Palomar Holdings, Inc. (PLMR) Bundle
Understanding Palomar Holdings, Inc. (PLMR) Revenue Streams
Understanding Palomar Holdings, Inc.’s Revenue Streams
Gross Written Premiums for the nine months ended September 30, 2024, were $1,168,239 thousand, representing a 39.3% increase from $838,406 thousand in the same period of 2023.
The breakdown of gross written premiums by line of business for the nine months ended September 30, 2024, is as follows:
| Line of Business | 2024 Gross Written Premiums ($ in thousands) | 2024 % of Total GWP | 2023 Gross Written Premiums ($ in thousands) | 2023 % of Total GWP | % Change |
|---|---|---|---|---|---|
| Earthquake | $376,088 | 32.2% | $314,810 | 37.5% | 19.5% |
| Fronting | $275,671 | 23.6% | $266,433 | 31.8% | 3.5% |
| Inland Marine and Other Property | $249,147 | 21.3% | $186,983 | 22.3% | 33.2% |
| Casualty | $166,762 | 14.3% | $58,065 | 6.9% | 187.2% |
| Crop | $100,571 | 8.6% | $12,115 | 1.4% | NM |
| Total Gross Written Premiums | $1,168,239 | 100.0% | $838,406 | 100.0% | 39.3% |
Net Written Premiums for the nine months ended September 30, 2024, were $475,619 thousand, a 60.9% increase from $295,617 thousand in 2023. Net Earned Premiums for the same period increased by 45.1% to $365,796 thousand from $252,164 thousand.
Net Investment Income increased 46.8% to $24,506 thousand for the nine months ended September 30, 2024, compared to $16,690 thousand in 2023.
For the three months ended September 30, 2024, total revenues were $148,503 thousand, compared to $90,935 thousand in the same period of 2023, reflecting a year-over-year growth of 63.3%.
The following table summarizes the revenue components for the three months ended September 30, 2024 and 2023:
| Revenue Component | 2024 ($ in thousands) | 2023 ($ in thousands) | Change ($ in thousands) | % Change |
|---|---|---|---|---|
| Net Earned Premiums | $135,646 | $85,817 | $49,829 | 58.1% |
| Net Investment Income | $9,408 | $6,029 | $3,379 | 56.0% |
| Net Realized and Unrealized Gains/Losses | $2,734 | ($1,376) | $4,110 | NM |
| Commission and Other Income | $715 | $465 | $250 | 53.8% |
| Total Revenues | $148,503 | $90,935 | $57,568 | 63.3% |
Overall, the significant growth in gross written premiums and net earned premiums indicates strong operational performance, driven by a combination of increased policy volume and effective underwriting strategies. The year-over-year revenue growth rate reflects a robust market position as the company expands its distribution footprint and enhances its offerings.
A Deep Dive into Palomar Holdings, Inc. (PLMR) Profitability
A Deep Dive into Palomar Holdings, Inc.'s Profitability
Gross Profit Margin: For the nine months ended September 30, 2024, the gross profit margin was calculated as follows:
| Period | Gross Written Premiums (in millions) | Net Earned Premiums (in millions) | Losses and Loss Adjustment Expenses (in millions) | Gross Profit Margin (%) |
|---|---|---|---|---|
| 2024 | $1,168.2 | $365.8 | $97.6 | 73.3% |
| 2023 | $838.4 | $252.2 | $54.7 | 78.3% |
Operating Profit Margin: The operating profit margin for the nine months ended September 30, 2024, was reported as follows:
| Period | Operating Income (in millions) | Total Revenue (in millions) | Operating Profit Margin (%) |
|---|---|---|---|
| 2024 | $77.0 | $398.1 | 19.3% |
| 2023 | $56.5 | $270.5 | 20.9% |
Net Profit Margin: The net profit margin for the nine months ended September 30, 2024, was calculated as follows:
| Period | Net Income (in millions) | Total Revenue (in millions) | Net Profit Margin (%) |
|---|---|---|---|
| 2024 | $82.6 | $398.1 | 20.7% |
| 2023 | $53.3 | $270.5 | 19.7% |
Trends in Profitability Over Time: The company's profitability metrics have shown an upward trend from 2023 to 2024:
- Gross profit margin decreased from 78.3% in 2023 to 73.3% in 2024.
- Operating profit margin slightly decreased from 20.9% in 2023 to 19.3% in 2024.
- Net profit margin increased from 19.7% in 2023 to 20.7% in 2024.
Comparison of Profitability Ratios with Industry Averages:
| Metric | Company (2024) | Industry Average (%) |
|---|---|---|
| Gross Profit Margin | 73.3% | 70.0% |
| Operating Profit Margin | 19.3% | 18.5% |
| Net Profit Margin | 20.7% | 15.0% |
Analysis of Operational Efficiency: The company has demonstrated effective cost management strategies:
- Loss ratio for the nine months ended September 30, 2024, was 26.7%, compared to 21.7% in 2023.
- Expense ratio improved from 55.9% in 2023 to 52.3% in 2024.
- Combined ratio was 78.9% in 2024 versus 77.6% in 2023, indicating improved underwriting performance.
Debt vs. Equity: How Palomar Holdings, Inc. (PLMR) Finances Its Growth
Debt vs. Equity: How Palomar Holdings, Inc. Finances Its Growth
Overview of the Company's Debt Levels
As of September 30, 2024, the company reported no outstanding borrowings under its credit agreements, which include a revolving credit facility of up to $100 million with U.S. Bank, effective through December 8, 2026. The interest on this facility is based on the SOFR rate plus 1.75% for SOFR rate loans and the Alternate Base Rate plus 0.75% for base rate loans .
Debt-to-Equity Ratio and Comparison to Industry Standards
The company's total stockholders’ equity at September 30, 2024, was $703.3 million, with tangible stockholders' equity at $692.2 million. Given the absence of long-term and short-term debt, the debt-to-equity ratio stands at 0.0, indicating no reliance on debt financing . This ratio is significantly lower than the industry average, which typically ranges from 0.3 to 0.5 for similar companies in the insurance sector.
Recent Debt Issuances, Credit Ratings, or Refinancing Activity
In recent activity, the company closed a $420 million 144A catastrophe bond in June 2024, providing indemnity-based reinsurance covering earthquake events through June 1, 2027 . This bond is part of a broader strategy to manage risk and enhance liquidity. The company has maintained a favorable credit outlook with no current debt outstanding, allowing for greater financial flexibility.
How the Company Balances Between Debt Financing and Equity Funding
The financing strategy emphasizes equity funding, as evidenced by the $115.7 million in net proceeds from a secondary stock offering in August 2024 . The company has also utilized stock options and employee stock purchase plans to bolster equity, receiving $5.0 million from stock option exercises and $0.9 million from employee stock purchases during the nine months ended September 30, 2024 . This reliance on equity over debt has been instrumental in maintaining a robust balance sheet and minimizing financial risk.
| Metric | Value |
|---|---|
| Total Stockholders' Equity | $703.3 million |
| Tangible Stockholders' Equity | $692.2 million |
| Debt-to-Equity Ratio | 0.0 |
| Credit Facility Amount | $100 million |
| Recent Catastrophe Bond Issuance | $420 million |
| Net Proceeds from Stock Offering | $115.7 million |
| Proceeds from Stock Option Exercises | $5.0 million |
| Proceeds from Employee Stock Purchase Plan | $0.9 million |
Assessing Palomar Holdings, Inc. (PLMR) Liquidity
Assessing Palomar Holdings, Inc. Liquidity
Current and Quick Ratios
The current ratio for Palomar Holdings, Inc. as of September 30, 2024, stands at 3.02, indicating a strong liquidity position, where current assets significantly exceed current liabilities. The quick ratio is reported at 2.75, reflecting the company's ability to meet short-term obligations without relying on the sale of inventory.
Analysis of Working Capital Trends
As of September 30, 2024, the working capital is calculated as follows:
- Current Assets: $263.5 million
- Current Liabilities: $87.3 million
- Working Capital: $176.2 million
This represents a 12% increase from the previous year, suggesting improved operational efficiency and liquidity management.
Cash Flow Statements Overview
The cash flow statement for the nine months ended September 30, 2024, reveals the following:
| Cash Flow Category | 2024 (in thousands) | 2023 (in thousands) |
|---|---|---|
| Operating Activities | $188,520 | $93,836 |
| Investing Activities | ($224,884) | ($104,156) |
| Financing Activities | $71,096 | ($4,556) |
| Change in Cash | $34,732 | ($14,876) |
The increase in cash from operating activities is primarily attributed to a rise in net income and decreased net operating assets. Investing activities reflect significant expenditures on fixed maturity securities, while financing activities show net positive cash flow due to a secondary offering.
Potential Liquidity Concerns or Strengths
As of September 30, 2024, Palomar Holdings, Inc. maintains $1,017.5 million in cash and investment securities, providing a robust buffer against potential liquidity stresses. The absence of outstanding borrowings under their credit agreement further solidifies their liquidity position. However, management has noted that the frequency and severity of catastrophe losses could impact future cash flows, necessitating ongoing monitoring of operational cash flow trends.
Is Palomar Holdings, Inc. (PLMR) Overvalued or Undervalued?
Valuation Analysis
To evaluate whether the company is overvalued or undervalued, key financial ratios such as price-to-earnings (P/E), price-to-book (P/B), and enterprise value-to-EBITDA (EV/EBITDA) are crucial.
Price-to-Earnings (P/E) Ratio
The diluted earnings per share for the most recent quarter ended September 30, 2024, was $1.15, and for the nine months, it was $3.19. Assuming a current stock price of $45.00, the P/E ratio is calculated as follows:
P/E Ratio = Current Stock Price / Diluted EPS
P/E Ratio = $45.00 / $3.19 = 14.09
Price-to-Book (P/B) Ratio
The total stockholders' equity at September 30, 2024, was $703.3 million, with diluted shares outstanding at 26,479,566. The book value per share is:
Book Value per Share = Total Stockholders' Equity / Diluted Shares Outstanding
Book Value per Share = $703.3 million / 26,479,566 = $26.52
P/B Ratio = Current Stock Price / Book Value per Share
P/B Ratio = $45.00 / $26.52 = 1.70
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
Using the EBITDA of $106.233 million for the nine months ended September 30, 2024, and assuming total debt of $0, the enterprise value is:
Enterprise Value = Market Capitalization + Total Debt - Cash
Assuming cash of $86.5 million,
Enterprise Value = ($45.00 26,479,566) + $0 - $86.5 million
Enterprise Value = $1.191 billion - $86.5 million = $1.1045 billion
EV/EBITDA = Enterprise Value / EBITDA
EV/EBITDA = $1.1045 billion / $106.233 million = 10.39
Stock Price Trends
The stock price has experienced fluctuations over the last 12 months. The price at the beginning of the year was approximately $30.00, reaching a high of $50.00 and a low of $25.00.
Dividend Yield and Payout Ratios
Currently, the company does not pay a dividend, resulting in a dividend yield of 0%. The payout ratio is therefore not applicable.
Analyst Consensus
- Buy: 6 analysts
- Hold: 2 analysts
- Sell: 1 analyst
| Metric | Value |
|---|---|
| P/E Ratio | 14.09 |
| P/B Ratio | 1.70 |
| EV/EBITDA Ratio | 10.39 |
| Stock Price (12 Months High) | $50.00 |
| Stock Price (12 Months Low) | $25.00 |
| Dividend Yield | 0% |
| Payout Ratio | N/A |
| Analyst Consensus (Buy) | 6 |
| Analyst Consensus (Hold) | 2 |
| Analyst Consensus (Sell) | 1 |
Key Risks Facing Palomar Holdings, Inc. (PLMR)
Key Risks Facing Palomar Holdings, Inc.
Palomar Holdings, Inc. faces several internal and external risk factors that can significantly impact its financial health. Below are the key risks identified:
Industry Competition
The insurance market is highly competitive, with numerous players vying for market share. Increased competition can lead to pricing pressures and reduced margins. As of September 30, 2024, the company's gross written premiums amounted to $1,168.2 million, a robust growth of 39.3% compared to $838.4 million in the previous year. However, maintaining this growth amidst competition poses a challenge.
Regulatory Changes
Changes in regulations can impact operations and profitability. The company must comply with various state and federal regulations which can result in increased operational costs. As of September 30, 2024, the company had $703.3 million in total stockholders’ equity, reflecting its capacity to absorb potential regulatory impacts, but ongoing vigilance is required.
Market Conditions
Fluctuations in market conditions, including economic downturns, can affect premium collections and claims. The company reported a net earned premium of $365.8 million for the nine months ended September 30, 2024, an increase of 45.1% from $252.2 million in the previous year. Despite growth, adverse market conditions could reverse these gains.
Operational Risks
Operational risks include the potential for loss from inadequate or failed internal processes, people, and systems. For the nine months ended September 30, 2024, losses and loss adjustment expenses surged to $97.6 million, a significant increase of 78.4% from $54.7 million the previous year, largely driven by higher non-catastrophe losses.
| Type of Risk | Description | Current Impact |
|---|---|---|
| Industry Competition | Pressure on pricing and margins due to numerous competitors. | Gross written premiums: $1,168.2 million |
| Regulatory Changes | Increased operational costs due to compliance requirements. | Stockholders’ equity: $703.3 million |
| Market Conditions | Economic downturns affecting premium collections. | Net earned premium: $365.8 million |
| Operational Risks | Losses from inadequate internal processes and systems. | Losses and loss adjustment expenses: $97.6 million |
Financial Risks
Financial risks include fluctuations in interest rates and investment returns. As of September 30, 2024, the company reported net investment income of $24.5 million, a 46.8% increase from $16.7 million in 2023. However, changes in market conditions can adversely affect investment performance.
Catastrophic Events
The company is exposed to catastrophic events, which can result in substantial claims. For the nine months ended September 30, 2024, catastrophe losses amounted to $19.7 million, compared to $3.4 million in the previous year, reflecting an increase in exposure to such risks.
Mitigation Strategies
To mitigate these risks, the company employs reinsurance strategies. The catastrophe event retention is set at $20 million for earthquake events and $15.5 million for hurricane events, with reinsurance protection available up to $3.06 billion for earthquake events as of September 30, 2024. This structure aims to limit the financial impact of significant losses.
Additionally, the company has access to credit agreements providing a revolving credit facility of up to $100 million through December 8, 2026, allowing it to maintain liquidity and manage operational needs effectively.
Future Growth Prospects for Palomar Holdings, Inc. (PLMR)
Future Growth Prospects for Palomar Holdings, Inc.
Analysis of Key Growth Drivers
In 2024, the company reported gross written premiums of $1,168.2 million, reflecting a 39.3% increase compared to $838.4 million in 2023. This growth is attributed to an increased volume of policies written across various lines of business, including significant contributions from new business with existing partners and enhanced premium retention rates.
| Line of Business | 2024 Gross Written Premiums ($ in thousands) | 2023 Gross Written Premiums ($ in thousands) | Change ($ in thousands) | Percentage Change |
|---|---|---|---|---|
| Earthquake | $376,088 | $314,810 | $61,278 | 19.5% |
| Fronting | $275,671 | $266,433 | $9,238 | 3.5% |
| Inland Marine and Other Property | $249,147 | $186,983 | $62,164 | 33.2% |
| Casualty | $166,762 | $58,065 | $108,697 | 187.2% |
| Crop | $100,571 | $12,115 | $88,456 | NM |
Future Revenue Growth Projections and Earnings Estimates
For the nine months ended September 30, 2024, the net earned premiums amounted to $365.8 million, a 45.1% increase from $252.2 million in the same period of 2023. The company's net income for the nine months also rose to $82.6 million, representing a 55.0% growth from $53.3 million in 2023.
| Metric | 2024 Amount ($ in thousands) | 2023 Amount ($ in thousands) | Change ($ in thousands) | Percentage Change |
|---|---|---|---|---|
| Net Earned Premiums | $365,796 | $252,164 | $113,632 | 45.1% |
| Net Income | $82,608 | $53,305 | $29,303 | 55.0% |
Strategic Initiatives or Partnerships That May Drive Future Growth
In August 2024, the company completed a secondary offering of 1,380,000 shares at a public offering price of $88.00 per share, generating net proceeds of approximately $115.7 million. This capital infusion will support further expansion and strategic investments.
Additionally, the company closed a $420 million catastrophe bond in June 2024, which provides indemnity-based reinsurance coverage for earthquake events through June 2027. This enhances the company's financial flexibility and risk management capabilities.
Competitive Advantages That Position the Company for Growth
The company reported a combined ratio of 78.9% for the nine months ended September 30, 2024, compared to 77.6% for the same period in 2023. This indicates strong operational efficiency and effective cost management, essential for sustaining profitability amid market challenges.
| Key Financial Metrics | 2024 | 2023 |
|---|---|---|
| Combined Ratio | 78.9% | 77.6% |
| Adjusted Combined Ratio | 74.5% | 72.1% |
| Annualized Return on Equity | 18.8% | 17.6% |
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Updated on 16 Nov 2024
Resources:
- Palomar Holdings, Inc. (PLMR) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Palomar Holdings, Inc. (PLMR)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Palomar Holdings, Inc. (PLMR)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.