• Gross Written Premium Growth: 23% in Q4 2024; 39% excluding runoff lines.
• Adjusted Net Income Growth: 48% in Q4 2024, inclusive of $8 million catastrophe losses.
• Adjusted Return on Equity (ROE): 23% in Q4 2024.
• Full Year Gross Written Premium Growth: 35%; 43% on a same-store basis.
• Full Year Adjusted Net Income Growth: 43%.
• Stockholders' Equity Increase: 55% year over year; 30% excluding equity issuance.
• Earthquake Franchise Premium Growth: 20% in Q4 2024.
• Marine and Other Property Category Growth: 36% year over year.
• Casualty Segment Premium Growth: 112% year over year.
• Fronting Business Premium Decline: 33% in Q4 2024.
• Palomar Crop Premiums: $15.7 million in Q4 2024; $116 million for the full year.
• Adjusted Combined Ratio: 71.7% in Q4 2024; 66.1% excluding catastrophes.
• Net Investment Income: $11.3 million in Q4 2024, a 61.3% increase year over year.
• Net Written Premium to Equity Ratio: 0.8821 at the end of Q4 2024.
• Full Year Adjusted EPS Growth: 38% to $5.09.
• Full Year Adjusted Combined Ratio: 73.7%.

• Warning! GuruFocus has detected 5 Warning Sign with PLMR.

Release Date: February 13, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Palomar Holdings Inc (NASDAQ:PLMR) reported a 23% growth in gross written premiums for Q4 2024, with a 39% increase when excluding runoff lines of business.
• The company achieved a 48% growth in adjusted net income, despite $8 million in catastrophe losses, and an adjusted return on equity of 23% for the quarter.
• Palomar Holdings Inc (NASDAQ:PLMR) successfully executed its strategic objectives, including sustaining strong growth, managing diversification, delivering predictable earnings, and scaling the organization.
• The company's earthquake franchise grew gross written premiums by 20% in Q4 2024, maintaining a balanced approach between residential and commercial earthquake insurance.
• Palomar Holdings Inc (NASDAQ:PLMR) saw significant growth in its casualty segment, with premiums increasing by 112% year over year, driven by strong performance in contractors GL, real estate EO, and environmental liability.

Negative Points

• The fronting business experienced a 33% decline in premiums due to the separation from Omaha National, impacting overall growth.
• Commercial earthquake products experienced an average rate decrease of approximately 5%, which may persist throughout the year.
• The company's adjusted combined ratio increased to 71.7% in Q4 2024 from 68.8% in the same quarter of the previous year.
• Palomar Holdings Inc (NASDAQ:PLMR) faces challenges in the California homeowners market due to the recent wildfires, which could impact future market dynamics.
• The company's net earned premium ratio is expected to decrease in Q3 2025 due to increased participation in crop insurance, which has a higher loss ratio.

Q & A Highlights

Q: Are you assuming some improvement in reinsurance pricing over the course of the year, or is it a steady state view in the guidance? A: Mac Armstrong, CEO: The guidance range is built on a flat to 5% decrease in reinsurance pricing. While we saw favorable renewals at 15% down, we are being conservative due to the market's reaction to wildfire exposure.

Q: Do you see opportunities for Palomar in the disrupted California market? A: Mac Armstrong, CEO: Yes, the market is disrupted, particularly in residential earthquake insurance due to reduced exposure from CEA participating insurers. We also see potential in builder's risk but will stick to our core areas without expanding into homeowners or traditional commercial multi-peril.

Q: How does the 6/1 reinsurance renewal pricing impact your outlook? A: Mac Armstrong, CEO: Excess of loss reinsurance is our largest expense, and a price below 5% would positively impact results. We are cautiously optimistic due to strong investor appetite for single peril exposures like earthquakes.

Q: How elastic is the demand for earthquake insurance to homeowner's pricing in California? A: Mac Armstrong, CEO: The residential earthquake market is underpenetrated, and we see an uptick in new business due to heightened awareness. Rising homeowners' costs haven't impacted retention yet, and non-renewals in the CEA could provide opportunities.

Q: Can you explain the 8 to 12 million catastrophe loss guidance for the year? A: T. Christophe Uchida, CFO: The guidance reflects our efforts to minimize exposure to US catastrophes. It accounts for 1 to 2 points of loss ratio, with additional budget for mini-cats, totaling 3 to 5 points of loss ratio for the year.

Q: What is the outlook for the fronting business in 2025? A: Mac Armstrong, CEO: The fronting business will be impacted by the loss of the Omaha National deal, with flat to slightly up growth on a same-store basis. Our capital allocation focus is on crop, quake, other property, surety, and casualty.

Q: How do you expect the crop business to perform with increased participation? A: T. Christophe Uchida, CFO: We expect the crop business to operate with a low 90s combined ratio. With increased participation from 5% to 30%, we anticipate significant growth, aiming for $200 million in premiums in 2025.

Q: What are the growth expectations for the casualty and marine lines? A: Mac Armstrong, CEO: Casualty and marine lines are expected to grow faster than earthquake, driven by geographic expansion and new hires. Casualty, in particular, will be a fast grower due to strong underwriting talent and reinsurance support.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.