Can Strong Premium Growth Sustain Palomar's Earnings Momentum?

Palomar Holdings, Inc. PLMR, a specialty insurance provider, offers coverage across earthquake, inland marine, property, casualty, crop, and surety and credit markets. Its diversified specialty portfolio and disciplined underwriting approach remain key drivers of profitability.

Palomar's premium growth has remained a key earnings catalyst. In the second quarter of 2026, gross written premiums increased 27% year over year to $630.5 million, driven by broad-based momentum across casualty, crop, inland marine and property, and surety and credit. New business production and policy count increased year over year, while premium retention exceeded 96%, supporting sustained earned premium growth.

The company continues to grow premiums through new products, distribution relationships, program partnerships, geographic expansion and rate increases in selected lines. In the second quarter of 2026, net earned premiums surged 59.5% year over year to $287 million, aided by improved excess-of-loss reinsurance terms, greater premium retention, growth in quota-share businesses, such as crop, as well as the Gray Surety acquisition.

Higher premiums are contributing to underwriting income and earnings, although pricing remains critical to profitability. In second-quarter 2026, the adjusted combined ratio increased to 76.7% from 73.1%, while commercial earthquake pricing remains competitive. Still, the larger premium base supported higher underwriting income and earnings.

Overall, Palomar's specialty-market expertise, strong premium growth and disciplined underwriting provide a solid foundation for continued earnings growth. Sustaining this momentum will depend on balancing expansion with adequate pricing and underwriting profitability.

What About Its Peers?

Axis Capital Holdings Limited AXS, a global specialty underwriter, has a strategic focus on specialty products, such as professional liability, cyber, marine and aviation. AXS has been witnessing an increase in its top line over a considerable period of time on the back of higher net premiums, led by its strong Insurance segment. It continues to boost shareholder value through buybacks and dividend hikes.

RLI Corp. RLI, another specialty insurer, benefits from premium growth across its diversified property, casualty and surety businesses. The insurer continues to emphasize disciplined underwriting while pursuing profitable premium growth. It also benefits from investment income generated from its growing invested asset base, providing an additional source of earnings.

PLMR’s Price Performance

Shares of PLMR have gained 12.7% in the past three months compared with the industry’s growth of 4.6%.

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PLMR’s Expensive Valuation

The stock is overvalued compared with its industry. It is currently trading at a price-to-book value multiple of 3.48, higher than the industry average of 1.41.

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Favorable Estimate Movement for PLMR

The Zacks Consensus Estimate for Palmar’s 2026 earnings per share (EPS) indicates a year-over-year increase of 27.5%. The consensus estimate for revenues is pegged at $1.29 billion, implying a year-over-year improvement of 49.3%.

The consensus estimate for 2027 EPS and revenues indicates an increase of 11.3% and 19.5%, respectively, from the corresponding 2026 estimates.

The Zacks Consensus Estimate for PLMR’s 2026 and 2027 EPS has moved up 2.3% and 2.7%, respectively, in the past 30 days.

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PLMR stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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