Palomar(PLMR) - 2025 Q1 - Earnings Call Transcript

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]