Palomar Holdings (NASDAQ:PLMR) Reports Strong Q3, Stock Soars

Specialty insurance provider Palomar Holdings (NASDAQ:PLMR) reported Q3 CY2025 results beating Wall Street’s revenue expectations, with sales up 64.8% year on year to $244.7 million. Its non-GAAP profit of $2.01 per share was 24.8% above analysts’ consensus estimates.

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Mac Armstrong, Chairman and Chief Executive Officer, commented, “Our third quarter results were exceptional, highlighted by record gross written premium and adjusted net income. We continue to achieve strong top and bottom-line growth as gross written premium grew 44% and adjusted net income increased a stellar 70% across our unique and diverse portfolio. This strong growth underscores the stability of our balanced book of E&S and admitted residential and commercial property and casualty products. Our operating and return metrics were also impressive as we generated an adjusted combined ratio of 75%, and a 26% adjusted return on equity.”

Company Overview

Founded in 2013 to fill gaps in catastrophe insurance markets, Palomar Holdings (NASDAQ:PLMR) is a specialty insurance provider that offers property and casualty insurance products in underserved markets, with a focus on earthquake coverage.

Revenue Growth

In general, insurance companies earn revenue from three primary sources. The first is the core insurance business itself, often called underwriting and represented in the income statement as premiums earned. The second source is investment income from investing the “float” (premiums collected upfront not yet paid out as claims) in assets such as fixed-income assets and equities. The third is fees from various sources such as policy administration, annuities, or other value-added services. Luckily, Palomar Holdings’s revenue grew at an incredible 37.1% compounded annual growth rate over the last five years. Its growth surpassed the average insurance company and shows its offerings resonate with customers, a great starting point for our analysis.

We at StockStory place the most emphasis on long-term growth, but within financials, a half-decade historical view may miss recent interest rate changes, market returns, and industry trends. Palomar Holdings’s annualized revenue growth of 47.2% over the last two years is above its five-year trend, suggesting its demand was strong and recently accelerated.

This quarter, Palomar Holdings reported magnificent year-on-year revenue growth of 64.8%, and its $244.7 million of revenue beat Wall Street’s estimates by 10.2%.

Net premiums earned made up 92.9% of the company’s total revenue during the last five years, meaning Palomar Holdings lives and dies by its underwriting activities because non-insurance operations barely move the needle.

Our experience and research show the market cares primarily about an insurer’s net premiums earned growth as investment and fee income are considered more susceptible to market volatility and economic cycles.

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Net Premiums Earned

When insurers sell policies, they protect themselves from extremely large losses or an outsized accumulation of losses with reinsurance (insurance for insurance companies). Net premiums earned are therefore gross premiums less what’s ceded to reinsurers as a risk mitigation and transfer strategy.

Palomar Holdings’s net premiums earned has grown at a 37.4% annualized rate over the last five years, much better than the broader insurance industry and in line with its total revenue.

When analyzing Palomar Holdings’s net premiums earned over the last two years, we can see that growth accelerated to 46.1% annually. Since two-year net premiums earned grew slower than total revenue over this period, it’s implied that other line items such as investment income grew at a faster rate. These extra revenue streams are important to the bottom line, yet their performance can be inconsistent. Some firms have been more successful and consistent in managing their float, but sharp fluctuations in the fixed income and equity markets can dramatically affect short-term results.

Palomar Holdings’s net premiums earned came in at $225.1 million this quarter, up a hearty 66% year on year and topping Wall Street Consensus estimates by 5.7%.

Key Takeaways from Palomar Holdings’s Q3 Results

It was good to see Palomar Holdings beat analysts’ EPS expectations this quarter. We were also excited its net premiums earned outperformed Wall Street’s estimates by a wide margin. Zooming out, we think this was a good print with some key areas of upside. The stock traded up 8.5% to $128 immediately after reporting.

Sure, Palomar Holdings had a solid quarter, but if we look at the bigger picture, is this stock a buy? The latest quarter does matter, but not nearly as much as longer-term fundamentals and valuation, when deciding if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free for active Edge members.