Kinsale Capital Group (KNSL 3.67%) isn’t your everyday insurance company. Instead of specializing in auto insurance, life insurance, or other common types, Kinsale specializes in the unusual. It is the only pure-play specialty insurance company that is publicly traded, and it focuses on insurance for unusual situations and hard-to-assess risks.
Specialty insurance -- formally known as excess and surplus lines (E&S) in insurance terms -- is a difficult business. But it can be highly lucrative for companies that are good at it, and Kinsale certainly is. It has unheard-of profitability metrics, with impressively low loss ratios and expense ratios, driven by the company’s proprietary technology platform.
An amazing track record and a massive market
Kinsale went public in 2016 and has produced a positive return for shareholders every year since then. It continues to grow rapidly more than 15 years after its inception, with 30% revenue growth over the past 12 months. In all, investors have been handsomely rewarded with a total return of more than 2,300% since the 2016 initial public offering, better than 10 times the total return of the S&P 500 in the same period.
Although Kinsale has grown impressively in its relatively short history, the market opportunity in front of it is massive. The E&S insurance market is estimated to be about $116 billion in direct premiums written. Kinsale is the 13th-largest E&S company and serves about 1.4% of this highly fragmented market. So there’s room for Kinsale to multiply in size several times over the coming years, and if it can keep up its momentum, investors could be handsomely rewarded.
Now could be an opportunity
Despite strong fundamentals and excellent revenue growth, Kinsale’s stock is down by 13% over the past three months. As mentioned, Kinsale has an excellent track record of growth and shareholder returns, so this could be a rare opportunity to add Kinsale to your portfolio on sale.
