Palomar (NASDAQ:PLMR) raised its full-year earnings outlook after reporting record third-quarter adjusted net income and gross written premiums, as growth in crop and surety insurance helped offset competitive pressure in commercial property markets.
Adjusted net income rose 47% from a year earlier to $81.3 million, while adjusted earnings per diluted share increased 50% to $3.01. Gross written premiums climbed 28.4% to $767 million, and net earned premiums rose 62.3% to $365.4 million.
Chairman and CEO Mac Armstrong said all five product categories grew during the quarter, despite a softening property and casualty market and deliberate reductions in some exposures. He said the quarter marked Palomar’s fourth increase to its full-year adjusted net income guidance.
Higher Outlook as Crop Business Expands
Palomar now expects full-year adjusted net income of $280 million to $285 million, up from its previous range of $270 million to $280 million. The forecast includes $8 million to $12 million in catastrophe losses for the year, including events during the first nine months. At the midpoint, the guidance implies approximately 31% growth from 2025, Armstrong said.
Crop gross written premiums rose 89% in the third quarter. The company increased its expectation for 2026 crop premiums to approximately $425 million, compared with an initial outlook of $320 million.
CFO Chris Uchida said the $425 million figure was a starting point and that the company hoped to exceed it modestly, with some year-over-year crop premium growth in the fourth quarter. The third quarter is Palomar’s largest for crop, with most annual premium written and earned during that period.
Armstrong said the company feels confident about reaching a previously stated intermediate crop premium goal of $500 million, but it will provide more specific 2027 estimates when it issues guidance for that year.
Palomar also launched its PLMR.Farm policy administration system during the quarter, supporting 2027 reinsurance year products including livestock and winter wheat. Armstrong said the company expects underwriting gains across its multiple-peril crop insurance and private crop products, although claims will continue to develop and settle into early 2027.
Earthquake Growth Returns Despite Commercial Rate Pressure
Earthquake gross written premiums increased 3%, led by residential business. Armstrong said residential earthquake accounted for approximately two-thirds of the category’s premiums and benefited from heightened consumer awareness following global earthquake activity and capacity constraints at a competitor.
New policy sales were at their highest level since 2022, with new business sales exceeding $4 million in each month of the quarter, Armstrong said. Residential policy retention was 88%. He added that new business was still being written at a strong pace in the fourth quarter.
Commercial earthquake renewals faced tougher conditions, with rates down approximately 20% in the quarter. Armstrong said Palomar’s expectation for earthquake growth in 2026 does not assume a reversal in commercial pricing pressure.
Inland marine and property premiums grew 13%, including 23% growth in Hawaii hurricane and 25% growth in flood. Armstrong said three loss-generating Hawaii storms produced $3 million in net losses, with only one expected to generate losses for reinsurers.
Casualty premiums grew 3%, slowing as the company exited primary transactional liability, re-underwrote a fronted cyber program and completed certain program administrator book rollovers. Armstrong said the actions and broader re-underwriting probably made the difference between the reported growth rate and approximately 15% to 18% growth on a normalized basis.
Surety and credit premiums rose approximately 228%, reflecting the acquisition and integration of Gray Surety. Armstrong said expanded reinsurance capacity will support larger bonds, and he described an ambition to grow the surety book to a couple hundred million dollars in premiums over a few years.
Loss Ratio Rises as Business Mix Changes
Palomar’s adjusted combined ratio was 76.3%, compared with 74.8% a year earlier. Its total loss ratio rose to 41.5% from 32.3%, while the annualized adjusted return on equity increased to 33.1% from 25.6%.
Uchida attributed much of the increase in the loss ratio to the growing crop business. Crop accounted for 15.9 percentage points of the third-quarter loss ratio, compared with 7.8 points a year earlier. He said Palomar expects a higher loss ratio and lower adjusted expense ratio as its business mix evolves.
Third-quarter catastrophe losses were $4.5 million, primarily related to hurricane and flooding in Hawaii and flooding in the Midwest. The quarter also included unfavorable prior-year development primarily associated with reallocating livestock losses between 2025 and 2026. Uchida said the reallocation did not materially change the underlying ultimate losses.
For the full year, Palomar continues to expect a loss ratio, including catastrophes, in the mid-to-upper 30s and an adjusted combined ratio in the mid-70s.
Capital Returns and Reinsurance
Net investment income rose 54% to $22.4 million, supported by higher yields and a larger average investment balance. Cash and invested assets totaled approximately $1.8 billion at quarter-end.
The company repurchased $8.9 million of common stock during the quarter and paid its first dividend of $0.45 per share in September. Its board approved a second quarterly dividend of $0.45 per share, payable December 2.
Armstrong said Palomar will continue to assess how much risk it retains as its earnings and capital grow. The company may consider taking more crop risk when its treaty renews January 1, 2027, and has the balance sheet to increase property catastrophe event retentions if pricing makes that attractive, he said.
About Palomar (NASDAQ:PLMR)
Palomar Holdings, Inc is a specialty insurance company that provides property and casualty insurance products in markets that may be underserved by traditional insurers. The company focuses on risks that are complex, difficult to place or exposed to natural catastrophes, using specialized underwriting and risk-management capabilities.
Its offerings include residential and commercial earthquake insurance, inland marine coverage, specialty property insurance, casualty products, workers’ compensation and other tailored insurance solutions.
