbia, the Commonwealth of Puerto Rico, and the United States Virgin Islands. It derives its revenue from Premiums and Investment income. As of December 02, 2021, the company's market capitalization stood at USD 4.65 billion.

Latest News:

• Dividend Declaration: On November 15, 2021, the company declared a quarterly dividend of USD 0.11 per common share, payable on December 13, 2021, to shareholders of record on November 29, 2021.

Q3FY21 Results:

• Improvement in Revenues: KNSL's total revenues increased by 34.60% to USD 164.88 million in Q3FY21 (ended September 30, 2021) compared to USD 122.50 million in Q3FY20 (ended September 30, 2020), attributable to a surge in net written premiums.
• Increase in Net Income: The Q3FY21 net income increased to USD 36.63 million from USD 14.89 million in Q3FY20.
• Low Combined Ratio: KNSL's combined ratio (sum of loss ratio and expense ratio) stood at 75.7% in Q3FY21 from 97.3% in Q3FY20, indicating an increase in underwriting profit.

Key Risks:

• Broker Concentration Risk: The majority of KNSL's products are sold through a small number of brokers. For example, five of its ~167 brokers accounted for 46.1% of its FY20 gross written premiums, with three accounting for 34.8% of its FY20 gross written premiums. As a result, any disruption or termination of the company's relationship with these brokers could result in lower gross written premiums, thereby jeopardizing the company's financial position.

Valuation Methodology: Price/Book Value Multiple Based Relative Valuation

(Analysis by Kalkine Group)

• % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

KNSL Daily Technical Chart (Source: REFINITIV)

Stock Recommendation:

KNSL's stock price increased 34.74% in the past nine months and is currently leaning towards the higher end of its 52-week range of USD 153.12 to USD 252.69. The stock is currently trading far above its 50 and 200 DMA levels, and its RSI Index is at 62.49. We have valued the stock using the Price/Book Value multiple-based relative valuation methodology and arrived at a target price of USD 194.34.

Considering the uptick in the stock price and current valuation, we believe the decent business fundamentals are adequately reflected at current trading levels. Hence, we recommend a "Sell" rating on the stock at the closing price of USD 212.60, up 4.33% as of December 02, 2021.

* The reference data in this report has been partly sourced from REFINITIV.

*All forecasted figures and industry information have been taken from REFINITIV.