Here's our initial take on Kinsale Capital Group's (KNSL 3.67%) fourth-quarter financial report.
Key Metrics
| Metric | Q4 2023 | Q4 2024 | Change | vs. Expectations |
|---|---|---|---|---|
| Revenue | $351.17 million | $412.12 million | 17% | Missed |
| Earnings per share | $4.43 | $4.68 | 6% | Beat |
| Gross written premiums | $395.2 million | $443.3 million | 12% | n/a |
| Combined ratio | 72.1% | 73.4% | 130 bps | n/a |
Strong growth with no big surprises
Kinsale's fourth quarter results were somewhat mixed. While the company's bottom-line earnings were better than expected, revenue failed to meet analyst forecasts.
Beyond the headlines, Kinsale's operating earnings increased by 19% on a per-share basis, and the company's gross written premiums (a good measure of the growth of its insurance business) increased by about 12% year over year.
Kinsale is known for being one of the most profitable insurers in the market. If you aren't familiar, an insurance company's combined ratio is the percentage of premiums that are either paid for claims or used for business expenses (the lower the percentage, the better). Most insurance companies are happy with combined ratios in the 90%-95% range, which implies a single-digit underwriting margin. Kinsale's combined ratio in the fourth quarter was 73.4%. To be sure, this is higher (worse) than the 72.1% combined ratio it produced a year ago, but this was fueled by higher catastrophe losses due to hurricanes, not anything wrong with the business itself.
On the investment side, Kinsale's net investment income increased by about 38% year over year. This was fueled by a combination of more available capital to invest and higher yields from investments.
NYSE: KNSL
Key Data Points
Immediate Market Reaction
There was a mildly negative reaction to the report among stock traders. As of 4:40 p.m. EST, Kinsale was trading down by about 3.5%.
There are a couple of things to point out. This reaction (or lack thereof) is before Kinsale's conference call, which is scheduled for Friday, Feb 14, at 9 a.m. EST. The topics of discussion could certainly move the stock in one direction or the other.
It's also worth noting that Kinsale generally isn't too reactive in after-hours trading. About 15 minutes after the earnings were posted, only about 5,000 shares of Kinsale had changed hands -- for context, Airbnb (ABNB 2.92%) is another company that reported earnings on Thursday, and about 2.4 million shares had traded in the first 15 minutes of the after-hours session. After its last earnings report, the stock barely budged after earnings and then proceeded to drop sharply the following day. So, it's entirely possible that the stock's reaction tomorrow will be a different story.
What to Watch
Obviously, underwriting profitability is important to keep an eye on throughout 2025, and there's no way to know what hurricane season will bring. Two other things that will be interesting to watch in 2025 are Kinsale's gross written premium growth rate and its investment income, which could take a hit if interest rates fall.
