What Happened?
Shares of specialty insurance provider Palomar Holdings (NASDAQ: PLMR) fell 9.9% in the morning session after its fourth-quarter 2025 earnings report revealed weaker-than-expected underwriting results, which overshadowed strong top- and bottom-line beats.
The company reported that revenue grew 62.7% year over year to $253.4 million, while adjusted earnings per share of $2.24 topped analyst estimates by 7.1%. However, investors focused on the insurer's core profitability. Palomar's combined ratio—a key measure of underwriting efficiency where a lower number is better—came in at 76.8%. While this was in line with the same quarter last year, it missed Wall Street’s expectations by 2.06 percentage points. The miss suggested underwriting profitability was not as strong as anticipated, prompting a negative reaction from the market despite the headline beats.
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What Is The Market Telling Us
Palomar Holdings’s shares are somewhat volatile and have had 10 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 6 months ago when the stock dropped 14.2% on the news that its mixed second-quarter financial report, where investors focused on weaker underwriting profitability despite a beat on earnings per share. The specialty insurer posted adjusted earnings of $1.76 per share, which topped analyst forecasts. However, the company's combined ratio, a key measure of profitability for insurers, landed at 78.8%, missing estimates. A higher combined ratio indicated that the company paid out more in claims and expenses relative to the premiums it earned. This detail overshadowed other positive news, including an increase in gross written premiums and a raised full-year profit forecast. The market reaction suggested that concerns about underwriting performance outweighed the strong earnings and improved outlook.
Palomar Holdings is down 9.5% since the beginning of the year, and at $119.29 per share, it is trading 32.1% below its 52-week high of $175.67 from June 2025. Investors who bought $1,000 worth of Palomar Holdings’s shares 5 years ago would now be looking at an investment worth $1,066.
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