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Here's Why Hold Strategy is Apt for Palomar Holdings (PLMR)

Palomar Holdings, Inc. PLMR has been in investors' good books on the back of a higher volume of policies written, new partnerships, rate increases and financial flexibility.

Growth Projections

The Zacks Consensus Estimate for Palomar’s 2022 earnings is pegged at $3.03, indicating a 47.8% increase from the year-ago reported figure on 45.4% higher revenues of $358.6 million. The consensus estimate for 2023 earnings stands at $3.85, indicating a 26.7% increase from the year-ago reported figure on 32.1% higher revenues of $473.8 million.

Estimate Revision

The Zacks Consensus Estimate for 2022 and 2023 has moved 5.6% and 1.3% north, respectively in the past 60 days. This should instill investors' confidence in the stock.

Zacks Rank

Palomar currently carries a Zacks Rank #3 (Hold). The stock has gained 5.9% in a year against the industry's decline of 0.9%.


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Return on Equity (ROE)

Palomar’s trailing 12-month return on equity (ROE) of 14.9% expanded 1070 basis points year over year. ROE reflects its efficiency in using its shareholders’ funds.

Business Tailwinds

Palomar’s premiums are likely to gain from a higher volume of policies written across lines of business, strong premium retention rates for an existing business, expansion of products’ geographic and distribution footprint and new partnerships.

Rate increases for commercial products are also likely to contribute to the premium growth of the insurer.

Higher policies written through the internal managing general agency, Palomar Insurance Agency are expected to boost the commission and other income of the insurer.

High-quality fixed income securities, a higher average balance of investments and higher yields on invested assets should continue to drive investment income going forward.

Palomar Excess and Surplus Insurance Company's (PESIC) growth is likely to be driven by its main products, commercial earthquake, commercial all risk, and builder’s risk.

For 2022, Palomar Holdings projects to generate adjusted net income in the range of $80 million to $85 million, which indicates 54% year-over-year growth and an adjusted ROE of 19% at the mid-point of the range.

Palomar has generated positive cash flows from operations over the past years. Also, its growing cash and cash equivalents indicates that the insurer has sufficient cash reserves to ensure financial stability. PLMR boasts a debt-free balance sheet.

Banking on a solid capital position, in January 2022, Palomar’s board of directors authorized a new two-year share buyback program of $100 million through Mar 31, 2024, of which $79.7 million remains under authorization after the buyback of $20 million worth of shares in the first half of 2022.

Stocks to Consider

Some better-ranked stocks from the property and casualty insurance industry are Arch Capital Group Ltd. ACGL, American Financial Group, Inc. AFG and ProAssurance Corporation PRA, each sporting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

The bottom line of Arch Capital surpassed earnings estimates in three of the last four quarters and missed in one, the average being 33.64%. In the past year, the insurer has rallied 20.1%.

The Zacks Consensus Estimate for Arch Capital’s 2022 and 2023 earnings has moved 3.6% and 4.8% north, respectively, in the past 60 days.

American Financial’s earnings surpassed estimates in each of the last four quarters, the average beat being 37.09%. In the past year, American Financial has lost 3.3%.

The Zacks Consensus Estimate for AFG’s 2022 and 2023 earnings has moved 4% and 4.3% north, respectively, in the past 60 days.

The bottom line of ProAssurance surpassed earnings estimates in three of the last four quarters and missed in one, the average being 150.9%. In the past year, the insurer has lost 21%.

The Zacks Consensus Estimate for ProAssurance’s 2022 and 2023 earnings has moved 25.9% and 13.9% north, respectively, in the past 60 days.


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ProAssurance Corporation (PRA): Free Stock Analysis Report
 
American Financial Group, Inc. (AFG): Free Stock Analysis Report
 
Arch Capital Group Ltd. (ACGL): Free Stock Analysis Report
 
Palomar Holdings, Inc. (PLMR): Free Stock Analysis Report
 
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