RLI or KNSL: which P&C insurance title is worth investing in?


Zacks’ P&C insurance business is doing well, driven by better pricing, conservative underwriting, increased technology adoption, increased exposure and impressive solvency. The streamlining of operations, the diversification of activities, the favorable development of reserves and the expansion of global presence have been favorable winds for players in the industry.

The industry is up 18.4% over the past year compared to the 9% rise in the Zacks S&P 500 composite and the 5.5% growth in the financial sector.

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In this context, let’s look at two major P&C insurance companies, namely RLI Corp. RLI and Kinsale Capital Group, Inc. KNSL, and find out which stock is the most profitable to add to your portfolio for better returns.

RLI, with a market capitalization of $4.9 billion, is an insurance holding company that underwrites property and casualty insurance in the United States and around the world. Kinsale Capital, with a market capitalization of $5.3 billion, is a property and casualty insurance company focused exclusively on the excess and excess lines (E&S) market in the United States. Both companies carry a Zacks rank #2 (buy). You can see the full list of today’s Zacks #1 Rank (Strong Buy) stocks here.

According to the Swiss Re Institute, global non-life premiums are expected to increase by 3.7% in 2022 and 3.3% in 2023. It also projects that global insurance premiums will exceed $7 trillion by the end of the year. mid-2022. Increased risk awareness and improved, natural, above-average pricing should support premium growth.
According to Willis Towers Watson’s 2022 Insurance Market Realities Report, the commercial insurance market is expected to see a return to normalcy in 2022 as rate increases for commercial lines of insurance decline to a figure and even stable renewals.

Fitch forecasts double-digit rate increases for property catastrophe insurance in 2022. Fitch also expects 2022 to be the fifth consecutive year of price increases, although growth is expected to be slower than in 2021.

Price increases, operational strength, higher retention, high turnover, appointment of retail agents and higher new business premiums should help underwrite higher premiums.

The P&C insurance industry remains exposed to claims from natural disasters and weather-related events, inducing volatility in its underwriting results. According to Swiss Re, natural disasters resulted in a total global economic loss of $270 billion and an insured loss of $111 billion in 2021. Colorado State University expects above-normal activity during the 2022 hurricane season and there will be a total of 19 named storms during the Atlantic hurricane season. With exposure growth, better pricing, prudent underwriting, favorable reserve developments and a strong capital position, the insurance industry will be able to absorb catastrophe losses. .

Building on a strong capital position, players in the property and casualty insurance industry are pursuing strategic mergers and acquisitions, likely to expand their geographic reach, increase their scale and add new technological capabilities. M&A activity is also likely to strengthen portfolios, diversify operations, and enable companies to enter more profitable market segments. According to Deloitte Insights, M&A activity in the insurance industry increased in 2021. Deloitte’s Global Outlook Survey predicts more M&A strategies in 2022.

Insurers have increased their investments in emerging technologies in an effort to increase efficiency, improve cybersecurity, upgrade policy administration and claims systems, and expand reporting capabilities. automation across the organization. The adoption of technologies such as robotic process automation, Chatbot and RoboAdvisory, artificial intelligence and data analytics, insurtech solutions, telematics and cloud computing is gaining momentum. Deloitte’s global survey predicts insurers’ technology budget will grow by 13.7% in 2022.

At the last FOMC meeting, the Fed approved its first interest rate hike of 25 basis points in a range of 0.25-0.5%, its first interest rate hike since 2018. The The Fed also indicated three interest rate hikes in 2023. Insurers are poised to take advantage. of the recent rate hike, as they benefit from a rising rate environment. A broader invested base, directing funds into alternative investments like private equity, hedge funds and real estate, should increase investment income going forward.

Now let’s look at two major players in the industry: RLI and KNSL.

Price performance

Kinsale Capital is up 36.9% over the past year compared to the industry’s 18.4% increase and RLI’s 4.3% decline.

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Image source: Zacks Investment Research

Return on equity (ROE)

Kinsale Capital, with a return on equity of 20.5%, beat RLI’s ROE of 14.5% and the industry average of 5.9%.

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Image source: Zacks Investment Research


The price-to-book ratio is the best multiple used to value insurers. Compared to Kinsale Capital’s reading of 7.59, RLI is cheaper, with a reading of 4.06. The P/E ratio of the P&C insurance industry is 1.42.

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Image source: Zacks Investment Research

Dividend yield

RLI’s 0.9% dividend yield is better than Kinsale Capital’s 0.2%. So RLI is in an advantageous position over Kinsale Capital on this front.

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Image source: Zacks Investment Research

Debt to equity

Kinsale Capital’s leverage ratio of 6.1 is below the industry average of 22.5 and Markel’s reading of 16.2.

Earnings Surprise History

RLI has a strong record of beating earnings estimates over the past six quarters. Kinsale Capital has a record of beating earnings estimates in five of the last six quarters.
Therefore, RLI has an advantage in this regard over Kinsale Capital.

Growth projection

Zacks consensus estimate for 2022 earnings points to 15.3% growth on the figure reported a year ago for Kinsale Capital and the same for RLI implies a decline of 1.8%.

Combined report

Kinsale Capital’s combined ratio was 77.1% in 2021, while RLI’s was 86.8% in the said period. Thus, the combined ratio of Kinsale Capital is better than that of RLI.

Estimate movement

For 2022, the Zacks consensus estimate for RLI has moved 1.3% north to $3.80 in the last 60 days and the same for Kinsale Capital has been revised down 5.9% higher to $6.62. Therefore, Kinsale Capital is in an advantageous position over RLI on this front.

To conclude

Our benchmarking shows that Kinsale Capital has an edge over RLI in price, return on equity, leverage, growth projection, estimate movement and combined ratio, while RLI achieves higher scores in terms of dividend yield, valuation and earnings surprise history.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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