Core Insights - Palomar Holdings Inc. (PLMR) reported a second-quarter 2025 operating income of $1.76 per share, exceeding the Zacks Consensus Estimate by 4.7%, with a year-over-year increase of 40.8% [2] - The company's total revenues rose 48.9% year over year to $195 million, driven by higher premiums and net investment income, also surpassing the Zacks Consensus Estimate by 4.7% [3] - Gross written premiums increased by 28.8% year over year to $496.3 million, while net earned premiums rose 47.2% to $164 million [3] Financial Performance - Net investment income surged 68% year over year to $13.4 million, primarily due to higher yields on invested assets and an increased average balance of investments [4] - Underwriting income reached $38.3 million, up 49.5% year over year, with adjusted underwriting income nearly at $48.4 million, reflecting a 47.1% increase [5] - Total expenses increased by 46.8% year over year to $143.3 million, attributed to higher loss and loss adjustment expenses, acquisition expenses, and other underwriting expenses [5] Ratios and Equity - The loss ratio was reported at 25.7, deteriorating by 80 basis points year over year, while the adjusted combined ratio, excluding catastrophe losses, was 73.1, deteriorating by 280 basis points [6] - Cash and cash equivalents increased by 1.1% from the end of 2024 to $81.3 million, and shareholder equity rose by 16.2% to $847.7 million [7] Capital Management - The board of directors approved a $150 million share repurchase program effective from July 31, 2025, to July 31, 2027 [8] Future Outlook - Palomar Holdings raised its 2025 adjusted net income guidance to a range of $198 million to $205 million, up from the previous outlook of $186 million to $200 million, factoring in estimated catastrophe losses of $8 million to $12 million for the remainder of the year [10]

PART I. FINANCIAL INFORMATION [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) The unaudited condensed consolidated financial statements for Palomar Holdings, Inc. as of June 30, 2025, reflect significant growth in total assets to $2.83 billion from $2.26 billion at year-end 2024, driven by increases in investments and premiums receivable, with net income rising to $89.5 million from $52.1 million year-over-year for the six months ended June 30, 2025, fueled by a 49.5% increase in net earned premiums and strong investment income, and total stockholders' equity increasing to $847.2 million from $729.0 million over the same period [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) | Balance Sheet Highlights | June 30, 2025 (Unaudited, $ thousands) | December 31, 2024 ($ thousands) | | :--- | :--- | :--- | | Total Investments | $1,174,993 | $987,715 | | Total Assets | $2,832,491 | $2,262,220 | | Total Liabilities | $1,985,294 | $1,533,190 | | Total Stockholders' Equity | $847,197 | $729,030 | [Condensed Consolidated Statements of Income and Comprehensive Income](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income%20and%20Comprehensive%20Income) | Income Statement Highlights (Q2) | Three Months Ended June 30, 2025 ($ thousands) | Three Months Ended June 30, 2024 ($ thousands) | | :--- | :--- | :--- | | Gross Written Premiums | $496,288 | $385,184 | | Net Earned Premiums | $179,958 | $122,285 | | Total Revenues | $203,311 | $131,069 | | Net Income | $46,528 | $25,729 | | Diluted EPS | $1.68 | $1.00 | | Income Statement Highlights (YTD) | Six Months Ended June 30, 2025 ($ thousands) | Six Months Ended June 30, 2024 ($ thousands) | | :--- | :--- | :--- | | Gross Written Premiums | $938,452 | $753,262 | | Net Earned Premiums | $344,029 | $230,151 | | Total Revenues | $377,945 | $249,603 | | Net Income | $89,450 | $52,111 | | Diluted EPS | $3.24 | $2.04 | [Condensed Consolidated Statements of Changes in Stockholders' Equity](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders%27%20Equity) - Total stockholders' equity increased from **$729.0 million** at December 31, 2024, to **$847.2 million** at June 30, 2025, primarily driven by net income of **$89.5 million** and a decrease in accumulated other comprehensive loss[15](index=15&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) | Cash Flow Summary | Six Months Ended June 30, 2025 ($ thousands) | Six Months Ended June 30, 2024 ($ thousands) | | :--- | :--- | :--- | | Net cash provided by operating activities | $208,061 | $88,252 | | Net cash used in investing activities | ($212,698) | ($45,003) | | Net cash provided by (used in) financing activities | $5,413 | ($47,082) | | Net change in cash | $776 | ($3,833) | [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) - The company operates as a single segment in the property and casualty insurance business, and its financial statements include the accounts of Laulima Exchange, a variable interest entity for which the company is the primary beneficiary[25](index=25&type=chunk)[26](index=26&type=chunk) - The company completed the acquisition of First Indemnity of America Insurance Co. (FIA) on January 1, 2025, and substantially all assets of Advanced AgProtection, LLC (AAP) on April 1, 2025, both accounted for as business combinations[90](index=90&type=chunk)[92](index=92&type=chunk) - For the six months ended June 30, 2025, the company experienced favorable prior year loss development of **$10.8 million**, primarily due to lower than anticipated severity of attritional losses, compared to **$2.4 million** of favorable development in the same period of 2024[54](index=54&type=chunk)[55](index=55&type=chunk) - The company's catastrophe event retention is **$20 million** for earthquake events and **$11 million** for continental hurricane events and all other perils, with the XOL reinsurance structure providing protection up to **$3.53 billion** for earthquake events[82](index=82&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=20&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discussion highlights a **24.6%** increase in Gross Written Premiums (GWP) for the first six months of 2025, driven by strong growth in Casualty and Crop lines, which offset a decline in the Fronting business, with net income growing **71.7%** year-over-year for the six-month period, supported by higher net earned premiums and a favorable loss ratio, while maintaining a strong balance sheet with sufficient liquidity from operations and access to credit facilities, and announcing a new **$150 million** share repurchase program [Results of Operations](index=25&type=section&id=Results%20of%20Operations) For the six months ended June 30, 2025, GWP grew **24.6%** to **$938.5 million**, and net income increased **71.7%** to **$89.5 million** compared to the prior year, primarily organic growth driven by a **116.2%** increase in Casualty and a **114.3%** increase in Crop premiums, while Fronting premiums declined **39.8%** due to a partnership termination in 2024, and the combined ratio improved to **76.1%** from **78.0%** year-over-year, reflecting underwriting profitability | Key Metrics (Six Months Ended June 30) | 2025 ($ thousands) | 2024 ($ thousands) | % Change | | :--- | :--- | :--- | :--- | | Gross Written Premiums | $938,452 | $753,262 | 24.6% | | Net Earned Premiums | $344,029 | $230,151 | 49.5% | | Net Income | $89,450 | $52,111 | 71.7% | | Adjusted Net Income | $99,837 | $59,775 | 67.0% | | Combined Ratio | 76.1% | 78.0% | (1.9) pts | | Adjusted Combined Ratio | 70.9% | 73.0% | (2.1) pts | | Gross Written Premiums by Product (Six Months Ended June 30) | 2025 ($ thousands) | % of GWP | 2024 ($ thousands) | % of GWP | % Change | | :--- | :--- | :--- | :--- | :--- | :--- | | Earthquake | 277,929 | 29.7% | 240,759 | 32.0% | 15.4% | | Casualty | 238,932 | 25.5% | 110,539 | 14.7% | 116.2% | | Inland Marine and Other Property | 219,098 | 23.3% | 170,329 | 22.6% | 28.6% | | Fronting | 114,810 | 12.2% | 190,727 | 25.3% | (39.8)% | | Crop | 87,683 | 9.3% | 40,908 | 5.4% | 114.3% | | **Total** | **$938,452** | **100.0%** | **$753,262** | **100.0%** | **24.6%** | - The decrease in Fronting premiums was caused by the termination of a large fronting partnership in the third quarter of 2024[134](index=134&type=chunk)[152](index=152&type=chunk) - For the six months ended June 30, 2025, the company experienced favorable catastrophe loss development of **$0.6 million**, compared to **$6.8 million** in catastrophe losses in the same period of 2024, while non-catastrophe losses increased due to premium growth in attritional lines like Casualty and Inland Marine[160](index=160&type=chunk)[161](index=161&type=chunk) [Reconciliation of Non-GAAP Financial Measures](index=33&type=section&id=Reconciliation%20of%20Non-GAAP%20Financial%20Measures) The company provides several non-GAAP measures to offer insight into underlying business performance, with Adjusted Net Income at **$99.8 million** for the six months ended June 30, 2025, up from **$59.8 million** in the prior year, an Annualized Adjusted Return on Equity of **25.3%**, and an Adjusted Combined Ratio of **70.9%**, an improvement from **73.0%** in the prior year, which excludes items like transaction expenses and stock-based compensation | Reconciliation to Adjusted Net Income (Six Months Ended June 30) | 2025 ($ thousands) | 2024 ($ thousands) | | :--- | :--- | :--- | | **Net Income (GAAP)** | **$89,450** | **$52,111** | | Net realized/unrealized gains on investments | (5,968) | (3,034) | | Expenses associated with transactions | 2,841 | 472 | | Stock-based compensation expense | 10,092 | 7,789 | | Amortization of intangibles | 2,054 | 779 | | Expenses associated with catastrophe bond | 2,661 | 2,483 | | Tax impact | (1,293) | (825) | | **Adjusted Net Income (Non-GAAP)** | **$99,837** | **$59,775** | | Reconciliation to Adjusted Combined Ratio (Six Months Ended June 30) | 2025 | 2024 | | :--- | :--- | :--- | | **Combined Ratio (GAAP)** | **76.1%** | **78.0%** | | Impact of transaction expenses | (0.8)% | (0.2)% | | Impact of stock-based compensation | (2.9)% | (3.4)% | | Impact of amortization of intangibles | (0.6)% | (0.3)% | | Impact of catastrophe bond expenses | (0.8)% | (1.1)% | | **Adjusted Combined Ratio (Non-GAAP)** | **70.9%** | **73.0%** | [Liquidity and Capital Resources](index=37&type=section&id=Liquidity%20and%20Capital%20Resources) The company's primary liquidity sources are premiums and investment income, with operating activities providing a strong cash flow of **$208.1 million** for the first six months of 2025, and the company maintains access to a **$100 million** revolving credit facility with U.S. Bank and an FHLB line of credit, with no outstanding borrowings on either as of June 30, 2025, and a new **$150 million** share repurchase program was approved in July 2025, enhancing capital management flexibility - Cash flow from operations was **$208.1 million** for the first six months of 2025, a significant increase from **$88.3 million** in the same period of 2024, driven by net income and changes in operating assets and liabilities[202](index=202&type=chunk) - The company has a **$100 million** revolving credit facility and access to FHLB advances, with no borrowings outstanding on either facility as of June 30, 2025[209](index=209&type=chunk)[210](index=210&type=chunk)[212](index=212&type=chunk) - On July 31, 2025, the Board of Directors approved a new share repurchase program authorizing up to **$150 million** of common stock through July 31, 2027[207](index=207&type=chunk) [Investment Portfolio](index=39&type=section&id=Investment%20Portfolio) As of June 30, 2025, the investment portfolio's fair value was **$1.17 billion**, with the vast majority (**$1.11 billion**) in fixed maturity securities classified as available-for-sale, and the portfolio is high-quality, with an average rating of 'A1/A', and the book yield increased to **4.81%** from **4.59%** at year-end 2024, with a weighted average effective duration of **4.13 years** | Investment Portfolio Composition (Fair Value, $ thousands) | June 30, 2025 | % of Total | | :--- | :--- | :--- | | Corporate and other | $582,835 | 52.4% | | Mortgage/asset-backed securities | $474,848 | 42.6% | | U.S. Governments | $20,338 | 1.8% | | U.S. States, Territories, and Political Subdivisions | $18,372 | 1.7% | | Special revenue | $16,973 | 1.5% | | **Total available-for-sale** | **$1,113,366** | **100.0%** | - The fixed income investment portfolio's book yield increased to **4.81%** as of June 30, 2025, compared to **4.59%** as of December 31, 2024[216](index=216&type=chunk) [Reinsurance](index=41&type=section&id=Reinsurance) The company utilizes a robust reinsurance program to reduce exposure to catastrophe losses and limit earnings volatility, including a mix of traditional reinsurers and insurance-linked securities (ILS) via catastrophe bonds, with catastrophe event retention of **$20 million** for earthquake events and **$11 million** for hurricane and other perils as of June 30, 2025, and reinsurance coverage for earthquake events extending up to **$3.53 billion** - The company's catastrophe event retention is **$20 million** for earthquake events and **$11 million** for hurricane events and all other perils[221](index=221&type=chunk) - The company utilizes **$1.2 billion** of multi-year indemnity-based reinsurance coverage for earthquake events through catastrophe bonds issued via Torrey Pines Re Ltd[220](index=220&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=42&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risks are interest rate risk and credit risk associated with its investment portfolio, managed by investing predominantly in a diversified portfolio of high-quality, investment-grade fixed maturity securities, with the fixed maturity portfolio having an average rating of 'AA-' and approximately **69.9%** rated 'A-' or better as of June 30, 2025 - The company's main market risks are equity price risk and interest rate risk from its investment portfolio[225](index=225&type=chunk) - Credit risk is managed by investing in high-quality securities, with the fixed maturity portfolio having an average rating of 'AA−' and **69.9%** rated 'A−' or better as of June 30, 2025[227](index=227&type=chunk) [Item 4. Controls and Procedures](index=42&type=section&id=Item%204.%20Controls%20and%20Procedures) Based on an evaluation as of June 30, 2025, the company's CEO and CFO concluded that disclosure controls and procedures were effective, and the assessment of internal control over financial reporting for the quarter excluded the recently acquired operations of FIA and AAP, which are in the process of being integrated - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report[229](index=229&type=chunk) - The company excluded the recently acquired operations of FIA and AAP from its assessment of internal control over financial reporting for the quarter, with plans to include them in future periods[230](index=230&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=43&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in legal proceedings that arise in the ordinary course of business, and management believes that the outcomes of these matters will not have a material adverse effect on the company's consolidated financial position - The company states that it is party to ordinary course legal proceedings which are not expected to have a material adverse effect on its financial position[233](index=233&type=chunk) [Item 1A. Risk Factors](index=43&type=section&id=Item%201A.%20Risk%20Factors) The company outlines numerous risks, with a primary focus on its exposure to unpredictable and severe catastrophe events, particularly due to its business concentration in California, and other significant risks include reliance on third-party reinsurance, potential inadequacy of loss reserves, intense competition, extensive regulation, and potential failures of information technology systems, while economic risks such as inflation and recession, and the performance of its investment portfolio, are also highlighted as key concerns - A primary risk is the company's exposure to unpredictable and severe catastrophe events, such as earthquakes and hurricanes, which could eliminate earnings and stockholders' equity[236](index=236&type=chunk)[239](index=239&type=chunk) - The business is significantly concentrated in California, which generated **32%** of gross written premiums for the first six months of 2025, creating heightened exposure to California-specific loss activity and regulatory changes[271](index=271&type=chunk) - The company relies on third-party reinsurance and may be unable to purchase it on acceptable terms in the future, also facing counterparty risk if reinsurers fail to pay claims[236](index=236&type=chunk)[242](index=242&type=chunk)[252](index=252&type=chunk) - The company faces risks from its recent acquisitions of FIA and AAP, including challenges with integration and the possibility of not realizing anticipated benefits[294](index=294&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=67&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) There were no unregistered sales of equity securities or use of proceeds to report for the period - None[384](index=384&type=chunk) [Item 5. Other Information](index=67&type=section&id=Item%205.%20Other%20Information) On July 31, 2025, the Board approved a new Equity Award Retirement Policy allowing for continued vesting of certain equity awards for qualifying retirees, and in June 2025, several executive officers, including the CFO, President, and Chief Legal Officer, entered into Rule 10b5-1 trading plans for future sales of company stock, with an updated form of executive employment agreement also approved in January 2025 - On July 31, 2025, the Board of Directors approved an Equity Award Retirement Policy that allows employees who meet age and service requirements (age 58+ with 5+ years of service, totaling at least 65) to be entitled to continued vesting of RSUs and prorated vesting of PSUs upon a qualified retirement[387](index=387&type=chunk)[388](index=388&type=chunk) - In June 2025, CFO Chris Uchida, President Jon Christianson, and Chief Legal Officer Angela Grant each entered into Rule 10b5-1 trading plans to sell shares of company stock, with sales permitted to begin in September 2025[390](index=390&type=chunk)[391](index=391&type=chunk)[392](index=392&type=chunk) [Item 6. Exhibits](index=70&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including the Form of Executive Employment Agreement, certifications by the principal executive and financial officers pursuant to the Sarbanes-Oxley Act, and Inline XBRL data files

Financial Data and Key Metrics Changes - The company achieved exceptional top-line growth of 29%, with a 45% increase on a same-store basis, and adjusted net income increased by 52% year-over-year [5][25][26] - The adjusted combined ratio was 73%, with an adjusted return on equity of 24% [5][27] - Gross written premiums for the second quarter were $496.3 million, a 29% increase compared to the prior year [27] Business Line Data and Key Metrics Changes - The earthquake franchise saw gross written premium growth of 9% year-over-year, with a focus on residential earthquake insurance [9][10] - Inland marine and other property categories grew by 28% year-over-year, driven by a diversified mix of residential and commercial lines [12] - Casualty gross written premium increased by 119% year-over-year, with strong performance in E and S casualty business [16][17] - Crop franchise generated $39 million in written premium, significantly up from $2.2 million in the prior year [19] Market Data and Key Metrics Changes - The company noted increased competition in the commercial earthquake market, particularly in large commercial accounts, which saw average rate decreases above 20% [11] - The residential earthquake book maintained a high retention rate of 87% and a 10% inflation guard [10][41] - The Hawaii hurricane line grew by 39%, with continued rate increases on the held book [12][13] Company Strategy and Development Direction - The company is focused on its Palomar 2x strategic imperative, aiming to double adjusted net income within three to five years while maintaining an ROE above 20% [5][25] - A strategic partnership with Neptune Flood was announced to enhance residential flood offerings, expanding exposure from inland flood risk to a nationwide portfolio [13][95] - The company is committed to disciplined underwriting and reserving, building reserves across the book while releasing redundancies in mature lines [8][18] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving high single-digit growth in the earthquake franchise for the remainder of the year, driven by residential earthquake strength [10][41] - The company raised its 2025 adjusted net income guidance to $198 million to $208 million, reflecting strong operating results [25][37] - Management highlighted the importance of maintaining a balanced portfolio to navigate market cyclicality and sustain growth [41][44] Other Important Information - The company completed the placement of its June 1 core excess of loss treaty, achieving a 10% risk-adjusted rate decrease [21] - A two-year $150 million share repurchase program was authorized to opportunistically buy back shares [23][24] - The company expects the third quarter to be the low point for net earned premium ratio, with growth expected throughout the remainder of the year [28][36] Q&A Session Summary Question: Concerns about property-related competition and its impact on growth - Management reassured that they are still forecasting growth in earthquake and other segments, despite rate pressure in commercial earthquake [39][40][41] Question: Growth rates between residential and commercial earthquake - Management indicated that residential earthquake constitutes about 55% of the book and is growing at a healthy rate, while commercial earthquake is under more pressure [51][52] Question: Drivers of elevated accident year loss ratio - Management attributed the elevated ratio primarily to mix-driven factors, particularly related to the crop business [54][56] Question: Outlook for casualty pricing and growth - Management noted that casualty pricing remains strong, with mid to high teens rate increases in excess liability and E and S casualty [63][64] Question: Impact of reinsurance retentions on underwriting income - Management explained that casualty lines are earning less premium currently compared to more mature property lines, but expect leverage to improve over time [82][84] Question: Growth outlook for marine and other property - Management expressed confidence in sustaining growth in marine and other properties through geographic expansion and new underwriting talent [90][92]

Financial Data and Key Metrics Changes - The company achieved exceptional top line growth of 29%, with a 45% increase on a same-store basis, and adjusted net income increased by 52% year over year [5][26] - The adjusted combined ratio was 73%, with an adjusted return on equity of 24% [5][27] - Gross written premiums for the second quarter were $496.3 million, a 29% increase compared to the prior year [27] - Net earned premiums increased by 47% to $180 million [28] Business Line Data and Key Metrics Changes - The earthquake franchise saw gross written premium growth of 9% year over year, with a focus on residential earthquake insurance [9][10] - Inland marine and other property categories grew by 28%, driven by a diversified mix of residential and commercial lines [12] - Casualty gross written premium increased by 119% year over year, with strong performance in E and S casualty business [15] - Crop insurance generated $39 million in written premium, significantly up from $2.2 million in the prior year [19] Market Data and Key Metrics Changes - The company noted increased competition in the commercial earthquake market, particularly in large accounts, which saw average rate decreases above 20% [11] - The residential earthquake book maintained a high policy retention rate of 87% and a 10% inflation guard [10] - The Hawaii hurricane line grew by 39%, reflecting rate increases on the held book [12] Company Strategy and Development Direction - The company is focused on maintaining a balanced portfolio across residential and commercial products, allowing it to adapt to market conditions [6][40] - A strategic partnership with Neptune Flood was announced to enhance the residential flood offering, expanding exposure to a nationwide portfolio [13][95] - The company is committed to disciplined underwriting and reserving practices, with a conservative approach to gross and net line sizes [7][18] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving high single-digit growth in the earthquake franchise for the remainder of the year [10][40] - The company raised its 2025 adjusted net income guidance to $198 million to $208 million, reflecting strong operating results [24][37] - Management highlighted the importance of a diversified product suite to provide stability amid macroeconomic cyclicality [7][12] Other Important Information - The company completed the placement of its June 1 core excess of loss treaty, achieving a 10% risk-adjusted rate decrease [21] - A two-year $150 million share repurchase program was authorized to opportunistically buy back shares [23] Q&A Session Summary Question: Concerns about competition in the property market - Management reassured that they are still forecasting growth in the earthquake segment despite rate pressures in commercial accounts [39][40] Question: Growth in residential vs. commercial earthquake - Management indicated that residential earthquake constitutes about 55% of the book and is growing at a healthy rate, while commercial earthquake is under more pressure [51] Question: Drivers of elevated accident year loss ratio - Management attributed the elevated loss ratio primarily to mix-driven factors, particularly in the crop business, but expects favorable developments in the second half of the year [53][55] Question: Outlook for casualty pricing - Management noted that casualty pricing remains strong, particularly in excess liability and E and S casualty, while professional liability has softened [62][64] Question: Impact of reinsurance retentions on underwriting income - Management explained that casualty lines have less immediate impact on underwriting income due to their nascent nature, while property lines are more mature [82][84]

Financial Performance - Palomar reported $195.01 million in revenue for the quarter ended June 2025, a year-over-year increase of 48.8% [1] - The EPS for the same period was $1.76, compared to $1.25 a year ago, indicating a significant growth [1] - The reported revenue exceeded the Zacks Consensus Estimate of $186.21 million by 4.72% [1] - The company delivered an EPS surprise of 4.76%, with the consensus EPS estimate being $1.68 [1] Key Metrics - Loss Ratio was reported at 25.7%, better than the average estimate of 28.1% based on six analysts [4] - Combined Ratio stood at 78.8%, slightly above the average estimate of 77.8% based on five analysts [4] - Expense Ratio was 53.1%, compared to the estimated 49.4% by five analysts [4] - Adjusted combined ratio was 73.1%, better than the average estimate of 74.3% based on three analysts [4] Revenue Breakdown - Net investment income was $13.37 million, exceeding the estimated $12.06 million by six analysts, representing a 68% year-over-year increase [4] - Commission and other income reached $1.68 million, significantly higher than the average estimate of $0.81 million, reflecting a year-over-year change of 111.7% [4] - Net earned premiums were reported at $179.96 million, surpassing the estimated $173.63 million, with a year-over-year increase of 47.2% [4] Stock Performance - Palomar's shares have returned -12.2% over the past month, while the Zacks S&P 500 composite increased by 0.6% [3] - The stock currently holds a Zacks Rank 3 (Hold), suggesting it may perform in line with the broader market in the near term [3]

Core Insights - Palomar reported better-than-expected Q2 2025 results, with non-GAAP earnings per share at $1.76, surpassing the $1.67 estimate, and GAAP revenue of $203.3 million, reflecting a 55.1% year-over-year increase [1][2] - The company raised its full-year adjusted net income guidance to $198–208 million for 2025, up from a previous estimate of $186–200 million [13] Financial Performance - Non-GAAP EPS increased by 40.8% year-over-year from $1.25 in Q2 2024 [2] - Net earned premiums rose to $180.0 million, a 47.2% increase from $122.3 million in Q2 2024 [2][5] - The adjusted combined ratio remained stable at 73.1%, while the annualized adjusted return on equity was reported at 23.7% [2][9] Business Segments and Growth - The casualty segment saw significant growth, with gross written premiums increasing by 113% year-over-year, now comprising over a quarter of total gross written premiums [3][5] - Crop insurance gross written premiums surged from $2.2 million to $39.5 million year-over-year, indicating strong expansion [5] - Earthquake insurance, while slower in growth, is expected to see mid- to high-teens growth for FY2025 [8] Diversification Strategy - Palomar is diversifying its offerings beyond earthquake coverage, focusing on product expansion and geographic reach [4][10] - The earthquake segment's contribution to gross written premiums decreased to 29.8% from 35.1% in Q2 2024, reflecting a broader portfolio [6] Strategic Initiatives - The acquisition of Advanced AgProtection has expanded the crop business's geographic reach [10] - The company successfully renewed its reinsurance program with an adjusted rate decrease of approximately 10% year-over-year, reducing exposure to large events [11] Technology and Operational Efficiency - Investments in technology and analytics are enhancing underwriting and operational scale, although they incur additional costs [12]

Core Viewpoint - Palomar (PLMR) reported quarterly earnings of $1.76 per share, exceeding the Zacks Consensus Estimate of $1.68 per share, and showing a year-over-year increase from $1.25 per share [1] Group 1: Earnings Performance - The earnings surprise for the recent quarter was +4.76%, following a previous quarter surprise of +17.61% when actual earnings were $1.87 per share against an expectation of $1.59 [1][2] - Over the last four quarters, Palomar has consistently surpassed consensus EPS estimates [2] Group 2: Revenue Performance - Palomar's revenues for the quarter ended June 2025 were $195.01 million, surpassing the Zacks Consensus Estimate by 4.72% and increasing from $131.04 million year-over-year [2] - The company has also topped consensus revenue estimates in each of the last four quarters [2] Group 3: Stock Performance and Outlook - Palomar shares have appreciated approximately 22.8% since the beginning of the year, significantly outperforming the S&P 500's gain of 6.1% [3] - The future stock performance will largely depend on management's commentary during the earnings call and the trends in earnings estimate revisions [3][4] Group 4: Earnings Estimates - The current consensus EPS estimate for the upcoming quarter is $1.62, with projected revenues of $215.94 million, and for the current fiscal year, the estimate is $7.15 on revenues of $788.63 million [7] - The estimate revisions trend for Palomar was mixed prior to the earnings release, resulting in a Zacks Rank 3 (Hold) for the stock, indicating expected performance in line with the market [6] Group 5: Industry Context - The Insurance - Property and Casualty industry, to which Palomar belongs, is currently ranked in the top 39% of over 250 Zacks industries, suggesting a favorable outlook compared to lower-ranked industries [8]

Core Viewpoint - Palomar Holdings, Inc. reported significant growth in net income and adjusted net income for the second quarter of 2025, highlighting the effectiveness of its strategic initiatives and strong performance across its insurance portfolio [1][3][4]. Financial Performance - Net income for Q2 2025 was $46.5 million, or $1.68 per diluted share, compared to $25.7 million, or $1.00 per diluted share, in Q2 2024, representing an increase of 80.8% [1][33]. - Adjusted net income increased by 51.8% to $48.5 million, or $1.76 per diluted share, from $32.0 million, or $1.25 per diluted share, in the same quarter last year [1][33]. - Gross written premiums rose by 28.8% to $496.3 million from $385.2 million in Q2 2024, while net earned premiums increased by 47.2% [4][7]. Underwriting Results - The underwriting income for Q2 2025 was $38.3 million, with a combined ratio of 78.8%, compared to $25.6 million and a combined ratio of 79.1% in Q2 2024 [6][33]. - The total loss ratio for the quarter was 25.7%, slightly higher than 24.9% in the same period last year, with a catastrophe loss ratio of 0.0% compared to 2.8% [5][7]. Investment Results - Net investment income increased by 68.0% to $13.4 million from $8.0 million in Q2 2024, driven by higher yields on invested assets [7][33]. - The company recorded $8.3 million in net realized and unrealized gains related to its investment portfolio, a significant increase from an immaterial amount in the same period last year [8][33]. Strategic Initiatives - The company is focused on achieving its 2025 strategic imperatives, including a successful reinsurance program executed at an adjusted rate decrease of approximately 10% year-over-year [3][4]. - Investments are being made to enhance talent and operational scale, which are expected to strengthen both near-term and long-term prospects [3][4]. Shareholder Returns - The Board of Directors approved a share repurchase program authorizing the repurchase of up to $150 million of outstanding shares, effective July 31, 2025 [11][12]. - Stockholders' equity increased to $847.2 million at June 30, 2025, compared to $532.6 million at the same time last year [10][33]. Full Year Outlook - For the full year 2025, the company expects adjusted net income to be in the range of $198 million to $208 million, an increase from the previously announced range of $195 million to $205 million [13][33].

[Financial Highlights](index=1&type=section&id=Second%20Quarter%202025%20Highlights) Palomar Holdings reported strong Q2 2025 growth with significant increases in net income and gross written premiums, maintaining a stable adjusted combined ratio Q2 2025 Key Financial Metrics vs. Q2 2024 | Metric | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | Gross Written Premiums | $496.3M | $385.2M | +28.8% | | Net Income | $46.5M | $25.7M | +80.8% | | Adjusted Net Income | $48.5M | $32.0M | +51.8% | | Diluted EPS | $1.68 | $1.00 | +68.0% | | Adjusted Diluted EPS | $1.76 | $1.25 | +40.8% | | Adjusted Combined Ratio | 73.1% | 73.1% | 0.0% | | Annualized Adj. ROE | 23.7% | 24.7% | -1.0 ppt | - The catastrophe loss ratio was **0.0%** for the quarter, a significant improvement from **2.8%** in the same period last year, contributing to stable underwriting results[6](index=6&type=chunk)[9](index=9&type=chunk) [Management Commentary](index=1&type=section&id=Management%20Commentary) Management attributes strong financial performance to the 'Palomar 2X' strategy and a favorable reinsurance program renewal - The company's performance is driven by the 'Palomar 2X' strategic imperative, focusing on a balanced book of property and casualty products[4](index=4&type=chunk) - A key strategic success was the June 1 reinsurance program renewal, which achieved an approximate **10%** year-over-year adjusted rate decrease, enhancing future earnings predictability[4](index=4&type=chunk) - Palomar continues to invest in talent and operational scale to strengthen both near-term and long-term business prospects[4](index=4&type=chunk) [Detailed Financial Performance](index=1&type=section&id=Detailed%20Financial%20Performance) Detailed financial results reveal robust growth in underwriting income, net investment income, and stockholders' equity [Underwriting Results](index=1&type=section&id=Underwriting%20Results) Strong underwriting performance shows significant premium growth, a low loss ratio, and consistent adjusted combined ratio Q2 2025 Underwriting Metrics | Metric | Q2 2025 (Millions USD) | Q2 2024 (Millions USD) | | :--- | :--- | :--- | | Gross Written Premiums | $496.3 | $385.2 | | Net Earned Premiums | $179.9 | $122.3 | | Underwriting Income | $38.3 | $25.6 | | Adjusted Underwriting Income | $48.4 | $32.9 | | Loss Ratio | 25.7% | 24.9% | | Combined Ratio | 78.8% | 79.1% | | Adjusted Combined Ratio | 73.1% | 73.1% | - The quarter included **$6.5 million** of favorable prior year development, primarily from the short tail Inland Marine and Other Property business[6](index=6&type=chunk) [Investment Results](index=1&type=section&id=Investment%20Results) Net investment income surged due to higher yields and increased asset balances, with total assets at **$1.3 billion** - Net investment income grew **68.0%** YoY to **$13.4 million**, driven by higher yields and a larger investment portfolio[8](index=8&type=chunk) - The company recorded **$8.3 million** in net realized and unrealized gains on its investment portfolio during the quarter[10](index=10&type=chunk) - Total cash and invested assets stood at **$1.3 billion** as of June 30, 2025[10](index=10&type=chunk) [Stockholders' Equity and Returns](index=3&type=section&id=Stockholders%27%20Equity%20and%20Returns) Stockholders' equity significantly increased, contributing to strong annualized returns on equity for the quarter Equity and Returns (Q2 2025 vs Q2 2024) | Metric | June 30, 2025 (Millions USD) | June 30, 2024 (Millions USD) | | :--- | :--- | :--- | | Stockholders' Equity | $847.2 | $532.6 | | Annualized Return on Equity | 22.7% | 19.9% | | Annualized Adjusted ROE | 23.7% | 24.7% | [Corporate Developments and Outlook](index=3&type=section&id=Corporate%20Developments%20and%20Outlook) The company announced a new share repurchase program and raised its full-year 2025 adjusted net income guidance - The Board of Directors approved a new share repurchase program, effective July 31, 2025, authorizing the buyback of up to **$150 million** of common stock over a two-year period[13](index=13&type=chunk) - The company increased its full-year 2025 adjusted net income guidance to a range of **$198 million** to **$208 million**[15](index=15&type=chunk) [Financial Statements and Data](index=8&type=section&id=Financial%20Statements%20and%20Data) This section presents detailed unaudited financial statements, including operating results, balance sheets, and underwriting data [Summary of Operating Results](index=8&type=section&id=Summary%20of%20Operating%20Results) Operating results for H1 2025 demonstrate significant year-over-year growth in key financial metrics Six Months Ended June 30, 2025 vs 2024 | Metric | H1 2025 (Millions USD) | H1 2024 (Millions USD) | % Change | | :--- | :--- | :--- | :--- | | Gross Written Premiums | $938.5 | $753.3 | +24.6% | | Net Earned Premiums | $344.0 | $230.2 | +49.5% | | Net Income | $89.5 | $52.1 | +71.7% | | Adjusted Net Income | $99.8 | $59.8 | +67.0% | [Condensed Consolidated Balance Sheets](index=10&type=section&id=Condensed%20Consolidated%20Balance%20sheets) The balance sheet reflects a strengthened financial position with significant growth in total assets and equity Balance Sheet Highlights | Account | June 30, 2025 (Millions USD) | Dec 31, 2024 (Millions USD) | | :--- | :--- | :--- | | Total Investments | $1,175.0 | $987.7 | | Total Assets | $2,832.5 | $2,262.2 | | Total Liabilities | $1,985.3 | $1,533.2 | | Total Stockholders' Equity | $847.2 | $729.0 | [Underwriting Segment Data](index=12&type=section&id=Underwriting%20Segment%20Data) Underwriting data highlights significant growth in the Casualty line and reduced California geographic concentration GWP by Product - Q2 2025 vs Q2 2024 | Product | GWP (Q2 2025, Millions USD) | % of Total | % Change YoY | | :--- | :--- | :--- | :--- | | Earthquake | $147.7 | 29.8% | +9.4% | | Casualty | $128.2 | 25.8% | +118.8% | | Inland Marine & Other | $120.0 | 24.2% | +28.4% | | Fronting | $60.9 | 12.2% | -36.5% | | Crop | $39.5 | 8.0% | NM | - The company's geographic concentration in California has decreased, with GWP from the state representing **33.0%** of the total in Q2 2025, down from **47.6%** in Q2 2024, while premiums from 'Other' states grew to **38.0%** of the total[44](index=44&type=chunk) [Non-GAAP Financial Measures](index=3&type=section&id=Non-GAAP%20Financial%20Measures) This section defines and reconciles key non-GAAP financial measures for assessing operational performance [Definitions of Non-GAAP Measures](index=3&type=section&id=Definitions%20of%20Non-GAAP%20Measures) Key non-GAAP measures are defined to provide additional insight into operational performance - Key non-GAAP measures are defined to provide clarity on the company's performance, including: - **Adjusted net income**: Excludes items like realized/unrealized investment gains, transaction expenses, and stock-based compensation[22](index=22&type=chunk) - **Underwriting income**: Excludes net investment income, investment gains/losses, and interest expense from pre-tax income[23](index=23&type=chunk) - **Adjusted combined ratio**: Excludes the impact of certain items from the standard combined ratio calculation[27](index=27&type=chunk) [Reconciliation of Non-GAAP Measures](index=14&type=section&id=Reconciliation%20of%20Non-GAAP%20Measures) Detailed reconciliations illustrate adjustments from GAAP Net Income to Adjusted Net Income for Q2 2025 Reconciliation of Net Income to Adjusted Net Income (Q2 2025) | Description | Amount (in thousands USD) | | :--- | :--- | | **Net Income (GAAP)** | **$46,528** | | Net realized and unrealized gains on investments | ($8,306) | | Expenses associated with transactions | $754 | | Stock-based compensation expense | $5,347 | | Amortization of intangibles | $1,346 | | Expenses associated with catastrophe bond | $2,661 | | Tax impact | $202 | | **Adjusted Net Income (Non-GAAP)** | **$48,532** |

Core Viewpoint - Palomar Holdings, Inc. (PLMR) is anticipated to show improvements in both revenue and earnings for the second quarter of 2025, with a revenue estimate of $186.21 million, reflecting a 42.1% year-over-year increase [1] Revenue and Earnings Estimates - The consensus estimate for PLMR's earnings per share is $1.68, indicating a year-over-year increase of 34.4% [2] - The earnings estimate has decreased by 1.2% over the past 60 days [2] Earnings Prediction Model - The earnings prediction model suggests a likely earnings beat for PLMR, supported by a positive Earnings ESP of +0.25% and a Zacks Rank of 3 (Hold) [3][4] Factors Influencing Q2 Results - PLMR's second-quarter earnings are expected to benefit from a fee-based revenue stream and increased policy volumes across various business lines, driven by new business with existing partners and strong premium retention [5] - The focus on the crop business is likely to have positively impacted performance, with premiums earned estimated at $172.4 million [6] Revenue Drivers - Total revenues are expected to be driven by premium increases, higher net investment income, and commission income [7] - The Zacks Consensus Estimate for premiums earned is $174 million, while investment income is estimated at $12.06 million [6] Expense and Loss Ratios - Total expenses are projected to rise due to higher losses, interest, and acquisition expenses, with an estimated total expense of $136.9 million [8] - The combined ratio is expected to be 78.9, aided by a reinsurance policy that limits catastrophe losses [7][9] - The expense ratio is estimated to be slightly higher at 43.4 [10]