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LA JOLLA, Calif. - Palomar Holdings, Inc. (NASDAQ:PLMR) announced Thursday it has entered into a definitive agreement to acquire The Gray Casualty & Surety Company for $300 million in cash, subject to customary closing adjustments.
The transaction, approved by both companies' boards of directors, is expected to close during the first half of 2026, pending regulatory approvals and other closing conditions. According to InvestingPro data, Palomar appears undervalued based on its Fair Value assessment, with analysts setting price targets between $134 and $168, suggesting potential upside for investors following this strategic acquisition.
Gray Surety specializes in contract bonds for midsized and emerging contractors across the United States. The company is licensed in all 50 states and operates through 13 regional offices.
"This transaction meaningfully enhances Palomar's surety franchise, bolstering our current market position and complementing our existing operations," said Mac Armstrong, Palomar's Chairman and Chief Executive Officer, in the press release statement.
Cullen Piske, President of Gray Surety, stated that joining Palomar provides the company with "financial strength, scale, and strategic support to expand our reach."
Gray Surety was founded in 1996 as a subsidiary of The Gray Insurance Company. In 2021, Bernhard Capital Partners made a significant investment in Gray Surety. The company is currently ranked among the Top 50 carriers in its sector.
Evercore is serving as exclusive financial advisor to Palomar, while J.P. Morgan is acting as exclusive financial advisor to Gray Surety.
Palomar Holdings is a specialty insurer serving residential and commercial clients across five product categories: Earthquake, Inland Marine and Other Property, Casualty, Fronting, and Crop. Its insurance subsidiaries hold A (Excellent) ratings from A.M. Best.
In other recent news, Palomar Holdings reported strong financial results for the second quarter of 2025, with an earnings per share of $1.76, surpassing the consensus estimate of $1.67. The company also achieved revenues of $496.3 million, exceeding projections by 8.1%. Despite these positive results, some analysts have adjusted their price targets for the company. Piper Sandler lowered its target to $151 due to concerns over a higher-than-expected expense ratio, although it maintained an Overweight rating. JPMorgan also reduced its price target to $158, citing slower growth in the earthquake insurance segment, but kept an Overweight rating. Keefe, Bruyette & Woods lowered their target to $172, noting unusual seasonality affecting the earnings report but retained an Outperform rating. Meanwhile, Truist Securities reiterated a Buy rating with a price target of $168, expressing confidence in the company's potential for sustained growth. These developments reflect a mix of optimism and caution among analysts regarding Palomar Holdings' future performance.
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