Palomar(PLMR) - 2025 Q2 - Quarterly Results

Financial Highlights 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][9] Management Commentary 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] - 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] - Palomar continues to invest in talent and operational scale to strengthen both near-term and long-term business prospects[4] Detailed Financial Performance Detailed financial results reveal robust growth in underwriting income, net investment income, and stockholders' equity Underwriting Results 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] Investment Results 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] - The company recorded $8.3 million in net realized and unrealized gains on its investment portfolio during the quarter[10] - Total cash and invested assets stood at $1.3 billion as of June 30, 2025[10] Stockholders' Equity and Returns 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 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] - The company increased its full-year 2025 adjusted net income guidance to a range of $198 million to $208 million[15] Financial Statements and Data This section presents detailed unaudited financial statements, including operating results, balance sheets, and underwriting data Summary of Operating Results 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 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 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] Non-GAAP Financial Measures This section defines and reconciles key non-GAAP financial measures for assessing operational performance Definitions of Non-GAAP Measures 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] - Underwriting income: Excludes net investment income, investment gains/losses, and interest expense from pre-tax income[23] - Adjusted combined ratio: Excludes the impact of certain items from the standard combined ratio calculation[27] Reconciliation of Non-GAAP Measures 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 |