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Yahoo
8 hours ago
- Business
- Yahoo
Wall Street mixed on Accelerant; sees real platform upside, but valuation is high
-- Accelerant Holdings has mixed views from analysts as they start coverage of the stock, with optimism around its data-driven insurance exchange model tempered by early valuation and execution risks. The newly listed company which connects specialty insurance underwriters to risk capital through a proprietary digital platform was initiated with Buy ratings from Piper Sandler and BMO. Both brokerages were bullish on rapid premium growth and a differentiated model that combines fee-based platform income with equity stakes in managing general agents (MGAs). Piper noted Accelerant's exchange written premiums have grown more than 200% annually since 2018. BMO called the platform a potential 'NYSE for insurance risk,' arguing the model could re-rate as more third-party insurers start to take on risk, rather than Accelerant relying on its own balance sheet. Goldman Sachs and Citizens, however, took a more measured view, starting at neutral and market-perform rating. Goldman said the company's strong growth trajectory and better-than-industry underwriting margins are compelling, but warned that underwriting exposure, capital needs and the complexity of shifting risk to external carriers make the model riskier than a pure insurance brokerage. Citizens said fair value sits closer to $32-$33, implying only limited upside from current levels near $28. Across the coverage, analysts agree the long-term addressable market in specialty insurance and MGAs is large and fragmented, and that Accelerant is well-positioned to gain share. But several firms emphasize the stock has already rallied about 35% since its late-July IPO, and near-term valuation looks full without clearer evidence of third-party carrier adoption and sustained loss ratios. Related articles Wall Street mixed on Accelerant; sees real platform upside, but valuation is high Victoria's Secret Exposed: The Warning Sign Behind the Stock's 52% Collapse If Powell goes, does Fed trust go with him? Sign in to access your portfolio
Yahoo
4 days ago
- Business
- Yahoo
Why Investors Pay a Premium for Kinsale Capital and Should They?
Kinsale Capital Group (NYSE:KNSL) recently reported its second-quarter 2025 results, showcasing record profitability even as premium growth continued to decelerate. Yet after a stumble earlier this year (when first-quarter catastrophe losses drove a higher combined ratio and spooked investors), Kinsale's stock has only modestly appreciated, up about 2% year-to-date as of July 27, 2025, underperforming the broader market. In this context, the latest results were closely watched as a gauge of whether Kinsale can sustain its high-growth, high-profit trajectory. Kinsale's ability to consistently generate superior underwriting results in the specialized Excess and Surplus (E&S) market continues to set it apart. In this article, I will break down Kinsale Capital's latest financials, analyze its business and assess the valuation against peers. Kinsale Capital Group is a specialty insurance company focused exclusively on the E&S market in the United States. The company underwrites "hard-to-place small and mid-sized business risks". Kinsale offers a wide range of commercial lines, including property, excess casualty, small business, construction, allied health, life sciences, commercial auto, professional liability, and environmental insurance. It also has a smaller presence in personal lines, like high-value homeowners. Kinsale distributes its products through a network of independent insurance brokers across all 50 states, the District of Columbia, Puerto Rico, and the U.S. Virgin Islands. The E&S market provides customized insurance solutions for risks that traditional, or "admitted," insurance companies are unwilling or unable to underwrite due to their unique, complex, or higher risk profiles. This market offers flexibility in coverage and pricing, making it essential for emerging technologies, hazardous materials, or businesses in catastrophe-prone areas. The U.S. surplus lines market has shown impressive growth, rising 15.9% to nearly $36 billion in the first half of 2023, and wrote over $130 billion in direct premiums in 2024. It typically expands when the standard market tightens or becomes overly cautious, filling coverage gaps. The company's exclusive focus on the E&S market means it operates in a segment designed for specialized, often complex risks that traditional insurers avoid. This dynamic gives Kinsale a clear structural advantage. The demand for "hard to place" risks is persistent, and the specialized nature of the coverage limits direct competition from broader P&C carriers. This market dynamic allows Kinsale to operate with a degree of pricing power and selectivity that is less common in the standard insurance market, thereby establishing a fundamental competitive advantage akin to a protective barrier around its core business. Kinsale differentiates itself through disciplined underwriting, technology-enabled expense management, and control over its claims and underwriting processes. The company's core strategy prioritizes profit first, growth second. This disciplined approach allows Kinsale to "maintain underwriting and pricing discipline" even in a soft market. The company is known for its "innovative underwriting and risk management practices" and a "conservative risk management approach" to natural catastrophe exposure, utilizing robust reinsurance and strict concentration limits. This focus helps Kinsale achieve "reliable and attractive underwriting profits". Kinsale also leverages a "proprietary technology platform" to enhance its underwriting, pricing, and operational efficiency. This technology enables "scalable growth, enhanced customer interactions, and improved cost control". It facilitates quicker adjustments to market conditions, helping Kinsale capture market share from slower competitors. Furthermore, Kinsale operates with a "significant technology enabled expense advantage" and "vigorous expense management". This focus has successfully lowered its net underwriting expense ratio in recent years. The combination of deep underwriting expertise in a specialized market, coupled with a technology driven, low cost operating model, creates a strong competitive moat for Kinsale. The company's management has explicitly stated that its operating model is designed to create a cost advantage, a specialization advantage, and a technology advantage. This is not merely a collection of good business practices but an integrated and intentional design. By controlling its underwriting and claims processes in house, and by aggressively using technology to manage expenses and select risks, Kinsale has built an operational structure that is difficult for competitors to replicate. This integrated operational excellence allows Kinsale to consistently generate superior underwriting profits and high returns on equity. Kinsale Capital Group reported robust results for the second quarter of 2025, exceeding analyst expectations for earnings per share while showing continued strength in underwriting and investment income. Gross written premiums rose just 5% year over year to $555.5 million, marking the seventh straight quarter of slowing growth. The main drag was the Commercial Property division (Kinsale's largest segment), where premium volume fell 17% as softer pricing and competition from standard insurers ate into opportunities. Excluding property, however, the rest of Kinsale's business grew a healthy 14% in premiums, driven by robust submissions in other specialty lines. However, the slowdown is not idiosyncratic but appears connected to shifts in the broader insurance market. After a few years of hard-market pricing (high rate increases) in property insurance, new entrants and moderating prices are cooling off that segment. Kinsale's net earned premiums still grew 15% in Q2, reflecting prior-period growth and reduced reinsurance cessions. Kinsale's net investment income surged 30% to $46.5 million, thanks to a growing investment portfolio and higher yields. This indicates that Kinsale is effectively leveraging its "float" (premiums collected but not yet paid out as claims) in the current interest rate environment. As premium growth shows signs of moderating, the robust and growing investment income acts as an increasingly important and potentially stabilizing source of profit, diversifying its earnings streams beyond pure underwriting. With this in mind, total net revenue grew 22% YoY, accelerating from mid-teen growth rates in the previous two quarters. Source: Gurufocus Kinsale's latest quarter was particularly strong in terms of profitability. Net income reached $134.1 million in Q2 2025, a substantial increase from $92.6 million from a year ago. All told, Q2 diluted EPS rose to $5.76, a company record, while operating EPS (which excludes volatile investment gains) was $4.78, up 27.5% YoY. The difference between GAAP and operating earnings was largely due to $22.6 million in after-tax unrealized gains on equities in the investment portfolio, which boosted net income. Combined ratio (losses + expenses as a percentage of premiums) is the key profitability metric for insurers, and Kinsale's track record here is stellar. Over the past decade, Kinsale's combined ratio has averaged about 78%, and never exceeded 86%, which is extraordinarily good for an insurer. (By comparison, a combined ratio under 100% indicates underwriting profit.) Kinsale's net combined ratio for this quarter was 75.8%, improving 190 bps from a year ago, as both the loss ratio (55.1%) and expense ratio (20.7%) ticked down slightly. This ratio consistently outperforms the broader E&S industry average, which was 92% in 2024, and the overall P&C industry average of 97%. Source: S&P Capital IQ, Insurance Insider US Research Kinsale's Q2 2025 combined ratio was very strong, particularly when considering the impact of catastrophe losses. The company incurred after-tax catastrophe losses of $2.9 million in Q2 2025, which also included 6.0 points from net catastrophe losses. The fact that the combined ratio remained low and improved from Q1 despite these events highlights the effectiveness of Kinsale's "disciplined underwriting and low cost model" and their "conservative risk management approach" to natural catastrophes. Annualized Return on Equity (ROE) was 32.5% up from 30.5% a year ago. Kinsale's ROE consistently beats the industry average. Looking at the balance sheet, cash and invested assets totaled $4.6 billion, while debt and reserves stood at $2.8 billion. Book value per share rose to $73.93 from $63.75 at the beginning of the year. Dilution remains under control, with diluted shares outstanding reducing by 0.2%. Kinsale's stock is expensive by traditional metrics, reflecting the company's superior performance and growth profile. For an insurance company, price to book (P/B) and (P/E) ratios are generally considered more appropriate, therefore these are the multiples I will concentrate on. Kinsale trades for roughly 27x forward P/E and 6.5x P/B, roughly double the multiples of most property-casualty insurers. Source: Gurufocus The forward P/E is expensive in absolute terms for the industry, though one could argue the premium is earned. Relative to its past performance, its average forward P/E is in the mid 30s, so the current multiple is lower than its historical norm. The lower forward P/E might be warranted now due to the recent growth slowdown and concerns that the E&S pricing cycle may have peaked. For perspective, Kinsale's P/E was over 80 at one point in 2020 when interest rates were near zero and growth was red-hot. Now, with higher interest rates (which benefit Kinsale's investment returns but can temper equity valuations) and more modest premium growth, a high-20s multiple is where the market has settled on the stock. With gross written premium growth trending lower for the past seven quarters (Q2 2025 came in at just 5% YoY), the stock appears to be priced for a new cycle. Looking at its peers, it is worth noting that Kinsale is the only publicly traded, pure-play E&S investment opportunity. Source: Author That said, Kinsale has worn a high multiple since its 2016 IPO, which is far above its peers. For example, Arch Capital (NASDAQ:ACGL) trades at significantly smaller multiples despite growing at a similar pace. It trades at 9.5x forward P/E and only 1.5x P/B, however, its combined ratio is well above Kinsale's. On the other hand, Palomar Holdings (NASDAQ:PLMR) trades at multiples closer to Kinsale's, with a combined ratio just slightly below Kinsale's and significantly faster top-line growth. However, its business model introduces additional risk factors, such as greater catastrophe exposure and earnings volatility, which justifies a narrower valuation gap. Kinsale has been delivering consistently high 20s to low 30s ROE, supporting a much higher P/B ratio. This sustained ability to generate exceptional profits and growth, coupled with its disciplined underwriting and efficient operating model, validates its "best in class" status within its niche. With that being said, the market assigns a higher multiple to Kinsale because it has proven its ability to generate superior financial results consistently. While its P/E is now below its historical average, it remains well above the specialty insurance peer group, reflecting sustained market confidence in Kinsale's quality and growth outlook. It's also worth noting Kinsale carries minimal debt and has no goodwill from acquisitions, so its book value is high-quality. Guru investors holding this stock include Jefferies Group (Trades, Portfolio), Ron Baron (Trades, Portfolio) and Joel Greenblatt (Trades, Portfolio). While Ron holds a significant position, the others are relatively minor positions. Even a high-quality business like Kinsale Capital faces inherent risks that warrant careful consideration. Despite Kinsale's standout financial performance and clear operational advantages, there are several risks that investors need to monitor. The most immediate is the slowdown in premium growth. Gross written premiums grew just 5% YoY in Q2 2025, a marked deceleration from prior double-digit trends. The sharp decline in Commercial Property premiums, which fell nearly 17% in the quarter, suggests that competitive pressures and pricing softness are beginning to weigh on demand. While Kinsale's management has stressed its commitment to underwriting discipline, a prolonged soft market could test that resolve and force the company to choose between maintaining margins or reaccelerating top-line growth. Another persistent risk is Kinsale's exposure to unpredictable loss events. The company operates in the excess and surplus lines segment, insuring hard-to-place risks that traditional insurers avoid. Although this niche is typically more profitable, it can also be more volatile. Q1 2025 offered a clear reminder when catastrophe losses from the Palisades Fire pushed Kinsale's combined ratio above 82%. While the company uses reinsurance to limit exposure, large events can still hit earnings and introduce significant volatility. Similarly, the high concentration of broker relationships adds operational risk. Roughly 50% of premiums come from just three brokers, meaning any disruption in these relationships could impact Kinsale's ability to generate new business. Finally, there is incentive risk. Management could theoretically be tempted to prioritise rapid premium growth over underwriting discipline in order to maximise bonus payouts. This risk is particularly relevant in the E&S market, where underwriting complexity is high. Underpricing even a few high-impact, low-frequency risks could materially damage long-term profitability. At Kinsale, executive compensation is tied to actual underwriting profit, which could, in theory, create pressure to stretch risk tolerance. But so far, the company's actions tell a different story. Management has consistently reinforced its profit first, growth second philosophy and has walked away from unprofitable business when competitors became more aggressive. Source: Author Despite rising bonuses in line with increasing underwriting profit, Kinsale's combined ratio has steadily improved, and return on equity has expanded, reinforcing signs that incentive alignment has not come at the expense of underwriting quality. Still, the structure bears monitoring in future cycles. Kinsale Capital remains one of the highest-quality businesses in the P&C insurance space. Its underwriting discipline, best-in-class combined ratios, and ROE that consistently exceed 20% speak to a company with a durable edge in the E&S lines market. The operating model continues to deliver, and Q2 2025 once again demonstrated Kinsale's ability to print industry-leading profitability even in a more competitive landscape. But valuation matters. And right now, the stock leaves little room for upside. Kinsale trades at a steep premium, and that premium is no longer being supported by rapid top-line expansion. The E&S market is softening. Gross written premium growth has decelerated for 7 straight quarters, with this quarter coming in at just mid-single digits. This reflects a more competitive market, moderating rate increases, and a shift away from the hard market conditions that powered Kinsale's earlier growth. What we may be seeing is the beginning of a new cycle, where Kinsale's growth remains solid but no longer exceptional. (It's worth noting that some of the growth slowdown reflects management's deliberate strategy: profit comes first, growth second.) In this context, it's not hard to see how the multiple could compress. Analysts are already pricing in slower growth over the next one to two years, and if the E&S cycle continues to normalize, investor expectations will need to reset as well. None of this changes the fact that Kinsale is a standout operator. But at 27x forward earnings and over 6x book, the risk/reward skews more neutral at current levels. I continue to hold my position in Kinsale, but I'm not adding at this price. The quality remains intact, but the valuation offers little margin of safety while the growth trajectory resets. This article first appeared on GuruFocus. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
4 days ago
- Business
- Yahoo
Why Investors Pay a Premium for Kinsale Capital and Should They?
Kinsale Capital Group (NYSE:KNSL) recently reported its second-quarter 2025 results, showcasing record profitability even as premium growth continued to decelerate. Yet after a stumble earlier this year (when first-quarter catastrophe losses drove a higher combined ratio and spooked investors), Kinsale's stock has only modestly appreciated, up about 2% year-to-date as of July 27, 2025, underperforming the broader market. In this context, the latest results were closely watched as a gauge of whether Kinsale can sustain its high-growth, high-profit trajectory. Kinsale's ability to consistently generate superior underwriting results in the specialized Excess and Surplus (E&S) market continues to set it apart. In this article, I will break down Kinsale Capital's latest financials, analyze its business and assess the valuation against peers. Kinsale Capital Group is a specialty insurance company focused exclusively on the E&S market in the United States. The company underwrites "hard-to-place small and mid-sized business risks". Kinsale offers a wide range of commercial lines, including property, excess casualty, small business, construction, allied health, life sciences, commercial auto, professional liability, and environmental insurance. It also has a smaller presence in personal lines, like high-value homeowners. Kinsale distributes its products through a network of independent insurance brokers across all 50 states, the District of Columbia, Puerto Rico, and the U.S. Virgin Islands. The E&S market provides customized insurance solutions for risks that traditional, or "admitted," insurance companies are unwilling or unable to underwrite due to their unique, complex, or higher risk profiles. This market offers flexibility in coverage and pricing, making it essential for emerging technologies, hazardous materials, or businesses in catastrophe-prone areas. The U.S. surplus lines market has shown impressive growth, rising 15.9% to nearly $36 billion in the first half of 2023, and wrote over $130 billion in direct premiums in 2024. It typically expands when the standard market tightens or becomes overly cautious, filling coverage gaps. The company's exclusive focus on the E&S market means it operates in a segment designed for specialized, often complex risks that traditional insurers avoid. This dynamic gives Kinsale a clear structural advantage. The demand for "hard to place" risks is persistent, and the specialized nature of the coverage limits direct competition from broader P&C carriers. This market dynamic allows Kinsale to operate with a degree of pricing power and selectivity that is less common in the standard insurance market, thereby establishing a fundamental competitive advantage akin to a protective barrier around its core business. Kinsale differentiates itself through disciplined underwriting, technology-enabled expense management, and control over its claims and underwriting processes. The company's core strategy prioritizes profit first, growth second. This disciplined approach allows Kinsale to "maintain underwriting and pricing discipline" even in a soft market. The company is known for its "innovative underwriting and risk management practices" and a "conservative risk management approach" to natural catastrophe exposure, utilizing robust reinsurance and strict concentration limits. This focus helps Kinsale achieve "reliable and attractive underwriting profits". Kinsale also leverages a "proprietary technology platform" to enhance its underwriting, pricing, and operational efficiency. This technology enables "scalable growth, enhanced customer interactions, and improved cost control". It facilitates quicker adjustments to market conditions, helping Kinsale capture market share from slower competitors. Furthermore, Kinsale operates with a "significant technology enabled expense advantage" and "vigorous expense management". This focus has successfully lowered its net underwriting expense ratio in recent years. The combination of deep underwriting expertise in a specialized market, coupled with a technology driven, low cost operating model, creates a strong competitive moat for Kinsale. The company's management has explicitly stated that its operating model is designed to create a cost advantage, a specialization advantage, and a technology advantage. This is not merely a collection of good business practices but an integrated and intentional design. By controlling its underwriting and claims processes in house, and by aggressively using technology to manage expenses and select risks, Kinsale has built an operational structure that is difficult for competitors to replicate. This integrated operational excellence allows Kinsale to consistently generate superior underwriting profits and high returns on equity. Kinsale Capital Group reported robust results for the second quarter of 2025, exceeding analyst expectations for earnings per share while showing continued strength in underwriting and investment income. Gross written premiums rose just 5% year over year to $555.5 million, marking the seventh straight quarter of slowing growth. The main drag was the Commercial Property division (Kinsale's largest segment), where premium volume fell 17% as softer pricing and competition from standard insurers ate into opportunities. Excluding property, however, the rest of Kinsale's business grew a healthy 14% in premiums, driven by robust submissions in other specialty lines. However, the slowdown is not idiosyncratic but appears connected to shifts in the broader insurance market. After a few years of hard-market pricing (high rate increases) in property insurance, new entrants and moderating prices are cooling off that segment. Kinsale's net earned premiums still grew 15% in Q2, reflecting prior-period growth and reduced reinsurance cessions. Kinsale's net investment income surged 30% to $46.5 million, thanks to a growing investment portfolio and higher yields. This indicates that Kinsale is effectively leveraging its "float" (premiums collected but not yet paid out as claims) in the current interest rate environment. As premium growth shows signs of moderating, the robust and growing investment income acts as an increasingly important and potentially stabilizing source of profit, diversifying its earnings streams beyond pure underwriting. With this in mind, total net revenue grew 22% YoY, accelerating from mid-teen growth rates in the previous two quarters. Source: Gurufocus Kinsale's latest quarter was particularly strong in terms of profitability. Net income reached $134.1 million in Q2 2025, a substantial increase from $92.6 million from a year ago. All told, Q2 diluted EPS rose to $5.76, a company record, while operating EPS (which excludes volatile investment gains) was $4.78, up 27.5% YoY. The difference between GAAP and operating earnings was largely due to $22.6 million in after-tax unrealized gains on equities in the investment portfolio, which boosted net income. Combined ratio (losses + expenses as a percentage of premiums) is the key profitability metric for insurers, and Kinsale's track record here is stellar. Over the past decade, Kinsale's combined ratio has averaged about 78%, and never exceeded 86%, which is extraordinarily good for an insurer. (By comparison, a combined ratio under 100% indicates underwriting profit.) Kinsale's net combined ratio for this quarter was 75.8%, improving 190 bps from a year ago, as both the loss ratio (55.1%) and expense ratio (20.7%) ticked down slightly. This ratio consistently outperforms the broader E&S industry average, which was 92% in 2024, and the overall P&C industry average of 97%. Source: S&P Capital IQ, Insurance Insider US Research Kinsale's Q2 2025 combined ratio was very strong, particularly when considering the impact of catastrophe losses. The company incurred after-tax catastrophe losses of $2.9 million in Q2 2025, which also included 6.0 points from net catastrophe losses. The fact that the combined ratio remained low and improved from Q1 despite these events highlights the effectiveness of Kinsale's "disciplined underwriting and low cost model" and their "conservative risk management approach" to natural catastrophes. Annualized Return on Equity (ROE) was 32.5% up from 30.5% a year ago. Kinsale's ROE consistently beats the industry average. Looking at the balance sheet, cash and invested assets totaled $4.6 billion, while debt and reserves stood at $2.8 billion. Book value per share rose to $73.93 from $63.75 at the beginning of the year. Dilution remains under control, with diluted shares outstanding reducing by 0.2%. Kinsale's stock is expensive by traditional metrics, reflecting the company's superior performance and growth profile. For an insurance company, price to book (P/B) and (P/E) ratios are generally considered more appropriate, therefore these are the multiples I will concentrate on. Kinsale trades for roughly 27x forward P/E and 6.5x P/B, roughly double the multiples of most property-casualty insurers. Source: Gurufocus The forward P/E is expensive in absolute terms for the industry, though one could argue the premium is earned. Relative to its past performance, its average forward P/E is in the mid 30s, so the current multiple is lower than its historical norm. The lower forward P/E might be warranted now due to the recent growth slowdown and concerns that the E&S pricing cycle may have peaked. For perspective, Kinsale's P/E was over 80 at one point in 2020 when interest rates were near zero and growth was red-hot. Now, with higher interest rates (which benefit Kinsale's investment returns but can temper equity valuations) and more modest premium growth, a high-20s multiple is where the market has settled on the stock. With gross written premium growth trending lower for the past seven quarters (Q2 2025 came in at just 5% YoY), the stock appears to be priced for a new cycle. Looking at its peers, it is worth noting that Kinsale is the only publicly traded, pure-play E&S investment opportunity. Source: Author That said, Kinsale has worn a high multiple since its 2016 IPO, which is far above its peers. For example, Arch Capital (NASDAQ:ACGL) trades at significantly smaller multiples despite growing at a similar pace. It trades at 9.5x forward P/E and only 1.5x P/B, however, its combined ratio is well above Kinsale's. On the other hand, Palomar Holdings (NASDAQ:PLMR) trades at multiples closer to Kinsale's, with a combined ratio just slightly below Kinsale's and significantly faster top-line growth. However, its business model introduces additional risk factors, such as greater catastrophe exposure and earnings volatility, which justifies a narrower valuation gap. Kinsale has been delivering consistently high 20s to low 30s ROE, supporting a much higher P/B ratio. This sustained ability to generate exceptional profits and growth, coupled with its disciplined underwriting and efficient operating model, validates its "best in class" status within its niche. With that being said, the market assigns a higher multiple to Kinsale because it has proven its ability to generate superior financial results consistently. While its P/E is now below its historical average, it remains well above the specialty insurance peer group, reflecting sustained market confidence in Kinsale's quality and growth outlook. It's also worth noting Kinsale carries minimal debt and has no goodwill from acquisitions, so its book value is high-quality. Guru investors holding this stock include Jefferies Group (Trades, Portfolio), Ron Baron (Trades, Portfolio) and Joel Greenblatt (Trades, Portfolio). While Ron holds a significant position, the others are relatively minor positions. Even a high-quality business like Kinsale Capital faces inherent risks that warrant careful consideration. Despite Kinsale's standout financial performance and clear operational advantages, there are several risks that investors need to monitor. The most immediate is the slowdown in premium growth. Gross written premiums grew just 5% YoY in Q2 2025, a marked deceleration from prior double-digit trends. The sharp decline in Commercial Property premiums, which fell nearly 17% in the quarter, suggests that competitive pressures and pricing softness are beginning to weigh on demand. While Kinsale's management has stressed its commitment to underwriting discipline, a prolonged soft market could test that resolve and force the company to choose between maintaining margins or reaccelerating top-line growth. Another persistent risk is Kinsale's exposure to unpredictable loss events. The company operates in the excess and surplus lines segment, insuring hard-to-place risks that traditional insurers avoid. Although this niche is typically more profitable, it can also be more volatile. Q1 2025 offered a clear reminder when catastrophe losses from the Palisades Fire pushed Kinsale's combined ratio above 82%. While the company uses reinsurance to limit exposure, large events can still hit earnings and introduce significant volatility. Similarly, the high concentration of broker relationships adds operational risk. Roughly 50% of premiums come from just three brokers, meaning any disruption in these relationships could impact Kinsale's ability to generate new business. Finally, there is incentive risk. Management could theoretically be tempted to prioritise rapid premium growth over underwriting discipline in order to maximise bonus payouts. This risk is particularly relevant in the E&S market, where underwriting complexity is high. Underpricing even a few high-impact, low-frequency risks could materially damage long-term profitability. At Kinsale, executive compensation is tied to actual underwriting profit, which could, in theory, create pressure to stretch risk tolerance. But so far, the company's actions tell a different story. Management has consistently reinforced its profit first, growth second philosophy and has walked away from unprofitable business when competitors became more aggressive. Source: Author Despite rising bonuses in line with increasing underwriting profit, Kinsale's combined ratio has steadily improved, and return on equity has expanded, reinforcing signs that incentive alignment has not come at the expense of underwriting quality. Still, the structure bears monitoring in future cycles. Kinsale Capital remains one of the highest-quality businesses in the P&C insurance space. Its underwriting discipline, best-in-class combined ratios, and ROE that consistently exceed 20% speak to a company with a durable edge in the E&S lines market. The operating model continues to deliver, and Q2 2025 once again demonstrated Kinsale's ability to print industry-leading profitability even in a more competitive landscape. But valuation matters. And right now, the stock leaves little room for upside. Kinsale trades at a steep premium, and that premium is no longer being supported by rapid top-line expansion. The E&S market is softening. Gross written premium growth has decelerated for 7 straight quarters, with this quarter coming in at just mid-single digits. This reflects a more competitive market, moderating rate increases, and a shift away from the hard market conditions that powered Kinsale's earlier growth. What we may be seeing is the beginning of a new cycle, where Kinsale's growth remains solid but no longer exceptional. (It's worth noting that some of the growth slowdown reflects management's deliberate strategy: profit comes first, growth second.) In this context, it's not hard to see how the multiple could compress. Analysts are already pricing in slower growth over the next one to two years, and if the E&S cycle continues to normalize, investor expectations will need to reset as well. None of this changes the fact that Kinsale is a standout operator. But at 27x forward earnings and over 6x book, the risk/reward skews more neutral at current levels. I continue to hold my position in Kinsale, but I'm not adding at this price. The quality remains intact, but the valuation offers little margin of safety while the growth trajectory resets. This article first appeared on GuruFocus. 擷取數據時發生錯誤 登入存取你的投資組合 擷取數據時發生錯誤 擷取數據時發生錯誤 擷取數據時發生錯誤 擷取數據時發生錯誤
Times
5 days ago
- Business
- Times
Beazley lowers growth forecast on ‘disciplined approach' to cover
The Lloyd's of London insurer Beazley has lowered its annual written premium growth forecast for the year, as it said it was taking a 'disciplined approach' following California's wildfires and rising cyberattacks across Europe. The specialist insurer said it now expected gross written premium growth to be in the low to mid-single digit range, down from a previous mid-single digit forecast. In the first half of 2025, insurance written premiums grew by 2 per cent year-on-year to $3.187 billion, below City forecasts of $3.254 billion. Shares in Beazley fell 112p, or 12.3 per cent, to 800p at the close on Wednesday. Its combined ratio, a key metric for insurers where a figure below 100 indicates underwriting profitability, was 80.3 per cent — broadly in line with a consensus estimate of 81 per cent. Adrian Cox, the chief executive of Beazley, said that its growth figures reflected a 'disciplined approach' and were fully aligned with the company's strategy of prioritising value for money and long-term profitability over short-term income. 'Our depth of experience in operating within a cyclical environment means we know when to take risks and when to pull back,' Cox said. 'This phase is no exception.' The company said that major climate-related natural catastrophes, such as the wildfires in California, floods in Texas and heightened cyberthreats, including a wave of ransomware attacks on retailers in the UK and Europe, meant that it was essential to be disciplined in its coverage. • I helped save Lloyd's of London. The personal touch keeps it alive UK retailers such as Marks & Spencer, the Co-op Group and Harrods have been targeted by hackers this year. Beazley also pointed to the general elevated uncertainty and the rising costs of insurance claims in North America as other reasons for being more judicious in what it chooses to cover. To ensure that it has the ability to adapt to the changing risk environment, Beazley said it was 'looking at new ways to enhance our diversified platform and product set', leading analysts to speculate that the insurer could be considering engaging in M&A activity. • Forgive me, for I have sinned: I didn't switch my car insurance The insurer added that its solvency ratio, a measure by which assets cover commitments to future payments, had increased by 23 percentage points since its full-year results to 287 per cent, well above its target level of at least 170 per cent. It also reported profit before tax of $502.5 million, down 31 per cent from $728.9 million in the same period last year but 11 per cent above a consensus forecast of $453 million.
Yahoo
08-08-2025
- Business
- Yahoo
Australian insurer QBE beats interim profit estimates on premium growth, lower claims
(Reuters) -Australian insurer QBE beat market estimates for interim earnings on Friday, helped by strong premium growth in North America and international divisions coupled with claims being limited. The company said its catastrophe costs stayed below its allowance despite high industry losses from severe U.S. and Australian weather, including floods in the Mid-North Coast and in the Hunter regions onshore in May. The group paid out $479 million in catastrophe-related claims, lower than $527 million forked out in the prior corresponding period and "comfortably below" its first-half catastrophe allowance of $549 million. The group, which operates in 27 countries including the United States, said its gross written premiums grew 5.9% to $13.82 billion for the first half of fiscal 2025. The insurer added that growth continued, fuelled by targeted expansion in select insurance classes in North America and internationally, and aided by reduced costs after exiting weaker lines. QBE posted adjusted net profit after income tax of $997 million for the six months ending June 30, compared with $777 million a year earlier, beating LSEG estimate of $839.39 million. The Sydney-based insurer also declared an interim dividend of 31 Australian cents per share, up from 24 Australian cents a year ago. The company reported a combined operating ratio of 92.8%, compared with 93.8% a year earlier. A ratio below 100% means the insurer earned more in premiums than it paid out in claims. QBE reiterated its forecast for constant currency gross written premiums growth in mid-single digits for financial year 2025.
