Shares of Palomar (PLMR) have been struggling lately and have lost 8.2% over the past two weeks. However, a hammer chart pattern was formed in its last trading session, which could mean that the stock found support with bulls being able to counteract the bears. So, it could witness a trend reversal down the road.The formation of a hammer pattern is considered a technical indication of nearing a bottom with likely subsiding of selling pressure. But this is not the only factor that makes a bullish case for th ...

Core Viewpoint - Palomar Holdings, Inc. has shown strong financial performance in its recent earnings report, with significant growth in both revenues and operating income, despite facing higher expenses and a slight miss in gross written premiums [2][3][4]. Financial Performance - The company reported Q4 2025 operating income of $2.24 per share, exceeding the Zacks Consensus Estimate by 9% and reflecting a year-over-year increase of 47.4% [2]. - Total revenues for Q4 2025 reached $251 million, a 59.9% increase year-over-year, surpassing the Zacks Consensus Estimate by 13.1% [2]. - Gross written premiums increased by 31.8% year-over-year to $492.6 million, although this fell short of the estimate of $590.6 million [4]. - Net earned premiums rose 61.1% year-over-year to $233.5 million, exceeding both the estimate of $197.9 million and the Zacks Consensus Estimate of $205.6 million [4]. Investment Income and Underwriting - Net investment income climbed 41.3% year-over-year to $16 million, driven by higher yields and a larger average investment balance, surpassing estimates [5]. - Adjusted underwriting income increased by 51.8% to $62.3 million, while reported underwriting income rose 55.7% to $54.4 million, exceeding the estimate of $46.5 million [6]. Expense and Ratios - Total expenses rose 63.1% year-over-year to $180.7 million, driven by higher losses and acquisition costs, exceeding the estimate of $152.1 million [6]. - The loss ratio improved to 30.4%, down 470 basis points year-over-year, better than the estimate of 37.9% [7]. - The adjusted combined ratio worsened by 170 basis points year-over-year to 73.4%, slightly above the Zacks Consensus Estimate of 73.1% [7]. Full-Year Highlights - For the full year 2025, Palomar reported operating revenues of $876 billion, a 58.2% increase from 2024, surpassing the Zacks Consensus Estimate by 4.9% [8]. - Adjusted earnings increased 54.4% year-over-year to $7.86 per share, beating the Zacks Consensus Estimate by 2.1% [8]. - Total expenses for the year increased 54.6% to $622.6 million, while the adjusted combined ratio improved by 100 basis points to 72.7 [8]. Financial Position - Cash and cash equivalents rose 32.9% year-over-year to $106.9 million, and shareholders' equity increased by 29.3% to $942.7 million [9]. - The annualized adjusted return on equity for 2025 was 25.9%, representing an expansion of 100 basis points year-over-year [9]. Future Outlook - Palomar raised its 2026 adjusted net income guidance to $260-$275 million from a previous range of $210-$215 million, including expected catastrophe losses of $8-$12 million [10]. - Estimates for the company have trended upward, with a consensus estimate shift of 10.01% in the past month [11]. - The company holds a Zacks Rank 2 (Buy), indicating expectations for above-average returns in the coming months [13].

Group 1 - Palomar Holdings Inc. is identified as one of the 15 most undervalued NASDAQ stocks to buy according to Wall Street analysts [1] - JPMorgan raised its target price on Palomar by 3.2% to $160 from $155 and maintained an Overweight rating after the company's Q4 2025 results [1] - The Q4 2025 earnings report showed a 47% year-over-year increase in diluted adjusted earnings per share to $2.24, surpassing the street consensus of $2.09 [1] - The earnings growth was attributed to a significant rise in gross insurance premiums written, which outweighed higher loss ratios, along with increased investment income [1] Group 2 - Management provided guidance for 2026, expecting adjusted net income to be between $260 million and $275 million, indicating a 24% increase compared to 2025 [2] - Palomar specializes in property and casualty insurance, particularly earthquake insurance in states like California, Oregon, and Washington [3]

Core Viewpoint - AM Best has removed Palomar Casualty and Surety Company from under review with positive implications and affirmed its credit ratings, indicating strong financial stability and growth potential following its recent acquisitions [1] Group 1: Credit Ratings and Financial Strength - AM Best affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of "a-" (Excellent) for Palomar Casualty and Surety Company, with a positive outlook assigned to these ratings [1] - The ratings reflect PCSC's very strong balance sheet strength, adequate operating performance, limited business profile, and appropriate enterprise risk management [1] Group 2: Recent Acquisitions and Strategic Importance - In early 2026, Palomar Holdings, Inc. completed the acquisition of The Gray Casualty & Surety Company, which has been renamed to Palomar Casualty and Surety Company, enhancing its surety coverage capabilities [1] - The strategic importance of PCSC is expected to grow as it integrates into a larger organization with sophisticated distribution channels and a strong capital structure [1] Group 3: Operational Performance - PCSC reported pretax operating income in four of the last five years, with consistent combined and operating ratios below 100, indicating profitable operations [1] - The company's surplus has grown in most years, contributing to its strong risk-adjusted capitalization as measured by Best's Capital Adequacy Ratio (BCAR) [1]

Summary of Palomar's Investor Conference Call Company Overview - **Company Name**: Palomar - **Founded**: 2014 - **Public Company Status**: 7 years - **Initial Focus**: Specialty property insurance, particularly in the earthquake market - **Current Status**: Specialty insurer with five distinct product categories [3][4] Key Product Categories 1. **Earthquake Insurance**: Largest product line, with a balance of residential and commercial exposure. Residential rates are regulated, providing stability [9][10]. 2. **Marine and Other Property Products**: Includes flood, builder's risk, and Hawaiian hurricane insurance [4]. 3. **Casualty Insurance**: Focus on niche segments like real estate E&O and environmental liability, with a conservative risk appetite [5][15]. 4. **Crop Insurance**: Aiming for significant growth, with a target of $500 million in business in the near term and $1 billion long-term [20]. 5. **Surety and Credit**: Recently acquired two surety businesses to enhance this product line [6][24]. Market Dynamics - **Pricing Pressure**: Noted in the commercial earthquake segment, with mid-teen rate decreases, while residential earthquake business remains stable due to regulatory approval [9][10]. - **Casualty Market**: Opportunities in healthcare liability, while pulling back from professional liability due to pricing pressures [11][15]. - **Crop Insurance**: Differentiation through service and technology, with a focus on building relationships rather than competing on price [20][21]. Growth Strategy - **Palomar 2X Initiative**: A strategic goal to double adjusted net income organically while maintaining a return on equity (ROE) of over 20% within 3-5 years [29][56]. - **Organic vs. Inorganic Growth**: Emphasis on organic growth, but also open to acquisitions, particularly in markets where buying is more advantageous than building [24][53]. - **Capital Management**: Plans for stock buybacks and potential dividends to enhance shareholder returns [53][54]. Technology and AI Integration - **AI Utilization**: Enhancing underwriting models and operational efficiencies through AI, with ongoing pilots to improve workflows and customer service [39][40][42]. - **Market Positioning**: AI expected to become a standard in the industry, with Palomar focusing on maintaining competitive advantages through technology [42][46]. Risk Management - **Earthquake Risk**: Comprehensive reinsurance treaty in place to manage potential large earthquake events, with a focus on maintaining a robust analytics framework to assess portfolio risk [50][51]. - **Regulatory Compliance**: Emphasis on adhering to regulatory requirements while leveraging technology for better risk assessment [43]. Conclusion - **Unique Positioning**: Palomar aims to build a distinct specialty franchise capable of navigating various market cycles, with a strong focus on growth and profitability [56][57].

Core Viewpoint - Palomar (PLMR) shares have increased by 1.7% over the past four weeks, closing at $121.68, with analysts suggesting a potential upside of 36.2% based on a mean price target of $165.67 [1] Price Targets - The average price target consists of six estimates ranging from a low of $151.00 to a high of $183.00, with a standard deviation of $11.96, indicating a potential increase of 24.1% to 50.4% from the current price [2] - A low standard deviation suggests a high degree of agreement among analysts regarding the price movement of PLMR [2][9] Analyst Sentiment - Analysts are optimistic about PLMR's earnings prospects, as indicated by a positive trend in earnings estimate revisions, which has shown a strong correlation with stock price movements [4][11] - The Zacks Consensus Estimate for the current year has risen by 11.9% over the past month, with four estimates increasing and no negative revisions [12] Zacks Rank - PLMR holds a Zacks Rank 2 (Buy), placing it in the top 20% of over 4,000 ranked stocks based on earnings estimate factors, indicating a strong potential upside [13] Caution on Price Targets - While price targets are a common metric, they should not be the sole basis for investment decisions due to concerns about analysts' biases and the reliability of their estimates [3][10][7]

Catastrophe Risk and Reinsurance - The company has incurred significant losses from catastrophe events multiple times in its history, with the unpredictability of such events posing a risk to earnings and stockholders' equity [127]. - The company's reinsurance coverage currently exhausts at $3.1 billion for earthquake events and $100 million for continental U.S. hurricane events, with a retention of $20 million for earthquake events and $11 million for hurricane events [131]. - As of December 31, 2025, the company had $468.7 million of aggregate reinsurance recoverables, indicating reliance on reinsurance for risk management [133]. - The company closed a $525 million catastrophe bond in Q2 2025, effective June 1, 2025 through June 1, 2028, to enhance its reinsurance coverage for earthquake events [143]. - The company may face increased costs or limitations in purchasing reinsurance during hard market cycles, which could adversely impact its business and results of operations [142]. - The company is exposed to risks from unpredictable catastrophe events, including those caused by climate change, which could limit its ability to underwrite new insurance policies [124]. Competition and Market Position - The company faces intense competition in the insurance industry, which may result in pricing pressure and reduced underwriting margins [124]. - The company faces intense competition from larger specialty insurance companies and public enterprises, which may result in pricing pressure and reduced underwriting margins [170]. - Increased competition in the insurance industry may arise from new entrants and federal regulatory reforms, potentially affecting pricing and business retention [172]. Financial Performance and Risk Management - The reserve for losses and loss adjustment expenses is based on estimates and assumptions, which may prove inadequate, potentially impacting net income and stockholders' equity [134]. - The company relies on third-party data for risk modeling, which may lead to materially higher actual losses if estimates are incorrect [149]. - The company’s risk management approach relies on subjective variables and models that may not accurately predict actual outcomes, introducing uncertainty into loss estimates [151]. - The concentration of business in California exposes the company to greater regulatory and economic risks compared to insurers with a more diversified premium base [160]. - The company’s written premium in future years could be materially adversely affected if actual renewals of existing policies do not meet expectations [174]. Growth and Expansion - The company’s employee base has approximately doubled in the last twelve months, indicating significant growth and potential challenges in managing this expansion [181]. - Recent acquisitions include Gray Surety in January 2026 and FIA and AAP in 2025, which are part of the company’s strategy to expand its business [182]. - The company faces risks related to the evaluation and integration of acquired businesses, which could impact financial performance and operational efficiency [183]. Economic and Regulatory Environment - Economic downturns, particularly in California, could adversely affect the company’s financial condition and results of operations [196]. - The company is subject to extensive regulations that may adversely affect its ability to achieve business objectives and could result in penalties for non-compliance [224]. - U.S. insurance subsidiaries must maintain risk-based capital at required levels to avoid regulatory actions, including supervision or liquidation [228]. - The Bermuda subsidiary is subject to the Economic Substance Act 2018, which may require changes to business operations to comply with regulations [229]. Investment Risks - The company’s investment portfolio performance is subject to various risks, including interest rate fluctuations and credit quality considerations [199]. - The company faces risks from potential investment losses due to economic downturns, which could lead to impairments in the fixed income portfolio [207]. - The company may need to sell investments to meet liquidity requirements, which could result in significant realized losses depending on market conditions [210]. - The estimated fair value of the company's fixed maturities was $1.2 billion, with a 100-basis point increase in interest rates potentially causing a 3.8% decline in value [454]. - The company's fixed maturity portfolio has an average rating of "AA−," with approximately 71.3% rated "A−" or better, indicating a focus on high credit quality investments [452]. Cybersecurity and Compliance - Increased regulatory scrutiny around cybersecurity incidents could exacerbate potential harm to the company's business and reputation [217]. - The company is required to comply with cybersecurity regulations, which mandate the establishment and maintenance of a cybersecurity program [238]. - Compliance with the Sarbanes-Oxley Act and Dodd-Frank Act has increased regulatory demands and operating costs for the company [255]. - The company incurs significant costs as a public company, including legal and accounting expenses, which divert management's time from revenue-generating activities [253]. Legal and Tax Risks - The company faces risks associated with litigation, which could have an adverse effect on its business and financial condition [247]. - Changes in tax laws could negatively impact the company's results of operations and profitability by increasing tax expenses [241]. - The use of credit scoring in pricing and underwriting is subject to legal and regulatory scrutiny, which could decrease profitability if restrictions are enacted [248]. Dividend Policy - The company does not intend to declare and pay cash dividends in the foreseeable future, relying on its insurance subsidiaries for any potential dividends [244].

Core Insights - Palomar Holdings, Inc. will host a fireside chat at the 47th Annual Raymond James Institutional Investors Conference on March 2, 2026, at 2:15 pm ET, featuring CEO Mac Armstrong and CFO Chris Uchida [1] - Management will also be available for one-on-one and small group meetings with investors during the conference [1] Company Overview - Palomar Holdings, Inc. is the holding company for several subsidiaries, including Palomar Specialty Insurance Company, Palomar Specialty Reinsurance Company Bermuda Ltd., and others, providing a range of insurance services [3] - The company specializes in five product categories: Earthquake, Inland Marine and Other Property, Casualty, Fronting, and Crop [3] - Palomar's insurance subsidiaries have received strong financial strength ratings, with PSIC, PSRE, PESIC, and FIA rated "A" (Excellent) and PCSC rated "A-" (Excellent) by A.M. Best [3]

Investor Presentation February 2026 plmr.com Disclaimer This presentation contains forward-looking statements about Palomar Holdings, Inc. (the "Company"). These statements involve known and unknown risks that relate to the Company's future events or future financial performance and the actual results could differ materially from those discussed in this presentation. This presentation also includes financial measures which are not prepared in accordance with generally accepted accounting principles ("GAAP") ...

Financial Data and Key Metrics Changes - In 2025, the company achieved record levels of gross written premium and adjusted net income, with gross written premium increasing by 32% and adjusted net income rising by 62% to $216 million, exceeding initial guidance of $180 million-$192 million [4][31] - The adjusted return on equity for the full year was 26%, with an adjusted combined ratio of 72.7%, an improvement from 73.7% in 2024 [30][31] - For Q4 2025, adjusted net income was $61.1 million, or $2.24 per share, representing a 48% increase from Q4 2024 [23][24] Business Line Data and Key Metrics Changes - The earthquake franchise saw a 2% decline year-over-year, attributed to a one-time headwind from a large unearned premium transfer in Q4 2024, while the residential earthquake book performed well with a premium retention rate of 97% [8][9] - The Inland Marine and other property group grew by 30% year-over-year, driven by strong performance in admitted and E&S Builders Risk products [10] - The casualty business experienced a 120% year-over-year growth in gross written premium, ending 2025 at 20% of total gross written premium [13][14] Market Data and Key Metrics Changes - The commercial earthquake book faced a 15% rate decrease due to elevated competition, while the residential earthquake book continued to grow, expected to achieve high single digits to double digits growth [9][48] - The crop franchise generated $248 million in gross written premium, exceeding expectations, with a projected growth of over 30% in 2026 [16][17] Company Strategy and Development Direction - The company executed four strategic imperatives in 2025: integrate and operate, build new market leaders, remember preferences, and generate consistent earnings [5] - For 2026, the company aims to leverage scale for profitable growth, curate a distinct portfolio, deepen market positions, and integrate AI for operational efficiency [21][22] - The acquisition of Gray Surety is expected to strengthen the surety franchise and provide diversification to the earnings base [19][34] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in sustaining growth momentum, with 2026 adjusted net income guidance set at $260 million-$275 million, implying a 24% growth [20][32] - The company anticipates modest premium growth and margin expansion in the earthquake book despite ongoing commercial pressure [10][49] - Management remains conservative in managing casualty exposure and reserves, with a focus on maintaining balance sheet strength [15] Other Important Information - The company reported a net investment income of $16 million for Q4 2025, a 41.3% increase year-over-year, driven by higher yields on invested assets [28][29] - The company plans to reconstitute product groups, with fronting no longer being a standalone category, and will report on five product categories going forward [18][35] Q&A Session Summary Question: Higher retention on crop and its contribution to earnings - Management indicated that retaining more in crop could add approximately $8 million of pre-tax income for every $100 million retained, with a combined ratio expected in the low 90s [38] Question: 10% reduction in reinsurance costs - The reduction is on a risk-adjusted basis, assuming like-for-like exposure [39] Question: Growth expectations from new underwriting hires - Management noted that growth contributions from new hires depend on the market they enter, with a focus on moderate growth and strong reinsurance support [42][44] Question: Breakdown of earthquake growth - The residential earthquake book is expected to grow while the commercial book faces pressure, with management anticipating high single digits to double digits growth for residential [48] Question: Loss ratio expectations - Management expects the loss ratio to be in the mid- to upper 30s for 2026, influenced by increased retention in crop and growth in that segment [50][54] Question: Capital deployment opportunities - Management indicated a focus on organic growth, increased retention, and opportunistic share buybacks, with a balanced approach to capital allocation [71][73]