Financial Data and Key Metrics Changes - The company reported a 44% increase in gross written premiums, reaching $597.2 million for the third quarter of 2025 compared to the same period in 2024 [19] - Adjusted net income grew 70% to $55.2 million or $2.01 per share, up from $32.4 million or $1.23 per share year-over-year [18] - The adjusted combined ratio improved to 74.8% from 77.1% in the previous year, indicating better underwriting performance [18] - Annualized adjusted return on equity was 25.6%, compared to 21% for the same period last year [18] Business Line Data and Key Metrics Changes - The earthquake franchise grew 11% year-over-year, driven by strong performance in the residential earthquake market with an 88% policy retention rate [7] - Inland marine and other property categories saw a 50% year-over-year growth, significantly up from 28% in the second quarter [10] - The casualty business experienced a remarkable 170% year-over-year growth in gross written premiums [12] - The Crop franchise doubled its gross written premium to $120 million, exceeding the previous year's $60 million [14] Market Data and Key Metrics Changes - The commercial earthquake business faced rate pressure, with average risk prices decreasing approximately 18% on a risk-adjusted basis [8] - The company expects single-digit growth in the earthquake book for the fourth quarter, influenced by a one-time under premium transfer from the previous year [9] - The partnership with Neptune Flood is anticipated to accelerate growth in the residential flood product over the next three years [10] Company Strategy and Development Direction - The company is focused on profitable growth and has entered select specialty markets that offer compelling, risk-adjusted returns [5] - The acquisition of Gray Casualty and Surety Company is expected to enhance the company's surety platform and market position [5] - The company aims to double adjusted net income over a three to five-year timeframe as part of its Palomar 2X initiative [17] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term ability to profitably grow the earthquake business despite market challenges [9] - The company anticipates favorable conditions in the Crop market, with expectations to exceed the 15-year average industry loss ratio [15] - Management remains optimistic about achieving the revised full-year adjusted net income guidance of $210 million to $215 million [27] Other Important Information - The company placed seven reinsurance treaties during the third quarter, all renewing on favorable terms [15] - Investment income for the third quarter increased by 55% year-over-year, driven by higher yields on invested assets [25] - The acquisition of Gray Surety is expected to close in the first quarter of 2026 and should be accretive to earnings in its first year [16] Q&A Session Summary Question: Market opportunity in surety and competition - Management highlighted the complementary nature of Gray Surety to existing operations and the potential to become a top 20 surety carrier [29][30] Question: Future of the Crop business - Management expressed confidence in growing the Crop business to $500 million in the near term, emphasizing service and technology investments [33] Question: Net income guidance and catastrophe losses - Management confirmed that the updated guidance includes expectations for catastrophe losses, with a favorable outlook for the loss ratio [34] Question: Rate pressure in commercial earthquake - Management acknowledged ongoing rate pressure but indicated that the residential earthquake book's strength would support growth [36] Question: Net earned premium ratio expectations - Management expects the net earned premium ratio to increase in the fourth quarter and into the first half of the following year [37] Question: Healthcare liability book specifics - Management provided details on the healthcare liability book, including targeted segments and the current market conditions [45] Question: Stickiness of flood policies - Management noted strong policy renewal rates and increased interest in new business due to the federal program's shutdown [46] Question: Growth trajectory and future hiring - Management indicated plans for continued organic growth and potential opportunistic hiring to sustain growth momentum [51]