Hi Multis
Thursday, Kinsale Capital Group (KNSL) reported its Q2 earnings, as the first Potential Multibaggers pick.
The Numbers
Let's first look at the raw numbers.
Revenue: +22% YoY to $470M, a beat of $35M, or 8%.
Non-GAAP EPS: $4.78, a beat by $0.36 or 8.1%.
Diluted EPS: $5.76, +45% YoY
Gross Written Premiums: +5% YoY to $556M
Net Investment Income: +30% YoY to $47M
Underwriting Income: $96M
Combined Ratio: 75.8%
Expense Ratio: 20.7%
Annualized Operating ROE Q2: 32.5%
Annualized Operating ROE H1: 27.9%
Book Value Per Share: +16% since YE 2024
Float: $2.9B
Kinsale Capital Group just delivered another masterclass in E&S insurance. I know, that probably sounds hyperbolic. But it's also what all the experts in the field say. On the Markel Brunch in Omaha, this is what Markel showed:
I'm sorry the quality of this image is not great, but I took a picture of this slide from the back of the conference room (which can hold about 2000 people), so I had to zoom in a lot. But the content is more important than the picture quality, obviously.
The lower the combined ratio, the better. With a combined ratio of 75.8%, Kinsale remains the best-in-class insurer, with a wide lead.
Revenue continues to grow fast too, at 22% in Q2. That was 8% higher than the estimates, which is very impressive for a company like Kinsale.
Non-GAAP EPS soared to $4.78, beating by $0.36, or 8.1%. On a GAAP basis, fully diluted EPS jumped 45% to $5.76. This is another example of non-GAAP metrics adding valuable information. The non-GAAP EPS excludes investing profits, while GAAP EPS includes the investing gains, which were very strong in Q2, with $47 million in gains or 30%.
Oh, you may miss guidance, right? Well, this is Mike Kehoe, and he has a straightforward, no-nonsense approach that I really like.
Previously, he had said growth would be 'somewhere between 10% and 20%.' With this great quarter, an analyst wanted to know if he still thought the same about this.
We don't offer a growth prospect because ultimately, we don't really know what that number is going to be. I think 10% to 20% over the course of the cycle is a -- it's a good faith estimate and it's actually, I think, a conservative one.
When another analyst pressed Kehoe on where we are in the cycle, this was his answer:
We don't really have an opinion on that.You guys are in the business of analyzing companies and prognosticating. So we'll leave that in your capable hands.
I love that. It feels like someone from Main Street made a great insurance company with level-headed thinking, not puffing himself up like so many others in the insurance business. :-)
Kinsale expects to maintain returns on equity in the low-to-mid 20% range going forward. It will continue to return money to shareholders through a dividend and buybacks but it wants to keep enough money to invest in growth and for unexpected market conditions.
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