Palomar Holdings, Inc. (PLMR) stock intrinsic value fair value estimate & owner earnings analysis

Palomar Holdings is a specialty property insurer that sells mainly through program administrators and brokers in the excess and surplus lines market. Its best-known products are earthquake cover (about 28% of 2025 gross written premiums), plus Hawaii hurricane, inland marine, flood and other property lines. Gross written premiums were $2.0 billion in 2025, up from $16.6 million in its first year in 2014. California is the largest state at 31% of 2025 premiums. How we measured earnings. We start from operating cash flow, then strip out the cash that comes only from the insurer's float growing (higher unearned premiums, loss reserves and ceded balances, net of premiums receivable and reinsurance balances), and subtract stock compensation. Capital spending is negligible. On that basis, earnings per diluted share were $0.38 (2019), $0.32 (2020), $1.96 (2021), $2.40 (2022), $3.08 (2023), $4.54 (2024) and $6.77 (2025). We anchor on the median of 2024 and 2025, or $5.66, because revenue more than doubled between 2023 ($376 million) and 2025 ($876 million) and earlier years describe a much smaller book. Six-month 2026 net income of $95.5 million versus $89.5 million a year earlier, and operating cash flow of $214 million versus $208 million, indicate the 2025 level is holding. We could not reconcile why reported revenue rose 57% in that half while net income rose only 7%, so we credit the level but give no growth beyond the low single digits. Base case ($104 per share). Earnings of $5.66 grow 5% in each of the first two years (versus 49% actual growth in 2025; the assumption is well below trailing actual), then 4% for two years, 3% for two years and 2% a year for the last four, reaching about $7.75 in year ten. That growth is credited because premiums already written are still being earned into revenue (unearned premiums rose $241 million in 2025) and because the company has organically grown premiums from $16.6 million in 2014 to $2.0 billion in 2025. After year ten we assume the franchise persists but with earnings fading 2% a year, as nothing in the filings evidences growth beyond that. Not credited: new product launches, share gains, or margin improvement. Bear case ($46 per share). The largest program administrator (Arrowhead) wrote 20.3% of 2025 premiums and the second largest 11.7%, so losing one would cut premium sharply. We assume earnings drop to about $3.80 (close to the 2022-2025 median) and stay flat for ten years, then fade 5% a year. Catastrophe losses themselves are capped for shareholders: retention is $20 million for earthquake and $11 million for hurricane and other perils, and reinsurance exhausts at $3.1 billion for earthquake, above the company's estimated 1-in-250-year peak zone loss. Bull case ($159 per share). Earnings hold at the 2025 level of $6.77 and grow 8% a year for five years and 5% for five more, reaching about $12.70, driven by premiums already written and the same distribution channels that took premiums from $16.6 million to $2.0 billion, then fade 2% a year after year ten. What would make this wrong. A large earthquake or hurricane loss far beyond the modeled range or the loss of a major program administrator would push results toward the bear case. Stock compensation ($21 million in 2025) is treated as a real cost. Debt is not deducted separately because interest is already reflected in cash flow. The margin-of-safety price is set at a wide discount to the base case because the business is exposed to catastrophe events and its earnings history on this basis is short.