PLMR — Palomar Holdings, Inc.

Summary of Palomar Holdings, Inc. Q4 2025 Earnings Call

1. Key Financial Results and Metrics

• Q4 2025 Results:
  • Adjusted net income: $61.1 million ($2.24 per share), up 48% YoY.
  • Gross written premiums: $492.6 million, up 32% YoY.
  • Adjusted combined ratio: 73.4%, compared to 71.7% in Q4 2024.
  • Adjusted return on equity: 26.9%, up from 23.1% YoY.
  • Net investment income: $16 million, a 41.3% increase YoY.
• Full Year 2025 Results:
  • Adjusted net income: $216.1 million, up 62% YoY.
  • Gross written premiums: $2 billion, up 32% YoY.
  • Adjusted combined ratio: 72.7%, improved from 73.7% in 2024.
  • Adjusted diluted earnings per share: $7.86, a 54% increase YoY.

2. Strategic Updates and Business Highlights

• Executed on four strategic imperatives: integration and operation, building new market leaders, maintaining disciplined underwriting, and generating consistent earnings.
• Expanded into new verticals, particularly in Casualty and Crop insurance, while maintaining a balanced portfolio across admitted and E&S products.
• Successfully integrated two specialty franchises and announced the acquisition of Gray Casualty & Surety, enhancing the surety business.
• Focused on leveraging AI for underwriting workflow, portfolio optimization, and operational efficiency.

3. Forward Guidance and Outlook

• 2026 Guidance:
  • Adjusted net income forecast: $260 million to $275 million, implying 24% growth.
  • Anticipated adjusted return on equity: greater than 20%.
  • Expected loss ratio (including catastrophes): mid- to upper 30s.
  • Adjusted combined ratio for 2026 projected in the mid-70s.
  • Crop premium expected to grow over 30% in 2026, with a target of $500 million in premium.

4. Bad News, Challenges, or Points of Concern

• Earthquake Segment:
  • Commercial earthquake premiums declined by 15% YoY, with competitive pressures expected to persist into 2026.
  • The Earthquake franchise overall saw a slight decline of 2% YoY, attributed to a one-time headwind from a large premium transfer in 2024.
• Loss Ratios:
  • The loss ratio for Q4 was 30.4%, up from 25.7% YoY, driven by higher attritional losses in Casualty and Crop businesses.
  • Concerns about potential deterioration in future loss ratios due to increased retention and growth in lower-margin lines like Crop.

5. Notable Q&A Insights

• Retention in Crop Insurance: Increasing retention to 50% is expected to contribute an additional $8 million in pretax income for every $100 million in premium retained, though Crop is a lower-margin business.
• Reinsurance Costs: A projected 10% reduction in reinsurance costs is based on risk-adjusted terms, with expectations for modest growth in earthquake premiums.
• Casualty Underwriting: The team has added strong talent, with expectations for moderate growth from new hires without overextending in the market.
• Fronting Business: No longer a strategic focus; existing partnerships will be integrated into relevant product categories, reflecting a shift in capital allocation strategy.

Overall, Palomar Holdings demonstrated strong financial performance in 2025, with significant growth in premiums and income, while navigating challenges in specific segments like commercial earthquake insurance. The company remains optimistic about its growth trajectory and strategic initiatives for 2026.