Kinsale (KNSL) Q4'24 Gross Written Premium Growth Decelerated, A Concern?
Decelerating written premiums, rising competition, met with resilience and decent growth prospects in adjacent segments, is ~$445/share a reasonable long-term buy?
Hi, I am Trung. I deep-dive into market leaders that passed my sleep-well checklist. I follow up on their performance with my Thesis Tracker updates, and when the right price comes, I buy them for the Sleep Well Portfolio, which I am building for my daughters to redeem in 2037. I disclose my reasoning for all BUY and SELL (ideally never). Access all content here.
Hi friends,
Kinsale (KNSL), purchased in May 2024, is a leader in Excess and Surplus (E&S) insurance.
To understand the discussion, read my deep dive, Q3’24, Q2’24 update, and ownership alert.
I own it because of (i) its discipline and exclusive focus on just one line of insurance - E&S (hard-to-place risks), (ii) the lowest-cost provider (technology-driven, one location), and (iii) total control of its underwriting and claim management processes (no middle man). Its extended superior combined ratio (loss and expense ratio) of 75% vs. peers’ 90%+ and free cash flow per share CAGR of 28% since 2015 is a testament to the quality of the business.
Every quarter, I review the results presentation and conference call to determine whether Kinsale maintains these advantages and can sustainably grow to deserve the current valuation - 25x PE.
More importantly, what growth rate is the market expecting at ~$450/share? Is it worth buying?
Kinsale Q4’24 results follow-up.
Last week, Kinsale reported Q4’24, shares dropped 10% to $430/share. As an owner, I hope to find temporary issues and add shares if the market expects very little from the business.
Key Metrics vs. Q4 2023:
Net Income: $109.1M ($4.68 per diluted share), up from $103.4M ($4.43 per share)
Net Operating Earnings: $107.8M ($4.62 per share), up 19.4%
Gross Written Premiums: $443.3M, up 12.2%
Underwriting Income: $97.9M, with a combined ratio of 73.4%
Net Investment Income: $41.9M, up 37.8%, almost half of the core earnings above
Full-Year 2024 vs. 2023:
Net Income: $414.8M ($17.78 per share), up from $308.1M ($13.22 per share)
Net Operating Earnings: $374.8M ($16.06 per share), up 28.5%
Gross Written Premiums: $1.9B, up 19.2%
Underwriting Income: $325.9M, with a combined ratio of 76.4%
Net Investment Income: $150.3M, up 46.9%
Operating ROE: 29.2%
Glaring Negative - competition
The glaring negative was the deceleration of Gross Written Premium. It grew only 12% this quarter and 19% for the last four quarters. Although that’s still within the 10-20% long-term range management expects, it was far from 42% in 2023 and 38% in 2022.