On Wednesday, Evercore ISI updated its outlook on Palomar Holdings (NASDAQ:PLMR) shares, increasing the price target to $89 from the previous $88 while maintaining an In Line rating.
The adjustment reflects a positive perspective on the company's June 1 renewals, which included better-than-expected pricing and retention for Southeast wind coverage.
The firm noted that these renewals led Palomar to increase its full-year adjusted net income guidance by approximately $10 million.
The report highlighted Palomar's effective management of reinsurance costs and a strategic reduction in the size and probable maximum loss (PML) of its Southeast wind book, which saw a 35% decrease in cumulative all-risk gross written premiums in 2023.
The company's ability to lower its Southeast hurricane retention and increase its limit, now at $117.5 million in excess of $15.5 million compared to $100 million in excess of $17.5 million a year ago, was seen as a positive development.
This change was supported by a 21% growth in Palomar's common equity base and an expected improvement in the underlying quality of its book of business.
The analyst suggested that the renewal could be seen as a slight negative for reinsurers, indicating a potential lapse in discipline due to lower Southeast wind retention, although Palomar pointed out that the lower layer protection was costly.
Despite this, the overall rate decline of 3-4% was consistent with market expectations and slightly better than previously thought by the firm.
The report speculated on the possibility of other insurers reallocating savings from higher layers to afford more expensive lower layer protection, which could help sustain overall insurance rates.
Evercore ISI's commentary concluded by expressing interest in observing whether other insurers will follow Palomar's lead in using savings from higher layers to invest in pricier lower layer protections, potentially affecting overall rate support in the industry.
InvestingPro Insights
As Palomar Holdings (NASDAQ:PLMR) navigates a dynamic market landscape, real-time data from InvestingPro offers additional context to Evercore ISI's updated outlook. The company's market capitalization stands at approximately $2.02 billion, with a P/E ratio of 22.9, reflecting investor sentiment on its earnings potential. Notably, Palomar has experienced a robust revenue growth of nearly 19.84% over the last twelve months as of Q1 2024, underpinning the positive adjustments in its full-year guidance.
InvestingPro Tips highlight that Palomar is trading at a low P/E ratio relative to near-term earnings growth, which may appeal to value-oriented investors. Additionally, with analysts predicting the company to be profitable this year and considering its high return over the last year, there is a clear indication of financial resilience and potential for continued growth. For readers looking to delve deeper into Palomar's financial health and strategic positioning, InvestingPro offers 6 additional tips that could inform investment decisions. To access these insights and more, consider using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at Investing.com.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.