Highlights

  • Palomar shows 31.05% one-year basic EPS growth, a P/E of 19.05 and PEG of 0.93.
  • Second quarter gross written premiums were $630.5 million, up 27.0%.
  • Palomar declared its first cash dividend, $0.45 per share, on July 30.
  • Management raised full year adjusted net income guidance to $270 million to $280 million.

An undervalued growth stock pairs earnings growth with its P/E and PEG ratios, and Palomar (NASDAQ:PLMR) shows all three: basic earnings per share grew 31.05% over one year, the trailing twelve-month P/E ratio is 19.05 and the PEG ratio, on an expected basis, is 0.93, with shares trading at USD 137.14 on October 28, 2026, up 2.30%. Alongside those figures, the specialty insurer completed its acquisition of Gray Surety on January 31, approved a $200 million share repurchase program effective May 6, and reported second quarter 2026 diluted earnings per share of $1.94 against $1.68 in early August.

Palomar is based in La Jolla, California, and is a Delaware-incorporated insurance holding company founded in 2014. It provides property and casualty insurance products to individuals and businesses in five product categories: Earthquake, Inland Marine and Property, Casualty, Crop, and Surety & Credit. It serves the admitted and excess and surplus lines markets through retail agents, program administrators, wholesale channels and partnerships with other insurance companies, and reports a single operating segment.

Growth: Second Quarter Earnings, Premiums and Product Lines

Net income was $52,592 thousand in the second quarter against $46,528 thousand a year earlier, and $95,539 thousand for the first six months against $89,450 thousand. Second quarter basic earnings per share were $2.00 against $1.74, and diluted earnings per share were $1.94 against $1.68.

Gross written premiums were $630.5 million, up 27.0%, and net earned premiums were $287.0 million, up 59.5%. The company said premium growth was primarily due to higher policy volume, particularly in Casualty and Crop. Casualty premiums were $197,494 thousand, up 36.8%, Crop $77,368 thousand, up 96.0%, and Surety & Credit $39,218 thousand, up 235.6%.

The combined ratio was 83.3% against 78.8%, with a loss ratio of 34.5% against 25.7% and an expense ratio of 48.8% against 53.1%. Non-GAAP diluted adjusted earnings per share were $2.36 against $1.76.

Valuation: P/E of 19.05, PEG of 0.93 and Returns on Equity

The P/E ratio of 19.05 is measured on trailing twelve-month earnings, and the PEG ratio of 0.93 on expected growth. Annualized return on equity was 21.7% against 22.7%, and non-GAAP annualized adjusted return on equity was 26.3% against 23.7%. Stockholders' equity was $980.9 million at June 30, 2026, against $942.7 million at December 31, 2025, and non-GAAP tangible stockholders' equity was $744.2 million against $881.6 million.

On the second quarter earnings call, Chairman and Chief Executive Officer Mac Armstrong said the dividend does not change the growth strategy or limit the company's ability to execute its Palomar 2X plan.

Capital and Balance Sheet: Repurchases, First Dividend and Term Loan

Under the 2025 program of up to $150 million, Palomar repurchased 226,130 shares for $27.3 million in the six months, and no amount remains. The 2026 program, effective May 6, authorizes up to $200 million through May 6, 2028; 332,844 shares were repurchased for $36.8 million, leaving $163.2 million.

The Board declared the first cash dividend on the common stock, $0.45 per share, on July 30, payable September 2 to stockholders as of August 19, with an aggregate payment expected at approximately $12.2 million.

Gray Surety was acquired for aggregate consideration of approximately $314.0 million, funded with the term loan and cash on hand. The January 2026 credit agreement provides $450 million of unsecured facilities, a $150 million revolver and a $300 million term loan, both maturing January 27, 2031. The term loan balance was $295.8 million at June 30, 2026, with no borrowings on the revolver or the Federal Home Loan Bank line.

Disclosed Risks and Outlook: Loss Ratio, Pricing and 2026 Guidance

The company said Crop premiums are mostly recognized in the third quarter, so interim results may not indicate full-year performance. California generated 25.6% of gross written premiums in the six months. The company disclosed that PCSC is excluded from its internal control assessment while integration continues, and that it is party to ordinary-course legal proceedings not expected to have a material adverse effect. Armstrong said that in certain instances new business prices in large commercial earthquake are below the company's technical pricing levels.

On the call, management raised full year 2026 adjusted net income guidance to $270 million to $280 million, including $8 million to $12 million of expected catastrophe losses, and raised its 2026 Crop premium outlook to more than $400 million from approximately $320 million. It expects the adjusted combined ratio to increase to the mid-70s for 2026, with the high point in the third quarter.