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Palomar (PLMR) Estimates Q3 Catastrophe Loss of $34M to $38M

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Palomar Holdings (PLMR - Free Report) estimates third-quarter 2020 pretax catastrophe loss of about $34 million to $38 million, net of reinsurance. The loss can be attributed to hurricane Hanna, Isaias, Laura and Sally.

The Zacks Consensus Estimate for Palomar’s third-quarter earnings is currently pegged at 25 cents, indicating a year-over-year increase of 25% from the year-ago quarter reported figure.  We expect estimates to move south once analysts start incorporating loss estimates into their numbers.

The third quarter of a year generally bears the brunt of catastrophes as the hurricane season typically starts in June and lasts through November during a year, gathering strength in August and September. In a report on Aug 5, 2020, Colorado State University stated that ‘hurricane activity will be about 190% of the average season’. There will be 24 named storms, including 12 hurricanes and six major hurricanes per CSU.

Being a property and casualty insurer, Palomar Holdings is exposed to catastrophe loss, stemming from earthquakes, hurricanes, windstorms, floods and other severe events. However, underwriting profit jumped 76.8% year over year in the first half of 2020 while adjusted combined ratio improved 160 basis points year over year to 63.4% in the same time frame.

Combined ratio, which reflects underwriting profitability, of Palomar Holdings has been improving over the past few years due to lower catastrophe events and improved loss ratio. It has been able to maintain combined ratio below 95% for three years. Also, its reinsurance program mitigates the impact of major events on overall profitability. The company expects the combined ratio and adjusted combined ratio to increase about 2 to 2.5 points in the second half of 2020.

Shares of Palomar Holdings have rallied 115.6% year to date compared with the industry’s decrease of 10%.


 

The company carries a Zacks Rank #4 (Sell).

Recently, RLI Corp (RLI - Free Report) estimated third-quarter 2020 pre-tax catastrophe loss of about $35 million to $45 million attributed to Hurricane Hanna, Hurricane Isaias, Hurricane Laura and Hurricane Sally. United Insurance Holdings Corp (UIHC - Free Report) estimated third-quarter 2020 catastrophe loss of about $135 million before income taxes or $107 million after tax, net of expected reinsurance recoveries. The loss can be attributed to six new named windstorms (Tropical Storm Fay, Hurricane Hanna, Hurricane Isaias, Hurricane Laura, Hurricane Marco, and Hurricane Sally) and other non-named windstorm catastrophe events.

Stock to Consider

A better-ranked insurer is Fidelity National Financial (FNF - Free Report) , carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Fidelity National delivered an earnings surprise of 53.52% in the last-reported quarter.

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