Inflation Across The Industry Should Be Net Positive For Kinsale Capital Group: Analyst's View

Truist Securities analyst Mark Hughes reiterated a Buy rating on Kinsale Capital Group, Inc. KNSL, raising the price target to $450 from $400.

KNSL recently reported Q2 results, where net income increased by 168.7% Y/Y. The CEO noted that 2023 is the sixth calendar year of double-digit Excess & Surplus, or E&S premium growth.

However, the company expects inflation to prolong the challenging market through 2024 and beyond.

Hughes notes that loss inflation across the industry should be a net positive for KNSL.

According to the CEO, inflation issues should drive robust and sustained growth in industry premiums.

The analyst adds that commercial property is experiencing rapid growth in premiums and substantial rate increases, while entertainment and general liability are also very healthy.

Overall, for FY23, the analyst expects KNSL's gross written premiums to increase 37% Y/Y to $1.511 billion. For FY24, the company's gross written premiums to increase 18% Y/Y to $1.777 billion. 

Following the upbeat Q2, Hughes increased the 2023 EPS forecast to $11.70 from $10.93 based on the improved topline visibility in light of the company's 58% jump in gross written premiums.

The analyst also raised the 2024 projection to $13.70 per share from $12.80, boosting the price target based on an assumed P/E of 33x 2024 earnings. 

The analyst notes that Kinsale is growing its property book, but its exposure to catastrophes is still limited. 

The analyst thinks that the company still has a lot of opportunities to improve the expense ratio in the coming quarters.

Price Action: KNSL shares are trading lower by 0.33% to $375.32 on the last check Monday.