A month has gone by since the last earnings report for Palomar (PLMR). Shares have added about 12.5% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Palomar due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Palomar's Q4 Earnings and Revenues Top, Rise Y/Y

Palomar reported fourth-quarter 2023 operating income of 94 cents per share, which beat the Zacks Consensus Estimate by 10.6%. The bottom line increased 14.6% year over year. Palomar witnessed improved premiums and net investment income as well as improved losses and loss adjustment expenses.

Behind the Headlines

Total revenues improved 16% year over year to $102 million, mainly attributable to higher premiums and net investment income. The top line beat the Zacks Consensus Estimate by 7.7%.

Gross written premiums increased 26.8% year over year to $303.2 million. Our estimate was $269.6 million. Net earned premiums increased 14% year over year to $93.7 million. Our estimate was $87.9 million. The Zacks Consensus Estimate was pegged at $90 million.

Net investment income increased 58.9% year over year to $7 million, driven by higher yields on invested assets and a higher average balance of investments. The Zacks Consensus Estimate was pegged at $6.2 million. Our estimate was $6.3 million.

Palomar witnessed an underwriting income of $24.2 million, up 20.4% year over year. Adjusted underwriting income was nearly $29.3 million, rising 24.5% year over year.

Total expenses of $71.9 million increased 13% year over year due to loss and loss adjustment expenses. Our estimate was $68.3 million.

The loss ratio was 19.1, which improved 330 basis points (bps) year over year. Our estimate was 20.3. The Zacks Consensus Estimate was pegged at 20.9.

Adjusted combined ratio, excluding catastrophe losses, improved 260 bps year over year to 68.8. The Zacks Consensus Estimate was pegged at 72.

Full-Year Highlights

Adjusted income of $3.69 per share increased 33.2% year over year.

Gross written premiums increased 29.4% year over year to $1.1 billion.

Underwriting income of $80.8 million improved 30.1% year over year. Total loss ratio was 21%, which improved 390 bps year over year. Adjusted combined ratio was 71.2, which improved 440 bps year over year.

Financial Update

Cash and cash equivalents declined 25.1% from 2022-end to $52.4 million at 2023-end. Shareholder equity increased 22.5% from 2022-end to $471.3 million at the end of 2023.

Annualized adjusted return on equity in 2023 was 21.9%, up 360 bps year over year. As of Dec 31, 2023, $43.5 million remained under authorization.