Palomar Holdings, Inc. ( PLMR Quick Quote PLMR - Free Report) is well-poised for growth, driven by strong premium retention rates, new partnerships, rate increases and effective capital deployment. Growth Projections
The Zacks Consensus Estimate for Palomar’s 2023 earnings is pegged at $3.32, indicating a 19.8% increase from the year-ago reported figure on 14.7% higher revenues of $384.04 million. The consensus estimate for 2024 earnings is pegged at $3.91, indicating a 17.9% increase from the year-ago reported figure on 22.5% higher revenues of $470.66 million.
The Zacks Consensus Estimate for 2023 and 2024 has moved 1.2% and 0.2% north, respectively, in the past 60 days. This should instill investors' confidence in the stock.
Palomar currently carries a Zacks Rank #3 (Hold). The stock has gained 27.9% year to date, outperforming the
industry's growth of 6.4%. Image Source: Zacks Investment Research Return on Equity (ROE)
The company’s return on equity is 17.6%, which compares favorably with the industry’s average of 6.8% and rose 410 basis points (bps) year over year. Annualized adjusted ROE expanded 150 bps year over year to 20.7%. ROE reflects its efficiency in using its shareholders’ funds.
New business generated with existing partners, strong premium retention rates for existing business, expansion of its products’ geographic and distribution footprint, and new partnerships have been driving the volume of policies written, which, in turn, drives premium growth. In September 2021, Palomar launched the fee-generating PLMR-FRONT to drive growth in the medium term. The managed premium from PLMR-FRONT is expected to aid fee income growth in 2023.
Investment income witnessed a five-year CAGR (2017-2022) of 36.7%. High-quality fixed-income securities, a higher average balance of investments and an increase in fixed-income yields should help it retain the momentum. PLMR’s revenues have increased at a five-year CAGR (2017-2022) of 32.9% on the back of higher premiums, net investment income and commission and other income. High premium retention and strong renewal rates are likely to help retain the momentum going forward. Palomar has been witnessing substantial improvement in the combined ratio of its property and casualty (P&C) business over the past few years due to lower catastrophe events and improved loss ratio. PLMR boasts a debt-free balance sheet with no exposure to the equity markets. As of Mar 31, 2023, $58.8 million remained under authorization. Stocks to Consider
Some better-ranked stocks from the P&C insurance industry are
RLI Corp. ( RLI Quick Quote RLI - Free Report) , Kinsale Capital Group, Inc. ( KNSL Quick Quote KNSL - Free Report) and Root, Inc. ( ROOT Quick Quote ROOT - Free Report) . While RLI Corp. sports a Zacks Rank #1 (Strong Buy), Kinsale Capital and Root carry a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here. RLI beat estimates in each of the last four quarters, the average being 43.50%. Year to date, the insurer has gained 3.3%. The Zacks Consensus Estimate for 2023 and 2024 has moved 3.6% and 10.9% north, respectively, in the past 60 days. This should instill investors' confidence in the stock. Kinsale Capital has a solid track record of beating earnings estimates in each of the last trailing four quarters, the average being 14.77%. Year to date, KNSL has rallied 43.9%. The Zacks Consensus Estimate for KNSL’s 2023 and 2024 earnings per share is pegged at $10.62 and $13.05, indicating a year-over-year increase of 36.1% and 22.9%, respectively. Root beat estimates in each of the last four quarters, the average being 18.24%. Year to date, the insurer has rallied 181.3%. The Zacks Consensus Estimate for ROOT’s 2023 and 2024 earnings per share indicates a year-over-year increase of 43.8% and 47.3%, respectively.