Palomar Holdings: A High-Conviction Growth Play in a Resilient Insurance Sector

The insurance sector has long been a barometer of economic resilience, and Palomar Holdings (PLMR) is emerging as a standout performer in this space. With a compelling blend of robust fundamentals and technically favorable stock dynamics, the company presents a high-conviction opportunity for investors seeking exposure to a sector poised for sustained growth.

Fundamental Strength: A Foundation of Profitability and Strategic Expansion

Palomar's third-quarter 2025 results underscore its operational excellence. The company reported net income of $51.5 million, or $1.87 per diluted share, a 58% year-over-year increase, while adjusted net income surged 70% to $55.2 million, or $2.01 per diluted share. These figures reflect not only strong underwriting discipline but also the scalability of its insurance portfolio. Gross written premiums jumped 43.9% to $597.2 million, driven by "strong demand across its diverse portfolio of insurance products".

Equally impressive is Palomar's efficiency. Its adjusted combined ratio improved to 74.8% in Q3 2025, down from 77.1% in the same period in 2024, signaling better cost control and loss management. Annualized return on equity (ROE) of 23.9% and adjusted ROE of 25.6% further highlight its capital allocation prowess. The company's recent acquisition of The Gray Casualty and Surety Company, a strategic move to bolster its surety platform, positions it to capitalize on long-term growth in specialty insurance markets.

Technical Momentum: A Bullish Tapestry of Indicators

From a technical perspective, PLMR's stock has exhibited a compelling alignment with its fundamental strength. The share price of $135.38 as of Q3 2025 is above key moving averages: the 20-day (129.37), 50-day (125.31), 100-day, and 200-day averages. This "golden cross" pattern typically signals upward momentum and investor confidence. The Price Rate of Change (ROC) of 17.28 reinforces this optimism, indicating a "Buy" signal.

While the Relative Strength Index (RSI) of 66.37 suggests a neutral stance, the MACD (12,26) indicator at 3.90-a potential sell signal-is outweighed by the broader consensus. Technical analysis platforms highlight 11 bullish signals versus zero neutral or bearish ones for moving averages, with 8 "strong buy" indicators. This divergence between mixed short-term signals and overwhelmingly positive long-term trends suggests that PLMR is in a phase of consolidation ahead of a breakout.

Convergence of Fundamentals and Technicals: A Symbiotic Outlook

The alignment between Palomar's financial performance and its stock's technical trajectory is striking. The company's 12th consecutive earnings beat and raised 2025 guidance-from $198–208 million to $210–215 million in adjusted net income-have fueled investor enthusiasm, translating into elevated trading volumes and price action. Analysts have raised earnings estimates for 2025 and 2026, reflecting confidence in Palomar's ability to sustain its momentum.

This convergence is further validated by the stock's outperformance relative to its industry peers. Yahoo Finance notes that PLMR has outperformed its sector, a rare feat in a market where technical and fundamental narratives often diverge.

Risks and Considerations

No investment is without risk. The RSI's proximity to overbought territory (above 60) and the MACD's bearish signal warrant caution. However, these indicators should be viewed in context: Palomar's fundamentals provide a strong underpinning, and its strategic acquisitions, such as The Gray Casualty, offer long-term value creation. Investors should monitor the company's ability to maintain its combined ratio improvements and execute its expansion plans effectively.

Conclusion: A High-Conviction Play

Palomar Holdings exemplifies the rare synergy between technical and fundamental strength. Its triple-digit growth in net income, improved operational metrics, and strategic acquisitions form a solid foundation, while its stock's alignment with bullish technical indicators suggests continued momentum. For investors with a medium- to long-term horizon, PLMR represents a compelling case of a company leveraging both its business model and market dynamics to drive shareholder value.