Over the past six months, Palomar Holdings’s shares (currently trading at $115.84) have posted a disappointing 14.2% loss, well below the S&P 500’s 15.6% gain. This may have investors wondering how to approach the situation.
Following the pullback, is now a good time to buy PLMR? Find out in our full research report, it’s free.
Why Is PLMR a Good Business?
Founded in 2013 to fill gaps in catastrophe insurance markets, Palomar Holdings (NASDAQ: PLMR) is a specialty insurance provider that offers property and casualty insurance products in underserved markets, with a focus on earthquake coverage.
1. Net Premiums Earned Skyrocket, Fueling Growth Opportunities
When insurers sell policies, they protect themselves from extremely large losses or an outsized accumulation of losses with reinsurance (insurance for insurance companies). Net premiums earned are:
- Gross premiums - what’s ceded to reinsurers as a risk mitigation and transfer strategy
Palomar Holdings’s net premiums earned has grown at a 38.3% annualized rate over the last two years, much better than the broader insurance industry.
2. Growing BVPS Reflects Strong Asset Base
Book value per share (BVPS) serves as a key indicator of an insurer’s financial stability, reflecting a company’s ability to maintain adequate capital levels and meet its long-term obligations to policyholders.
Palomar Holdings’s BVPS increased by 16.5% annually over the last five years, and growth has recently accelerated as BVPS grew at an incredible 37.7% annual clip over the past two years (from $16.69 to $31.64 per share).
3. Projected BVPS Growth Is Remarkable
The key to book value per share (BVPS) growth is an insurer’s ability to earn underwriting profits while generating strong returns on its float - Warren Buffet’s secret sauce.
Over the next 12 months, Consensus estimates call for Palomar Holdings’s BVPS to grow by 24.9% to $31.81, elite growth rate.
Final Judgment
These are just a few reasons why Palomar Holdings is one of the best insurance companies out there. With the recent decline, the stock trades at 3.4× forward P/B (or $115.84 per share). Is now the time to initiate a position? See for yourself in our in-depth research report, it’s free.
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