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Category: Stock Market and Palomar Inc
Date: 9 September 2019 Stock Price: $34.82 We take a look at the 2nd quarter earnings release of their 2019 fiscal year of Palomar, an insurance underwriting company.
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About Palomar
Founded in 2014, by a team with deep experience across underwriting, analytics, reinsurance and capital markets, Palomar, provides specialty property insurance products to both individuals and businesses focused on short tail, low frequency risks. Palomar is uniquely positioned to address approximately $20 billion of the $500+ billion U.S. property and casualty insurance market.
Through the use of proprietary data analytics and a modern technology platform, we offer our customers flexible products with customized and granular pricing on an admitted basis. Our primary lines of business include: Residential Earthquake, Commercial Earthquake, Specialty Homeowners, Commercial All Risk, Hawaii Hurricane, Residential Flood, and Real Estate Investor (“REI”). Our products are distributed through multiple channels, including retail agents, program administrators, wholesale brokers, and in partnership with other insurance companies.
Through the use of proprietary data analytics and a modern technology platform, we offer our customers flexible products with customized and granular pricing on an admitted basis. Our primary lines of business include: Residential Earthquake, Commercial Earthquake, Specialty Homeowners, Commercial All Risk, Hawaii Hurricane, Residential Flood, and Real Estate Investor (“REI”). Our products are distributed through multiple channels, including retail agents, program administrators, wholesale brokers, and in partnership with other insurance companies.
Financial overview of Palomar's latest earnings report
The numbers we are interested in (for the quarter):
- Gross written premiums: $58.36 million (up from $37.342 million for the same quarter of the previous year)
- Ceded written premiums: $24.632 million (down from $26.647 million for the same quarter of the previous year)
- Net income: $6.69 million (down from $6.934 million for the same quarter of the previous year)
- Diluted income per share: $0.3 (down from $0.41 for the same quarter of the previous year)
- Diluted number of shares outstanding: 22.105 million (up from 17 million for the same quarter of the previous year)
- Cash and cash equivalents: $14.404 million
- Cash and cash equivalents per share: $0.65
- Cash and cash equivalents makes up 4.12% of Palomar's total assets
- Cash and cash equivalents makes up 1.86% of Palomar's current market capital
- Premiums receivable: $33.878 million
- Trade receivables makes up 9.6% of Palomar's total assets
- Stockholders equity: $199.636 million
- Stockholders equity per share: $9.03
Palomar's management commentary on the results and earnings guidance
La Jolla, CA, August 12, 2019 – Palomar Holdings, Inc. (NASDAQ:PLMR) (“Palomar” or the “Company”) reported net income of $6.7 million, or $0.30 per diluted share, for the second quarter of 2019 compared to net income of $6.9 million, or $0.41 per diluted share, for the second quarter of 2018.
Second Quarter 2019 Highlights:
"We are pleased with our second quarter results, highlighted by gross written premium growth of 56.2%, year over year, driven by strong performance across all of our product lines. Additionally, we successfully renewed $470 million of our core reinsurance program at June 1, 2019 and purchased $200 million of incremental limit at the top of our reinsurance tower, expanding our coverage for earthquake events up to $1.05 billion. We continue to pursue what we believe is a substantial market opportunity while maintaining a thoughtful and conservative risk transfer strategy. Our retention remains at $5.0 million per earthquake or wind event, which not only provides loss protection but also strong visibility into our earnings,” commented Mac Armstrong, Chief Executive Officer and Founder. “Our core products continued to demonstrate high retention, improving pricing trends, and strong new business activity. In addition, we maintained our focus on developing innovative products that address underserved markets and saw increasing contributions from several of our newer product offerings including our recently launched Inland Marine and Assumed Reinsurance divisions. Looking forward, we believe we are well positioned for growth as we continue to scale our existing lines of business, introduce new products and expand our geographic footprint.”
Second Quarter 2019 Highlights:
- Gross written premiums increased by 56.2% to $58.3 million compared to $37.3 million in the second quarter of 2018
- Net income of $6.7 million compared to net income of $6.9 million in the second quarter of 2018
- Adjusted net income increased by 15.4% to $8.0 million compared to $6.9 million in the second quarter of 2018
- Total loss ratio of 2.8% compared to 4.0% in the second quarter of 2018
- Combined ratio of 69.2% compared to 65.1% in the second quarter of 2018
- Adjusted combined ratio(1) of 63.8%, compared to 65.1% in the second quarter of 2018 • Annualized return on equity of 17.8%
- Annualized adjusted return on equity of 21.2%
"We are pleased with our second quarter results, highlighted by gross written premium growth of 56.2%, year over year, driven by strong performance across all of our product lines. Additionally, we successfully renewed $470 million of our core reinsurance program at June 1, 2019 and purchased $200 million of incremental limit at the top of our reinsurance tower, expanding our coverage for earthquake events up to $1.05 billion. We continue to pursue what we believe is a substantial market opportunity while maintaining a thoughtful and conservative risk transfer strategy. Our retention remains at $5.0 million per earthquake or wind event, which not only provides loss protection but also strong visibility into our earnings,” commented Mac Armstrong, Chief Executive Officer and Founder. “Our core products continued to demonstrate high retention, improving pricing trends, and strong new business activity. In addition, we maintained our focus on developing innovative products that address underserved markets and saw increasing contributions from several of our newer product offerings including our recently launched Inland Marine and Assumed Reinsurance divisions. Looking forward, we believe we are well positioned for growth as we continue to scale our existing lines of business, introduce new products and expand our geographic footprint.”
Palomar Holdings (NASDAQ: PLMR) stock price history
The image below shows the stock price history of Palomar since its listing date in April 2019. It has been edging up slowly since its listing date. Around its listing date it was trading at $15 a stock and it is currently trading at $34.84. More than 100% returns provided to stockholders in the last 6 months. Palomar stock is also trading at a lot closer to its 52 week high than it is to its 52 week low, which is an indication that short term sentiment towards the stock is positive.
Palomar (NASDAQ: PLMR) latest stock valuation
So based on Palomar's latest earnings report what are their stock worth? Our valuation models provides a stock target (full value) price of $37.70 per stock. So we believe the stock is slightly undervalued at its current price. For us to see a stock as a real value buy it has to be at least 10% below our target price. So we would see a good buying opportunity at levels just below the $34 a stock. So we would recommend looking to enter Palomar stock at levels below $34.