We came across a bullish thesis on Kinsale Capital Group, Inc. (KNSL) on Substack by Bulls On Parade. In this article, we will summarize the bulls’ thesis on KNSL. Kinsale Capital Group, Inc. (KNSL)’s share was trading at $449.34 as of Feb 14th. KNSL’s trailing and forward P/E were 25.27 and 23.87 respectively according to Yahoo Finance.
A close-up of a hand signing a property casualty insurance product contract.
Kinsale Capital (KNSL), founded in 2009 by CEO Michael Kehoe, has rapidly grown into a high-performing company with a strong outlook for long-term compounding. Kehoe, an entrepreneurial force within the insurance industry, recognized inefficiencies in the market and set out to create a company that would innovate within the excess and surplus (E&S) insurance sector. By combining in-house underwriting expertise with advanced technology and data analytics, Kinsale has established itself as a dominant player. The insurance business itself is a unique and appealing model for investors due to its ability to generate profits from both underwriting and a capital pool known as “Float,” which can be invested for additional shareholder returns. Kinsale has leveraged these strengths, adopting a more profitable approach to underwriting than traditional insurers and providing a superior risk/reward profile compared to other businesses like banks or casinos.
Operating in the specialized E&S market, Kinsale thrives by targeting higher-risk, unique insurance needs that are underserved by traditional insurers. This market positioning has allowed Kinsale to enjoy low competition and attractive margins, bolstered by a range of insurance products, including liability, property, and professional liability coverage. Since going public in 2016, Kinsale has expanded its capabilities through investments in technology and talent, fostering a culture where both management and employees hold equity, aligning them with the company’s long-term goals.
Kinsale’s operational model sets it apart from competitors. While traditional insurers often outsource underwriting to third-party brokers, Kinsale keeps this function in-house to avoid conflicts of interest, which has resulted in a significantly lower expense ratio of around 20%. In comparison, competitors like Lloyd’s of London face expense ratios of 30-40%. This efficient model, along with economies of scale as the company grows, enables Kinsale to remain competitive on pricing while maintaining superior profitability.
Technology is central to Kinsale’s success. The company uses predictive modeling and advanced data analytics to optimize pricing, improve underwriting, and develop innovative insurance products that meet emerging market needs. Digital platforms enhance customer interactions, streamline operations, and expedite claims processing, giving Kinsale a competitive edge in a space where many competitors remain slower to adapt.
Furthermore, Kinsale’s focus on niche, smaller risks offers a significant advantage. This specialization reduces competition, allowing Kinsale to create bespoke solutions that larger insurers may overlook. Despite the high valuation relative to peers, Kinsale’s impressive growth, disciplined management, and market-leading position in the E&S market make it a standout company. Although the stock is currently priced at a premium, investors should keep it on their radar for 2025, hoping to secure it at a more attractive price for long-term growth.
Kinsale Capital Group, Inc. (KNSL) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 32 hedge fund portfolios held KNSL at the end of the third quarter which was 28 in the previous quarter. While we acknowledge the risk and potential of KNSL as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than KNSL but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.
Disclosure: None. This article was originally published at Insider Monkey.