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, a 32% increase YoY.
  • Adjusted combined ratio: 73.4%, slightly worse than 71.7% in Q4 2024.
  • Adjusted return on equity: 26.9%, compared to 23.1% in the prior year.

• Full Year 2025 Results:

  • Adjusted net income: $216.1 million, a 62% increase YoY.
  • Gross written premiums: $2 billion, up 32% YoY.
  • Adjusted combined ratio: 72.7%, improved from 73.7% in 2024.
  • Adjusted return on equity: 25.9%, compared to 22.2% in 2024.

2. Strategic Updates and Business Highlights

• Palomar executed on its four strategic imperatives for 2025, focusing on integration, market leadership, disciplined underwriting, and consistent earnings.
• Successful integration of acquisitions, including First Indemnity of America and Advanced Ag Protection, with a new acquisition of Gray Casualty and Surety announced.
• Growth in various segments:
  • Casualty business saw a 120% increase in gross written premiums.
  • Inland marine and other property group grew 30% YoY.
  • Crop franchise exceeded expectations with $248 million in written premium.
• Continued investment in talent, growing the workforce to over 500 professionals.

3. Forward Guidance and Outlook

• For 2026, Palomar expects adjusted net income between $260 million and $275 million, implying a 24% growth from 2025.
• Guidance assumes a $10 million catastrophe load and a 10% decrease in excess of loss property catastrophe reinsurance renewal costs.
• Strategic imperatives for 2026 include leveraging scale for growth, curating a distinct portfolio, expanding market presence, and enhancing operational execution through AI.

4. Bad News, Challenges, or Points of Concern

• The earthquake franchise experienced a 2% decline YoY, attributed to competitive pressures and a one-time headwind from prior year premiums.
• Commercial earthquake rates are expected to remain under pressure, with a 15% decline noted.
• The casualty book's growth may be tempered by a higher loss ratio due to increased retention and growth in lower-margin segments like crop insurance.
• Concerns about the sustainability of high returns as the business diversifies away from earthquake insurance, which traditionally has higher margins.

5. Notable Q&A Insights

• Management clarified that the 10% reduction in reinsurance costs is on a risk-adjusted basis.
• The company plans to retain more crop insurance, which is expected to contribute positively to earnings despite being a lower-margin business.
• The underwriting team expansion is expected to contribute to growth, but management emphasized a cautious approach to avoid overextending.
• The discussion highlighted the importance of conservative reserving practices, with 80% of reserves held as IBNR, which supports balance sheet strength.

Overall, Palomar Holdings reported strong financial performance in 2025, with significant growth across various segments and a positive outlook for 2026, despite facing competitive pressures and challenges in certain lines of business.