Palomar Holdings, Inc. (PLMR) - 2025 Annual Report (10-K) Summary
Business Context and Reporting Period
This summary covers the fiscal year ended December 31, 2025. Palomar Holdings, Inc. is a specialty property and casualty insurance company operating in the admitted and excess and surplus (E&S) markets. The company focuses on five product categories: Earthquake, Casualty, Inland Marine and Other Property, Crop, and Fronting. Palomar leverages proprietary data analytics and a technology-enabled platform for underwriting. As of December 31, 2025, the company's insurance subsidiaries (PSIC, PESIC, and FIA) held an "A" (Excellent) financial strength rating from A.M. Best.
Key Financial Metrics
| Metric | 2025 | 2024 | Change |
|---|---|---|---|
| Gross Written Premiums (GWP) | $2.03 billion | $1.54 billion | +31.5% |
| Net Earned Premiums | $802.6 million | $510.7 million | +57.2% |
| Net Income | $197.1 million | $117.6 million | +67.6% |
| Adjusted Net Income (Non-GAAP) | $216.1 million | $133.5 million | +61.9% |
| Combined Ratio | 76.9% | 78.1% | -1.2 pts |
| Adjusted Combined Ratio (Non-GAAP) | 72.7% | 73.7% | -1.0 pts |
| Return on Equity (ROE) | 23.6% | 19.6% | +4.0 pts |
| Stockholders' Equity | $942.7 million | $729.0 million | +29.3% |
| Investment Portfolio | $1.35 billion | $987.7 million | +36.9% |
Material Changes vs. Prior Period
- Premium Growth: Gross written premiums increased 31.5% to $2.03 billion, driven by significant growth in Casualty (+130.5%) and Crop (+113.0%) lines. This growth was partially offset by a 33.9% decline in Fronting premiums due to the termination of a large partnership in late 2024.
- Underwriting Performance: The combined ratio improved to 76.9% (from 78.1% in 2024). The loss ratio increased slightly to 28.5% (from 26.4%), while the expense ratio decreased to 48.4% (from 51.7%).
- Catastrophe Activity: The company reported a negative catastrophe loss ratio of -0.1% in 2025, reflecting favorable development on prior period events, compared to a 5.5% catastrophe loss ratio in 2024 which included losses from hurricanes and floods.
- Investment Income: Net investment income rose 56.3% to $56.0 million, driven by a larger average investment portfolio balance and higher yields.
- Acquisitions: The company completed acquisitions of First Indemnity of America (FIA) in January 2025 and Advanced AgProtection (AAP) in April 2025, expanding its Surety and Crop capabilities.
Guidance, Outlook, and Risks
Recent Developments and Strategy:
- Gray Surety Acquisition: In January 2026, Palomar acquired The Gray Casualty & Surety Company (renamed Palomar Casualty & Surety Company) for approximately $311 million to further expand its Surety platform. This was funded by a new $450 million credit facility entered into in January 2026.
- Reporting Changes: Beginning in 2026, the company will report Surety and Credit premiums as a separate line of business. Fronting premiums will no longer be reported separately but consolidated into existing lines.
- Share Repurchases: The Board approved a $150 million share repurchase program in July 2025. The company repurchased $37.3 million of shares in 2025, with $112.7 million remaining available.
- Catastrophe Exposure: Significant exposure to earthquakes (retention of $20.0 million) and hurricanes (retention of $11.0 million). While reinsurance coverage is robust, severe events could impact earnings.
- Reinsurance Dependency: The company relies on third-party reinsurers. Failure of reinsurers to pay claims could materially affect financial condition.
- Reserve Adequacy: Loss reserves are estimates subject to uncertainty. Adverse development could require reserve increases, reducing net income.
- Regulatory Environment: Subject to extensive state and federal regulation, including capital requirements and dividend restrictions on subsidiaries.
Investor Verification Checklist
- Reinsurance Coverage Limits: Verify the specific terms and limits of the catastrophe excess of loss (XOL) treaties and quota share agreements, particularly regarding the $3.1 billion earthquake coverage limit.
- Acquisition Integration: Monitor the integration progress and financial performance of the FIA, AAP, and Gray Surety acquisitions, including the impact on the Surety line profitability.
- Reserve Development: Review the loss development tables for accident years 2024 and 2025 to assess the stability of reserve estimates and the impact of favorable development on current earnings.
- California Exposure: Assess the concentration risk given that California represented 30.9% of gross written premiums in 2025 and the regulatory environment regarding rate filings.
- Debt Covenants: Confirm compliance with the financial covenants of the new $450 million credit agreement, specifically the leverage ratio and minimum net worth requirements.