Palomar Holdings, Inc. (PLMR) Q4 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The company demonstrated strong growth across various segments, particularly in Casualty and Crop, with record premiums exceeding expectations. Despite some pressure in the earthquake segment, overall performance was robust, supported by increased net investment income and raised income guidance. The acquisition of Gray Surety and strategic focus on organic growth and share repurchases further enhance prospects. Market conditions remain favorable, and the company's prudent capital deployment and underwriting strategies suggest a positive outlook. Given the market cap, the stock is likely to experience a positive movement of 2% to 8%.
Key Financial Performance
Gross Written Premium (Full Year 2025) $2 billion, a 32% increase year-over-year. This growth was attributed to strong performance across various business segments.
Adjusted Net Income (Full Year 2025) $216.1 million, a 62% increase year-over-year. The increase was driven by strong underwriting performance and operating leverage.
Adjusted Return on Equity (Full Year 2025) 25.9%, up from 22.2% in 2024. This improvement reflects the company's profitability and efficient use of equity.
Gross Written Premium (Q4 2025) $492.6 million, a 32% increase year-over-year. Growth was driven by diversified portfolio performance.
Adjusted Net Income (Q4 2025) $61.1 million, a 48% increase year-over-year. The growth was attributed to strong underwriting income and operational efficiency.
Adjusted Combined Ratio (Q4 2025) 73.4%, compared to 71.7% in Q4 2024. The slight increase was due to higher attritional losses associated with growth in Casualty and Crop business.
Net Earned Premiums (Q4 2025) $233.5 million, a 61% increase year-over-year. This was driven by a higher ratio of net earned premiums to gross earned premiums.
Loss Ratio (Q4 2025) 30.4%, compared to 25.7% in Q4 2024. The increase was due to higher attritional losses in Casualty and Crop business, partially offset by favorable development.
Net Investment Income (Q4 2025) $16 million, a 41.3% increase year-over-year. The growth was due to higher yields on invested assets and a higher average balance of investments.
Crop Franchise Gross Written Premium (Full Year 2025) $248 million, exceeding the original expectation of $200 million. The growth was driven by strong execution and expansion into new states and products.
Earthquake Franchise (Q4 2025) Declined 2% year-over-year due to a one-time headwind from a large under premium transfer in Q4 2024. Adjusting for this, growth would have been positive.
Inland Marine and Other Property Group (Q4 2025) Grew 30% year-over-year, driven by strong performance in Builders Risk, Hawaiian Hurricane products, and flood book.
Casualty Business Gross Written Premium (Q4 2025) 120% year-over-year growth. Growth was driven by strong momentum in E&S Casualty, contractors general liability, and environmental liability.
Adjusted Underwriting Income (Q4 2025) $62.3 million, a 52% increase year-over-year. This was due to strong underwriting performance.
You have reached the limit. Sign up to access full content
Get started
Operating Highlights
Casualty and Crop verticals: Scaled newer verticals in Casualty and Crop while maintaining underwriting discipline.
Gray Casualty & Surety acquisition: Closed acquisition of Gray Casualty & Surety, now Palomar Casualty & Surety, strengthening the surety franchise.
Construction engineering practice: Launched a new construction engineering practice to expand into large infrastructure projects.
National footprint: Expanded national footprint with offices and team members across the country.
Geographic expansion: Added professionals in Texas and the Northeast to support growth in commercial property.
Neptune Flood partnership: Achieved record production in the flood book through the Neptune Flood partnership.
AI deployment: Strategically deploying AI to enhance underwriting workflow, portfolio optimization, process automation, and operational efficiency.
Reinsurance renewals: Renewed 4 quota share treaties and completed 2 new placements with improved economics.
Casualty reserving approach: Maintained a conservative reserving approach with 80% of reserves held as IBNR.
Palomar 2X target: Achieved Palomar 2X target of doubling adjusted net income for 2022 and 2023 cohorts.
Fronting strategy shift: Fronting is no longer a strategic focus; resources are reallocated to other product groups.
2026 strategic imperatives: Outlined 4 imperatives: leverage scale, curate portfolio, deepen market position, and integrate/execute.
You have reached the limit. Sign up to access full content
Get started
Risk or Challenges
Earthquake Franchise: Decline of 2% year-over-year in Q4 2025, with commercial earthquake rates down 15% and elevated competition. This challenging environment is expected to persist through much of 2026.
Commercial Property: Rate decreases in certain E&S Builders Risk accounts and pressure in commercial property lines, though profitability remains strong.
Casualty Business: Exposure to volatility despite conservative management, with 80% of reserves held as IBNR. Growth in E&S Casualty and health care liability markets, but these areas are inherently risky.
Crop Franchise: Increased retention to 50% net of SRA for 2026, which could expose the company to higher losses despite stop-loss reinsurance.
Reinsurance Market: Softening reinsurance market could impact the company's ability to manage risk effectively, though it provides cost benefits.
Fronting Business: No longer a strategic focus, which could lead to reduced diversification and potential loss of revenue from existing partnerships.
Surety and Credit: Acquisition of Gray Surety adds scale but is expected to be only modestly accretive in 2026, with potential risks from integration and reliance on debt financing.
You have reached the limit. Sign up to access full content
Get started
Guidance & Outlook
Earthquake Business Outlook: The Earthquake franchise is expected to deliver modest premium growth and margin expansion in 2026, despite commercial pressure persisting. Residential Earthquake book is performing well with a 97% premium retention rate and a 10% inflation guard, which provides operating leverage in a softening property catastrophe reinsurance market. High-quality Residential Earthquake partnerships could bolster growth in 2026 and 2027.
Inland Marine and Other Property Outlook: The group grew 30% year-over-year in Q4 2025. Pending rate increases of more than 10% for Hawaii Hurricane Motor Truck Cargo book in California are expected. The company is investing in talent and geographic expansion to support profitable growth in commercial property. A new construction engineering practice is being launched to target large infrastructure projects, supported by reinsurance.
Casualty Business Outlook: Casualty business delivered 120% year-over-year gross written premium growth in Q4 2025. The E&S general liability segment is experiencing a healthy rate environment with rate increases in the low teens for excess policies and mid- to high single digits for primary rates. Health care liability market is highly dislocated with technical rates increasing by approximately 35%. The company is adding underwriters to drive growth and manage exposure conservatively.
Crop Business Outlook: Crop premium is expected to grow more than 30% in 2026, with a long-term target of $1 billion in premium. The company increased retention to 50% net of the SRA effective 1/1/2026, supported by stop-loss reinsurance. Incremental business is diversifying from spring season MPCI, complementing the portfolio.
Surety and Credit Business Outlook: Following the acquisition of Gray Surety, Surety and Credit will become a key growth driver, providing diversification and stability. Pro forma written premium for Surety was approximately $110 million in 2025. The acquisition is expected to be modestly accretive in 2026 and scale further in 2027.
Reinsurance Market Outlook: Favorable market conditions for reinsurance buyers are expected to continue into the 6/1/2026 renewal, with further pricing improvements anticipated across the property catastrophe program.
2026 Financial Guidance: Adjusted net income is projected to range between $260 million and $275 million, implying approximately 24% growth at the midpoint. Adjusted return on equity is expected to exceed 20%. The adjusted combined ratio is projected to be in the mid-70s, reflecting growth, business mix, and capital use.
You have reached the limit. Sign up to access full content
Get started
Shareholder Return Plan
The selected topic was not discussed during the call.
You have reached the limit. Sign up to access full content
Get started
Key Q&A
Q:What is the expected contribution of higher retention on Crop to earnings next year compared to 2025?
A:Crop is expected to have a combined ratio of around 92%. For every $100 million and 10 points retained, it adds approximately $8 million of pretax income to the bottom line.
Q:Is the 10% reduction in reinsurance costs on a risk-adjusted basis or absolute dollars?
A:The 10% reduction is on a risk-adjusted basis, assuming like-for-like exposure.
Q:What growth is expected from the new underwriting hires in 2026 and 2027?
A:The growth depends on the market they enter. For example, a new hire in Builders Risk could open several million dollars of potential production, while another in construction engineering could target a larger TAM. The company emphasizes a cautious approach, with modest gross and net line sizes supported by reinsurance.
Q:How did the residential and commercial earthquake books perform in the fourth quarter, and what is the outlook for 2026?
A:Residential earthquake grew and now makes up about 60% of the book, with high single to double-digit growth expected. Commercial earthquake faced pressure with rates down 15%, and this pressure is expected to persist into 2026.
Q:Why is the loss ratio expected to increase in 2026 compared to 2025?
A:The increase is due to higher retention in Crop (50% vs. 30% in 2025), which operates at a higher loss ratio (~80%). However, the combined ratio is expected to remain stable due to savings in operating expenses.
Q:What is the composition of the Casualty book, and how is it underwritten?
A:The book is primarily E&S Casualty (GL and niche segment GL) and some professional lines (E&O, healthcare liability). The company uses conservative limits, focuses on buffer layers to avoid social inflation, and employs experienced underwriters. About half of the programs are written through delegated authority arrangements.
Q:What are the capital deployment priorities as the market softens?
A:The company prioritizes organic growth, increased retention, and opportunistic share repurchases or tuck-in deals. It plans to leverage its balance sheet for growth and potentially increase retentions in areas like earthquake cat retentions.
Q:What is the outlook for commercial earthquake pricing in 2026?
A:Commercial earthquake pricing is expected to remain under pressure, with rates continuing to decline in the first half of 2026 before stabilizing.
Q:Will the company increase its retention in Crop beyond 50%?
A:The company may increase retention beyond 50% as it grows, but this will depend on capital allocation and the growth rate of the Crop book.
Q:How does the company view the evolution of its Fronting business?
A:Fronting is not a strategic focus, and the company is reducing its involvement due to the participatory risk now required in most Fronting deals. It plans to focus on internal efforts and programs instead.
Q:What are the expected cat excess of loss attachment points for 2026?
A:The wind retention is expected to be around $12 million, and earthquake retention slightly above that.
Q:What is the retention strategy for the Casualty quota share?
A:The company kept its retentions flat year-over-year for the Casualty quota share, with an average gross limit of $3 million and an average net limit of less than $1 million.
Q:Review of Unclear Management Responses
A:Management avoided directly addressing the long-term impact of the changing business mix on returns on equity. While they emphasized maintaining an ROE above 20% and highlighted operational leverage, they did not provide specific details on how diversification and reduced reinsurance leverage might affect long-term returns.
You have reached the limit. Sign up to access full content
Get started
Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Builders Risk
Casualty Surety
Casualty book
Casualty product
Commercial Earthquake
Crop
ES Builders
ES Casualty
Earthquake book
Hurricane
Inland Marine
Residential Earthquake
Surety Credit
Texas
book rate
catastrophe reinsurance
closing acquisition
digit
effort
environment
expansion
improvement
income return
instance
line size
market leader
momentum
opportunity imperative
premium income
product group
property catastrophe
quality
success
term premium
top line
track
PLMR Transcript
Palomar Holdings, Inc. (PLMR) Q4 2025 Earnings Call Transcript
Positive2-14
The company demonstrated strong growth across various segments, particularly in Casualty and Crop, with record premiums exceeding expectations. Despite some pressure in the earthquake segment, overall performance was robust, supported by increased net investment income and raised income guidance. The acquisition of Gray Surety and strategic focus on organic growth and share repurchases further enhance prospects. Market conditions remain favorable, and the company's prudent capital deployment and underwriting strategies suggest a positive outlook. Given the market cap, the stock is likely to experience a positive movement of 2% to 8%.
Palomar Holdings, Inc. (PLMR) Q3 2025 Earnings Call Transcript
Positive11-7
The company demonstrated strong financial growth across various segments, including a 170% increase in the casualty business and a doubling of crop franchise premiums. Positive guidance, such as raising adjusted net income expectations and strong growth projections for the crop business, supports optimism. The Q&A session reinforced confidence with no unclear responses, and the market's positive reaction to new partnerships and strategic growth plans further boosts sentiment. Given the company's small-cap status, these factors suggest a strong positive stock price movement.
Palomar Holdings, Inc. (PLMR) Q2 2025 Earnings Call Transcript
Positive8-5
The earnings call reveals strong financial performance, with significant growth in written premiums and investment income. Despite challenges in the Commercial Earthquake segment, management remains optimistic about growth opportunities in Casualty, Crop, and Surety. The raised guidance and strategic partnerships, like Neptune, signal positive market sentiment. While there are some concerns about competition and pricing pressures, the overall outlook, including raised guidance and strategic growth areas, suggests a positive stock price reaction in the short term.
Palomar Holdings, Inc. (NASDAQ:PLMR) Q1 2025 Earnings Call Transcript
Positive5-7
The earnings call shows strong financial performance with record high revenue and improved margins, suggesting operational efficiency. The Q&A highlights conservative guidance but also showcases growth opportunities in residential and commercial sectors. Despite some competitive pressures, the company is well-positioned with new product offerings and a balanced portfolio. The market cap of $2 billion suggests a moderate reaction, leading to a positive stock price movement in the 2% to 8% range over the next two weeks.
PLMR Report
Frequently Asked Questions
Where does this earnings call transcript come from?
All transcripts are sourced directly from the official live webcast or the company’s official investor relations website. We use the exact words spoken during the call with no paraphrasing of the core discussion.
How soon is the transcript available after the earnings call ends?
Full verbatim transcripts are typically published within 4–12 hours after the call ends. Same-day availability is guaranteed for all S&P 500 and most mid-cap companies.
Is the transcript edited or altered in any way?
No material content is ever changed or summarized in the “Full Transcript” section. We only correct obvious spoken typos (e.g., “um”, “ah”, repeated 10 times”, or clear misspoken ticker symbols) and add speaker names/titles for readability. Every substantive sentence remains 100% as spoken.
Why do some answers appear as “Unclear” or “Inaudible”?
When audio quality is poor or multiple speakers talk over each other, we mark the section instead of guessing. This ensures complete accuracy rather than introducing potential errors.
Who creates the AI Summary and Key Q&A highlights shown above the transcript?
They are generated by a specialized financial-language model trained exclusively on 15+ years of earnings transcripts. The model extracts financial figures, guidance, and tone with 97%+ accuracy and is regularly validated against human analysts. The full raw transcript always remains available for verification.
