Yahoo Finance Palomar (PLMR) Raises Full-Year 2023 Net Income Guidance
Palomar Holdings, Inc. PLMR completed the renewal of certain reinsurance programs, beginning Jun 1, 2023. The company also raised its 2023 guidance for adjusted net income. The reinsurance program would provide the capacity for the company’s growth in subject business lines.
Palomar is a Property and Casualty (P&C) insurer exposed to catastrophe loss from earthquakes, hurricanes, windstorms, floods and other severe events. Companies in this space have to reinsure themselves to maintain stability in their income statements. In the first quarter, catastrophe losses surged more than three-fold year over year to $1.8 million. Hence, reinsuring itself against losses helps protect the company against any downside.
Through the above-mentioned reinsurance program, the company is transferring its risk related to insurance claims in exchange for some premium. This move will also reduce earnings volatility in the future. Palomar can take advantage of additional growth opportunities, given its low-risk profile due to the risk transfer arrangement.
The company expects net income for 2023 to be in the range of $88-$92 million. The raised guidance comes from lower insurance claims expenses expected in the future due to reinsurance activity. Moves like this showcases the company’s unwavering focus to protect its income statement and pursue ambitious growth activities. Palomar can also access additional capital by entering a reinsurance arrangement, boosting its growth trajectory.
Palomar reinsurance coverage is now extended to $2.7 billion for earthquake events. Apart from traditional reinsurance purchases, it also protects itself through catastrophe bonds. The company has also purchased $550 million of reinsurance to aid its expanding earthquake franchise in 2023, out of which $200 million was through a catastrophe bond. Palomar expects to reduce its risk profile further through reinsurance, deliver more predictable results and execute its 2X strategic objective.
Price Performance
Shares of Palomar have gained 4.7% year to date compared with the industry’s rise of 0.1%.
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Zacks Rank & Key Picks
Palomar currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks from the P&C insurance industry are HCI Group, Inc. HCI, RLI Corp. RLI and Axis Capital Holdings Limited AXS. HCI Group and RLI Corp. sport a Zacks Rank #1 (Strong Buy), while Axis Capital carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
HCI Group beat estimates in three of the last trailing four quarters and missed once, the average being 308.8%. In the past year, HCI has lost 22.9%.
The Zacks Consensus Estimate for HCI’s 2023 and 2024 earnings per share indicates a year-over-year increase of 140.2% and 45.5%, respectively.
RLI Corp.’s earnings surpassed estimates in each of the last trailing four quarters, delivering an average earnings surprise being 45.5%. In the past year, RLI Corp. has gained 6%.
The Zacks Consensus Estimate for RLI’s 2023 earnings has moved 3% north in the past 30 days.
Axis Capital beat estimates in three of the last four quarters and missed once, the average being 6.5%. The Zacks Consensus Estimate for 2023 has moved 0.5% north in the past 30 days.
The Zacks Consensus Estimate for AXS’ 2023 and 2024 earnings per share is pegged at $7.74 and $8.60, indicating a year-over-year increase of 33.2% and 11.1%, respectively. In the past year, AXS has lost 9.7%.
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