PLMR — Palomar Holdings, Inc.

Summary of Palomar Holdings, Inc. Q3 2025 Earnings Call

1. Key Financial Results and Metrics

• Adjusted Net Income: Increased by 70% to $55.2 million, or $2.01 per share, compared to $32.4 million, or $1.23 per share, in Q3 2024.
• Gross Written Premiums: Rose 44% year-over-year to $597.2 million; 56% growth when excluding runoff business.
• Net Earned Premiums: Increased by 66% to $225.1 million.
• Adjusted Combined Ratio: Improved to 74.8% from 77.1% in the prior year.
• Adjusted Return on Equity (ROE): Annualized at 25.6%, up from 21% year-over-year.
• Investment Income: Increased by 55% to $14.6 million, driven by higher yields on investments.

2. Strategic Updates and Business Highlights

• Acquisition of Gray Casualty and Surety Company: A $300 million deal expected to close in Q1 2026, enhancing Palomar's surety platform and market presence in key states (Texas, Florida, California).
• Growth in Specialty Products: Significant growth in the crop insurance segment, doubling year-over-year to $120 million in gross written premiums, with a revised expectation of $230 million for 2025.
• Earthquake Franchise: Grew 11% year-over-year, with strong policy retention at 88% for the residential earthquake business.
• Casualty Business: Achieved 170% year-over-year growth, with a disciplined approach to underwriting and managing volatility.

3. Forward Guidance and Outlook

• Adjusted Net Income Guidance: Raised to $210 million to $215 million for 2025, implying a growth of over 59% year-over-year.
• Long-term Growth Target: Commitment to the "Palomar 2X" initiative, aiming to double adjusted net income every 3 to 5 years.
• Net Earned Premium Ratio: Expected to improve sequentially from Q3 2025 through Q1 2026.

4. Bad News, Challenges, or Points of Concern

• Commercial Earthquake Rate Pressure: Continued rate declines of approximately 18% in Q3, with expectations that this trend may persist, impacting profitability.
• Fronting Premium Decline: A 32% year-over-year decrease due to the termination of a partnership, although underlying performance is expected to improve in future quarters.
• Loss Ratio: Anticipated to be around 30% for the year, reflecting the impact of growing lines with higher attritional losses.

5. Notable Q&A Insights

• Market Position in Surety: The acquisition of Gray Surety aims to enhance Palomar's market position, with plans to move from a top 30 to a top 20 surety carrier by expanding geographic reach and cross-selling opportunities.
• Future of Crop Business: Management expressed confidence in the growth trajectory of the crop business, targeting $500 million in premiums in the near term, supported by favorable market conditions and strategic hires.
• Rate Environment: Management indicated that while rate pressures in commercial earthquake insurance are expected to continue, the residential earthquake segment remains robust, providing a hedge against declines.
• Stickiness of Flood Policies: Strong retention and new business interest in flood insurance were noted, particularly due to the temporary shutdown of the National Flood Insurance Program.

Overall, Palomar Holdings demonstrated strong financial performance in Q3 2025, with strategic acquisitions and growth in specialty insurance products, while navigating challenges in certain segments and maintaining a positive long-term outlook.