Specialty insurance provider Palomar Holdings (NASDAQ: PLMR) reported revenue ahead of Wall Streets expectations in Q3 CY2025, with sales up 64.8% year on year to $244.7 million. Its non-GAAP profit of $2.01 per share was 24.8% above analysts’ consensus estimates.

Is now the time to buy PLMR? Find out in our full research report (it’s free for active Edge members).

StockStory’s Take

Palomar Holdings’ third quarter results were positively received by the market, as management credited robust premium growth and expanding margins to its diversified specialty insurance portfolio and disciplined underwriting. CEO Mac Armstrong highlighted the company’s broad mix of admitted and excess and surplus (E&S) property and casualty offerings, noting, “All our product groups, save for fronting, experienced double-digit growth in the third quarter.” The addition of new specialty lines, including crop and surety, further enhanced the company’s balanced risk exposure and earnings consistency.

Looking forward, management sees further growth opportunities through the integration of the Gray Casualty and Surety Company acquisition and continued expansion in specialty lines. Armstrong pointed to a pipeline of strategic partnerships and technology investments to strengthen Palomar’s competitive position. CFO Chris Uchida emphasized the company’s focus on maintaining strong return on equity and underwriting discipline, stating, “Our Palomar 2X objective remains in focus, and we plan on doubling adjusted net income every 3 to 5 years.” Management also signaled ongoing investments in talent and technology to support sustained premium growth and operational scalability.

Key Insights from Management’s Remarks

Palomar’s management attributed the quarter’s strong performance to product diversification, investment in new markets, and disciplined risk management, which helped the company outperform industry benchmarks despite a dynamic insurance environment.

• Specialty product diversification: Management emphasized that all major product groups except fronting saw double-digit premium growth, with newer lines such as crop and surety scaling rapidly. This diversification reduces the company’s exposure to cyclical market swings.

• Earthquake and property growth: The company’s residential earthquake franchise achieved 11% year-over-year growth, supported by healthy new business production and high policy retention, while commercial earthquake faced ongoing rate pressure but still managed to grow due to a balanced portfolio approach.

• Expansion of crop and builders risk: Crop insurance premiums doubled year-over-year, driven by favorable market conditions and new talent in high-growth regions, while builders risk products also saw strong expansion with investments in underwriter talent in Boston and Dallas.

• Gray Surety acquisition: The $300 million acquisition of Gray Casualty and Surety Company, expected to close in early 2026, is set to enhance Palomar’s market presence in surety, especially in high-growth regions like Texas, Florida, and California, and add scale to its platform.

• Conservative reserving and risk management: Management maintained a conservative approach to reserving, particularly within its casualty business, where over 80% of reserves are held as incurred but not reported (IBNR), providing balance sheet strength and future earnings predictability.

Drivers of Future Performance

Management forecasts continued growth, driven by the integration of new acquisitions, a balanced product mix, and investment in technology and talent, while monitoring potential headwinds from commercial rate pressure and evolving market conditions.

• Gray Surety integration: The pending acquisition of Gray Surety is expected to accelerate growth in surety, giving Palomar a broader national footprint and the ability to write larger bonds. Management believes this will support the company’s goal of becoming a top-20 surety carrier.

• Crop and specialty line momentum: Investments in crop, builders risk, and healthcare liability lines are projected to sustain premium growth, with management targeting $500 million in crop premiums over the next several years and continued expansion in high-demand specialty products.

• Risk and margin management: While favorable loss ratios are expected to persist, management is cautious about ongoing rate pressure in commercial earthquake and the natural increase in attritional losses as the business mix evolves. Conservative reserving and diversified growth vectors remain central to sustaining margins and return on equity.

Catalysts in Upcoming Quarters

Looking ahead, our team will be watching (1) the successful integration and financial impact of the Gray Surety acquisition, (2) sustained growth in crop and specialty insurance lines as new talent and partnerships mature, and (3) the company's ability to navigate ongoing rate pressures in commercial earthquake. Execution on technology investments and expansion into new markets will also be important indicators of future performance.

Palomar Holdings currently trades at $127.80, up from $117.93 just before the earnings. Is the company at an inflection point that warrants a buy or sell? Find out in our full research report (it’s free for active Edge members).

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