Company Overview - Palomar (PLMR) shares have increased by approximately 12% over the past month, outperforming the S&P 500 [1] - The stock has a Zacks Rank of 1 (Strong Buy), indicating expectations for above-average returns in the coming months [4] Earnings Estimates - Fresh estimates for Palomar have trended upward in the past month, suggesting positive sentiment among analysts [2] - The overall direction and magnitude of estimate revisions for Palomar are promising [4] VGM Scores - Palomar has a Growth Score of B, a Momentum Score of C, and a Value Score of F, placing it in the bottom 20% for the value investment strategy [3] - The aggregate VGM Score for Palomar is C, which is relevant for investors not focused on a single strategy [3] Industry Performance - Palomar operates within the Zacks Insurance - Property and Casualty industry [5] - The Hartford Insurance Group (HIG), a peer in the same industry, has seen a 2.7% increase in shares over the past month [5] - The Hartford reported revenues of $4.75 billion for the last quarter, reflecting a year-over-year increase of 9.6% [6]

Core Viewpoint - Growth stocks are appealing due to their potential for above-average financial growth, but identifying strong candidates can be challenging due to inherent volatility and risks [1] Group 1: Company Overview - Palomar (PLMR) is currently highlighted as a promising growth stock, supported by a favorable Growth Score and a top Zacks Rank [2] - The historical EPS growth rate for Palomar is 54%, with projected EPS growth of 36.1% this year, significantly outperforming the industry average of 3.4% [4] Group 2: Financial Metrics - Cash flow growth is crucial for growth-oriented companies, and Palomar's year-over-year cash flow growth stands at 45.1%, compared to the industry average of 15% [5] - The annualized cash flow growth rate for Palomar over the past 3-5 years is 25.5%, while the industry average is 11.5% [6] Group 3: Earnings Estimates - Positive trends in earnings estimate revisions are indicative of potential stock price movements, and Palomar's current-year earnings estimates have increased by 3.1% over the past month [8] - Palomar has achieved a Zacks Rank of 2 due to favorable earnings estimate revisions and has earned a Growth Score of B based on various metrics [10]

Core Viewpoint - Palomar Holdings, Inc. has successfully completed reinsurance programs and increased its full-year 2025 adjusted net income guidance to a range of $195 million to $205 million, up from a previous range of $186 million to $200 million [1][6]. Reinsurance Program Highlights - The company has secured approximately $455 million of incremental limit to support the growth of its Earthquake franchise, bringing total reinsurance coverage to $3.53 billion for earthquake events and $100 million for hurricane events in the continental United States [2]. - Palomar's per occurrence event retention has been reduced to $11 million for hurricane events from $15.5 million and remains at $20 million for earthquake events, which is within management's guideposts [3]. - The reinsurance program provides ample capacity for growth and exceeds the company's 1:250-year peak zone Probable Maximum Loss, with $525 million of the earthquake limit sourced through the largest Torrey Pines Re catastrophe bond issuance [4]. New Treaty and Coverage Changes - Effective June 1, Palomar executed its first standalone excess of loss treaty covering Hawaii hurricane policies, which were previously included in the core reinsurance tower now consisting of over 95% earthquake-only coverage [5]. - The Laulima's XOL reinsurance program offers per occurrence coverage up to $735 million with a retention of $1.5 million [5]. Management Commentary - The CEO expressed satisfaction with the reinsurance placement outcomes, highlighting a risk-adjusted rate decrease of approximately 10% and the successful procurement of additional earthquake limits, which should enhance earnings prospects for the remainder of 2025 and the first half of 2026 [6]. - The Chief Risk Officer noted the strong support from the reinsurance market, emphasizing the stability and predictability of results, which positions the company for long-term value delivery to shareholders [7]. Financial Strength and Capacity - Palomar has $1.15 billion of multi-year ILS capacity providing diversifying collateralized reinsurance capital, supported by a panel of over 100 reinsurers and ILS investors, all rated "A-" or better [9]. - The company maintains prepaid reinstatements for most layers, limiting pre-tax net loss to $11 million for hurricane events and $20 million for earthquake events [9].

Company Participation - Palomar Holdings, Inc. will participate in the William Blair Growth Stock Conference on June 4, 2025, with CEO Mac Armstrong and CFO Chris Uchida presenting at 1:20 pm Central Time [1] - The management will also engage in one-on-one investor meetings during the conference [1] Webcast Information - Interested parties can access a live webcast of the presentation through the Investor Relations section of Palomar's website, with an online replay available afterward [2] Company Overview - Palomar Holdings, Inc. operates several subsidiaries, including Palomar Specialty Insurance Company, Palomar Specialty Reinsurance Company Bermuda Ltd., and Palomar Insurance Agency, among others [3] - The company specializes in innovative insurance solutions across five product categories: Earthquake, Inland Marine and Other Property, Casualty, Fronting, and Crop [3] - Palomar's insurance subsidiaries hold strong financial ratings, with PSIC, PSRE, and PESIC rated "A" (Excellent) and FIA rated "A-" (Stable) by A.M. Best [3]

Core Insights - Palomar Holdings Inc. (PLMR) is experiencing a short-term bullish trend, trading above its 50-day simple moving average (SMA) with a current share price of $161.54, down 2.1% from its 52-week high of $165.00 [1] - The company aims to be among the top 10 crop premium writers in the U.S. by 2025, projecting crop premiums to grow to $500 million in the intermediate term [2] - PLMR has gained 53% year-to-date, outperforming the industry, sector, and the Zacks S&P 500 composite [5] Financial Performance - PLMR's price-to-earnings ratio stands at 5.46X, significantly higher than the industry average of 1.56X, indicating that shares are trading at a premium [9] - The Zacks average price target for PLMR is $174.50 per share, suggesting a potential upside of 9.7% from the last closing price [11] - The Zacks Consensus Estimate for 2025 earnings is $6.95, reflecting a 36.5% year-over-year increase, with revenues projected to rise by 41.5% to $777.4 million [12] Growth Drivers - PLMR's return on equity is 20.6%, outperforming the industry average of 7.8%, while return on invested capital (ROIC) is 19.9%, compared to the industry average of 5.9% [14] - The company’s fee-based platform, PLMR-FRONT, is expected to drive medium-term growth, enhancing its earnings foundation [15] - Increasing policy volumes, strong retention rates, geographic expansion, and new partnerships are anticipated to boost premiums, with crop insurance projected to contribute around $200 million by 2025 [16] Strategic Initiatives - PLMR identifies Surety as a long-term growth opportunity, providing diversification and stability [17] - The company maintains a strong capital position with a debt-free balance sheet and is executing share buybacks as part of its shareholder return initiatives [19] - PLMR is positioning itself as a key player in the crop insurance sector, with diverse products and strategic partnerships fueling its growth momentum [20]

Core Viewpoint - Growth investors are interested in stocks with above-average financial growth, but identifying such stocks can be challenging due to inherent risks and volatility [1] Group 1: Growth Stock Identification - The Zacks Growth Style Score simplifies the process of finding promising growth stocks by analyzing real growth prospects beyond traditional metrics [2] - Palomar (PLMR) is currently recommended due to its favorable Growth Score and top Zacks Rank [2] Group 2: Earnings Growth - Earnings growth is crucial for growth investors, with double-digit growth being highly desirable as it indicates strong future prospects [4] - Palomar's historical EPS growth rate is 54%, with projected EPS growth of 36.1% this year, significantly outperforming the industry average of 3% [5] Group 3: Cash Flow Growth - Higher-than-average cash flow growth is essential for growth-oriented companies, enabling them to expand without relying on external funding [6] - Palomar's year-over-year cash flow growth is 45.1%, exceeding the industry average of 15.6% [6] - The company's annualized cash flow growth rate over the past 3-5 years is 25.5%, compared to the industry average of 11.6% [7] Group 4: Earnings Estimate Revisions - Positive trends in earnings estimate revisions are correlated with stock price movements [8] - The current-year earnings estimates for Palomar have increased by 3.2% over the past month [8] Group 5: Overall Positioning - Palomar has achieved a Growth Score of B and a Zacks Rank 2 due to positive earnings estimate revisions, positioning it well for potential outperformance [10]

Financial Performance - Gross written premiums increased from $16.6 million in 2014 to $1.5 billion for the year ended December 31, 2024, reflecting a compound annual growth rate of approximately 57%[90] - Net income growth since 2016 reflects a compound annual growth rate of 43%[90] - Gross written premiums increased by $74.1 million, or 20.1%, to $442.2 million for the three months ended March 31, 2025, compared to $368.1 million for the same period in 2024[124] - Net written premiums rose by $71.5 million, or 51.1%, to $211.4 million for the three months ended March 31, 2025, from $139.9 million in the prior year[128] - Net earned premiums increased by $56.2 million, or 52.1%, to $164.1 million for the three months ended March 31, 2025, compared to $107.9 million for the same period in 2024[129] - Underwriting income surged by $19.1 million, or 76.6%, to $44.1 million for the three months ended March 31, 2025, from $25.0 million in the previous year[131] - Net income rose by $16.5 million, or 62.7%, to $42.9 million for the three months ended March 31, 2025, compared to $26.4 million for the same period in 2024[124] - Adjusted net income increased by $23.5 million, or 84.6%, to $51.3 million for the three months ended March 31, 2025, from $27.8 million in the prior year[124] - Total revenue for the three months ended March 31, 2025, was $174.6 million, up from $118.5 million in 2024, resulting in an underwriting revenue of $164.9 million compared to $108.4 million[141] Underwriting and Ratios - The combined ratio is defined as the sum of the loss ratio and the expense ratio, with a ratio under 100% indicating an underwriting profit[116] - Adjusted combined ratio excluding catastrophe losses is a non-GAAP financial measure that provides insight into underlying business trends[120] - The combined ratio improved to 73.1% for the three months ended March 31, 2025, down from 76.9% in the prior year[124] - Other underwriting expenses as a percentage of gross earned premiums increased to 9.5% for the three months ended March 31, 2025, compared to 8.2% for the same period in 2024[135] - The adjusted combined ratio improved to 68.5% for the three months ended March 31, 2025, from 73.0% in 2024[151] - Adjusted combined ratio excluding catastrophe losses improved to 68.9% in Q1 2025 from 69.8% in Q1 2024[157] Investment and Cash Flow - Net investment income rose by $4.9 million, or 69.1%, to $12.1 million for the three months ended March 31, 2025, from $7.1 million in the prior year[136] - The company incurred $2.3 million of net realized and unrealized losses on investments for the three months ended March 31, 2025, compared to $3.0 million of net realized and unrealized gains for the same period in 2024[137] - Cash provided by operating activities was $87.2 million for Q1 2025, significantly higher than $33.1 million in Q1 2024[173] - Cash used in investing activities was $51.9 million in Q1 2025, compared to $16.3 million in Q1 2024[173] - The company had $1,168.7 million in cash and investment securities available as of March 31, 2025[177] Equity and Dividends - Total stockholders' equity increased to $790.4 million as of March 31, 2025, up from $729.0 million at the end of 2024[184] - Tangible stockholders' equity rose to $765.5 million as of March 31, 2025, compared to $715.8 million at December 31, 2024[159] - PSIC subsidiary has the capacity to pay dividends of up to $99.6 million in 2025 without regulatory approval[162] - The maximum dividend available from PSRE during 2025 is approximately $4.2 million, subject to solvency requirements[168] Acquisitions and New Products - The company completed the acquisition of Advanced AgProtection in April 2025, enhancing its capabilities in the Crop insurance sector[92] - The company has introduced several new products, including Crop, Environmental Liability, and E&S Casualty, to diversify its portfolio[91] Reinsurance and Catastrophe Events - The company holds $895 million in multi-year indemnity-based reinsurance coverage for earthquake events, issued through Torrey Pines Re Ltd[191] - The catastrophe event retention is set at $20 million for earthquake events and $15.5 million for hurricane events[193] - The company’s reinsurance coverage exhausts at $3.2 billion for earthquake events, providing significant protection against catastrophic losses[193] - The company utilizes a mix of traditional reinsurers and insurance-linked securities, purchasing reinsurance from over 100 reinsurers[190] Investment Portfolio - The investment portfolio comprised $991.8 million in fixed maturity securities as of March 31, 2025, with a book yield of 4.65%[186] - The corporate and other fixed maturities represented 51.3% of the total fair value of available-for-sale investments as of March 31, 2025[187] - The fair value of AAA-rated securities increased to $139,730 thousand, accounting for 14.1% of the total fair value as of March 31, 2025, compared to 13.9% on December 31, 2024[188] - The fixed maturity portfolio has an average rating of at least "AA−," with approximately 73.7% rated "A−" or better as of March 31, 2025[198] - As of March 31, 2025, 1.4% of the fixed maturity portfolio was unrated or rated below investment grade, indicating a focus on high credit quality[198] - The estimated fair value of fixed maturities due within one year is $70,386 thousand, representing 7.1% of the total fair value[188]

Financial Data and Key Metrics Changes - The company reported an 85% growth in adjusted net income, reaching $51.3 million or $1.87 per share compared to $27.8 million or $1.09 per share in the same quarter of 2024 [31] - The adjusted combined ratio improved to 68.5% from 73% year-over-year, indicating better operational efficiency [32] - Gross written premiums increased by 20% year-over-year to $442.2 million, with a 37% growth when excluding runoff business [33] Business Line Data and Key Metrics Changes - The casualty gross written premium grew by 113% year-over-year, driven by strong performance across various segments [20] - The crop franchise generated $48 million in written premium, a 25% increase year-over-year, despite seasonal limitations [23] - The earthquake franchise saw a 23% year-over-year growth in gross written premium, with strong contributions from both residential and commercial segments [14] Market Data and Key Metrics Changes - The company noted pressure in the commercial accounts market, with rate decreases of approximately 5% in small commercial accounts and 7.5% in large commercial accounts [17] - The Hawaii hurricane segment experienced an 82% growth, with new business written at rates 26% higher than the previous year [18] - The company is facing increased competition in the commercial all-risk market, leading to significant pricing pressure [19] Company Strategy and Development Direction - The company is focused on executing its "Palomar 2X" strategic imperative, aiming to double adjusted net income within three to five years while maintaining an ROE above 20% [30] - The strategy includes diversifying its portfolio and increasing resource allocation to specific products like residential earthquake and Hawaii hurricane [10] - The company is also integrating new acquisitions, such as Advanced Ag Protection, to enhance its crop business capabilities [25] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating economic uncertainties, noting that the insurance sector is less impacted by tariffs compared to other industries [11] - The company raised its full-year 2025 adjusted net income guidance to a range of $186 million to $200 million, reflecting optimism about growth despite market challenges [41] - Management acknowledged that a recession could impact premium retention and loss severity but emphasized the strength of their diversified portfolio [13] Other Important Information - The company secured $525 million of earthquake limit through a catastrophe bond issuance, exceeding its target [27] - The acquisition of Advanced Ag Protection is expected to significantly enhance the crop market opportunity and scale the business [25] - The company is committed to investing in talent across various departments to support its growth strategy [29] Q&A Session Summary Question: Can you help us think through the flat to down five that you're assuming in your outlook? - Management indicated that all placements have come in better than forecasted, with a conservative approach to future placements [46] Question: Could you talk about the thought process around splitting out Laulima separately? - The intention is to establish Laulima as a standalone entity, allowing for independent management and fee generation [49] Question: Can you elaborate on the growth seen in the residential and commercial sides of the earthquake business? - Management noted strong growth in both segments, with residential benefiting from heightened awareness and new partnerships [54] Question: How much of the inland marine and property book has excess national marine? - The most pricing pressure is seen in the large commercial segment, but the overall exposure is balanced across various lines [95]

Financial Data and Key Metrics Changes - The company reported an 85% growth in adjusted net income, reaching $51.3 million or $1.87 per share compared to $27.8 million or $1.09 per share in the same quarter of 2024 [31] - The adjusted combined ratio improved to 68.5% from 73% year-over-year, indicating better operational efficiency [32] - Gross written premiums increased by 20% to $442.2 million, with a 37% growth rate when excluding runoff business [34] Business Line Data and Key Metrics Changes - The casualty gross written premium grew by 113% year-over-year, driven by strong performance across various segments [20] - The earthquake franchise saw a 23% year-over-year growth in gross written premium, with record new business in the residential segment [15] - The crop franchise generated $48 million in written premium, a 25% increase year-over-year, despite seasonal limitations [23] Market Data and Key Metrics Changes - The company noted pressure in the commercial accounts market, with rate decreases of approximately 5% in small commercial accounts and 7.5% in large commercial accounts [17] - The Hawaii hurricane segment experienced an 82% growth, with new business written at rates 26% higher than the previous year [18] - The company is monitoring the impact of tariffs on its portfolio, particularly in relation to crop prices and potential increases in loss severity [12] Company Strategy and Development Direction - The company is focused on executing its "Palomar 2X" strategic imperative, aiming to double adjusted net income within three to five years while maintaining an ROE above 20% [30] - The strategy includes integrating and operating new acquisitions, such as Advanced Ag Protection, to enhance market presence and operational scale [25] - The company is committed to a conservative risk appetite, avoiding volatile property segments while increasing resources in more stable areas like residential earthquake and builders' risk products [10] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving mid to high teens growth in earthquake premiums for 2025, despite competitive pressures in the commercial market [17] - The company raised its full-year 2025 adjusted net income guidance to a range of $186 million to $200 million, reflecting optimism about growth vectors despite economic uncertainties [30][41] - Management acknowledged that a recession could impact premium retention and loss severity, but emphasized the diversity of the portfolio as a buffer against economic downturns [13] Other Important Information - The company successfully secured $525 million in earthquake limit through a catastrophe bond issuance, exceeding its target [27] - The acquisition of Advanced Ag Protection is expected to enhance the crop business, aiming for significant premium growth in the future [25][26] - The company is investing in talent across various departments to support its growth strategy and operational efficiency [29] Q&A Session Summary Question: Can you help us think through the flat to down five that you're assuming in your outlook? - Management indicated that all placements have come in better than the forecast of flat to down 5%, with a conservative approach to future placements [46][47] Question: Could you talk about the thought process around splitting out Laulima separately? - The decision to separate Laulima is part of a long-term strategy to establish it as an independent entity, allowing for better management and fee generation [50] Question: Can you elaborate on the growth seen in the residential and commercial sides of the earthquake business? - Management noted strong growth in both segments, with residential benefiting from heightened awareness and new partnerships, while commercial faces more pressure [54][57] Question: How much of the acceleration in the casualty book is due to market growth versus internal ramp-up? - Management stated that both factors contributed, with new underwriters and market dislocation driving growth [62] Question: What is the expected trend for the attritional loss ratio? - The attritional loss ratio is expected to increase in Q2 and Q3 due to the seasonal nature of the crop business, but management remains confident in their conservative reserving practices [88][90]

Financial Data and Key Metrics Changes - The company reported an 85% growth in adjusted net income, reaching $51.3 million or $1.87 per share compared to $27.8 million or $1.09 per share in Q1 2024 [30] - The adjusted combined ratio improved to 68.5% from 73% in the same quarter last year, indicating better underwriting performance [31] - Gross written premiums increased by 20% year over year to $442.2 million, with a 37% growth rate when excluding runoff business [32] Business Line Data and Key Metrics Changes - The casualty gross written premium grew by 113% year over year, driven by strong performance across various segments [20] - The earthquake franchise saw a 23% year-over-year growth in gross written premium, with record new business in the residential segment [14] - The crop franchise generated $48 million in written premium, a 25% increase year over year, despite seasonal limitations [23] Market Data and Key Metrics Changes - The company noted pressure in the commercial accounts market, with rate decreases of approximately 5% in small commercial accounts and 7.5% in large commercial accounts [16] - The Hawaii hurricane segment experienced an 82% growth, with new business written at rates 26% higher than the previous year [18] - The company is facing increased competition in the commercial all-risk segment, leading to significant pricing pressure [19] Company Strategy and Development Direction - The company is focused on executing its strategic imperatives, including integrating and operating new acquisitions, building new market leaders, and maintaining a conservative risk appetite [7][10] - The acquisition of Advanced Ag Protection is expected to enhance the crop business and contribute to long-term growth [24] - The company aims to build a leading specialty insurance franchise with a diversified portfolio, targeting $500 million in premium for the crop business in the intermediate future [25] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating economic uncertainties, noting that the insurance sector is less impacted by tariffs compared to other industries [11] - The company raised its full-year 2025 adjusted net income guidance to a range of $186 million to $200 million, reflecting strong performance and growth potential [29] - Management acknowledged that a recession could have a more significant impact on the portfolio than tariffs, but emphasized the diversity of the portfolio as a strength [13] Other Important Information - The company secured $525 million of earthquake limit through a catastrophe bond issuance, exceeding its target [26] - The net investment income for Q1 was $12.1 million, a 69.1% increase year over year, attributed to higher yields on invested assets [36] - The company is committed to investing in talent across various departments to support growth and operational efficiency [28] Q&A Session Summary Question: Can you help us think through the flat to down five that you're assuming in your outlook? - Management indicated that all placements to date have come in better than the forecast of flat to down 5%, with a conservative approach to future placements [44] Question: Could you talk about the thought process around splitting out Laulima separately? - The decision to separate Laulima stems from the desire to establish it as an independent entity, allowing for better management and fee generation [47] Question: What sort of growth did you see in the residential and commercial sides? - Management noted strong growth in both residential and commercial segments, with residential benefiting from heightened awareness and new partnerships [52][55] Question: How much of the acceleration in the casualty book was due to market growth versus internal ramp-up? - Management stated that the acceleration was a combination of both new hires and favorable market conditions, allowing for broader distribution and service capabilities [61] Question: Are you keeping the commercial all-risk program in the portfolio? - Management confirmed that they will maintain a minimal presence in the commercial all-risk market, ready to re-enter when conditions improve [73]