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Palomar (PLMR) Announces Estimates for Q3 Catastrophe Loss

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Palomar Holdings (PLMR - Free Report) estimates third-quarter 2021 pretax catastrophe loss of about $14.5 million to $15.5 million, net of reinsurance. The loss can be attributed to Hurricanes Ida and Nicholas.

Palomar expects that 70-75% of its gross losses from these events are from its discontinued Admitted All Risk and Louisiana Specialty Homeowners products, lines of business that the insurer had exited in the fourth quarter of 2020.

The Zacks Consensus Estimate for Palomar’s third-quarter earnings is currently pegged at 37 cents, indicating a year-over-year increase of 159.6% from the year-ago quarter reported figure.  We expect estimates to move south once analysts start incorporating loss estimates into their numbers.

Colorado State University hurricane researchers continue to predict an active 2021 Atlantic hurricane season.

RMS, the world’s leading catastrophe risk solutions company, estimates total onshore and offshore U.S. insured losses from Hurricane Ida in the range of $31 to $44 billion. This estimate is in addition to the previous industry loss estimate of $25-$35 billion for the Gulf of Mexico region that takes into account inland flooding impacts in the Ohio Valley, Mid-Atlantic, and the Northeast U.S. regions.

RMS estimates the total U.S. insured losses from Hurricane Nicholas in the range of $1.1 to $2.2 billion, which includes claims stemming from wind, storm surge and flooding damage, along with losses to the National Flood Insurance Program (NFIP).

Modeling firm AIR Worldwide updated its insured loss estimates for Hurricane Ida, which is projected in the range of $20 billion to $30 billion. AIR estimates wind and storm surge losses to range from $17 to $25 billion, and private-market insured losses from inland flooding to range from $2.5 billion to $5 billion.

Being a property and casualty insurer, Palomar Holdings is exposed to catastrophe loss, stemming from earthquakes, hurricanes, windstorms, floods and other severe events. In the first half of 2021, underwriting profit increased 26.1% year over year. The catastrophe loss ratio was negative 10.6% in the first half of 2021 due to narrower catastrophe losses from 2020 Hurricanes and reinsurance recoveries.

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.

The company strives to protect earnings and balance sheet with a reinsurance program that mitigates the impact of major events on overall profitability. This reinsurance program provides support to the company’s growth initiatives and appropriate levels of protection in the event of a major catastrophe.

Shares of Palomar Holdings have lost 8.5% in the past year against the industry’s growth of 27.2%.

Zacks Investment ResearchImage Source: Zacks Investment Research

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

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Q3 Catastrophe Loss Estimates of Other P&C Insurers

RLI Corporation (RLI - Free Report) estimates third-quarter catastrophe loss of $30-$35 million pre-tax, primarily stemming from Hurricane Ida as well as other catastrophes. Horace Mann Educators Corporation (HMN - Free Report) estimates $35 million to $40 million, pretax, catastrophe loss, most notably driven by the effects of Hurricane Ida. AXIS Capital Holdings Limited (AXS - Free Report) estimates third-quarter 2021 catastrophe loss of $250 million, before taxes. The estimated pre-tax net loss consists of $175 million stemming from Hurricane Ida, $55 million from July European floods and $20 million from other catastrophe and weather-related events.