0001193125-25-272277
SEC filingNet income surged 68.7% YoY in Q3 2025 to $51.5M, driven by 66.0% net earned premium growth and a combined ratio improvement of 240 bps to 78.1%.
In the third quarter of 2025, Palomar reported strong financial results. Total revenue reached $244.7 million, a 64.7% increase from $148.5 million in the prior-year quarter, driven primarily by a 66.0% rise in net earned premiums to $225.1 million. Net income grew 68.7% to $51.5 million, and diluted earnings per share increased to $1.87 from $1.15. The combined ratio improved by 240 basis points to 78.1%, reflecting a lower catastrophe loss ratio (0.8% vs. 9.5%) and improved expense ratio (45.8% vs. 50.8%). Underwriting income rose 86.1% to $49.2 million, while net investment income increased 54.9% to $14.6 million due to a higher average investment balance and yields.
Gross written premiums grew 43.9% to $597.2 million, with strong performance across most lines. Casualty premiums surged 170.0% to $152.0 million, driven by new business and distribution expansion. Crop premiums more than doubled to $119.8 million, consistent with seasonal third-quarter recognition. Inland Marine and Other Property rose 49.7% to $117.9 million. Earthquake premiums increased 10.8% to $149.9 million. Fronting premiums declined 32.2% to $57.6 million due to the termination of a large partnership in the prior year. The net earned premium ratio increased to 43.4% from 34.3% as a larger portion of business was retained net of reinsurance.
Palomar's management did not provide explicit forward guidance but highlighted strategic priorities including expansion of product offerings (Crop, Environmental Liability, E&S Casualty) and distribution footprint. The company continues to invest in technology and talent. A $150 million share repurchase program was authorized in July 2025, with $112.7 million remaining. The company maintains a robust reinsurance program with a $20 million catastrophe retention for earthquake and $11 million for hurricane events. Management believes current liquidity is sufficient for at least the next 12 months.
As of September 30, 2025, Palomar reported total assets of $2.94B, with cash and cash equivalents of $111.7M and total investments of $1.21B, primarily fixed maturity securities ($1.14B) and equity securities ($52.2M). The company maintains a conservative balance sheet with zero outstanding debt under its $100M revolving credit facility or FHLB line. Shareholders' equity stood at $878.1M, supported by retained earnings of $365.8M.
The most significant commitment disclosed in the notes is $102.3M in unfunded capital commitments to limited partnership investments (private equity funds). These commitments have a ten-year term with no redemption rights; capital is drawn as needed. The company also participates in catastrophe bond programs (Torrey Pines Re), but these are reinsurance contracts, not purchase commitments. No other material purchase obligations were noted.
In July 2025, the Board authorized a $150M share repurchase program through July 2027. During the nine months ended September 30, 2025, the company repurchased 308,417 shares for $37.3M at an average price of $120.85, leaving $112.7M available. No dividends were declared or paid. Debt remained at zero, with no borrowings on the credit facility or FHLB line. Capital expenditures were minimal ($2.7M net property and equipment), representing 0.4% of total revenues.
Palomar operates as a single segment: property and casualty insurance. The CODM evaluates performance using consolidated GAAP net income. Gross written premiums by product for the nine months were: Earthquake ($427.9M, 27.9%), Casualty ($392.5M, 25.6%), Inland Marine and Other Property ($335.5M, 21.8%), Crop ($207.4M, 13.5%), and Fronting ($172.4M, 11.2%). Geographically, California led at 30.8% of GWP, followed by Texas (7.8%), Hawaii (4.6%), Florida (4.3%), and New York (3.3%). The remainder was spread across other states (41.8%).