Palomar Holdings: Riding Out the Correction with a Strong Business Model

Palomar Holdings is a specialty insurance company that provides customized coverage for emerging, high-risk, or difficult-to-insure exposures. The company's unique offerings set it apart from traditional insurance providers, making it an attractive option for businesses and individuals seeking tailored protection. Despite recent market volatility, Palomar Holdings remains a solid investment opportunity, with its diversified portfolio and strong financial position making it well-equipped to weather any storms.

Palomar Holdings (NASDAQ: PLMR) is a specialty insurance company that stands out in the market by providing customized coverage for emerging, high-risk, or difficult-to-insure exposures. The company's unique offerings, which include earthquake, inland marine, and crop insurance, set it apart from traditional insurance providers, making it an attractive option for businesses and individuals seeking tailored protection.

Palomar Holdings has been experiencing significant growth, with its stock surging about 79.4% over the past year, far outpacing the S&P 500’s 12.5% gain [2]. This growth has been driven by robust premium growth, with gross written premiums up 28.8% year-on-year in Q2 2025 [2]. The company’s underwriting success is evident in its adjusted combined ratio of 73% for Q2, which indicates strong profitability and efficient risk management [1].

In recent developments, Palomar Holdings has expanded its product offerings through strategic partnerships and acquisitions. For instance, the company entered into a partnership with Neptune Flood, a tech-driven private flood insurance provider, in June 2025 [1]. This partnership will allow Palomar to access advanced AI technology for underwriting and tap into the growing flood insurance market. Additionally, Palomar has made acquisitions in the crop insurance and surety segments, further diversifying its portfolio [2].

Despite recent market volatility, Palomar Holdings remains a solid investment opportunity. The company’s diversified portfolio and strong financial position make it well-equipped to weather any storms. Its balance sheet is robust, with no net debt and a growing book value per share (BVPS), which has seen 37.7% annual growth over the last two years [1]. The company's strategic use of reinsurers has also helped to manage risk effectively, with ceded earned premiums increasing by only about 11% compared to a 28.8% increase in gross written premiums [1].

However, investors should be aware of potential risks. Catastrophe exposure, regulatory changes, and free cash flow volatility are among the key risks that could impact Palomar Holdings' performance. The company's free cash flow yield has been negative at –3.87%, which signals that capital is tied up in reserves or working capital [2]. Additionally, the company's high stand-alone volatility of 62.98% indicates significant price swings, even when the wider market is calm [2].

In conclusion, Palomar Holdings is a specialty insurance company with a strong track record of growth and financial performance. Its unique offerings, strategic partnerships, and diversified portfolio make it an attractive investment option for those seeking exposure to the specialty insurance market. However, investors should be mindful of potential risks and the company's free cash flow volatility.

References:
[1] https://seekingalpha.com/article/4818108-palomar-holdings-running-on-all-cylinders-buy-correction
[2] https://finimize.com/content/plmr-asset-snapshot