The saying about being wary of fast growth in financials, esp. banks and insurers is very true.
So what if ER is a bit low(er) because the underwriting is done fast(er) without looking into risks in that much detail, leading to a) low ER and b) faster quoting which the brokers might prefer and thus deliver much business.
The low LR and thus low CR overall might be understated due to the high growth. So the moment the growth stops
1) investors might assign a lower multiple due to lower growth/reinvestment, and
2) a yet lower multiple due to higher LR/CR and thus lower roe
(That said, I play the pessimistic dude here but own another high growth insurer)
Kinsale seems pretty conservative considering really great loss ratios. But definitely something to keep an eye on. There are always risks like a big settlement that a company doesn't sufficiently reserve for. Management talked about this on the latest call and they try to be conservative.
The saying about being wary of fast growth in financials, esp. banks and insurers is very true.
So what if ER is a bit low(er) because the underwriting is done fast(er) without looking into risks in that much detail, leading to a) low ER and b) faster quoting which the brokers might prefer and thus deliver much business.
The low LR and thus low CR overall might be understated due to the high growth. So the moment the growth stops
1) investors might assign a lower multiple due to lower growth/reinvestment, and
2) a yet lower multiple due to higher LR/CR and thus lower roe
(That said, I play the pessimistic dude here but own another high growth insurer)
Kinsale seems pretty conservative considering really great loss ratios. But definitely something to keep an eye on. There are always risks like a big settlement that a company doesn't sufficiently reserve for. Management talked about this on the latest call and they try to be conservative.
hard to outperform expectations of 40% growth for too long
True! Management has tried to level set expectations and the multiple was under 25x recently.