Kinsale Capital Group, Inc. (KNSL) stock intrinsic value fair value estimate & owner earnings analysis

Kinsale Capital writes specialty property and casualty insurance for risks that standard insurers avoid, known as excess and surplus lines. In 2025 gross written premiums were $1.98 billion, up 5.7%; 70.7% was casualty and 29.3% property. Average premium per policy is about $13,400, and the company focuses on small and mid-sized accounts. California, Florida and Texas together produced about 49% of 2025 premiums, so a downturn or a major storm or wildfire in those states matters more than for a nationally spread insurer. How we measured earnings. We start from operating cash flow and remove three things: the cash effect of changes in operating assets and liabilities (mostly claims reserves and unearned premiums that grow as the company grows, which are set aside for future claims rather than free to distribute), stock compensation (treated as a real cost), and the portion of capital spending that merely supports growth. The result is close to net income excluding non-cash swings in the value of the equity portfolio and realized investment gains. On this basis earnings per share were $1.22 in 2017, $1.70 in 2018, $1.51 in 2019, $1.77 in 2020, $5.50 in 2021, $7.42 in 2022, $12.05 in 2023, $14.99 in 2024 and $17.15 in 2025. Because purchases of property and equipment were unusually high in 2019 ($19.6 million) and 2020 ($32.9 million), most of that spending was counted as ongoing cost, which holds down those two years. Starting level. We anchor on the middle of the last three years, $14.99 per share (2024). Earlier years describe a company a fraction of today's size. The three-year window is also the period in which the combined ratio (claims plus expenses as a share of premiums; below 100% is an underwriting profit) stayed between 75.4% and 76.4%; it was 77.1% in 2021 and 77.9% in 2022, against 84.7% in 2019 and 86.7% in 2020. We deliberately start below the 2025 result of $17.15 because 2025 benefited from $62.8 million of favorable prior-year claims development and only $30.4 million of catastrophe losses, chiefly from the Palisades Fire, and we do not treat either as a permanent condition. Growth check. Earnings per share grew 14.4% in 2025. We assume 6% in the first year of the base case, which is below that trailing rate, so no reversal of a slowdown is being assumed. Recent results are consistent with this being cautious: for the first six months of 2026, revenue was $1,015 million versus $893 million a year earlier (up 13.7%) and net income was $288 million versus $223 million. We did not raise the starting level on the strength of two quarters. Base case, $347 per share. Earnings per share grow 6%, 6%, 5%, 5%, 4%, 4%, 3%, 3%, 2% and 2% over ten years, reaching about $22.17, and then stay flat. Growth credited rests on three things: revenue has grown every year from 2016 through 2025 and operating cash flow has grown every year from 2018 through 2025; in 2025 premiums outside commercial property grew 13.3% on strong broker submission flow; and premiums already collected and reserves already booked enlarge the investment portfolio, which produced net investment income of $192.2 million in 2025. We credit far less than that record because the same filing shows commercial property premiums fell 17.9% on rate declines and competition from standard carriers, and we do not count market expansion, share gains or new products. After year ten we assume no growth, only that the current level persists, supported by a low expense ratio (20.8% in 2025) and five consecutive years of combined ratios at or below 77.9%. Bear case, $182 per share. The main risks are named in the filing. Commercial property, 29.3% of premiums, continues to lose rate; the favorable prior-year development stops; and casualty claims, which are long-tail, develop adversely. The company already reports adverse development in its construction liability business for the 2016 through 2019 accident years and has adjusted its actuarial assumptions for inflation uncertainty around construction defect claims. We assume a combined ratio of 88%, worse than any of the last seven years, on 2025 premium volume, with earnings then eroding 2% a year for ten years before staying at that lower level. That gives about $12.76 per share to start. Bull case, $448 per share. Starting from the 2025 level of $17.15 per share, the favorable claims experience continues and the growth in non-property lines, which grew 13.3% in 2025, keeps supporting earnings. Earnings per share grow 9%, 8%, 7%, 6%, 6%, 5%, 4%, 4%, 3% and 3%, reaching about $29.25, then stay flat. Interest expense is small ($10.6 million in 2025 against $634 million of pre-tax income), so leverage does not change the picture; interest is already paid inside the earnings figure. The value shown for each case is what the business appears to be worth per share today, discounting future earnings at 6% a year, and it does not depend on the share price. What would make this wrong. If casualty reserves prove too low across the 2020 to 2024 accident years, or if rate declines spread from property into casualty, earnings would fall toward the bear case. The claims reserve is an estimate, and this analysis relies on the company's own reserve figures. We could not independently test them. The margin-of-safety price is $215 per share, about 38% below the base case and roughly 18% above the bear case, reflecting the long-tail casualty exposure and soft property market.