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PLMR Stock Declines 39.1% in a Year: What Should Investors Do Now?
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Key Takeaways
PLMR expects 2026 adjusted net income of $260M-$275M, above prior guidance levels.
Palomar sees growth from specialty products, Surety expansion and the PLMR-FRONT platform.
PLMR targets a mid-70s adjusted combined ratio despite catastrophe and expense pressures.
Shares of Palomar Holdings, Inc. (PLMR - Free Report) have lost 39.1% in the past year compared with the industry’s decline of 6.2%.
Weakening underwriting margins, rising claims and operating expenses, and concerns associated with acquisition and catastrophe exposure likely have weighed on the insurer. However, premium growth across lines, expanding fee income, rising investment yield and disciplined reinsurance will sustain earnings compounding.
Image Source: Zacks Investment Research
Shares of its peers, The Allstate Corporation (ALL - Free Report) and The Travelers Companies, Inc. (TRV - Free Report) , have rallied 1.7% and 7.3%, respectively, while Arch Capital Group Ltd (ACGL - Free Report) has lost 7.6% in the same time frame.
Average Target Price for PLMR Suggests Upside
Based on short-term price targets offered by six analysts, the Zacks average price target is $154.83 per share. The average suggests a potential 44.4% upside from the last closing price.
Image Source: Zacks Investment Research
PLMR Shares Are Expensive
PLMR shares are trading at a premium to the industry. Its price-to-book value of 2.89X is higher than the industry average of 1.33X.
Image Source: Zacks Investment Research
PLMR’s Encouraging Growth Projection
The Zacks Consensus Estimate for Palomar’s 2026 earnings per share (EPS) indicates a year-over-year increase of 23.9%. The consensus estimate for revenues is pegged at $1.25 billion, implying a year-over-year improvement of 45.2%.
The consensus estimate for 2027 EPS and revenues indicates an increase of 12.9% and 20%, respectively, from the corresponding 2026 estimates.
Mixed Analyst Sentiment on PLMR
One of the three analysts covering the stock has raised estimates for 2026, while two analysts have revised their 2027 estimates upward over the past 60 days. The Zacks Consensus Estimate for 2026 and 2027 earnings has moved up 1.1% and 0.7%, respectively, in the past 60 days.
PLMR’s Return on Capital
Return on equity is a measure of profitability reflecting how efficiently the company is utilizing its shareholders’ equity. Return on equity of 20.9% compares favorably with the industry’s average of 6%.
Also, the return on invested capital in the trailing-12 months was 20.3%, better than the industry average of 5.7%, reflecting the company’s efficiency in utilizing funds to generate income.
Factors Driving PLMR
Revenues have been increasing over the last several years on the back of higher premiums, net investment income, and commission and other income. Palomar’s fee-based platform, PLMR-FRONT, is positioned to drive medium-term growth. The addition of this revenue stream is expected to strengthen its earnings foundation. The increasing volume of policies across multiple business lines, strong retention rates, and expansion into new geographic areas and distribution channels are expected to drive premiums. Premiums should also benefit from its specialty product portfolio, expanded producer appointments, strategic partnerships with other insurance carriers and rate increases. PLMR expects its net earned premium ratio to increase into the upper forties and anticipates slight improvements in the acquisition expense ratio for 2026.
PLMR identifies Surety as an attractive long-term growth opportunity. Like crop insurance, Surety is not correlated with the traditional property and casualty insurance cycle, offering diversification and stability.
Net investment income is expected to rise, supported by a high-quality fixed-income portfolio, higher average investment balances and improved yields. This solid investment base is poised to generate strong returns.
The company uses reinsurance to limit loss exposure and support policy limits through both excess of loss and quota share structures. For 2026, PLMR expects the loss ratio, including catastrophes, to be in the mid-to-upper thirties. PLMR expects the adjusted combined ratio for 2026 to be in the mid-70s. These expectations reflect growth, business mix, integration of Gray Surety and the use of capital as the company builds the specialty insurance platform.
The insurer maintains a strong capital position and a debt-free balance sheet. As part of its shareholder return initiatives, Palomar continues to execute share buybacks.
With these strengths in place, Palomar expects adjusted net income to be in the range of $260-$275 million in 2026, up from the earlier guidance of $$210-$215 million.
Risks for PLMR
Palomar has been experiencing higher expenses driven by increases in incurred losses and loss adjustment expenses, interest expense, acquisition expenses and other underwriting expenses.
Palomar remains exposed to catastrophe losses from earthquakes, hurricanes, windstorms, floods and other severe events. PLMR expects the adjusted combined ratio for 2026 to be in the mid-70s, including expected catastrophe losses in its outlook.
Conclusion
Palomar’s focus on new business, premium growth across lines, rising investment yield and renewal of existing policies positions it well for growth. PLMR should also benefit from its solid product portfolio as well as geographic expansion. However, exposure to catastrophe losses and rising expenses can strain margin expansion. Mixed analyst sentiment keeps us cautious.
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PLMR Stock Declines 39.1% in a Year: What Should Investors Do Now?
Key Takeaways
Shares of Palomar Holdings, Inc. (PLMR - Free Report) have lost 39.1% in the past year compared with the industry’s decline of 6.2%.
Weakening underwriting margins, rising claims and operating expenses, and concerns associated with acquisition and catastrophe exposure likely have weighed on the insurer. However, premium growth across lines, expanding fee income, rising investment yield and disciplined reinsurance will sustain earnings compounding.
Image Source: Zacks Investment Research
Shares of its peers, The Allstate Corporation (ALL - Free Report) and The Travelers Companies, Inc. (TRV - Free Report) , have rallied 1.7% and 7.3%, respectively, while Arch Capital Group Ltd (ACGL - Free Report) has lost 7.6% in the same time frame.
Average Target Price for PLMR Suggests Upside
Based on short-term price targets offered by six analysts, the Zacks average price target is $154.83 per share. The average suggests a potential 44.4% upside from the last closing price.
Image Source: Zacks Investment Research
PLMR Shares Are Expensive
PLMR shares are trading at a premium to the industry. Its price-to-book value of 2.89X is higher than the industry average of 1.33X.
Image Source: Zacks Investment Research
PLMR’s Encouraging Growth Projection
The Zacks Consensus Estimate for Palomar’s 2026 earnings per share (EPS) indicates a year-over-year increase of 23.9%. The consensus estimate for revenues is pegged at $1.25 billion, implying a year-over-year improvement of 45.2%.
The consensus estimate for 2027 EPS and revenues indicates an increase of 12.9% and 20%, respectively, from the corresponding 2026 estimates.
Mixed Analyst Sentiment on PLMR
One of the three analysts covering the stock has raised estimates for 2026, while two analysts have revised their 2027 estimates upward over the past 60 days.
The Zacks Consensus Estimate for 2026 and 2027 earnings has moved up 1.1% and 0.7%, respectively, in the past 60 days.
PLMR’s Return on Capital
Return on equity is a measure of profitability reflecting how efficiently the company is utilizing its shareholders’ equity. Return on equity of 20.9% compares favorably with the industry’s average of 6%.
Also, the return on invested capital in the trailing-12 months was 20.3%, better than the industry average of 5.7%, reflecting the company’s efficiency in utilizing funds to generate income.
Factors Driving PLMR
Revenues have been increasing over the last several years on the back of higher premiums, net investment income, and commission and other income. Palomar’s fee-based platform, PLMR-FRONT, is positioned to drive medium-term growth. The addition of this revenue stream is expected to strengthen its earnings foundation.
The increasing volume of policies across multiple business lines, strong retention rates, and expansion into new geographic areas and distribution channels are expected to drive premiums. Premiums should also benefit from its specialty product portfolio, expanded producer appointments, strategic partnerships with other insurance carriers and rate increases. PLMR expects its net earned premium ratio to increase into the upper forties and anticipates slight improvements in the acquisition expense ratio for 2026.
PLMR identifies Surety as an attractive long-term growth opportunity. Like crop insurance, Surety is not correlated with the traditional property and casualty insurance cycle, offering diversification and stability.
Net investment income is expected to rise, supported by a high-quality fixed-income portfolio, higher average investment balances and improved yields. This solid investment base is poised to generate strong returns.
The company uses reinsurance to limit loss exposure and support policy limits through both excess of loss and quota share structures. For 2026, PLMR expects the loss ratio, including catastrophes, to be in the mid-to-upper thirties. PLMR expects the adjusted combined ratio for 2026 to be in the mid-70s. These expectations reflect growth, business mix, integration of Gray Surety and the use of capital as the company builds the specialty insurance platform.
The insurer maintains a strong capital position and a debt-free balance sheet. As part of its shareholder return initiatives, Palomar continues to execute share buybacks.
With these strengths in place, Palomar expects adjusted net income to be in the range of $260-$275 million in 2026, up from the earlier guidance of $$210-$215 million.
Risks for PLMR
Palomar has been experiencing higher expenses driven by increases in incurred losses and loss adjustment expenses, interest expense, acquisition expenses and other underwriting expenses.
Palomar remains exposed to catastrophe losses from earthquakes, hurricanes, windstorms, floods and other severe events. PLMR expects the adjusted combined ratio for 2026 to be in the mid-70s, including expected catastrophe losses in its outlook.
Conclusion
Palomar’s focus on new business, premium growth across lines, rising investment yield and renewal of existing policies positions it well for growth. PLMR should also benefit from its solid product portfolio as well as geographic expansion. However, exposure to catastrophe losses and rising expenses can strain margin expansion. Mixed analyst sentiment keeps us cautious.
Coupled with the solid growth projections, capital strength, as well as strong fundamentals and favorable return on capital, it is wise to retain this Zacks Rank #3 (Hold) insurer. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.