Palomar (NASDAQ:PLMR) detailed record fourth-quarter and full-year 2025 results and issued 2026 earnings guidance on its latest conference call, pointing to broad-based growth across its specialty portfolio, continued underwriting discipline, and improving reinsurance conditions.
Full-year 2025 results exceeded initial outlook
Chairman and CEO Mac Armstrong said the company delivered “record levels” of gross written premium and adjusted net income in 2025, citing “strong, broad-based, profitable growth.” For the full year, Palomar reported gross written premium growth of 32% and adjusted net income growth of 62%, generating an adjusted return on equity of 26%.
Fourth-quarter performance driven by growth and underwriting profitability
Chief Financial Officer Chris Uchida said fourth-quarter 2025 adjusted net income was $61.1 million, or $2.24 per diluted share, up from $41.3 million, or $1.52 per share, a year earlier. Adjusted underwriting income rose 52% year over year to $62.3 million, and the adjusted combined ratio was 73.4% versus 71.7% in the prior-year quarter.
Gross written premiums in the quarter increased 32% to $492.6 million, while net earned premiums rose 61% to $233.5 million. Uchida noted the ratio of net earned premiums as a percentage of gross earned premiums increased to 48.2% in the quarter, compared with 39% in the fourth quarter of 2024.
Losses and loss adjustment expenses totaled $70.9 million, including $0.7 million of favorable attritional development and $2.1 million of favorable catastrophe loss development, “largely from Hurricane Milton,” according to Uchida. He said higher attritional losses reflected growth in casualty and crop, partially offset by favorable development, and reiterated that the company maintains conservative reserves.
Net investment income was $16 million in the quarter, up 41.3% year over year, which Uchida attributed to higher yields and a higher average balance of invested assets. The fourth-quarter investment yield was 4.8%, and the average yield on investments made during the quarter was “above 5%,” he said. Stockholders’ equity ended the quarter at $942.7 million.
Business line updates: earthquake pressure, property strength, and rapid casualty and crop expansion
Armstrong said Palomar’s earthquake franchise declined 2% year over year in the quarter, below the company’s prior expectation for low single-digit growth, due in part to a one-time headwind from a large unearned premium transfer that benefited the fourth quarter of 2024. He said commercial earthquake rates were down 15% in the quarter amid elevated competition, and management expects pressure could persist “through much of 2026.”
Residential earthquake, which management said ended the year at 58% of total earthquake premium, posted year-over-year growth in new business written and maintained 97% premium retention for the company’s admitted flagship product. Armstrong said the inflation guard on residential policies provides operating leverage in a softening property catastrophe reinsurance market, and management sees a pipeline of residential earthquake partnerships that could support growth in 2026 and 2027.
Inland Marine and other property grew 30% year over year in the fourth quarter, driven by the admitted and E&S builders risk book, Hawaiian hurricane products, and “record production” in flood stemming from early success with the Neptune Flood partnership. Armstrong said underwriting results were strong in commercial property, noting that all-risk, excess national property, and E&S builders risk each had a loss ratio below 25%.
Palomar also discussed new hiring and expansion efforts in commercial property, including additions in Texas and the Northeast and the recruitment of Matt Deans to launch a construction engineering practice. Management said it plans to enter the market with modest net line sizes supported by robust reinsurance, targeting large infrastructure projects such as bridges, roads, and data centers.
Casualty gross written premium grew 120% year over year in the fourth quarter, and Armstrong said casualty ended 2025 at 20% of the company’s total gross written premium. Management highlighted momentum in E&S casualty, contractors’ general liability, environmental liability, and early traction in healthcare liability, where “technical rates” are increasing and “approaching 35%.” The company emphasized conservative exposure management, with average net line size below $1 million and E&S casualty averaging about $700,000 net. Armstrong and Uchida also reiterated a conservative reserving posture, with management noting that approximately 80% of casualty reserves are held as IBNR.
In crop, Armstrong said the franchise generated $248 million of gross written premium in 2025, exceeding both the original $200 million expectation and revised guidance of $230 million. He said the crop book produced a loss ratio under 80% in 2025 and that Palomar increased retention to 50% net of the SRA effective Jan. 1, 2026, supported by stop-loss reinsurance consistent with last year. Management expects crop premium to grow more than 30% in 2026 and reaffirmed intermediate- and long-term targets of $500 million and $1 billion in crop premium, respectively.
Fronting de-emphasized; surety becomes a new reported category after acquisition
Management said fronting is no longer a strategic focus and will no longer be reported as a standalone category beginning in the first quarter of 2026, with existing fronting programs reclassified into product groups aligned with underlying business. Following the acquisition of Gray Casualty & Surety (now Palomar Casualty & Surety), the company will report a fifth product category, “Surety and Credit.”
Uchida said the Gray acquisition closed Jan. 31, 2026, with an estimated purchase price of $311 million, financed with a $300 million term loan and cash on hand. The term loan bears interest at SOFR plus 1.75%, with potential spread improvement tied to leverage. Management expects Gray to be “modestly accretive” in 2026 before scaling in 2027. On a pro forma basis, the company said the surety line would have written about $110 million of premium in 2025, and Armstrong said surety and credit would have represented 6.5% of Palomar’s 2025 premium base on a pro forma basis.
Reinsurance tailwinds and 2026 guidance
Armstrong said the fourth quarter included multiple reinsurance renewals and placements, including quota share renewals and new placements. Management cited risk-adjusted reductions of more than 15% on renewed earthquake excess-of-loss treaties and said the commercial earthquake quota share renewed about 15% lower on a risk-adjusted basis. Looking ahead to the June 1 renewal, Armstrong said market conditions remain favorable for reinsurance buyers, and the company expects further improvement across its property catastrophe program.
For 2026, Palomar guided for adjusted net income of $260 million to $275 million. Management said the midpoint implies about 24% adjusted net income growth and an adjusted return on equity above 20%. The midpoint assumes a $10 million catastrophe load and, on a risk-adjusted basis, a 10% decrease on the June 1 property catastrophe excess-of-loss renewal. Uchida said the company expects the net earned premium ratio to move into the “upper 40s” in 2026, improvement in acquisition and other underwriting expense ratios, a loss ratio (including catastrophes) in the mid- to upper 30s, and an adjusted combined ratio in the mid-70s.
Management also outlined four strategic imperatives for 2026 and said it is deploying AI initiatives focused on underwriting workflow, portfolio optimization, process automation, and operational efficiency, using both third-party tools and internally developed solutions.
About Palomar (NASDAQ:PLMR)
Palomar Holdings, Inc (NASDAQ: PLMR) is a specialty insurance holding company focused on providing medical stop-loss coverage and related administrative services to self-funded employer health plans in the United States. The firm operates through two primary business segments—Medical Stop-Loss and Specialty Program Management—to deliver tailored risk protection and comprehensive program administration.
In its Medical Stop-Loss segment, Palomar underwrites excess and aggregate stop-loss policies designed to shield self-insured employers from catastrophic medical claims that exceed pre-determined retention levels.
