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ARGO or PLMR: Which P&C Stock is Better-Placed at the Moment?
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The Zacks Property and Casualty Insurance industry has been gaining momentum on the back of improved pricing, increased technology advancements, exposure growth, underwriting profitability, favorable reserve development, demand for insurance products, and global expansion as well as impressive solvency level.
The industry has lost 2.2% in the past year compared with the Zacks S&P 500 composite’s decline of 9.3% and the Finance sector’s 10.6% decline.
Image Source: Zacks Investment Research
Against this backdrop, let’s take a look at two leading P&C insurer companies, namely Argo Group International Holdings, Ltd. and Palomar Holdings, Inc. (PLMR - Free Report) and find out which stock is more likely to provide better returns.
Argo Group, with a market capitalization of $1.4 billion, underwrites specialty insurance and reinsurance products in the property and casualty markets. Palomar, with a market capitalization of $1.6 billion, is an insurance holding company. It provides specialty property insurance to residential and commercial customers and offers personal and commercial specialty property insurance products. Both the companies carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Per the Swiss Re Institute, global non-life premiums are expected to rise 3.7% in 2022. It also expects global insurance premiums to exceed $7 trillion by mid-2022.
Per Willis Towers Watson’s 2022 Insurance Marketplace Realities report, the commercial insurance market is likely to witness a shift toward normalcy in 2022, as the rate increases for commercial lines of insurance are declining to single digits and even flat renewals.
Price hikes, operational strength, higher retention, strong renewal, the appointment of retail agents and higher new business premiums should help write higher premiums and address claims payment.
The P&C insurers remain exposed to catastrophe loss from natural disasters and weather-related events. Such losses pose an inherent risk to the insurance business, inducing volatility in its underwriting results. The Colorado State University expects above-normal activity during the 2022 hurricane season as there will be a total of 19 named storms during the Atlantic hurricane season. Better pricing, prudent underwriting and favorable reserve development will enable the insurance industry to absorb catastrophe losses going ahead.
Consolidation in the property and casualty industry is likely to expand players’ geographic reach, increase their scale and add new technology capabilities. With the reopening of the economy and solid capital position, the insurance industry is witnessing a number of mergers, acquisitions and consolidations.
The Fed approved a hike of 50 basis points in the interest rate to a range of 0.75-1%, the highest point since the pandemic struck two years ago. The insurers are well-poised to benefit from this improved interest rate environment. A larger invested base and movement of funds to alternative investments like private equity, hedge funds, and real estate are expected to drive investment income.
In an effort to improve operational efficiency, the insurance industry is now adopting technological changes like blockchain, Artificial Intelligence (AI), advanced analytics, telematics, cloud computing, and robotic process automation. Accelerated digitization ensures smooth functioning of the insurers and is also likely to save costs, in turn driving margin expansion.
Now let’s take a look at how PLMR & ARGO are poised.
Price Performance
Palomar Holdings has lost 15.9% in the past year compared with the industry’s decrease of 2.2%. Argo Group shares have declined 22.2% in the said time frame.
Image Source: Zacks Investment Research
Return on Equity (ROE)
Palomar Holdings, with a return on equity (ROE) of 13.5%, exceeds Argo Group’s ROE of 4.7% and the industry average of 5.7%.
Image Source: Zacks Investment Research
Valuation
The price-to-book value is the best multiple used for valuing insurers. Compared with Palomar Holding’s P/B ratio of 4.26, Argo Group is cheaper, with a reading of 0.99. The P&C insurance industry’s P/B ratio is 1.27.
Image Source: Zacks Investment Research
Dividend Yield
Argo Group has a dividend yield of 2.9% whereas Palomar Holding does not pay any dividend. Thus, Argo Group is in an advantageous position over Palomar Holding on this front.
Debt-to-Equity
Argo Group’s debt-to-equity ratio of 24.75 is higher than the industry average of 23.6 and Palomar Holding’s reading of 3.94.
Image Source: Zacks Investment Research
Earnings Surprise History
ARGO has a solid record of beating earnings estimates in six of the last seven quarters. PLMR has a record of beating earnings estimates in four of the last seven quarters.
Hence, ARGO has an edge in this regard over PLMR.
Growth Projection
The Zacks Consensus Estimate for 2022 earnings indicates 255.5% growth from the year-ago reported figure for Argo Group while the same for Palomar Holding implies growth of 44.4%.
VGM Score
VGM Score rates each stock on their combined weighted styles, helping to identify those with the most attractive value, best growth, and most promising momentum. Argo Group has a VGM Score of A while Palomar Holding has a VGM Score of C. Argo Group thus is better placed.
Earnings Estimates
For 2022, the Zacks Consensus Estimate for PLMR has moved 0.2% north to $4.23 in the past 60 days while the same for ARGO has been revised 0.7% upward to $2.96. Therefore, PLMR is in an advantageous position over ARGO on this front.
To Conclude
Our comparative analysis shows that Argo Group is better-positioned than Palomar Holdings with respect to dividend yield, growth projection, VGM Score, valuation and earnings surprise history, while Palomar Holdings scores higher in terms of price, return on equity, leverage and earnings estimates. As the scale is slightly tilted toward Argo Group, the stock discernibly makes a more promising investment proposition.
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ARGO or PLMR: Which P&C Stock is Better-Placed at the Moment?
The Zacks Property and Casualty Insurance industry has been gaining momentum on the back of improved pricing, increased technology advancements, exposure growth, underwriting profitability, favorable reserve development, demand for insurance products, and global expansion as well as impressive solvency level.
The industry has lost 2.2% in the past year compared with the Zacks S&P 500 composite’s decline of 9.3% and the Finance sector’s 10.6% decline.
Image Source: Zacks Investment Research
Against this backdrop, let’s take a look at two leading P&C insurer companies, namely Argo Group International Holdings, Ltd. and Palomar Holdings, Inc. (PLMR - Free Report) and find out which stock is more likely to provide better returns.
Argo Group, with a market capitalization of $1.4 billion, underwrites specialty insurance and reinsurance products in the property and casualty markets. Palomar, with a market capitalization of $1.6 billion, is an insurance holding company. It provides specialty property insurance to residential and commercial customers and offers personal and commercial specialty property insurance products. Both the companies carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Per the Swiss Re Institute, global non-life premiums are expected to rise 3.7% in 2022. It also expects global insurance premiums to exceed $7 trillion by mid-2022.
Per Willis Towers Watson’s 2022 Insurance Marketplace Realities report, the commercial insurance market is likely to witness a shift toward normalcy in 2022, as the rate increases for commercial lines of insurance are declining to single digits and even flat renewals.
Price hikes, operational strength, higher retention, strong renewal, the appointment of retail agents and higher new business premiums should help write higher premiums and address claims payment.
The P&C insurers remain exposed to catastrophe loss from natural disasters and weather-related events. Such losses pose an inherent risk to the insurance business, inducing volatility in its underwriting results. The Colorado State University expects above-normal activity during the 2022 hurricane season as there will be a total of 19 named storms during the Atlantic hurricane season. Better pricing, prudent underwriting and favorable reserve development will enable the insurance industry to absorb catastrophe losses going ahead.
Consolidation in the property and casualty industry is likely to expand players’ geographic reach, increase their scale and add new technology capabilities. With the reopening of the economy and solid capital position, the insurance industry is witnessing a number of mergers, acquisitions and consolidations.
The Fed approved a hike of 50 basis points in the interest rate to a range of 0.75-1%, the highest point since the pandemic struck two years ago. The insurers are well-poised to benefit from this improved interest rate environment. A larger invested base and movement of funds to alternative investments like private equity, hedge funds, and real estate are expected to drive investment income.
In an effort to improve operational efficiency, the insurance industry is now adopting technological changes like blockchain, Artificial Intelligence (AI), advanced analytics, telematics, cloud computing, and robotic process automation. Accelerated digitization ensures smooth functioning of the insurers and is also likely to save costs, in turn driving margin expansion.
Now let’s take a look at how PLMR & ARGO are poised.
Price Performance
Palomar Holdings has lost 15.9% in the past year compared with the industry’s decrease of 2.2%. Argo Group shares have declined 22.2% in the said time frame.
Image Source: Zacks Investment Research
Return on Equity (ROE)
Palomar Holdings, with a return on equity (ROE) of 13.5%, exceeds Argo Group’s ROE of 4.7% and the industry average of 5.7%.
Image Source: Zacks Investment Research
Valuation
The price-to-book value is the best multiple used for valuing insurers. Compared with Palomar Holding’s P/B ratio of 4.26, Argo Group is cheaper, with a reading of 0.99. The P&C insurance industry’s P/B ratio is 1.27.
Image Source: Zacks Investment Research
Dividend Yield
Argo Group has a dividend yield of 2.9% whereas Palomar Holding does not pay any dividend. Thus, Argo Group is in an advantageous position over Palomar Holding on this front.
Debt-to-Equity
Argo Group’s debt-to-equity ratio of 24.75 is higher than the industry average of 23.6 and Palomar Holding’s reading of 3.94.
Image Source: Zacks Investment Research
Earnings Surprise History
ARGO has a solid record of beating earnings estimates in six of the last seven quarters. PLMR has a record of beating earnings estimates in four of the last seven quarters.
Hence, ARGO has an edge in this regard over PLMR.
Growth Projection
The Zacks Consensus Estimate for 2022 earnings indicates 255.5% growth from the year-ago reported figure for Argo Group while the same for Palomar Holding implies growth of 44.4%.
VGM Score
VGM Score rates each stock on their combined weighted styles, helping to identify those with the most attractive value, best growth, and most promising momentum. Argo Group has a VGM Score of A while Palomar Holding has a VGM Score of C. Argo Group thus is better placed.
Earnings Estimates
For 2022, the Zacks Consensus Estimate for PLMR has moved 0.2% north to $4.23 in the past 60 days while the same for ARGO has been revised 0.7% upward to $2.96. Therefore, PLMR is in an advantageous position over ARGO on this front.
To Conclude
Our comparative analysis shows that Argo Group is better-positioned than Palomar Holdings with respect to dividend yield, growth projection, VGM Score, valuation and earnings surprise history, while Palomar Holdings scores higher in terms of price, return on equity, leverage and earnings estimates. As the scale is slightly tilted toward Argo Group, the stock discernibly makes a more promising investment proposition.