Palomar(PLMR) - 2024 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - For Q4 2024, adjusted net income was $41.3 million or$ 1.52 per share, representing a 47.5% increase from $28 million or$ 1.11 per share in Q4 2023 [47] - Gross written premiums for Q4 were $373.7 million, a 23% increase year-over-year, and 39% growth excluding runoff business [48] - The annualized adjusted return on equity for Q4 was 23.1%, compared to 25.1% for the same period last year [48] Business Line Data and Key Metrics Changes - The earthquake franchise grew gross written premiums by 20% in Q4, maintaining a balanced approach between residential and commercial insurance [19] - The inland marine and other property category grew 36% year-over-year, with strong premium growth from builders risk and Hawaii hurricane lines [22] - The casualty segment saw a significant premium increase of 112% year-over-year, now representing 50% of the total portfolio [25] Market Data and Key Metrics Changes - The company exited 2024 as the third largest writer of earthquake insurance in North America, indicating strong market positioning [19] - The California homeowners market is experiencing dislocation due to recent wildfires, which may lead to increased opportunities for the company's earthquake insurance products [15][72] Company Strategy and Development Direction - The company aims to integrate and operate effectively, build new market leaders, and maintain a conservative risk appetite while focusing on profitable growth [40][41] - The acquisition of First Indemnity of America (FIA) is expected to enhance the company's casualty product group and provide growth opportunities in the surety market [36] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism regarding the reinsurance market, noting that recent wildfires may slow the pace of rate decreases but could also create opportunities in the earthquake insurance market [16][37] - The company anticipates adjusted net income guidance for 2025 to be in the range of$ 180 million to $192 million, reflecting a growth of 39% [60] Other Important Information - The company reported a stockholders' equity increase of 55% year-over-year, reaching$ 729 million [58] - The adjusted combined ratio for the full year was 73.7%, with a loss ratio of 26.4% [59] Q&A Session Summary Question: Clarification on reinsurance pricing expectations - Management indicated that the guidance range for reinsurance pricing is built around a flat renewal to a potential decrease of 5%, reflecting a conservative approach given market conditions [68] Question: Opportunities in the disrupted California market - Management noted that the disruption in the California market could lead to opportunities in residential earthquake insurance as insurers reduce their exposure [72] Question: Impact of 6/1 pricing on outlook - Management stated that lower pricing on excess of loss reinsurance would positively impact results, especially since it constitutes a significant expense [79] Question: Elasticity of demand for earthquake insurance - Management highlighted that the residential earthquake market remains underpenetrated, and rising homeowners' costs could lead to increased opportunities as insurers nonrenew policies [85] Question: Crop insurance exposure and reinsurance structure - Management confirmed that the crop business will focus on core Midwest states, with a shift towards a combination of quota share and stop loss in reinsurance [136]