Pelagos Insurance Capital: 2Q26 Wrap: Reducing EPS Estimates Modestly on Slower Premium Growth

Research evidence excerpt

J P M O R G A N

North America Equity Research

17 August 2026

Pelagos Insurance Capital

2Q26 Wrap: Reducing EPS Estimates Modestly on

Slower Premium Growth

Underweight

PLGO, PLGO US

Price (14 Aug 26):$23.84

▼Price Target (Dec-27):$25.00

Prior (Dec-27):$26.00

Adjusting EPS estimates and reducing December 2027 price target from $26

to $25; no change to Underweight rating. PLGO reported 2Q26 earnings on

8/12/26 and held its earnings call the following day.

We are adjusting EPS estimates as follows: 3Q26 from $0.86 to $0.82, 4Q26

from $1.01 to $1.12, and 2027 from $4.33 to $4.28. Our updated model reflects

(1) lower net earned premiums and investment income, mostly offset by (2) a

slightly better combined ratio. Management had guided to 3Q26 insurance net

earned premiums being “similar” to the second quarter (we are assuming $533

million in 3Q26 compared to $515 million in 2Q26), and 3Q26 reinsurance net

earned premiums to range from $130-160 million (we are assuming $159

million). PLGO is also guiding to a mid-40s loss ratio in both insurance and

reinsurance over time (with differing distributions between attritional and

catastrophe/large loss), but we are assuming loss ratios closer to the low-40s.

We note that a mid-40s loss ratio would imply overall combined ratios

closer to the mid-90s, which is worse than PLGO’s mid- to high-80s CR target.

2Q26 summary: margins pressured by large losses, premium growth

weaker than expected. Operating EPS of $0.34 was well below our and

consensus estimate of $0.88. Reserve releases (+$0.02 per share after taxes)

were more favorable than expected, adjusting for which, we estimate PLGO

would have earned $0.32. Alternative investment income was also favorable,

but PLGO does not include this item in operating income. Turning to

underwriting, results were weaker, driven by lower earned premiums (-$0.20)

and higher catastrophe/large losses (-$0.70), partly offset by lower expenses

(+$0.28) and attritional losses (+$0.07). Unlike other insurance carriers, where

we normalize for both prior-year development and catastrophe losses, for

PLGO we adjust only for PYD variances, as we consider potential exposure to

…