Here's Why Pelican Bay Capital Management Decided to Sell Kinsale (KNSL)

Pelican Bay Capital Management, an investment management company, released its third-quarter 2025 investor letter. A copy of the same can be downloaded here. PBCM Concentrated Value Strategy returned 7.8% in the quarter, compared to a 5.3% return for the Russell 1000 Value Index. YTD, the fund returned 11.2% compared to 11.6% for the index. In addition, please check the fund’s top five holdings to know its best picks in 2025.

In its third-quarter 2025 investor letter, PBCM Concentrated Value Strategy highlighted stocks such as Kinsale Capital Group, Inc. (NYSE:KNSL). Founded in 2009, Kinsale Capital Group, Inc. (NYSE:KNSL) is a property and casualty insurance company. The one-month return of Kinsale Capital Group, Inc. (NYSE:KNSL) was -17.48%, and its shares lost 12.31% of their value over the last 52 weeks. On November 6, 2025, Kinsale Capital Group, Inc. (NYSE:KNSL) stock closed at $393.10 per share, with a market capitalization of $9.145 billion.

PBCM Concentrated Value Strategy stated the following regarding Kinsale Capital Group, Inc. (NYSE:KNSL) in its third quarter 2025 investor letter:

"Kinsale Capital Group, Inc. (NYSE:KNSL) shares fell 10% this quarter. The decline was driven by challenges in the Excess and Surplus (E&S) insurance market, which is facing increased competition and lower insurance premiums. Consequently, the company's rapid pace of policy growth over the last four years is expected to decelerate in the coming quarters.

Furthermore, our due diligence uncovered that Kinsale recently lost two court cases resulting in significant financial damages awarded to clients. While Kinsale has appealed both verdicts, management has not reserved for these potential losses. Though not an incorrect accounting practice, this is less conservative than we prefer, as losing just one of these appeals could materially impact the company's earnings. We note that neither the company nor Wall Street analysts have publicly acknowledged these cases.

Although we admire Kinsale's leading position in the E&S market, we believe the stock would decline significantly if the company loses its appeals, at which point management would be compelled to disclose the adverse verdicts. Given the binary nature of this outcome and management's decision not to book reserves after the initial losses, we decided to sell our shares for a small loss."

Kinsale Capital Group, Inc. (NYSE:KNSL) is not on our list of 30 Most Popular Stocks Among Hedge Funds. According to our database, 31 hedge fund portfolios held Kinsale Capital Group, Inc. (NYSE:KNSL) at the end of the second quarter, compared to 33 in the previous quarter.  While we acknowledge the potential of Kinsale Capital Group, Inc. (NYSE:KNSL) as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

In another article, we covered Kinsale Capital Group, Inc. (NYSE:KNSL) and shared Giverny Capital Asset Management's views on the company in the previous quarter. In addition, please check out our hedge fund investor letters Q3 2025 page for more investor letters from hedge funds and other leading investors.

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Disclosure: None. This article is originally published at Insider Monkey.