0001193125-26-067364
SEC filingNet income surged 67.6% to $197M, driven by 31.5% premium growth and improved combined ratio of 76.9%.
Palomar Holdings, Inc. describes itself as a specialty insurance company providing property and casualty insurance to individuals and businesses. The company leverages underwriting expertise and data-driven analytics to offer innovative solutions in five product categories: Earthquake, Casualty, Inland Marine and Other Property, Crop, and Fronting. It operates in both the admitted and excess and surplus lines markets, utilizing proprietary data analytics and a technology-enabled platform. Its insurance subsidiaries carry an "A" financial strength rating from A.M. Best. Founded in 2014, Palomar grew gross written premiums from $16.6 million to $2.0 billion in 2025 (55% CAGR) and has been profitable since 2016.
Palomar reports through five product lines based on gross written premiums for 2025. Earthquake accounted for 28.2% of GWP, offering Residential and Commercial Earthquake products on both admitted and E&S bases. Casualty represented 26.8%, covering niche segments such as E&S Casualty, Primary Casualty, Real Estate Agent Errors and Omissions, Excess Liability, Environmental Liability, and Surety. Inland Marine and Other Property contributed 22.0%, including Inland Marine, Hawaii Hurricane, Excess National Property, and Residential Flood. Crop made up 12.2%, primarily multi-peril crop insurance through the USDA's Risk Management Agency. Fronting comprised 10.8%, enabling other insurers to use Palomar's licensed companies for customized programs. Notably, in 2026, Fronting will be consolidated into existing lines and Surety will be reported separately following acquisitions.
Key platforms include the Palomar Automated Submission System (PASS), which enables rapid quoting and binding for personal lines. The company also uses Torrey Pines Re Ltd, a Bermuda-domiciled special purpose insurer, for catastrophe bond issuances. Other notable entities include Laulima Exchange (a reciprocal exchange for Hawaii hurricane), PSIC (admitted carrier), PESIC (surplus lines), and acquired carriers FIA and Gray Surety (now PCSC) for surety. The company emphasizes technology integration with APIs for seamless connectivity with partners.
Palomar employs a multi-channel, open architecture distribution model involving retail agents, wholesale brokers, program administrators, and carrier partnerships. As of 2025, it maintained partnerships with over 35 insurance companies. Personal lines are primarily distributed through retail agents, while commercial lines go through wholesale brokers. Program administrators provide scale, and carrier partnerships include fronting and assumed reinsurance arrangements. No single customer concentration is disclosed.
The specialty insurance market is highly competitive. Named competitors include Kinsale Capital Group, RLI Corp., Skyward Specialty Insurance Group, W.R. Berkley, Bowhead Specialty Holdings, The Chubb Corporation, American Financial Group, Lloyd's of London, California Earthquake Authority, and National Flood Insurance Program. Competition is based on factors such as reputation, coverages, pricing, customer service, and financial strength ratings.
Palomar's strategy focuses on: expanding in existing markets by gaining share and increasing total addressable market; maintaining profitability and growth through disciplined underwriting; diversifying the book by loss exposure, customer type, and geography; generating fee income through quota share and partnerships; purchasing conservative reinsurance to protect earnings; investing in proprietary technology including AI; and pursuing opportunistic acquisitions to enter new markets, as demonstrated by the FIA and Gray Surety acquisitions.
As of December 31, 2025, Palomar employed 439 team members, a 74% increase year-over-year partly from acquisitions. The company emphasizes competitive compensation, with 100% of employees receiving equity awards and annual cash bonuses. In 2025, 21% of the workforce was promoted or moved into new roles. An engagement survey yielded an 85% response rate and an 85% engagement score. The company also provides tuition reimbursement and development programs.
For the year ended December 31, 2025, Palomar Holdings reported strong financial performance. Total GAAP revenue increased 58.2% to $875.97 million from $553.86 million in 2024, driven primarily by a 57.2% increase in net earned premiums to $802.6 million. Net income rose 67.6% to $197.1 million ($7.17 per diluted share) from $117.6 million ($4.48 per share). The combined ratio improved 120 basis points to 76.9%, with a loss ratio of 28.5% (up from 26.4%) and an expense ratio of 48.4% (down from 51.7%). The adjusted combined ratio (non-GAAP) was 72.7% versus 73.7% in the prior year. Underwriting income increased 66.1% to $185.9 million, and adjusted underwriting income grew 63.2% to $218.9 million.
Gross written premiums reached $2.03 billion, up 31.5% from $1.54 billion. The growth was broad-based, led by Casualty (+130.5% to $542.9M) and Crop (+113.0% to $247.5M) lines, driven by new business, strong retention, distribution expansion, and new partnerships. Inland Marine and Other Property grew 33.6% to $446.2M, while Earthquake rose 9.3% to $571.4M. Fronting premiums declined 33.9% to $220.2M due to a large partnership termination in the third quarter of 2024. The mix shift toward higher-retention Casualty and Crop lines reduced the ceded premium ratio to 52.5% from 58.2%.
Management highlighted the upcoming reorganization in 2026, where Surety and Credit will be reported as a separate line and Fronting will be consolidated into existing segments. A new $450 million credit facility (revolver and term loan) was entered in January 2026, replacing the prior $100M facility, enhancing liquidity. The company has a $150M share repurchase authorization through July 2027, with $112.7M remaining. No specific numerical guidance was provided, but the company emphasized its focus on profitable growth, product diversification, and maintaining strong underwriting discipline.
Palomar Holdings ended 2025 with a strong balance sheet. Cash and cash equivalents stood at $106.9 million, while the investment portfolio totaled $1.35 billion, primarily in fixed-maturity securities ($1.224 billion) and equity securities ($99.3 million). The company had no outstanding borrowings under its $100 million revolving credit facility or its FHLB line of credit. Shareholders' equity was $942.7 million, up from $729.0 million at year-end 2024, driven by net income and other comprehensive income. Unearned premiums, a proxy for deferred revenue, reached $988.1 million, reflecting strong premium growth.
Palomar has two notable commitments disclosed in the notes. First, the company has unfunded capital commitments of $124.3 million to limited partnerships (private equity funds), which will be drawn over the life of the funds. Second, operating lease commitments for office space total $10.6 million, with $0.9 million due in 2026 and $7.4 million beyond three years. There are no other material purchase obligations or contractual commitments disclosed.
Palomar does not pay dividends. In July 2025, the Board authorized a $150 million share repurchase program. Through December 31, 2025, the company repurchased 308,417 shares for $37.3 million at an average price of $120.85 per share, leaving $112.7 million remaining authorization. No debt was outstanding at year-end, and the company did not issue or repay any debt during the year. Capital expenditures are not explicitly disclosed in the notes; however, capitalized software additions of $6.1 million and property and equipment purchases were modest.
Palomar operates as a single reportable segment: Property and Casualty Insurance. The CODM evaluates performance using consolidated net income. Gross written premiums (GWP) by product line for 2025: Earthquake 28.2% ($571.4M), Casualty 26.8% ($542.9M), Inland Marine and Other Property 22.0% ($446.2M), Crop 12.2% ($247.5M), and Fronting 10.8% ($220.2M). California remains the largest state by GWP at 30.9%, followed by Texas (7.9%), Florida (4.8%), Hawaii (4.6%), and Washington (3.4%). The two largest program administrators accounted for 20.3% and 11.7% of GWP, respectively.
Palomar's risk factors emphasize its exposure to unpredictable catastrophe events, with specific retention levels ($20M earthquake, $11M hurricane) and reinsurance exhaustion points ($3.1B earthquake, $100M US hurricane). The 2025 California wildfires are highlighted as a risk even where Palomar does not insure against the loss, as policyholders may cancel policies. California concentration declined from 43% of 2024 GWP to 31% in 2025, but remains a key vulnerability.
Reinsurer non-payment risk is underscored by $468.7M in recoverables. The company relies on both traditional reinsurance and catastrophe bonds (Torrey Pines Re Ltd.). Inability to renew coverage on acceptable terms could increase loss exposure or force premium reductions.
Palomar depends heavily on program administrators, with Arrowhead distributing 20.3% of 2025 GWP. The loss of this relationship could materially impact premiums. Recent acquisitions (FIA, AAP, Gray Surety) and a doubling of employee count introduce integration and management challenges.
Extensive regulation across multiple states (Oregon, California, Arizona, New Jersey, Hawaii) and Bermuda affects capital, dividends, and underwriting. Changes in California insurance laws or federal crop insurance could significantly impact operations.
Security breaches and AI evolution are flagged as ongoing risks. Palomar maintains cybersecurity programs but notes that increased regulation and sophisticated threats could cause material harm.
Adverse economic factors, inflation, and trade policy changes could affect insurance demand and investment returns. The investment portfolio ($99.3M equity securities) is subject to market volatility. Stock price volatility is acknowledged as a key risk for investors.
The provided document excerpt does not contain the actual Consolidated Statements of Cash Flows. It only includes auditor reports and a table of contents. Therefore, no cash flow figures (CFO, investing, financing, capex, free cash flow, share repurchases, dividends) are available for analysis. The cash flow statement is referenced on page 77, but the text is truncated before that page.