I am curious though. In a world where KNSL exists, why would one own SKWD?
KNSL's combined ratio is far superior (77% vs 90%), and if the thesis is around E&S market growth, they are 100% concentrated on E&S vs 55% for SKWD.
Also, in my view, the biggest point one should look for in insurance before anything else is risk management. In this post I only see "deep expertise, disciplined underwriting" which doesn't mean much.
I would like to know if they outsource their underwriting for example, as that is a big sign of whether the company is in control of it and considers it a core competency or not. Nevertheless, I appreciate the breakdown of their underwriting by line of business and geography.
The point I would see in SKWD's favour is valuation as KNSL's is considerably higher. The quality of the business is better though, so it should command a higher multiple.
Disclaimer: KNSL is a big part of my portfolio, but I am always looking for added perspectives.
Disclaimer 2: I don't know anything about SKWD besides what you wrote in your piece, hence the questions.
Great question since I own KNSL as well! I certainly am not making the argument that SKWD is higher quality however KNSL can't be the best in every E&S niche. SKWD has carved out a place for themselves.
Since this was really meant to be a simple thesis I only touched on the most important points in my view for the company to grow in value over time. So my thought is regardless of if underwriting is in house or outsourced if they have below average combined ratios that is what matters.
That is not to say that isn't an important point though. If price were to drop around 35 I would do a much deeper dive into their operations.
I think you are correct the biggest selling point comparing KNSL to SKWD is the valuation difference. 2x book for SKWD vs 7x book for KNSL is a big difference. If I had to guess I would say in the shorter term of 3-5 years SKWD might have better returns.
Thanks for the thesis.
I am curious though. In a world where KNSL exists, why would one own SKWD?
KNSL's combined ratio is far superior (77% vs 90%), and if the thesis is around E&S market growth, they are 100% concentrated on E&S vs 55% for SKWD.
Also, in my view, the biggest point one should look for in insurance before anything else is risk management. In this post I only see "deep expertise, disciplined underwriting" which doesn't mean much.
I would like to know if they outsource their underwriting for example, as that is a big sign of whether the company is in control of it and considers it a core competency or not. Nevertheless, I appreciate the breakdown of their underwriting by line of business and geography.
The point I would see in SKWD's favour is valuation as KNSL's is considerably higher. The quality of the business is better though, so it should command a higher multiple.
Disclaimer: KNSL is a big part of my portfolio, but I am always looking for added perspectives.
Disclaimer 2: I don't know anything about SKWD besides what you wrote in your piece, hence the questions.
Great question since I own KNSL as well! I certainly am not making the argument that SKWD is higher quality however KNSL can't be the best in every E&S niche. SKWD has carved out a place for themselves.
Since this was really meant to be a simple thesis I only touched on the most important points in my view for the company to grow in value over time. So my thought is regardless of if underwriting is in house or outsourced if they have below average combined ratios that is what matters.
That is not to say that isn't an important point though. If price were to drop around 35 I would do a much deeper dive into their operations.
I think you are correct the biggest selling point comparing KNSL to SKWD is the valuation difference. 2x book for SKWD vs 7x book for KNSL is a big difference. If I had to guess I would say in the shorter term of 3-5 years SKWD might have better returns.