KNSL · Kinsale Capital Group $356.62 -2.91 (-0.81%) 2026-SEP-18 12:48 EST

Kinsale insures small businesses that standard insurers turn down (the "excess & surplus" market). It underwrites tightly and keeps costs low partly by paying brokers less. That works when insurance is scarce. But when prices soften, brokers move those customers back to mainstream insurers — and a carrier that pays brokers less may be the first to lose them. It has never been tested in a soft market, and the stock is pricier than Travelers.

Kinsale insures the risks ordinary insurers decline, mostly for smaller businesses, and does all its own underwriting and claims handling with its own software. The July update argued that the current soft market — falling premium prices as competitors pile in — would eventually clear out the weaker participants and let prices recover, with Kinsale surviving as the low-cost operator.

This update quietly moderates that. The multiple case is intact and striking: 17.2 times forward earnings against a five-year average of 28.6, nearly 40% below its own norm. But the earnings forecast now assumes only 6% annual growth to 2028, giving a three-year expected return of 6.2% — the second-lowest of any holding, for a company with a 34.7% ten-year compound rate.

Read together, those two facts describe the position honestly: the recovery in premium pricing is not being assumed in the numbers. If the soft market persists, 6% is what you get; if it turns as argued, the multiple has a very long way back.

Kinsale writes insurance for the risks ordinary insurers will not touch — the unusual building, the awkward liability — mostly for small and mid-sized businesses. It does everything itself: its own software, its own underwriters deciding what to insure, its own staff settling the claims. That matters because an insurer that outsources underwriting to brokers is partly paid on volume; one that keeps it in-house is only trying to write policies that make money.

The uncomfortable bit right now is that insurance prices are falling. Competitors have piled into the same market, so premiums are coming down — the industry calls it a soft market. Slegers makes an explicit parallel with memory chips: in both cases high profits attract competition, competition drives prices down, weaker players lose money and withdraw, and prices recover. The difference is that Kinsale is the low-cost operator, so it should be one of the survivors rather than one of the casualties. His complaint is that the share price now assumes the soft market lasts forever.

Two independent measures say the same thing. The shares trade at less than half the multiple of earnings they normally command. And a reverse discounted-cash-flow calculation — working backwards from today's price to ask what growth is being assumed — says Kinsale needs to grow its cash flow by only 3.3% a year to hand shareholders 10% annually. For a company that has grown many times faster than that, it is a low bar.

Kinsale insures the awkward risks that ordinary insurers decline — the odd property, the hard-to-price liability. Those policies are written one at a time rather than off a standard rate card, so an underwriter who is genuinely good at pricing them can charge properly for the risk.

The scoreboard for an insurer is the combined ratio: of every dollar of premium collected, how many cents go out again as claims and running costs. Below 100 means the insurance itself made money before any investment income. Kinsale runs at roughly 77 cents; a well-regarded peer like Markel is near 95. That twenty-cent gap is the whole thesis, and Slegers traces it to two choices — doing nothing but excess-and-surplus business, and building its own software from scratch instead of stitching together acquired systems, which makes it cheaper and faster to quote a policy accurately.

The timing is deliberately uncomfortable. Insurance prices are currently falling because competitors have piled in — a "soft market" — and that is normally when insurance shares are avoided. His view is that the soft patch is a cycle, not a change in Kinsale's advantage, so the depressed valuation is the opportunity. He adds $20,000, sixty-five shares, capped at $330.

Kinsale is the company presented from the stage at the Omaha panel. It writes American "excess and surplus lines" insurance — the awkward risks that ordinary insurers turn down. Because these policies fall outside standard rate regulation, the insurer sets its own price, so the whole business is a bet on knowing what a difficult risk is actually worth.

The proof that it does know is the combined ratio, described as one of the best in the industry. That ratio compares claims and expenses to premiums collected; below 100% means the underwriting itself makes money. When it does, the cash held between premium and claim — the float — is genuinely free, and Kinsale reinvests it to fund growth without needing outside capital.

The founder still owns 3.9% of the company, which is the alignment point: Mike Kehoe's own money moves with the shareholders'.

The result so far is a 34.4% annual return since listing in 2016 — the strongest record of the three insurance names discussed in this issue.

Kinsale insures the awkward risks that ordinary insurers turn away — the unusual property, the hard-to-price liability — in what the industry calls the excess and surplus lines market. Because those policies are not standardised, the pricing is not standardised either, and a disciplined underwriter can charge properly for the risk it takes.

Slegers' case has three legs. The founder, Mike Kehoe, still runs the company, so the person who set the underwriting culture is still enforcing it. It is the market leader and intends to double its share of that market over the coming years. And it runs on a single modern technology platform rather than a patchwork of acquired systems, which shows up as the best operating metrics in its industry — it simply costs Kinsale less to process a policy than it costs a rival. The new element in this update is price: after a long derating, "today you can buy Kinsale Capital at its cheapest valuation level ever."

Kinsale writes insurance that ordinary insurers refuse — the awkward, hard-to-price business risks — and charges accordingly. It keeps the premiums it does not pay out in claims and invests them in the meantime. Slegers' reference point is GEICO seventy years ago, on which Berkshire eventually made about 100 times its money: both operate in a segment growing faster than the overall insurance market, and both were taking share within it.

Four things support the case: it prices risk better than its competitors, it has room to roughly double its share of the market, its single technology platform lets it quote faster and cheaper than rivals running older systems, and CEO Mike Kehoe reinvests the profits well. The target is 10-20% growth a year for a long time.

The reason to buy it now is pure arithmetic. The shares fell 15% over the past year while earnings per share rose 15% — so you are paying about 30% less for each dollar of profit than a year ago, at one of the lowest valuations in the company's history. The model puts the expected return at 14.6% a year.

Kinsale insures risks that ordinary insurers turn away, in the corner of the market called excess and surplus lines, and prices each policy individually.

2025 was a hard year for insurance pricing generally, and Kinsale's operating profits still rose 20% over the first nine months while it wrote more business. That is the important sentence: growing through the soft part of the cycle is what a genuine cost advantage looks like from the outside. The advantage itself is the combined ratio — the industry's best — which simply means it costs Kinsale less to underwrite and administer a policy than it costs anyone else.

The founder still runs it and owns 3.8%. The company has authorised a $250 million buyback and one of its directors has bought a million dollars of stock personally.

And the price gives more room than anything else in the portfolio: working backwards, the shares only need cash flow to grow 4.6% a year to return 10% annually to an owner, against roughly 15% expected and 29% delivered over the past decade.

Kinsale writes insurance for risks other insurers decline — unusual properties, hard-to-price liabilities — and prices them individually rather than off a standard rate card.

This entry is unusually disciplined because the whole thesis is compressed to one number. Kinsale had 0.9% of its market in 2021 and 1.4% in 2024; the claim is that it can roughly double that again over the next few years. Everything else — the technology platform, the founder, the underwriting record — matters only insofar as it lets that share keep rising.

A thesis stated that way is easy to check and easy to be wrong about in public, which is the point. If share growth stalls, the case is finished regardless of how good the business still looks.

Kinsale insures the awkward risks ordinary insurers turn away — the unusual property, the hard-to-price liability. Because those policies are not standardised, a disciplined underwriter can charge properly for what it is taking on.

The shares fell 13.9% in 2025 because more competitors moved into that market, which pushes prices down for everyone. Slegers thinks the reaction is out of proportion, and rather than argue from his own model he points at three people acting with their own money: a director of the company bought about a million dollars of stock, the board authorised buying back 2.7% of the company, and François Rochon — an investor with a long record in exactly this style — added to his position. His line is "how many buy signals do you want?"

The thing to hold on to is the logic, not the enthusiasm: insurance pricing runs in cycles, and a firm with a genuine cost advantage survives the soft part of the cycle that removes weaker competitors. If that is true of Kinsale, the competition that caused the fall is temporary and the fall is the opportunity.

Kinsale is an "excess & surplus" (E&S) insurer — it writes the odd, hard-to-price risks that ordinary insurers refuse, and charges a lot more for taking them. Its edge is running everything on one in-house software platform while old-line rivals juggle 10–15 systems: more data, faster quotes, sharper pricing, and higher profits than peers. The founder still runs it, and it aims to double its market share over a decade. Slegers compares it to the young GEICO that made Buffett rich — a low-cost, fast-growing insurer with a long runway.