Key Points
Kinsale Capital Group beat expectations on both the top and bottom lines.
Investment income continues to be a major growth driver thanks to higher-yielding fixed-income investments.
Kinsale's combined ratio rebounded as disaster losses normalized.
Here's our initial take on Kinsale Capital Group's (NYSE: KNSL) financial report.
Key Metrics
| Metric |
Q2 2024 |
Q2 2025 |
Change |
vs. Expectations |
| Revenue |
$384.6 million |
$469.8 million |
22.2% |
Beat |
| EPS (adjusted) |
$3.75 |
$4.78 |
27.5% |
Beat |
| Combined ratio |
77.7% |
75.8% |
-190 bps |
n/a |
| Net investment income |
$35.8 million |
$46.5 million |
29.6% |
n/a |
Few Disaster Losses Leads to Record Profits
Kinsale Capital Group reported two mildly disappointing quarters prior to this one, so investors were curious to see if the company could turn things around.
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Well, the good news is that Kinsale beat revenue and earnings expectations for the second quarter, and pretty handily. Adjusted earnings of $4.78 per share grew by 27.5% year over year, and total revenue grew by 22% to $469.8 million. Unlike the first quarter, Kinsale's catastrophe losses in the second quarter were comparable to the year-ago period, which helped the company's headline numbers return to impressive growth. In fact, Kinsale's net income was the highest it's ever been.
Beyond the headlines, Kinsale's gross written premiums grew 5% year over year, but the biggest stories were profitability and investments.
On profitability, Kinsale reported a 75.8% combined ratio, improved from 82.1% in the first quarter and indicating an underwriting profit margin of more than 24%. To put it mildly, most other insurers would love to have half of this. And on the investment side of the business, Kinsale's net investment income increased by 29.6% in the second quarter thanks to the persistent high-interest environment.
Immediate Market Reaction
The initial market reaction to Kinsale's report was slightly negative. As of 4:25 p.m. EDT on Thursday, Kinsale shares were down by less than 1%.
However, it's important to point out that this was before management's earnings call. Plus Kinsale stock has a track record of not being particularly reactive in after-hours trading. In fact, after the first-quarter report, Kinsale's stock barely budged, but it fell sharply on the next trading day. So it's entirely possible we'll see a larger move tomorrow in one direction or the other.
What to Watch
The second quarter is typically a seasonally strong one for the insurance industry, as it has a relatively low probability of natural disasters. We saw this reflected in this earnings report, but with the third quarter containing the peak of hurricane season, the combined ratio will be worth a closer look as 2025 goes on.
It's also worth noting that Kinsale bought back $10 million in stock during the second quarter, a relatively low rate for a company of this size. In fact, Kinsale spent exactly $10 million on buybacks for the past three quarters in a row. Going forward, it will be interesting to see if the company will be more optimistic if the share price is weak or will pull back on buyback activity if the stock price rises.
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Matt Frankel has positions in Kinsale Capital Group. The Motley Fool has positions in and recommends Kinsale Capital Group. The Motley Fool has a disclosure policy.
