Palomar Holdings (PLMR) Moves to HOLD
Yesterday Palomar (PLMR) issued a press release detailing estimated Q3 pretax catastrophe losses, net of reinsurance, of $34 million to $38 million from Hurricanes Hanna, Isaias, Laura and Sally. Reinsurance caps losses at $10 million per event so the assumption here is that the cap was hit on a couple of these events. As of mid-morning Tuesday, the stock is down around 16% since these numbers are likely considerably larger than were factored into analyst estimates. I haven’t seen an 8-K filed with the SEC yet so we don’t have much of an explanation as to exactly what happened. In my view that will be necessary before moving the stock to buy as I’d like to know if this was a breakdown in risk management or simply the result of an active hurricane season, which wasn’t the case in 2019 (the first hurricane season in which Palomar was publicly traded).
Big picture, I don’t think this changes the story (some exposure to severe weather is, obviously, part of the risk of owning this type of company) and we still have a modest gain. But as always, a double-digit decline dents confidence and we’d like more details to aid in rebuilding that, or at least see evidence of a swift rebound in the stock, before moving back to buy. HOLD