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KNSL or AFG: Which Property & Casualty Insurer Has an Edge?
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The Zacks Property and Casualty (P&C) Insurance industry is well-poised to benefit from increased exposure driving business growth, higher retention, streamlined operations, global presence, better pricing, solid underwriting and a strong capital position. With the ongoing economic expansion, insurers remain well-poised for growth. However, catastrophe events, both natural and man-made, might have weighed on underwriting profit.
The industry has returned 29.9% in the past year, outperforming the Zacks S&P 500 composite’s rise of 27.1% and the Finance sector’s 23.8% growth.
Industry Outperforms Sector, S&P 500
Image Source: Zacks Investment Research
Here we focus on two property and casualty insurers, namely Kinsale Capital Group, Inc. (KNSL - Free Report) and American Financial Group, Inc. (AFG - Free Report) .
Kinsale Capital, with a market capitalization of $11.31 billion and being a specialty insurance company, is engaged in the provision of property and casualty insurance products in the United States. American Financial, with a market capitalization of $11.12 billion, is an insurance holding company that provides specialty property and casualty insurance products in the United States. KNSL and AFG carry a Zacks Rank #3 (Hold) each at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Driving Forces
Global commercial insurance rates remained unchanged in the second quarter of 2024, per the Marsh Global Insurance Market Index. Price hikes, operational strength, higher retention, strong renewal and the appointment of retail agents should help write higher premiums. Per Deloitte Insights, gross premiums are estimated to increase sixfold to $722 billion by 2030.
Analysts at Swiss Re Institute predict premium volume to reach $4.6 trillion in 2024 and $4.8 trillion in 2025. Per the Swiss Re Institute, property and casualty insurers are anticipated to enhance profitability in 2024, with industry-wide return on equity (ROE) at 10% so far in 2024. For 2025, the Swiss Re Institute estimates an ROE of more than 10%.
According to Verisk’s Extreme Event Solutions group estimates, U.S. onshore wind property losses from Beryl were within the $2-$3 billion range. Per Allstate, estimated catastrophe losses were $587 million for July alone from 20 events. Exposure growth, improved pricing, prudent underwriting, favorable reserve development and a sturdy capital position will help absorb catastrophe losses. Also, frequent occurrences of natural disasters should accelerate the policy renewal rate.
A solid capital level supports insurers in pursuing strategic mergers and acquisitions to gain market share, expand in niche areas and diversify operations into new business lines and geography, as well as increase dividends, pay special dividends and buy back shares. Deloitte estimates more mergers and acquisitions in the reinsurance space in 2024.
The P&C insurance industry is witnessing increased use of technology like blockchain, artificial intelligence, advanced analytics, telematics, cloud computing and robotic process automation that expedite business operations and save costs. Insurers continue to invest heavily in technology to improve basis points, scale and efficiencies.
Let’s delve deeper into specific parameters to ascertain which P&C insurer is better positioned at the moment.
Price Performance
Shares of Kinsale Capital have climbed 21.9% in the past year, outperforming American Financial’s rise of 14.4%. Shares of the insurance industry have returned 29.9% in the said time frame.
Return on Equity (ROE)
Kinsale Capital, with a ROE of 30.3%, exceeds American Financial’s ROE of 21.1% and the industry average of 7.9%.
Valuation
The price-to-book value is the best multiple used for valuing insurers. Compared with Kinsale Capital’s P/B ratio of 9, American Financial is cheaper, with a reading of 2.54. The P&C insurance industry’s P/B ratio is 1.54.
Debt-to-Capital
American Financial’s debt-to-capital ratio of 25.2 is higher than the industry average of 17.2 and Kinsale Capital’s reading of 12.7. Therefore, KNSL has an advantage over AFG on this front.
Growth Projection
The Zacks Consensus Estimate for 2024 earnings indicates 3.7% growth from the year-ago reported figure for American Financial, while the same for Kinsale Capital implies an increase of 22.3%.
Earnings Surprise History
Kinsale Capital outpaced expectations in each of the last seven reported quarters. American Financial surpassed estimates in four of the last seven reported quarters.
Combined Ratio
AFG’s combined ratio was 90.3% in the first half of 2024, whereas that of KNSL was 78.6% in the said time frame. Thus, the combined ratio of Kinsale Capita is better than that of American Financial.
Dividend Yield
American Financial’s dividend yield of 2.14% is better than Kinsale Capital’s dividend yield of 0.12%. Thus, AFG has an advantage over KNSL on this front.
Revenue Estimates
The Zacks Consensus Estimate for Kinsale Capital and American Financial's 2024 revenues implies a year-over-year increase of 29.5% and 2.9%, respectively.
Therefore, KNSL is at an advantage on this front.
To Conclude
Our comparative analysis shows that Kinsale Capital is better positioned than American Financial with respect to price, return on equity, leverage, growth projection, earnings surprise history, combined ratio and revenue estimates. Meanwhile, American Financial scores higher in terms of valuation and dividend yield. With the scale majorly tilted toward Kinsale Capital, the stock appears to be better poised.
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KNSL or AFG: Which Property & Casualty Insurer Has an Edge?
The Zacks Property and Casualty (P&C) Insurance industry is well-poised to benefit from increased exposure driving business growth, higher retention, streamlined operations, global presence, better pricing, solid underwriting and a strong capital position. With the ongoing economic expansion, insurers remain well-poised for growth. However, catastrophe events, both natural and man-made, might have weighed on underwriting profit.
The industry has returned 29.9% in the past year, outperforming the Zacks S&P 500 composite’s rise of 27.1% and the Finance sector’s 23.8% growth.
Industry Outperforms Sector, S&P 500
Image Source: Zacks Investment Research
Here we focus on two property and casualty insurers, namely Kinsale Capital Group, Inc. (KNSL - Free Report) and American Financial Group, Inc. (AFG - Free Report) .
Kinsale Capital, with a market capitalization of $11.31 billion and being a specialty insurance company, is engaged in the provision of property and casualty insurance products in the United States. American Financial, with a market capitalization of $11.12 billion, is an insurance holding company that provides specialty property and casualty insurance products in the United States. KNSL and AFG carry a Zacks Rank #3 (Hold) each at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Driving Forces
Global commercial insurance rates remained unchanged in the second quarter of 2024, per the Marsh Global Insurance Market Index. Price hikes, operational strength, higher retention, strong renewal and the appointment of retail agents should help write higher premiums. Per Deloitte Insights, gross premiums are estimated to increase sixfold to $722 billion by 2030.
Analysts at Swiss Re Institute predict premium volume to reach $4.6 trillion in 2024 and $4.8 trillion in 2025. Per the Swiss Re Institute, property and casualty insurers are anticipated to enhance profitability in 2024, with industry-wide return on equity (ROE) at 10% so far in 2024. For 2025, the Swiss Re Institute estimates an ROE of more than 10%.
According to Verisk’s Extreme Event Solutions group estimates, U.S. onshore wind property losses from Beryl were within the $2-$3 billion range. Per Allstate, estimated catastrophe losses were $587 million for July alone from 20 events. Exposure growth, improved pricing, prudent underwriting, favorable reserve development and a sturdy capital position will help absorb catastrophe losses. Also, frequent occurrences of natural disasters should accelerate the policy renewal rate.
A solid capital level supports insurers in pursuing strategic mergers and acquisitions to gain market share, expand in niche areas and diversify operations into new business lines and geography, as well as increase dividends, pay special dividends and buy back shares. Deloitte estimates more mergers and acquisitions in the reinsurance space in 2024.
The P&C insurance industry is witnessing increased use of technology like blockchain, artificial intelligence, advanced analytics, telematics, cloud computing and robotic process automation that expedite business operations and save costs. Insurers continue to invest heavily in technology to improve basis points, scale and efficiencies.
Let’s delve deeper into specific parameters to ascertain which P&C insurer is better positioned at the moment.
Price Performance
Shares of Kinsale Capital have climbed 21.9% in the past year, outperforming American Financial’s rise of 14.4%. Shares of the insurance industry have returned 29.9% in the said time frame.
Return on Equity (ROE)
Kinsale Capital, with a ROE of 30.3%, exceeds American Financial’s ROE of 21.1% and the industry average of 7.9%.
Valuation
The price-to-book value is the best multiple used for valuing insurers. Compared with Kinsale Capital’s P/B ratio of 9, American Financial is cheaper, with a reading of 2.54. The P&C insurance industry’s P/B ratio is 1.54.
Debt-to-Capital
American Financial’s debt-to-capital ratio of 25.2 is higher than the industry average of 17.2 and Kinsale Capital’s reading of 12.7. Therefore, KNSL has an advantage over AFG on this front.
Growth Projection
The Zacks Consensus Estimate for 2024 earnings indicates 3.7% growth from the year-ago reported figure for American Financial, while the same for Kinsale Capital implies an increase of 22.3%.
Earnings Surprise History
Kinsale Capital outpaced expectations in each of the last seven reported quarters. American Financial surpassed estimates in four of the last seven reported quarters.
Combined Ratio
AFG’s combined ratio was 90.3% in the first half of 2024, whereas that of KNSL was 78.6% in the said time frame. Thus, the combined ratio of Kinsale Capita is better than that of American Financial.
Dividend Yield
American Financial’s dividend yield of 2.14% is better than Kinsale Capital’s dividend yield of 0.12%. Thus, AFG has an advantage over KNSL on this front.
Revenue Estimates
The Zacks Consensus Estimate for Kinsale Capital and American Financial's 2024 revenues implies a year-over-year increase of 29.5% and 2.9%, respectively.
Therefore, KNSL is at an advantage on this front.
To Conclude
Our comparative analysis shows that Kinsale Capital is better positioned than American Financial with respect to price, return on equity, leverage, growth projection, earnings surprise history, combined ratio and revenue estimates. Meanwhile, American Financial scores higher in terms of valuation and dividend yield. With the scale majorly tilted toward Kinsale Capital, the stock appears to be better poised.